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What is the impact of less wealth on the average American?

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When the Rich Get Poorer, Look Out Below

What is the impact of less wealth on the average American?

“Any major shift in the financial status of the rich could have big implications…..Over the last century, the worst years for the rich were the early 1930s, the heart of the Great Depression.” — New York Times, August 21, 2009
 
On Friday, the New York Times had a cover story, “After 30-Year Run, Rise of the Super-Rich Hit a Sobering Wall.”
 
The financial crisis has hit the rich hard — the net worth of rich Americans has fallen an average 24% in the past year, according to a new Merrill Lynch Wealth Management report. The number of people with investable assets over $1 million has fallen from 3 million to 2.5 million. They have lost big money in real estate and stocks, their two biggest holdings. Even the price of Mei Moses Art Index has fallen 32% in the past six months.  
 
The real question is: What is the impact of less wealth on the average American? The answer is: serious.
 
The wealthy, including business entrepreneurs such Bill Gates and independent investors such as Warren Buffett, have led the global economy to astonishing new heights over the past generation.  
 
The New York Times may not want to admit it, but over the past 50 years, the rich have gotten richer and the poor have gotten richer too due to the new global market economy.  If you look at average real income figures, the wealthy have benefited more from the growth economy since the Reagan eighties, and many critics argue that income inequality has worsened in the US.  
 
But wage income does not tell the whole story.  If you look at actually goods and services used by Americans over the past 30 years, middle and poor income earners may have done much better, and may have even done as well as the rich in terms of the quality and variety of life.  

According to a recent study by the Dallas Fed, the poor and middle class are enjoying substantially more and better quality cars, food, housing, education, and entertainment since 1980.  If you look at average size of a new home, households with a computer, cable TV, microwave, and washer/dryer, the indicators are all higher for all income levels.  (See chapter 1 of “Economic Logic.”)
 
The positive effects of market capitalism have been felt around the world.  Even in countries such India and Brazil, the number of poor people have declined markedly since 1980.  Worldwide the number of extreme poor has fallen by 50%.  
 
Trickle-down economics appears to be have more a waterfall than a drizzle. As Andrew Carnegie once said, “Capitalism is about turning luxuries into necessities.”  
 
But what about the future? The answer is simple: When times are good, the rich get richer and the poor get richer too. But when times are tough, the rich get poorer….and so do the poor and middle class.  
 
And times are tough. When you tax the rich, you get less wealth, and fewer rich people….When you regulate successful corporations, you get less profits, less retained earnings, and less job creation. That means fewer job opportunities for everyone, rich and poor, and less income.  
 
It’s all a cycle of wealth and poverty. Want to return to prosperity? Encourage the rich to invest, hire and spend more. You don’t do that by taxing, regulating and attacking the rich.  Are you listening, President Obama and Capitol Hill?  
 
Calvin Coolidge said it best:  “Don’t expect to build up the weak by pulling down the strong.”

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