Inequality Hurts

"For a greedy man even his tomb is too small." - Tajikistani Proverb

Ask any 9 year old and they will tell you the secret to winning.  Stack your team with all the best players and then take on a weak team and crush them.  It is obvious.  Getting ahead in business is similar.  Find an opportunity and fill it quickly.  Once there draw up the gates, build protective walls and attack any competitors.  Once you have forged a secure environment protected by legions of attorneys and scores of patents squeeze the life out of your employees so that the few at the top can reap all the rewards for their investment risk.

In a normal society those are basically the rules to the game and so long as you obey the rules of the law you have the opportunity to make a fortune.  On paper this is fine, but in the real world most entrepreneurs reap a decent amount of reward and form the middle class.  A few manage to break that mould and become the super wealthy while the majority of the population struggle to make ends meet.  This inequality is normally healthy but as the spread between the haves and the have nots widens problems start to occur.

As with any business operating in a healthy economy the weaknesses in the company are hidden and the personalities of the owners are manageable until the proverbial fan starts to sling mud around the room.  In society when things start to go wrong the divide opens up like a festering wound and society becomes restless.  In severe cases riots break out and governments can be toppled.  New regimes come in and with one swoop extract from those that have and give to those that supported their uprising.  These lucky few then start the cycle again.  Greed is a terrible thing to waste!

At present the divide between the rich and the rest is as wide as it has been since the great depression.  There has been a slow creep since 1980 and has been covered over by the middle class taking on more and more debt to keep up with the Jones'.  As the fat lady has finally stopped singing and this class of society is being squeezed the divide has increased.  Over $650 billion has shifted from the middle class to the rich.  The problem is this - societies that have a large divide suffer from weak recoveries and large economic slowdowns as the buffer of a large middle class is removed.

Furthermore the problem is exacerbated in political circles as deadlock ensues leading to lame duck sessions with no progress just when leadership is needed.  As there is no resolution or guidance from the top people lose faith in their leaders and start to point fingers.  A loss of confidence ensues and a generation of non-believers is born that forever shuns the markets.  After the great depression it took the Dow Jones Industrial Average until 1954 to achieve its highs of 1929.  A quarter of a century to recover.

When I look at the problems that face the world and see the lack of trust and the divide growing every day, it is clear to me that regardless of how much propaganda Wall Street dishes out via the media it is not enough to repair the damage that the past decade has inflicted on the average person.  So even though the market rallies here and there I am still convinced that we are just setting up for a very poor outcome but hopefully one that levels the playing field for the next generation to enjoy.