How much is too much?

[rubato]

So where are we in this process? There has long been a substantial body of evidence that wealth has become very concentrated in the United States and also that such a concentration is harmful economically, socially, and politically as it kills growth and expansion, kills ambition and effort at both ends of the economic spectrum, and undoes democracy. It kills growth because GDP, building factories and hiring more employees, is driven by the spending of the bottom 80% in income and they have been made poorer. It kills effort at both ends of the spectrum by making the rich just rentiers who have no reason to act like entrepreneurs and by teaching those at the bottom that there is no real hope for them. And it kills democracy by making only the rich and super-rich able to access the media and shout the loudest.

There has been a recent flush of interest in changing this, as can be seen with the "occupy wallstreet" movement(s).

But there is no coherent strategy for what to do or even what a 'better world' would look like. So where are we? Are we still in the process of developing data about the scope, history and mechanisms of the problem? Are we in the process of transmitting that information to the larger community? Or are we stuck at the point where we don't know what to do?



http://equitablegrowth.org/2014/04/11/f ... #more-2612

A Few Finger Exercises with the Saez and Zucman Wealth-Concentration Estimates…
By Brad DeLong | April 11, 2014, 9:38 pm


From Emmanuel Saez and Gabriel Zucman (March 2014): The Distribution of US Wealth, Capital Income and Returns since 1913:
DeLong Saez Zucman Finger Exercises numbers

From today’s perspective, the $800K per capita in today’s purchasing that the circa-1949 average member of the “merely rich”–those between the 99%ile and the 99.9%ile–had looks extraordinarily small. Why, a 3% rate of spending relative to assets would leave them with only $24K per capita to spend! Barely enough to give you the median standard of living in 2014! (OK, OK: a much bigger house and a much more comfortable commute than the median today–but no electronic toys and air travel a very exceptional treat.) Even the truly rich of 1949–the upper 15,000–would find that a 3% rate of spending relative to assets would give them only the upper-middle class standard of living today or, well, me: the kind of style of life at which one stays at the Crowne Plaza or the Holiday Inn Express because more fancy seems not worth it given other demands on one’s cash.

Looking at it the other way, our truly rich today–the top 0.01%, the top 30,000–have a standard of living that, if one trusts the real income figures, was only matched by the top 0.0003%–the top 400 in 1949…

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[rubato]

This might not be be understandable unless you've read Rawls but it does capture something I had not thought of; It really WAS true in the 1970s that you could believe in an emerging society with a greater measure of economic justice ("distributive justice" in the terms of political philosophy). And it is a dead hope today. It would take a broad change in how we do things to repair the damage there.


http://crookedtimber.org/2014/04/10/tea ... r-piketty/

Teaching Rawls after Piketty

by Chris Bertram on April 10, 2014

We’re hoping to have a proper book event on Thomas Piketty’s Capital in the Twenty-First Century in due course. That’s hard for those of us who have read it, because the book is so stimulating, so bursting with surprising facts and ideas, that there’s a lot to talk about. Still, I think I’ll permit myself to share a few thoughts that I had about the way in which reading Piketty might impact on teaching political philosophy, and, specifically, teaching Rawls and the difference principle.

A Theory of Justice came out in 1971 and was composed during the period the French call the trente glorieuses . During that period it was easy to believe that the power of inherited wealth had melted away and that we were living in a new era of more equal opportunity, with careers open to talents and income inequalities largely explained by the differences in talent and ability that the parties in the original position were denied knowledge of. To be sure, 1960s America (like 1960s Europe) hadn’t accomplished that social-democratic meritocratic ideal, but it was kind of visible in embryo, waiting to be born. Rawls’s book took us way beyond that, challenging the glib assumptions about desert that the winners flattered themselves with, but in its toleration of some inequality for the greater good (and particularly for the benefit of the least advantaged), Rawls’s view was recognizably connected to a then-emerging social reality.

Today things look very different. What we thought would be normal—widely spread prosperity, reduced income inequality, and constant growth—has been replaced by the world of the 1 per cent (indeed of the 1 per cent of the 1 per cent). Accumulated wealth and capital ownership in the hands of the few, which never completely went away but retreated into the shadows, is back and (if Piketty is right), threatens to subject us all to the dominance of a new rentier class if we don’t do something pretty drastic fairly soon.

I suspect, though, that the teaching of Rawls hasn’t really moved on in the light of the new social reality. Though Rawls actually writes explicitly about income and wealth , much of the classroom (and textbook) exposition of Rawls inevitably focuses on functional inequalities in income from labour (to provide incentives etc). With inequalities in wealth (and inherited wealth) being both more extreme and of growing importance in actual societies, there’s quite a lot of scope to include in our teaching (i) an account of the shocking facts about inequalities in wealth as Piketty documents them and (ii) to notice that so much of that wealth inequality is non-functional and even dysfunctional as it actually disincentivizes work and the development of skill. Piketty’s constant return to Vautrin’s advice to Rastignac in Balzac’s Père Goriot is instructive here: in a rentier society, why bother working hard and training, when marriage or inheritance are the way to riches? We need to get across to our students that a society in which inequalities of reward to work exist but are functional is even further from the society in which we actually live than they (and the media) normally assume.

However even though Rawls was writing at a time when a just society looked like an emerging possibility and when private wealth was in remission, he also provided (via the influence of James Meade) an attractive alternative to the society Piketty believes we are turning into. Specifically, I’m thinking of Rawls’s ideal of a property-owning democracy, a society with widely dispersed capital ownership and different forms of enterprise (an ideal most recently explored by Martin O’Neill and Thad Williamson in their collection Property-Owning Democracy: Rawls and Beyond ). Spreading the wealth, expropriating the expropriators somewhat, and giving us all a stake in society’s stock of capital and thereby assuring that citizenship and democracy are not sucked of their meaning by the super-rich: that’s a message on which Rawls’s normative theory and Piketty’s economic narrative converge.

What happens when most of the wealth of a society has been sucked up by a tiny minority who can make a lot of money by doing nothing? By taking no risk?


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[dgs49]

As far as I can see, nobody has been "made poorer" by the vast accumulation of wealth by the tippy-top of the pyramid, even to the extent that they have done so by questionable means. They are able to do so because of the torrent of fiat money flowing into the economy, and not because they are "stealing" money from the bottom 80%. So, ironically, it is the profligate spending policies of the current Administration that are the main cause of the wealth accumulation that they complain about so vigorously. It is perverse.

Wages, as always, are determined basically by supply and demand (except where government has intervened and set up "minimum wages"). If you have a skill that is in demand you will make a good wage, if you have no particular skills, then your job and your compensation will be marginal. Productivity increases have gone on through no merit of the "workers," but rather through technological innovation and creativity on the part of engineering and management, thus it is not realistic to "demand" that workers' compensation rise with increases in productivity, or with the profitability of the employer. If they could hire five more of you tomorrow at the same wage, why are you entitled to more?

For an example of a non-contributory productivity increase, modern word processors make it possible for me to prepare lengthy contract documents, perfect in every detail, in a fraction of the time it would have taken me in, say, 1975 (and with NO support from a "secretary"). I just take an old one from a similar situation and adapt it. I even pirate them from the internet in some cases, but the result is a near-perfect document for the occasion. But it's not because I'm smarter or more competent or harder working than I was in 1975; it's because an army of software engineers developed and refined Microsoft WORD to the point where I can use it thus. I can literally do the work of four similarly competent people in 1975, and this is through no merit of my own, other than mastering a few tasks on MS WORD.

Just as important, the entrepreneurial opportunities available today are perhaps better than they have ever been in the American past. The "rags to riches" stories are ubiquitous. Also, opportunities for success in the "learned professions" and for those with task-specific educational background (e.g., petroleum engineering) are fantastic. Government hires more and more mediocre slugs every year, thus maintaining a tremendously fertile ground for employment for those with bachelor's degrees and no particular ambition. Hell they could be president one day.

The regrettable thing about today's economy is that, unlike in some generations past, a high school grad with no skills cannot earn a good living at the Mill or at a local manufacturing plant; some do, but the number of those jobs is quite limited. But this has nothing to do with "the rich getting richer"; it has to do with living in a global economy, and there is no way to turn back the clock on that evolution.

As pre-schoolers, if we were raised properly, we were taught NOT to fret about the fact that others have things that we would like to have. Unless they actually stole it from us, we have nothing to gripe about it. If you really want it, then go out and get some for yourself. But today's democrats have turned envy into a political justification for power - at least they are trying to. The Politics of Envy, indeed.

Anyone who would even use the expression "economic justice" is an "economic moron."

[rubato]

The four questions of the apocalypse" are:


1. Does inequality matter?
2. Is it getting worse?
3. What would a better world look like?
4. How do we get there by means which are allowable in a Liberal Democracy and politically feasible?



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[dgs49]

1. Not really. Not unless those at the top are truly stealing from those at the bottom, which is clearly not the case now. The fortunate or unfortunate fact is that today's technology makes it possible for enterprising folks to amass incredible fortunes without actually producing anything. But realistically speaking, this has been going on forever anyway.

2. The word "worse" presumes that it is "bad," which has not been established. But I think it is reasonably well established that the economic baseline (people at the bottom) are at the same level in perpetuity (which is not to say that THOSE INDIVIDUALS remain at the bottom, but only that those who happen to be at the bottom today remain at the same low level in perpetuity, adjusted for inflation). And since those at the top (same qualifiers) become wealthier over time, it is a mathmatical certainty that "inequality" increases over time. But so what?

3. Depends on where you sit. (a) Would it be "better" if everyone's compensation and accumulation of wealth were proportionate to the true economic value of their effort? To me this would be ideal, but if this were the case most democrats would be earning nothing at all. (b) Would it be better if all wealth were evenly distributed regardless of merit or economic worth? Most people would say no; furthermore, in places where this has been tried (other than monasteries and convents) the result was that everyone got lazy. Why not? (c) Would it be better if everyone were compensated according to the "content of their character"? Too difficult to measure. Intrinsic value of their work? Unmeasurable.

The answer is obvious but not quantifiable. It would be nice if everyone in society were guaranteed life circumstances that facilitated a life that would be dignified and civilized. Sufficient food to eat, a roof over your head, "free" health care for life, as much education as you were capable of taking, and so on. But there are two serious problems with this scenario: (1) people who are provided for become irredeemably lazy, and those who COULD provide for themselves albeit at a low level, tend to default to the level of dependency (i.e., they "go on welfare"). Indeed, the number of government dependents would skyrocket if the aforementioned benefits were guaranteed by Government. So policies aimed at protecting those who cannot fend for themselves for one reason or another tend to be taken advantage by many who could take care of themselves but choose not to. (2) The funds necessary to provide the "safety net" alluded to in (1) have to be paid for by the productive, in one way or another. And beyond a certain point, they become so resentful of the taxation (and the ones taking advantage) that they spend as much effort avoiding taxes as they do producing wealth. Because of the aggressive strategies that are employed by the truly wealthy, historically speaking, the actual taxes paid by the top couple percent of earners doesn't change much whether the top marginal income tax rate is 40% or 90%. It's the wage slaves - and not the investment class and the inheritance class - that get screwed.

4. Ain't happening. The Americans, unlike our European friends, will NEVER accept a level of taxation sufficient to pay for the "safety net" you seem to favor.

[Econoline]

Major Study Finds The US Is An Oligarchy
ZACHARY DAVIES BOREN, THE TELEGRAPH
............ APR. 16, 2014, 8:16 AM

The U.S. government does not represent the interests of the majority of the country's citizens, but is instead ruled by those of the rich and powerful, a new study from Princeton and Northwestern universities has concluded.

The report, "Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens" (PDF), used extensive policy data collected between 1981 and 2002 to empirically determine the state of the U.S. political system.

After sifting through nearly 1,800 U.S. policies enacted in that period and comparing them to the expressed preferences of average Americans (50th percentile of income), affluent Americans (90th percentile), and large special interests groups, researchers concluded that the U.S. is dominated by its economic elite.

The peer-reviewed study, which will be taught at these universities in September, says: "The central point that emerges from our research is that economic elites and organized groups representing business interests have substantial independent impacts on US government policy, while mass-based interest groups and average citizens have little or no independent influence."

Researchers concluded that U.S. government policies rarely align with the preferences of the majority of Americans, but do favour special interests and lobbying organizations: "When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose. Moreover, because of the strong status quo bias built into the US political system, even when fairly large majorities of Americans favour policy change, they generally do not get it."

The positions of powerful interest groups are "not substantially correlated with the preferences of average citizens," but the politics of average Americans and affluent Americans sometimes does overlap. This is merely a coincidence, the report says, with the interests of the average American being served almost exclusively when it also serves those of the richest 10%.

The theory of "biased pluralism" that the Princeton and Northwestern researchers believe the U.S. system fits holds that policy outcomes "tend to tilt towards the wishes of corporations and business and professional associations."

[rubato]

fixed the graphic in the OP. Here it is again:





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[dgs49]

Regarding the study mentioned above... Does it account for the inordinate power of organized labor? Government employee unions? The gay mafia?

What rich people or corporations are pushing HeadStart? What rich people are preventing serious immigration reform (aside from a few farmers)? What rich people have forced the U.S. Congress to have the highest corporate income tax rate in the civilized world? What rich people are demanding that the CFR double in size every five years, increasing corporate "compliance" costs with every new page?

It smells too much like one of those "studies" that decides what it wants to conclude, then accumulates data to support it.

[Scooter]

The gay mafia?

[Beer Sponge]

To be fair, the gay mafia did break into my house once. They redid the decor and now it's fabulous!

[TPFKA@W]

Yeah we got a visit too Beery. They went shopping with my husband and got his wardrobe lined out.

[Lord Jim]

My encounter was a little less benign...

They tried to shake me down for a contribution to The Hair Dressers Anti-defamation League, and when I refused they broke into a medley of Broadway show tunes...

After the third performance of "One" from A Chorus Line, I cracked...

Every man has his breaking point...

[Econoline]

[Joe Guy]

Click on the following icon for information on -

[Long Run]

A few apparent problems with that chart Econoline: First, using just 2009 for comparison will be a distortion since the U.S. had its worst economic performance in about forever, meaning very low corporate profits. I'm not sure how many of the other countries were impacted to that extent, but a comparison has to be done over a period of time to be valid. Second, the data should not include outlier countries like Norway with about 4 million people and a ton of oil; that resource alone lets them have a tax system that would make no sense anywhere else. Third, the comparison would have to include state and local corporate taxes, as well as the tax on shareholder-owners, to get the true picture of the tax on corporate profits.

[Joe Guy]

Okay, just one more thing about the gay mafia then I'll quit.

I've got an idea for a movie about the gay mafia. I'm going to call it The Fairy Godfather...

[rubato]

A few apparent problems with that chart Econoline: First, using just 2009 for comparison will be a distortion since the U.S. had its worst economic performance in about forever, meaning very low corporate profits. I'm not sure how many of the other countries were impacted to that extent, but a comparison has to be done over a period of time to be valid.... " .

And you have addressed this 'criticism' by looking for data from other years? ?? If you are going to claim that year is uniquely different the way to do it is find evidence. And the downturn in the US was much less severe than in most of Europe.

Actual corporate taxes in the US are very low and have been for decades, among the very lowest in the world. We have a higher "nominal" rate but the actual rate is low:






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[Lord Jim]

Okay, just one more thing about the gay mafia then I'll quit.

Okay, this is my last one, I promise:

The nick names are a little different...

Instead of names like "Fat Tony" their Capos have names like "Svelte Bruce"...

[MajGenl.Meade]

... and the big boss is called Capo di Tutti Frutti

[rubato]

And, for serious people, back to the res:



1. Does inequality matter?
2. Is it getting worse?
3. What would a better world look like?
4. How do we get there by means which are allowable in a Liberal Democracy and politically feasible?



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