Living in Mexico I have come to see economic inequality for what it really is. And it is really quite simple. It is a function of a person’s level of capitalization (or skills).

Example. There are people that earn their daily bread on the street, pay their rent and so on by various means: selling bags, cosmetics, fruits and vegetables, batteries, newspapers, shoeshines; all the way up to the folks that have car dealerships or work in office buildings.

And it has been my observation that what people do and what they sell is all predicated on their level of capitalization. The guy that sells AA batteries would love to be higher up in the food chain but at the end of the day he only has enough capital to replenish his supply of batteries.

So it stands to reason that the 1%ers in the world, with their vast resources of capital, have better opportunities to increase that capital in scale or proportion with the resources they have on hand. So obviously earning 2% on a $1B is much more lucrative than earning 2% on $100.

Advertisements