How does inequality of wealth skew the free market?

Not necessarily.

 

If we give people who have not the ability to be productive, through charity, enough to thrive, then perhaps. But in general, people serve themselves first and others later, which is the most effective way of overall productivity.

 

How are property rights and free interprise, within a fair playing field, imprisonment?

 

80% of all millionaires are first generation. They get there over longterm saving and investing.

Most people with nothing living payday to payday, spend and enjoy all of their earnings now.

This is what liberals do not understand. They just see the results of behavoirs and not the actions that cause them.

 

We need both such sorts of people in order to have such a thing as wealth inequality. If people didn't live payday to payday and spend and enjoy all their earnings impulsively, then the products (iPods, flatscreens, restaurants, alcohol, cigarettes, etc.) that said people spent their money on, would not fund the owners of and investors for the companies that produce said products.

 

It is possible for everyone to live on less then they earn and still buy all of these products. It does not matter how much one earns, they can invest 10% of their incomes into investments and share in the wealth and prosperity.

The problem is that most people will not give up just a few things in order to share in the wealth. That is their fault and not that of the rich.

 

Wealth disparity is the result of personal decisions. Yet, government helps promote this inequality.

Example: FHA and GSE's distort market forces in the housing industry that allow the individual to buy too much house while impeading saving skills. This also leads to higher costs for upkeep, taxes, insurance, interest and utility bills. All of which lower disposable income for investing. This is a huge unintended consequence of improper government intrusion.

The free market demands that individuals pay 20% down on a house. This promotes savings skills. It also forces those who do not have patience to buy less house, which uses less of their disposable income.

In 1970, the average size home was under 1100 SF. In 2005, it was 2000 sf. This is a result of improper government.

 

It won't make me shed a tear to see all these kids that don't even go to college and do nothing but drugs and alcohol and party, die of starvation in the near future when this economic disaster weeds out the poor spenders/earners.

 

Well, I am in support of low government and taxation for a reason.

 

Indeed? But were talking of capitalism arent we? Indeed a pie will get bigger but without equality the consumer is reduced. Weve seen this across the world in capitalist nations with poor income equality - India? China? South America? Africa? all very unequal and all not exactly paragons of innovative drive are they?
See northern europe and northern america where equality has been much better to see more productive economies, thats because of the redistribution.

Indeed why should you produce more if all incomes are communised, but were talking of capitalism? So in that system, why should you consume more if your only going to receive less and less?

 

There are no capitalist nations.

 

MAAT Said: "FHA and GSE's distort market forces in the housing industry . . . . This is a huge unintended consequence of improper government intrusion."
Maat is correct on the matter of, "unintended consequence". However, one could ask if the subprime mortgage crises was a consequence of "improper government intrusion" or "insufficient government regulation". After all, the mortgage banks were never forced to do what they did. But more to the point, a lot of people made a lot of money thanks to the absence of "government intrusion". The truth is: Government guarantees [explicit or otherwise] without government oversight is a bad idea!

Wikipedia Says "Some of the GSEs [such as Fannie Mae and Freddie Mac until 2008] have been privately owned but publicly chartered; others, such as the Federal Home Loan Banks, are owned by the corporations that use their services. GSE securities carry no explicit government guarantee of creditworthiness, but lenders grant them favorable interest rates, and the buyers of their securities offer them high prices. This is partly due to an "implicit guarantee" that the government would not allow such important institutions to fail or default on debt. This perception has allowed Fannie Mae and Freddie Mac to save an estimated $2 billion per year in borrowing costs. This implicit guarantee was tested by the subprime mortgage crisis, which caused the U.S. government to bail out and put into conservatorship Fannie Mae and Freddie Mac in September, 2008."

SOURCE: http://en.wikipedia.org/wiki/Government-sponsored_enterprise

 

If that happens, the profits of these materially wealthy capitalists will go down because people won't be buying their companies' products as often.

 

Well that happens, so they either rely on exports, expansion of credit, or a recession happens. Remember that the logic of what suits any given individual capitalist is not necessarily compatible with what benefits the functioning of the capitalist system. Apple can pay Chinese workers low wages, they dont need to worry whether those workers can by Ipads, they sell them in the west. But overall low wages will = low 'demand'.

 

Capitalists want to lower the cost of labor as much as possible, and this means looking for the most skilled and least demanding employees, and hopefully, hire the least number of employees possible and create the fewest jobs possible. Chinese workers are low demanding because they're desperate for the most part, but not very skilled. But the U.S. government tips them over the edge to go outside the U.S. because of their excessive taxation etc.

But always remember, it doesn't take one rich capitalist to create a company and jobs. A group of many average income or even poor people can invest and work together to do the exact same thing (pool their resources and create a company), and then compete with the rich capitalists and lower their profits.

In other words...fight capitalists, with capitalism!!

 

Ditto many of the remarks here...."It doesn't"

 

I believe it may contribute to any boom and bust cycles due to less efficient circulation of money in our money based markets; and would be the opposite under full employment with fewer boom and bust cycles.

 

Perfect response.

Wealth inequality is every honest person's goal....well, it's everyone's goal, but only honest people admit it.

 

Wealth inequality per se is not necessarily a bad thing. It provides for the concentration of decision making for capital deployment critical to reach efficient scales of production and for the exploitation of hard to reach resources. However, concentrations of wealth beyond that are observed to generate many negative economic effects, especially where speculative markets are in operation. The history of speculative markets can be described through their serial manipulation by interests of great wealth. That this in turn led to the semi-regular collapse of underlying economies, increasing the relative wealth of the already wealthy while impoverishing everyone else is something that attends serious consideration. This cycle was recognized well over a century ago with alarm and continues into today with little respite.

Are we more alarmed or less that those of great wealth periodically wreck the economy, and our lives and livelihoods in their pursuit of purely speculative gains in markets that are meant to reflect the state of the underlying economy of goods and services but in reality reflect the whims of speculators, whose frantic movement of funds overwhelm all markets and grossly distort the price signals of supply and demand. The distortion of prices leads to vast swings in over and underinvestment as producers react to price projections, which are determined more by expected flows of speculative monies than any real changes in supply and demand.

In the world economy today all prices are frantic because there is so much money looking for profit in the shortest possible time, $Billions move into and out of markets in less than a second. Market manipulating trades can be carried out in milliseconds by computers housed in the same data centre as the market computers.

 

Ipads.

 

Your question is backwards. If you ask how skewing the free market has aggravated inequality of wealth, you could just read a few dozen of my posts to find the answer.

 

Except in practice it never works that way.