Thursday, May 8, 2014

Wealth Creation? The Jury Is Still Out

Why should wealth formations matter, in terms of inequality? Especially when ongoing transformation in capital use can be taken as a given. Characteristics of wealth generation might not appear all that important right now, had it not been for the fact economic growth essentially stalled in the developed world. The problem: further growth is still needed in developed nations, for services which remain on the wrong side of the ledger in wealth creation terms. But how to focus on developing the next phase of knowledge use (which would also have the potential to transform wealth), if the process gets completely sidelined by struggles over present inequalities?

Knowledge use needs to evolve into more inclusive and effective systems in the 21st century, before anyone attempts to alleviate inequalities among middle to upper incomes through redistribution of earlier wealth holdings. Indeed, those holdings depend on circumstances which could quickly change. That means these holdings could become increasingly fragile over time, if they are accepted as the only means of wealth creation which are possible. The reason this is so, is that too much of their value was built on artificial limitations as to any kind of economic access in the marketplace.

Most people don't have the means to scrape out survival from the land as before, in earlier times when they were left out of more substantial economic formations. Therefore, everyone needs access to knowledge use income, which can at least buy the gains that automation brought to agriculture! Can't government continue to provide basic assistance in some form, to those with little economic access? No not really, because governments increasingly need what budgets they have for those who have better political representation. Slowly but surely, the most fundamental forms of assistance are those which are being scrapped from budgets, first. As this happens, more people end up in U.S. prisons while neighborhoods increasingly worry over the inmates who are eventually released back into the population.

The only way budget obligations can be presently reduced in government, is by getting rid of the most utilitarian obligations. This may seem crazy, but the ones who depend most on utilitarian assistance, have the least political voice. Thus, their outcry is the least likely to be heard, when inevitable cuts are made. It's too difficult politically to make cuts presently, to the budget issues that are really substantial in the money they demand.

Those obligations won't disappear until the money simply is not there, for them. While some may believe I think this would be a good thing, actually that's not true. Because chaos would be the order of the day if this budget constraint resulted. And I still believe that by allowing the marginalized to generate their own wealth, such chaos could hopefully be circumvented.

Of course, some factions wouldn't like being one upped by better productivity and lower IQs from elsewhere. Just the same, such a silly ego dilemma would beat the heck out of the chaos on the evening news: chaos which is every bit as likely here, as anywhere. Upper factions can fight over income levels till infinity if they want, just so long as this doesn't prevent better economies from materializing, underneath it all. I really don't give a hoot about the one percent, so long as I can eke out a reasonable and sustainable way to live.

Lower income levels need to create economic means by which they can tend to their own, when governments lose the ability to help them. It makes little sense for the marginalized to wait for everyone else to get their act together, and we've seen far too many sad examples of that in recent years, already. In other words, there are entire groups of people and regions which need to be allowed to generate their own knowledge based wealth. Especially since they have largely lost those earlier means for survival. Back to the land would mean far shorter lifetime spans for these groups, among other problematic issues. Will they be allowed to assist in what should become the economy of the 21st century?

Unfortunately, gridlock among special interests now prevents more effective and productive wealth formations from happening at middle to upper income levels. As a result, middle class groups are scrapping over the remains of the limited marketplace which has already been generated. What is also referred to as "crony capitalism", continues to polarize the marketplace, both in terms of economic access and scope. The lack of scope (GDP potential) is also responsible for what is still missing aggregate demand. The place this aggregate demand could potentially hold, continues to be obstructed by "inflation" which has four causes: unnecessary complexities, services default scenarios, signalling product, and artificial shortages in both knowledge use and innovative utilitarian asset formations.

One of the most disconcerting elements of recent discussions regarding present day inequality, are assumptions that wealth creation supposedly has "reliable" characteristics which can be counted on to perform as they have in the past. Just as wealth formations changed dramatically from the 19th to the 20th century, that transformation is still very much in progress - for better or worse, depending on whether polarization is addressed or more war breaks out, instead. Maybe some people think war is appropriate, but it disgusts me if for no other reason than the extreme confusion it creates. War is of course capable of destroying buildings. But just as Einstein implied, it could also destroy economic, social and cultural gains in knowledge use. Recent gains cannot be expected to hold, should knowledge use remain artificially limited.

Let's hope that both governments and special interests will recognize the error of their ways. Enough bluster already about what is not essentially important. Today, the greatest inequality is that of knowledge use, and it increasingly separates prosperous regions and cities from marginalized cities and regions around the world. Even if governments do not think it is worth their while to address the lack of economic access on the part of individuals, they could at least acknowledge the threats this poses for multiple regions, cities and towns which have no way to access the gains of prosperity. Great potential for further wealth creation still exists. But first, it has to be recognized.

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