The Roof And The Floor

The Investoralist had this excellent post on the narrowing of gap between the rich and poor and how the inequality gap was shrinking.

Here is an excerpt:

“In the US, the statistics are no less glaring. Numbers show that in 1979, the top 0.1% Americans earned 20 times the income of the bottom 90%. This number climbed to 77 times in 2006. The tide is now turning. During the last three downturns, the share of income held by the richest 1% of Americans obligingly declined. Economists are now predicting that in the next year or two, the share of income by the richest American will fall from an estimated 23% or 24% in 2007, to 18% to 19%.”

The gap is narrowing, but, for the wrong reason. The poor are not getting richer — the rich are getting poorer.

This reminds of a conversation that I had more than 10 years ago, when India’s globalization process was still relatively new and there was debate on whether it was good or bad.

The rise of outsourcing and other such industries meant that there was a rising middle class in India that was concentrated in big cities and towns. The rural areas did not gain as much from globalization as the urban areas and as a result the gap between the urban rich and the rural poor was widening.

The wealth did trickle down to the lowest segments of the society and the number of people below the poverty line as a percentage to the total population declined over the years. The poor were also getting richer albeit; at a slower pace.

At that time, someone had said to me that there is some angst among the poor that the rich are getting richer, even though the poor are getting richer too.

It was like a room in which the rich were perched at the roof-top and the poor were on the floor with a distance of 10 feet in between. Both, the floor and the roof were moving upwards, but, the roof was moving at a much more rapid pace than the floor.

The rich were getting richer at a faster pace than the poor were getting richer. So if the roof moved up by ten feet — the floor only moved up by two or three feet.

As a result, while the poor were now enjoying a higher standard of living, when they looked up at the rich — they saw a lifestyle that was far better than before. They also saw that to attain their dreams of being rich — they will have to get much more wealthier than they thought was needed a decade ago. This created some sort of despair in people who were really better off than they were ever before in their lives. Anyone, who has a neighbor can understand this feeling and also that the focus should be on pushing the floor higher; not, pulling the roof lower.

Ten years later, I fully understand what she meant.

2 thoughts on “The Roof And The Floor”

  1. Thanks Dana, I hope you liked the new look.

    I think making the pie bigger almost always depends on innovations and giants leap of productivity. I hope we see something like that soon.

  2. First off, congrats on the new design!

    Secondly, thank you for the mention, and I’m glad you’ve taken the discussion and shone another angle to it.

    No doubt, the rich getting poorer is in large part responsible for all this. But as one of my reader said, it’s hardly a zero-sum game most of the time. So while some focus on getting their rightful portion of the pie, many are more concerned over making the pie bigger.

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