Before you begin, I want to let you know this is a serious topic. This is for some trivia for economic majors. Please keep in mind you should have some economic background before you read this. If you want to give it a try then read everything slowly and thoroughly. PLEASE don’t leave any response as “too long I didn’t read everything blablabla”, sorry about my grammar.
I know the saying that the rich get richer and the poor get poorer, and it caught my attention that I know how the rich can’t spend all their savings amassed from corporation business, even if they are taxed certain percentage of their earnings to help poor people get by.
I know simple economic models help demonstrate the problem. Let me know if I am wrong. For simplicity we will start without a government.
Example 1.
Let’s say in the economy there is only 2 dollars, and there are 2 people and each have 1 dollar.
Person A has the secret trade to grow apples but needs land. Person B has the land and housing acquired through inherency. Thus person A pays 1 dollar for the use of his land to grow unlimited apple as well sleep in it shared by person B. Person B in return pays 1 dollar to eat his apple. Thus the money velocity is 1. No one is in debt. No wealth is gained.
Example 2.
Let’s say there are 3 people now. And there is 3 dollar in the economy and each have 1 dollar. Person C is a low IQ laborer, and because he has 1 dollar to spend he will always be broke (in debt) after spending that 1 dollar on either housing or food. Either way Person C is screwed.
Example 3.
Let’s say there are 4 people now, and each have 25 dollar. So there is (25×4) 100 dollar in the economy. Person A still pays 1 dollar for land and sells apple at 1 dollar each, and Person B still charges 1 dollar per person for housing. However Person C and D are willing to work to provide for food and housing, and also demands higher wages. Even If Person C and D work for labor at 1 dollar, they can only pay for either food or shelter. Because of Market theory that as there is more demand, price will rise, therefore there’s an incentive for “A” to sell apple at a higher price let’s say 2 dollar. Because of our desire to survive, C and D will demand higher wages, and then “A” demands even higher prices to compensate for the labor. Person B is fine as long as he can feed himself. This vicious cycle continues. Therefore Person A and B will always amass wealth while Person C and D therefore be spending from their savings until they are broke, meaning they will always be poor.
Example 4.
Let’s say there are 5 people now. Each have 20 dollar. So there is (20×5) 100 dollar in the economy. Because Person C and D are broke. There is an incentive for them to steal. ONLY when the stealing starts, Person A hires person E to work as a police man to safeguard the asset paying him 2 dollar, minimum sustainment. Thus Person A and B will always accumulate wealth, Person C and D will suffer the same faith of poverty. Person E will neither go up or down the wealth ladder.
Example 5.
Let’s say there are is still 6 primary people and 100 other people who are Low IQ laborer, who will still suffer the same faith of Person C and D, just in the matter of moment. The money supply is a lot more now, almost uncountable Person F sees that the world is unjustified and therefore revolt and later a government is form. Person F is a government official and requires the merchant to pay taxes to compensate for the housing, therefore Laborers are only working for food 1 dollar labor for 1 dollar apple, while Person B is also taxed from housing to supply better jobs at better wage to build railroad, sewers, buildings, schools. Keep in mind that not government cannot compensate everyone, therefore some will always be unemployment and broke. While some Low IQ laborers are lucky to acquire free education to get the better paying jobs. Person F is in the safe zone of being a government official.
For now keep in mind there is no bank for money multiplier, bank ratio, money printing, etc. Even if there is, it does not affect the poor people, even if they have savings, the interest is miniscule. Person A will still have more interest base on his large Capital acquired from all the people who used up their savings. There is no longer equality.