One might suppose that to be true from reading all the news, blogs, and other media. Yes, one might think that a few people are too rich and too many people are too poor. Unfortunately poverty and wealth are relative to the individual. I think my income is just at that poverty level defined by our fearless Congress who know so much better than we of such things. Yet I do not think myself poor or poverty stricken. By the same token I do not think myself rich, either. I’ve got a roof over my head, food on the table (sometimes too much), gas in the truck and a laptop and internet service that works. And outside a bottle of wine to drink with meals and another used book to add to my library and reading enjoyment, what more could I want? There are others like myself, retired and living their version of the good life. They saved more and avoided ex-wives who took the lion’s share of one’s savings, but Social Security does well enough by me and my cost of living is low. I don’t own a three or five thousand square foot mansion that I am still paying an arm and a leg on the mortgage nor do I suffer from high property taxes, utility bills, maintenance costs, and the insurgence on multiple houses and expensive automobiles. The old 96 Toyota Tacoma still runs well, and it’s paid for, has been for at least ten years. So what’s all this stuff about income inequality?
I suppose if I really wanted all that good life the more affluent retires have then I should have picked my wives more carefully and gotten my university degree earlier and in a field where demand for my services would have far out lasted my working life. We all make choices and the uncertainty of life, or chance occurrence, as it should be more properly known, can either add or subtract from the effectiveness of such choices. Chance has a lot to do with life. If you were born with Down’s syndrome and happened to be born into a wealthy family then you will be taken care of all you life with the best of everything. On the other hand, if you were born to a poor family you will be warehoused by the state in whatever conditions it believes are acceptable. There is no money back guarantee in life, no higher court of appeal to make you a millionaire for your past bad decisions (although many feel that they should be rewarded for such decisions because the world has deep pockets, just ask the lawyers). Now on to the problems at hand.
Income inequality is not a crime, stupidity is crime that may be punishable by death, depending of the circumstances. In a free market economy capitalism brings both profit and loss. Doesn’t matter if you are a seller or buyer (one sells one’s labor, by the way, just as others are willing or not to buy your labor). This system works as long as people are honest and forthright. Unfortunately, they aren’t, not by a long shot. Laws are to remind honest people to be honest. For the dishonest, laws are a mere inconvenience. A great many tomes have been written about legal theory and the application of just laws (I love the inexactness of ‘Just’, means whatever you wish it to mean), but law is about basic human behavior. When a young male horse ‘breaks’ the law of the herd, the alpha females kick him out. The alpha studs have no authority over the females except reproduction rights (even the females control that, they mate with the one they want to mate), usually about who is first in line. The female use the punishment of exclusion to bring the young males thinking back into line with the herd. That young male must learn that he has two duties to the herd, the first of which is the protection of the females from predators. The second is reproduction under the supervision of the females and according to his status. The exclusion from the herd approaches a death sentence since a horse alone can be quickly overcome by a pack of wolves.
But us humans have far more complicated lives. True, when we were hunter gathers we would have used exclusion from the group and from its territory as punishment. The last resort would have been the sanctioned killing of the offending individual. In modern society we use exclusion, namely prison, but have not the good sense to keep sanctioned killing as the ultimate penalty. It is not inhumane nor uncivilized, indeed, not to use it for the more willing criminals is insane, but is another post. The major problem in human affairs of sufficient complexity is that a few individuals game the rules and many more will try. The human condition is that we will take the easy way out. It is part of the old survival instinct, if you like. If you have an apple tree that is now bearing fruit, will you pick from the low hanging fruit or climb to the top for that apple on the highest branch? If the roof on your present house leaks when it rains and you want to sell it, will you disclose that information to prospective buyers? That is why we have disclosure laws and house inspectors. We want to trust but we should always verify, no offense intended, keep us both honest. So what does all this have to do with income inequality?
Glad you asked. The simple fact of income inequality is that it exists because so many of us want something for nothing. The hell you say! Oh yes, I say. We have been sold on the necessity of the economy of scale, bigger is better. Except it’s not. Capitalism is when one puts aside discretionary income for future use. People use to grow vegetables in the spring, summer, and fall to eat and what they could not consumed, they canned. It was a standard practice a hundred years ago. Plant and cultivate what you could grow so that you could can much of your harvest or put it in the root cellar to be eaten when late autumn, winter, and early spring came. That is a basic form of capitalism. And if one had a little more land and could grow a little more then one could sell the excess that one could not consume. Then one could save that income for the sale of excess to buy a better plow, or dig a deeper well, or even buy a little more land on which to plant crops. So many stupid people think Capitalism is an evil practice and yet it is a human survival instinct (I use the word instinct in a rather loose manner, more for illustration than scientific exactness). But the over reliance on economies of scale kills Capitalism because it relies of the creation of credit and the use of credit results in debt, that claim on future earrings. We now have factory farms, when companies buy thousands and hundreds of thousands of acres of farm land using credit and paying for the land through complicated loan schemes. If you manufacture farm equipment then to increase your sales you give credit, that is you hold the loan and hand over the equipment. No money, or I should say, no currency has passed from one hand to the next. But suddenly there is more ‘wealth’ in the system. Unfortunately that is not the case since your asset, the tractor or harvester is now a liability on the one side and your loan to the buyer, which you count as an asset is still a liability. Do you start to see that so much of our financial system is a sham, an accounting slight of hand?
Well, if the creation of excessive amounts of credit isn’t enough to cause income inequality, free trade is. that right, all though you years of public school you were induced to believe the problems of the world would be solved with free trade. All those poor people in poverty land would suddenly have jobs and buy our stuff and we could all live the American Dream. Well, not quite. What did I tell you about economy of scale? The big get bigger until only a couple of biggest are left and then they dictate prices to the world. Economies of scale only works for those who own the economies of scale, no one else benefits. Auto factories go from twelve men making one car a week to one hundred and twenty men making a hundred and twenty cars a week on an assembly line. The original twelve men were skilled craftsmen, the one hundred and twenty on the assembly line are, at best, semiskilled workers. Division of labor means that the less skilled individuals can be herded into mass production to product more with less cost. And free trade allows the biggest of the big to go to countries where those workers cost the less to employ. with no trade barriers, the imports come back at a lower price. But who is left to buy those imports. How many Indonesians who work in the Nike factories are willing to pay one or two hundred dollars for a sneaker whose material cost isn’t more than five bucks? Or, well, the rest is intellectual property profits. Right, do you really believe that a pair of Air Jordans are really worth that much in intellectual content? When I was a kid I saw the ads for US KIDS sneakers. Run faster and jump higher with US KIDS. Except that claim was never true.
So it continues, manufactures, banks, financial institutions, retail and commercial real estate companies and builders, everyone is trying to game the system. Hell, look at the Clintons. What does Bill or Hillary have to say that is worth hundreds of thousands of dollars? They aren’t selling speeches, they are selling influence, political and government influence, and that is a crime. Then they hide the income and the donations for their influence in a shell of a charity, one that has never given in any one year more than 19 percent of its income to any charitable cause. And when it does give, most of the money go not to those who need it the most but to those who will funnel more into the Clinton money bag. Do you start to understand that if you want to lower income inequality (you will never end it) you have to stop so the ability of the few to game the system for so much. Free trade is a wonderful ideal in theory but it will never work in practice. Why? Haven’t we learned from the Chinese who have spent so much time gaming the trade with us and the rest of the world? China is the poster child for tariffs. It is also time to stop the creation of credit by the banking industry. Let us go back to limiting banks to lending no more than their capital and not against their deposits. Do you know how much debt their is in the world? About one hundred times the world’s collective GDP. And most of that is naked debt, meaning no collateral is behind it should it default. And you want to end income inequality.
Like minimum wage, just another pimple on mankind’s rear. Minimum wage will not end income inequality, won’t even come close. It will make sure that unemployment for the many will continue. A higher minimum wage only insures that you will work fewer hours in an unskilled job. Asking, ‘Do you want fries with that order?’ is unskilled labor. Wiping tables is unskilled labor. Picking up trash in the parking lot is unskilled labor. And if you raise the minimum wage at McDonald or some other fast food joint, who pays? Normally we would expect the customer to pick up the tab for your raise. But look at the cost of a fast food hamburger. That crap is too expensive for me now, do you think I am going to buy it at higher prices? Many fast food places will either go out of business because they can’t recover the cost of higher wages or it will be cheaper to put robots in the place of human workers. Then one will have neither wages nor a job with dignity, one will be unemployed. And this is the stupidity I have been talking about. Minimum wage and pushing an end, or at least a reduction to income inequality are both attempts to game the system and both will fail to do much more than keep poor people poor. Have a nice life.