A relative of mine made me aware of this viral video going around on YouTube by the author “politizane”. As you can imagine, I have quite a few issues with this video. I’m not suggesting some of the information is incorrect, I just have an issue with the conclusions and some of its assessments.
Wealth Is Dynamic
The primary issue I have with this video is it assumes the “1%” in wealth are always the same 1% every year. Not in terms of income, but net worth. The fact of the matter is it’s not always the same. One of the first things learned in economics 101 is the pie isn’t fixed.
Wealth is created primarily by productive individuals adding value to society. Wealth does not come out of thin air or (like Ben Bernanke would like to lead you to believe) the printing press. So for the most part, if you work hard, take some risks, more than likely you will be rewarded for your efforts. It’s not guaranteed, but then again nothing in life is guaranteed, nor fair. Individuals are paid a wage based upon the skills needed for the job and the demand for that skill in the marketplace. Almost always this axiom is true: low skills work gets paid a low wage; high skilled work gets paid a high wage.
“The analysis also found that the composition of the very top income groups changes dramatically over time. Less than half (40 percent or 43 percent by different measures) of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Only about 25 percent of individuals in the top 0.01 percent in 1996 remained in the top 0.01 percent in 2005.”
Source: Dept. of the Treasury – Income Mobility in the U.S. from 1996 to 2005
Second, 80% of millionaires today (in terms of net worth) are first generation (source: Millionaire Next Door). Meaning they did not inherit their wealth. So somehow they were able scale the social ladder and become individuals in the top %1. Again, disproving that wealth is static.
Socialism Yields The Same Results?
In part of the video, the narrator states with socialism the wealth would be equally distributed. The narrator then states in 2009 our economy had a total net worth of $54 trillion. The fallacy is with socialism we would have that same net worth. How many socialistic and communistic countries do you need to look at to know this statement is completely false? A great petri dish of an experiment is the economic differences between South and North Korea.
We would NEVER have $54 trillion of net worth under socialism. It forgets to mention the flatter the distribution in wealth the less typically wealth is created. Mind you, I’m NOT suggesting in the existing form of wealth inequality is good. What I am suggesting is that you need inequality in capitalism, and it is a “good thing”. The fact of the matter is that the reality graphs the narrator shows you have more under socialism and corporate cronyism. A small amount of rich politically connected individuals who capture most of the economy.
But Individuals Got More Wealthy?
From the Pew Research, you could just as easily manipulate the economic data to say that from 1970-2011 more Americans moved into the upper middle class bracket than at any other time.
“The Pew Research analysis finds that upper-income households accounted for 46% of U.S. aggregate household income in 2010, compared with 29% in 1970. Middle-income households claimed 45% of aggregate income in 2010, compared with 62% in 1970. Lower-income households had 9% of aggregate income in 2010 and 10% in 1970.”
Wealth Inequality Increasing
What the video fails to tell you in the past 5 years, the wealth inequality has been increasing, NOT decreasing. Now some socialists might make this as a claim – this is because capitalism has failed. What we have now in the USA is anything but capitalism, but rather corporate cronyism and/or modified version of socialism. History has shown repeatedly central planning does not work and only leads to everyone more poor with only a few in the upper end.
Only CEOs Are In The 1%?
The video goes into a discussion about “greedy” CEOs. As if they are the only ones who compromise the 1% in salary. The fact of the matter is that the 1% are of many different individuals from many different backgrounds. Many professionals are part of the %1: doctors and lawyers, but also small business owners, entertainers, and oddly enough politicians are a decent part. Physicians actually make a good part of this group. But instead this video tries to outcast one specific group. However, this statement is completely false, and the 1% is a diverse group of individuals. Not all of them earning 380 times the average worker.
In realty, CEOs are in the 0.01% of all income, not the 1%. It’s a completely different category. They are the rock stars, pro sports players, and famous actors, of the business world. It’s expected they earn a high income. Are they worth the salary they earn? In many cases, yes, otherwise board members and shareholders will want the CEO replaced for poor company and stock performance.
Who Is ‘Politizane’?
Damned if I know. The YouTube user politizane only has this one video on YouTube, with no other information about the author. Like the State Farm commercial, if it’s on the Internet, it must true, right?
Without question, I can say the video is professionally produced. This wasn’t done by some part-time blogger in their mother’s basement. If someone paid for the work, I suspect it would have cost at least $10-15k to produce. Not exactly chump change that some Occupy Wall Street member would have lying around in one of those evil bank accounts. If paid for by an individual, perhaps someone with a 1% net worth? Hmmm, makes you wonder, but I digress..
Actually the more reasonable answer is some liberal progressive group paid for the video and wanted to get their agenda out there in a viral way. Yet they wanted to make it appear it was done by some amateur so they did not disclose this information. I personally would like to know who did this video. At least be honest in the source. Are they part of some larger organization? I would be willing to bet yes. The bigger question then becomes, why hide this fact, and what is their ulterior motive?
I guess the positive aspect of this video is it does talk about everything in terms of wealth and not just income. The downside to this video then, expect more of our government to discuss means to tax actual net worth. After all it’s not “fair” that these individuals have most of the net worth.
All this video is propaganda for more taxes on individuals like me (which trickles down to the poor and middle class), and yet again more class warfare. If anything, what the narrator suggests will cause more distance between the rich and the poor, not less.