I believe that there are a lot of misconceptions about an economy, many is that wealth is unlimited, that money is almost always considered plentiful and that anyone who tries can make it and that we do not need to regulate the distribution of wealth because the market will balance out at a healthy level.
Let’s start with the basics, and see where it goes from there. Each nation has a obscure value given it by the rest of the world, and prints money that amounts to some unit of that value. If it is worth a million values, and prints a million units of money, each printed unit will equal one value. Now, it is up to the nation to balance things, and if its value increases by 10 values, each unit of money will equal 1.1 values, but if its value decreases 10 values, a unit will only equal 9/10th of a value. That nation can also print money to redistribute its wealth and control its currency’s value. If the nation’s value remains the same, and the above case printed an additional 500,000 units of money, each unit is now only worth 2/3rd of a value, and you get inflation. The more money printed in excess of the increase of the nation’s value, the higher the inflation rate. And a small bit of inflation is actually healthy to ensure that the currency stays competitive against others, and that wages, prices, and costs can be incremented slightly as well to maintain that balance. If the currency gains too much value, things made in that nation become more expensive in the rest of the world, and the nation loses its competitiveness.
Stability breeds success, and without a good regulator to balance things out, all wealth will eventually rise to the highest level, as wealth will slowly be accumulated by a few, and as it is accumulated, there is less for all the others. Using the example above, if there are a thousand people, and the first year each got 1000 units as salary. Half saved and half spent, and the savers took 100,000 units out of circulation, thus the additional printing of 100,000 units of money, and while everyone the second year got the same number of units as salary, its value was reduced to 10/11th of a value by inflation. If this continues over 10 years, the savers will own 75% of the nation’s value.
Of course, everyone does not make the same, but we all do need the same basic necessities to live, food, shelter, transportation, clothes….and these things we must buy to live, so the less you earn, the greater part of your earnings will be used for just these things, thus limiting your ability to save anything, while the higher your earnings, the more you can accumulate each year, and that accumulation only grows each year, transferring wealth on up the line. Using the above example, if 250 people earned 500 units, 500 earned 1000 units, and the last 250 earned 1500 units, and it costs 500 values just for the bare necessities, and an additional 500 values for comforts and fun, after the same 10 years, the highest earners will own over 72% of the nations value, and the 500 units that are earned by the lower earners are now only worth less than 250 values, and that 1000 units earned by the middle earners are less than the 500 values needed for the bare necessities.
Most economies are quick to grow, and last only a few centuries because this imbalance reaches a critical point where they are just torn down to start again by a younger, healthier, more competitive economy. A good government is needed to temper the need to balance the distribution of wealth with the need to reward success and innovation and motivate its population to grow and expand and do big things. I see today the ignorance of the facts of economics, and while a economy is much more complex then the example listed above, you can look at the above example and see that if limits are not set, those that can will eventually end up with everything, while those that are just able to get by will start to fall further and further behind as the portion that is available to them continues to diminish. Wealth must not only flow from the bottom up, but also from the top down, some abstract limits must be set that ensures that without restricting growth and new ideas, or not rewarding the innovators for their risks. There is a very thin line between a society where new ideas progress are so restrictive that there is no profit for the innovators and no growth for the society with stagnation and fading from history as the outcome, or a quick buildup of wealth by the few until there is a collapse every few generations to redistribute the wealth to all when the imbalance makes it impossible for the many to survive.
One of the biggest threats to today’s economy is probably the stock market, which may seem like a bit of a puzzle, how could investing in a company be counter-productive? It is quite easy, after the initial public offering of a stock, stocks are then traded and sold outside of the main economy, drawing capital from creating jobs and infrastructure into this isolated bubble. This bubble has continued to siphon money from Main Street to Wall Street, until it has reached a point where it is no longer symbiotic in its relation, but more parasitic.
I do not believe that government should control or interfere unless lines are crossed, that it should stimulate competitiveness and ingenuity with rewards, but it also has a responsibility to ensure that no class walks on or tramples the future of another, that some basic distribution of wealth should be allowed for all. Wealth should be available at all levels, even if only a percentage point or two to the lowest earners. There needs to be a path up to keep ingenuity and hope for improvement alive. As things are today, there is very little wealth or hope available to the lowest earners, and not a lot of chance an average child born at the lowest level will have much of a chance to obtain any wealth in its lifetime, and even a gifted one has little chance to obtain the opportunities needed to excel as more and more people compete for the ever shrinking piece of the American pie that is left over from above.