Friday, April 26, 2013

It's a question of capital

Here's a question that I have been considering for some time.

Capitalism unchecked can lead to some unpleasant side effects.  It is often said that it is easy to make money if you already have it.  This is true.  The principle is sound.  If you have money, you can invest it and that (if done wisely) makes you more money.  If you have no money, you cannot invest it.   If not, you somehow have to generate it.  This is much much much much harder to do.

We have the divide.  Those that have and those that have not.  This blog is not a judgement on the people who have.  

The gap between the haves and have nots is growing.  The welfare net stops those at the bottom from falling too far but that is not really the gap.  There is obviously a set of people for whom life is hard at the bottom but there appears to be a group (I cannot say how big) that sits above that line but still has not enough capital to generate the incomes through wise investment that the haves can.

The question is, given that the gap is growing and the proportion of wealth the haves have vs the have nots the is growing (and accelerating) when and how will the situation become so bad that redistribution will need to occur.

Redistribution is a horrible term and almost impossible to do fairly.  The issue is made worse from globalisation when the haves can move money out of the country (I am not talking tax avoidance here) away from such activity.

The housing situation is a clear indication of this principle.  Those in possession of property will do ok as interest levels are low and provided you can pay the mortgage property prices will continue to rise.  Those renting have a different outlook.  The rent paid to the haves (owners of assets) will be all but prevented from change as the vast majority will simply not be able to afford the deposits.

This is a bleak model I understand.  But at some point things will need to be adjusted and at the moment I see no policies in place from this government nor the opposition to effectively address the balance.


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