The wealth gap and why it exists

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webmaster | 06/24/14
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A lot has been written lately about “income inequality,” from President Obama down to the Wall Street occupiers. There were even some occupiers in Fresno, only I forget what they occupied. I thought it had blown over.

Or I had thought that until the book “Capital in the 21st Century” by economist Thomas Piketty was wheeled onto the world stage as if in a book publisher’s dream of lead being turned into gold through the alchemy of publicity.

In his book, Piketty points out that income inequality is getting bigger, and that the growing difference between the haves and have nots is a cause for concern. Well, he may be right about that, to a certain extent. But he still doesn’t answer the question of why that growth is occuring.

Some people think it’s because the wealthy are too greedy, implying that if they took less, more would be available for the rest of us. Others think the low earners are unproductive louts who are too stupid to invest wisely and expect the government to take care of them.

Both of those assumptions are attractive, but they’re false.

A lot of the wealth, for example, is acquired through hard work and judicious application of capital. As an example, the new billionaires in the dot.com universe saw value in designing devices that would entertain as well as inform — the computers in all their iterations, from desktop to cell phones — and they continue to reap the benefits. Should they be giving their money away? Many do. Bill and Melinda Gates of Microsoft fame, for example, are the world’s premier philanthropists. Others aren’t so generous.

But the dot.com rich have spawned a problem: Most of what they sell is not made in the United States. Consumers in the U.S. and elsewhere are sending their money to places such as China where the miracle devices are made. We’re helping foreign workers get richer. When things were manufactured in America, more of the money spent by American consumers stayed at home. That helped out small businesses, as well as workers.

The old economic model of America, the one which succeeded for many years after World War II, no longer is a sure thing for a lot of ordinary workers, as it used to be.

 

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