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Dan Connors

The Matthew Effect: 5 ways the wealth gap is distorting reality



“For to everyone who has, more will be given, and he will have abundance; but from him who does not have, even what he has will be taken away." Matthew 25:29


"I tell you the truth, it is hard for a rich man to enter the kingdom of heaven. Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of heaven." Jesus, as quoted in Matthew 19:24


The rich are getting richer and the poor are running faster and harder to stay in place. So what else is new? Globalization and the internet have supercharged income inequality around the world, and rich people are having trouble figuring out what to do with their obscene amounts of money. Meanwhile, the bottom 90% of us live at the margins, worrying about that next big disaster that could spell bankruptcy.


The rich have always been with us. Having rich people can be a good thing in that it incentivizes people to work harder and gives some an aspirational goal. If we all had the same amount of wealth, it could get boring and there would be fewer incentives to excel at anything. But at some point if wealth gets out of balance, big problems can arise. When the rich become separate and contemptuous of the rest of humanity, and when they hoard their wealth and build prisons to punish the poor, revolutions can happen to turn the whole thing upside down. There is a delicate balance between wealth for some and prosperity for all, and when it gets extreme as it is today, something is wrong.


What good, really, does another yacht in the fleet accomplish? Could that money have been spent more constructively on something else? What good does all that offshore money do, when the countries that make it possible can't afford a safety net to protect the next generations? Most of this extra money is going to waste when there are so many worthy projects that will never happen.


     We are told by those who tout the trickle-down theory, that the when the rich get richer, we all benefit. Wealth trickles down and improves all of our lives. In some sense this is probably true, but again when things go too far and the rich run out of things to invest in, they waste enormous amounts of resources on stuff that benefits no one. Their fragile egos require them to compete with each other to see who can accumulate the most toys, mansions, or supermodels in a never-ending treadmill of consumption and recklessness.


There are five areas that are distorted and the focus of some of the most wasteful spending by the 1% Here they are:


1- Food and drink.

There is enough food in the world to feed every single human a healthy diet. Yet we still see vast deficiencies in the nutrition that's available to those on the bottom. Meanwhile, the foods chosen by the top 1% are prettier and much more expensive, but barely worth the price tag. Their foods come from exotic places and have fancy names, but they still end up the same place that all foods end up- your stomach. How about a lovely bit of chocolate pudding, priced at a mere $35,000?

The money is not buying the food itself, but the prestige of having eaten $35,000 in one sitting.

And don't even get me started on wines. One bottle of rare wine can be priced in the tens of thousands of dollars, but only a wine snob can possibly tell the difference. Blind taste tests of wines rarely are able to tell the difference between a $6 wine and a $600 wine. There's a lot of difference based on the climate and age that the grapes are grown in, but very few people are able to tell a difference. And even if they could, wines for the rich are more about status and snobbery than actual enjoyment of the taste.



2- Housing


The super-rich can never have enough houses. Jeff Bezos has over a dozen houses, all situated in some of the most expensive real estate in the country. His main home was near Seattle, included of a compound of 3 houses, the largest of which is 24,000 square feet. He also owns two mansions in Beverly Hills, a huge ranch in Texas, a Hawaiian compound, two luxurious Manhattan residences, a 27,000 sq feet mansion in Washington DC, and his newest compound of houses on exclusive Indian Creek Island near Miami, also known as the Billionaire bunker.


What's the purpose for all this real estate? Investment is surely a part of it, though the enormous upkeep of properties like this could eat up any profits in a fickle real estate market. And Bezos is not alone. Most billionaires have multiple homes, and I'm sure they compete with each other to brag about who has the most properties with the most luxuries.


What a waste! Most of these properties are surely vacant most of the time and exist only to stroke the egos and portfolios of the very rich. Meanwhile there's a housing shortage for many other Americans who can't even afford a small house of their own. Not only that, but the 1% are scooping up single family homes and turning them into rentals so that they can profit while others fail to accumulate any home equity or security.


3- Clothing and accessories


There's plenty of clothing to go around for every man, woman, and child on Earth. In fact, tons and tons of good clothing end up in landfills every year because no one wants it. The fashion industry exists to drive trends and make old clothing obsolete, which contributes to this waste. For most of us a shirt is a shirt and a pair of pants is still a pair of pants, but for those who crave status, designer labels and fashion make clothing a personal statement rather than a utilitarian need.


Thus you have dresses that cost six figures and up (the most expensive one is $35,000,000!) You have men's suits that are custom tailored for $100,000 and up, and then there's the designer brassieres decorated with diamonds and other precious stones that can go for as much as $15 million. It's all about the rich trying to outdo each other.

As for the rest of us, we clamor for designer labels like Ralph Lauren, Armani, Calvin Klein, Louis Vuitton, Gucci and many more to give us that elusive feeling that we are special. We even will accept counterfeits and knock-offs if they will fool our less knowledgeable peers. And the sad thing is that many of these designer clothes will only get worn once or a few times before they are discarded for the next new trend.


"Clothes make the man" is the famous saying, but we also say it's what's inside that counts. Does anybody really believe that a person wearing a $1000 outfit is ten times as important as somebody wearing a $100 outfit?


The same distortion applies to the accessories market- jewelry, watches, handbags, and more. People with more money than they can handle often waste their money on these items that often sit in a closet or locked case most of the year. Diamonds are especially concerning given the exploitative ways in which they are mined.



4- Vacations and recreation


We all like to take time off to relax. Since the uber-wealthy have an abundance of both time and money, they can and do blow their money in exorbitant ways. Many billionaires own vacation properties that they occasionally visit. They also like to visit exclusive resorts in the Caribbean and South Pacific that are prohibitively expensive for the rest of us. Most of them own giant yachts that broadcast their main message- "Look at me, I'm so rich!"


Billionaires like to think that they are superior in every way, and don't like mixing with regular people. They take private jets, belong to exclusive clubs, go to private art auctions, and have private boxes to most concert and sporting events. They go out of their way to avoid having to deal with average people, which is one reason they are so out of touch and self-centered when it comes to their beliefs.


The newest in thing for the ultra-wealthy is extreme adventures- trips into space, to the bottom of the ocean, or to the South Pole. It's all just a game of one upmanship that will never end. Given more money, they will just blow more on expensive toys, artwork, and vacations. All while the rest of us are lucky to be able to afford Disney World.

5- Rent seeking


Rent seeking is the practice of increasing wealth by manipulating the political or social environment without creating new wealth. This is the worst of the five, and it distorts our entire political and economic environment when the rich get way too rich.


They would like you to believe the trickle-down myth, that any time they benefit, we all do to some extent. That theory has rarely been proven true. Honestly, the rich don't particularly care if others benefit, but this myth has led to legions of tax cuts and preferential treatment throughout history.


Examples of rent seeking include lobbying in congress that produces preferences in laws and taxation, rules to block competition and new companies, or tax abatements for sports teams or large businesses to relocate to a city. It includes wealthy people pulling strings to get preferential legal treatment and buying passports from small countries to change citizenship and avoid taxes. These actions generally benefit a few people, but those benefits are far outweighed by the negative downstream effects they produce.


The impossible amount of money in our political system ($16 billion in costs for 2024) has a devastating effect on our democracy. Politicians are forced to beg for donations from whoever will donate, and that money comes with strings attached. Even the Supreme Court has been shown to have been influenced by gifts from the rich, and you wonder if any decision in Washington is motivated by what's best for the entire country? If you are rich, politicians will meet with you. If not, you can write or call, but good luck getting your message anywhere near your representatives.


The two quotes from the bible at the top of this blog post seem to contradict each other. One says that the rich will get richer and the poor will get poorer. This is famously called the Matthew effect. The other says that rich people can't get into heaven. Both sayings have a element of truth to them. The rich accumulate various advantages- education, money, connections, that help them get even richer. The poor live a very different life full of discrimination, crime, and unpredictability that prevents most of them from catching up.


But you can't take it with you. Eventually, the rich will lose everything that they've accumulated here on earth, and have to enter the next life with only their karma to follow them. Christianity today seems to be playing both sides (and most other religions aren't much better.) They want to tout the prosperity gospel where God favors some with riches that they deserve, while other Christians will have to suck it up and wait until they get to heaven. Kindness, mercy and love don't seem to matter as much because they can't be monetized.


No wonder we're so screwed up. Money is like manure, as Thornton Wilder once said. Spread carefully and evenly, it helps healthy plants grow. But accumulated in giant piles, it just sits, stinks and goes to waste.


The rich are too damned rich. They are using rent seeking to take more and more control of society, while the rest of us are losing our voice in what used to be a democracy. They're cruising on yachts with expensive jewelry to exotic locations while eating fancy foods from all over the world. They have no reason to care about the criminal justice system, which gives them a pass, nor about climate change, that they can buy their way around. At some point something will have to change.


Think about society as a human pyramid. Those at the top only survive on the backs of the many who prop them up. If the pyramid gets taller at the top than the base can support, then the whole thing will fall down at some point. The rich don't get this. For some reason, we need some wealthy winners in a healthy society. But the rich depend on the rest of the pyramid, and this they tend to forget, especially because they see and understand so little of us. They're more concerned about competing with their fellow billionaires for power, status, and influence.


How does this all end? I have no idea. Perhaps we end up like the movie Elysium, where the rich live on a luxurious space station while the poor are back on an Earth that's a hellscape. Or perhaps the rich will run out of influence when things start going south in the economies of the world. Looking back at history, this kind of power imbalance has rarely lasted very long. Camels don't fit through the eye of a needle.










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