Monday, December 06, 2004

Income Distribution and Wealth Creation
Income distribution is who makes how much money. It usually refers to the population of a whole country, and to the total of all salaries or wages. In 1990 in the US, the richest 20% made 44% of all income, the poorest 20% made only 4.6% of all income. How does this compare to Brazil? In 1996 the richest 20% of Brazilians made 63% of all income, while the poorest 20% made only 3% of all income.

When there is a big middle class, more people can go to college and make use of their talents. The whole country benefits. If the poor become the biggest group, then the talents of these people--potentially high IQs, batting averages, etc.--are wasted. The country as a whole looses out. But if the rich create jobs and wealth, why shouldn't they be encouraged? CEOs don't create wealth, they only redistribute it. Any one executive could (and would!) be easily replaced by another. Only a company with a real innovation is irreplaceable. Only inventors and entrepreneurs really create wealth.

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