Tuesday, 18 February 2014

QUOTE OF THE DAY: On the gap between rich and poor

“The poor are not poor because the rich are rich.
The two conditions are generally unrelated.”
- Robert Samuelson, from his article “The Poor Aren't Poor Because the Rich Are Rich

Discuss…

31 comments:

  1. I agree in theory and in a state of laissez faire capitalism. Under crony capitalism, the rich exercising pull via the mechanism of government CAN have a substantial effect on the poor's inability to create wealth and raise themselves from poverty. At the very least, it can be demoralising.

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  2. @Greig: Yes, true enough. Under central banking and mixed economies, the Cantillon Effect and cronyism reward moochers. Astonishing then that opponents of "inequality" are generally in favour of both.

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  3. The poor are poor. The rich are rich. To even ask a question as to whether this is desirable or changeable concedes the argument to the leftists

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  4. I have several friends who were poor and decided that was an undesirable state of affairs. Now they are rich men. Seems they worked very hard...

    "The poor are poor for a reason."

    AMit

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  5. ""The poor are poor for a reason."

    I agree!

    There will *always* be a gap between rich and poor. Why?
    Because *people are different*.

    Different skills, abilities, motivation levels (not to mention luck).

    It is really up to *each individual* to do what they can to fulfil their potential. Governments will **never ever** come remotely close to eliminating the rich-poor gap *except* by making everyone poor (which would probably please the left enormously).

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  6. Thor

    About "luck". It has been said, "You make your own luck." In my experience this often seems to be so.

    Amit

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  7. Quote of today: (well paraphrase)

    Kathryn Ryan: Mr Key you said WFF was "communism by stealth". Why haven't you changed them.
    Key: lots of countries have those polices
    Kathryn Ryan: communist countries Mr Key.

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  8. Are you saying there's no such thing as luck Amit? How do you know?

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  9. its all very poetical Mr Peter Creswell you quote that the poor are poor because not.
    My wife works in the restaurant for $NZ11.
    Suck that, and wax lyrical about that my friend.
    Can you tell me more that I do not know about the poor, my good brother tell me more ,
    and not Anne Raynd ,
    please don't give us Marixism reversed before you die,
    otherwise your life will have been for nothing

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  10. Paul Scott

    If your wife wants more than $11 per hour then she needs to find a job that is worth more than $11 per hour. Of course, the assumption is that she has the capability to actually undertake such a job successfully & to a high standard.

    Amit

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  11. @Chaz - There is such a thing as luck. But almost everyone has a mixture of good and bad luck in their lives, and it's how they respond to those ups and downs that largely determines their success.

    And even if someone is poor due primarily to bad luck - the message of the quote still stands. The rich being richer does not (generally) make the poor poorer. If anything the relationship is the opposite, the obvious example being that the poor in western countries are in a far superior position to the poor of the 3rd world. Or consider how much richer most of our lives are from the innovations of people like Bill Gates and Steve Jobs...

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  12. Mark

    The reason poor people are better off in developed countries is due to govt initiatives such as minimum wage laws. Corporations generally don't pay people a living wage out of charity or decency.

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  13. "But almost everyone has a mixture of good and bad luck in their lives..."

    Yeah, that orphan in the Central African Republic has the same amount of luck as Bill Gates' kids. He just didn't use it properly.

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  14. It’s not luck; it’s you. If you want the details, buy the book.

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  15. 'You' are a product of 'nature' and 'nurture'. Both are outside of your control i.e. luck. Any book that refuses to acknowledge this must have a moron for an author.

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  16. @Scott C.: Nonsense. Here's the way philosopher Tibor Machan suggests you think about it. Nature and nurture together give you your talents, your personality if you like. But character is what you make of them. Character is all.

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  17. "It’s not luck"

    What would you call being an orphan in the CAR then? Poor choice of natal circumstance?

    That book sounds suspiciously like the Secret to me.

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  18. @ Chaz

    The context I took for granted was the western world. Being born into a country where there's a significant degree of freedom and respect for property rights. But I suppose you can't take anything for granted when conversing with someone who's probably arguing in bad faith, possibly trying to rationalise their own failings.

    Yes, an orphan being born into the CAR is unlucky. But the only way to help them, and make luck less of factor in their life is globalisation, capitalism, freedom, property rights. All the things you probably don't like. Another necessary ingredient is respect and admiration for those who have achieved something and grown wealthy as a result. Ironically, by attributing their success to luck you're promoting bad ideas that ultimately make luck more of a factor that it should be.

    @ Jeff

    The fact you can see only two possible causes of high wages - gov't force versus charity - tells me you must have a very malevolent view of the world. You can't escape the notion that your success depends not on what you do - but on what others do to you. High wages are paid because workers are in a position to demand it in a competitive labour market. They acquire the skills needed by employers, and employers are able to engage that labour productively in a way that makes the business money. If you have any doubt about that, then try implementing a high minimum wage in the CAR and see how far that gets you.

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  19. @PC

    I can see why people would want to believe that argument, but you can't separate your 'character' from your nature and nurture. Neuroscience has proven Tibor's (and Aristotle's) view on free will to be optimistic at best.

    @Mark

    Chinese employees have no hope of being paid as much as their counterparts in the developed world no matter how much more productive they are. Why? because their employers are free to pay them as low as the employment market dictates. Which is fuck all. Your benevolent view of employment doesn't stack up.

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  20. Thanks heaps for the passive aggressive response, Mark.

    "But the only way to help them, and make luck less of factor in their life is globalisation, capitalism, freedom, property rights."

    How do you know this is the only way to help an orphan in the Central African Republic?

    "Another necessary ingredient is respect and admiration for those who have achieved something and grown wealthy as a result."

    Why is this a necessary ingredient, and do I need to admire those born into great wealth and privilege or just those who have according to some standard you haven't specified "achieved something"?

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  21. Mark

    Arguing in bad faith is exactly what is happening. Look at this coment, "That book sounds suspiciously like the Secret to me." Why yes, of course, don't bother reading the book when it can be damned without going to the bother of reading it. Don't be wasting too much of your time trying to educate that sort of person. Such creatures do need to do their own reading PRIOR to criticising that which they know vanishingly little or even nothing about. Nor ought they to be allowed to expect others to spoon feed them.

    You are right in identifying that the way to help the poor is by way of globalisation, capitalism, freedom and property rights. I would add that it is not possible to help the poor by stealing resrouces from other people.

    Amit


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  22. Scott

    Of course, that's it! You utter genius! There is nuture and there is nature. So employing free will to make a decision is but an illusion, as it has all previously been set in place by nuture and by nature. Thus there is no free will- not really. Neuroscientists have proven it! There is nuture and there is nature which predetermine what you are going to do. Inescapable!

    .....and you are not an utter genius after all. You are merely a drone, a cipher, an empty idiot, a puppet that is animated by nature and nuture. After all, you can't be receiving credit for something that was completely beyond your control altogether! You can't be held responsible for the consequences of anything you do or say- nuture and nature did it!

    As for this, "Chinese employees have no hope of being paid as much as their counterparts in the developed world no matter how much more productive they are." Either you are telling lies or you are ignorant. I have a friend in China who some 6 years ago joined a business of manufacturing kitchen counter tops. He is in a workshop where he and, more recently, some of his family busy themselves cutting and polishing granite. Each of them earns around three times what they'd be able to make in NZ doing the same thing. That's one example, there are others. Your argument is unsustainable and is borne of bigotry and racism. Must be you got it from your mother's milk (that's the nuture part of you at work).

    Amit

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  23. Thanks heaps Amit!

    "You are right in identifying that the way to help the poor is by way of globalisation, capitalism, freedom and property rights."

    Why is it the only way? Are there no other ways? How do you know this? Why do you think asking you questions to try to understand the basis of your views is "arguing in bad faith"? Referring me to a book that sounds from the blurb like The Secret simply isn't helpful. If you can't explain why it is you have views, which you must admit are held by a tiny number of people, perhaps it's time to reappraise.

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  24. Amit

    If you can provide evidence to support your claim of a Chinese employee getting paid three times what they would make in NZ I'm sure everyone would be fascinated to see it.

    If you were a rational person, you would accept that nature and nurture are indeed all there is. Otherwise you are making the same argument and the same logical fallacy that religious people make in favour of free will.

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  25. @ Scott C
    "Your benevolent view of employment doesn't stack up".

    You seem to be confused about my point - or deliberately misrepresenting it, but I'll give you the benefit of the doubt.

    There's no benevolent deity that assures everyone's pay is exactly proportional to their effort, regardless of the circumstances of the country they live in. Chinese are paid less because the lower productivity of that country (in general) means the value they produce is less. If they are in a factory making plastic toys for the $2 shop, then the global market will value that contribution accordingly.

    Now if a factory is set up in the developed world making plastic toys for the $2 shop, then true enough that same person doing the same job will need to get paid the (higher) minimum wage, but for how long? The business model will not be sustainable, because the labour costs of producing the goods exceed their value. The business will go bankrupt, and they will soon be out of a job.

    If they come to the developed world and work in a factory producing something more valuable, they may well end up working similar hours and working equally as hard. But if they're producing things that the global economy values much more (which doesn't require subsidies to survive) then they are assured of being paid much more, with or without a minimum wage.

    My "theory" as you call it doesn't rely on benevolence, it relies on the reality of a competitive labour market where there are no victims - something you clearly have no comprehension of. In fact I'd be very surprised if you have experience at all of being employed in the private sector. It's the reality where every employer may well pay as little as they can, and likewise every employee demands as much as they can. Because there's not an infinite supply of labour the resulting supply/demand balance sets the price. Do you really believe that we dropped minimum wages in the developed world everyone would be paid $1 an hour (or whatever they're paid in China)?

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  26. Mark

    If you think employers and prospective employees are on an equal footing with regard to remuneration negotiations then you are the one with zero experience in the private sector. The same goes with the notion that there can't be victims in a competitive labour market.

    The average wage for a factory worker in China isn't $1 per hour, it's between 25-35 cents. And this applies to workers manufacturing TVs and iPads as much as it does to workers making toys for the $2 shop, so your assumption that higher value goods equals higher wages in nonsense. You even acknowledged this by conceding that employers will pay as little as they possibly can.

    Apple has more cash than it knows what to do with, yet there was a controversy not long ago when it was revealed that its subcontractors in China weren't even provided with a staff room. Go figure.

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  27. Scott

    I recall that in one part of Eastern Europe the average wage in the '90s was the equivalent of US$50 per month. At that time I rent a house, get a month of groceries and have US$18.00 left over from US$50. That $18 would go on incidentals and a good café nearby. When I visited the UK a few months later and mentioned the average monthly salary to the British locals they were horrified. Yet for all the mountains of extra paper money they had, few lived substantially better month to month. In fact, the food they existed on was inferior, as were the wines (better not to talk about the beer). The economy altered shortly after the fall of the Berlin Wall with costs and incomes rising to those of Western Europe as outside capital poured in along with all the rules, regulations, corporations and banking/finance organisations of the EU (yuck). The lesson in this is that the costs of living were and are proportionate to the salaries people earned. The reasons are not difficult to understand. It has to do with a vendor being able to sell his wares or his services to his custom. He can't force anyone to become custom and pay him so he seeks the best he can get for what he offers by pricing it at a level that will entice people to transact. He sets price at the level he finds the custom is willing to bear. In other words the customer is king and signals assent to him by voluntary purchase of what he has to provide.

    In the case of China it is completely clear that you lack first-hand experience of the situation there and are relying on second-hand news stories, op-eds and the like mixed in with your own prejudicial racism and bigotry. Have you even been to mainland China? Have you lived there for even just a single solitary month? I doubt it. You need to and soon, for that is where the evidence you pretend to be interested in is located. See, what you ought to do before shooting off your ignorant dribble mouth is to go see first hand and experience what the situation actually is. For as long as you fail to do so you remain inexperienced, lacking in knowledge and worse, an ignorant loud mouth bigot.

    Amit


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  28. Why do you feel the need to lace all your comments with abuse, Amit? It detracts from what little argument you have. Try being civil. What you're saying here is that you think that the people in poor countries aren't actually poor and it's all a trick of the light or something. Again you have provided no evidence to support this assertion. Care to?

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  29. @ Scott C

    I never said that a higher sales price for a good automatically equals higher wages. You seem to be getting confused between the sales price of a product, and the value of the contributing labour to the production process. Whether you're talking about an Ipod that sells for $1000 or a cheap plastic toy that sells for $2, the principle is the same. The $2 toy was just a simple example to illustrate the principle.

    Why does the same principle apply? Firstly, the value of a product (to the business owner) is sales value less costs to make it, not just sales value. A business does have something called costs you know. Secondly, there's a lot that goes into creating an Ipod beyond just labour - in particular the innovation and creativity that went into developing it in the first place. The ones that did this created the most value and took the greater risk, and therefore they get 'paid' the most. This is via both salaries to employees who did the software development in the US say - and also profits to owners who organised it all. There contribution has a lot more value than the labour putting it together in a factory, and so the market values their contribution accordingly.

    As for your assertion that employers and employees aren't on an equal footing when it comes to negotiating pay (and that's your genuine experience) - all I can say is that you speak for yourself on that one. That's certainly not my experience, and if you had more (value) to offer I doubt you'd find that's the case.

    Finally, wages are relatively low in China because they have a lot of labour, and the resulting supply/demand balance sets the price lower than the developed world. Not so long ago China was an impoverished and predominantly agrarian economy where the majority lived in complete poverty. Whatever Apple are paying, it's more than what they were earning in the old days, otherwise workers wouldn't leave the fields and come to work in an Apple factory. Incomes in China have risen rapidly in China as its developed - and as Chinese start finding jobs in software development rather than just working in factory, it will rise further. What do you think has allowed the income growth that's already happened? Clue: it's got nothing to do with minimum wages.

    The workings of an economy are not as simple as you would like to reduce my (strawman) argument to. But the fundamental fact is that an economy can never have a situation where overall, the labour cost is greater than the value labour is adding to the production process. When the two are close, then higher productivity is the only thing that can unlock the path to higher wages. If you can't understand that simple fact, then you really live in lulu land!

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  30. Mark

    You write to Scott that, "As for your assertion that employers and employees aren't on an equal footing when it comes to negotiating pay (and that's your genuine experience) - all I can say is that you speak for yourself on that one. That's certainly not my experience, and if you had more (value) to offer I doubt you'd find that's the case."

    If he indeed had more to offer he would convey a very different outlook indeed. That right there is the nub of the matter. He has not got much to offer to anyone.

    People like this guy are wracked with guilt and with fear. They are worried that they will be exposed as being of very modest skill and but slight experience, barely competent, possibly incompetent even. They feel uneasy, guilty, that the style of living to which they are accustomed (let alone that to which they aspire) is well beyond what their abilities can honestly support. They rely on third party protection from competition from those who are better then they by way of imposts, regulations and various distortions of the relationship between buyer and seller. They seek their own welfare by demanding vile beggar-thy-neighbour policies be imposed against the welfare and wealth of others. Their fear is that they will end up exposed, by-passed and impecunious. They are correct to be fearful as the changes in cultures, finances, economies, societies and political structures all over the world are irrevocably leading to new arrangements- ones which do not value those who have little to offer (whether low skills, lack of experience, delinquent working habits etc).

    For people who grew up of the culture of the NZ "welfare paradise" there is little to look forward to. The debt that has been accumulated will result in a severe reduction in their circumstance. The "obligations" of the government to pay them will be terminated. They will find that they are on their own and that the promises they received will never be honoured. For someone nurtured and educated by the existing state system and carrying a debt (getting ready to understand that it is, for them, going to be a life of debt) the hard times are getting a lot harder. They are in competition with a whole lot of people all over the world. There are plenty who will out-compete them and do much better tghen will they.

    That poor factory worker in China won't be poor for ever. Already many are not poor any longer. They have generated wealth and seized the opportunity they generated. This is an accelerating trend. A number of them are here in NZ already (I know of two who are outright owners of significant amounts of real estate) and doing well. Scott and his ilk are going to need to lift their games (if they are able) or watch as their personal circumstance erodes.

    To do well a man needs to offer to others what they'll voluntarily pay for. It's best to be sure that what is offered, the goods, capabilities or services, are valued highly. Debt laden young people of collectivist/socialist leaning are at a particular disadvantage in this regard.



    You are correct about China. There is a lot of labour available. People are coming to the cities as the conditions and opportunities are superior to staying on the land. Incomes are climbing quickly as skills rise and experience improves. They'll continue to do so provided China is not drawn into a world financial recession and they can clean up their banks, also provided they are not enmeshed in a war. The future is not going to look like that past. It is likely that China (and India) will shortly surpass the West. It is to be hoped the new superpowers learn from the mistakes of their predecessors and embrace capitalism fully and without let or hindrance.

    Amit

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  31. Mark

    You said if they were in a factory producing items that the global economy values more than $2 toys they would be assured of being paid more. No point denying it when it is there for everyone to read. If you didn't articulate yourself properly that isn't my fault.

    It is a fact that there is a massive power imbalance between a company and an individual. If you don't think this applies to you then you are delusional. Developed countries have democracies which allow voters to demand labour laws from their politicians. Labour laws are the second component low or unskilled people need for a liveable wage (not to mention a staff room and meal breaks).

    Companies don't outsource labour because the labour cost in developed nations is greater than the value labour is adding to the production process; it is done simply because it is cheaper leading to higher profit margins.

    You're the one oversimplifying the workings of an economy, not me. You even labelled your own argument a strawman argument. I was only responding to what you wrote .

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