In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.
The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first less of economics.
– Thomas Sowell
(Video). There seems to be an inordinate amount of discussion about ‘inequality’ in society, even though it focuses only on ratios of financial income between cherrypicked examples. When the social media hordes opine on this subject, there is often a comical inability to distinguish income and net worth. Even worse, when people in positions of power address the topic, there is a fixation on financial inequality, rather than the various other inequalities that exist between people (health and vitality, attractiveness, likeability, physical abilities, cancer susceptibility, communication skills, quality of relationships, the climate where they live, their commute, etc.). Why is the facile metric of financial income ratios between arbitrarily selected strata suddenly a dominant crisis of our age, when by most statistical measures, inequality is far less than it was for the majority of human existence?
The political push behind ‘inequality’ is mostly because monetary assets are the only possession that can be forcibly transferred from one person to another. If one person is much more attractive than another, amputating the former’s nose and grafting it onto the latter’s face as a second nose will make both of them much less attractive than they were before the operation, despite the ‘redistribution’. Sadly, the process of forcible wealth redistribution destroys wealth and social values with much the same effect. Proponents continually refuse to see the evidence of the failure of this system in country after country.
However, there is a different track of financial inequality that is more valid, and where the focus should migrate to. Now that money-creation by central banks has to become permanent and ever-rising, it is absolutely valid to complain about how QE money accumulates in the hands of extremely few people, who then may or may not spend it in a way that diffuses across the economy. The executives and shareholders of the largest banks, as well as the holders of US Treasuries and Mortgage Backed Securities, are disproportionate recipients of US QE, even ahead of other billionaires in other sectors. This not only is unfair, but after QE1, QE2, and QE3, the finite and diminishing effectiveness of this sort of very narrowly concentrated money creation is becoming more obvious. Therefore, in addition to being essential that newly created money be given to individuals, the DUES of central bank money addresses a large portion of the inequality debate, because what can be fairer than every US citizen receiving the same share of the required monetary creation?
Inequality is not best addressed by taxing the most productive, or by conflating assets with income, or by assuming that two people of the same income are equally prosperous if they are at very different stages of life and have very different obligations. The real inequality of this era is something quite different.
The Real Inequality : There are many products and services available for little or no cost today, that were inaccessible to even the wealthiest person from a century ago. These examples are more numerous than people realize (such as the ability to research a topic online in a few minutes, vs. spending half a day at the library to mine various books for information). But as good as such examples are, they do not fully explain how different 2016 is relative to just two, five, or seven decades ago. There is a saying that comes up in futurism circles, which is that “The future is already here, it is just not evenly distributed.” Allow me to present my interpretation of what this statement truly means.
This chart from Max Roser is a byproduct of the earlier exponential GDP growth charts. For most of human existence, the only occupations available to the bottom 99.9% of people were handicrafts, agriculture, construction labor, or military service (usually not by choice). Ordinary people often had to partake in very dangerous work just to earn basic food and clothing, while today the same necessities can be earned in an hour of work within a safe environment. Most individuals with very high IQs, deep musical or artistic talent, or exceptional innovative capacity never got a chance to see if they could earn a living from such aptitudes, if those attributes were even considered valuable at all. This is still true for the billion plus people who earn less than $2/day in the most destitute countries, and their condition is a window to what almost all humans lived like before modern times. Very few people have ever lived in a time and place where they had any chance to monetize their more exclusive, specialized talents.
Starting at the very top, we see that today, there are a select few people who earn over $10 Million per year in careers that could not have existed just a generation ago. Would Oprah Winfrey be a billionaire in any other time, or in most other countries, considering how many enabling factors of hers are exclusively contemporary? Would professional athletes not only earn millions from their sport, but additional millions by ‘endorsing’ products that they themselves may not use? Would musicians be earning millions in royalties for decades after their best songs are released, even from countries they have never been to? We can see that some people are extraordinarily fortunate to be born in the right time and right countries for their talents to be actualized, but what about the rest of us?
You may not be quite as supreme an extractor of modern opportunities as an A-list celebrity or self-made tech billionaire, and fame will always be finite in a way that wealth is not, but lest you think this concept is applicable only to those at the apex, take an inventory of your own career. Is your profession one that either did not exist a century ago, or otherwise pays much more than it used to, due to productivity-enhancing technologies? If you think the answer is no, consider how many of your tasks involve the use of MS Word, Excel, or Powerpoint (or equivalent non-Microsoft programs). Think about how often you communicate with a colleague who might be hundreds or thousands of miles away, via a medium that carries little or no cost of communication. Think about how often you travel, for business, to a country that your home country was at war with less than a century ago.
Now, think back to what professions your grandparents did, both your grandfathers and grandmothers. If you happen to have a grandfather who was an illustrious success, he is just one of the four, and is not representative of the dataset. If you don’t know what some of your grandparents did, they were almost certainly not in a profession that would be considered impressive today. Once you list out what all four did as their primary occupation (most of your grandmothers were housewives), consider how fortunate you are to be born just two generations later, where someone of the same genetics has such a better suite of career choices available to them. To broaden the dataset even further, consider all of your cousins who are common to these grandparents, and assess the professions they are in and their general prosperity levels. You will find an overwhelming rise in the variety as well as quality of professions between the two groups, over just two generations of genetically similar people.
Thus, the real inequality is not one of present income or some other shortsighted metric, but rather one of era. Until recently, only a few skills could be monetized and rarely were they the person’s ‘dream’. In the modern age, a much higher portion of the workforce is able to utilize a wider range of their talents at higher compensation and with great safety. This, more than anything else, indicates how fortunate the vast majority of people in all but the poorest countries are, compared to their ancestors just two or more generations earlier.
Yet, it gets even better, as we circle back to the favorite subplot of this piece, that of exponentially rising prosperity. There are many products, services, and conveniences that are almost free today, but were inaccessible to even the wealthiest people of 40 years ago. Returning to the celebrated smartphone, the device that serves as your telephone is now wireless, and further serves as your camera, music player, calculator, geo-locator, alarm clock, and much more. The peasants earning just $4000/year in developing countries now have a smartphone that is better than what anyone could have purchased in 2006, with the ongoing rate of improvement continuing to amaze. The same goes for many other types of electronic devices.
At this point, a critic will emerge who utters a memorized line like “people don’t eat computers and smartphones, so this progress is overrated”. This conclusion is incorrect, as the processes that create low-tech consumer staple products continue to become more efficient from the implementation of technological stardust. A few graphs from Prof. Perry’s blog depict the trend of price declines in some products that by themselves are low-tech consumer staples. Everything from food, to clothing, to housing square footage, to energy bills, to the cost to travel by either airplane or automobile, has been dropping relative to average household income. Even if the end product is apparently low-tech, the processes that go into producing, delivering, and improving them continue to adopt the latest productivity-enhancing technology, becoming part of the ATOM.
Anyone of a certain age remembers when airline travel was only for the wealthy, cars broke down often and left oil slicks in parking spots, clothes deteriorated more quickly than today, and almonds and cashews were considered expensive for the average household. Most complaints about the inflation seen in basic necessities are either very selective or outright inaccurate, for in reality the price of most staples continues to decline. The only exceptions are invariably from products derived from industries that have concocted a deep entanglement with government to willfully obstruct market forces.
If all of this is not enough to demonstrate that a later a person is born, the more blessed they are with resources, luxuries, and branches in their life script, consider one particularly profound frontier of research – anti-aging and longevity. While this is still a very distant prospect, serious observers agree that there is at least some chance for a longevity miracle treatment to emerge. People spend most of their lives coming to terms with the grim reality of their own finite lifespan, yet now there is the slim possibility that people born late enough might be able to readily reach ages of 110 or higher. Before long, we will see examples of older billionaires pledging most of their wealth towards longevity research in a desperate bid to turn back the clock. Meanwhile, a younger person with no money can simply wait until the treatment is mainstream and inexpensive, with little risk of cutting it too close. An extended lifespan may ultimately be no more than the random luck of having been born before 1970 vs. after 2000, with those in between on the fence. That, dear readers, is the ultimate inequality. Consider the misfortune of those who die just a year before some breakthrough longevity treatment.
Hence, the real inequality, affecting the greatest percentage of people, is one of era. The message here is not to depress those who were born a bit too early to have a realistic shot at living until the age of 105. Rather, that many discussions about inequality today are misguided, incomplete, and seem to be built around an agenda to forcibly transfer wealth. This is, in the age of the ATOM, an obsolete ideology. Under the ATOM transition, when the DUES eventually crosses $100,000/year or more by the 2030s, the distribution of net worth will still not be very different than it is today, nor should it be, given the differences in effort, talent, and enterprise among individuals. Nonetheless, the greatest fortunes will be more tightly tied to entrepreneurship and innovation rather than embedded cronyism, while ordinary people operate from a much higher floor, with a wider range of choice and options than ever before.
This juncture is where the future starts to become more evenly distributed. We are at the point where early adoption of ATOM economics begins to transition to mass-market adoption, if governments reorient accordingly.
Continue to : 10. Implementation of the ATOM Age for Nations