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Hawai’i’s Shared Futures By Vision Foresight Strategy

Profiting off the wealth gap

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A recent BusinessWeek article examined the financial sub-industries that have grown up around the lower income classes, catering to what is known as sub-prime markets. The article details a few cases of low income individuals getting caught in what many see as a predatory game to hook individuals into credit they can ill afford, all catering to their needs and desires to pay bills and purchases higher end products. A key insight of the article is the lack of financial knowledge and savvy common to many Americans, and how this exacerbates the very real human tendencies to play to emotional responses (e.g., desires, impatience, need for status), all of which lead to poor financial decisions.

Thoughts: One of the concerns raised by the article is the increasing wealth gap found in the US and believed by many to be occurring around the globe. In our economic system, individuals have considerable incentive to find ‘niche’ markets within which to build profitable businesses. Indeed, much of the ‘corporate strategy’ literature points to differentiation and finding niches as the effective ways to orient a business and product development. The sub-prime markets talked about above represent a certain kind of niche that some saw long ago and into which many are now flocking. From a ‘profit-maximization’ viewpoint (something management luminaries such as Peter Drucker thought was ridiculous), this makes perfect and legitimate sense. From a broader point view, something endorsed by advocates of environmentalism, sustainability, and social justice, the knowing pursuit of policies (read: business trends) that contribute to the fraying of the socio-economic fabric are unethical and in many cases immoral.

Here a key may be context and knowledge. It often takes someone to identify the larger and longer-time ramifications of policy, consequences not examined by the policy designer/implementers for a variety of cultural and structural reasons, to make the broader public or policy establishment (or business community) aware of the potential impact before society and its instruments (like government) can properly identify the threat and establish new rules. And of course, this response is always shaped by the cultures woven through a society: thus, do we as modern Americans feel enough offense at the widening wealth gap to advocate for substantive behavioral and structural changes in our socio-economic system?

Related:

  • The End of Poverty: Economic Possibilities for Our Time. Jeffrey Sachs. 2006
  • The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. William Easterly. 2007
  • Development as Freedom. Amartya Sen. 2000 (winner of the Nobel Prize in Economics in 1998)
    • For a related item by Amartya Sen dealing with culture and identity
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Filed under: Economics, Wealth

One Response

  1. copperwestinsider says:

    No. we wont. It’s simply too hard to advocate for that type of change on the frontline. It may be a cliche, but it’s tough to get people up off the couch to advocate for something that isn’t directly in their best interests.

    Great Blog! My Sister Maile sent me your link.

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