Wealth condensation is a theoretical process by which, in certain conditions, newly-created wealth tends to become concentrated in the possession of already-wealthy individuals or entities. According to this theory, those who already hold wealth have the means to invest in new sources of creating wealth or to otherwise leverage the accumulation of wealth, thus are the beneficiaries of the new wealth.
Two processes that some critics claim are driving wealth condensation are:
- The process by which corporate officers are paid large salaries and bonuses, the total compensation sometimes being as much as thirty thousand times as much as that of their lower-paid employees. Critics of the corporate system have often charged that there is a substantial disconnect between a) officer performance and compensation, and b) officer compensation and worker compensation, and that officers are compensated at levels disproportionate to either performance or payroll because they are already part of the elite, and that this is a self-perpetuating methodology to maintain an elite class (see neofeudalism).
- The U.S. Republican party tax policy which critics claims vastly favors the wealthy over the poor and the middle class, thus allowing the wealthy to retain more of their wealth as disposable and investible income. The argument underlying this is that progressive tax systems are being scrapped in favor of regressive tax systems, driving wealth condensation.
Some advocates believe the theory of wealth condensation applies to democratic countries with free market economies, which they claim exemplify the old phrase "The rich get richer and the poor get poorer."
This theory is similar to the "law of the centralization of capital " posited by Marx.
Proponents of free market economics argue that this "leveraging of wealth" can be explained either by the legitimate creation of wealth by its owners or by specific instances of malfeasance. Therefore, by this line of argument, the results do not constitute a "process" or "effect", and to describe it as such could even be misleading because it would conflate two distinct sorts of behavior: one legitimate and positive, the other dishonest and harmful.
Free market democrats also generally claim that wealth condensation theory does not apply to democratic countries. They point to the United States as an alleged counter-example of the theory, on the grounds that its middle class is supposedly the most prosperous in recorded human history. Some go further, claiming that even America's "poor people" are envied by the "middle class" of other, less industrialized countries.
Critics of this position also point out that the total wealth of the United States is vastly higher than most other nations, and that the relatively superior standard of living of the American poor is solely due to this single disparity. This criticism further states that the wealth disparity must be measured by the wealthy versus the poor of the United States, not the American poor versus the poor of the rest of the world.
See also
