daenku32
8th December 2010, 08:38 AM
So, real back breaking work creates wealth. That's the general assumption. Obviously you can "gain wealth" or even "create wealth" without actually doing back breaking work. Something that involves being a self-employed programmer, perhaps. Or financial analyst. Or insurance sales person..
But in most general cases it's result of an activity that involves low level workers and the owners of the capital. Think of manufacturing or fast food. In both situations you tend to have a very large difference in the amount of wealth the different types of individuals posses. One argument for this is that the ones with the greater wealth are just better at handling it. However, income is what generates personal wealth, and here is where I see something that I think is already a problem now, and will only become a worse:
While the worker adds X dollars (or Y% increase) to the value of the inputs, their share of this addition is deteriorating.
Let's say that in a reference scenario which is considered "healthy", a $100 increase in the value of the inputs due to the work done is divided so that the worker gets $50, and the capital owner gets another $50. The capital owner then uses their $50 to pay for other external costs. But after doing so, still have enough income to make their venture financially desirable.
But now the market changes, the workers' wages suddenly decrease due to a recession. While the work they do still adds $100 to the value of the inputs, the worker's wages decline. The worker only gets $30 now, while the capital owner gets $70. The capital owner sees the benefit from this (and ignores the long term, because in the long term they are dead, or retired with a large sack of cash) and does not seek to reverse it. While the workers have seen a reduction in their share of the profit, the capital owner has seen an increase and has no incentive to reverse course.
Now the capital owner should however face competition because the venture allows greater profits. But, since so many workers have had too small income to accumulate their own wealth, and current situation causes them to accumulate even less wealth, their access to necessary funds to compete with the capital owner is diminished. The worker still has to compete in a market where large competition exists, but the capital owner does not. The other alternative is other capital owners, but the chances are there are very few who understand the work involved in the venture. The original capital owner is protected from competition. Due to the lack of competition there is no self correcting mechanism and the workers chances of seeing their share of their work's surplus regain its existing share is gone permanently.
So, under the system the workers will only continue a downward spiral as the lack of competition on the top causes inefficiencies and demands for even greater returns on the rapidly increasing wealth of the capital owner. And the only changes you see, with a extremely tiny exceptions, is the occasional move from a capital owner to the worker class, and no movement from the worker class into the capital owner class. The income and wealth divide continues to grow leading to stagnate economy in which the workers starve, while the capital owners believe their success was entirely the result of hard work, and not the structural changes within the society.
But in most general cases it's result of an activity that involves low level workers and the owners of the capital. Think of manufacturing or fast food. In both situations you tend to have a very large difference in the amount of wealth the different types of individuals posses. One argument for this is that the ones with the greater wealth are just better at handling it. However, income is what generates personal wealth, and here is where I see something that I think is already a problem now, and will only become a worse:
While the worker adds X dollars (or Y% increase) to the value of the inputs, their share of this addition is deteriorating.
Let's say that in a reference scenario which is considered "healthy", a $100 increase in the value of the inputs due to the work done is divided so that the worker gets $50, and the capital owner gets another $50. The capital owner then uses their $50 to pay for other external costs. But after doing so, still have enough income to make their venture financially desirable.
But now the market changes, the workers' wages suddenly decrease due to a recession. While the work they do still adds $100 to the value of the inputs, the worker's wages decline. The worker only gets $30 now, while the capital owner gets $70. The capital owner sees the benefit from this (and ignores the long term, because in the long term they are dead, or retired with a large sack of cash) and does not seek to reverse it. While the workers have seen a reduction in their share of the profit, the capital owner has seen an increase and has no incentive to reverse course.
Now the capital owner should however face competition because the venture allows greater profits. But, since so many workers have had too small income to accumulate their own wealth, and current situation causes them to accumulate even less wealth, their access to necessary funds to compete with the capital owner is diminished. The worker still has to compete in a market where large competition exists, but the capital owner does not. The other alternative is other capital owners, but the chances are there are very few who understand the work involved in the venture. The original capital owner is protected from competition. Due to the lack of competition there is no self correcting mechanism and the workers chances of seeing their share of their work's surplus regain its existing share is gone permanently.
So, under the system the workers will only continue a downward spiral as the lack of competition on the top causes inefficiencies and demands for even greater returns on the rapidly increasing wealth of the capital owner. And the only changes you see, with a extremely tiny exceptions, is the occasional move from a capital owner to the worker class, and no movement from the worker class into the capital owner class. The income and wealth divide continues to grow leading to stagnate economy in which the workers starve, while the capital owners believe their success was entirely the result of hard work, and not the structural changes within the society.