The more dollars you have, the less difference each additional dollar you have will make to your life. It's fairly obvious, that giving a man making 100,000 a year, another 100,000, is more significant then giving a man making a million a year a 10% pay increase. Wealth is worth the most prosperity/happieness when its spread out, but before you can spread it out, you have to have it, and obviously inequality is essential for incentive, and thereby essential for any economy aspiring to actually have something to spread out.

Now this debate rears away from where it (wealth that is) is worth the most from a prosperity standpoint. It also shys from where it should placed in order to provide the most economically valuable incentive. Here is what I would like to ask:

Whose collective spending benefits the economy the most? The Lower Classes? The Middle Classes? The Upper Classes?

Whose collective spending benefits the economy the most? The Lower Classes? The Middle Classes? The Upper Classes?

The economy is very complicated. Whose spending benefits the economy the most? A most subjective question...

The lower classes spend their money predominantly on need items. Food, clothing, shelter. If you think about these industries, they are very low margin, although highly necessary. There will always be a demand for these items, but the profit margin available is low.

The middle class spends its money on these same need items, but adds luxury items. Items such as cable TV, computers, vacations, nice cars. These industries are often much higher profit than pure need items but are often subject to the whims of taste. While today every kid in America has Crocs, tomorrow it might be back to Converse basketball shoes. The middle class is increasingly involved in investing, which has until recently been out of their reach.

The upper classes spend their money both on necessities and on luxury items. They do so relatively higher quantities and some niche markets cater only to the high rollers in this crowd. For the most part, their consumption pattern isn't that much different than the middle class, although they might spend more money per capita. Where the bulk of their money goes is into investments--investments which drive company growth.

So we have all classes in America driving consumption (or demand) and one class predominantly driving production (or supply). There must be a balance between these two forces or else neither works well.

Of course, in the US, the lines are blurred considerably. The "poor" have luxury items and do not spend their money exclusively on their most basic needs. The middle class in America is now a huge investing bloc, mainly through 401(k) contributions. The rich are ... the rich.

All of these groups drive various segments of the economy. The business class drives the transportation industry. The construction industry is fueled by company expansions and relocations. The fast food industry is fueled by the lower classes and by those on the go. Each of these industries is important, to varying degrees. It is impossible to say that one segment (and hence, one source of funds) is more important than another.

Whose collective spending benefits the economy the most? The Lower Classes? The Middle Classes? The Upper Classes?
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A very difficult question to answer. If you look at things from the standpoint of an open marketplace with the least interference from outside market forces then I'd have to say the best use of spending would come from the upper classes, mainly those who invest. Money invested is money spent on expanding an economy. Will this benefit the citizens the most is up for debate, but from a strictly ecconomic standpoint expansion through capital investment is what assures the strength and continuance of the market.

Does profit equal increased wealth or merely reshuffled wealth?

To an empirical degree we can certainly state, that in at least currency terms, all imports drain wealth from a country (unless currency value degrades faster then what is bought...). Yet we print money fast enough that we don't run out of it. As we print it, inflation occurs, and dollar reserves around the world go down in value, neccesitating fresh aquisitions out of the American homeland. The US is rich because of dollar exportation (oil can only be bought with dollars, and thats why they are needed), though I suppose thats besides the point...

What is the most essential internal component to a strong economy?

My best guess would be proper circulation.

Around 90% of bank saved money is used to give out loans; that is to say, it is invested. Thereby "saved money" is really invested money (as long as it is placed in a vault, as opposed to a sofa).

The best economy will be that which balances "saving" and direct investment, with spending.

The Middle class invests and spends, and so does the upper class. The poor can only spend, as their subsistence needs don't leave them with enough excess to save.

In order to know which class is the most economically beneficial to the economy from a spending standpoint, you would need to know:

1. What is the precise ratio of best balance when looking at investment and spending.

2. Which classes spending and saving habits most closely meet 1's ratio. If the balance is to far towards the investment side, then the best economy would have the poor to subsidize the spending size of the equation.

Extrapolating from this theory of economics I just made up , I think we can state, that at some points of time, when far too little spending is going on, money may actually be most valuable in the hands of the government. If no one is spending privately, the government can forcedly take up the slack, and while it may not spend in the best areas, at least it will spend. This would explain why the new deal was helpful to us, though the uplifting of the US economy during WW2 was I believe a result of spirit making uneccessary material incentive.

Macura:

Investments will never reap anything without a market; that is without buyers.

Also, remember that all banked money is being invested via loan.

That having been said, the rich do more direct investing then the middle class does, which may be good or may be bad. Are they perhaps spending too little? They obviously didn't get to where they are via an ireverence to making their fortunes self multiply.

I think that Amlord's analysis was both objective and spot on. However, i will try to venture deeper and offer my own opinion on it.

Whose collective spending benefits the economy the most? The Lower Classes? The Middle Classes? The Upper Classes?

I may catch a lot of flack for this, but i think that it is the spending of the upper class that benefits the economy as well as society the most. The premise for this argument is basically that without the private spending of the country's richest, the luxuries and benefits that all classes share today would not have come to fruition. This is because they have the capital and the entrepreneurial spirit to lead us through technological and scientific advances. Throughout history, it has been private individuals that have led the charge in the areas of knowledge and progress. Aristotle, Copernicus, Galileo, Newton, Da Vinci, Einstein. These are individuals who through their own effort and not through some collective goal achieved the advancements that we know today. History is telling in this area. For our future progress to be ensured, it must rest on the shoulders of the private citizen who has the means and the ability to push the boundaries of knowledge. The West may be richer than the rest of the world because of technological advancement, but they have more advanced technological knowledge because they are rich.

Furthermore, it is through the spending and experimentation of the rich that allows for luxuries to be enjoyed by the rest of us. The luxuries that we all think only the rich get are not absolute because in the evolutionary progress of society, those luxuries eventually get passed onto the rest of the population. Some examples off the top of my head are automobiles, plane rides, refrigerators, computers, and ipods. These are products or services that were once only available to the few but are now available to the masses. And that is a direct result of the fact they were made available to the few first. The rich can be compared to guinea pigs for new products or services. It is through experimentation with these few that businesses can know if there is a demand for such a product or service. They then make it so that the supply of these luxuries meets the demand.

So i still agree with Amlord that the spending of all three classes is necessary to perpetuate the balance, it is in my opinion that it is the spending of the rich that most benefits society.

lederuvdapac:

I wouldn't disagree that their existence helps allow products which are very expensive to make, break into the market and exist there long enough to become affordable. Though how many rich people to you need to help early inventions is much smaller then the number we currently have. Cars were brought on in the late guilded age, where markets were consolidated, and the wealthy were just a few at the economies very apex.

Moving on, you cite the ingenuity of the private individual. I won't deny its there. I will however state, that once your rich, your less likely to take big risks because you have too much to lose. A big company will improve what its got, but not deviate much from its general concept. Despite a lack of reasources therein, many to most new markets are created by those in the middle and the bottom. Such underdogs need incentive true, but, lets not deviate off topic.

The exact number of wealthy is insignificant. If there was one true wealthy person and they enjoyed some sort luxury, then that enjoyment would be demanded by the rest of the populace.



I think this is completely incorrect. The only way that a business or person can become wealthy in a capitalist system is through risk-taking. Those who take the largest risks gain the biggest rewards and can also receive the biggest losses. If a business is successful, it just means that the large risks that they took were better than the ones their competitors made. I think that this risk is actually larger than those of middle and low income businesses because there is more capital and more lives affected. The risk may only be surpassed by the starting of a business in the first place.

To comment on a statement you made in an earlier post:


If you think that the New Deal was helpful to us, then i implore you to make a debate topic on that (if there isn't one already) because according to my understanding of history, the New Deal programs and government mismanagement if anything prolonged the depression longer than it could have been without government intervention.

Could you elaborate on what you mean by margin? Home sales recently have hardly been low margin. Owning a McDonalds restaurant can have very high margins for the owner.

Computers are very competitive and I'm not sure the margins are that great. Vacations depend on air travel and god knows the airlines are not having high margins.

I guess I'm not sure what you mean by margins.

Whose collective spending benefits the economy the most? The Lower Classes? The Middle Classes? The
Upper Classes?

I think it really depends on how the particular person spends the money and not what class spends the money.

For instance, the Rockefellers were very rich and if it weren't for their extreme wealth we wouldn't have things like the Rockefeller Plaza etc. Bill Gates is very rich, but without him we wouldn't have all the charity and programs that his organization does.

There is spending that takes a LOT of money that stimulates the economy hugely and if the gov't doesn't do it, very few individuals could. And that spending creates a stimulus for the economy and more importantly improves our infrastructure which allows our economy to grow.

Now, on the other hand, you also have very wealthy people who simply hoard wealth and waste resources. Obviously this spending is not good for the economy. Such as Donald Trump who flies around in a Boeing airliner, or a billionare who decides to make all his faucets in his 100 room mansion out of pure gold. Or the billionare who buys property and land. These people do not stimulate the economy compared to other spending.

In general though, I think if you need instant stimulus for the economy you give the money to those that will spend it. If a millionare just puts the extra money into stocks or land or into a savings account, that doesn't help the economy much.

The people that ABSOLUTELY will spend the money are the poor and lower middle class. So IMHO, if you needed instant stimulus, you'd give the money to those groups because you would be assured that they would spend the money where it would create more jobs, more growth as well as increase OTHER spending.

Whose collective spending benefits the economy the most? The Lower Classes? The Middle Classes? The Upper Classes?
Before I give my 2 cents on this, I should point out that America's Consumption economy is propped up by various instruments of debt. While Americans get up every day for work, very few Americans actually make the actual products themselves. What that means is that much of the consumer spending does not go to American factories, but goes to foreign countries instead. In most economies, this type of pattern would make consumption increasingly expensive since the foreign countries would want some actual use for their paper wealth. What keeps this merry-go-round rolling is that foreign countries have been lending America billions of dollars year after year.

It is true that the Wealthy people have the most potential to uplift the economy through spending. But other debaters pointed out that a person who's already wealthy isn't going to have much incentive to invest because he's already had his million made. Also, as far as the luxury spending is concerned, we need to keep that stuff in perspective. The people on the fortune 500 list could easily buy themselves 1,000 mansions for themselves if they wanted to. And doing so would create several million construction jobs easily. I can think of other ways for the wealthy people to spend their money. But it should be evident that their luxury spending is not creating all that many jobs.

The best way for consumption to benefit the economy is to make it easier for the middle class and the poor class to invest. And Investment should be directed to the real economy and towards building factories in America. The Big Box stores and the Fast Food huts that make up America's economy don't create wealth, but merely shuffle the existing wealth around.

There are some things one can do with money that is good for the economy, and some things that are not good for it.

Basically, any time money is used in exchange for goods or services, it is stimulative to the overall economy. Anytime money is used in the form of capital spending, it is even more stimulative. Anything that removes money from circulation is harmful for the economy.

You can:
1) spend it
2) save/invest it
3) give it away
4) pay taxes
5) hide it (say, in a mattress)
6) destroy it

One through three are nearly the same as a stimulant, four is neutral at best, five is harmful because it is the removal of capital at least temporally from from use and six is a permanent removal.

It seems that the wealthy have the most to apply to one through three, insofar as there is anything left after four.

The stimulative effect of government spending is diluted by the amount of spending that is unproductive- bombs and bridges to nowhere do not enhance the economy as much as say, highway construction or forest management. Perhaps that would explain why tax cuts always cause the economy to expand- less to four makes for more for one through three!