"Rich are getting richer, poor are getting poorer"???

[Michael]

There are quite a few Hollywood celebs, TV stars on rich lists. Tiger Woods will likely be worth $4-5 billion when he's done. Michael Schumacher is worth about $800 million. I disagree with what you said about celebrities not being able to move into mega rich. I believe many of them are already very high in terms of their earning power.

Are the poor and the rich and the middle class proportionately getting richer? In my old stomping grounds, Hong Kong, a new study just came out. There are 77,000 millionaires in a city with 6 million. Their average net worth is $40 million HK, highest in Asia, but these are just the upper/high middle class! The mega rich have seen their wealth go up even more because they own the top companies and the best property.

I don't think all the classes are getting richer proportionately. I think the middle class and even the poor in the US of A have been living beyond their means by using the equity in their homes. Are they really better off if they are borrowing to finance consumption and luxury items? I think not.

I was also not talking about the corporation as an entity. I was referencing that to demonstrate access. Money makes money! If you had the access to money and top fund managers, you could have been in on that youtube deal. If you were poor and unconnected, forget it. I think you will agree with my premise the rich have more opportunities to become more rich.

Yes, I do agree with your premise that the rich have more opportunities to get richer. In reference to the study you mentioned about HK that is rather interesting.

You are right in everything you said, and I agree with you. However, I still believe that studying, in a micro level, individuals that pertain to the 'middle class' will reveal that there is a trend of becoming richer. Maybe I am wrong, but in China--last time I studied it--the middle class is encompassing a HUGE chunk of the classes. I remeber someone made an analogy to a barbell and two weights on the side. The rich are on one side as a 10 pound weight, and the poor are on the other side with another 10 pound weight. The barbell itself, which weighs 45 pounds, is the middle class. It stems all the way from the poor, to the rich. So, in essence, the middle classes is becoming a class that encompasses the rich and the poor, so is there no class? Marx would argue that there is a seperation of classes and the proletariat is the working class, while the bougeosie or the rich and take advantage of the working class. Unfortunately this ideology is pretty much dead in the water but it still has some truths. That's why many countries that have nothing but poverty resort of social theories such as this one in order to put the 'blame' on the upper class. I must admit, I have deviated away from my true purpose in writing a response.

I bolded part of your quote. You said that the relative to the poor and the middle class, they (the rich) are proportionately getting richer. But you also say that proportionately, the rich are not getting richer in relation to the poor and the middle class.

This is neat, little discussion!

You are correct. I am contradicting myself there. Let me clarify, and correct what I was trying to say.

The rich, in my humble opinion, are getting richer by all means, however, relative to the middle class, they are getting richer but the middle class and the poor are also moving up. So, in the end, looking at the whole of the matter grouping together the rich, middle class, and poor, proportionately they are moving upward, so you cannot, speaking collectively, say that the rich are getting richer. However, looking at the group as an individual, you can say they are getting richer. The same goes for the middle class. You can analyze the middle class and see that it is 1. expanding, and 2. getting richer, relative to its older statues.

Do you understand now? I apologize for the misunderstanding.

 

[450SEL6.9]

Do you understand now? I apologize for the misunderstanding.

Yup! After reading your initial statement, I just wasn't sure which point you believed in. It's all clear now.

According to the same study, China has a very tiny percentage of millionaires, but they average wealth is $39m v. $43m for Hong Kong millionaires. China has also not been a member of the global economy for that long so it'll take time for them to really expand their wealth classes. I consider most Chinese a rural/farming class rather than middle class.

I don't really know what to make of the middle class in America because I think there is a housing bubble. People are living vicariously off that bubble. If everyone in the "middle class" bought a house for $400,000 and it's worth $600,000 today, they ought to be getting richer. Correct?

But what if they took that $200,000 profit/equity out of their house and financed their otherwise unaffordable consumption? Say, they all buy a fancy car that depreciates like hell. Are they really better off? I really don't know the answer. I think this is happening in the middle class and even amongst the poor (though not the dirt poor class).

 

[Michael]

Yup! After reading your initial statement, I just wasn't sure which point you believed in. It's all clear now.

According to the same study, China has a very tiny percentage of millionaires, but they average wealth is $39m v. $43m for Hong Kong millionaires. China has also not been a member of the global economy for that long so it'll take time for them to really expand their wealth classes. I consider most Chinese a rural/farming class rather than middle class.

I don't really know what to make of the middle class in America because I think there is a housing bubble. People are living vicariously off that bubble. If everyone in the "middle class" bought a house for $400,000 and it's worth $600,000 today, they ought to be getting richer. Correct?

But what if they took that $200,000 profit/equity out of their house and financed their otherwise unaffordable consumption? Say, they all buy a fancy car that depreciates like hell. Are they really better off? I really don't know the answer. I think this is happening in the middle class and even amongst the poor (though not the dirt poor class).

I wonder, at times, if there were a study to be done on soci-ecnomic habits, I wonder if Americans(multicultural) would be the most irresponsible spenders. As a matter of fact, I have seen, heard, read, and studied that Americans are the most spenders in this world. So, with that said, I guess it is safe to say that the middle class will only grow, because of the market in the US.

You are also right in your assertion about borrowing against their equity. Personally, Americans are in a hurry for everything. I think the market is the reason why, because all these companies are constantly promoting new ideas, software, products, cars, etc. We buy, buy, buy and buy. We cannot sit down and deal with what we have. It is truly a consumers market and we will consume. Look at the fast food chains. That is an American icon. It is everywhere!

 

[SDNR]

I don't agree that all the classes are getting richer proportionately. I say that because I think the middle class and even the poor in the US of A have been living beyond their means by using the equity in their homes. Are they really better off if they are borrowing to finance consumption and luxury items? I think not. I think not.

I utterly agree Ray ...this is most certainly the case ...and it is not just in the USA, it is a major problem throughout the western world.

 

[SDNR]

Did you know that India has a middle class population that is greater than the entire population of the United States of America.

 

[Michael]

Did you know that India has a middle class population that is greater than the entire population of the United States of America.

Well India is the second largest country, in terms of population, so I would presume that this is not to surprising.

I stick by my proportionality theory.

 

[450SEL6.9]

I utterly agree Ray ...this is most certainly the case ...and it is not just in the USA, it is a major problem throughout the western world.

But why is it a western problem, Rob? I really haven't much clue about its reasons.

The Japanese are savers. For instance, they still have a postal savings system in Japan. Japanese people can deposit their cash in various post offices as well as obtain other, albeit basic, financial services from a post bank. The postal savings arm, the post bank, specifically, is called the Yucho.

But why are Americans and westerners spendthrifts? I'm unsure how many westerners are in the middle class because they live off and carry a prodigious amount of debts. This finances consumption that I think they otherwise can't afford. I've said before, household debts in America are at levels seen only just before the Great Depression. Debts must eventually be repaid.

If someone is living and consuming according to a "middle-class" lifestyle, but doing so with borrowed money that they don't otherwise have, does that still make them middle class? Or are they a lower economic class on temporary financial steroids? Again, I really don't know the answer.

 

[450SEL6.9]

I wonder, at times, if there were a study to be done on soci-ecnomic habits, I wonder if Americans(multicultural) would be the most irresponsible spenders. As a matter of fact, I have seen, heard, read, and studied that Americans are the most spenders in this world. So, with that said, I guess it is safe to say that the middle class will only grow, because of the market in the US.

You are also right in your assertion about borrowing against their equity. Personally, Americans are in a hurry for everything. I think the market is the reason why, because all these companies are constantly promoting new ideas, software, products, cars, etc. We buy, buy, buy and buy. We cannot sit down and deal with what we have. It is truly a consumers market and we will consume. Look at the fast food chains. That is an American icon. It is everywhere!

You raise some great points in this post, BMWFREAK. I would love to see a current study on international socio-economic and consumption habits. I can't be certain that the middle class will grow because Americans are spenders. If people are spending money that they have, then the middle class will grow by fuelling the consumer market. If people are spending money they really can't afford to spend, any growth is artificial as that money must be repaid.

 

[SDNR]

There is also an important aspect of "buying a self esteem" and "buying an identity". In a culture that celebrates the individual above society as a whole, many people feel the desperate need to surround themselves with objects that communicate to the world ....there really seems to be a lot of people who are almost devoid of a personality these days -- they use consumer products to create an identity ...but also to create there own little fantasy world of self-delusion.

I sometimes find it sad that we live in a world today where beauty and materialism is prized well above intelligence, wit, dignity, kindness, generosity, and wisdom.

When I look at Hollywood celebrities and Hip Hop artists, it is difficult to think of any really intelligent ones ...most of them are far more concerned with their image, their hair, fashion, publicity etc.. -- where are the great characters, the great eccentrics, the great thinkers of our time? ...why are they ignored today?, while so much time is given to people who cannot even string a coherent sentence together.

 

[SDNR]

You raise some great points in this post, BMWFREAK. I would love to see a current study on international socio-economic and consumption habits. I can't be certain that the middle class will grow because Americans are spenders. If people are spending money that they have, then the middle class will grow by fuelling the consumer market. If people are spending money they really can't afford to spend, any growth is artificial as that money must be repaid.

What about the huge numbers of working class people who have lost their jobs because the West can no longer compete with cheap labour in other parts of the world. In some cases, entire towns of people in the US have lost their jobs when factories have closed down and moved to China -- what will become of these people -- they are the new poor who will buy the cheap imported goods that they themselves used to make in the factories they were employed in -- America's trailer parks might be funny on Jerry Springer, but it is a hell of a way to live ...I wouldn't wish that on anybody.

 

[450SEL6.9]

The buying of self esteem and self identity is someting that I believe comes from America's obsession with celebrity. The west has gone that route and I don't think it is coming back.

I find it disturbing that companies like GM, up to their neck in trouble, find the necessary resources to parade a host of celebrities to "sell" their cars and endorse their products. There was a time when companies tried to drive sales by thinking about how to make a better product and not what celeb we can get to prostitute our product.

Personally, I think the biggest delusion is buying a diamond to show your love for your wife! How did that originate? There's no rule that says no diamond = no love for the wife. It is a marketing gimmick.

 

[Snake Vargas]

Heh. Every time I come back (I'm working these days guys, sorry - I can make it back maybe once or twice a week, but there's 2000 posts waiting..!) I bump this thread again!

Anyhow, good point Rob. The buying of an identity is really quite prevalent now. The advertisers and marketers attribute image and emotions onto their products, which would otherwise be an object of utility in itself. Then, people buy into the image, as they think about how they would like to be. It's a way of trying to show who you are through your possessions, and do it quickly, too. Buying is a lot easier than changing yourself, or letting others know what you are like through getting to know you, and your words and actions.

Also, from this, there's a strange obsession with image. I have read somewhere (I think it was in the blurb or a review of a book or something) that a store that couldn't sell a heap of sweaters raised their price and moved them from a bargain bin to near the usual products. They sold more quickly that way! Thus - perhaps there was nothing intrinsically wrong with the product, just that people who shopped there didn't want to see themselves as cheap, and thus wouldn't buy a low priced sweater. I'm speculating, but not without reason.

How about a Nike t-shirt? Or some other designer t-shirt? Does the logo make it better? I'm not saying all t-shirts are created the same, but sometimes the price of those things are ridiculous. At some point you've stopped paying for the product and are paying for the label, as it were.

Then, on buying a diamond for your wife - well, it's a cultural thing. I can't remember when it originated, but it wasn't always so. Let's not even mention that if you decide to buy only an 'average' diamond (according to your means) that it could be seen as you not loving your wife, if not by her then perhaps by others! However, I say, dare to be different and do it for your own reasons, if you are in such a position.

 

[Snake Vargas]

What about the huge numbers of working class people who have lost their jobs because the West can no longer compete with cheap labour in other parts of the world. In some cases, entire towns of people in the US have lost their jobs when factories have closed down and moved to China -- what will become of these people -- they are the new poor who will buy the cheap imported goods that they themselves used to make in the factories they were employed in -- America's trailer parks might be funny on Jerry Springer, but it is a hell of a way to live ...I wouldn't wish that on anybody.

This has been on my mind lately. I've had discussions about the moral dimension of companies that sack their workers to hire overseas, usually to cut costs and therefore increase profitability.

Is it right that the CEO could well get a $X million bonus for increasing profitability by reducing costs, such as by sacking workers? Sure, the savings are probably greater than the bonus (sadly, thanks to the often large numbers of people they sack), but the morality is therefore all the more lacking. Why is it necessary to offer a bonus? Do CEOs find it hard to live on $5 million or whatever, and need more? Couldn't they have saved the jobs of even 10 workers with that, for a period? Stalin has been quoted as saying (paraphrasing for effect) that a million deaths is a statistic, but one death is a tragedy. When hearing about sackings in the media, the numbers roll off and we move on; but every one of those people is a person like you and me, and they have lives, families and emotions. The companies have a legal right and perhaps even some sort of sickening financial responsibility or mandate to make a profit (for their shareholders), but the social justice aspect of their actions is often sadly ignored. Governments might not be held up as the epitome of social caring, but in my moments of cynicism about the world at large their regulations often the last hope that many have, who would otherwise be 'rationalised'.

This rant aside, there's a global justice to this, somehow. If looking beyond our borders, giving jobs overseas is sort of an unintentional benefit to the workers in foreign lands. Sure, they get paid peanuts, comparatively, and their working and living conditions may be that much worse. But these people, by and large, choose to work in these conditions over either unemployment or other work. Eventually they will then move up, and become the newly affluent. The same cycle will happen to them, since there are enough poor in the world to last a long, long time. The only thing is that people in the companies' home countries generally aren't that amused, and perhaps as a social problem like you said, Rob, then it's an important one.

But we each can do what we can do - if the company does something you don't like, whether this or some other issue, then do something about it. Be prepared to make sacrifices, though it's often not easy. If your bank sacks call centre workers for overseas ones, you could close your account, and let them know. If a company is taking unfair advantage of communities overseas, and you own shares, then sell them. It's easy to think that you don't make a difference, and then continue on.. and perhaps your one action won't make a difference. But the alternative is doing nothing, and then that's a sure way that you won't make a difference.

One more rant, now. I guess it's easy to pick on these 'other' people, these nasty companies and their nasty CEOs. However, when we want to invest and get a 10% return, when we go shopping and become obsessed with the lowest possible price, and when we work and become obsessed with getting the highest pay possible, then what we're doing is affirming, promoting and indeed living out the culture of greed, where we want more. It's this that gives companies a mandate to rationalise as much as possible to make profit. Thus, the sackings, the poor quality, the imported products made in China or whatever. When people are only prepared to pay the minimum, companies can either go cheap to compete, or stick to their guns and hope people can see some sense. Then again, my dilemma is whether paying a higher price necessarily equates to better pay and conditions for workers, and such - essentially, whether the more money I pay ends up distributed fairly to workers and society, or whether it ends up only in the pockets of the bosses.

 

[Imhotep Evil]

found this on Forbes: http://www.forbes.com/home/economy/...-income-population-biz_cx_tvr_1017median.html

Also roberto about new wave of poor taste rich people.
Don't sweat it, it happened before (in Europe so many times).

 

[450SEL6.9]

I like your rant about corporate CEOs, SnakeVargas. However, you are partly responsible for what these guys make. I'm assuming you've bought a share or stock of invested money in an investment/mutual fund.

Personally, CEOs making scandalous amounts of money is a problem that we, as investors, created ourselves. Most stockholders in companies don't bother to vote on what directors are elected. We throw away our proxy forms and allow bad directors to stay. These bad directors end up approving huge compensation deals for CEOs even when our stocks go down! When we all realize that we let the wrong people manage our companies, hundred of millions of stockholders' money has already been paid out. We're all to blame.

 

[Osnabrueck]

Thanks for pointing out that article Imhotep.

So basically - the rich are getting richer, but the poor are also getting richer.

 

[Osnabrueck]

Personally, CEOs making scandalous amounts of money is a problem that we, as investors, created ourselves. Most stockholders in companies don't bother to vote on what directors are elected. We throw away our proxy forms and allow bad directors to stay. These bad directors end up approving huge compensation deals for CEOs even when our stocks go down! When we all realize that we let the wrong people manage our companies, hundred of millions of stockholders' money has already been paid out. We're all to blame.

You're right. CEOs don't make obscene amounts of money in Germany because there isn't the corporate culture there to support such behavior. The CEO as lord and savior is, for the most part, an American (and perhaps British) phenomenon that all investors are part and parcel to.

For the most part, there isn't evidence to support the claim that top managerial talent is worth anywhere near the money being paid today.

 

[450SEL6.9]

You're right. CEOs don't make obscene amounts of money in Germany because there isn't the corporate culture there to support such behavior. The CEO as lord and savior is, for the most part, an American (and perhaps British) phenomenon that all investors are part and parcel to.

For the most part, there isn't evidence to support the claim that top managerial talent is worth anywhere near the money being paid today.

There isn't any real evidence to support that a $100 million per year CEO does a better job of returning value to stockholders than a $500,000 per year CEO. They justify that $99.5 million difference with stupid subjective terms like "relative compensation."

Correct me if I'm wrong, Osnabrueck, but aren't Germans still distrustful of corporations? I'm having a discussion in another thread about a German banker who was blown up in his armoured Mercedes and he was just one of many who have fallen to the same fate.

The pay packages for European and Japanese CEOs are much lower. The "Celebrity CEO" is an American concept that costs stockholders billions of dollars. They compete with each other on things like who has a better golf club membership, who has the more advanced corporate jet.

 

[Osnabrueck]

There isn't any real evidence to support that a $100 million per year CEO does a better job of returning value to stockholders than a $500,000 per year CEO....

Correct me if I'm wrong, Osnabrueck, but aren't Germans still distrustful of corporations?

Distrustful would be too harsh a word. No, Germans are just more pragmatic. In the German corporate culture, talent is still poached for large sums of money, but we're talking mostly about engineers, designers and the like. People who can actually prove their worth in the field of battle.

German CEOs and upper management are paid what they're worth, which is to say that they're paid significantly less than the "power CEOs" of American multinationals and the like.

 

[SDNR]

Also roberto about new wave of poor taste rich people.
Don't sweat it, it happened before (in Europe so many times).

I don't think I said anything about the "poor taste of some rich people" IE ....but you are correct, there is nothing new about some super rich people having poor taste.

In the 17th and 18th centuries, the finest furniture makers in France were commissioned to create objects for the great houses all over Europe. A lot of the furniture made for the aristocracy of Eastern Europe was much bolder and more flamboyant than the furniture made for the French aristocracy -- the French taste was more subtle and refined -- many Parisians considered the tastes of Eastern Europeans (particularly the Russians) to be vulgar and showy.