I was listening to the news the other day and somebody of conservative Republican leanings was accusing his liberal Democratic opponent as favoring economic policies that would create an environment that would redistribute wealth. I found that funny here in America where we talk about poor people and the less fortunate picking themselves up by their boot straps. In order for somebody with no wealth to get some wealth they have to find somebody with wealth who is willing to give up some of it, usually it’s in exchange for something like a product or service but it can also take the form of a charitable donation. Regardless, it is a redistribution of wealth.
But all too often the transfer of wealth goes from the poor to the rich. Every year it seems like the rich get richer. Granted we have developed a culture where we worship the people at the top of our financial pyramids. We are willing to work in an environment where an executive running his or her company into the ground must be paid hundreds of millions of dollars just for being fired. I don’t know about you but if I got fired I’d be lucky to collect a couple weeks salary along with any reimbursement for accumulated vacation time. Our financial captains of industry on average make something like five hundred times the average worker. That’s a phenomenal ratio.
To put it in perspective, the upper zero point two percent of a company with five hundred employees has the potential to earn fifty percent of a company’s payroll. For every hundred dollar this company devotes to payroll, a single individual can earn fifty dollars while each peon would get something like a dime. Is it any wonder how the rich keep getting richer?
In order to make up for this ever growing difference in pay between the haves and the have nots, people supplement their ten cents of income with credit. Need a car or a house? By the time you save enough money to buy either it’ll cost twice as much as what you have. Credit for large purchases has become a natural way of life in America. But now we need our credit power just to buy the kind of television we want or the type of things we should be buying with disposable income. Credit has become our disposable income. And in the long run, we end up paying even more for the things that we shouldn’t have. Credit is when people with no money pay people with money to borrow their money. And coincidentally this type of economy helps the rich to get even richer.
As the rich get richer the distribution of wealth gets more and more focused until you have a situation where only one person out of a thousand can actually afford to buy anything while everyone else works hard to just to keep from having to live in a cardboard box under a highway overpass. When only one person can truly afford a car the car company will go under. When only one person can truly afford a television then chances are good that it will only be a matter of time before the television manufacturer goes out of business. The economy isn’t going to get anywhere when only one person out of a thousand is the only one keeping factories open. It’s only a matter of time before the credit bubble bursts and everybody has to actually buy what they can truly afford.
And it doesn’t help the picture when companies are constantly doing everything possible to trim cost by constantly laying people off in order to keep improving productivity and constantly maximizing peak efficiency. The constantly shrinking pool of people working will lead to a constantly shrinking pool of people buying which will lead to a constantly shrinking pool of items needed for purchase which will lead to a constantly shrinking need for items which will lead to a constantly shrinking need for people to make items which will lead to a constantly shrinking pool of people necessary to work. It is a vicious cycle that continues to shrink into a vortex of destructive consequences like a tornado in a trailer park.
Creating strategies that keep the concentration of our national wealth from collecting in a relatively tiny fraction of the population is smart economic policy. The more people who can truly afford to participate in the exchange of wealth will directly lead to more money flowing through the economy. When such a large portion of our population depending on credit to supplement our incomes in order to get the things that help keep the economy rolling it is nothing but a sophisticated pyramid scheme built like a house of cards just waiting for the worse time to come crashing down, not that any time is a good time for markets to go bad.
If people want this financial mess to end the ability for individuals to flow their own money has to return to a larger portion of the population. That’s what happened after the great market crash in the early twentieth century. Economic policies were created that made for a much wider distribution of wealth than ever realized before and the country prospered for it. The aristocratic environment of the haves and the have nots was replaced with the development of a true middle class. More people earning leads to more people buying leads to more production which leads to more jobs. It’s not rocket science.
A redistribution of wealth is exactly what our economy needs. People will say if you can’t afford to buy it then don’t do it. To be honest, I don’t have a problem with that argument. But when people are earning pittances while other people are running their companies into the ground and earning millions of dollars in the process, something’s seriously wrong. If we don’t allow more wealth into more hands than the global economy is for naught and we all can just return to a barter and trade system and take the love of money totally out of the picture.