With the World economic forum having just taken place in Davos last week, I'd to address some points concerning economics and inequality.
The poor and the rich
The gap between the poor and the rich has expanded dramatically in the last 30 years, economists like Thomas Piketty (author of "Capital in the 21st Century") say. They also say that this gap is a problem that has to be addressed.
The solution Picketty and many others propose is wealth redistribution by the means of charging up to as much as 80% marginal income tax and additionally a 10% wealth tax.
Picketty even admits, that this won't help the poor much. The reason for this immense taxation is to bring inequality or "the gap", down.
Why should people care about inequality?
If the word were a zero sum game, whch means someone's gain would be a loss to somebody else, then we should be increadibly concearned about inequality.
A zero sum game would mean othing new would be created or added and thus the only way to gain would be by taking, which is exactly what a large percentage of the world thinks, is the reality.
But is it true? Let's look at the facts:
250 years ago 98% of people were poor. We were farmers and we ate what we produced, worked all day and our life expencancy back then was 39 years. Most children didn't live to see their 10th birthday.
Meanwhile the poplation has grown immensly and the west and some other parts of the world have become a lot richer. But that wealth was not created at the expense of someone else. The poorer areas did not become poorer, because others got richer, they just stayed at the same level.
The iPhone example
When someone buys an iPhone for $300, it is worth more than $300 to them. It adds more value to their life than the $300, so they choose to buy it.
To Apple it is worth less than $300, they make a profit.
The buyer is better off and Apple is better off. Yet, inequality increased the buyer is poorer by $300 and Apple is richer by $300.
What economists are missing
Economists just see money leaving someone's wallet and going into someone else's. They don't consider the value a product adds to someone's life.
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