The Hidden Prosperity of the Poor - NYTimes.com

The Hidden Prosperity of the Poor

By THOMAS B. EDSALL

A concept promulgated by the right — the notion of the hidden prosperity of the poor — underpins the conservative take on the ongoing debate over rising inequality.

The political right uses this concept to undermine the argument made by liberals that the increasingly unequal distribution of income poses a danger to the social fabric as well as to the American economy.

President Obama forcefully articulated the case from the left in anaddress on Dec. 6, 2011 at Osawatomie High School in Kansas:

This kind of gaping inequality gives lie to the promise that’s at the very heart of America: that this is a place where you can make it if you try. We tell people — we tell our kids — that in this country, even if you’re born with nothing, work hard and you can get into the middle class. We tell them that your children will have a chance to do even better than you do. That’s why immigrants from around the world historically have flocked to our shores.

The conservative counterargument – that life for the poor and the middle class is better than it seems – goes like this: Even with stagnant or modestly growing incomes, the poor and middle class benefit from the fact that a stable or declining share of income is now required for basic necessities, leaving more money for discretionary spending. According to this theory, consumption inequality – the disparity between the amount of money spent on goods and services by the rich, the middle class and the poor — remains relatively unchanged, even while income inequality worsens.

The Iv-B economy can cause some prices to rise in bubbles to a ceiling, also other prices to fall to a floor. For example many electronic goods fall virtually to the cost of production and then this downward momentum causes some companies to crash chaotically and go bankrupt. Farming can also have this problem, with cyclical booms and busts hitting this low floor of prices can regularly send them broke and needing to be supported by Bi cooperatives. 

It is also a Biv attitude, that all people are gaining from transactions so everyone must be getting wealthier, or a rising tide lifts all boats. However some areas can be Roy where resources are scarce, this can also be because resources tend to flow to the wealthier Y-Oy areas which are predatory.