Wealth inequality

[Mr. Natural]

I completely agree with FLoW, and would like to point out that perhaps "Mother Jones" is not the most unbiased source? Sure, CNN is more credible in their use of statistics, but of course it's "news", so it must be written in an alarmist standpoint.

ETA - must this turn into another strident thread where the Americommies go around waving their union-sympathy flags and indulge in class warfare (while being firm members of the middle class?)

Does this now happen once a week on the Board?

There is a double standard in the US. The left have to have all their facts right to the tiniest detail, even then it's ignored. The right can make up whatever they want to no consequence.

The most annoying part of this to me is that the right are so blatantly propagandistic that whenever they see a supposed left wing blog or paper they call bias. Let me make things clear for you, the bias is on the right. Period. The right wing love to make false equivalencies saying "but the left do it too!" when it has no basis in reality and merely serves as deflection.

I also want to note how right wingers always turn the truth completely on it's head. Right now there is class warfare going on in the US. Wealth redistribution from the middle class and poor to the rich. This is being done through regressive tax cuts which lead to draconian cuts of social programs. Somehow in the right wingers mind, the rich are the victims in this scenario.

[Swordfish]

There is a double standard in the US. The left have to have all their facts right to the tiniest detail, even then it's ignored. The right can make up whatever they want to no consequence.

The most annoying part of this to me is that the right are so blatantly propagandistic that whenever they see a supposed left wing blog or paper they call bias. Let me make things clear for you, the bias is on the right. Period. The right wing love to make false equivalencies saying "but the left do it too!" when it has no basis in reality and merely serves as deflection.

I also want to note how right wingers always turn the truth completely on it's head. Right now there is class warfare going on in the US. Wealth redistribution from the middle class and poor to the rich. This is being done through regressive tax cuts which lead to draconian cuts of social programs. Somehow in the right wingers mind, the rich are the victims in this scenario.

An accomplishment in meaningless generalization!

i commend you, sir, for your thoroughness, among other things.

Bonus points for the earnestness of your tone.

[Mr. Natural]

I'd also like to point out that while real wages have stagnated over the last 30 years, the cost of living has simutaneously skyrocketed over this same timeframe. The only reason that the middle class hasn't completely collapsed is because women over this same timeframe have entered the workplace to help supplement their family income.

[Aemon Stark]

What's the problem with wealth inequality per se? To me, it seems like either sour grapes, or a at best a fundamental misunderstanding of economics. Value and wealth are created by labor and innovation. They aren't fixed quantities. We're still making plenty of more of both.

The problem with wealth inequality is not its existence per se, but the degree of said inequality and its change over time. If a perfectly equal society is far from optimally efficient, it does not also follow that economic efficiency increases linearly with toleration of greater inequality. There are ample reasons to show that lack of redistribution and investment in the "commons" leads to worse outcomes - poorer infrastructure, weaker rule of law, poorer utilization of, for example, human resources.

As long as you accept that this is just an emotional reaction to the other kid having more toys, fine. Wealth as a zero sum concept doesn't align with reality however.

Well, economic growth may not be intrinsically zero sum, but the benefits are extremely concentrated, to the point that 80% of the population or more shows no improvement in standing (or even declines in real terms) over time. The tendency to rely on GDP growth or market capitalization as measures of economic "health" rather overlooks the blatant fact that employment data is far more relevant to 90% of the population.

In a free market, you gain wealth by providing a good or service that someone willingly buys becauses they get more value from it than from other purchase options. Entirely the antithesis of zero sum. Forced redistribution is closer to zero sum, but is in actuality negative sum, in that it also discourages risk taking in the first place. Not entirely congruent, but mostly summed up by the old saw about "The problem with socialism is that eventually you run out of other peoples' money."

Well, no. That's a simplistic argument which assumes that taxation ("forced redistribution") is some sort of intrinsic cost which inhibits some perfectly competitive and efficient free market. It's this sort of nonsense abstract reasoning that underlies a lot of wrongheaded - dare I say, misguided - ideology which ignores the perfectly obvious fact that no economy exists in a vacuum insulated from politics, social structure, culture, or, crucially, power. Risk taking is all well and good, but it requires predictable, enforceable rules and some semblance political and social stability in which to flourish.

Inflation would actually help the lower class the most in the long run, from a wealth equality point of view. If favorite bogey men the Koch brothers lost half of their wealth to inflation, they'd be relatively much worse off compared to a median wage earner with no savings than they were before inflation started. It sounds like a ludicrous conclusion, but it's empirically factual, which just demonstrates the original premise is bunk.

No, actually the Koch brothers would be absolutely much worse off but a median wage earner whose purchasing power is cut in half will be hit much harder - relatively - than anyone who's still wealthy after such an inflationary shock. I don't see how any of this argument follows at all.

[NestorMakhnosLovechild]

When I said it was misguided that was merely my own opinion. Certainly if voters want to give a break to the very wealthy despite rising income inequality and a regressive tax structure at high income levels, they can. However, I suspect, given the abject ignorance of the average voter, that they don't really understand the issue.

Er, well, your framing kind of just illustrates the point, no? If you believe the only yardstick by which the appropriateness of a government tax can be measured is how much or efficiently it redistributes wealth from one group of people to another, you are always going to see people voting against a transfer of wealth to them from some other group is irrational or misguided. But then you have apparently completely forsaken the idea that there may be (read: certainly are) independent principles by which to judge the appropriateness of some government action that isn't reducible to how efficiently it steals money from one group to give to another.

[Mr. Natural]

Er, well, your framing kind of just illustrates the point, no? If you believe the only yardstick by which the appropriateness of a government tax can be measured is how much or efficiently it redistributes wealth from one group of people to another, you are always going to see people voting against a transfer of wealth to them from some other group is irrational or misguided. But then you have apparently completely forsaken the idea that there may be (read: certainly are) independent principles by which to judge the appropriateness of some government action that isn't reducible to how efficiently it steals money from one group to give to another.

The redistribution of wealth has gone from the middle class and poor to the rich, not the other way around. It has gotten so extreme that the US is starting to approach the wealth inequality of third world nations. A progressive tax would simply reverse this trend.

[DrownedCrow]

Er, well, your framing kind of just illustrates the point, no? If you believe the only yardstick by which the appropriateness of a government tax can be measured is how much or efficiently it redistributes wealth from one group of people to another, you are always going to see people voting against a transfer of wealth to them from some other group is irrational or misguided. But then you have apparently completely forsaken the idea that there may be (read: certainly are) independent principles by which to judge the appropriateness of some government action that isn't reducible to how efficiently it steals money from one group to give to another.

Yes, yes all taxation is theft etc. You're not the first fanatical libertarian to join this board you know. As I already said, it is possible that voters are opposing the estate tax purely out of principle and without regard for their own financial well-being. I very much doubt it though. Do you have any other point to make?

[mcbigski]

Well, economic growth may not be intrinsically zero sum, but the benefits are extremely concentrated, to the point that 80% of the population or more shows no improvement in standing (or even declines in real terms) over time. The tendency to rely on GDP growth or market capitalization as measures of economic "health" rather overlooks the blatant fact that employment data is far more relevant to 90% of the population.

I don't know how my income stacks up in inflation adjusted numbers to a corresponder earner from 50 years ago, but even if my share of inflation adjusted GDP were the same (and I'm willing to concede it's likely lower) as said earner, I'm still way better off today. Not sure if you consider Progressive a title that applies to yourself, but technologically, and as a consequence economically, we sure have made a lot of it. I'd rather have (numbers strictly pulled out of my ass) .01% of the buying power of the super rich but have internet, MRIs, HDTV, and organ transplants than have .02% of the buying power of the super rich and have none of those things. Which also ought to put to rest the idea that economic growth is zero sum, btw.

Well, no. That's a simplistic argument which assumes that taxation ("forced redistribution") is some sort of intrinsic cost which inhibits some perfectly competitive and efficient free market. It's this sort of nonsense abstract reasoning that underlies a lot of wrongheaded - dare I say, misguided - ideology which ignores the perfectly obvious fact that no economy exists in a vacuum insulated from politics, social structure, culture, or, crucially, power. Risk taking is all well and good, but it requires predictable, enforceable rules and some semblance political and social stability in which to flourish.

The US has had predictable, enforeceable rules and some semblance of political and social stabilty for multiple centuries at far less than current spending of government as a percentage of GDP. I don't think, for example, that the Tea Party are anarchists that want to eliminate all government services or social structure.

No, actually the Koch brothers would be absolutely much worse off but a median wage earner whose purchasing power is cut in half will be hit much harder - relatively - than anyone who's still wealthy after such an inflationary shock. I don't see how any of this argument follows at all.

I'm being partially facile here in that wealth held by the wealthy in real assets rather than in currency denominated assets would appreciate in an inflationary environment, but wages beyond the immediate short term tend to rise in more direct correleation with inflation, so the net difference in wealth is still a decrease. I'm assuming that the basically break even wage earners won't work for less money than it takes to run their household, one way or another. Cash holders hold old dollars, but wage earners earn from currently valued dollars, so more nominal money is available to pay them in an inflationary environment.

Some righties seem to think that is another reason the Obama administration is so apparently blase about excess spending, we'll just inflate our way out of it and let those who hold assets take the hit.

[Tears of Lys]

/snip

Redistribution was a noble ideal when labor lived in abject poverty and died young, not when it wanted to upgrade from a Ford to a BMW.

Redistribution in those circumstances was not only a noble idea, it was remotely possible. "Bread and circuses" comes to mind. IOW, we're still too fat and happy to work for any change.

Maybe a serious fuel shortage, worse than the '70s, might ruffle a few feathers, though. Inability to get to jobs would gum up the works quite a bit.

[Bill Foote]

Case in point: the average down-trodden middle-class American is vastly better off than was any comrade in the USSR.

Also better off than 3/4 of Americans :)

It might look obscene that Bill Gates has $40bn or Mark Zuckerberg has $7bn, but they created Microsoft and Facebook (although both are accused of stealing at the origin of their success). They created something...

I've haven't gotten my RDA of propaganda. So let's ignore the niggers in the hood, and figure out what either has contributed that's worth say a thousand research scientists or a thousand attorneys or a thousand doctors. (You did mention shadiness/luck for both and I'm not implying you think net worth == value to society.)

[NestorMakhnosLovechild]

Yes, yes all taxation is theft etc. You're not the first fanatical libertarian to join this board you know. As I already said, it is possible that voters are opposing the estate tax purely out of principle and without regard for their own financial well-being. I very much doubt it though. Do you have any other point to make?

Buddy, I hate to break it to you. I may not be the first fanatical (left) libertarian (free-market anti-capitalist) to join this board, but I'm definitely the best. Ask MarkosWineDarkStainedVegan - he loved me so much he borrowed all three of my prior nicks in loving homage.

[Shryke]

Really? The convictions of the tens of millions of voters that support the Republican party were created by some secret cabal of billionaires. I know that corporations and wealthy individuals give a lot of money to the party, but really? The Democrats receive a lot of money from unions. Would you say that the ideology of liberal voters was bought and paid for by unions then? You don't think that the unusual and durable attitudes toward class and capitalism that exist in the US might have something to do with it?

By the way, economists have actually studied the question of whether legislation can be bought in the US and largely failed to find any evidence that this occurs. See Ansolabehere et al, Journal of Economic Perspectives, 2002. But I'm sure you have some compelling reasons to be so very sure about this and I would love to hear it.

Those opinions aren't durable (they've changed quite a bit in the past like 50 years). Unusual I'd agree with.

But anyway, you are completely ignoring the effect media of all sorts has on shaping opinion. Or do you honestly believe Fox News or William Randolph Hearst or the like never helped shape public opinion? That money has never bought political advertising? That money has never influenced politicians?

There's many factors at work here, but you can't discount the effect of money and moneyed interests in shaping political beliefs.

[DrownedCrow]

Those opinions aren't durable (they've changed quite a bit in the past like 50 years). Unusual I'd agree with.

But anyway, you are completely ignoring the effect media of all sorts has on shaping opinion. Or do you honestly believe Fox News or William Randolph Hearst or the like never helped shape public opinion? That money has never bought political advertising? That money has never influenced politicians?

There's many factors at work here, but you can't discount the effect of money and moneyed interests in shaping political beliefs.

I don't discount the influence of money, I just think that it tends to be exaggerated. And from what I can tell, the scholarly literature would seem to agree. There is still scope for money to have an effect, especially with narrow or highly complex areas of legislation where the general public does not have any interest. But I don't think that the estate tax, to go back to my favorite example, is one of those instances.

[Spring Bass]

I'm not quite sure what you mean by either sentence. To me it's not at all an emotional reaction about more toys or anything like that. It's more of a policy analysis. I don't believe that most of the top 1% have "earned" their immense wealth in the sense that what they've created or done for society is that important. With a Bill Gates I don't have a problem at all. But with cronyism and boards of directors and shit....that's where I have a problem. That's not an indictment of every wealthy person by any means. But CEO pay's explosion is a problem. They ain't that valuable, especially when they focus on shorter term profits and not long term strategy, eventually get fired because things start to go poorly based on their shorter term thinking, and then they get bailed out thanks to some phenomenal golden parachute? Doesn't make sense.

They get golden parachutes and high wages for two reasons:

1. They don't expect to be CEO for a long time - your average CEO's tenure period at the top is about five or six years. That leads to a perverse set of incentives to jack up their stock options as much as possible and negotiate a solid severance package for when they inevitably get kicked out in favor of the new guard.

2. The international business arena is incredibly competitive, but there's no way to perfectly tell good CEOs from bad ones. Those that show any sign of quality thus have a great deal of bargaining power with companies.

I believe in social cohesion which is part of the justification for the redistribution of wealth, to an extent. As I said earlier, we had a 91% top marginal tax rate under a Republican POTUS and saw outstanding growth that was broadly distributed. Sure, that may have been a special time, but it's maddening to hear people bitch like just letting that rate go back up the Clinton levels (39% give or take, point being WAY lower than 91%) would make a huge dent in our deficit.

What makes you think most of the rich paid that top rate? They just got extremely creative with sheltering money.

[sologdin]

this is the problem rather than the solution

oh, he's quite right, DP. i would use the revolution from a desire to do good, but through me, it would wield a power too great and terrible to imagine.

[Jaime L]

Redistribution was a noble ideal when labor lived in abject poverty and died young, not when it wanted to upgrade from a Ford to a BMW.

Agree with almost everything in your post, but this is an unworthy conclusion. You make it sound like economic inequality is petty jealousy of a neighbor, and such a representation makes me question, for the first time, if you truly grasp the concern as well as you seemed to in previous posts on this subject.

My (and others') concern is that the rising tide of economic growth is accruing to fewer and fewer people. It's no longer raising all boats. It's raising the one percent of yachts while the rest of the country stagnates. This isn't a concern about people's neighbors, it's a concern that the top 1% or moreover the top .001% has just gotten better at rent capturing activity through leverage, through outsourcing, through technology, through tax cuts. The top 1% will doggedly fight for its economic interests through lobbyists under the premise that these are the people who create jobs. But clearly they don't create as many as they did, at least not in this country...and they are taxed less than ever for it. Continuation of Bush Tax Cuts, low capital gains rates, highest estate tax exemption I've ever seen. This is the least progressive our tax system has been in living memory, so is it any surprise that economic inequality is at its highest level by just about any measure since 1928? I don't think progressive taxation is the total answer to the confluence of factors for why this inequality exists, but it's weird how there's very little public recognition of these larger trends.

But the greatest trick in the whole deal is this emerging common sentiment that when the middle and lower class fights for its economic interests they are somehow greedy. That they want what they don't have to work for. Lot of middle and lower class people feel this way and so they play the fool's game. It's a little like how if a guy sleeps around he's a stud and if a woman sleeps around she's a slut. If a business owner demands a tax break to move to a new state he's just being a savvy business man. But if a middle class person favors the sunsetting of tax cuts for the top 2% they're just trying to make other people pay for the government services they enjoy. You can guarantee that there's someone somewhere always standing against your interests - someone who wants to pay you less than you're worth (talk about an illusory term), someone who wants to cut the funding to your kid's schools because they don't have kids, someone who doesn't care about highway maintenance because they don't have a car - if you're not fighting for these things, you're going to watch them erode. It shouldn't be a mystery why the income gap has accelerated. The winners have fought hard for their interests while the losers have been convinced not to. This isn't close to the whole story, but I think it'd be naive to deny the role it plays.

[KazigluBey]

I believe I'll see revolution within my lifetime (I'm 28). All my friends were born and raised in middle class families, and those who picked the wrong major in college or didn't go to college at all have no hope of retaining the quality of life they were born into. You have to go $80k in debt and graduate with a degree in engineering or computer science to have a good shot at being middle class nowadays. And the vast majority of people I know got degrees in the liberal arts, and are now making near minimum wage. The millenials are the first generation since the industrial revolution that will have a poorer quality of life than their parents.

Ipads and smartphones will only go so far, as most of the young people are living outside of their means to purchase these fancy gadgets. What's the average credit card debt in the US, 8k? And how many young people are putting off starting a family and moving into their own home because they can't afford it, and instead are living with their parents well into their 20's or 30's? Once this realization hits them, that they will never be in the same class that they were brought up in, we'll see changes. Either reform or revolution.

[Shryke]

I don't discount the influence of money, I just think that it tends to be exaggerated. And from what I can tell, the scholarly literature would seem to agree. There is still scope for money to have an effect, especially with narrow or highly complex areas of legislation where the general public does not have any interest. But I don't think that the estate tax, to go back to my favorite example, is one of those instances.

Really? The Estate Tax is the perfect example.

It's been stigmatized heavily by the American Right Wing (DEATH TAX!!!! Probably administered by Panels. Of Death!) Why do you think so many people who have no reason to even think about it, hate it? Where do you think they even heard about it?

Even the general randian philosophy that underpins alot of it's opposition comes from decades of promotion by groups using money to get their ideas and message out.

And it has all, in one sense, culminated in something like Fox News, a completely closed information loop. Very rich people spent alot of money creating that.

[Shryke]

Agree with almost everything in your post, but this is an unworthy conclusion. You make it sound like economic inequality is petty jealousy of a neighbor, and such a representation makes me question, for the first time, if you truly grasp the concern as well as you seemed to in previous posts on this subject.

My (and others') concern is that the rising tide of economic growth is accruing to fewer and fewer people. It's no longer raising all boats. It's raising the one percent of yachts while the rest of the country stagnates. This isn't a concern about people's neighbors, it's a concern that the top 1% or moreover the top .001% has just gotten better at rent capturing activity through leverage, through outsourcing, through technology, through tax cuts. The top 1% will doggedly fight for its economic interests through lobbyists under the premise that these are the people who create jobs. But clearly they don't create as many as they did, at least not in this country...and they are taxed less than ever for it. Continuation of Bush Tax Cuts, low capital gains rates, highest estate tax exemption I've ever seen. This is the least progressive our tax system has been in living memory, so is it any surprise that economic inequality is at its highest level by just about any measure since 1928? I don't think progressive taxation is the total answer to the confluence of factors for why this inequality exists, but it's weird how there's very little public recognition of these larger trends.

But the greatest trick in the whole deal is this emerging common sentiment that when the middle and lower class fights for its economic interests they are somehow greedy. That they want what they don't have to work for. Lot of middle and lower class people feel this way and so they play the fool's game. It's a little like how if a guy sleeps around he's a stud and if a woman sleeps around she's a slut. If a business owner demands a tax break to move to a new state he's just being a savvy business man. But if a middle class person favors the sunsetting of tax cuts for the top 2% they're just trying to make other people pay for the government services they enjoy. You can guarantee that there's someone somewhere always standing against your interests - someone who wants to pay you less than you're worth (talk about an illusory term), someone who wants to cut the funding to your kid's schools because they don't have kids, someone who doesn't care about highway maintenance because they don't have a car - if you're not fighting for these things, you're going to watch them erode. It shouldn't be a mystery why the income gap has accelerated. The winners have fought hard for their interests while the losers have been convinced not to. This isn't close to the whole story, but I think it'd be naive to deny the role it plays.

That's the rhetorical game that's always played with this. Screams of "Class Warfare!" and "Your just jealous!". No one, of course, could possibly be concerned with the other issues inherent in large wealth gaps or with the benefits of communal action and redistribution (the current state of "wealth redistribution", as new as it is, must of course be the baseline). It can't be about how real wages have stagnated, it must be about "Keeping up with the Jones".

You could reason that it's very inline with the American Right's Randian roots on these kind of things. The not-rich are the "moochers" after all, just trying to take from the real honest hardworkers because they envy them and can't rise up themselves. It implies an idea that these "titans" are somehow not a part of the system, and thus any attempt to tax them is obviously stealing the fruits of their productivity because we have not the mettle to be productive ourselves.

Regardless of that digression, it's always an attempt to colour the opposition as greedy and envious. Because they either don't get it or because it's easier to avoid facts when you steer the discussion into the realms of "how people feel".

Iskaral Pust's post is particularly interesting in the incredible dichotomy I think we both noticed. An entire, fairly accurate, summation of the wealth concentration capitalism brings and the ways we counter-act it and the reasons why .... followed by a complete 180 whereby any questioning of the current state of the system must be petty jealousy instead of simply pointing out that that we aren't counter-acting it enough. He implicitly asserts that the current state of affairs is, obviously, exactly as far as we need to go and any discussion of going further is just about class envy. Very strange all around.

The fact is, the numbers on this stuff (you can find it above or in hundreds of other different formats) are pretty clear that wealth concentration is only becoming more and more prevalent over the past few decades. The richer you are, the richer you are getting. And when you have actually real wage stagnation going on, while GDP is still going up, I think it's obvious (or at the very least, plausible and worth discussing) that the systems we use to curtail wealth concentration are failing miserably. So if you acknowledge it's something worth doing, it's obviously something not being done.

[Altherion]

(1) In this new global economy, labor is cheap. A lot of jobs can be off-shored or are replaced by automation/technology, thereby increasing supply of labor for those jobs that remain. This over-supply of labor reduces its power to demand a bigger share of profits.

I think this is the main one. There are three simultaneous effects here: automation, outsourcing to cheaper locations and "undocumented" labor (i.e. illegal immigration). The last one is particularly interesting because it can only happen in quantities large enough to matter if and only if the federal government overtly refuses to enforce several laws (not only the laws on hiring, but also minimum wage and other workers' rights).

Capitalism is a system that will inevitably lead to concentration of wealth to the point of oligarchy. Marx established this very well. This is true even if we evenly redistribute all wealth tomorrow and start over in a fresh capitalist system. Some people earn/produce/create more than others and some people save more than others and some people risk more than others. Those are the three biggest factors, along with luck/randomness, that will influence the new concentration of wealth that will emerge. The concentration is a product of the system, even if there is no evil exploitatative bourgeouis class.

In order to avoid this concentration problem, democratic capital systems adopt, to varying degrees, non-capitalist offsetting policies like minimum wage, social welfare safety net, unions, etc. Our realization and usage of this invalidates the need for communism. The extent of our usage or non-usage of these policies is entirely democratic and self-determined -- not the fault of some tyrannical bourgeouis.

This is a very good summary, but I don't agree with the last sentence. The extent of our usage or non-usage of these policies is the outcome of a struggle. It is democratic, of course, but our flavor of democracy requires a massive amount of resources to enact policy. The thing I find worrying is that these offsetting policies are being dismantled. Minimum wage is simply ignored, private unions are mostly gone and public ones are under attack, the social safety net has been raided for cash for decades and is now underfunded, funds for public education (both grade school and university) are being cut, etc. etc.

Most of us like this system despite its flaws because it creates the most economic growth. It grows the pie for all of us.

This was true for a long time, but I'm not so sure it is true anymore -- that is what those links are about.

Redistribution was a noble ideal when labor lived in abject poverty and died young, not when it wanted to upgrade from a Ford to a BMW.

I think you are overestimating the wealth of the lower classes. The middle class is pretty close to what you say (although the analogy I would make is drive the Ford until it disintegrates rather than upgrading to a new Ford; the BMW is rather far out of reach), but the poor are pretty darned poor. Not the same as the third world, but getting there.