The Wealth Gap And The Tall Poppies
It is elections time in Singapore and time to bring up the problems of the poor which is timely, I would suppose, even if Singapore does not really have a severe problem with poverty and a negligible homeless problem.
What has teared many of us this week would be the photograph of the drowned Syrian toddler Aylan Kurdi that reminded the world of the plight of the millions around the world displaced by persecution, conflict and poverty.
2014 saw a global record in the population of displaced people, at 59.8 mio, with half of them being children.
We need to look no further than our region in South East Asia where boat loads of Bangladeshis, Laotians and Rohingas are invading the shores of Thailand, Malaysia and Indonesia, many of whom are subject to atrocities in the hands of human traffickers.
So here we are, unhappy about our situations when 1 in 6 households in Singapore has more than a million USD in disposable wealth and one of the highest GDP per capita in the world that is unfortunately accompanied by one of the highest income inequality in the developed world.
Wealth is a Relative Concept
Rich is a relative word and you only feel rich by comparing yourself against your neighbour, which partly explains why some of us feel exceedingly poor among richer friends and peers. And relative riches does bring happiness and satisfaction whereas being poor in an inequitable environment leads to unhappiness. https://tradehaven.net/views_commentaries/its-not-insane-but-its-unhappy-to-be-poor/
It is relative wealth and not absolute wealth that makes people happy and as the rich middle class watch the richer spiral out of their reach, the unhappiness and frustrations would potentially set in. https://tradehaven.net/market/singapore-millionaires-in-trouble-real-estate-and-the-mass-market-wealth-effect/
Plutonomy, a term coined by ex-Citibank strategist Ajay Kapur, is a situation where economic growth is powered and consumed by the wealthiest upper class of society. Plutonomy refers to a society where the majority of the wealth is controlled by an ever-shrinking minority; as such, the economic growth of that society becomes dependent on the fortunes of that same wealthy minority.
Yet it is not just the problem of Singapore and income inequality has risen over the years to become the most worrying trend for 2015 as designated by the World Economic Forum.
In the Federal Reserve’s triennial Survey of Consumer Finances, they found that poor are getting poorer, that 90% of US families accounted for 24.7% of the share of wealth (compared to 33.2% in 1989). http://www.federalreserve.gov/pubs/bulletin/2014/pdf/scf14.pdf
There is no longer any need to prove that the poor are getting poorer and the rich, richer because even the Federal Reserve and Janet Yellen has admitted to it in the Federal Reserve’s triennial Survey of Consumer Finances, they found that poor are getting poorer, that 90% of US families accounted for 24.7% of the share of wealth (compared to 33.2% in 1989) as a direct result of their QE programmes.
Common sense tells us that wealth begets more wealth itself unless it is wagered away, lost or stolen. Those coming from the higher base would have exponentially gained in the past 8 years from real estate and stock market that have risen astronomically. Indeed the wealth gap between the 0.01% richest and the 1% richest is growing in America.
For the person who has not benefited financially from the QE years, it puts such assets even more out of their reach.
For most of the countries house prices as a portion of disposable income has risen as a % to its long term average. In Singapore, it is not that bad if you earn GDP per capita and dream of owning an upscale home – it just takes about 34 years to pay it off.
I wrote a bit more on this a year ago. https://tradehaven.net/market/singapore-millionaires-in-trouble-real-estate-and-the-mass-market-wealth-effect/
It is not just a favourite topic of the media these days as we observe a trend of populist governments coming into power making promises to close the inequality gap as Thomas Piketty’s Capital in the 21st Century shot to the top of best seller lists around the world.
We note a rising number of the ultra rich speaking up on various occasions like billionaire hedge funder, Paul Tudor Jones who said at a TED talk in March that “This kind of gap between the wealthiest and the poorest will get closed. History shows it usually ends in one of three ways—either higher taxes, revolution, or war. None of those are on my bucket list.”