You may be against what is called "Equity", but there are some positive aspects to it as you will see in this blog.
In a prior blog, I defined an index for "equity". It is the ratio between "median" income or net worth and the "average". Just to remind you, the median is that value where 50% of the people are lower and 50% are greater. Average, just adds up the total and divides it by the number in the population. It has to be clear that if a country has a few very rich people, it can significantly raise the average with out changing the median at all. Is that clear?
For most of us, the USA is a great place, but even the USA has been changing and not all for the good. If you have been around for a while, you will notice that we have many more multimillionaires and even billionaires. Did you ever calculate how much the average net worth can change for the USA with the addition of just "one" billionaire? I'll do the calculation for just the "10" richest people in the USA. Their wealth is estimated to be 1,347 billion dollars and there are estimated to be about 93 million families here in the USA. It works out to $14,500 per family. Given that the median wealth is about $50,000, that is an impact of 29%. I did not include all the wealth of those above the median which would have been an even larger impact.
These figures points out even bigger problems. As we have moved our economy to higher and higher technology those few with in our population who can participate in this higher technology, they make many time what the median makes. If you have your eyes open, you can see this happening all around you. If you believe that we should all be paid on the basis of merit, you might be missing a big point. Take the example of adding up numbers on a sheet of paper. If you take 10 people, they will take different amounts time to add up those numbers. The best one might add the numbers 30 seconds while a slowest person may take 5 or more minutes. That means the fastest person is worth 10 times the slowest person. That is what we get with merit alone in this new high tech world.
If you were to just look at the size of the pie, paying the smartest person 10 times as much will produce the biggest pie, but it will make the concept of equity much worse. If you look around, you will see that there are fewer different grocery stores than just 50 years ago. You will see the same with your TV sets and other technical products. Look at the impact of Amazon and you will see that there are thousands of small businesses that are no move. Look at your malls. They are having a hard time competing against Walmart, Home Depot and Lowes. This consolidation is happening all over the place and many of us like it. Notice that small towns are getting smaller while the biggest cities are getting bigger. Why is that? It is the consolidation that I have been talking about. Is it bad? That is the big question.
Well, it is bad. Our whole society is getting more and more brittle. It is like glass that can be very strong, but when hit just right, it can shatter. Our economy is exactly the same. Look at inflation. Most economist look in the rear view mirror for guidance. They learn from experience. That sounds good if the basic ground rules do not change, but they have! They do not take into account the consolidation of the economy that has been going on right under our noses. We are now more brittle and thus the inflation could get much worse than anyone has any experience with. It would be like using your experience driving around the USA while assuming the world was flat. That experience would not help you if you decided to fly your plane to Sidney Australia. Economics and most of us humans think like the world is flat and that is the danger that we now face.
Even if you feel that equity is good, do you also feel that allowing illegal immigration over our Southern border? If you really understand equity, you will clearly see that it makes our equity ratio worse. It is a double factor because big companies like Walmart will get richer and raise the average while the median will actually go down.
If you are trusting that our colleges will prepare your kids for the future, you are mistaken . Most of the soft sciences like economics are based on looking into the rear view mirror as I have explained above. Even the head of the Fed stated that she was mistaken when she said that inflation was only temporary. She is a product of the looking backwards into the rearview mirror rather than looking into the future.
Did you predict that all these new tech companies would grow so fast and the owner would become so rich? No, you did not. You are a looking backwards person too as are most of us. With the current rate of change, it is clear that we all have to change where we look for answers. This blog is just a reminder and wake up call for all of us.
