The rise of wealth inequality

Wealth inequality is on the rise. Wealth is increasing for the top but decreasing for the bottom.
Average wealth has increased over the past 50 years, but it has not grown equally for all groups. Between 1963 and 2013,

families near the bottom of the wealth distribution (those at the 10th percentile) went from having no wealth on average to being about $2,000 in debt,
those in the middle roughly doubled their wealth—mostly between 1963 and 1983,
families near the top (at the 90th percentile) saw their wealth quadruple,
and the wealth of those at the 99th percentile—in other words, those wealthier than 99 percent of all families—grew sixfold.
These changes have increased wealth inequality significantly. In 1963, families near the top had six times the wealth (or, $6 for every $1) of families in the middle. By 2013, they had 12 times the wealth of families in the middle. - http://apps.urban.org/features/wealth-inequality-charts/
This is in the United States. Wealth inequality may vary by country, but I think it is on the rise all throughout the world.
The labor share has declined.
Focusing on private income, such as earnings and dividends, plus cash government benefits, we see that families near the top had a 70 percent increase in income from 1963 to 2013, while the income of families at the bottom stayed roughly the same. - http://apps.urban.org/features/wealth-inequality-charts/

Basically what is happening is that the difference in wealth between the top wealthiest and bottom poorest has gotten larger and as productivity went up, the share in wealth gained has mostly went to the top rather than the workers that contributed. This is pretty unfair if you ask me. People should be paid by how much they work, and if productivity goes up, incomes should largely go up as well. However, incomes haven't went up with the productivity. Why is wealth and income inequality on the rise? and how can we fix it?

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Is income inequality a problem in your country?

Bi0Hazard: When people argue about "income inequality", it sounds like this child-mentality of "He has so much more money than me. It's not fair!". Well, if you want more money, work harder. In all labor there is profit.

Just be content with your pay. What's unfair is that the harder/longer you work, the more you are punished. The more money you make, the more money is taken from you by the government for taxes. It's backwards and messed up.

Most poor people are poor because they're lazy. That's the truth. Yeah, circumstances happen, life happens, but the main reason why people go into poverty is because of laziness.

Income inequality is not a problem except for people who have an issue with somebody else having a lot more money than they do.

Krazy: When people argue about "income inequality", it sounds like this child-mentality of "He has so much more money than me. It's not fair!". Well, if you want more money, work harder. In all labor there is profit.
"Working harder" is relative. I can dig trenches and work sweating hours to make a living, but is it working harder than someone who sits in an office and makes phone calls? Maybe or maybe not. In our system, you don't get paid according to a fixed system of "more work, more money", it is capitalism, not meritocracy. Capitalism has some meritocratic elements, but is a system of voluntary interactions and unstable (not in the negative sense of being unsustainable) markets. We don't live in literal free market capitalism anyways, it is rigged corporatism. A corporation is able to get a bailout from taxpayer funds ("earning" other peoples money).
Just be content with your pay. What's unfair is that the harder/longer you work, the more you are punished. The more money you make, the more money is taken from you by the government for taxes. It's backwards and messed up.
What if you are not getting paid enough? Are you saying that the top wealthiest are working much harder than poorer people?
The more money you make, the more you can pay. The top paying more in taxes makes sense to me.
Most poor people are poor because they're lazy. That's the truth. Yeah, circumstances happen, life happens, but the main reason why people go into poverty is because of laziness.
There are so many different variables though. Even you would agree that nobody is guaranteed a job, so there are circumstances where people can't get ahead.
The reason why so many are in poverty (mainly in these poor developing countries) is largely because of the lack of access to institutions and markets for these people. The system doesn't always reward those that innovate and produce new ideas.
After all, there obviously is a reason why the United States is so much wealthier than North Korea. The "laziness" idea simply doesn't work, and I don't see the reason for supporting it. It only assumes that meritocracy is absolute and barriers for people are impossible or largely nonexistent. As if we live in such a great system anyways (such a joke).
Income inequality is not a problem except for people who have an issue with somebody else having a lot more money than they do.
Income inequality is rising though. The gap continues to grow, and pretending it isn't an issue isn't going to fix it. Our market corporatism is rigged in favor of the top 1% and multinational corporations.

Wall Street just continues to pump their money to influence the political system to get their way. Corporatists like Hillary Clinton and Jeb Bush are backed by wealthy donors to protect their interests. Crony capitalism is part of the problem, and the top benefits at the expense of the rest.

Bi0Hazard: "Working harder" is relative
Lol, tell that to your boss.

In our system, you don't get paid according to a fixed system of "more work, more money"...
Well then in that case, I'll just work 10 hours this week instead of 50. After all, like you said, I don't get paid more money if I work more. That's ridiculous. Of course you get paid more money the more you work.

What if you are not getting paid enough?
People who are greedy never get "paid enough". It doesn't matter how much money they get, it's not enough.

Are you saying that the top wealthiest are working much harder than poorer people?
What's with you and the "top wealthiest"? I'm saying as a general principle that people become or remain poor because they just don't want to work. They don't like effort. That's why life's hard for them.

The more money you make, the more you can pay.
Pay for what? What did they do?

There are so many different variables though
There are more variables to lazy people than to hard workers. Lazy people encounter more obstacles, more variables, and more barriers. But for someone who has a tough work ethic, the path is made plain for them. It's like magic.

Even you would agree that nobody is guaranteed a job...
The only people who are guaranteed a job are those who live in a completely communistic society. Of course nobody is guaranteed a job. But if you don't have one, then go get one. If you're a hard worker, people will hire you.

The gap continues to grow, and pretending it isn't an issue isn't going to fix it.
I'm not "pretending it isn't an issue", I just honestly don't care if somebody makes a lot more money than I do. I don't care how much they make. I don't need that much money, so I don't worry about it.

Krazy: Here's the thing. Plenty of billionaires are unemployed. They've never worked a day in their life because they can happily live comfortable lives off the interest. Some forefather was fortunate enough, maybe exploited some people, IDK... and the kids can enjoy that wealth and to hell with where it came from. At the same time I've seen "hard workers" fail to find work for all manner of reasons. There's been days when I struggled when I was running a small business - and let me be fair, tax was certainly one thing that I didn't like, because the system seemed in some ways designed to punish the little guys in the world of commerce. Yet I'd say about a hundred people begged me to employ them.

The gap growing is a social issue. Those "lazy" people (many of whom were clearly non-lazy enough to cold call me and beg for work) aren't playing video games or something. Most of them would work if they had the chance, but they don't have a job. If they do, it's a dead end. Who wouldn't want a promotion? I've seen people with plenty of higher education, reduced to working in supermarkets. Others with no qualifications and a mean attitude to their employees become CEOs. I know people who bullied me in school who cheated on key tests, and yet have gone on to be successful people. I don't think I am unique in these observations. Yes there are good leaders, but there are bad, dare I say lazy ones too. And there's this false constructed narrative that effort = pay. I'm moving into a profession right now, teaching - any teacher will tell you how hard they work. Even if only some of them work hard, all of them are paid (at least where I live) an amount barely enough to live on. My parents both earn double what a teacher earns, and yet are barely considered middle-class. They worry about their retirement savings every day, for good reason.

So what does this mass of poor and undervalued people do as the gap widens? They tend to cause social unrest. Hence your high prison population. Ever noticed how many people in prison also happen to be poor? It's not a coincidence. The same trend existed in a big way during the depression. During the apartheid. Most recently, look at ISIS. Big war created a void of jobs among a mass and concentrated wealth among the few. The mass revolted and created the most terrible terror organization in the world today. We cannot allow ourselves to repeat our foolish mistakes.

Wealth and inequality will always be on the rise except when there is redistribution to prevent it. Some, by means of social or economic standing, will always seek to control the means of production (capital). By doing so effectively, wealth is trapped and a classist society forms. This can be traced right back to classical times. The only things that are required for this is:
- Relatively stable currency
- Apathetic government
- Private property, and
- Non-public factors of production

The fix is obvious - allow people to produce what they like. Let them try to be competitive. You could:
- Destroy the currency - this tends to happen naturally when armed groups take over
- Redistribute money via the government to compensate after the fact
- Abolish private property (as identified), or
- Strongly limit types of investment (solving the problem but creating others, too)

I'm all for equal opportunity to work hard & earn a living. That inherently means people need the right to work. Not that this is a government obligation to give them jobs, but by providing them capital, the government gives them chances. Which is why I tolerate my taxes

Krazy: Lol, tell that to your boss.
It doesn't matter who you tell.
Well then in that case, I'll just work 10 hours this week instead of 50. After all, like you said, I don't get paid more money if I work more. That's ridiculous. Of course you get paid more money the more you work.
"More hours" doesn't mean "more work". I can work for 80 dollars an hour and 10 hours a week, and someone else may work at 10 dollars an hour for 50 hours a week. So, a person working for less hours may make more. There isn't exactly a way to verify that one that is making more is working harder than the other, since employers don't compare variables with other workers for a different company. My point is, there isn't a fixed system of meritocracy in capitalism, it is unpredictable markets.
People who are greedy never get "paid enough". It doesn't matter how much money they get, it's not enough.
Maybe they don't get paid enough. The top has much more wealth than the bottom. It is kinda strange to say that the workers are the greedy ones when they lost part of the labor share to the top 1%.
What's with you and the "top wealthiest"? I'm saying as a general principle that people become or remain poor because they just don't want to work. They don't like effort. That's why life's hard for them.
Many do work and are still poor or in poverty. Some can't find jobs. It isn't mass "laziness" that is causing poverty. Many do not need to "work as hard" as others to get "rich" since they have greater opportunities (benefits of being born in a privileged family).
Pay for what? What did they do?
In taxes. It is common sense, the more wealth means more ability to pay.
There are more variables to lazy people than to hard workers. Lazy people encounter more obstacles, more variables, and more barriers. But for someone who has a tough work ethic, the path is made plain for them. It's like magic.
Oh, I see you mean those who are luckier than the others. Good for them, but all people should be able to have access to a decent paying job.
The only people who are guaranteed a job are those who live in a completely communistic society. Of course nobody is guaranteed a job. But if you don't have one, then go get one. If you're a hard worker, people will hire you.
You don't need to be "guaranteed" employment to have mass employment and decent paying jobs. Just knock down much of the barriers and make sure people have access to these jobs.
I'm not "pretending it isn't an issue", I just honestly don't care if somebody makes a lot more money than I do. I don't care how much they make. I don't need that much money, so I don't worry about it.
You don't see it as a "problem". You don't seem to think our current system is a problem.

admin: Wealth and inequality will always be on the rise except when there is redistribution to prevent it. Some, by means of social or economic standing, will always seek to control the means of production (capital). By doing so effectively, wealth is trapped and a classist society forms. This can be traced right back to classical times. The only things that are required for this is:
- Relatively stable currency
- Apathetic government
- Private property, and
- Non-public factors of production
On the rise in what system? Capitalism doesn't inherently create a growing gap of wealth inequality. You can seek to control the means of production but you can't take massive wealth without being a benefit to society. The only way to forcibly take something is with the state (which is based on coercion). Capitalism itself is a system of voluntary interactions.
The fix is obvious - allow people to produce what they like. Let them try to be competitive. You could:
- Destroy the currency - this tends to happen naturally when armed groups take over
- Redistribute money via the government to compensate after the fact
- Abolish private property (as identified), or
- Strongly limit types of investment (solving the problem but creating others, too)
These are disastrous. Destroy what currency? The universal currency in a country?
Redistribute "money"? I am not sure if that is on purpose or if you mean "wealth". Wealth and money are not the same. Redistributing "money" as opposed to wealth would be a disaster.
Abolishing private property is a socialist, communist, or anarchist concept and would be disastrous since it requires an oppressive regime to prevent private property and enforce collective property, and everyone would be subordinate to a larger group, or there would be no concept of ownership in such a society and just possession of a means of production to be used by others.
Limiting investment? As if that is creating all the inequality.

Bi0Hazard: Any system that meets those four conditions will have this problem. So let's take an extreme anarcho-capitalist society. Somebody buys capital or bullies others into giving them capital. Gradually they buy up capital to control most of the factors of production. No doubt others try the same strategy and a capital-elite emerges, what Marx called the bourgeois. So the apathy of "government" (by which I mean democracy, or the people at large) has allowed a system to emerge where the masses are UNABLE to produce anything and therefore earn an income, while the elite are ABLE to produce stuff and therefore make money (eventually, they'll get smart and hire some workers for slave wages, since they control the currency they can do what they like). Once society reaches that point, do you honestly think the lower class (what Marx called the proletariat) will just stand by and do nothing? No, they fight back, and I gave several modern examples before. So this "system of voluntary interactions" has still produced the problem.

There are simple reasons why the four factors are required. Stable currency provides a meaningful medium of exchange. This is necessary for the production chain. In a barter economy, for example, you couldn't have this problem because to acquire capital you'd have to surrender capital, not something virtual like money. You need an apathetic government. There's hundreds of government initiatives that could stop this quite easily. Virtually every state today has at least basic protections against a single person owning too many factors of production. Third you need private property. This means one person can have exclusive rights to money or capital. Without this, hoarding capital is fairly meaningless. And finally you need the factors of production to be non-public. A public good is not a worthwhile investment so people won't produce it. It follows logically that removing these factors solves the problem. You need all four factors for the problem to exist.

admin: The problem is that you assume that this is an inevitable consequence given the four conditions. You use an anarcho-capitalist society as an example, but that is a terrible example. In an anarcho-capitalist society, there would be no universal currency and society would be organized into smaller social groups.
Somebody buys capital or bullies others into giving them capital. Gradually they buy up capital to control most of the factors of production.
Nonsense. I don't know what you mean by "bullies others", but to assume that one person or organization will eventually take most of the capital is bogus in a voluntary society. You can't gain massive wealth in the system without benefiting society, and capital can only be bought voluntarily between the parties involved. Also, the economy is largely controlled by the middle and lower classes, so if an organization that relies on them is not beneficial, they will die off.
There are simple reasons why the four factors are required. Stable currency provides a meaningful medium of exchange. This is necessary for the production chain. In a barter economy, for example, you couldn't have this problem because to acquire capital you'd have to surrender capital, not something virtual like money.
Just one currency? or can it be many different ones spread over a large area?
As for the barter, if I sold something and use the money to trade for something, wouldn't that be almost the same as direct trade? Money operates as a representative of wealth.
A public good is not a worthwhile investment so people won't produce it.
A for-profit organization may not find it a worthwhile investment, but "people" certainly can. A collective in an area may find it beneficial.

This is simply impractical even given the four factors you provided.

Bi0Hazard: I think it's less of an assumption and more of a conclusion. You claim people don't amass capital in a voluntary society. I'd like you to explain the story of every western liberal democracy in the last 400 years then. This was the essential premise of Thomas Piketty's "capital in the 21st century". It is well established that wealth accumulation happens even in spite of progressive regulation, and flourishes without it, as a matter of econometrics. Right now there's a housing boom going on in New Zealand's biggest city. The whole boom is pretty much universally acknowledged to be funded by speculation on assets on the assumption their value will continue to increase by means of more speculation. The average householder in many suburbs earns less than half what their property earns, even before tax (New Zealand has no capital gains tax, making the problem much worse). So we see this capital (land) being moved to the hands of the speculators and money to the people, who might buy themselves a holiday or something with the extra money earned from the more high-value capital. This is one of the many mechanisms provided for by the four keys to my model - there is a stable currency used to exchange exclusive, rivalrous private capital in an apathetic regulatory environment.

I'm not sure what you mean by "control" of the economy. Nobody "controls" an economy. If you're referring to conducting the most economic activity, I'd have to say that's a fairly meaningless metric. If it's controlling the most capital, I'd be tempted to point out that most productive capital tends to generate more money for executives than blue collar workers. That there are more blue collar workers is not relevant - what is relevant is how that system concentrates more wealth in the hands of the wealthy over time.

Money is a medium of exchange, completely virtualized. If all capital had a flat amount of money associated with it, there would be no problem, but the currency would not have a stable value, because capital doesn't. The supply of money would vary drastically according to the supply of capital on the market. Money does not represent wealth therefore - it is a ticketing system for the provision of goods and services, nothing more. Bartering is different because there is non-virtual capital on each end of the transaction. Double coincidences of wants are hard to come by, though.

People certainly do fund public goods through taxes. If taxes were not compulsory then you'd have the cartel problem, where every member of society has an incentive not to pay. The accumulation of capital among the wealthy therefore tends to exclude public goods like street lights. Those tend to accumulate in the hands of the state.

It all boils down to this - governments can either allow the rich to get richer while the poor get poorer, or they can do something about it.

Why does wealth inequality matter? Especially when the quality of life for the poorest people in first world countries keeps getting better?

admin: The poor are not getting poorer though. When I was a kid we went without electricity or food. Now poor kids all have cellphones and free lunches at schools year round.

Not to mention the fact a 12 year old poor kid can just jump online and make $20 an hour easy. Something I could never do

Wylted: They are getting poorer relative to the wealthy. You have to remember economics is marginal, not absolute. Although I know kids who have neither lunches or cellphones.

The problem is ultimately social unrest. Even if in future poor people live well, they'll still hate the rich for having so much more and denying it to them. Right now the world still faces problems like malnutrition and disease. These problems could be easily solved if the world's resources were perfectly efficiently allocated. Obviously the wealthy are a clear group to scapegoat given these facts.

By the way, have you ever actually tried earning $20/hour online? There's 12 year olds on my street who've had to resort to literally opening a lemonade stand.

admin: I have made $10 bottom feeding on fulltilt poker until "black Friday" with all the resources available to teach people how to plat expertly $20 how should be easy, if that isn't their thing there is about a hundred other options. If people hate the rich for hacring more , it sounds like a philosophy problem. As far as malnutrition and disease is concerned the problem isn't how resources are allocated. It's a lack of capitalism. The poor countries tend to be more socialist and the rich countries more capitalist as evidenced by the economic freedom index.

Wylted: Online gambling isn't an infinite money supply. By the same logic you could say people in the yesteryear made easy money by going to a physical casino. The internet has its own Las Vegas, and it is no less shady. People bet, win some, lose some. On the whole people lose money to the house. All gambling is profitable on that principle. I should add that I don't know any country where online gambling is legal for 12 year olds, but I'm sure there is one. It's certainly an exceptional case even that a 12-year-old can own their own credit card.

I see it as a very practical problem. Almost every revolution in history has been against the rich. Meanwhile some of the happiest places in the world also have the least striking inequality. That problem is compounded because the rich oppress the poor by controlling the capital. When only the rich are able to be rich, you disempower people and rob them of their potential. In fact people like to be in control of their own destiny. The four factors causing most of the world's inequality - as I outlined before - all contribute to this. So the people obviously rise up against the rich.

Capitalism is nothing but a means of allocating resources. Economic systems are all different ways of allocating resources - if we assume socialism and capitalism are the only options for a moment, capitalism would be allocation by popular ballot according to existing resources, while socialism would be allocation by a central governing authority. Neither are perfectly efficient. I've said this many times but the numbers always startle me - one-fifth of the planet are obese, and exactly the same amount are malnourished. If the world were absolutely capitalist, those who have more capital would be able to purchase more food. That's not perfectly efficient because the poor have less capital by definition. In fact governments tend to BECOME more socialist in times of hardship or famine, in response to that crisis, as people in democratic nations seek some remedy for their problems.

That having been said, I'm not a big fan of the economic freedom index. I have a problem with how it defines "freedom."

All that being said, if you have no problem with wealth inequality and forever quelling the ensuing social unrest that always follows (ie oppressing the under-privileged) then your logic is largely flawless. I'm just one of those weirdo liberals who believes in equal opportunity for all.

admin: You said that someone or a few would inevitably take close to all the capital given the four factors you mentioned, and I disagree because voluntary interactions don't hoard wealth. Markets distribute wealth themselves, so even with an unequal distribution of resources, the free market allows those who lack moderate amounts of capital to have access to wealth creation. The idea that wealth will inevitably be accumulated to a few in a voluntary system is just plain ridiculous to me. I honestly think it is more a matter of theory and ideology rather than econometrics. You mention Thomas Piketty, who I believe to be flawed in approach, but I can see what your view on this is.
Right now there's a housing boom going on in New Zealand's biggest city. The whole boom is pretty much universally acknowledged to be funded by speculation on assets on the assumption their value will continue to increase by means of more speculation.
A bubble.
I'm not sure what you mean by "control" of the economy. Nobody "controls" an economy.
The consumers largely do. Demand will largely determine the winners and losers. Also, in our modern day, the big banks control the global economy, but that's a different story.

As for money, it is a medium exchange based on the same principle as bartering. Money represents the supply and demand. However, there is inflation and money created out of thin air, so a problem exists with control of the money supply.

It all boils down to this - governments can either allow the rich to get richer while the poor get poorer, or they can do something about it.
I disagree with that premise. Capitalism has a tendency to raise all incomes and can do so with overall stability in income share. I agree that rising wealth inequality is an issue today, but I disagree with your premise.

Wylted: Wealth inequality is a problem when it is unstable. Capitalism tends to rise all incomes, but the wealth inequality issue has the decline in the labor share. The incomes of the rich have risen proportionally higher as compared to the labor income (workers and middle class income).
The poor are not getting poorer though. When I was a kid we went without electricity or food. Now poor kids all have cellphones and free lunches at schools year round.
Given the factor of stable rising incomes as a norm, the poor are getting poorer.
As far as malnutrition and disease is concerned the problem isn't how resources are allocated. It's a lack of capitalism.
How resources are allocated is what an economy is for. So, what you seem to be stating is that capitalism is the most effective means for allocating resources in the most efficient manner.
The poor countries tend to be more socialist and the rich countries more capitalist as evidenced by the economic freedom index.
That is because many of these countries lack the institutions (political and economic) that allow innovation and mass financial success at the benefit of others. The capitalist economies have this, so their standards of living have risen higher.

Bi0Hazard: Markets distribute wealth to those who produce stuff. Giving out wealth to all sounds very much like the opposite of a market to me. To be a producer, you need capital. To lack moderate amounts of capital, therefore, means lacking a moderate amount of money in a market-based economy almost by definition. Of course there are many forms of capital (ie a person's time, skills and energy) with varying amounts of liquidity, but the principle is simple - when a few control more capital, they control more money in a market economy. The four factors I mentioned are required for that process to actually work. I'd be interested, however, in how your version of the invisible hand distributes profits to all people such that they have sufficient access to capital. I certainly have never seen that working in practice.

To be clear - I mention Piketty's work in the context of its econometric analysis (ie that capital has indeed tended to be accumulated), not its conclusions on the basis of that research. You yourself concluded this in the very first sentence of the OP so I don't see the need for argument on that point.

You still don't really define what you mean by "control." If your argument is "who earns money and who doesn't" I'd say that's a very simplistic view. Are you in control when you choose to buy from the supermarket? Or are you doing that because you cannot afford the alternative? Therefore your employer is controlling you (going by your logic). I don't really think either option sounds right. I tend to think of economies in terms of power relationships, not control. But if you want to take an absolute freedom analysis into it, I'd suggest it's you who's being philosophical/idealist as opposed to realistic about it. The average consumer doesn't buy from Wal-Mart because they want to support billionaires, they do it because they want to get some groceries.

The very existence of bubbles necessarily proves that money doesn't perfectly represent supply and demand. Inflation, fiat money, sticky wages, fractional reserve banking and about a million other things prevent that. The big question for me is whether money can be always used to readily acquire capital. The existence of a supply curve proves that it can't. So when you exchange your car for money there's no guarantee you'll get a like amount of capital in exchange. In fact inflation virtually guarantees that you won't.

It's not capitalism that has a tendency to raise incomes. All economic systems do that over time (how much time, of course, is another question). What raises real income (on a macro level, ie not just in one industry) is technology. You can funnel money any way you want around an economy and aggregate wealth (as measured by accumulated capital) will not change. But when you invent a new production process, for example, to make cotton-picking easier, suddenly supply of cotton shirts increases and people can finally buy clothes to wear. The only other thing which is arguably a determinant of real income is trade, although I consider trade to be a form of technology. The question is therefore if capitalism is more conductive to technological developments (or trade policy). Which is almost a whole other discussion in and of itself. The point is that it's important to understand the mechanism by which real incomes tend to rise over time.

When I say "the rich get richer while the poor get poorer," I am speaking of relative wealth. A greater proportion of the capital in society is controlled by the wealthy over time. That's the same premise I explained a few paragraphs ago that we actually both agree on. If you feel that this is not inherent to capitalism, then there are three other factors that can explain that phenomenon. I'd be interested to know what other factor you believe can potentially account for a lack of the problem given the circumstances.