Richest 2% Own Half the World's Wealth 1330
kop writes "The richest 2% of adults in the world own more than half of all household wealth, according to a new study by a United Nations research institute. Most previous studies of economic disparity have looked at income, whereas this one looks at wealth — assets minus debts. The survey is based on data for the year 2000. Many figures, especially for developing countries, have had to be estimated. Nonetheless, the authors say it is the most comprehensive study of personal wealth ever undertaken." The study itself is available from the World Institute for Development Economics Research.
So what? (Score:3, Informative)
Mind the Gap [paulgraham.com]
Re:Not just true for humans (Score:3, Informative)
Re:Not just true for humans (Score:5, Informative)
The top 1% pay about 30% of all taxes
The top 5% pay about 50% of all taxes
and the top 50% pay about 98% of all taxes
Tax breaks for the rich?! DUH only the rich can get 'em cause the botom 50% is getting the money.
Right idea, wrong math. (Score:3, Informative)
Where'd you go wrong? You forgot to consider that a home isn't like a car -- it holds its value. This means that every dollar you pay toward equity in your home is a dollar gained in the assets column.
Put another way. When you buy a home, you own the whole thing. Your name is on the deed. All $100,000 is assets, and it all belongs to you. You also carry a loan on the side. If you still owe $40,000 on your loan, you've got $100,000 - $40,000 = $60,000 in assets.
Re:What I'd like to see is a comparison (Score:3, Informative)
But that's where such conversations always go wrong. The pie isn't always the same size - it grows through production. We aren't just changing the way the economic pie is distributed, we're producing more pie. And, as you alluded to, we're also putting things like Penicillan into the mouths of dying babies for less than a hamburger costs - and someone from 500 years ago would have considered themselves rich indeed if they could live through an otherwise fatal infection for the cost of a meal.
Re:Not just true for humans (Score:3, Informative)
Re:Pareto Distribution (Score:5, Informative)
But surely it's not hidden in a mattress anywhere. It's out in the economy, making the economy work. The money *is* changing hands. Sure, it's making Rich Bastard wealthier, but it's making us wealthier, too. Maybe it's in a treasury bill, giving our government a loan and working capital to buy things and pay salaries. Or in a stock, which gives a company working capital to buy things and pay salaries.
What would happen to to the US government if all of its bonds and bills were suddenly called in and no one else bought? For that matter, what happens to a company? That money *has* to be there for our economy to work.
Re:Not just true for humans (Score:3, Informative)
If he ever sells his stock, he'd have to pay taxes on it. It's not a free ride by any means.
Re:Missing econ theory? (Score:2, Informative)
Who are you to make that value judgement? You just automatically assume it's bad.
simply take back what was taken from them...American revolution
Theft is theft. I don't remember any stories of socialist wealth redistribution from the American Revolution. Have you actually read the declaration of Independance? It's just about the most libertarian document ever written.
I'm not even going to address the rest of your message. I think your unsupported assertion that an imbalance of wealth leads to revolution is bogus, and all your arguments are based on that.
Poverty can lead to revolution, but an imbalance in wealth doesn't indicate anything about the levels of poverty in a country. Economics is not zero-sum, it doesn't work that way.
Re:The rich are disproportionately heavily taxed (Score:5, Informative)
Do they use more than 18% of the expenditure of State?
If not, on what ethical basis do we justify taking from them what they or their parents have earned and spending it on ourselves?
Because the rich have more stake in the state keeping the status quo intact (i.e. enforcing property rights, repelling foreigh takeover) than the poor. Not to mention many often receive indirect benefits in the form of subisidies, etc. from the government.
Re:What's worse (Score:1, Informative)
If the bank owned the home, and you were paying off the loan they gave you to own it, then if you defaulted, they would end up with possession of the home, including any equity or appreciation in the home (it was, after all, their property that appreciated, not yours). There is an important distinction there.
Re:You act as if this is some sort of problem (Score:3, Informative)
Barbara Ehrenreich called bullshit [nickelanddimed.net]on this attitude. [henryholt.com]
You're wrong about China (Score:5, Informative)
Another thing in China helped redistribute wealth. While in most places the eldest son inherited everything, in China, the property was divided equally amongst all the sons. This meant that "rich" families often became "ordinary" over a few generations unless they can produce one or two men of great ability every generation or so. In fact, this custom was deliberated introduced by the Chinese emperors to reduce the chance of feudalism.
Re:Not just true for humans (Score:3, Informative)
Integrating the DC Component of Wealth (Score:5, Informative)
"The rich get richer" is basically a result of something sometimes called the "risk free asset" by modern portfolio theory [wikipedia.org] aka "risk free rate of return" -- generally the interest rate the government pays to borrow money. In classical economics its called "economic rent" or "Ricardian rent" (after the classical economist Ricardo). It results from systemic growth in the economy -- growth that increases the value of assets that do not increase with increasing demand, such as land. If you shove more people onto the Earth, you get higher land prices but you don't get more land. (BTW: This is the real reason guys like Gates, Bush and Kennedy are for immigration liberalization.) In a natural setting, this corrects itself through die-offs and/or fighting over the land -- or whatever the monopoly at issue happens to be (it could be a monopoly on, say, the right to make copies of an operating system that everyone happens to have standardized on, which is what made the present day's richest man). Governments protect wealth holders from this natural redistribution by taxing things to pay for police, courts, military, and other things that protect nonsubsistence property rights. When this service is paid for by taxing things other than those property rights, you have a subsidy of nonsubsistence property rights.
If you don't tax away all monopoly profits and redistribute it evenly to everyone, then you end up with a class of people who have an incentive to load up the economy with more people, whether through immigration or birth rates, in order to increase the demand for their property. This class can be the private owners of the monopolized rental properties or it can be public officials that reserve to themselves and their special interests the economic rent derived from taxation.
Think of it as signal processing where you don't subtract out the DC component of the signal before integrating. You end up overflowing your accumulators and losing the information you were trying to extract.
The only exception you might make is for intellectual property representing genuine invention of technological utility, and subsistence property rights since people will generally fight to the death to retain their subsistence.
That's why "the money quote" from my white paper says:
Re:Not just true for humans (Score:5, Informative)
You don't even need to read the article, but please at least RTFSummary:
". Most previous studies of economic disparity have looked at income, whereas this one looks at wealth -- assets minus debts. "
It's not income, it's wealth.
So apparently 31.02% of the population owe more than they have.
I don't know about any other countries, but I know that's fairly common in the US, even among middle-class people with good standards of living.
Re:Pareto Distribution (Score:3, Informative)
On a personal level, I live in a beautiful old railcar suburb. I do so because I prefer city living to suburban or country living. I also do so because I like the racial integration that tends to be lacking in the suburbs and the country. (Places that are predominantly white frighten me. White people can be scary and I'm one of them.) This suburb had three grocery stores. One is leaving my state, so we'll be down to two grocery stores from the same chain. This is a middle class city, but likely because of the high number of black citizens in the neighboring inner-city, the parent corporation doesn't see fit to stock these stores well. My wife and I prefer to eat healthy food and typically buy heavy on the produce. The problem is... the produce is always old. We know this because it spoils within one or two days of purchase. Sometimes the stores are also just plain "out" of certain produce for extended periods. Having experienced this one too many times, my wife decided that she would shop once a week at a neighboring suburb (mostly white and about two cities away) grocery store. Quite a few things stood out. Not only do they have better quality produce that lasts longer, but they also have a much wider selection. They also have a "health food" and very well stocked "imported foods" section. Plus the prices tend to be lower. Just as an example, a bag of Tostitos corn chips in the "Family Size" costs about $3.49 at this store. At our neighborhood store (where the incomes of the customers are lower) the same bag is $4.49. A dollar difference between two stores about 30 minutes apart. This is wrong on many levels with the most notable one being that they are fucking with the food supply for many many people simply in the name of profit. I'm guessing the reason for the higher prices where I live is because they are trying to counter a possibly higher rate of theft. But that's only a guess. I'd be far more likely to suspect that the cover story for a little price gouging.
Re:Not just true for humans (Score:5, Informative)
Does that mean that 1% of the richest are not quite the same as 1% of the top tax payers? What happened to the progressive tax system?
It means exactly that. We tax based on INCOME, not WEALTH. If I have one TRILLION dollars in assets, but an income of only fifteen thousand a year, I pay no taxes. And that trillion is pretty much meaningless.
So Bill Gates doesn't pay taxes based on what his Microsoft stock is worth, but rather on what Microsoft pays him (plus what he gets for selling any stock over and above what Microsoft pays him). In his case, wealth and income are totally disjoint.
Once upon a time, the last time but a few (dozen) that we had a discussion that got around to taxes, I went to the IRS website to get their tax statistics. The "rich" (in terms of income, NOT wealth) pay a higher percentage of their income as taxes than the rest of us do. Not an astoundingly higher percentage, but higher. Which is as it should be - a flat tax is an inherently bad idea, just as an extremely progressive tax is a bad idea.
Re:Not just true for humans (Score:3, Informative)
Income tax systems taxes income, not wealth. The top 1% of earners presumably make A LOT less than 30% of the world's income. That said, a progressive tax system is immoral. Everyone should be taxed at the same rate.
Re:Pareto Distribution (Score:3, Informative)
Re:Not just true for humans (Score:4, Informative)
He told about how he went on a radio show, gave this advice, and was ridiculed by the talk show host, who admitted he was shoe stringing it on $100k/year in New York. The talk show host finally gave in and did this. He found he was spending $16,000/year eating out. Some people spend a couple thousand a year on coffee-like substances, when inexpensive or home-brewed varieties can be had for a couple hundred or less. Any regular expense that you incur that doesn't relate directly to running your house or car should be viewed in a similar manner, and decide which is a bigger priority, having that item today or setting the money aside to invest and turn into 5 or 10 times as much money later.
I can imagine paying 3 or 4 thousand a year to cook (excellent meals) for myself and my wife (and soon our children), and finding a much better use of the other 12k dollars. And, actually we do similarly, instead of paying rent and eating out, we eat at home and bought a house three years ago when interest rates were really low. In less than 10 years, we'll own our house debt free, and what we were paying on house payments (or would otherwise be spending on rent), about $7100, will be money we can use to do things we consider fun or invest for retirement, or buy our next house. We'll probably do more of the last two, but some of the former too. Keep in mind that when we executed our house purchase, my average expected income for the next 8 years was around $35,000 in the mid-USA, and we bought a house for $110,000, with my wife quiting her job (planned) to stay at home with our children. I got an unexpected promotion and nearly 40% raise this year, which is making things much easier. I expect that in 30 years, we'll have $5 million in assets divided between 401k, real estate, RothIRA (we pay little in taxes currently, and I'd rather avoid the taxes I can't predict in 30-40 years) and other stock market investments.
In the end, people make their own decisions about their priorities, and choose not to spend a couple dozen hours figuring out how to do more with less, thus making themselves wealthy in the end. The book I was looking at was The Automatic Millionaire: A Powerful One-Step Plan to Live and Finish Rich, available for about $10 on Amazon, but it really comes down to a few simple steps.
1: Eliminate unnecessary expenses, set aside that money, and put it to work for you.
2: Buy a place to live, paying rent makes others rich at your expense, owning your place will be your foundation to future wealth.
3: Have a certain portion of your paycheck directly diverted to your retirement/investment program, and plan the rest of your budget like that money doesn't exist. (This can be done manually, if you have discipline, but it must happen)
4: Profit!!! (sorry, couldn't resist)
As for the grandparent post, houses in New York for very modest places rent for thousands depending on the area/building, I could get a similar place for 1/4 the cost or less in less urban areas. And when you rent, that becomes nothing as far as your balance sheet is concerned, when you are paying on the mortgage, that expense you pay on the principle becomes an asset.
"Ownership Society" and its pitfalls (Score:3, Informative)
The problem with Bush's ownership society push was that people want, set it and forget it. All these accounts (IRAs, Roth vs. Traditional), 401(k) (Roth vs. Traditional), 403(b), SEP-IRA, Simple-IRA, Keogh, etc., confuse people, so they do nothing. There was talk of a simplified retirement planning system, where you would have a business retirement account and a personal one, and consolidate this big mess, but nothing came of it.
The fact is, most people would prefer the "good ole days" which only really applied to the WW II generation, where you work for a company for 40 years, pay your 30 year mortgage off by retirement, had health care covered, and when you retired, collected your pension and social security. When you died, your house was sold and your kids split the sale, and life continued.
The odd effect of this was that nobody obtained "wealth" because they simply had lifetime income streams.
The idea of the ownership society was that instead of just getting payments, you'd accumulate wealth. People would earn returns off this wealth. The problem is, during your lifetime, there is no benefit to this, you just get more headaches. The difference is that when you die, your heirs would receive the wealth, because you owned assets, instead of getting a stream from the pension fund.
One of the things that the right-wing think tanks were proposes was this "neo-conservative" (economic policy, not foreign policy) idea where the government would encourage you to build wealth, but support things like annuities to make it easy. If people convert all their wealth into an annuity at retirement, they keep their "paycheck," which makes things easy for them, but then they didn't really get any wealth because it all goes to the insurance company. Which is why you're seeing the business publications running models where people annuitize part of their wealth at retirement.
The fact is, people will glad trade some "expected return" for a stable return, which leads to no wealth creation. Of course, the politicians turned it into wedge issues, on the theory that the more people had in the stock market, the more they were likely to vote GOP, so the GOP pushed for replacing government guarantees with stock ownership, and the Democrats opposed it. The social security debate was such a travesty because it ignored the actual effects on people, and was only based upon the GOP wanting people to own stocks so they'd become more conservative, and the Democrats wanted people to not own stocks because it would cause them to vote GOP. The joke of the matter was that since it required buying an annuity at retirement anyway, there was no wealth being created, it was simply moving it off the government budget.
For people to acquire wealth, they have to own assets. But people don't want assets, they want the income that the assets generate. So somehow, the market will need to capture this, which you are seeing, as more and more 401(k) plans offer automatic "annuitization" at retirement. In addition, for people to gain these benefits (individual investments with a historic return of 10%, compared to pension funds with a historic rate of return of 8%), they had to take the risk. Even though the average person would be better off, and some would be much better off, some people would be losers.
How much potential "gains" would you trade to know that you never have to worry about housing, food, healthcare, and education. For most people this is a lot, which is wh
Re:You're wrong about China (Score:2, Informative)
If the attitudes towards bankers and traders would have been more friendlier and them be treated as an integral element of society, industrialization would have started either from China or Japan. Because Europe was fragmented and people could move away from oppression, advanced banking system developed itself in Europe and as times showed its' advances it spread over the continent and in the end destroyed last remaining bits of aristocracy in the French revolution as bourgou took the power from the king and land lords.
I know I'm little bit of the chain, but when speaking about feudal times, one key factor which is not usually discussed is the treatment of trading classes.
Re:Bunk (Score:2, Informative)
The wealthy are already efficient. They pay higher tax rates on more money than anybody, and are still 'the wealthy'.
Taxing them heavily doesn't help the poor, simply because it doesn't deal with the reasons they are wealthy or with the reasons the poor are poor.
If you want to change a system, you don't fiddle with its outputs alone. If you want to win basketball games, you don't go to the scoreboard and take points away from the winning team- you work on passing and teamwork and free throws and all the stuff that causes your team to win basketball games. If you want to cure a disease, you don't just treat the symptoms, you deal with the cause. If you want people to be financially equal, you must deal with why they're not- otherwise you're just fiddling with the scoreboard. (and taking their money.) It's like trying to win basketball games without focusing on how to play better basketball.
You can tear down the wealthy all you want, and you can rationalize that as 'promoting efficiency', but it won't make for anything close to equality- because in the end, rich and poor people are that way for reasons other than their tax rates.
Re:Bunk (Score:3, Informative)
is a discussion of the top marginal income tax in the last century in the US. [truthandpolitics.org]
Compare the top rate [truthandpolitics.org] with the wealth gap [economist.com] and I think you'll see an inverse correlation.
In the 50's and 60's, when everyone says the middle class was at it's best place, the rich were taxed around 90% Today its around 35% plus loophole city.
Your analogy is actually right on. You don't change the scoreboard to make your team win. We've done that and that's why there is a problem. If we put the scoreboard back where it was maybe the "teams" will be able to play fair.