More Wealth Redistribution To the Rich

[Bruce Gourley]

We've Adam Smith's principle that national economic well-being is tied to wealth redistribution: the greater a nation's wealth gap between rich and poor, the more unhealthy and even ruinous a given economy. Too great a wealth gap, in short, will ruin a nation, according to Smith. America's own economic failings, coming against the backdrop of a wealth gap equivalent to those of Third World nations, mirrors Smith's warnings.

Even before the Great Recession, America's redistribution of wealth to the rich had reached Third World proportions. In 2007, that the 400 richest Americans owned more wealth than the bottom 150,000,000 million Americans (that is, the 400 richest Americans own as much as does approximately 50% of the American population). (The entirety of the article linked above is worth a read; it reveals some eye-popping stats regarding America's widening wealth gap and how the richest of the rich are contributing less and less to America's tax coffers.)

And now the wealth gap is widening even more. As alerted by an article in the Wall Street Journal this morning, the Great Recession is throwing even more money at the rich while taking from the poor. "The incidence of underemployment problems in the fourth quarter of 2009 was 13 times higher among those workers in the bottom household income decile as opposed to those residing in the top decile of the income distribution (20.6% vs. 1.6%)." (). Broken down another way, among the top 10% of richest Americans, the unemployment rate is 3%, while among the poorest 10% of Americans, the unemployment rate is 31%.

The question is, will America's politicians have the backbone to heed Adam Smith's warnings about redistributing wealth to the rich, and take action in time to avert a total economic collapse in America?

[ET]

[Dave Roberts]

Part of the issue here is the export of our manufacturing to overseas locations. In my dad's generation there were manufacturing jobs for most of those who wanted one that were available or there were service jobs supported by the manufacturing sector's income that provided a far better living wage. A man working in one of those could support his family and could often rise into the middle class by buying a home and building equity in what he had purchased. Now, jobs are often with WalMart or Lowe's, and a couple both working there will still be skating on the edge of poverty in many cases. I live in a community that has a 13% unemployment rate, a largely unskilled work force, a declining manufacturing base in which small niche manufacturers are replacing the big employers of the past. Our largest single employer is the Department of Corrections that provides about 2,500 jobs in this county. This means that there are certainly those who have a fair degree of wealth but most of the area is lacking in what is needed. Those who can leave the area, and those who do not face a daunting challenge to find and retain work. It's not a case of being unwilling to work. It's the fact that we no longer have the manufacturing base in this country with its supporting wages to allow the middle class to rise.

[Jonathan]

I just got my 2 copies (2 different editions...one is more annotated than the other) of Smith's "...the Wealth of Nations" back and think that I may have found some of my notes from that econ class from the Fall of '86 or Spring of '87. When I read Bruce's comment about how Smith actually supports his centrally planning position, something just seemed wrong. As I'm digging through my Smith and my notes on Smith and some commentaries that I have on Smith (as an aside, I think that I did waaaay too much study on economics for a student of mechanical and industrial engineering...I do admire folks like Bruce who had the discipline to focus on a single area all the way to a terminal degree). At some point, I'll either say "Bruce was right" or start a new thread correcting the record on Smith.

Now, Mark and other wiseacres can have some cut and paste fun with the above paragraph...

[Mark]

[Jonathan]