Income Disparity

I have heard many people try to explain the reasons for the increasing gap between the wealthiest and the average in the U.S.  It seems that every one of them had some explanation that fit their pre-conceived politcal ideology and none were very convincing.  Today I finally heard two numbers that instantly crystallized the answer in my head.

We already know globalization is the ultimate cause, but the guy on Bloomberg I heard today said that 25 years ago there were about 500 million people participating in the global economy, most of them in the U.S. and northern Europe.  Today that number is 2.5 billion.  I started thinking about that and came up with the answer:  Globalization can allow few producers to reach many consumers or many producers to reach few consumers.  Mark Zuckerberg, the guy behind Facebook, can reach over a billion customers through the internet, with virtually no competition.  No one else can do what they do.  A t-shirt factory, on the other hand, can only produce enough t-shirts to reach a few thousand consumers a year, and there are billions of people who can do that work.  Who is going to make more money?

The guy being interviewed used the phrase "scalable ideas."  When an entrepenuer comes up with an idea that can be scaled up to serve consumers all over the planet with little or no additional fixed costs, the leverage is enormous.  As the pool of global consumers expands, the value of this leverage is going to continue to increase, and that disparity is going to keep widening.