Are we creating the right kind of "WEALTH"?
This should be a question people (who are doing startups) should ask themselves.
IMHO, that is why socialist Governments providing education, healthcare, roads and security sound popular to some people. All these are part of wealth that are provided to citizens at low prices.
But in a capitalistic economy, it is left to individuals (entrepreneurs) to provide this services at competitive prices.
One way of looking to solve the problems of the poor and deprived people would be to provide them services of education, healthcare, housing etc. at ultra-competitive prices.
I know it is easier said than done. But it is something worth doing.
When the poor have no money they can't pay entrepreneurs.
When the super-rich have all the money, the super-rich drive up the cost of living. The middle class then must directly serve the interests of the rich in order to get enough profit to afford the higher cost of living.
It quickly becomes uneconomical to sell anything to poor people.
It's a poverty spiral. Uneducated families just get more uneducated without state intervention. Rich families just get richer, driving up cost of living, cornering markets to destroy the free market, and making the poor families poorer in comparison.
When are we going to wake up from this Randian dystopia we're creating??
> When the super-rich have all the money, the super-rich drive up the cost of living.
For the sake of argument, let's assume that the super-rich spend the same or a similar proportion of their income on necessities as everyone else (meaning that they buy more food, more clothing, more housing, etc.). What does this do? It increases the demand for food, clothing, housing , etc. in the area. This is _not_ a bad thing. This means businesses in the area, if they are allowed to, will grow and new businesses can come into existence. For a real world example, look at Apple, for example. Apple employs 13,000 in Cupertino. However, Apple also indirectly creates 70,000 additional service jobs in the area through their direct employment. Are you saying this is a bad thing? This is much better multiplier than manufacturing.
The only issue we run into here is housing. If the area can't accommodate the increase in demand, housing prices will increase. This means owning a business will be more expensive, meaning the costs of everything will increase. This is what we're seeing in areas like SF.
But the thing is, this doesn't just have to be the super-rich who cause this. If you see an increase in demand for living in a specific area for any reason, a similar thing will happen as if a bunch of super-rich move into the area.
Further, the super-rich don't actually spend their money in the same way poor people do. They invest a good chunk of their money and they don't spend in the same proportion of their income on necessities, so they'll contribute far less to the increases in the cost of living than previously assumed.
So this entire argument of yours really doesn't make sense to me.
> It's a poverty spiral. Uneducated families just get more uneducated without state intervention
And this is a completely different topic and again I don't understand for what you're arguing. The government has had a monopoly on education for a long time and has gone to great lengths, in both primary and secondary schooling, to intervene. In many ways, this has driven up the cost of education and driven down the quality. But this is mostly a tangent.
> When are we going to wake up from this Randian dystopia we're creating??
I wouldn't call the Bay Area, in California, in the United States, a Randian dystopia. The amount of regulations and taxes one must deal with in this area is astounding. You even brought up the sad state of public education. How is this Randian in any way imaginable? You're on the wrong end of the spectrum.
> For the sake of argument, let's assume that the super-rich spend the same or a similar proportion of their income on necessities as everyone else (meaning that they buy more food, more clothing, more housing, etc.). What does this do?
Like it or not, changes in wealth for the super-rich seem to have effects on the non-super-rich too. As the richest gain more wealth, the less rich feel even less rich. As they see bigger and nicer houses going up, more expensive cars driving around, etc., the relative quality of theirs is going down. In an attempt to keep up, they spend more, and so on down the socioeconomic ladder. This effect has been called "trickle-down consumption" in a recent study detailed here: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/27/t....
The result is is exactly what you acknowledge later, which is a bit contradictory to your opening assumption: "[T]he super-rich don't actually spend their money in the same way poor people do. They invest a good chunk of their money and they don't spend in the same proportion of their income on necessities..."
People in lower income brackets are spending more money while saving less, and this is in part due to the rising displays of opulence from the upper income earners.
> let's assume that the super-rich spend the same or a similar proportion of their income on necessities as everyone else (meaning that they buy more food, more clothing, more housing, etc.).
This is equivalent to saying "let's assume 2+2=5, so you see that 0=1". You need to revise basic economics.
IMHO, that is why socialist Governments providing education, healthcare, roads and security sound popular to some people. All these are part of wealth that are provided to citizens at low prices.
But in a capitalistic economy, it is left to individuals (entrepreneurs) to provide this services at competitive prices.
One way of looking to solve the problems of the poor and deprived people would be to provide them services of education, healthcare, housing etc. at ultra-competitive prices.
I know it is easier said than done. But it is something worth doing.