Wealth Inequality in America - YouTube
People think linearly, though income and wealth accrue geometrically. The differences are enormous, especially over time.
Those who spend all that they earn (or more) are not accumulating the wealth needed to buffer themselves from the vicissitudes of a capital economy. As a result, they accept increasingly poorer deals (can’t afford to be without a job due to the need for health insurance, can’t afford to retrain, relocate, or just relax…). This decreased bargaining power further diminishes their (and their children’s) ability to build wealth, and the cycle continues.
Meanwhile, those who can ensure their own heath coverage, college fees and living costs can bargain more effectively for a higher share of resources from whichever part of the economy will provide it (executive search committees, investment managers, congressmen…). This in turn enlarges the buffer with which they can bargain harder in the future, etc. In this sense, capital not only compounds as an investment, but also compounds as a “risk sink,” enabling more lucrative life choices not available to the less well off.
It’s this second form of compounding that makes the American system uniquely unbalanced. By disconnecting the wealthy from the worst parts of the capital system from which they so ably profit, a different regressive policy is at work: risk accrues to those least able to dispatch it. It is perhaps then unsurprising when the Romneys of the world are shocked–shocked!–that anyone would begrudge them their success or so lament the lot of the less fortunate. If you don’t like your job, quit! If you live in a city with no jobs, move! If you get sick, go to the doctor! This is the language and tone of someone who not only has never eaten at Burger King, but has not faced the real prospect that they or their children might never be able to afford better.