
The world’s rich stay rich while the poor struggle to prosper - rrgmitchell
http://www.johnkay.com/2014/01/29/9250
======
quaunaut
Y'know, I have seen Mr. Kay talk before, and I wouldn't regard him as an
idiot. However, he's seemed to have missed the entire point Bill was making.

> So what about China and India? Their recent growth performance has been
> exceptional, but both are still desperately poor countries by the standards
> set by Switzerland and Norway. The gap will take many generations to
> eradicate.

Which Bill completely acknowledges? However, he also makes the point that
today, China and India are moving up at considerable speed when it comes to
income. They have the abject poor still, no one will disagree, but compared to
where they were 20 years ago, even the poorest in those countries are much,
much better off, and all signs point to it getting better very quickly.

> But you do not have to venture far from the centre of Nairobi or Shanghai,
> and only round the corner in Mumbai, to see sights unimaginable in Norway or
> Switzerland.

The appeal to emotions here wasn't needed, nor was it affective. Not to
mention, it still misses the same point: Bill isn't saying that things don't
suck currently, he's saying that while they're not great, they're considerably
better than they were before and that's an ongoing trend.

~~~
old-gregg
I think their disagreement stems from the difference in how they define
"poor". Gates is certainly right (it just takes a bit of traveling to agree
with him) that hungry-and-dying type of poor is rapidly disappearing all over
the world.

But if you look at living-hand-to-mouth poor, I can understand John's
reasoning. Yes, average incomes (productivity) have gone up but you also see
how prices on commodities are rapidly raising in the developed countries to
make up for that. [1]

This makes me wonder if the universal basic income is ever going to work. Look
at insane costs of healthcare/education in the US - no doubt caused, in part,
by "free money" either through government-assisted programs or employer-
sponsored insurance.

Perhaps it's an inherent property of capitalism: some things always end up
_barely_ within reach of a lower class.

[1] Hence the need for things like
[http://en.wikipedia.org/wiki/Big_Mac_Index](http://en.wikipedia.org/wiki/Big_Mac_Index)

~~~
bsbechtel
>Perhaps it's an inherent property of capitalism: some things always end up
barely within reach of a lower class.

I wouldn't say that's true, we just need to figure out ways to produce those
things cheaply enough (through automation, other technologies) that everyone
can enjoy them. Take a look at agriculture in the US...even the poorest people
here have access to (not very healthy) food whereas just under 100 years ago
many were starving in the Great Depression. This is because agricultural
technology has led us to an abundance of cheap food that everyone can afford
at some level or another.

~~~
unclebucknasty
> _we just need to figure out ways to produce those things cheaply enough
> (through automation, other technologies) that everyone can enjoy them_

But, therein lies a paradox, right? I mean, when you seek to lower the cost of
production through automation, technology, etc. you wind up displacing human
workers, reducing labor demand, and putting downward pressure on wages. BTW,
I'll add that lower wages are another significant way that companies reduce
costs/prices.

The net result is that profits increase, which benefits a relative few rich,
while the quality of life for many is reduced or stagnant at best.

In other words, this "race-to-the-bottom" walmart-ization of our economy seems
to be, in large part, responsible for the income disparity we see today.
Perhaps the poorest who would otherwise starve are benefited (even if through
entitlements or aid which can now go further), and of course that's a very
good thing. But, on balance, the world's wealth is accumulating to a very
small number of people at an accelerating pace.

~~~
kiba
_In other words, this "race-to-the-bottom" walmart-ization of our economy
seems to be, in large part, responsible for the income disparity we see
today._

It does the poor no good if they can't even afford the cheapest good.

~~~
bsbechtel
You guys are opening up a whole other can of worms getting into labor. We tend
to think of labor as a cost of production and something to be minimized. Maybe
we need to start thinking of labor as a (actually, the main) party responsible
for creating the value the firm produces for society. Anytime value is
created, it can go to 4 parties - the consumer (lower prices), the government
(taxes), the shareholders (through profits), and the employees (labor wages).
Maybe the reason our economy is so screwed up right now is because employees
are getting a smaller and smaller share of the pie, not because technology is
displacing jobs. If more people are out of work because of technology, great!
That means we have more people who can go work on things like curing cancer
and colonizing space :-)

~~~
fennecfoxen
> Maybe we need to start thinking of labor as a (actually, the main) party
> responsible for creating the value the firm produces for society.

Right. That's pretty much straight Marxist ideology. (I say this as a matter
of fact, not as a matter of denigration per se.)

Idea for you.

It's a free country, relatively speaking. So if labor is truly _primarily_
responsible for the value in something, perhaps you and a bunch of laborers
should get together and start a business providing value to people, and paying
lots of money to the labor. Assuming the labor is the primary thing that
generates value, it should be easy - in fact, they can attract the best labor
by paying more than they'd get in a regime which does not value their output.

If, however, you find that it is really hard to get started because it takes a
lot of money to buy equipment (or to pay salaries of people programming vast
troves of computer-code, which is more or less custom-manufactured capital)...
if you find that it's hard to get started with labor alone, then you've
effectively demonstrated that capital provides a significant part of the
value.

Silicon Valley may provide a few interesting case studies for you if you wish
not to do the exercise yourself at this time.

~~~
unclebucknasty
There is no need to test whether capital provides value, as it obviously does.
Your parent was speaking to viewing labor as providing the _primary_ value.

I noticed though, that your test's premise started as a means to challenging
your parent's assertion that labor provided the _primary_ value (i.e. you
implied that capital provided the primary value). But, your test's conclusion
was that capital provided only _significant_ value, which no one is arguing.
Apparently, you couldn't bring yourself to conclude that capital provided the
_primary_ value, perhaps because your test doesn't prove it.

But, I have an exercise for you. Imagine starting a company with very little
capital, but plenty of labor (i.e. people willing to work for a share in
future profits). Now, imagine starting a company with $1B and no labor.

In any case, regardless of which you deem technically "most" valuable, there
is still the question of degree: that is, do the rewards accrue to the parties
proportionate to their value?

------
FD3SA
I've always been baffled by the investment choices of billionaires. If you
accept an empirical view of the universe, no matter what you do, you will
eventually die. Your experiences of the world will cease to exist. Therefore,
the only rational investment would be in life extension technologies (SENS,
advanced prosthesis, etc.).

At first, this might sound repulsive. The idea of a group of elites
discovering and hoarding the fountain of youth for themselves while the masses
suffer is dystopian. However, upon closer examination, it becomes clear that
the money invested in achieving any significant life extension will have a
massive public benefit. This is because combating aging requires curing almost
every known disease at its source. Any progress made in this front will have
massive benefits to healthcare worldwide.

So the question is, why do billionaires invest so irrationally? Why do they
buy yachts and invest in hedge funds and social media companies? From the
comment below, 113 billionaires out of 1426 are current members of the The
Giving Pledge. What are the rest doing with their money?

P.S. I must be clear that I don't consider members of Bill Gates' Giving
Pledge part of the group of "irrational billionaires". The Gates Foundation
funds an incredible amount of basic research for a philanthropic organization.

~~~
xenophanes
Big SENS fan here. Good question.

A lot of the reason is that people do philanthropy to gain various types of
status and reputation. It's often a social action. Investing in SENS wouldn't
impress their friends in the right way, while various other causes optimize
for social signaling.

Yachts and social media companies are a bit different. The yachts are for fun
in addition to being a social signal that impresses some people. The social
media companies are usually either to make money or to hang out in certain
circles, but they do also have some signaling possibilities (you can tell your
old stodgy rich friends that you're involved in more hip investments than
them).

~~~
exratione
Jason Hope is demonstrating that you can generate status from funding SENS.
More of this would be a good thing:

[http://www.jasonhope.com](http://www.jasonhope.com)

~~~
xenophanes
FWIW I'm not convinced that more appeasement of status signaling stuff would
be a good thing, even if that kind of compromise got SENS some more money in
the short term.

Living longer is great but living better is also very important. Social games
waste so much of many people's lives.

~~~
freshhawk
"more appeasement of status signaling stuff", "Social games waste so much of
many people's lives"

"appeasement"? Seeking social status is what primates do. It's not even "human
nature", it's lower level than that. It's not cultural, it's primate genetics.

The disconnect in the conversations in this thread? Two groups talking past
each other? It's because some people are talking about how homo sapiens behave
and some people are talking about how homo economicus [1] behaves.

It's not like you are wrong, it's just two conversations happening at once.
One is based in reality and another based in fantasy.

[1]
[http://en.wikipedia.org/wiki/Homo_economicus](http://en.wikipedia.org/wiki/Homo_economicus)

------
liquidise
People like this grind my gears. Many things go into being rich, but the top
of that list is making more money than you give away. Practically by
definition, people who continue to do this will continue to get rich.

There is no shortage of humanitarian efforts, funds, and foundations started
by the wealthy for the sake of the underprivileged. To suggest these are
insufficient because their founders remain wealthy is foolhardy.

~~~
vanderZwan
> Many things go into being rich, but the top of that list is making more
> money than you give away. Practically by definition, people who continue to
> do this will continue to get rich.

Except there is this thing called "diminishing returns" that somehow does not
apply to being rich. Also, wouldn't "spend" be a more appropriate description
than "give away" here?

> There is no shortage of humanitarian efforts, funds, and foundations started
> by the wealthy for the sake of the underprivileged. To suggest these are
> insufficient because their founders remain wealthy is foolhardy.

Luckily, the author of this article isn't suggesting that - he is arguing that
in its current form these efforts are insufficient because _the poor remain
poor_ , and that he has good reasons to believe they will stay poor if we
don't change specific problems not addressed in Gates' letter.

~~~
liquidise
I'll bite.

> there is this thing called "diminishing returns" that somehow does not apply
> to being rich

Once you hit a certain amount of money, investments begin to drive your
income. Unlike salary which is additive, investments tend to be multiplicative
in their wins and losses. So you stand to make (or lose, if you are bad at it)
money faster.

> Also, wouldn't "spend" be a more appropriate description than "give away"
> here?

Semantics. Credit and debits are all i am referring to.

The author is literally arguing that poor places are not getting richer fast
enough. Money alone does not make for better living conditions. There are
environmental constraints, infrastructure additions, and countless logistical
issues. The author provides no solutions that i saw, and instead spends his
time ranting about comparison between developed vs developing countries.

------
gavanwoolery
Sorry, but does this guy not realize that many of the world's richest people
gave half their wealth to the Gates foundation, thus forming an engine for
human improvement that could have never been attained by distributing their
wealth? The wealth divide is not a "real" problem - the real problem is
figuring out how to keep everyone employed in a world that is constantly
evolving, where most jobs are getting automated or over-seaed (neither of
which is a problem in of itself). A real problem is figuring out how to stop
corrupt people that enrich themselves by being parasites to the poor/middle
class, take advantage of our relatively indifferent government, or our screwed
up law system (like patent trolls).

~~~
buster
Many?

~~~
gavanwoolery
113 at current count.
[https://en.wikipedia.org/wiki/The_Giving_Pledge](https://en.wikipedia.org/wiki/The_Giving_Pledge)

Yes, there are 1,426 billionaires at current count, but that is still a
significant number. Many != the majority.

------
downandout
I have never heard of John Kay, but think it's normally a bad sign when
someone believes that a very famous person they have never met or spoken to is
talking directly to them through the media. It indicates that he is either a)
crazy or b) so full of himself that believes that Bill Gates read his obscure
book, and was so disturbed by its content that he decided to launch a
worldwide PR campaign against the ideas contained in it. Either way, this is
an interesting PR strategy.

------
ommunist
What really drives me crazy is that robots are far more productive and
generate so much more wealth than humans. And they are so poor.

------
tim333
So Kay says “... rich countries got rich and why poor countries stay poor” and
Gates says that's false. I think if you actually look at the data numerically
then Gates wins eg.
[http://www.youtube.com/watch?v=jbkSRLYSojo#t=238](http://www.youtube.com/watch?v=jbkSRLYSojo#t=238)

------
lmg643
Bill Gates would have to believe his efforts were worthwhile in order to keep
himself motivated to try. He's essentially "all-in" on the Gates Foundation.
His pronouncement on eliminating poverty is an aspiration he phrases as a
"fact" and we are taken aback by the audacious claim, primarily because he's
been wildly successful before, so hey, lightning might strike twice.

What if? And why discourage him?

It doesn't seem likely to me, but I don't have billions to spend proving my
theories. When I think in terms of probably outcomes, it seems more likely
that the US will regress towards the global mean, rather than remaining as a
permanent statistical outlier.

I also keep in mind that "poverty" has a way of becoming a dynamic definition.
In the US, it's becoming that anyone below the 33rd percentile is poor by that
definition. So poverty is always with us in that frame of mind.

~~~
jacalata
_In the US, it 's becoming that anyone below the 33rd percentile is poor by
that definition. So poverty is always with us in that frame of mind._

I think you are conflating the measures of Relative Poverty and the
Supplemental Poverty Threshold [0]. Relative poverty is a measure of
inequality and is explicitly labelled as such. The supplemental threshold is
people whose entire income is less than the 33rd percentile of spending on
necessities, and it is not intrinsically true that this group must always
exist.

[0]
[http://www.census.gov/hhes/povmeas/methodology/supplemental/...](http://www.census.gov/hhes/povmeas/methodology/supplemental/research/aea2013.kshort.pdf)

------
zvanness
Not trying to be dismissed as a conspiracy theorist, but how many people have
actually heard of the Rothschild Family? Niall Ferguson wrote a book on them
called "The House of Rothschild: Money's Prophets". He said their wealth is
measured not in the billions but in the trillions. They and a handful of other
families have single handily started and funded wars, overthrown governments,
chosen presidents and leaders, established central banks in almost every
country, bought out the largest shares in every major news outlet, etc.

The problem is that these few that have their hands on almost everything just
don't know when to stop. They truly have no mercy.

[http://www.amazon.com/The-House-Rothschild-
Prophets-1798-184...](http://www.amazon.com/The-House-Rothschild-
Prophets-1798-1848/dp/0140240845)

------
acd
We need to reform the banking sector, the too big to fail banks that creates
credit out of nothing and gets saved by the state when they make misstakes.
When the 1% superrich can't create money out thin air we will have a better
middle class.

See the GDP per capita vs median income development on the link below
[http://lanekenworthy.net/2008/09/03/slow-income-growth-
for-m...](http://lanekenworthy.net/2008/09/03/slow-income-growth-for-middle-
america/)

------
izzydata
Seems like the point this guy is trying to make is that being poor is
relative. So while poor countries are now better off than they were 50 years
ago they are still about as poor as they were 50 years ago in comparison to
other countries that also become better off.

I don't know if this is a good or a bad way to measure a country.

Would there not be any poor countries if all countries had about the same
wealth distribution? Perhaps all countries would be poor then.

~~~
tsotha
>So while poor countries are now better off than they were 50 years ago they
are still about as poor as they were 50 years ago in comparison to other
countries that also become better off.

That seems like unambiguous progress to me.

------
leobelle
Personally I think this is a public policy issue to be addressed with the
government which in democratic nations requires a sea change social movement
given that most are pretty conservative. Addressing the issue of wealth
disparity to rich people seems entirely pointless to me. Anyway, this more
like a publicity stunt not meant to address poverty but to get this guy rich
and or famous visa vis plugging his book.

------
alexeisadeski3
Inequality whining has already jumped the shark.

~~~
quadrangle
Because it's got nothing more to say and nothing relevant anymore? The "jumped
the shark" reference is to absurd things after running out of ideas. It
doesn't apply at all here. Non sequitur.

Inequality whining is just getting _started_ , given that we're on track for
the problem to just get worse.

~~~
alexeisadeski3
It never had anything to say, it never was relevant. These two facts are only
now becoming obvious to more people, hence the shark jumping.

~~~
quadrangle
That's not what shark jumping means. It means that something was relevant but
now has run out of ideas.

------
bayesianhorse
As far as I understood it, Bill Gates was arguing that the worst of poverty is
vanishing surprisingly well.

Kay says this is wrong, because the countries with intermediate economies
aren't on the top yet.

I think the basic misunderstanding is that economic development - if it works
- is a stochastic exponential process. Humans tend to underestimate this
function badly. On the one hand it is very fast - after the US went from where
Turkey is today to its current economy in "only" 50 years, but in every
particular year, looking into the future, progress looks like a painstakingly
slow crawl.

------
huherto
The article was frustrating since it is not clear on what the disagreement is.
My guess is that John Kay is referring to the first myth. "POOR COUNTRIES ARE
DOOMED TO STAY POOR"

According to Gates, poor countries are making progress.

According to Kay, there is a ceiling on how much progress a country can make.

So really, the positions are not contradictory since there is a big space
between the current state of poor countries (which are making progress) and
the ceiling that Kay proposes. Furthermore the ceiling it self can move up
overtime. And now I hate for Kay for not writing a clear article.

~~~
AnimalMuppet
And, if I understand him correctly, the ceiling is set by the quality of the
country's institutions. That's _really_ hard to fix.

Gates may be right that most countries will be out of absolute poverty. (In
fact, I hope he is right.) But I suspect that Kay is right that most countries
still won't be in the "rich" camp, even by 2014 standards.

------
tsotha
I think it's a mistake to rely too heavily on productivity to explain wealth
disparities among countries. Productivity increase, at least the way
economists measure it, is mostly a function of rising labor costs and as such
is a symptom of wealth and not a driver.

It's not that you get wealthier because you're more productive. It's that your
measured productivity increases as increased labor costs make automation
pencil out.

------
gesman
Poor are not staying poor by their "struggle to prosper".

Poor are staying poor by keeping doing things that keeping them poor, like
getting further down in debt, not acquiring new skills, not being productive
and not expressing their creativity.

And of course rich have their habits as well.

Give money to poor guy, take all the money from rich guy and see where they
are in in 5 years. Chances are they'll be back to their original platoes.

~~~
dwaltrip
Do you have any evidence for your claims? From what I have read and seen, the
effects of poverty are often are a reinforcing, positive feedback loop. Here
is a small example: financial struggles alone, irrespective of inherent talent
or background, actual reduces one's cognitive ability on a day to day level
[1]. How's that for being kicked while your down? And I'm sure I don't need to
explain how privilege and wealth benefits those who are born into it.

[1]
[http://www.princeton.edu/main/news/archive/S37/75/69M50/inde...](http://www.princeton.edu/main/news/archive/S37/75/69M50/index.xml?section=topstories)

------
dba7dba
Wrong title. It should say:

The world's rich get richer while the poor struggle to avoid getting poorer.

Money makes money.

~~~
bayesianhorse
Which is exactly the kind of attitude that gives nerds a bad reputation for
lack of economic understanding...

------
xname
"So what about China and India? Their recent growth performance has been
exceptional, but both are still desperately poor countries by the standards
set by Switzerland and Norway. The gap will take many generations to
eradicate."

\-- This is kind of ridiculous. How can you pick an exceptional rich sample to
set standards? Seriously? ????????

------
leterter
The American Dream!

