Red Alert: distribution patterns of wealth in Germany

[Skybird]

http://www.diw.de/documents/publikationen/73/74780/07-45-1.pdf (German)

In the latest edition of it's weekly publication reporting on trends and facts of economical and financial relevance for the developements in Germany, the German Institute for Economic Research (DIW) in edition 45/2007 from November 2007 publicates some findings on the distribution pattern of wealth in Germany amongst both sexes, age groups, West and East Germans, and so on. Most of it probably is not inetersting for the international public, but two points caught my attention.

http://img339.imageshack.us/img339/7748/image2xj1.jpg (http://imageshack.us)

For explanation, this graph shows the population, sorted by wealth (right=rich, left=poor) and then divided into ten groups on the horizontal axis, and then compared to the percentage of all wealth and property in Germany on the vertical axis (expressed in percent).

Two examples how to read it: the graphs show the the richest 10% of German population possesses almost 60% of all wealth, whereas the poorer half (50%) of the population possess almost nothing or is even in debts.It also reads that the upper third of the population toghether owns 90% of the wealth in Germany, and the lower two thirds own the remaining 10%.

the second graph is interesting when thinking of problems of over-aging soceities, the demand for the young ones not only to found families, pay for them, pay for their own existence and future security, but also to fund the pensions of the old - an effort that simply leaves many people simply no more air to breathe. More and more people in germany cannot afford to stockpile reserves for their own future security - all their income is eaten up to secure their survival in the immidiate present. Here I see the - by far - greatest time bomb of all threats coming from the demographical developement.

http://img339.imageshack.us/img339/9889/image3jo8.jpg (http://imageshack.us)

the three graphs show the savings, values and possessions (in thousands of Euro) on the vertical axis, and the various age groups on the horizontal axis, separated for westgerman, Eastgermans, and all Germans in total.

As to be seen, the highest peak is around the age group of 65-66, and by tendency the older age groups have far more values saved than the young ones. On the other hand, the savings of the young age groups, those who have just left school, job training, university, and are of the age where they are expected to found families, has significantly lesser reserves to care for the future of their families, of themselves, and still paying for the pensions of the old ones. Telling you separately, that these values are known to be constantly declining since years.

That poverty amongst the old is drastically spreading, is no contradiction, because by tendecny the information of the first graph is true for the old as well: many have little, few have much.

Now, I am not able to precisely calculate that myself, so it is a suggestion of a tendency only: combine the information of the first with that of the second graph, and be aware that by tendency, due to the career you may have (if you are lucky these days), the rich ones owning most (first graph) by tendency are older, and the the poorer ones are younger. It probably is not possible to assume that link to be a linear one, but think of it by tendency only, that is good enough a shot.

It means this: that with known decreasing of wealth and income of the young ones, wealth that would be needed by the young ones to found families and secure their own future and that of the old ones is shifting to the old ones instead, where it either is accumulated in very few rich families, or is simply consumed by the older ones, and then is gone. By tendency, again the majority of the olde rones is much poorer than the richer ones, and due to the demographic developement, fewwer young ones and more old ones, the young ones are having to deal with an avalanche effect of pension costs they have to shoulder in the future - additonally to founding families and securing their own future when they have become old.

This is most threatening social dynamite.

It is no wonder that almost every politician avoids to be associated with this problem like the plague, and only political outsiders dare to speak out this grim truth - no politicians dare that. The grim truth is that this system is about to collapse, and that the old eat up the young ones alive, like zombies, that way destroying the future of the national community and it's economical and financial basis. Politically most uncorrect to say that - but it is the simple truth.

I know from the press that the situation in america by tendency is the same, but more excessive. savings of private households tend towards zero amongst a great part of the American population. Also see the background of the current mortage crisis (which is only the tip of the iceberg, I say), and the link to credit business.

How is it in your country? If you are young by now, not an old chap, have you ever thought of it?

[CCIP]

This is most threatening social dynamite.
The grim truth is that this system is about to collapse, and that the old eat up the young ones alive, like zombies, that way destroying the future of the national community and it's economical and financial basis. Politically most uncorrect to say that - but it is the simple truth.


I've been preaching this for years. This is true of most of any country. I keep saying that politicians are far too focused on the social issues - which often result from this - and forget the real root of these in economics. That's why my original country, Russia, cannot develop "real" democracy, and that's why "real" democracy here is also in eventual danger of collapse. Unless something is done, we're in for a bad time.

[SUBMAN1]

Actually, to put things into perspective, things like that have been the same for 20 years +, even in America. Nothing has changed. The doomsayers are still saying the same thing, the sky, I mean, the economy is falling tomorrow! Problem is, it is not. It probably never will, no matter what the debt ratio is. What the real problem is, is not what things are for you now, but how they are when you retire. Those that save properly - that is not a simple savings acount but instead who invest, will retire rich and without worry from a money perspective. Those that fall into the evils of credit, well, nice knowing ya, but I think you will be living a harsh old age. Don't come looking to me when I have money and you don't because I didn't buy that new Cadillac when i couldn't afford to pay for it cash and instead made some sacrifices here and there.

But like the dumb asses they are, they will say "It's not my fault! The man did it to me!" BS - it is entirely your/their fault. You reap what you sow in this world. Time to pay the piper. That is not to say I won't feel for them for making their poor choices (trust me, I want the 500 HP Cadillac too when I can't afford it), but I will not give them one red cent either.

Just my two cents.

-S

PS. its a harsh world, and no, Socialism won't make it fair either. It will just make it worse.

[CCIP]

Actually, to put things into perspective, things like that have been the same for 20 years +, even in America. Nothing has changed. The doomsayers are still saying the same thing, the sky, I mean, the economy is falling tomorrow! Problem is, it is not. It probably never will, no matter what the debt ratio is. What the real problem is, is not what things are for you now, but how they are when you retire. Those that save properly - that is not a simple savings acount but instead who invest, will retire rich and without worry from a money perspective. Those that fall into the evils of credit, well, nice knowing ya, but I think you will be living a harsh old age. Don't come looking to me when I have money and you don't because I didn't buy that new Cadillac when i couldn't afford to pay for it cash and instead made some sacrifices here and there.

But like the dumb asses they are, they will say "It's not my fault! The man did it to me!" BS - it is entirely your/their fault. You reap what you sow in this world. Time to pay the piper. That is not to say I won't feel for them for making their poor choices (trust me, I want the 500 HP Cadillac too when I can't afford it), but I will not give them one red cent either.

Just my two cents.

-S

PS. its a harsh world, and no, Socialism won't make it fair either. It will just make it worse.
That would be perfectly logical if the world were full of equal opportunities. However with the distribution of wealth the way it is, that's inherently unlikely. Those with wealth aren't merely the users of wealth, but they also are the ones in control of opportunities to get it.

I say that as a highly educated professional who has trouble getting proper work, and likewise grew up in a hard-working but permanently poor family. It's idealistic to assume that market will fix everything; experience shows that it doesnt. Money gravitates toward money; if the money's in a limited number of hands, well, there's your equal opportunity to make it. Doesn't happen. Especially not in the modern world where corporations make all the difference.

And the fact that this has been like this in the past isn't a good indication. Things aren't too great for many people these days.

The problem is that the system is built around aiming for the top, and anything top-heavy is inherently unstable unless the top exercises harsh control over the rest. Noone says the system has to be uniform, but there's a pandora's box of social problems when there isn't a large and dominant middle, and the bottom really goes rock-bottom on a wide scale.

The real problem is always the risk of reducing the middle class to irrelevance. Only a society dominated by a relatively happy, moderate, future-proof economic middle class can sustain democracy successfully. The real issue isn't to fight the rich, or fight for the poor to get money from the rich. It should be about making more middle-class people, with opportunities for everyone to get to that middle and stay happy in that middle.

[Skybird]

I am not sure if it was understood correctly what I said when writing "The grim truth is that this system is about to collapse, and that the old eat up the young ones alive", I did not mean the old system is eating up the oyung one, but that the old generation is eating up the younger ones. Just to make that clear.

Subman, 20 years ago projections about the generation's collapse in this system where the young found the old ones, have not been that widespread, and well calculated, with very few exceptions, in germany only one politician from the early 80s come to my mind, saying already back then that the pensions in the future of 30 years are not safe for demographical reasons. I also did not talk of the debt ratio here. I talked of that the gap between rich and poor, old and young, is widening dramatically, and that the poor and young ones collapse under the pressure to save money for their future (what many simply cannot afford anymore, it is even more extreme in your country), and still supoorting the old ones who all together have more wealth in the society, but in their group the majority also is poor. They are also put into relation with their main share of the nations wealth by the fact that the demographic balance is shifting towards the old ones, they are forming a bigger and bigger group, so there is no contradiction in saying the older geenration have most of the wealth, and amongst the old, most are poor.

Socialism is not the problem here, because by tendency you see the same developement in the US, which nobody would accuse to be a socialistic country. Many would even argue it is not even a social country (let's not get heavy about that, I quote it just tor the sake of completeness). Both a capitalistic and socialistic system (or a social one, let's remember that social and socialistic are two different things) seem to be ulnerable to the massing of wealth in fewer and fewer hands sooner or later, with finaicial and economical policies concenring inflation, credit levels and debts and deficitary balances (no here we are at it, subman! :) ) also massively influencing it (I just refer to that long essay I quoted in the other thread "US vs the world", for your convenience: http://www.currentconcerns.ch/index.php?id=179 .

Saving properly, subman said. Well, I just said several times: more and more people are sent home with a paikcet money as wages that does not allow them to save any money for later times. It is unfair, to put it mildly, to poijnt finger at them and say "your own fault, why don't you save". If with great effort and often witz help of distant familay members living in better situations the money is getting you hardly to the end of the month, and not beyond, then "saving money" is not an option. In many branches of economy, the real income (meaning to calculate inflation out of it, and understanding it as "buying power") has not risen in the past 15 years, but fallen (whereas the wages of top level managers have increased by several dozen percent, in some cases even by hundreds, with the quality of their job not imporving, and often instead having led into chaos, collapse, and on the stockmarkets: annihilation of stellar ammounts of money). Feel lucky if you are in a material position to put money aside for the future, subman. but it is a fact that growing millions of peope simply cannot afford that.

Now see the importance of this economical status of grpowing numbers of young ones concerning family raising. Supporting the old. for the society of our nations, it is a lethal spiral, and in the end there is the great implosion. that is no doomsday-wioshing, and caling sky-is-falling, that is just cool calculation, logic, calm reason.

On a sidetrack, I also want to pojnt at very strong evidence from social science that you starting conditions into live and your job perspectives very very heavily depend on your family'S economical background. It is a fact that sinc elonger time nobody knowing the statistics is denying. The ideals says "work hard, give your best, and you will be rewarded with good chances and income". But only in exceptions from the rule it comes out like this, and then is celebrated as the American dream. But for each winner like this, there seem to be hundreds of loosers. We also know by very convincing research results that your family's background not only influences you furutre chnaces on a material, monetarian level, but alos on a psychological one, becaseu the living conditions you exprrience in your youth form and infleunce your psyche accordingly, and people who have been rejected chnaces and participation in their younger years, tend to have lower self-esteem and opötimism that they can do it when they are older. that is a simple fact about being hman that we cannod escape - it's just like this for many. It is not a question of superficial attitude, but deep-rooting fundamental chnages in your personality that you cannot reverse at will.

But this as a minor view only. The thread's objective is the demographic problem, and communal wealth distribution patterns, and their mutual influencing.