A lot of people don't seem to understand why the concentration of wealth in fewer and fewer hands is a major economic concern. I've heard several readers and/or commentators maintain that since a capitalist system "grows the pie", anyone can make more money by being inventive or creative, or working hard; therefore, since we're not dealing with a finite pie size, it doesn't matter if the rich become richer, because anyone else can, too.
That's a fundamental misunderstanding of the situation.
Regardless of the size of the economic pie at any moment in time, there are several primary functions of money. One of them is as a measure or unit of account, making it possible to express market value in a common frame of reference. That doesn't concern us here. A second is as a medium of exchange - a tool to buy and sell products. A third is as a store of value - to maintain or increase wealth according to the value of the assets money can buy. The trouble is, the more money that gets drained from the buy-and-sell economy in order to invest in assets (i.e. it's diverted from being a medium of exchange to being a store of value), the less money is available to exchange. The money is effectively "locked up" in assets, rather than being free to "move" and thereby keep the economy going (and growing).
This means that less money is available for consumers to buy products, and less is available to corporations and other producers to provide products for them to buy (and to pay salaries to the workers who make those products, which in turn affects their ability to buy products). That, in turn, leads to pressure to "print money" by extending credit or printing currency without any economic value backing it (a feature of so-called "fiat currency", where its value is whatever a government says it is, and/or the value the market assigns to it). The generation of more units of currency in that way (because a loan can be spent in the same way as if it were money being printed, thereby increasing the effective money supply even if no more actual cash has been manufactured) has an inflationary effect, which in turn affects the values of assets denominated in that currency (i.e. their "store of value" becomes more valuable in terms of rising prices of assets overall, but less valuable in terms of stability, because asset values are now subject to currency fluctuation).
Thus, headlines such as "The richest 10% of households now represent 70% of all U.S. wealth" are a real and major concern. Bold, underlined text in the excerpt below is my emphasis.
Deutsche Bank’s Torsten Sløk says that the distribution of household wealth in America has become even more disproportionate over the past decade, with the richest 10% of U.S. households representing 70% of all U.S. wealth in 2018, compared with 60% in 1989, according to a recent study by researchers at the Federal Reserve.
The study finds that the share of wealth among the richest 1% increased to 32% from 23% over the same period.
To make a finer point, Fed researchers say the increase in wealth among the top 10% is largely a result of that cohort obtaining a larger concentration of assets: “The share of assets held by the top 10% of the wealth distribution rose from 55% to 64% since 1989, with asset shares increasing the most for the top 1% of households. These increases were mirrored by decreases for households in the 50-90th percentiles of the wealth distribution,” Fed researchers said.
Sløk said the financial crisis has played a significant part in this growing gap, which resulted in the Federal Reserve stepping in to stem a massive ripple of losses through the global financial system as the housing market imploded.
As a result, the Fed lowered interest rates, which had the knock-on effect of pushing easy money into the hands of the already-wealthy.
. . .
“In sum, this meant that stock prices and home prices have increased but ownership has shrunk to fewer hands and as a result we now have more inequality than ever before,” he explained.
Inequality has partly given rise to Democratic-Socialist Congresswoman Alexandria Ocasio-Cortez, who has proposed leveling massive taxes on the superrich. Her mention in early January of a radical 70% tax on the wealthy has proven divisive in Washington.
The wealth divide has also intensified the debate about the merits of capitalism: the beating heart of the U.S.’s financial system.
Billionaire Ray Dalio said capitalism is no longer working for most Americans, adding that the expanding wealth gap is creating a volatile environment with disturbing parallels to the economic and social upheaval of the 1930s, he said in a blog on LinkedIn last month.
There's more at the link.
The breeding-ground for socialism and its advocates is thus directly related to the concentration of wealth in fewer hands. When that gets out of balance (as it is today), the reaction (calls for an imposed, legislated redistribution of wealth - i.e. socialism) becomes stronger. However, those who've benefited from the concentration of wealth usually have no intention of sharing their good fortune with anyone else. They've got theirs. They don't care whether we can get ours under the present system.
Food for thought . . . and for real concern.