This video has gone viral, so it’s likely you’ve seen it already. But just in case you haven’t, it’s worth a few minutes of your time.
No doubt there will be plenty of commentary by people far more knowledgeable than I about the accuracy of the data and economics, and then there will those with political agendas to further who will explain why it’s all their enemies’ fault, and if only they were in charge, you would be rolling in dough.
One critical feature of this video, however, is that we live in a world of delusion, where we neither appreciate where we stand relative to everyone else, nor where all the money actually resides. If it’s not in our pockets, and it’s not in our neighbors, or friends, or family’s, pockets, where is it?
We continue to harp on the American dream. We believe in our hearts in American exceptionalism. We hear that every person should go to college and end up in a corner office with a home, two cars and a chicken TV dinner in every oven. We believe in the promise our nation has made to our parents, us, and our children.
Maybe somebody isn’t telling us the truth? Maybe they’re just stringing us along because we want to believe that if we do it right, play by the rules, put our noses to the grindstone, we will have that fabulous life on Primrose Lane? Maybe people of every political persuasion are voting with their hearts and not their minds?
There may be someone in the top 1% who stops by here occasionally and feels some sense of duty to others to treat them kindly, but more likely not. They’re too busy putting caviar on their dog’s chow and pondering why the people who aren’t in the money haven’t figured it out yet. Not really.
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I have been arguing since the 1980’s that the concept of a middle-class is a statist-corporatist myth. The only difference between the working poor and the pseudo-middle class is two pay cheques.
The video is true, but I think it’s misleading. It’s mainly about wealth, not income. Most wealthy people created or invested heavily in a business, which has grown substantially and is the source of their wealth (see e.g. Google, Facebook, Microsoft, Oracle, Berkshire Hathaway, etc.). Most of their wealth is tied up in these investments and is separate from the net income that they earn.
Those in lower income distributions (and even those in the upper middle class), aren’t saving and investing. As the chart shows, even for people in the upper middle class, we tend to spend what we make, not save it. It’s not until you get to the higher end of the income brackets that two things occur: 1) people start to invest significant amounts of money, which then feeds back as wealth and 2) people have created businesses, which is the source of incredible wealth (see Google et al.)
IRS rules play in as well. Companies can’t expense cash compensation over 1M unless it’s tied to performance (which is still capped at 5-10M or so [I’m not a compensation expert]). So companies give stock and stock options to executives as compensation, which further drives the wealth gap.
Most troubling to me, the focus on inequality takes away from what our true focus needs to be: Why median incomes haven’t increased much for most workers and have actually decreased for people on the lower end of the income distribution. How can we equip these people with the training and social skills to succeed. How can we remove regulatory burdens to enable people of modest means to start businesses and accumulate wealth – that’s what we need to focus upon.
In America, facts have a well known liberal bias.
I don’t believe in American exceptionalism. The laws of economics apply in America just as they do in Zimbabwe. We did become the world industrial power back in the 50s and 60s with a huge middle class, but only because the rest of the world was bombed back to the stone age (and of course we helped.) Since then we’ve been trying to float that boat on credit and one of these days gravity will take over. Americans aren’t entitled to our false middle-class lifestyle, frankly we should be making the same low wages they make doing our skilled jobs in India.
The problem with this video is he is conflating wealth and income. It also assumes that each income quintile has the same distribution of people when the reality is that the population curve is heavily top loaded. Most of what we call the middle class is actually in the top two quintiles on the wealth chart because most of our nation’s wealth is housing, not cash.
This video also does not consider debt which is obviously directly related to wealth. Many living paycheck to paycheck likely has credit card debt (ie., likely negative wealth). Also, let’s not forget about the housing crisis. If your house is worth less than your mortgage, then you have debt (ie., negative wealth). The person who made this video probably has some good points to make, but loses me when he/she leaves all of this stuff out.
There may be someone in the top 1% who stops by here occasionally and feels some sense of duty to others to treat them kindly, but more likely not. They’re too busy putting caviar on their dog’s chow and pondering why the people who aren’t in the money haven’t figured it out yet.
There’s a terrible irony in a man whose almost every tale – and most are very interesting if sad tales – turns on bad behavior based on unjustifiable generalizations who then turns out to engage in unjustifiable generalization himself.
Keep fighting the good fight, Mr. Greenfield. The world needs more like you, even though you’re so wrong on occasion.