Why Is Wealth Concentrating at the Top?

An important Facebook question that was posed to me was:

Steven Brooks What is it about extreme wealth that causes the rest of us to fall behind? Is it that money is a finite resource and so earning profit is a zero-sum enterprise? And what is driving the concentration of wealth into an ever tightening range of the population? Is it lack of regulation, or the wrong kinds of regulation, or both? And finally, if a wealth tax could solve the problem, what would that world look like? Norway? Norway’s utopia is built upon global income inequality. Wouldn’t we just be pushing the problem further downstream?

L Larry Liu These are great questions. Here my attempt at answering it. There are several factors: as the poor and middle class people see their wages stagnate, those of the rich 1% keep on increasing. Wages are tied to the collective bargaining power of the workers (i.e. unions), the level of investment in the productive-sector economy (i.e. market confidence), the level of employment (the higher the rate, the higher the wages), which in turn depends on other factors like technological displacement of wage labor and/or outsourcing decisions from rich developed countries into poor and less developed countries. Well, we know that all of these values are trending downward, which means there is a constant downward pressure on wages, the primary means of income for little guys like us. Little guys like us then take out enormous loans so we can go to college, buy a house or a car, and make the wealthy creditors really rich.

The wealth of the 1% is not tied to wages, but to the profits of privately-owned companies and other asset values, most importantly housing and real estate. We know that these values have increased. As productivity of individual workers is growing leaps and bounds, but their wages are essentially flat, the corresponding profit share increases. We also know that international real estate speculation from wealthy investors drives up the price of housing and the cost of living higher, which is again reflected in the rising fortunes of the 1%. We also know that the governments and central banks of the world have dumped billions and trillions of dollars to save the financial system from complete meltdown. This is nothing else but the bailout of creditors, who are already rich and fat. The government is then piling up huge amounts of debt, and then turns around to cut government programs for working class people like college funding and health care, so that we have to go to even deeper debt to purchase the services that were once provided by the government.

You would think that democratic elections would make a difference and can mitigate extreme inequality, but that has thus far not been the case, as the poor and middle class are still distracted and divided, while the rich control the media, the education system, and quite frankly the political system. Thanks to citizens united and McCutcheon supreme court decisions, the rich can spent unlimited sums of money into political campaigns. The Koch brothers own $100 billion and are sure to use some of it to buy politicians, set up right-wing think tanks and their media channels.

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2 Responses to Why Is Wealth Concentrating at the Top?

  1. lorwetan says:

    Thanks, I’ve enjoyed your opinion. But we are not little guys, we are normal folks. Without our work, the rich wouldn’t be able to use their assets in any meaningful way.

    • Larry Liu says:

      The word selection “little guy” was not a putdown, but to contrast between the rich and the poor. Of course, the wealth is built on the poor, and we have to ensure that people understand it in this way and stop their fairytale stories about the superhero billionaires.

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