The Problem With Too Many Millionaires

This article, entitled The Problem With Too Many Millionaires, addresses the fact that the rich upper class is gradually becoming wealthier. The statistics found by RBC Wealth Management and Capgemini Financial Services show that the number of people who have more than 1 million dollars with which to invest went up to 12 million in 2012, which was a 9.2 percent increase from 2011. The overall wealth of that group went up to 46.2 trillion dollars; a ten percent increase over the prior year. The group studied consisted not only of wealthy people, but contained another layer of sorts of the richest of the rich- the wealthiest of the wealthy. Called the ‘ultra rich’ in this article, people with over 30 million dollars of money able to be invested are doing the best. These 111,000 people made up 35.2 % of the wealth for all of the millionaires in the world.

Alan Krueger, an economist at Princeton University, calls this monumental change a ‘rock and roll industry’. He states: “Over recent decades, technological change, globalization and an erosion of the institutions and practices that support shared prosperity in the U.S. have put the middle class under increasing stress. The lucky and the talented — and it is often hard to tell the difference — have been doing better and better, while the vast majority has struggled to keep up.” Professor N. Gregory Mankiw of Harvard University wrote an economic paper entitled “Defending the One Percent” that comments on the global rise of the one percent. He uses the term egalitarian utopia. Egalitarianism is a way of thought that values equality in economics and general rights for everyone. Mankiw states that this idea of a egalitarian utopia has been interrupted by an entrepreneur with an idea for a new product. He uses examples of this entrepreneur such as Steve Jobs and the ipod and JK Rowling and the Harry Potter series. Once this product is put out on the market, all consumers want to buy it. They spend around 100 dollars on it, which is a voluntary exchange; benefitting both the buyer and the seller. This is not always the case. In examples such as JK Rowling, there is only one of her. She is the only one to write the Harry Potter books. While there is only one of her, there are many consumers wanting to buy the books. This makes the economy unequal and not distributed in the way it used to be. This makes the entrepreneur much wealthier than was expected. This scenario describes perfectly what has happened to the United States over the past few decades.

This presents the problem of income inequality. The issue is that many of the people who are ‘ultra rich’ are entrepreneurs who help the public and add to general wealth as well. This is not just happening in the US, China as well, is having this problem. There are two main problems with income inequality. First, labor productivity has increased about 85% since 1980, while real wages have only grown about 35%. The problem with real wages being flat, is that it means people are making less money. The second problem is declining social mobility. Studies have shown that a rise in income inequality means a decline of equal opportunity. Because the very wealthy are often born that way, it is becoming increasingly harder to become wealthy if one was not born with that privilege. 

Citation:

FREELAND, CHRYSTIA. "The Problem With Too Many Millionaires." The New York Times . 20 June 2013.