We all know that there are two ways to make money: you work, or you invest. It used to be that both ways earned you roughly the same rate of growth; in other words, the rate at which you got raises at work was more or less comparable with the rate at which a rich person's wealth grew. (We're not talking about dividends. We're talking about how much more valuable the holdings are. Growth.) But a French author, Thomas Piketty, has done statistical analysis of the flow of personal wealth in several countries, and concluded that the growth of inherited personal wealth is now faster than the growth of the economy.
Here's a simplified example.
Suppose A works at his job, and earns roughly $100,000 a year. (Not many people do, but let's pretend.) Meanwhile, B has investments in the Stock Market, and does not work. But he is constantly watching the stock market, and and his stocks generally earn, say, $1000,000 a year. That's not surprising. But suppose A gets a 3% raise at the end of the year. This means, roughly, that the company that A works for, has grown about 3% over the year. On the average, we can expect that all American companies grow, and suppose they do so at an average rate of 3%. But B's stocks, says Picketty, would be expected to grow at the rate of about 5%. This means that, next year, A would make $103,000 dollars. But B would earn dividends of $1050,000. See that? Income from work grows at a slower rate than investment income.
Most people whose wealth is in the top 1% have got their money from their parents. Some have increased their wealth significantly (let's not mention names here), but it is difficult to become a multi-millionaire with money that you earn from an honest job. This is why we're talking about inherited wealth here.
This is big news. Not only are the wealthiest people in the country much richer than a typical person, they're constantly getting further away from the rest of us, and are impossible to catch up with. Impossible. None of us is ever going to catch up with people of the class of Warren Buffett, or any of the high-profile 1-percenters we hear about. (Interestingly enough, it is generally agreed that most people don't even know who the wealthiest people are, or where they live. They live hidden away, where their fabulous toys are not visible to the greedy eyes of ordinary citizens. Many of our rich friends are nervous, because they feel that they're probably in the top 10%, or at least the top 20%. They can relax; they're probably not even close. To get into the top 10% club, you must earn $120 thousand a year. I'm still trying to find how much a family has to be worth, to be in the top 20% of households in the US, by family wealth.)
I don't begrudge these people their ill-gotten gains. (Well, their ill-inherited gains.) What I do begrudge is the fact that they can control the government. The government usually dances to the tune of the most wealthy. This is why the Federal Government, and all the State Governments conspire to actually reduce taxes on the most wealthy. While we pay anything from 10% taxes to 25% taxes on our salaries, they pay about 6% on their dividends. Why are state legislatures and Congress so kind to the most wealthy taxpayers? Because the wealthiest families not only control the government, they also control the Newspapers, radio and television, and start a huge hue and cry about Socialism as soon as anyone stands for election who has the guts to raise taxes. The rich see taxes as eating into their personal wealth. But only the rich can use a lot of what the government pays for: the armed services, highways, medical research facilities, airports, seaports, the coast guard. Most of us cannot even afford the fancy drugs that they come up with, helped with government grants. Some politicians propose a flat 15% tax for everybody. But you can be sure that the most wealthy will never pay anything close to that rate, even if such a tax plan is made into law. They will find creative ways of saying that their incomes from their investments are not really incomes.
The video explains much more. Why is it less painful to live with a low income in such countries as Germany and France, than in the USA? Because most of the expenses on which poor people --I mean the working poor, who earn around, say, $30,000 a year, which is not terrible, and certainly would not be terrible in France-- blow their incomes are paid for in many European countries. As we know, basic health care, basic transportation, basic education are either paid for or subsidized in Europe. (The British upper class rebelled against this, and now British poor are in terrible shape. America has taught the fat cats around the world how to scrounge up every last penny, starving government services that used to make life tolerable for the working class.)
Indirectly, the political power of the wealthy is also increasing every year. That is the scariest part of the story. This is why Donald Trump ran for election. If he had not, his kids would not get his little fortune when he dies, it would be taxed. Even if it was taxed, the kids would still get a fortune, but not as big as they want to inherit. This is why they want to be in control of the government: to keep an eye on the legislation.
It all becomes clear.
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