We are all rich when we are all poor
by drinker on Mar.30, 2009, under Economics, Politics
What fascinates the hell out of me is that some very smart people do not understand that not everyone can be rich. Nor can everyone be poor either. We are rich or we are poor based on the people around us. Both Ted Rall and Cynthia Tucker do not understand how basic everyday economics work.
Although both are correct in criticizing the executive pay of these failing institutions, what they fail to recognize is aside from pulling back a little bit on the pay for CEO’s there will always be both wealthy, rich, poor, and a bunch of levels in the middle. I also made a very conscience decision putting in both wealthy and rich as different levels.
To the primary reason I wanted to post about tonight. The amount of middle class people has not changed in percentage of the population. The primary reason has nothing to do with economic policies or anything that complicated. The middle class are the people who make more than the lower class but less than the rich. The factory workers were never really middle class. The manager at the plant was middle class and the diner owner was middle class. Could the factory worker live comfortably with the two point five kids and a white picket fence? Maybe it really depended on the supply of houses with white picket fences. But that is my point. What does the average person today have in comparison to thirty years ago?
Today the average household owns two cars (with reliability and features Mercedes Benz did not have), a HDTV in one or two rooms, air conditioning in almost every room, cell phones, cable TV with 100 plus channels, a computer with internet, some type of game system, and health care that those in the 1970s could only dream of (even if it’s expensive).
Mean while in the 1970s when according to Cynthia Tucker all was great, the average American made car was complete junk, went 0-60 in 3.4 months, got about 15mpg, and were good for about 80K miles. Air conditioning was something only the rich people in the neighborhood had. A house might have two TVs only one worked. Cable was something for rich people also, if they even had it all. There were no cells phones. Ok that last one is bonus. The personal computer was just a series of blinking lights. Geeks really were geeks. The internet was for even bigger geeks. And healthcare although cheap was abysmal by today’s standards.
So where did all the productivity gains that the rich people ran away with go? It came back to the “poor people” in the form of better stuff for “poor people”. One can argue that all the stuff is not worth it, but when it comes to economics the stuff and the services that people can have does matter. Also if someone did not want the stuff they do not need to purchase the items.
The second point I want to make is directly related to the statistic mentioned in Cynthia’s editorial. I don’t think there is anything wrong with it. I think it actually shows exactly what it should show.
A few years ago, Earl Wysong of Indiana University and two colleagues published a study on social mobility in this country. As outlined in the Economist, a right-leaning British news magazine, they “compared the incomes of 2,749 father-and-son pairs from 1979 to 1998 and found that few sons had moved up the class ladder. Nearly 70 percent of the sons in 1998 had remained at the same level or were doing worse than their fathers in 1979. The greatest social mobility occurred in those families already at the top of the income ladder,” the magazine reported.
So 70 percent of the study did not move up the income ladder? No kidding. Not everyone can move up the income ladder since they have to move past someone else and then that person would move down the income ladder. I would bet the statistics would come out that 1/3 moved up, 1/3 stayed the same and 1/3 went down. Also 66% is really close to “almost 70%”.
The second part of the statement deals with that most of the social mobility was in the upper income brackets. This too can be easily explained without it coming down to something evil republicans did by reducing taxes. In 1979 a college degree was still a premium and those with them came from more affluent backgrounds. While a high school education pre 1979 may have been good enough, after that is simply was not good enough. One needed to have something besides a high school education. So simply showing that those who were affluent made better gains was primarily because they had access to a college education and valued it earlier. In addition it tends to the children of the rich that become the wealthy. The grandchildren become drug addicts and home move porn stars. So it sort of works out in the end.
Did some people become obscenely rich, while others were brushed to the wayside? Yes. Do I wish that people could live in a minimal of comfort even when they are on the lowest rungs of the economic ladder? Yes. And they do, but in comparison to the truly poor in this world they are doing pretty damn good, even if everyone else around them is doing better.
