Is inequality good or bad?

[Masterhawk]

By now, you've already heard of the debate surrounding inequality. progressives want to reduce it whereas cosnervatives say that it's nothing to worry about and that to some extent, it's a good thing.

But which one is right?

There is actually one economic theory known as the Galor-Zeira model. This model seeks to explain the effects of inequality on economic growth. Basically, the model says that inequality is good for growth in low income countries whilst being detrimental in high income ones. Brückner and Lederman tested this model and found that countries within the bottom quarter experienced growth that was directly correlated with inequality while those in the top fifth experienced growth that was inversely correlated.

Effects of income inequality on economic growth

The relationship between aggregate output and income inequality is central in macroeconomics. This column argues that greater income inequality raises the economic growth of poor countries and decreases the growth of high- and middle-income countries. Human capital accumulation is an important...

voxeu.org

Now why might that be?

The lowest income countries are dominated by agriculture. In order for their economies to grow, they must develop a manufacturing industry. Because it will obviously produce inferior goods when compared to upper income countries, the selling point becomes cheap labor. Obviously, having cheap labor means keeping wages low, resulting in high inequality. Examples include Bangladesh and Cambodia whose economies center around light industry. Both countries have high GDP growth rates at 6–10% a year.

The advantage of inequality disappears when a country hits the middle income trap. You see, unless the government actively suppresses wages, wages will grow with the economy. Eventually, it reaches the point where it’s no longer profitable to make goods in country A to be shipped to country B. At that point, the economy will shift towards services. This is the point where education becomes increasingly necessary. Some jobs pay well but those require education while others don’t require much education but pay very little. Thailand is an example of a country whose economy grew fast for the past few decades but has recently hit the middle income trap.

The US is at a point where the emerging industries promote those with college education. In this instance, high inequality means that many people can’t afford to go to college to obtain the necessary skills, thus slowing down economic growth.

 

[skeptic llc]

Good topic. I question this: " In this instance, high inequality means that many people can’t afford to go to college to obtain the necessary skills, thus slowing down economic growth." ANECDOTALLY (all caps to show I am not denying this is just my personal experience), my business does not need people who "go to college to obtain the necessary skills". We need people who have basic literacy, people skills, and a work ethic -- none of which has much to do with going to college. Are you sure more college answers any of the problems?

 

[RabidAlpaca]

Good topic. I question this: " In this instance, high inequality means that many people can’t afford to go to college to obtain the necessary skills, thus slowing down economic growth." ANECDOTALLY (all caps to show I am not denying this is just my personal experience), my business does not need people who "go to college to obtain the necessary skills". We need people who have basic literacy, people skills, and a work ethic -- none of which has much to do with going to college. Are you sure more college answers any of the problems?

No one said everyone needed a college degree, so you finding an example of someone not needing one is irrelevant.

The US is (allegedly) a highly advanced country and more and more jobs require higher levels of education than ever before. This is a trend and it won't be reversing any time soon. We don't manufacture many things, we need engineers, doctors, teachers and innovators. If one of the dominant political parties in our country is actively anti-education and wants to limit people attaining one, the economy will suffer.

To be honest, this isn't rocket science. We've spent decades favoring supply side economics, where we shower the ultra rich companies with money so they can produce a lot of goods. However, if the real people on the American economy don't have disposable income to buy those goods because they're barely able to make rent or feed their families, the economy will be depressed. A slightly better division of wealth would be better for everyone in the economy, the rich included.

Somewhere along the line we forgot that it takes TWO entities for an economic transaction to take place.

 

[skeptic llc]

No one said everyone needed a college degree, so you finding an example of someone not needing one is irrelevant.

[No, I'm saying my entire industry is an example of it being largely irrelevant. Your post suggests it is key.]

The US is (allegedly) a highly advanced country and more and more jobs require higher levels of education than ever before. This is a trend and it won't be reversing any time soon. We don't manufacture many things, we need engineers, doctors, teachers and innovators. If one of the dominant political parties in our country is actively anti-education and wants to limit people attaining one, the economy will suffer.

[Assertions noted. What if instead we need people who just STFU and work hard? And what if the other party is anti-education too, because it promotes an educational system where nothing means anything concrete and all results are rigged for social engineering purposes and explained by socioeconomic factors beyond anyone's control?]

To be honest, this isn't rocket science. We've spent decades favoring supply side economics, where we shower the ultra rich companies with money so they can produce a lot of goods.

[Agree.]

However, if the real people on the American economy don't have disposable income to buy those goods because they're barely able to make rent or feed their families, the economy will be depressed.

[Mostly agree.]

A slightly better division of wealth would be better for everyone in the economy, the rich included.

Somewhere along the line we forgot that it takes TWO entities for an economic transaction to take place.

[Agree. What does this have to do with the pros and cons of sending everyone to college, or acting like college access is the issue?]

 

[RabidAlpaca]

I don't know how quote boxes work!

If you sell any consumer product at your company, or sell to companies that do, your end customers are not struggling to survive, they have disposable income for your product. If more people weren't struggling just to survive, you'd have more customers and more wealth in your pocket.

THAT is the point of the OP, which you either didn't read or intentionally ignored and tried to pretend it was about sending every man, woman and child to college. The worse wealth inequality gets, the less customers you're going to have.

 

[skeptic llc]

Oh no! Allegations of intentionally ignoring and pretending! Does your response have anything to do with college degrees, the subject of my reply, or are we on a new topic now? If new topic, kindly please tell me what topic you have declared for us.

 

[skeptic llc]

If you sell any consumer product at your company, or sell to companies that do, your end customers are not struggling to survive, they have disposable income for your product. If more people weren't struggling just to survive, you'd have more customers and more wealth in your pocket.

THAT is the point of the OP, which you either didn't read or intentionally ignored and tried to pretend it was about sending every man, woman and child to college. The worse wealth inequality gets, the less customers you're going to have.

PS -- kudos for the quote boxes thing, I appreciated that.

 

[RabidAlpaca]

Oh no! Allegations of intentionally ignoring and pretending! Does your response have anything to do with college degrees, the subject of my reply, or are we on a new topic now? If new topic, kindly please tell me what topic you have declared for us.

The subject of the thread is income inequality. Check the title, reread the OP. Your inability to even address any of the OP's or my points is noted. Try harder to stay on topic. Literally no one here claimed everyone should go to college and that's not the topic.

ONE of the many points made by the OP is that even the people we want to go to college either can't afford it or are saddled with such debt they don't have the disposable income to buy "skeptic llc's" widgets. Income inequality in America is harming our economic growth and hurts our competitiveness internationally.

 

[skeptic llc]

The subject of the thread is income inequality. Check the title, reread the OP. Your inability to even address any of the OP's or my points is noted. Try harder to stay on topic. Literally no one here claimed everyone should go to college and that's not the topic.

ONE of the many points made by the OP is that even the people we want to go to college either can't afford it or are saddled with such debt they don't have the disposable income to buy "skeptic llc's" widgets. Income inequality in America is harming our economic growth and hurts our competitiveness internationally.

Don't obfuscate. You, literal direct quote:

"Good topic. I question this: " In this instance, high inequality means that many people can’t afford to go to college to obtain the necessary skills, thus slowing down economic growth." "

I'm challenging the role of college. Deal with it, you brought it up. There is bold and everything to prove my point.

 

[skeptic llc]

PS - see how my "bold and everything" is playful? Don't get confused, these are helpful guides to comprehension. You (per the bolded above) are all about college, now defend what you (not me) said.

 

[RabidAlpaca]

Don't obfuscate. You, literal direct quote:

"Good topic. I question this: " In this instance, high inequality means that many people can’t afford to go to college to obtain the necessary skills, thus slowing down economic growth." "

I'm challenging the role of college. Deal with it, you brought it up. There is bold and everything to prove my point.

The OP made a comparison.

- Does a third world manufacturing country require more education than a third world farming country?

- Does a first world service oriented economy (the US) require more educated people than a first world manufacturing economy?

The answer to both questions is yes. To be successful with our current economic model we need more people educated. That does not mean everyone, but even the people who should be going to college either can't or are saddled with massive debt.

I know you've obviously got a giant chip on your shoulder because you never went to college and for some reason resent people who do, but as an alleged businessman you should want more Americans with disposable income to buy your products. If we continue the trend of worsening wealth inequality (some 1/4th of Americans work minimum wage), then fewer and fewer people will be able to buy your products, which should concern you.

 

[skeptic llc]

The OP made a comparison.

- Does a third world manufacturing country require more education than a third world farming country?

- Does a first world service oriented economy (the US) require more educated people than a first world manufacturing economy?

The answer to both questions is yes. To be successful with our current economic model we need more people educated. That does not mean everyone, but even the people who should be going to college either can't or are saddled with massive debt.

I know you've obviously got a giant chip on your shoulder because you never went to college and resent people who do, but as an alleged businessman you should want more Americans with disposable income to buy your products. If we continue the trend of worsening wealth inequality (some 1/4th of Americans work minimum wage), then fewer and fewer people will be able to buy your products, which should concern you.

Yeah, Stanford and honors. Seems you are an idiot. I was trying to provide some insight from someone who hires lots of people (and rejects lots of applicants), but then you went into turbo-assuming moron mode. Oh well, bye.

 

[rickc]

Look there will always be income inequality. Some people are just worth more than others.

The problem we have now is much worse than that. The wealthy have stacked the deck in their favor with our bought and paid for government.

Now don't let the right redirect the discussion to the poor. We will always have the poor and society will take care of them.

The inequality that is the problem is between the middle/working class and the wealthy elite. Our middle class hasn't gotten a fair distribution of profits from increases in productivity since before Reagan. The wealthy have taken it all.

The wealthy accomplished this by using right wing propaganda to redirect the blame for the plight of the white working class to minorities, illegal immigrants and liberal politics. They played on those white working class males racist ideology. It keeps them voting republican. The republican party is the party of the wealthy elite. They are the party that has put all the pieces in place to allow the wealthy to accumulate wealth without measure while cutting the middle/working class out of the growth.

 

[jotathought]

The OP made a comparison.

- Does a third world manufacturing country require more education than a third world farming country?

- Does a first world service oriented economy (the US) require more educated people than a first world manufacturing economy?

The answer to both questions is yes. To be successful with our current economic model we need more people educated. That does not mean everyone, but even the people who should be going to college either can't or are saddled with massive debt.

I know you've obviously got a giant chip on your shoulder because you never went to college and for some reason resent people who do, but as an alleged businessman you should want more Americans with disposable income to buy your products. If we continue the trend of worsening wealth inequality (some 1/4th of Americans work minimum wage), then fewer and fewer people will be able to buy your products, which should concern you.

Why is wealth "inequality" a bad thing? Those that succeed make money .. those that don't, accept their current situation and/or rely on government subsidies which produce zero incentive to succeed.

 

[jotathought]

Look there will always be income inequality. Some people are just worth more than others.

The problem we have now is much worse than that. The wealthy have stacked the deck in their favor with our bought and paid for government.

Now don't let the right redirect the discussion to the poor. We will always have the poor and society will take care of them.

The inequality that is the problem is between the middle/working class and the wealthy elite. Our middle class hasn't gotten a fair distribution of profits from increases in productivity since before Reagan. The wealthy have taken it all.

The wealthy accomplished this by using right wing propaganda to redirect the blame for the plight of the white working class to minorities, illegal immigrants and liberal politics. They played on those white working class males racist ideology. It keeps them voting republican. The republican party is the party of the wealthy elite. They are the party that has put all the pieces in place to allow the wealthy to accumulate wealth without measure while cutting the middle/working class out of the growth.

How many Democrat Senators / Congressmen are wealthy? Do Democrats really care about wealth inequality or is it just a talking point to stir up emotion to pass meaningless legislation?

 

[RabidAlpaca]

Why is wealth "inequality" a bad thing? Those that succeed make money .. those that don't, accept their current situation and/or rely on government subsidies which produce zero incentive to succeed.

Some wealth inequality is always going to happen, but when you take it further and further to an extreme, the main block of Americans the rich want buying their products don't have the disposable income to buy those products, which is bad for everyone.

Is there no limit to wealth inequality where you'd see a problem? What if the top 1% has 99% of the wealth someday and the 99% has 1%? They'll be in mad max survival mode and certainly not able to buy the widget you're trying to sell.

Yeah, Stanford and honors. Seems you are an idiot. I was trying to provide some insight from someone who hires lots of people (and rejects lots of applicants), but then you went into turbo-assuming moron mode. Oh well, bye.

5 posts in and you neither addressed the OP, made a point of your own, or addressed any of my points which I presented in good faith. Now you're hurling insults. My point has been made, yours hasn't. Adios.

 

[jotathought]

Some wealth inequality is always going to happen, but when you take it further and further to an extreme, the main block of Americans the rich want buying their products don't have the disposable income to buy those products, which is bad for everyone.

Is there no limit to wealth inequality where you'd see a problem? What if the top 1% has 99% of the wealth someday and the 99% has 1%? They'll be in mad max survival mode and certainly not able to buy the widget you're trying to sell.


5 posts in and you neither addressed the OP, made a point of your own, or addressed any of my points which I presented in good faith. Now you're hurling insults. My point has been made, yours hasn't. Adios.

I'm not in the top 1% and I live pretty comfortably .. Why is making money and being rich a problem? Hollywood? Athletes? etc? Why do those who chose not to succeed and overly depend on government be rewarded?

 

[RabidAlpaca]

I'm not in the top 1% and I live pretty comfortably .. Why is making money and being rich a problem? Hollywood? Athletes? etc? Why do those who chose not to succeed and overly depend on government be rewarded?

We're talking about the income inequality TREND, and how it is holding our economy back from where it could be. That you're happy where you are doesn't add anything to the conversation or address any of the relevant points.

Further, your chosen language that wealth inequality stems from Americans "choosing not to succeed" and "being overly dependent on the government" shows you're not willing to take the topic seriously and have a fundamental disdain for your fellow Americans.

We're being lapped by other countries in many categories and that list grows by the year.

 

[jotathought]

We're talking about the income inequality TREND, and how it is holding our economy back from where it could be. That you're happy where you are doesn't add anything to the conversation or address any of the relevant points.

Further, your chosen language that wealth inequality stems from Americans "choosing not to succeed" and "being overly dependent on the government" shows you're not willing to take the topic seriously and have a fundamental disdain for your fellow Americans.

We're being lapped by other countries in many categories and that list grows by the year.

I have no pity for the lower class who chose to depend on government programs with ZERO incentive to succeed. Why do we focus on the successful business people who own companies and/or work in the stock market, but not those who work for Hollywood or play sports?

 

[RabidAlpaca]

I have no pity for the lower class who chose to depend on government programs with ZERO incentive to succeed. Why do we focus on the successful business people who own companies and/or work in the stock market, but not those who work for Hollywood or play sports?

Ok, so just to confirm you see zero issue with Amazon and Bezos gobbling up entire sectors of the economy, running Mom and Pop, mid-sized and large cap companies out of business and securing multiple monopolies?

No need for concern there right? According to you, wealth inequality can NEVER be bad, and if and when Amazon owns 95% of the economy it will be good for all Americans and we can sing kumbayah. Everyone who Amazon crushed was just a bunch of lazy takers who chose to fail.

Sound stupid? I thought so too when you said it.

 

[jotathought]

Ok, so just to confirm you see zero issue with Amazon and Bezos gobbling up entire sectors of the economy, running Mom and Pop, mid-sized and large cap companies out of business and securing multiple monopolies?

No need for concern there right? According to you, wealth inequality can NEVER be bad, and if and when Amazon owns 95% of the economy it will be good for all Americans and we can sing kumbayah. Everyone who Amazon crushed was just a bunch of lazy takers who chose to fail.

Sound stupid? I thought so too when you said it.

On the flip side .. lower class individuals continue to suck on the government teet with ZERO incentive to succeed. Sound stupid? I thought so to when you only focused on the wealthy who succeed as opposed to those enslaved to government.

 

[RabidAlpaca]

On the flip side .. lower class individuals continue to suck on the government teet with ZERO incentive to succeed. Sound stupid? I thought so to when you only focused on the wealthy who succeed as opposed to those enslaved to government.

Yes, the Mom and Pop companies and other large companies that Amazon gobbled up were just lazy takers looking for a free ride. The more concentrated the wealth the better, right?

Also, I think you radically overestimate how luxurious it is to live on food stamps.

 

[jotathought]

Yes, the Mom and Pop companies and other large companies that Amazon gobbled up were just lazy takers looking for a free ride. The more concentrated the wealth the better, right?

Also, I think you radically overestimate how luxurious it is to live on food stamps.

Considering a majority of food stamps are spent on frivolous items like soft drinks, chips, etc .. sure

 

[RabidAlpaca]

Considering a majority of food stamps are spent on frivolous items like soft drinks, chips, etc .. sure

The majority? I'm going to need a source for that. So in your view, because people have chips and soda, they're living super luxurious and have no reason to work a day in their lives? What a ridiculously incorrect and overly simplistic world you have in your head.

The Mom and Pop store crushed by Amazon wasn't crushed because they didn't want to work. If Amazon owned most of America's business and wealth, there would be dire and wide reaching negative consequences, and you know that, but you're actively choosing to be ignorant.

 

[rickc]

If you notice when the subject of income inequality comes up the right always redirects the topic to the poor. There will always be poor people just like there will always be rich people.

This topic is not about either of them. It is about the middle/working class American. The backbone of America. The largest consumer base in the world.

Since the Reagan administration America's middle class has been in decline. They have not participated in the economic growth that the wealthy have. Everyone knows the reason. Mitch is going to protect the wealth of the wealthy by whatever means necessary.