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The Economic Policy Institute put together data on income distribution across time periods that have seen large increases in wealth. When you look at these charts, it’s clear that some democratization is needed.

Look at the numbers from a decades growth between 1997 and 2008, all increase in value went to the wealthiest 10% of the nation. And the wealth increase is seen as a decrease of wealth for the bottom 90% of the population! Now that can’t be correct, can it? Re-visit the numbers as much as you like, the picture isn’t going to get any prettier.

The current ‘free market’ isn’t free at all. Information asymmetry is alive and well, and may indeed account for a lot of the wealth inequality. Not everyone has access to the same information and not everyone has the same connections. Just as in startup funding, not everyone has the possibility to participate in the best deals and as we’ve seen in the recent years, quality of deals can go a long way in determining how much wealth is created, but more specifically to whom that wealth is distributed.

Not everyone wants to be an investor in startups, just as not everyone wants to be an entrepreneur. It’s the way of the world and that’s fine, but who does the exclusionary mechanism benefit? The select few at least, but what about the rest of the nation and economic growth? Are we better off producing billionaires, than we would be producing 1 000 times as many millionaires with the same capital? 

It’s clear that the wealthiest 10% have done something right and there will always exist a new wealthiest 10%, but if we look at the entire spectrum of people, there are a lot of people that could do a lot of amazing things, if they had the slightest chance.  Many would make great entrepreneurs, with a drive that others would envy and maybe in a few years they would make great angel investors. But the barrier to participate in startups is way too high and for individuals looking to learn the name of the game, the costs of starting are enormous.

The good news? It’s changing as nations recognize the economic impact of new models. It’s changing because of the old models being recognized as ineffective for years to come. It’s changing because it needs to change.

Why? Because all efforts that pervert the free market will ultimately cause inefficiency and a shroud of other excess. Haven’t we seen enough in the past few years to recognize that this is not the future we want to see through?

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This entry was posted on Monday, October 17th, 2011 at 4:16 pm and is filed under Entrepreneur Motivation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.