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Inequality Kills the Golden Goose

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However, if everyone around you is hurting and stressed due to your crappy location in the societal pecking-order, the number of good influences will likely be greatly reduced and your idea of normal may not be super useful for getting out of poverty. This is how ghettos form and why they are so hard to undo.

Anyway, the third reason for avoiding inequality is economic. Simply put, it's bad economics when a lot of people don't have money to buy stuff. Capitalism relies on people buying stuff. My dollar spent is your dollar of profit.

I'm not sure who said it and can't find it right now but somebody said that "Capitalism is like poker. It's human nature to want all the chips but if you get them, the game is over."

Which is true. We've forgotten some central lessons from earlier in the 20th century. Inequality was peaking in its lead up to the Great Depression and peaked again in the lead up to the financial crisis of 2008 and has actually gotten worse since. This earlier failure of capitalism fed directly into fascism and communism. There is again a rise in right-wing populism in the European countries that are still suffering from the crisis and a reemerging militarism in Japan where the economic situation is still bleak.

One of the main problems has been the continued dominance of a bastardized version of supply-side economics, a type equated with low marginal tax rates and reduced regulations. Prior to that, demand-side economics was employed, an outgrowth of Keynesian economics that tried to achieve full employment as its goal. However, in the 70s came stagflation, the new phenomenon of inflation at a time of little economic growth and high unemployment. Economist Paul Craig Roberts, one of the brains behind supply-side, recently posted an explanation of why it was needed and why it worked in curing stagflation, which I won't go into here.

He also explains why it was not supposed to become the new permanent economic paradigm. Referred to by George H. W. Bush as " voodoo economics" and often known as 'trickle-down economics,' its base concept of reducing all regulations and taxes on 'job creators' was promptly embraced by the political and economic elite as the new model to use since it massively increased their share of the pie at the expense of everyone else. Alongside this was the  off-shoring of manufacturing jobs and the decoupling of wages from corporate profits and productivity gains.

Due to all of this, the consumer spending power required to maintain the required capitalist growth indefinitely is simply not there. Marx had actually predicted this earlier. People tend to get jittery when Marx is mentioned because his ideas of socialism and communism were taken and used to justify such horrible atrocities and authoritarian states. However, it's important to remember that he didn't know how socialism would possibly turn out. No one did, it had never been enacted anywhere. What Marx did understand though was capitalism. He also understood its self-destructive contradictions, which is why he felt socialism would have to be better.

One of the main contradictions was that of Overproduction and Underconsumption. He knew that capitalists would always try to undercut each other by pursuing productivity gains via automation and greater organization efficiencies that would require paying fewer people to do the work. Walmart terminating 1.4 jobs for every job it creates is a good example of this. This means that as more productive capacity builds up, there will be fewer customers able to purchase the goods, and eventually the system will seize up.

On one hand, this may be seen as a good thing considering that you can have fewer people doing the work that used to require more, leaving the excess people to do other necessary work. However, this is only the case if other jobs are available and training and social assistance is there to help them transition. Otherwise you just wind up with more people requiring social assistance from already broke governments and more resources to deal with the societal fallout that comes with unemployment. For capitalism to continue working for the masses, a return to an emphasis on creating demand is necessary, which means redistributing wealth to transition those whose skills are no longer relevant.

Anyway, what is clear is that labor is going to become less and less valuable in the near future. The movement towards fairly divvying up the economic pie needs to really get its act together because this concentration of economic power is also a concentration of political and military power.

Once this economic power is absolute and unified, which it could potentially already be, there will likely be no more chance for the masses to decide how the economic pie is sliced or whether they get a piece.

At that point, whether the Masters of the Universe choose to share it will be entirely up to them.


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25 year-old Canadian student, currently attaining my masters in political science. Work with mentally disabled individuals for employment. Try to be politically involved. A card-carrying member of the provincial and federal green parties of Canada. (more...)

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I'm a young guy and hopefully just ignorant about ... by Adam Smith on Saturday, Feb 8, 2014 at 2:37:07 PM
From one (possibly) young and somewhat ignorant, t... by Ad Du on Saturday, Feb 8, 2014 at 5:32:27 PM
And what is the problem with "inequality" ? How m... by Ad Du on Saturday, Feb 8, 2014 at 5:36:47 PM
It is all pretty confusing. I've lost faith in any... by Adam Smith on Tuesday, Feb 11, 2014 at 6:03:22 PM
Mr. Smith, your namesake did not concern himself ... by Larry Butler on Tuesday, Feb 11, 2014 at 5:07:56 PM
Thanks for the kind words Mr. Butler. Honestly, I ... by Adam Smith on Tuesday, Feb 11, 2014 at 6:45:03 PM