The nature of capitalism is to have winners and losers, i.e. social Darwinism. Just a few numbers, and I'll let you decide if our capitalistic economy is working in this manner:
- The latest Forbes list of the richest Americans is out, and the wealthiest billionaires increased their wealth by $125 billion in the past year. The top 400 are worth $1.13 trillion.
- In 2003, the income ratio of CEO to worker was 301:1. In 2004, that ratio increased to an astounding 431:1.
- Average worker salaries essentially remain flat with inflation.
My take is that our capitalistic economy remains strong.
2 comments:
Hey Von,
"...My take is that our capitalistic economy remains strong."
Well, inequality is part of the package. Societies that tend to be " flat" and economically more egalitarian also tend to be destitute, agrarian ones where starvation is a periodic fact of life. Ditto for command economies like North Korea
In any event you have a glib, Apples & Oranges comparison going there.
The Forbes list and CEO's draw their wealth from stock ownership, not income, whose value fluctuates with the market. Note that Bill Gates was once " worth" around $ 90 billion ( though he is still far from the richest man in history - that would be John D. Rockefeller, whose net worth in today's money would be about $ 400 billion).
The problem with CEO compenation is that you have an administrative class essentially rigging the game against shareholders by awarding such compensation without regard to performance. In other words, the problem is not the market but the executives having removed their compensation mechanism from the discipline of the free-market -guys losing money every quarter shouldn't be getting $ 100 million - that doesn't compute.
Salaried employess see *real* increases in income when you see a confluence of the following conditions:
a) low inflation
b) static or reduced indexed tax rates for their brackets
c) Tight, inelastic, labor markets that bid up wages of even unskilled labor - usually this means an unemployment rate of the low-mid 4 %
d) GDP growth of 5 - 7 % which makes corporations willing to pay more wages for talent or manpower to gain greater market share.
Education also has a very significant positive lifetime effect both in aggregate and individual terms.
Considering that the global labor market has added the former Soviet bloc, China and India to the labor pool - and immigration is at the highest rate in American history - it's a wonder American wages are not falling ! A function of our high tech comparative advantage I suppose.
postscript:
The benefits of capitalism tend to be seen longitudinally while the flaws are seen in static snapshots - which is what most of us tend to observe anecdotally:
http://www.washingtonpost.com/wp-dyn/content/article/2005/09/20/AR2005092001412.html
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