From: cthorne@magnus.acs.ohio-state.edu (Charles E Thorne)
Subject: Re: Wealth in the 1990's
Organization: The Ohio State University
Date: Fri, 9 Oct 1992 16:59:57 GMT

In article <1992Oct8.193905.26574@spectra.com> ohumukin@spectra.com (Kawika Ohumukini) writes:
>The distribution of wealth is not a good indicator of anything other
>than that those who have it are doing something everybody that doesn't
>have isn't doing.

>It may be useful to not worry who has the wealth and try to blame them
>for your financial or career woes.  They aren't the source, the government
>isn't the source (although they certainly have assisted the growth of
>the gap, later about that).  Instead of looking at that indicator and
>expecting the government to do something about it (which they are slowly
>just now beginning to address the issues) look at where the economy has
>been and where it is going and anticipate the trend and be the first
>to ride the shift.

At a time that companies that supplied things we needed to live were small
companies, that was true.  We could affect who we purchased items from and
bargain for the best price.  As companies became larger and larger, that
gradually became less true.

When John Rockefeller started the Standard Oil Company, he realized that if
he controlled all of the oil he could control the price.  Within a generation
of starting he controlled 90% of the world oil.  He shipped the oil in railroad
cars to refineries (which he owned) and was so powerful that he controlled the
prices that the railroads charged--even to the point that he received rebates
from government regulated prices--including rebates for shipments of his
competitors.  Likewise Andrew Carnegie was the biggest steel producer in the
world and controlled steel from the iron ore, coal, transportation and sale. 

By the time of the 1920's, large corporations controlled how everyone in the
industrialized countries lived.  They controlled wages paid to workers and
prices charged to those who bought from everyone.  Thus they gradually controlled more and more of the world's "wealth".  When the crash came at the end of
the 20's normal economic theory would have predicted that companies would 
lower their prices due to lack of demand.  The companies were so large and
powerful that normal economics did not solve the problem and the depression
lasted for more than 10 years, finally ending with a rise in the economy at
the start of World War II.

Many of the wealthy people lost money in the depression, but since the end of
WW II, the wealth has again becoming more concentrated in the hands of owners 
of large corporations.  One attempt to end the depression was the increase of
government spending during the 30's which really was insufficient to solve the
problem.  We did, however, increase government's role in the economy by
providing social security and other social welfare benefits to people who
would otherwise live in poverty.  Government also increased its regulation of
the business world, attempting to curb monopoly and damages to health and 
safety of workers and to the environment.

One of the actions of the Reagan administration was to drastically cut taxes
to the wealthy class (the only class that really benefitted from his tax
cuts) and to also decrease government regulations affecting how corporations
act in the market place.

On the other hand, the middle income class has seen government taxation
increase and job security decrease (I'm including in middle class the auto
and steel workers who make $40 - $50,000 per year--who had social security
taxes increase greatly over the past 10-15 years).

Thus, the wealthy (who own the large corporations) have become wealthier 
and more powerful (partly by having a bigger control over the government that
"regulates" them, and the working class has become less well off by actions
of the wealthy (e.g. shipping jobs to Asian countries, Latin America
countries, etc.).