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Why? In addition to the reasons other people have already said, a key reason excessive income inequality is bad is lack of demand. The economy doesn't exist if

by pdkl95 10y ago

Why? In addition to the reasons other people have already said, a key reason excessive income inequality is bad is lack of demand. The economy doesn't exist if money isn't flowing, and you need both supply and demand for the economy to work. While [many people * low income] and [few people * high income] should both be able to produce demand, it's important to remember there is a brick-wall limit at the poor end of the curve. This is similar to the flaw in the martingale[1] betting system; you have to stop playing when your cash runs out. When you have to spend every dollar you have trying - and often failing[2] - to pay for basic living requirements, you aren't spending money on the rest of the economy. Expect violence to start when the bottom end of the income curve is pushed low enough that some people starts going hungry. A proper social safety net helps both of these problems. Keeping people in the economy with realistic wages (and/or a basic income or other welfare programs) keeps money flowing through a large part of the economy. It also discourages people from looting your house. Brexit and Trump are warnings; when people are desperate they tend to attack anything they perceive is they problem. Fixing the income problem needs to happen now, so people not only have enough to live, but also have a sense that they have their fair chance to succeed. If the warning signs are ignored... as Mark Blyth said, "The Hamptons is not a defensible position"[3]. [1] https://en.wikipedia.org/wiki/Martingale_%28betting_system%29 https://en.wikipedia.org/wiki/Martingale_%28betting_system%2... [2] https://medium.com/@sarahkendzior/the-minimum-wage-worker-strikes-back-fa4c36eb306b https://medium.com/@sarahkendzior/the-minimum-wage-worker-st... [3] https://www.youtube.com/watch?v=Zzl4B3mrKQE https://www.youtube.com/watch?v=Zzl4B3mrKQE

TheOtherHobbes 10y ago
It's also true there are different kinds of demand. Poor people need a mass market economy. They need the support of huge economic and physical supply chains to create/grow/ship/distribute/sell food and goods. The economy of the rich tends to rely on boutique artisanal goods and services that are more likely to handcrafted, hand-made, and labour intensive - for a very much smaller volume of labour. You can't run an economy if the former networks aren't profitable because they supply essential goods and services to most of the population. They also create employment for large numbers of people. You can run an economy quite happily if no one at all is producing hyper-expensive yachts and one-off handbags. Worse, you can't run the economy of the rich without the economy of the poor to support it. The rich economy only works when it can skim profitability off the poor. If there is no profitability, everyone goes bankrupt.

by pdkl95 10y ago

TheOtherHobbes 10y ago

It's also true there are different kinds of demand. Poor people need a mass market economy. They need the support of huge economic and physical supply chains to create/grow/ship/distribute/sell food and goods. The economy of the rich tends to rely on boutique artisanal goods and services that are more likely to handcrafted, hand-made, and labour intensive - for a very much smaller volume of labour. You can't run an economy if the former networks aren't profitable because they supply essential goods and services to most of the population. They also create employment for large numbers of people. You can run an economy quite happily if no one at all is producing hyper-expensive yachts and one-off handbags. Worse, you can't run the economy of the rich without the economy of the poor to support it. The rich economy only works when it can skim profitability off the poor. If there is no profitability, everyone goes bankrupt.