{"id":16837,"date":"2020-10-22T22:07:53","date_gmt":"2020-10-23T02:07:53","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=16837"},"modified":"2020-10-31T23:46:02","modified_gmt":"2020-11-01T03:46:02","slug":"why-the-rich-get-richer","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/why-the-rich-get-richer\/","title":{"rendered":"Why The Rich Get Richer and How the System Fails"},"content":{"rendered":"\n<p>Why do the rich get richer? Is there a system failure that allows the rich to accumulate massive wealth, while everyone else struggles?<\/p>\n\n\n\n<p>Competitive exclusion is the concept of needing success to be successful or the rich getting richer. The reason why the rich get richer has to do with societal and economic systems failures that encourage it. <\/p>\n\n\n\n<p>Read about why the rich get richer, and how we might begin to correct this system failure. <\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\">Why t<strong>he Rich Get Richer<\/strong><\/h2>\n\n\n\n<p>Do you wonder why the rich get richer, instead of an economy gaining wealth in a more balance way? Also known as: competitive exclusion, success to the successful. This is how the rich get richer. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>How It Happens<\/strong><\/h4>\n\n\n\n<p>How do the rich get richer? Two competitors have access to the same limited pool of resources. The winner gets a greater share of resources, which in turn allows the winner to compete even better, which then earns it more resources. On the other side, the loser gets progressively fewer resources, which makes the loser even less able to compete. Reinforcing <a href=\"https:\/\/www.shortform.com\/blog\/feedback-loop-meaning\/\">feedback loops<\/a> are at play here.<\/p>\n\n\n\n<p>If this cycle is allowed to continue unabated, the losers will eventually be forced out of the game entirely. This outcome may be unhealthy and run counter to the goals of the whole system, and explains how the rich get richer. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Examples<\/strong><\/h4>\n\n\n\n<p>In ecology, one species can outcompete another, taking all the system resources to the point that the loser becomes extinct. (Shortform note: An example is an <a href=\"https:\/\/www.shortform.com\/blog\/cost-of-invasive-species\/\">invasive species<\/a> that reproduces so successfully it disrupts the local ecosystem.)<\/p>\n\n\n\n<p>In commerce, a <a href=\"https:\/\/www.shortform.com\/blog\/what-makes-a-business-successful\/\">successful business<\/a> can reinvest its profits into more technology, capacity, or political lobbying, which further enlarges its share of profits. Left unchecked, the business can become a monopoly.<\/p>\n\n\n\n<p>The author also discusses this in the context of social inequality. The poor get poorer in a number of ways:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The poor have access to worse education, which leads to worse job opportunities, which leads to lower incomes. Their children are born into poverty, perpetuating the cycle.<\/li><li>They pay rent to landowners, who use the income to buy more land.<\/li><li>The poor tend to organize politically less often, and so they are underrepresented in government spend and attention.<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Fixing the Rich Get Richer<\/strong><\/h4>\n\n\n\n<p>If you\u2019re an individual agent losing against a growing competitor, you can choose to diversify, or play a different game. In business, this can mean <a href=\"https:\/\/www.shortform.com\/blog\/disadvantages-of-entering-new-market\/\">entering a new market<\/a> or seeking different resources. However, this doesn\u2019t always work, if the monopolist can remove all budding competition, say by destroying them or buying them up.<\/p>\n\n\n\n<p>From a system point of view, the monopolist\u2019s reinforcing feedback loop can be countered with balancing feedback loops that limit the monopolist\u2019s growth. These include:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Antitrust regulation to break up monopolies<\/li><li>Tax laws to charge the wealthier a greater percentage of their wealth<\/li><li>Estate taxes to reduce the inheritance that is passed on to the next generation, thus limiting the ability of a family to preserve its wealth<\/li><\/ul>\n\n\n\n<p>These have the effect of leveling the playing field and equalizing the players.<\/p>\n\n\n\n<p>Now you know the answer to the question &#8220;how do the rich get richer?&#8221; A broken system.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Why do the rich get richer? Is there a system failure that allows the rich to accumulate massive wealth, while everyone else struggles? Competitive exclusion is the concept of needing success to be successful or the rich getting richer. The reason why the rich get richer has to do with societal and economic systems failures that encourage it. Read about why the rich get richer, and how we might begin to correct this system failure.<\/p>\n","protected":false},"author":5,"featured_media":16847,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[81,24],"tags":[139],"class_list":["post-16837","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-society","tag-thinking-in-systems","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why The Rich Get Richer and How the System Fails - Shortform Books<\/title>\n<meta name=\"description\" content=\"Do you want to know why the rich get richer? It&#039;s because of fundamental failures in our economic and social systems. Find out more.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.shortform.com\/blog\/why-the-rich-get-richer\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why The Rich Get Richer and How the System Fails\" \/>\n<meta property=\"og:description\" content=\"Do you want to know why the rich get richer? It&#039;s because of fundamental failures in our economic and social systems. 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