The rich prosper only insofar as the poor and middle see their earnings and living standards soar. This is important to remember as economists and pundits waste a lot of time promoting the impossibility that is a “K-Shaped” economy.
The claim from the deep in thought is that the rising stock market is lining the pockets of the rich as everyone else stagnates. Naaah.
The rich only own equities, and grow rich from owning equities, insofar as the underlying businesses are prospering. And they’re prospering because the productivity of those in their employ is growing by leaps and bounds. There’s no getting around what’s so basic, and so true.
Rich as “Wall Street” can be, and well-to-do as equity holders can become via the immense power of compounding, their wealth is an effect of what’s happening on Main Street. Get it?
If there’s confusion, think of Warren Buffett and his track record as arguably the most successful investor ever. He’s achieved enormous wealth by investing in credible businesses that have frequently won his attention through their location on or adjacent to Main, not to mention their employment of those who live near Main.
If investors are prospering, it’s because frequently large businesses with tens of thousands in their employ are prospering too. Thinking about competitors Amazon and Walmart, the former presently employs 156,000 around the world while the latter has over 2.1 million employees. And the rising head count at those corporations only tells part of the rising tide tale.
Think Apple, based in Cupertino, CA. It’s been estimated that there are something like 6,000 employees at Apple HQ, but the previous number is small relative to the myriad bartenders, baristas, personal trainers, doctors, lawyers, investment bankers and wealth managers employed in Cupertino as a direct effect of Apple’s prosperity.
Which brings up a crucial point: the impossibility that is a “K-Shaped” economy implies that prosperity within the 1 percent crowd occurs at the expense of the other 99 percent. Except that if there were any validity to this popular misconception, we would frequently be reading of mass migration of the other 99 percent out of Palo Alto, Seattle and San Jose in pursuit of better, more remunerative opportunity in Pueblo, Saginaw and Spokane. Except that there’s no such migration of any substance to speak of.
That’s because where the rich are is where the opportunity is. See above. Thinking about Seattle alone, when it formerly resembled Detroit this revealed itself in mass migration out of the Emerald City. It was only once native sons Bill Gates and Paul Allen returned to Seattle, and set up what eventually became a remarkably rich shop, that people of varying skills and economic classes returned. Wealth creation is a magnet for the opposite of well-to-do in relentless pursuit of work and life that is much better. Life looms large here.
What’s easily forgotten is that as opposed to wealth growing at the expense of those not rich, it nearly always is a sign of rising living standards as the former baubles of the incredibly well-to-do become commonplace.
John D. Rockefeller got rich by literally lighting up the night for the masses, Henry Ford became rich by creating cars for the "great multitude," those cars powered by gasoline brought to the masses once again by Rockefeller, and Bill Gates became the world’s richest man by helping to make computers that formerly cost over $1 million accessible to the typical household.
It’s a certain reminder that if the rich are getting richer right now, it’s because everyone’s living and working much better. There’s nothing to the K-Shaped economy precisely because there's no such thing.
