What Does the 1% Earn

Movements need slogans, and the 1% vs the 99% has caught attention. I want to dig deeper: who are the 1% that are getting richer relative to the rest of us? Do they earn their tremendous wealth? Why are people so angry at today's top 1%?

So who gets rich, and how? I'll start with the part of the 1% that doesn't upset me.

The Creative and Efficient Rich in a Free Market

Steve Jobs earned his pay. I do believe he should be taxed-and-thanked, it's a virtuous circle all around that past generations built schools and roads and an economy so people like Jobs could leverage their creativity to produce tremendous wealth, a substantial chunk of which should go to the next generation of schools and rails.

There are those who do in fact do things of tremendous productivity. Steve Jobs, or Henry Ford, or past generations of men who became immensely rich in the industrial revolution. Adam Smith said the economy would work wonders if everyone received money equal to their contribution. Steve Jobs was amazingly creative, and if he had $10 of my money for a palace or a yacht, in capitalist terms he'd earned it, he's provided me more than $10 worth of benefit. Henry Ford helped organize workers in new ways so that each worker could produce more: under Ford, a person working one hour actually produced more product, leaving more for himself, more for the consumers, and more for Ford. Steve Jobs or Henry Ford getting rich isn't mere "class warfare" being won by the rich.

Modern Elites Round #1: Mergers, Outsourcing and Rent-Takers

Are Occupy folks wealth-envious? We are more upset with American CEOs than European, with CEOs of the 2000's than the 1960's: Why?

For the last couple decades, there is another kind of elite coming to the fore.

Imagine you are a CEO with workers paid $15 an hour earning your company $30 every hour. You can help those workers produce a better product (think Steve Jobs) or be more productive (think Henry Ford's production lines), so they make $33 with the same hour. These seem like real productivity increases: you've earned your profits. A third way to increase profits is to cut worker pay from $15 to $12 (think Walmart). This doesn't seem like the same thing to me. Paying people less looks like the same thing on paper, but it violates the whole point of Adam Smith's capitalism. The CEO who bargains harder or sends the jobs to China is getting rich without contributing anything to society.

One hundred years ago these folks were called the Robber Barons: making their money not so much by being more efficient in a competitive market, but by ending the competitive market. Mergers rather than creativity.

When we think of capitalists earning vast riches by providing even more vast wealth, we're not talking about Walmart.

Modern Elites Round #2: Wall Street

Wall Street has absorbed a tremendous amount of the productivity of the US especially during the last decade. Supposedly they got so super-rich for moving our investments to where those investments were needed most, and for taking on risks. But the crash shows that this was never true: even before the crash, Wall Street was moving our nation's investments to meet their needs, not to create real productivity.

Wall Street, even before the crash, was being paid (don't use the word "earning") a fortune while destroying value. And the risks were always waiting on the shoulders of the school teachers, not bankers or CEOs.

That wealth comes from somewhere: some worker had to create all the goods and services that are not going back to the people creating the wealth, but to parasites. Investors trying to build factories that employ workers instead find their money leaking into a non-productive class, even on the good years when Wall Street isn't crashing the whole economy.

The idea that this portion of the 1% -- a huge and rapidly growing part of the 1% -- deserves what they "earned" is an obvious joke, one worthy of a peaceful revolution.

Next: Just as Wall Street has been paid tremendously without providing real value, the people creating real value are not being paid what we earn =>


Footnote: No Class War

Steve Jobs is part of the 1%. I do believe he earned, in free-market terms, his astounding pay. He did it in part because of all the teachers, scientists and productive people who either came before or who create a healthy economy today. There should be no class war: Steve Jobs kicked ass, did great things, should pay taxes sufficient for teachers, public works, basic research, etc. He should appreciate his teachers, and happily pay for the next generation of teachers; and in turn we could appreciate his productivity. No class war necessary.

Unfortunately, that's not the world we live in today. Why do we not live in a world of abundance?

Footnote: No Free Market

Not only are we not trying to start a Class War, but what we have now is no "Free Market." When Adam Smith talked about capitalism and a free market, fair competition was what the government was supposed to avoid messing with. That, we most surely do not have today:
Oligopolies where too few companies own too much -- and have too much ability to dominate supermarkets in this example. When companies are earning too much because of too little competition, that means someone else is getting much less of what is produced compared to what a healthy-capitalist free, competitive market would say they had earned. Who gets less because of the lack of free-market competition? Probably, you.

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