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June 28, 2007
Section: Business
Edition: MAIN
Page: 5B

Government's economic policies deliberately cater to the super-rich
CHUCK KELLY
STORY

Two news items on page one of the Business section of June 18 are related, although many readers may not see the connection. "New luxury standard: $700K pens, $40K handbags," and "Mortgage rates push buyers out of market" illustrate the zero-sum nature of wealth. In some of the most important aspects of life, the more money other people have, in effect, the less you have.
Of course, apologists for the wealthy and powerful claim that wealth is not a zero-sum game, and they've convinced the public that the huge incomes of the wealthiest Americans are irrelevant to those who make moderate-to-low incomes. They even claim that the more money the wealthiest Americans make, the more wealth will trickle down to the lower classes.

Sure, money is unlimited and it can multiply like crazy, and devalued money does trickle down. But there are only so many things in the world, like real estate and homes. All across this country working-class Americans are finding that they can no longer afford to buy or rent decent housing near where they work, especially if they live in a desirable location like Asheville, Myrtle Beach, San Diego, and so on.

Priced out of the market

The popular fiction that it doesn't matter to you how much money other people have ignores the obvious. We live in a world of auction markets. As those with more money increase the demand for housing, gasoline, scarce foods, medical care, education, etc., those with less money get priced out of the market.

The people who are buying $700,000 pens and $40,000 handbags are buying a few houses with a view, tearing them down, and building a single mansion for themselves and their dog. And they're doing it in multiple states and countries. But that's just the beginning of the story. They also make sure that real estate represents a significant part of their investment portfolio.

It's not unusual to see an ad in the classified section of a newspaper like this one:

FOR SALE

27 rental houses, singly or as a total package. Excellent rental histories, great tax advantages. Retiring. 555-3578.

Real estate disparity

Real estate is one of the greatest creators of wealth — for those who have it or can get it, and it's one of the greatest creators of poverty — for those who find themselves priced out of the market, either as buyers or renters.

Of course, the most important aspect of the zero-sum nature of wealth is in the original distribution of wealth to begin with.

The exploding wealth and income gap is no accident, and is not a result of the movement of the stars or some unexpected economic fluke. It is the direct result of economic policies that are deliberately designed to redistribute wealth from those who work for a living — actually handling and producing products and services — to those who have money to invest. Of course, those who serve investors, like top-level corporate executives, are also on the gravy train.

Keeping wages down

Our federal policies of manipulating the prime interest rate (to make sure the unemployment rate keeps "wage inflation" from occurring), our expansion of legal and illegal immigration, globalization and a host of other actions are deliberately designed to keep wages from going up — thus maximizing profits.

If wages don't go up along with rising corporate profits, then investors become wealthier faster. If workers make more money, the businesses and corporations make less profit and the investors don't become so rich so fast. Corporate profits always equal income minus expenses (including labor). Subtract the left side of the equation from the right side and you always get zero.

There is no getting around it; wealth is a zero-sum activity at both the front end —when income is distributed, and at the back end — when products and services are sold in an auction market.

Right now our government's economic policies favor the super-rich, and they're using their unfair advantages to demand far too great a share of our nation's productivity.

Chuck Kelly has a Ph.D. from Purdue. The author of "The Destructive Achiever; Power and Ethics in the American Corporation," he is a retired management consultant and college professor. He recently moved to Burnsville and can be reached at kellycm2@bellsouth.net.


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