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Business

The economy is a pyramid scheme


The economy is a pyramid structure of workers in which the more affluent workers are supported by the workers who makes less money and thus have less to spend. Those who have money normally buys the products and services of those who are not as fortunate whereas the former get their money by servicing those who are wealthier than them. The very bottom of the pyramid are the likes of sweatshop workers making 5¢ sandals in China or farmer-workers (those who doesn’t even own the land that they work) growing rice in rural Indonesia. The next layers are probably the various kinds of office workers pushing pens or massaging keyboards. Finally the top of the pyramid consists of those folks you regularly see in the world’s top 500-ish richest people in the world.

It’s roughly similar to the “food chain” metaphor (or more appropriately food pyramid) in which the plants are eaten by herbivores which in turn are food for the carnivores. Furthermore the population of plants must be greater than the population of herbivores and in turn the carnivores’ population are limited by the number of herbivores they can eat to survive. If this is not the case then the pyramid will become imbalanced and hunger will cause the population’s proportions to be re-adjusted.

Economic Hierarchy

For example, I’m typing this article on a MacBook Pro — which is a not-cheap laptop by most standards (unless probably the standards of those above Obama’s $200K per annum “rich” line). This fine laptop is assembled by relatively elite factory workers in China (relatively elite since probably Apple doesn’t contract sweatshops to make their stuff) that are supposedly more well-off than most other factory workers in the region. But probably they won’t be able to buy the laptops that they make from retail just by using their own salary (should they don’t have any employee’s discount) and thus probably buy cheaper knock-offs or DIY computers that are assembled by actual sweatshops. Which in turn those sweatshop workers probably won’t be able to buy the stuff they make themselves.

Enough for looking downwards, let’s look at the other direction now. I currently work as an IT support in an investment bank. We make and sell bonds and other investment products to big businesses and high net-worth individuals (those worth more than one million dollars). Since those bonds are primarily sold in at least a million dollar denomination (US dollars, not Zimbabwe dollars), I couldn’t afford to buy even one such bond with my current salary. I can only buy cheaper investment products (with lower returns) that other companies sell. Hey, that’s pretty similar to the Apple factory worker discussed earlier.

Interestingly enough, the size of your salary isn’t really determined by how difficult (or challenging, depending on your point of view) your job is but more tied to how much money your company is making and how much does it want to share it with you. Additionally how much other companies pay for a similar job matters too. You can be a code monkey in a highly profitable Fortune 500 company in New York making $100K+ annually or you can be the same code monkey in a dot-com startup in Jakarta making $2000 per year. Similarly the CEO in the former company probably makes millions of dollars per year but a CEO in the latter makes millions of rupiahs (the exchange rate at this time of writing is about 12K Rupiahs per USD) — that’s a ten-thousand-times difference. If the pastures are green it’s not too difficult to grow your cattle.

Yes, life isn’t fair — just live with it.



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