The real culprit behind income disparity: the microprocessor

From Mark Perry of "Carpe Diem." Excerpts:

"From John Steele Gordon writing in today’s WSJ (“The Little Miracle Spurring Inequality“):

The great growth of fortunes in recent decades is not a sinister development. Instead it is simply the inevitable result of an extraordinary technological innovation, the microprocessor, which Intel brought to market in 1971. Seven of the 10 largest fortunes in America today were built on this technology, as have been countless smaller ones. These new fortunes unavoidably result in wealth being more concentrated at the top.

But no one is poorer because Bill Gates, Larry Ellison, et al., are so much richer. These new fortunes came into existence only because the public wanted the products and services—and lower prices—that the microprocessor made possible. Anyone who has found his way home thanks to a GPS device or has contacted a child thanks to a cellphone appreciates the awesome power of the microprocessor. All of our lives have been enhanced and enriched by the technology.

Today the microprocessor, the most fundamental new technology since the steam engine, is transforming the world before our astonished eyes and inevitably creating huge new fortunes in the process. The number of new economic niches created by cheap computing power is nearly limitless. Opportunities in software and hardware over the past 30 years have produced many billionaires—but they’re not all in Silicon Valley. The Walton family collectively is worth, according to Forbes, $144.7 billion, thanks to the world’s largest retail business. But Wal-Mart couldn’t exist without the precise inventory controls that the microprocessor makes possible.
The “income disparity” between the Waltons and the patrons of their stores is as pronounced as critics complain, but then again the lives of countless millions of Wal-Mart shoppers have been materially enriched by the stores’ staggering array of affordable goods. Just as the railroad produced many new fortunes, the Internet is producing enormous numbers of them, from the likes of Amazon, Facebook and Twitter. When Twitter went public last November, it created about 1,600 newly minted millionaires.

Any attempt to tax away new fortunes in the name of preventing inequality is certain to have adverse effects on further technology creation and niche exploitation by entrepreneurs—and harm job creation as a result. The reason is one of the laws of economics: Potential reward must equal the risk or the risk won’t be taken.

MP: By several statistical measures, it’s true that income inequality was lower in 1971 than in recent years. The Gini index of income inequality was 39.6% in 1971 and increased to 46.9% by 2010. The share of total income earned by the top 20% increased from 43.5% in 1971 to 51% in 2012. But would anybody give up all of the technological innovations that came from the microprocessor (GPS, smart phones, Internet, email, computers, calculators, iPods, iPads, iTunes, etc.), which naturally contributed to greater income inequality, to go back to income distribution of 1971 and live without the microprocessor-generated technological abundance that we all enjoy today?

I didn’t think so….."