Comparing the 2009 personal earnings of the top five hedge fund managers and the most recent fiscal year's net income for some of the world's largest corporations.
While these corporations employ millions of people, hedge funds support hundreds / thousands. The result is even greater inequality and capital flowing from productive means (business investment / innovation) to goods for the rich (yachts and indoor basketball courts*).
Source: The Big Picture
Not that I wouldn't have an indoor basketball court if I was worth billions
Update:
Reader Economists Do It With Models counters that wealth transfers to hedge funds does flow its way back (at least in some portion) to the economy.
I object just a tad to your characterization of the productivity of corporation net income versus private net income. Yes, the rich people are buying luxury goods, but they are then employing the people who make those luxury goods. On the other hand, if the rich people aren't buying things with their piles of cash, they are investing it, which provides funds for the development of other businesses. Corporations may be plowing their earnings back into their businesses, but they may also be distributing them as dividends to shareholders and whatnot. Perhaps some of those shareholders are even wealthy people who are going to use the proceeds to, oh I don't know, buy some yachts. :)At least yachts are safe under any scenario!
I object just a tad to your characterization of the productivity of corporation net income versus private net income. Yes, the rich people are buying luxury goods, but they are then employing the people who make those luxury goods. On the other hand, if the rich people aren't buying things with their piles of cash, they are investing it, which provides funds for the development of other businesses. Corporations may be plowing their earnings back into their businesses, but they may also be distributing them as dividends to shareholders and whatnot. Perhaps some of those shareholders are even wealthy people who are going to use the proceeds to, oh I don't know, buy some yachts. :)
ReplyDeletegood point...
ReplyDeleteThe companies' earnings definitely go to their share holders.
ReplyDeleteSorry, but you can't like companies and dislike investors. They are the same.
Johan
an investor allocates capital. a non-financial business makes things. they may overlap in some cases (i.e. allocating capital to a business that makes things), but they are not the same thing.
ReplyDeleteEconomists Do It With Models must be one of those 'trickle down' and 'big giant invisible hand in the sky' type people
ReplyDelete