The money does flow back into the economy, but it's extremely diluted in that the surplus obtained by any individual "downstream" of great wealth is small.
Meanwhile, the people spending all that money are the same people setting things up to ensure that surplus flows back to... themselves. So the wealthy people spend money, the people who manufacture their stuff and provide their services get as little surplus as possible without inciting them to riot, and the remainder goes right back to some other wealthy person, and then the process repeats.
There's no guarantee that surplus/welfare/utility flows along with the money, and it should be obvious to any observer that it definitely does not in practice.
The tired old argument that wealth accumulation doesn't really exist because the money all eventually goes "back into the economy" has always been an insulting hand-wave that is neither a principled model nor in agreement with basic facts about the economy.
What is missing from your comment is the wealthy get that way by creating wealth, not by taking it from others. (This is why the economy grows - wealth creation.)
The government, on the other hand, gets money by taking it.
> What is missing from your comment is the wealthy get that way by creating wealth, not by taking it from others. (This is why the economy grows - wealth creation.)
Wealthy people accumulate wealth by many means. Creating wealth is only one of those means. Nor is wealth creation incompatible with the model I described.
> The government, on the other hand, gets money by taking it.
Who said anything about the government?
But if you want to argue that point, the government may create wealth just like any private individual or enterprise. In fact, it does create quite a lot of wealth, in the form of public services and overcoming various incentive problems of private industry operating in free markets.
Of course, governments do levy taxes in order to fund their activities. But you can't seriously argue that tax revenue is "taken" from the economy and also argue that wealth accumulation does not exist because wealthy individuals' money is not "taken" from the economy.
> What is missing from your comment is the wealthy get that way by creating wealth, not by taking it from others.
Its missing, because it is mostly not true.
The wealthy predominantly get wealthy by getting other people to create wealth, and taking it from them via contracts relying on imbalances of power and econonic coercion (in a fairly benign modern capitalist system; is less benign, less modern, emerging (or pre-) capitalist systems, the coercion is often jist direct threat or application of force rather than the economic coercion of the inherent precariousness of the working class in capitalist society.
Well, that's definitely the Marxist point of view of things.
Everybody in a business is creating the wealth of the business, and they get their share of the created wealth in the form of pay and benefits. Unsurprisingly, their compensation is in proportion to the value they add (i.e. the wealth their contributions create).
It is not a system based on forcing anyone. The cooperation is voluntary, with their compensation set by supply+demand.
> Everybody in a business is creating the wealth of the business
That's clearly not true. It's just ussually very hard to quantify how much wealth every individual is creating and it becomes even harder as you go up the chain of hierarchy.
> Unsurprisingly, their compensation is in proportion to the value they add
Well... that's a strong statement and generally incorrect, at best their compensation if bounded by the value they add (not that it's easy to measure in most roles). Supply+demand (as you said) is what determines compensation in 95%+ of all cases.
The job of a cost accountant is to quantify these things. If the business gets it wrong, then the business does poorly or even goes out of business.
Supply+Demand certainly does determine employee compensation. But consider that there is no demand for workers who would cost more than the value they add. If the worker was producing far more value than he was paid, then the worker will be enticed away by some other business offering him more money.
So, you can see how S+D nudges employee compensation towards being paid according to what value they produce.
> But consider that there is no demand for workers who would cost more than the value they add
In general yes. But as as some of the venture capital funded growth companies have shown us in recent years these values can stay detached for quite a while.
But yeah over longterm I'd you to be mostly right.
Let's look at the top 0.1%. An Amazon Senior SWE makes 1% and minimum wage in CA is 0.1% of the $35,000,000 per year that someone in the top 0.01% makes.
1/100 and 1/1000 is different, but the difference isn't that big.
Your overall point didn't make any sense though. "Lots of people don't earn minimum wage" doesn't mean that there isn't any power balance.
A senior engineer can be worth a lot more than $35M. Even just shaving 1% off the time that the server software consumes are worth many millions of dollars to the server company. The server companies compete for those people, so they get paid lots of money.
There is no power imbalance. If a worker produces a lot more value than he costs, he simply goes to another company that bids higher for him.
I'm sure just on this thread you'll find a ton of engineers who have saved their company millions of dollars, but they're still paid the generic wage everyone else is.
I’m not claiming market forces don’t exist. I’m just stating that earning wages is a completely different mindset than “some profit” vs “some more profit”.
People who don’t work for minimum wage are still facing the same basic constraint.
Meanwhile, the people spending all that money are the same people setting things up to ensure that surplus flows back to... themselves. So the wealthy people spend money, the people who manufacture their stuff and provide their services get as little surplus as possible without inciting them to riot, and the remainder goes right back to some other wealthy person, and then the process repeats.
There's no guarantee that surplus/welfare/utility flows along with the money, and it should be obvious to any observer that it definitely does not in practice.
The tired old argument that wealth accumulation doesn't really exist because the money all eventually goes "back into the economy" has always been an insulting hand-wave that is neither a principled model nor in agreement with basic facts about the economy.