The ratio of spending is a poor metric to measure equality. All it really shows is that the “poor” are getting milked for everything they earn and own. Energy costs, fuel, water, basics like bread and butter, insurance, even doing something nice - all at sky-high prices driven by nothing else but greed. Oh, and farewell to the middle class…
Yeah, that struck me too. Measuring wealth by spending disguises inequality because higher earners have less reason to spend more, and the difference in freedom to choose not to spend more is a large part of the inequality.
There are interesting aspects to the data, but they overstate what the numbers they present tell us about inequality.
It also ignores a similar phenomenon among the poor. Decreased self-supply.
In a rich country this might mean paying for childcare so you can work. Your expenditure has gone up, but you are only better off by the increased post tax income less the cost of childcare. Even worse is paid childcare has substituted for family provided (e.g. grandparents) childcare.
In a poor country it might mean buying food instead of growing it. An industrial worker will buy their food, a subsistence farmer will grow their own. There is a huge increase in expenditure, but they might well end up with a worse diet.
This is not new. The initial workforce for the industrialisation of Britain (the first country to industrialise) was available because of the enclosure of common land forced people to seek work in cities.
> In a rich country this might mean paying for childcare so you can work. Your expenditure has gone up, but you are only better off by the increased post tax income less the cost of childcare. Even worse is paid childcare has substituted for family provided (e.g. grandparents) childcare.
That's a pretty clear illustration of the myopia of excessively quantitative economic thinking. The economist looks at easily-quantified numbers: WAGES - CHILDCARE_EXPENSE = POSITIVE_NUMBER, and concludes "PROFIT! EVERYONE WINS!" But the hard-to-quantify negatives are completely ignored: the poorer relationship between the kids and parents, negative psychological effects on the kids due to day care, etc. That's especially true when talking about things in aggregate.
The point is that the unspent income has significant value.
I earn a multiple of the UK median. Above a lower multiple of the median, the primary increased value I got out of earning more was the freedom to stop thinking about what an increasing subset of things cost. I still need to think about what my housing cost, but I don't know what most groceries cost, because it doesn't matter to me.
The mental cost of detail budgeting, planning, and saving for most smaller costs, as well as the associated anxiety, is something I never want to pay again.
My actual spending thus tells a flawed story about the advantage I have over someone earning less.
Power. Why do you think people who already have huge amounts of money want more? Money is a way of acquiring power.
That is why billionaires typically give money away by putting it in foundations they control (so they keep the power) rather than just giving it to poor people (which would be more effective as people could spend it on what they most need).
power is one aspect but i think it is valid for billionaires to have power.
buying goods is the other aspect and the poor and the rich more or less consume similarly.
i do want to live in the world where money doesn't dictate _consumption_ as much as power. money has to mean something, and its good that it goes into power more than consumption. that means the poor can have a dignified life to buy what they want but they don't get to dictate how money will be allocated.
Marx said that concentration of wealth can be a good thing as rich people can invest their money in capital heavy things, such as factories, whereas poor people tend not to do that.
Despite the common image, Marx was a huge fan of capitalism. He thought it was a huge step forward, and not least that capitalism was an absolute necessity to bring production to a level where he believed socialism would become possible... He just also thought it had flaws that he believed would eventually make it obsolete.
Yeah, typically people don’t understand the point of Marx at all.
He saw capitalism as a natural and necessary step before developing communism.
Hence why most criticism of soviet and Chinese communism is fundamentally flawed, since they tried to develop communism in feudal societies.
FWIW I am libertarian leaning, but it is obvious to me capitalism has obvious defects that must be either compensated for, or be done away with entirely.
Capitalism and socialism is a false ideological dichotomy. Mr. Beat has a good video on this. We live in a mixed economy.
Not to fall into the "communism is when free stuff" trope, but...
Most people like public schools, public roads, public transit, public parks, and public libraries.
The benefits of public goods are well known. This is the whole field of public finance economics.
Market failures are also well-known. Negative externalities, moral hazard, adverse selection etc. Hence carbon taxes, congestion charges, and universal healthcare.
In other words, sometimes free trade capitalism works, other times it doesn't, and it's not a mystery when. Marx's whole spiel about contradictions is wrong and largely throws the baby out with the bath water, so to speak.
The notion of a "mixed economy" is really orthogonal to Marx arguments over capitalism, though it is relevant to other socialist ideologues. To Marx, what mattered was the dominant "mode of production", and the result power dynamic resulting from that. The existence of public services doesn't change that. A socialist system with a free market remains socialist. A capitalist system with public services remain capitalist. Calling either "mixed" doesn't alter what the dominant mode of production is.
As for Marx "spiel about contradictions", all he did was take capitalists seriously on the notion that competition in a truly free market will tend to drive down margins once the market is fully exploited.
One can certainly disagree with his conclusions over the consequences of that - e.g. whether societies will succeed in continuing to mitigate the negative effects, or end up in crises, but the core theory of Marx on capitalism was that competition and markets works as advertised.
The existence of different modes of production is an absurd and false dichotomy. Worker co-ops exist today. People are free to make them, and join them if the co-ops will take them.
And by socialist system with a free market do you mean one where private ownership of the modes of production remains legal, but simply isn't chosen, or do you consider banning private ownership compatible with free markets?
> And by socialist system with a free market do you mean one where private ownership of the modes of production remains legal, but simply isn't chosen, or do you consider banning private ownership compatible with free markets?
I would consider public ownership but not state ownership compatible with free markets. The only essential element for free markets is competition with sufficiently low regulation. Some socialist ideologies are inherently incompatible with markets, some are not. E.g. libertarian Marxism and other form of libterian socialism are, because they reject centralised government entirely.
> All it really shows is that the “poor” are getting milked for everything they earn and own
How are you concluding that? The only way I can see that could be true is if the bottom 50% has shifted their meagre savings to spending in an effort to stay afloat.
I find this to be dubious because the bottom 50% was never saving much at all in the first place. For context, the median income across planet earth is $850 USD _per year._ There's not a lot of room at the bottom for savings.
I think the world you're talking about would be the intra country comparison which bears out what your saying.
What the article is talking about is intercountry comparisons where, for instance, India as a nation now spends a lot more than it used to, and seeing as how they used to have nothing it means they probably have something now.
The thing is that buying a hamburger while knowing you can afford to buy a billion more of them is not the same as buying a hamburger knowing you can't afford another one.
This is as disingenuous as saying that both the rich and the poor consume the same amounts of calories, nutrients, oxygen and water, and hence they are not that different.
The key issue is that money often translates to such things as power and leisure. Prosperity is not consumption - it is the command over power, resources and time.
The poor have to sell their time in order to afford the basic necessities of life; the rich don't have to. So the rich have a lot more free time than the poor and the resources to use it well. The rich simply are freer than the poor, who are not unlike prisoners with no claim over their time.
The rich also get to influence policies to a far greater extent than the poor. In a way, wealth is just stored influence. This in turn helps them perpetuate their privilege. For instance, they can fund narratives that normalize inequality and lobby for lower taxes.
The lives of the rich are also far more secure than the lives of the poor. Many poor people are one major life crisis away from penury. This significantly affects the quality of their lives. Access to more wealth would mitigate this.
One could also flip your argument as follows: wealth is a scarce resource. If the rich already have everything they need to live a happy life at low amounts of wealth, then letting them horde more wealth than necessary is unjustified. Instead, that should be distributed to those in need. This would make no difference to the well-being of the wealthy, but it would help others who need resources more.
>The key issue is that money often translates to such things as power and leisure. Prosperity is not consumption - it is the command over power, resources and time.
I agree with you on this.
>The poor have to sell their time in order to afford the basic necessities of life; the rich don't have to. So the rich have a lot more free time than the poor and the resources to use it well. The rich simply are freer than the poor, who are not unlike prisoners with no claim over their time.
In general, I don't agree at all. Rich are "freer" but they definitely don't work fewer hours than poor on average. In USA the Rich became rich mostly by working.
Over 75% are self made billionaires and for sure these people work more than twice as hard as normal people. The others do normal jobs and I can't really find examples of non self made billionaires slacking off.
>On average, the CEOs participating in the study worked 9.7 hours per weekday and 62.5 hours per week. They also worked on the majority of their days off, on average 3.9 hours on weekend days and 2.4 hours on vacation days.
Poor people don't work as hard for many reasons
1. they don't want to
2. they don't have the opportunity to
3. they don't have the health
But that also does not mean that billionaires have more free time. It's usually not the case, simply because they are more invested in their ventures.
>The rich also get to influence policies to a far greater extent than the poor. In a way, wealth is just stored influence.
I agree but this is a caveat against the fact that the rich and the poor consume equally. Sure they can influence, but at the end of the day they consume the same which is more important for sustenance. Power and influence come higher in the hierarchy.
>The lives of the rich are also far more secure than the lives of the poor. Many poor people are one major life crisis away from penury. This significantly affects the quality of their lives. Access to more wealth would mitigate this.
Agreed.
>One could also flip your argument as follows: wealth is a scarce resource. If the rich already have everything they need to live a happy life at low amounts of wealth, then letting them horde more wealth than necessary is unjustified. Instead, that should be distributed to those in need. This would make no difference to the well-being of the wealthy, but it would help others who need resources more.
This buys into zero sum ideology of wealth. It is incorrect, misguided and a big mistake to think like this.
> In general, I don't agree at all. Rich are "freer" but they definitely don't work fewer hours than poor on average. In USA the Rich became rich mostly by working.
Dont forget about inherited privileges. If work was the primary driver of wealth, we'd see a much more even distribution. I suspect the eager CEOs either want to inflate their contribution (i know plenty who dont) or actually work more because it is their earning and not just salary plus maybe arbitrary bonus.
> Rich are "freer" but they definitely don't work fewer hours than poor on average. In USA the Rich became rich mostly by working.
> But that also does not mean that billionaires have more free time. It's usually not the case, simply because they are more invested in their ventures.
There is a difference between working because you want to, vs working because you have to. The rich have the choice to quit working if they want to and still pay no significant price - the poor don't have this choice. The rich also don't have to put up with disagreeable work, whereas the poor often do.
This is a question of human freedom and dignity - not just of material wealth.
I'd also challenge the notion that the poor don't "work hard". The food delivery guy who works 8 hours a day often in disagreeable weather is arguably working much harder than many rich people.
> I agree but this is a caveat against the fact that the rich and the poor consume equally.
If you consider purchase of political influence as consumption, then your statement doesn't hold. You are only counting the basic necessities of life as consumption - but there are many services that you can purchase as a rich person that poor people cannot.
> This buys into zero sum ideology of wealth.
I'd say that it’s a mistake to treat wealth as either purely zero-sum or purely positive-sum - a false dichotomy. It has both these natures, depending on the level of analysis and the time horizon.
Wealth can grow collectively over time through productivity gains, technological improvement, and better organization of labor. That is the positive-sum aspect, and I don't deny that.
However, at any given moment, wealth is only meaningful as long as it can be exchanged for real goods and services. At the bottom of all such goods and services lie two fundamental inputs: human labor and natural resources. Both are finite as a matter of physics and biology.
Hence while we do see the amount of goods and services ballooning (and hence total "wealth" growing) primarily due to better utilization of human labor and better extraction of natural resources, there is also a sense in which wealth has a zero-sum nature especially in the short term (i.e., several decades, which is relevant for humans).
What is their definition of self made? Zero inherited wealth? I doubt it. People who crossed the threshold? You can do that sitting on investment gains.
CEOs and billionaires are different groups. Those willing to take part in a study are not a random sample. Its a sample sample too. The numbers depend on self reporting.
You are buying into the myth of wealth going to those who create it. Most wealth is accumulated by being on the right end of transfers,and pricing power.
if you think someone with 1B is the same as someone with every month a minus number on their account then you are deluded.
A good measure of prosperity is quality of life, which sadly in our wonderful civilization one needs to buy with money.
And a little note. Billionaires do not eat the same food, do not take the same healthcare, and do not buy similar consumer goods for the most part. Maybe they will get the iPhone, but if you think a poor person can afford an iPhone maybe you also don't really understand what it is to be poor.
Poor people fighting hungerpains working their shit jobs. Poor people suffer from mental ailments induced by the stresses of being poor.
