As capitalism matures, it's clear to anyone with a thread of financial literacy that most wealth is created through capital gains rather than salary. We're approaching a state (at least in developed countries) where productivity is so high, that you can literally park your money in 500 of the biggest businesses and you're almost guaranteed a 7% annual return (if you hold stocks for the long term).
Using the commonly accepted safe withdraw rate of 4%, if you inherit $3 million (which is not even that much), you can safely collect $120,000 of capital gains/dividend income every year without doing anything. This also frees you up to work on other things that will acquire you even more wealth. People whose parents didn't leave them a large inheritance have to rely on salary, which is taxed at a higher rate and more difficult to earn.
In effect, late stage capitalism becomes the anti-thesis of the spirit of capitalism - devoid of competition, free innovation, and upward mobility. In an ideal capitalism society, the most talented should earn the most, but the compounding effect of capital makes it so that whoever holds wealth the longest earns the most.
None of these things are inherent to capitalism -- they're a result of current policy decisions, and could be fixed with different policy decisions.
Want to reduce the incentive to inherit money and do nothing? Increase the estate tax and lower the threshold where it kicks in.
Want to reduce the disadvantages of earning a salary? Increase taxes on capital gains and dividends and decrease taxes on earned income.
Want to make it easier for everyday folks to take risks and increase innovation? You can start with a comprehensive safety net, and things like universal health care.
Unfortunately (at least in the US) the party currently in power is going in the opposite direction. But it doesn't have to be that way.
Taxes on capital gains are harmful and don't make sense. It would be more efficient to tax consumption and have no capital, estate, income, or corporate taxes. Scott Sumner has written many excellent articles about taxes on capital gains:
Unfortunately sensible economic policies aren't politically feasible. This is partly because of the economic illiteracy of most voters and the lack of incentive for politicians to adopt economically sensible policies, but also because economists themselves often misunderstand economic theory.
Who ultimately pays a tax burden does not depend on who sends the check to the government; it depends on the relative elasticities of supply and demand. The tax paid by people, wealthy or not, comes either out of consumption or investment. When people consume goods and services, the labor and materials used to produce them cannot be allocated to produce goods and services for other people. The same is not true of investment, which is why you want to tax consumption and not investment.
If the government taxed 90% of Warren Buffett's wealth, Warren Buffett wouldn't consume less, he would just have less investments. The government would have more money, but if it spent the money on giving food to the poor, the food would have to come from somewhere, and it wouldn't be from Warren Buffett whose consumption was already modest. If the tax doesn't reduce your consumption, someone else is paying the tax, not you. Taxing 90% of Warren Buffett's wealth and spending it on welfare programs wouldn't make the poor better off, it would mainly make capital markets less efficient (which would make everyone, including the poor, worse off).
Capital income does make Warren Buffett richer if he makes wise investment decisions that make markets more efficient, but as long as he doesn't consume the gains it changes nothing, and as soon as he or his heirs consume the gains they would be taxed by a consumption tax.
Income taxes have the same issues as wealth taxes, so you want to tax only consumption. And a tax on estate is just an additional tax on future consumption by heirs. It makes no sense to tax future consumption at different rates than current consumption, so it's better to just increase the consumption tax than to add an estate tax.
Unfortunately I don't have time for a full response, but:
* I don't want to tax wealth at 90%, that's a straw-man, but let's use it as an example anyway
* In your extreme scenario, there would be an increased demand for food. Greater demand would increase prices. This would move the allocation of resources to food production from, say, Ferrari production. You would have more food production and poor people would eat better.
* The outcomes of taxation and other economic levers are never represented by monotonic functions. The optimal options are always somewhere "in between" the extremes, so saying "taxing at 100% doesn't work, so we should tax at 0%" is a fallacy.
> I don't want to tax wealth at 90%, that's a straw-man, but let's use it as an example anyway
My intent was only to use it as an example. You can change the percentage to anything you want, as long as it is low enough not to have an effect on Warren Buffett's consumption. And if it has an effect on Warren Buffett's consumption, then you could do the same thing with a consumption tax so that wouldn't be an argument for taxing wealth over taxing consumption.
> In your extreme scenario, there would be an increased demand for food. Greater demand would increase prices. This would move the allocation of resources to food production from, say, Ferrari production. You would have more food production and poor people would eat better.
Indeed. But this is just as true if the spending on food is funded by a consumption tax. This is an argument for taxes, not an argument for income or wealth taxes over consumption taxes. I also believe taxes are harmful in general, but that's a separate point from whether a consumption tax should be preferred over an income or wealth tax.
> The outcomes of taxation and other economic levers are never represented by monotonic functions. The optimal options are always somewhere "in between" the extremes,
I don't see why this ought to be true and you did not provide any evidence to support these claims.
> so saying "taxing at 100% doesn't work, so we should tax at 0%" is a fallacy.
It is, but not for the reason you stated. Saying "taxing at 2% doesn't work, so we should tax at 0%" would also be a fallacy if the optimal tax rate happened to be 1%. This has nothing to do with extremes.
> Indeed. But this is just as true if the spending on food is funded by a consumption tax.
The problem is that eating food IS consumption. For very poor people, food is the main consumption. That's the bad of taxing consumption - that it naturally taxes more the poor, making them even poorer, than the rich.
>> The outcomes of taxation and other economic levers are never represented by monotonic functions. The optimal options are always somewhere "in between" the extremes,
> I don't see why this ought to be true and you did not provide any evidence to support these claims.
Of course, if you think that there should be no State - and therefore no taxes - you won't believe that. But if you admit that some public services are necessary (eg police, defense from external threats) then it's obvious that a 0 tax rate is bad - 0 taxes mean 0 public services.
On the other hand, 100% taxation would mean that there is nothing left for people to spend. That can't be good.
If the benefit from taxation is 0 at the extremes (0% and 100%), and non zero somewhere in between, then the curve can't be monotonic.
> The problem is that eating food IS consumption. For very poor people, food is the main consumption.
Then tax consumption enough to pay for the food accounting for the consumption tax that will apply to the food. That the amount of money you need to pay for the food increases as the consumption tax used to pay for the food increases is not a problem as long as anything at all other than food is being consumed in the economy. (If it happened to be the case that nothing other than food was being consumed, that would just mean it isn't possible to supply enough food—an income or wealth tax wouldn't be able to change anything about this.) The consumption tax needed for the government to pay for the food will be lower than the income or wealth tax that would be needed for the same thing.
Taxing investment to pay for food is only going to work insofar as it reallocates resources from the production of whatever the investments were in to the production of food. A consumption tax can already do this reallocation more efficiently. If your goal is to make the economy produce more of food and less of other things, this goal can be achieved more efficiently with a consumption tax than with an income or wealth tax.
> That's the bad of taxing consumption - that it naturally taxes more the poor, making them even poorer, than the rich.
It only taxes the poor more in proportion to their wealth, to the extent a higher proportion of the wealth of the poor is consumed instead of invested, but not in absolute terms. In absolute terms, it is the reverse, since the rich consume on average more than the poor even if this consumption is less as a proportion of their wealth. The tax on consumption taxes your absolute consumption, not your consumption as a proportion of your wealth, so it does make the poor better off in relation to the rich.
> But if you admit that some public services are necessary (eg police, defense from external threats) then it's obvious that a 0 tax rate is bad - 0 taxes mean 0 public services.
Even if these public services could not be provided without taxes, the reason having no taxes would be bad would not be that it is an extreme. But public goods can be provided without taxes. For the police, courts and laws, chapter 29[1] of The Machinery of Freedom describes one way this could be done. National defense can be funded with dominant assurance contracts, as can many other public goods (even when they can't be made excludable), including lighthouses, scientific research, information goods such as books, software, or art, clean air, and free-to-air television. So even if some public services are necessary or even just desirable, it is not obvious that having no taxes is bad as they can also be provided without taxes.
Is that sort of meta reasoning an efficient way to get at the truth? There are much better arguments that can be found against Marxism. Saying "But what if the Marxists said the same thing?" is a low-effort excuse that can be used against the proponents of any belief you don't like. It's better to take the reasoning at face value and address the arguments directly.
I'm not saying "But what if the Marxists said the same thing?". I'm saying that trying to revolutionize how society works based on a theory never worked as expected in history, and cited the Marxists as the biggest example.
My first comment said that sensible economic policies are not politically feasible. I certainly don't predict that sensible policies are going to be adopted or sensible systems created through our current political institutions. Meanwhile, Marxism failed because the theory was wrong, not because it was politically unfeasible. It is possible for a system to never happen even if the theory behind it isn't wrong—Nash equilibria can remain and not spontaneously turn into Pareto optima even when there exists a Nash equilibrium that is a Pareto improvement over the current equilibrium.
There haven't been that many large scale attempts to revolutionize society in history and some have worked just the way some people expected without hindsight. So it is in fact possible to predict the outcomes of a large scale system through causal reasoning and to have a reasonable idea of their desirability.
> There haven't been that many large scale attempts to revolutionize society in history and some have worked just the way some people expected without hindsight.
Which ones worked "just the way some people expected without hindsight"?
The previous historic rate was 10% growth. That was revised down to 7% (you seem to indicate its grown). going forward, we are probably looking at 5% growth going forward.
developing countries have much higher rates of return.
its true you can collect a lot off interest if you have 3 million $. but if that is all you do, inflation is going to tear you apart. you might be fine, but the next generation you leave everything to wont be so well off. a few generations and its nothing to write home about.
so if you want growth in a developed economy, you need to be entrepreneurial, and you need to take risks. thats the spirit of capitalism.
> In effect, late stage capitalism becomes the anti-thesis of the spirit of capitalism - devoid of competition, free innovation, and upward mobility.
The notion that competition, free innovation, and upward mobility have ever been the spirit of capitalism is not based in any historic evidence. It was evident as far back as Adam Smith's Wealth of Nations that the true spirit of capitalism is the eventual concentration of wealth, formation of mono- and oligopolies and creating barriers to entry through influencing regulatory agencies (government) with wealth.
The 3 notions you stated are mostly an idealistic lie sold to the naive, young, and temporarily impoverished millionaires.
My view may be a tad biased, since I'm only alive as a product of communism (without all the freebies my parents received, as far as education, free housing and benefits, I would likely not exist right now)
In the U.S., your $120,000 of capital gains/dividends isn't taxed at a high rate to you, but is taxed at a high rate. First the company has to earn a profit, and out of that profit pay state and federal income taxes (35% + state). Then it pays whats left to you, where you pay your 15-20%, making the total tax rate usually over 50%.
Given that taxes on corporate income is a direct tax in investment, it's counterproductive, it reduces investment, and productivity gains that increase both wages and wealth. It would be far better to have a zero tax rate on corporate income, and tax capital gains* and dividends at personal rates. That restores not just investment incentives, but also progressively of our tax system, so that the person with $1M in dividends and capital gains is paying a higher rate than someone with $20,000 in income.
And this would probably raise more tax revenue in the long run. Corporate income taxes are a relatively small part of overall tax revenues, increasing dividend/capital gains rates offsets most of their loss if they are eliminated, and over time more investment will drive higher wages/income and increase tax receipts.
* If capital gains are taxed at ordinary income rates, they also need to be indexed to protect from inflation. If they aren't, we risk taxing phantom gains, i.e. if an investment is sold for 20% more than it's purchase price, but inflation was 25% during it's holding period, it was actually a loss, because it lost purchasing power. This is one of the reasons capital gains has special rates, but that's not a good protection. In the 1970s high inflation hurt investments because historical equity returns were money losers adjusted for inflation. Investors preferred high interest bonds to protect their principle.
I'm going to pick at one particular part of your statement; since while I generally agree with your thrust of "normalize cap gains and income taxes", this stood out: "Given that taxes on corporate income is a direct tax in investment, it's counterproductive, it reduces investment, and productivity gains that increase both wages and wealth"
I've seen this stated in a few prior debates I've had on this topic, but I'd ask the rebuttal: Why can't you make that EXACT statement but s/corporate income/personal income/? I never understood why capital investment was more a focus than consumer demand, especially given well understood properties of both marginal spend for low vs high worth individuals (low income salary workers will spend more by % on goods and services than wealthy investors) and the assertion that we are "swimming in investor money" right now. (I see the long bull market, P/E ratios, VCs over the last decade/ICOs/wealth gap as datapoints)
I'm 100% sure someone in the finance world has already thought this through but I don't know the words to search for, and my own intuition suggests that supporting demand-side consumption is going to be a far better driver for true efficient allocations of funds and market growth to support a virtuous cycle of consumerism and employment than investor money will.
I think discussions like this often devolve into religious wars, but I'll take a shot at it.
If you have a village of a hundred of starving artisans and workers, but no crops because they have no seed corn, you have high demand, but no capital, and so no one gets fed. Consumer demand isn't enough.
To address demand, someone must invest in production. Lets assume that the entire village has earned seed corn by selling their pottery but has no farming land. The villagers can eat the seed corn, so they do. But one day farmer walks into town and offers to give anyone 10x their seed corn in return for it, if they can just wait one growing season.
So now consumption is converted into investment. The farmer must get investment to have production. If the villagers tell him to just farm his land and they'll pay him in pottery when his crops are ready for sale, it won't work.
Now if the farmer has lots of seed corn, but the villagers died of starvation waiting, he's got no customers. He needs demand to make his investment valuable, otherwise it can only feed him, and he'll never get pottery or any other goods from it.
Consumption is the benefit of investment, and it helps drive more investment, but it's not the direct creator of it. Now lets assume the village and the farmer reach equilibrium. He plants enough crops every year to feed all of them, and they make enough goods that it's worthwhile to him to do it. Everyone's standard of living can rise as the farmer more of his excess seed corn every year an reinvests it to farm bigger crops, and the well fed villagers compete to make better goods to earn more food.
Now the King decides to tax farming output at 99%. The farmer can plant enough to feed himself and keep all of it, or plant enough to feed everyone, and only keep the same amount. Obviously he's not going to work 100x as hard for the same benefits as he can working just for himself. So we have demand, and capital, but we've broken the incentive for investing. So the farmer just plants enough for himself, and in the mean-time he sells all that extra seed corn to villagers for goods, akin to a rich son spending his inheritance. By next year the farmer is surviving, but no longer wealthy and the village is starving.
Keynes-iasts always want to focus on the benefits of demand, but it's only part of the story. Friedman-ists want to focus on investment, but again it's only part of the story. Laffer gave incentives a bad name, he was the Elon Musk of economic overpromising, but he was essentially right about their importance.
Our economy functions ok right now even though our corporate tax system is among the worst in the world and makes for substantial impediments to investments. The Republican bill lowers the rate significantly and allows for one time repatriation, but still leaves significant disincentives (and doesn't address progressivity at all).
Our economy would likely function better, productivity and incomes would increase faster, if we eliminated corporate income taxes. But our entire tax system would become less progressive if we didn't also address dividend/capital gains rates when we eliminated them.
That argument doesn’t make sense because when you receive a salary, the same taxation is passed through the company as well. Companies have to pay corporate taxes before they pay you too.
The only difference is the “last mile” tax of when you receive the money from the company. For capital gains it’s 15% federal, for salary it’s 28%
> We're approaching a state (at least in developed countries) where productivity is so high, that you can literally park your money in 500 of the biggest businesses and you're almost guaranteed a 7% annual return (if you hold stocks for the long term).
I think this has been true for a long time. Maybe even the whole 20th century, if you average out the Depression. I think the main difference in the last 20 or 30 years is that the instruments for making that investment have gotten dirt cheap, in percentage terms.
Middle class people can take advantage of those investment returns as well. A more interesting question to me is “Why aren’t they?”. A typical middle class person can still achieve significant upward mobility for their children, and yet they often choose not to. Is part of the problem with student debt not just that many parents of the last generation or two wasted their money rather than saving it to put their children through college? I’ve known a few people whose parents wouldn’t even attempt to take out Plus loans for them. The lack of upwards mobility seems to be based more on some sort of social disease than just economics at this point.
> Middle class people can take advantage of those investment returns as well.
By definition of the classes in a capitalist society, those who can fully take advantage of investment (capital) returns are the capitalist class. The petit bourgeoisie, or middle class, makes some return from capital, but that's limited (in the traditional definition, they are the ones who apply their own labor to their capital, though those dependent on selling wage labor who also have separate capital holdings that are inadequate without labor income for personal support are similarly situated.)
But the usual American definition of “middle class” isn't the Petit bourgeoisie, but some group around middle income, which is almost entirely composed of what are essentially pure wage-laborers without meaningful capital stocks who cannot take advantage, in any significant way, of investment returns.
It isn't true that they cannot take advantage, that was the entire point of what I was saying. They typically don't, but it isn't because of a lack of income. They're just spending almost all of it.
> Middle class people can take advantage of those investment returns as well.
How exactly do you define "middle class"?
Because by the popular definition of middle class, these folks can not take any meaningful advantage of any sort of investment returns.
Generally speaking, middle class people barely have enough money to house and educate themselves (they must take out large barely-sustainable loans to cover either/both of those, at high risk to themselves). The wealthier of the middle class might have a basic retirement account of some sort, which might barely cover basic food+shelter+medical for their own person.
You're confusing what people can do with what they actually do. I've known people who make close to the median income and support 4 children, own a home, and still had enough savings to buy them all cars and pay for their college tuition. They have some amount of retirement savings as well, though I don't know how much. I've also known people who make nearly 6 figures and just spend all of their money. A more expensive apartment than they need, a more expensive car than they need, eating at restaurants all the time, buying a bunch of what are essentially toys for adults, etc.
Although this is in the midwest, the cost of living is much lower here. It's quite possible that you just can't do this on your typical "middle class" income in other places.
> I've known people who make close to the median income and support 4 children, own a home, and still had enough savings to buy them all cars and pay for their college tuition.
You just said, in effect, they had enough savings to spend them later to meet basic expenditures needed in raising children in their income level, which isn't really a sign of ability to accumulate excess capital after maintenance.
Ownership costs in Vancouver and Toronto are sitting well north of 75% of the median income for individuals in those areas.
This isn't a made up issue caused by young kids eschewing spendthrift habits and buying all them dang newfangled iPhones rather than investing in equity building houses. It is an issue with the ratio of home prices to local median incomes.
How does someone having wealth stop anyone else from acquiring theirs? You may start out with less but there's nothing stopping you. Also all those capital investments are helping the companies and funds they're invested in, one of which could be your very own employer/startup/pension fund, etc.
> How does someone having wealth stop anyone else from acquiring theirs?
The wealthy person (a) does not need a 9-5 job to subsist and can devote all their time to a launching a business, (b) has a lower tax burden via capital gains, (c) can afford to fail multiple times, (d) can buy their way into a top school if they don't get in on merit, (e) tends to have better family connections, (f) etc.
Then the question is then whether startups exist in a competitive environment, which of course is true. Tech, and the web especially, often approaches a zero-sum game.
"Tech, and the web especially, often approaches a zero-sum game."
Why do you think that? Since 2000, how many brand-new companies and brand-new industries have been created, from scratch? Doesn't look very zero-sum to me.
>How does someone having wealth stop anyone else from acquiring theirs?
Through lobbying of laws that increase their wealth more than others. Tax breaks that give scraps to the poor while giving massive benefits to the wealthy. A legal system that only the rich have a chance of truly navigating.
Ideally it shouldn't matter. One person being rich doesn't make another person poor. But politicians have been for sale for some time, and even basic concepts such a free speech and the open exchange of ideas are strongly tied to wealth in a way that ends up being bad for the little guys.
How does someone else controlling resources prevent you from obtaining resources?
Well, because they control the resources.
The entire concept of rivalry in economics is about this. Only in the case of resource that are not rivalrous does pre-existing wealth become a non-factor.
If you just redefine the word then there's not much of an argument. Resources are constrained, wealth isnt. You can create value somehow and generate wealth, regardless of what someone else is doing.
Wealth is a measure of assets. Assets are, for the most part, rivalrous goods.
Ownership's most fundamental quality is the exclusionary right to prevent others to use or occupy the asset in question. Owning lumber, for instance, has value because it lets you prevent other people from walking off and building their houses with it.
Accordingly wealth is exclusionary by nature.
Part B) You might think that wealth isn't constrained, but it is.
You can't own more lumber than the sum of all of the forests and cut planks in the world. You can't output more human labour than the sum of the population on the planet can provide, and you certainly can't build an object which is composed of more minerals than our race can obtain. Will those limits increase over time? Sure. But that doesn't mean there's no hard top-end limit.
Even if we jump to non-rivalrous goods and you say "but I can create intellectual property at an infinite rate - those rights and assets aren't bound to physical constraints" - you'd be wrong again. The capacity to create and define non-tangible assets susceptible to ownership requires human labour. If you wanted to produce ideas for comic books, for instance, you wouldn't be able to produce a database containing the brainstorming of 10 billion people in a year. Because you don't have 10 billion people on the planet.
So even at your value maximizing best, applying the best possible combinations of resources, labour and opportunities, you still won't be able to create infinite wealth for all asset classes.
If you mean that wealth isn't constrained because you can inflate the value of the denomination it is traded in, that doesn't change the value of the asset itself - that's completely orthogonal.
A lot of them create their wealth specifically by destroying the ability of others to create wealth for themselves. There are human consequences to automating away entire industries in the time it takes someone to train for them.
Wealth insulates the wealthy from it, at least until millions of people can't find work for long enough that revolution seems like a good idea.
How is that actually stopping anyone? It seems you're referring to "ability" as in skills and talents to meet some demand for work, but that changes as it always has throughout history. The world marches on, that is inevitable and we must all adapt, wealthy or not.
Someone is going to make progress eventually and it's often just a worker who creates automation or other innovation to change their industry, and as a result creates massive wealth for themselves. This is exactly the competition that the OP seems to think doesn't exist. That's before getting into details like how many new ventures take investment from the wealthy to become viable in the first place, thereby helping everyone involved.
I fully agree that the pace of change and inadequate societal policies can create harsh conditions at times, but the perspective that that the wealthy have taken everything and nobody else can have it is just a simplistic, inaccurate, and unhelpful outlook on capitalism.
> How does someone having wealth stop anyone else from acquiring theirs?
Through regulation and corruption.
Accredited investor regulation in the startup world makes sure you can't participate in the future, even if you see it coming. Income tax to make sure a good year doesn't let you stop working. Capital gains tax to make sure you can't outperform the stddev for your socio-economic class range.
In principle, I agree with you. But setting the capital gains rate is a bit of a balancing act. If the rate is too high, then this disincentivizes people from putting their money in the market, which is also not what we want.
I agree with much of what you said, yet I just don't see it as all that bad of a situation.
I still think there is a lot of upward mobility even in that scenario -- the smarter people I know earn good salaries and have nice lifestyles. Nicer than their parents, in most cases, mainly because consumer technology constantly gets better and cheaper.
And there is still opportunity for risk takers to start their own companies, and it's really not all that hard with some traction to get acquired by a bigger player.
Of course, people with a lot of capital get rewarded for holding onto it / being conservative with it, but that's just common sense, not throwing good money after bad.
It's like we're all supposed to say, "Yeah! Late stage capitalism is so awful!" and nod along, but it doesn't feel awful to me at all. I have a 2016 Mazda that cost $18k and it's just awesome for the price. I bought a brand new iPhone SE for $150. I bought a 50 inch TV on black Friday for $200.
My parents as kids didn't have running water in their houses.
I'm not all about materialism, but I'm really at a loss for what exactly I'm supposed to be feeling outraged about. I don't even really make that high of a salary, just average middle class.
> I still think there is a lot of upward mobility even in that scenario -- the smarter people I know earn good salaries and have nice lifestyles. Nicer than their parents, in most cases, mainly because consumer technology constantly gets better and cheaper.
A lot of smart, hard-working, college-educated people I know live in studio apartments or with roommates in their 30s, because otherwise they can't make ends meet. Many work in STEM jobs, but not at one of the high-profile web/advertising companies that are currently printing cash. Their parents at the same age owned homes, often while working in blue collar jobs with one parent staying home to raise the kids.
Regardless of whether we, as individuals, can afford an iPhone or a TV, upwards mobility on a whole is declining. Income inequality is increasing. And the political system is under the thumb of lobbyists and billionaires who frequently act out of pure self interest. The United States government has spent $250 million a day for the past 16 years on wars that most people don't want but are powerless to stop. These are trends that are upsetting to many people, despite the momentary gratification provided by of our iPhones and TVs.
My parents had paid off their mortgage when they were my age. My father was self employed and my mother a housewife. I’m on a reasonably good salary but banks won’t loan us enough to buy an averaged sized family home even though we have a reasonable deposit. My partner would have to be on an equally sized salary but her teaching job pays very little.
Sure we have some nicer gadgets and personal comforts but the cost of accommodation and property has skyrocketed way out of proportion.
I suspect a lot of these comparisons are not apples to apples.
Declining wages are real, but populations are declining in the affordable but undesirable towns where property is cheap that my parents and grandparents bought into.
My mother's parents bought their first home in Minot, North Dakota and saved up for a tiny home in St. Paul, Minnesota. He was an engineer who put himself through school while living in a boxcar in Montana in the depression. She was a housewife. They scraped and saved, and did well for themselves despite hard circumstances (the depression, world war II, etc.)
My parents bought a starter home in Bloomington, MN. He was an attorney, she stayed at home. They moved to a wealthier suburb to find better schools when they could afford to.
Both sets saved aggressively, didn't go out, didn't drink, maintained cars themselves, didn't take elaborate vac actions, and lived in relatively low cost areas.
Me? I live in a booming tech hub. Prices aren't even comparable. I spend on food and wine and travel. I have a fancy phone I don't need and take my car to a mechanic for standard maintenance. I "can't afford a home" because I don't want to repeat the decisions of my elders. I could certainly buy a home in Minot with cash, and could get a mortgage in Bloomington without too much effort, but I don't prefer those options to what I'm doing now.
That's speaking for me only, but I'm pretty skeptical that prudent living doesn't have similar or better payouts than it did fifty years ago.
The problem is not that the growth is not there. But the sharing the growth corresponding to people's contribution.
Do the super rich really should enjoy the wealth? Are those really justified? Do their employees has done proportionally smaller amount of contribution to only entitle to that much less wealth in salary?
Wealth != salary. Most wealthy people who got wealthy didn't get there by making a large salary, they (at some point) booked capital gains on something.
Nothing is stopping you from venturing out into the world and setting up a business, and making your way into the 1%.
Most work is commodity work. And in a lot of cases, you have a significant amount of people who can solve a problem. This results in a race to the bottom in terms of compensation.
> Nothing is stopping you from venturing out into the world and setting up a business, and making your way into the 1%.
Well, that's the issue we were discussing:
Is there a system that can move the society in a rate that is at least as good as what we have now, but at the same time does not result into the 0.1% problem.
The problem isn't necessarily capitalism, but market failure in housing. Economic laws dictate that anyone who wants to purchase a house should be able find one that they can afford (assuming good credit history, etc), instead through zoning and other measures regions like the Bay Area and others choose not to build.
The other user probably did understand supply and demand. Consumers being priced out of the housing market can be a market failure. And in this scenario, it is a market failure. For every homeless person living in the street, there are 6 empty homes in the US, but a couple with 2 jobs and a down payment can't get approved for a home loan? Most definitely there is a market failure.
As long as there's land to build on and materials to build with, all creditworthy consumers who wish to buy a house should be able to buy one. (I'm using should in a non-normative sense here.) It may not be spacious, it may not be in the best school district, heck it may be a condo and not a standalone house, but it'll be at a price they can afford.
> the smarter people I know earn good salaries and have nice lifestyles. Nicer than their parents, in most cases, mainly because consumer technology constantly gets better and cheaper.
This is because today's booming companies rely on brain power instead of manpower. What does the future hold for people that aren't smart or born into money? As we continue externalizing intelligence to machines, eventually smart people will start falling victim to the automation trend that killed "dumb" jobs.
As I see it, we really need to increase funding for higher education (including adult retraining) and revamp K-12 to make the most of intelligent people from all socioeconomic backgrounds, while also placing greater emphasis on trade programs and small businesses.
We'd also benefit from tariffs on imported Chinese goods, increasing domestic manufacturing (rather than waiting until free trade equalizes global quality of life).
> I'm really at a loss for what exactly I'm supposed to be feeling outraged about.
Personally, I'm deeply concerned but not outraged... I vote for sound policies and politicians that may avoid the next Great Depression, but I profit when the public votes for more unregulated capitalism.
Underrated post, completely agree. There have been several times when I wasn't doing so well financially and I wondered -- if I'm this smart (not to be cocky, but top 1% at least) and struggling, how are other people making it at all?
The answer is, they take far fewer risks than I do and rarely mess up. And when they do mess up it's years of hard work to recover.
But yeah, there is definitely some social Darwinism currently at play in regards to intelligence.
out of control wealth inequality precedes economic collapse.
Pollution is the clear example, I think. The more money I have, the more money I can make by polluting. If I capture below a certain threshold of the benefits of pollution, then the personal cost to me of pollution outweighs any benefit I might receive, and I'm disincentivized from polluting. The more wealth inequality there is, the more frequently scenarios in which pollution is profitable to me occur. Compounding this problem, pollution increases wealth inequality on its own. It creates health burdens and lowers output. It's expensive for society. So I end up profiting while everyone else takes a loss, thereby increasing wealth inequality.
Democratic government helps a great deal with this problem (although simple majority is insufficient to offset it entirely, even with ideal information), but democratic governments themselves become polluted by exactly the same decision making processes.
The question is, how much of the status quo your describe is because we're not in a self contained system, and actually outsource a lot of the problems to developing countries? If the system you describe was constrained to just the United States, and no goods or capital could enter or leave, would we expect a similar system? Because scaled up, that's the world in X decades. Unless we decide, and rely on, various insurrections, rebellions and regime changes to change the system in some countries such that there's always a third world economy to take advantage of. Even if that's the reality of the future (which I think is morally repugnant to rely on), there's no guarantee that cheap external labor won't be extremely constrained in the future, even if it's not entirely gone. (Unless we specifically cause it to be so through political maneuvering and war, but I like to think that's crackpot territory...).
> Unless we decide, and rely on, various insurrections, rebellions and regime changes to change the system in some countries such that there's always a third world economy to take advantage of.
> (Unless we specifically cause it to be so through political maneuvering and war, but I like to think that's crackpot territory...).
When you look at the history of the world and consider current geopolitical situation, what leads you to believe that's crackpot territory?
We're already in this situation and the data do not entirely agree with your anecdotes. Social mobility is quantifiably dropping. And that's a problem.
Honestly if you don't know what to feel outraged about you need do some research of your own. There's far to much that needs to be explained to you and a forum isn't the ideal place for an economics lecture. In the future if you're this out of your element just refrain from commenting on economic issues.
> it's clear to anyone with a thread of financial literacy
That's argument from intimidation and not a valid form of argumentation.
> In effect, late stage capitalism becomes the anti-thesis of the spirit of capitalism - devoid of competition, free innovation, and upward mobility
Fortunately the world isn't in late stage Capitalism, because there is no such thing. As one obvious example, China has only begun to emerge from its backwards Communist shell, it's still in the first innings of its application of basic market economics. It's still doing trial runs market economic structures in things like asset ownership in general (eg equities), banking and real-estate. Its currency and bond markets are in the very early development stage. Other emerging economies such as Vietnam, Nigeria, Brazil, India are similarly going through their own very early stage experiments with market economic structures.
In the US, more people are moving up and out of the middle class, than are moving down and out of it. That has been the consistent trend for 50, 30, 15, 10 years.
There's zero evidence to support the notion that either the US or the world are meaningfully devoid of competition. It's competetion in fact that is terrifying so many. 20 years ago Google, Amazon, Facebook, Netflix, Apple, Priceline, SpaceX, Airbnb, Oracle, PayPal/Stripe/Square, Cisco, Uber/Lyft, Airbnb, Spotify, Tesla, T-Mobile, eBay, et al. were either non-existent or small compared to established corporate giants. That's just for the US, China has hundreds of business giants that didn't exist 20 years ago at all.
There's so much competition coming from the US tech giants, the EU is taking aggressive government intervention steps to begin restraining them from routing European competition. That's the exact opposite scenario of not having competition.
Leaders in AI? Not IBM. It's AWS, Google, Microsoft, etc.
Leaders in vehicle automation? GM had to buy its way back to the table, Ford is still running far behind. Companies like Google, Tesla, Uber, and dozens of smaller SV companies, have led the charge.
Leader in electrification of vehicles? Tesla has overwhelmingly led the charge, most everyone else (except perhaps for Nissan and partially GM) is running from years behind.
ULA for the future of space launch? No, it's SpaceX and Blue Origin.
GE? Dying.
Exxon? Dying.
IBM? 21 straight quarters of revenue decline.
Alcoa? Who?
US Steel? Who?
Sears? Dead. Walmart? Mortally terrified of a company that didn't exist in 1993. JC Penney? Dead. KMart? Dead.
Pfizer & Merck? Say hello to Celgene, Biogen, Gilead, Amgen, Regeneron, Vertex, Genzyme, et al.
Banking? Welcome to the online, payments, crypto revolution. Ant Financial is moving more money every year than most of the US financial giants; it didn't exist in 2003. Square, Stripe, PayPal, Ant, Google, Facebook, Apple, Samsung, et al. are setting the stage, not JP Morgan or Bank of America.
Travel? Priceline is more powerful than most airlines or large hotel chains. Ditto Airbnb.
Taxi industry? Largely dead, destroyed, bankrupt. Million dollar medallions? Gone. Say hello to Lyft, Uber, Didi, et al.
Food delivery etc? Booming. Dominated by Sysco, McDonalds, Procter & Gamble, Kraft Heinz? Nope. Companies like UberEats, Grubhub, Blue Apron, and dozens more.
Old media? Dying and desperate. Newspapers? Dead. Old radio giants? Dead. Cable? Bleeding out. Say hello to Netflix, Spotify, Amazon, Hulu, Facebook, YouTube, etc.
>In the US, more people are moving up and out of the middle class, than are moving down and out of it. That has been the consistent trend for 50, 30, 15, 10 years.
You're going to need to provide a citation for this statement.
As for the rest, how many people are getting wealthy from these companies? Largely the same people who were getting wealthy from previous generations, and a few lucky individuals who managed to gain entrance into the elite class. But really, it's the VCs making all the money here. The same sort of "already wealthy" people who have been making most of the money for the past several decades.
On your examples, they are extreme hyperbole. GE dying? Their revenue is 123 billion and have over a _quarter million_ employees. They span everything from aviation to healthcare to things like lightbulbs. Presumably you think Tesla is killing them or something? They are at 7 billion revenue and only 33 thousand employees. In automobiles GE has already simply bought self driving and electric car technology and by the time it's mainstream all their cars will have it. Tesla is amazing, but giants like GE have so much wealth they won't be going anywhere that easily, which is part of the point.
Ditto for the taxi industry. Dying? They seem to be everywhere still meanwhile Uber and Lyft are getting more and more regulated, or outright banned in some countries and cities. No, the end game isn't the death of taxies here, it's simply a change in the industry. Taxi companies will need to become more like uber and lyft, meanwhile uber and lyft will be regulated to the point where they are little different than taxis. Self driving cars might change the game, but by the time they are normal lots can change.
Most of your examples are not example of fundamental change, but rather simply the same rich people changing technology. Cable didn't die, it became netflix, hulu, amazon, disney, etc. Channels become streaming companies. Ads become product placements and internet ads. Same old stuff in new clothes, with the same cast of people running the show.
Agreed there's some hyperbole as to the current state of things, but the ability for new entrants to pressure the old guard in an industry and in some cases put them out of business or relegate them to the margins is paramount. It's about the system and trajectory more than any point in time.
And GP is absolutely right about some of these: it's hard to imagine bigger competitors than the likes of Sears, Walmart, IBM, Microsoft, etc. who, even if they aren't literally dead, have absolutely had their mantles of increasing dominance ripped away, contrary to the doomsayers of the past. Even if GM adapts as you say, they'll be producing electric cars with modern design at competitive prices with better features than ever, precisely because they were forced to by the market. The goal isn't to undermine any company's longevity; it's to force every company to bow to customer pressure via competition. Old or new, it's a win if products get better and cheaper.
Uber and Lyft are getting more and more regulated
This is a common thread across every industry we can discuss, and to the extent that you're correct about the same players wielding power and wealth across eras and trends, lobbying and regulation play a massive role. It's fundamentally a critique of government power, not capitalism.
Same old stuff in new clothes, with the same cast of people running the show.
I'm curious: in what sense is Netflix the same people as the cable companies (or for that matter, movie studios)? They're directly competing in many ways, run by literally different people, with different employees requiring different skills, and competing in new and different markets around the world.
You should try another piece of rather good poetry:
"Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones.
[...]
All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind."
This article provides paragraph after paragraph of supporting data that the richest have gotten richer, but none that I can see supporting its claim that “billions of poorer people across the world have seen their wealth standstill or decline”.
The issue is simple to understand: as population grows and technology grows even faster, there should be a steady stream of wealth increase. This has been observed as is obvious to everyone. However, if we allow the bulk of this wealth to be controlled by a tiny part of the population, we are creating a huge problem to current and to future generations. A hereditary oligarchy can be terrible to our civilization, and this is what we see forming nowadays. I am not against people participating in the creation of wealth and reaping the rewards, but these differences in wealth need to be leveled over time. Unfortunately, short-sighted politics of the US and other countries are giving more and more power to wealthy people so that they can amass more money without visible contributions to society.
It's way simpler. As population grows, the 500 richest people (whoever they are) are expected to get richer even if the wealth distribution does not change. And as the society gets richer, they are expected to get richer too.
So, if there is any indication that wealth has been accumulating faster, it is not on the article. And as such, the article is valueless and a complete loss of time.
The indication you're searching for is called wealth inequality. It is a measure of how much more money the richest people have compared to the rest of the population, and it has increased significantly over the years:
There is an economist called Thomas Piketty who has made his name by studying and measuring inequality over the years. Read his book and you will get a detailed analysis of how inequality has increased in our society.
If me and the rest the million other people in my city have $100,000, some billionaire in a city somewhere else making another 100 million doesn't really have any impact on me directly. Yet it increases this inequality metric and I'm supposed to be outraged.
If the billionaire was using this position to corner the real estate market I'm trying to buy a house in, then I might be upset. But, I could also pool 1,000 of my friends together each with our $100,000 into a corporation and corner a market as well.
So why exactly is inequality relevant? Shouldn't we be focused on just raising where the bottom of the income range is rather than cutting down the tall outliers?
It seems to me like trying to make yourself wiser by killing everyone with more education than yourself.
Because democracy stops working when inequality is too great. Regulatory capture and all that.
It's waaaaay harder for you to organize and mobilize your 1000 buddies than it is for 1 billionaire to decide he wants to do something you don't want, such as lobbying politicians to give him a tax break, for example.
It's not as hard to organize people along ideological boundaries as you might think. Look at the power of the US political parties, the NRA, unions, etc.
If we want to stop regulatory capture, stop that. Don't worry if it's one person or 1000 behind a movement.
Wealth and income inequality are only bad insofar as they have an effect on consumption inequality and leisure. (Another issue is that wealthy people may use their money to get politicians to pass laws that are harmful.) When people who are richer than you spend their money on yachts, the resources (labor, materials) used to build the yachts can't be used to provide other people with cars, food, homes, computers, and drinks from Starbucks. Since billionaires have most of their money invested, income and wealth inequality matter much less than the news try to make them seem.
According to this article, though, there has been an increase of consumption inequality from 1980 to 2005 in the US according to various papers: https://web.stanford.edu/~pista/JEP.pdf. But the consumption inequality is far less outrageous than income inequality and can be estimated to have been in decline in the world at large through data from the World Bank's DataBank.
The main problem is in political representation. In a democracy, everyone should count as one vote. The natural desire of the population is to have better education and health care, for example, that can lift the standing of the whole society. When a small minority has a disproportionate amount of wealth, they can relatively easily bend politics to their personal wishes. In the US this presents itself in politicians who vote for their wealthy donors to receive tax breaks, the rise of chartered schools, and the fight against public health care.
The measure to look at is consumption inequality, not wealth inequality. It has also increased (though it is harder to measure than income inequality, but see https://www.nber.org/papers/w17982.pdf), but the progressive global wealth tax of up to 2% advocated by Piketty in Capital in the Twenty-First Century could increase consumption inequality instead of diminishing it, and is otherwise less efficient than a tax on consumption.
See “Measuring inequality: A three-headed hydra”[1] in The Economist and “Economics is all about consumption” by Scott Sumner.[2]
Maybe. I don't want this to come off bad, but maybe the work a lot of people do just isn't that important and thus doesn't warrant increases in salary? If a company needs someone to do X, and 5 viable candidates can be found for $Y -- there really is no reason to increase wages.
Anyone with some capital could've invested in Netflix, Facebook or Google several years ago and would have achieved a good return on their money.
Even if some sort of global wealth tax would be introduced (that's a big IF) to fix the accumulation of extreme wealth, would people be better off? The amounts collected, spread out over the entire population, would be relatively small. And most of this new wealth is mostly paper wealth -- the headline next year could very well be: "World's richest lost $3tn of their wealth".
How well does that argument hold up tho'? I mean, there is always _someone_ who does it cheaper. Always. In fact I know of a web developer, who actually does quite decent work and is available for as little as $5 per hour. Does that mean everyone in that skill level should get paid so little?
How would you allocate work? Suppose you are paying a “fair” wage above the market wage, so you have 5 equally qualified candidates apply. They are not allowed to compete on price since you already decided to pay what you consider a fair wage.
I would hire whoever produces the best quality of work for that amount of money, but if they all produce the exact same quality of work, I would hire the one who takes the least amount of money.
The reason anyone can make this kind of wage work is through consumer credit. Eliminate consumer credit, and wages will go up/prices will go down, I would bet my life on it.
Cheaper yes, but perhaps not better. I'd be happy to demand a few million a year for high quality development work from an employer, but the laws of supply and demand do apply.
People who do not contribute to society are what we call parasites. Just because your father or grand-grand-father did something useful to the world doesn't justify that you have to live like a king. Modern society destroyed the old feudal order exactly to avoid this kind of social injustice.
You don't even need to get all this righteous anger involved; the rich benefit more from the stable functioning of society than the poor precisely because they are rich. If the structures that support that wealth were to collapse they'd have a lot more to lose than the guy drowning in debt. It's not only reasonable to expect them to invest more proportionally in the continued functioning of society: it's in their best interest if they're smart enough to look past their balance sheet at the end of the year.
That's a clearly defective model from a game theoretical point of view. A certain rich person can do very little to preserve the stability of the society, so their actions would be concentrated on things that give them direct benefits, that may or may not help society. It's essentially an externality problem, everybody is marginally hurt by say pollution, but some have local gains that far outweigh the costs, motivating them to pollute, bribe politicians and regulators, skirt taxes and so on, leaving other rich or poor people to support the welfare of the society. When the scales tip in favor of the freeriders, you have a failed state that no rich profiteer could have prevented, working individually.
Working individually, yes. But realistically this is more of an iterative prisoner's dilemma than a straight prisoner's dilemma. If the rich don't hold up their part of the social contract, the poor tend to eat them (eventually). So the rich are only incentivized to screw the system if they can get away with it. The problems start happening when we let them get away with it.
Who says they're smart enough? There's a very long history of aristocracies perfectly content to exploit the lower classes, and then got all shocked when the peons wanted the wealthy executed - assuming of course the aristocrats hadn't first riled up the ignorant masses with some reason to start a war.
They only invest in those things that prop them up. Like donating to police or lawmakers, or the very poor with next to nothing to lose (and thus the most dangerous).
I completely agree that the richest should contribute to society, especially as someone in the middle class. However, let's pretend I was born into the wealthiest class. If I inherit a business, that business provides jobs (ie. wages) for people, and is a functioning part of the economic system. Does that mean I am not contributing?
Regardless of how rich I am, I still need to eat and live and put clothes on my back. Are these not contributions?
Or are you suggesting that the wealthiest are parasites simply because they should contribute more to society than someone less financially well off?
> I'd say the higher in the social rank, they ratio of contribution to taking drops exponentially, not linearly.
You mean the richer people are, the ratio of their contribution to taking grows? That does not seem possible, because that will not make the person rich in the first place.
Avoiding taxes isn't illegal though. So in a global economy I'm not sure your argument is technically justified and simply the righteous argument most people would accept as true.
If my US company shifts labor to India, do we assume it is bad simply because the US doesn't receive those wages to stimulate the US economy? Does this benefit India though?
I think your argument depends on perspective, from US point of view this situation is bad, from India's it isn't bad. From the wealthy person's doing this, it simply benefits him/her.
I don't know how to solve this and completely agree with the argument but it is technically flawed.
> why should an extremely wealthy person have to contribute to society?
If influence, specifically political influence, and wealth could be perfectly decoupled, no reason. That nexus, however, means an oligarchical class of rich idiots have the capability to project their stupidity onto national policy.
Even if they aren't projecting their stupidity, they're certainly projecting their interests. There's nothing preventing their interests from being at odds with society's interests.
Poor idiots collectively have the capability to project their stupidity onto national policy as well. Maybe we should reduce the size and scope of national policy to minimize the impact of idiots, rich or poor.
If a wealthy person earns their wealth, then they have benefitted from their contribution to society. If they are allowed to lock that wealth up multigenerationally, then they are incentivized to change the system to make it harder for others to do what they themselves have done, to the benefit of others who have also already taken advantage.
Society as a whole benefits much more when each generation has to earn the bulk of their wealth.
At minimum, a wealthy person should at least buy stuff -- that would actually be a contribution to society. But the super-wealthy have more money than they can possibly spend!
You have offered no evidence for any of your assertions for the ill effects.
When Elon Musk becomes obscenely wealthy by creating affordable electric cars and space flight, everyone else gets the benefits of affordable electric cars and space flight. Not talking trips to mars, but constellations of satellites offering super cheap worldwide internet.
Wages have stagnated and the poor are not seeing an equivalent increase in their wealth. Moreover, while the jobs numbers are very high 94% of all jobs added in the last decade have been temp/contract work/self-employment.
We set up an incentive scheme to vigorously punish employers for offering full time work by loading it down with obligations over the worker’s long term well being, and didn’t do anything similar for temp/contract work. What were you expecting?
If we attached proportional responsibility to part time work, or just provided benefits out of the public purse instead of labor law, part time work wouldn’t be such an obviously superior choice to employers.
And humanity, as a whole, will probably reap a ton of long term benefits from it. I doubt there's much solace in this thought for someone being fired because of it, though.
(Personally I don't mind a bit of hardship if it helps everyone, but I understand not everyone can be frugal or that some people can be just plain unlucky)
That claim is not only unsupported, it's almost certainly false. The last few decades haven't been great for the middle class in wealthy countries, but it's been fantastic for "poorer people across the world." U.S. GDP per capita is up 60% since 2000. Bangladesh's is up 235%. India is up 288%. Thailand is up 195%. Poorer countries that have been able to cobble together enough rule of law to participate in capitalism have benefited tremendously from it.
To be exact, it seems to be saying that the richest 500 are x% richer at the end of the year, not that the 500 richest at the beginning of the year are %x richer at the end of it. These are two different things because they are two different sets of people.
In decades past the richest and the poorest people don't remain in that part of the income distribution very long; this is especially true in the US.
> These are two different things because they are two different sets of people.
The sets mostly overlap. The top 10 of the richest people was the same in 2016 and 2017 [1]. These 10 people saw their net worth increase by $107 billion.
> In decades past the richest and the poorest people don't remain in that part of the income distribution very long; this is especially true in the US.
I would say this is especially not true in the US where social mobility is notoriously bad.
"Several large studies of mobility in developed countries in recent years have found the US among the lowest in mobility." [1]
From 2001 to 2007 (just 6 years), the proportion of US households that left their income quintile were (starting at the lowest quintile) 44%, 61%, 58%, 55%, and 34%. Even by global standards that's quite high income mobility.
Those changes are about the same for any window of the same time length for all of recent US history. St. Louis FRED has data and papers on this.
One of the best studies on intergenerational mobility in the US, using all IRS records (not sure how hard they had to work to get those) shows that mobility in the US has been fairly constant for 50+ years.
While a technically valid criticism, is it really that controversial? Costs are increasing faster than wages at low income levels - which is easy when wages are largely stagnant or declining due to increased competition driven by labor surplus and automation.
It's not even controversial, it's wrong. Poverty, particularly extreme poverty, has been decreasing rapidly over the past 25 years.
Of course, this doesn't mean that everyone is better; there are always winners and some losers, and there are setbacks here and there, but the big picture is one of great progress.
For more, one should read the Human Development Reports:
Actually, about 1 percent of children in the United States suffer from chronic malnutrition. And malnutrition occurs in people who are either undernourished or overnourished. In the United States, more children suffer from malnutrition due to dietary imbalances than due to nutritional deficiencies.
Poverty also includes having your neighborhood torn apart by junkies on opioids.
But I guess actually looking at the econometric data to compare apples to apples isn't worthwhile because you can stay indoors while your tires are stolen and watch Jessica Jones, so things are better than they used to be, right?
Since the parent was commenting a quote about "billions of poorer people across the world have seen their wealth standstill or decline", it is rather obvious that the Guardian was commenting not on US poverty but global poverty.
Nearly a billion people have been pulled out of poverty in India and China over the last 25 years. Their wages have at least tripled on average in real terms in the last 20 years. So, it's you who's burying your head in the "America first" sand.
The middle class in the US had enjoyed the fruits of global inequality resulting from colonialism and WW2 during the second half of the 20th century.
As the gap in skills and education between the average American and the rest of the world have disappeared, the former US middle class will see their income gap with the rest of the world also disappear. A teacher, factory worker or a store clerk in the US isn't 20x more productive than a teacher, factory worker or a store clerk in India or China and there's not reason for that wage gap to exist any more.
I am not entirely sure if you are trolling. People being brought out of destitution is progress, absolutely.
It's the very first and most important step of progress. If people don't have enough to eat, even their brain won't develop properly. The lower layers of Maslow hierarchy are absolutely essential.
After that, more progress is needed, but having food, essential health and physical security is definitely the fundamental thing for any other types of progress, such as education.
Is it possible for everyone’s wealth to increase? I think they might be assuming this is not possible and there if richest wealth increases by this much it had to come from the rest?
So the people with the smallest piece of the pie are slowly getting a larger piece, but the people who already have the biggest piece of pie are getting even bigger pieces faster. But because the pie is growing, it doesn't mean that their larger piece is making someone else get a smaller piece.
The only people who have a proportionally smaller piece than they used to are in the middle class. Which is what happens when first world work more closely with developing nations. Taking more people out of extreme poverty but putting slight downward pressure on the middle class.
> The number of people living in extreme poverty has fallen DRASTICALLY over the last 25 years.
This is defined as people living on less than a dollar a day. Yes, it has more than halved in 30 years. Congratulations. I totally see how this progress actually over half a century relates to the world's richest getting an extra trillion in one year. Yep, makes sense to me.
The "dollar" has been adjusted over time, though, and is currently actually USD 1.90.
Your tone sounds sarcastic but I don't see the justification for it. The number of people who are actually hungry and malnourished has gone down significantly, and far more people are vaccinated today then 25 years ago, and far more children can go to school and literacy rates are up.
Sorry to hijack this, but referring to your other comment, I also saw weird stuff going on today with posts getting flagged. Seems the bots and trolls have found our corner of the internet as well... Not sure what's going on exactly.
Even if it did increase, most of that increase is just inflation anyway. And it's usually the wealthy that benefit from inflation (at least more than regular people do).
Compare the "regular" person of today to the "regular" person of 50 years ago.
Is it easier or harder to afford basic foodstuffs?
Do they eat out (luxury) more or less?
If they own a home, is it larger or the same size?
Who travels more?
Who has better healthcare?
Who spends more on entertainment?
How much do they spend on the family pet?
Who spent more time furthering their education?
All of these are measures of wealth, and the modern "regular" person would be wealthier in every one of these categories. And that's not even factoring in advances in technology that make the quality of life of a person better even if there share of societal wealth goes down.
This is very shortsighted-claiming that all of these trends have to do with being richer, is simply absurd. Also, "regular" person? What age? Male? Female? What does that even mean? This is just utter nonsense. But I will humor you:
> Is it easier or harder to afford basic foodstuffs?
Processed foods are far easier to afford, but they are extremely unhealthy. As for other basics, many have gone up over the last 50 years.
> Do they eat out (luxury) more or less?
Women now work. 50 years ago they did not. Less time/people to cook at home. Not like everyone is eating at steakhouses. They just don't have the time so they go to Chipotle or McDonalds or Panera.
> If they own a home, is it larger or the same size?
Most people own legacy homes-they are the same size because they are the same homes. New builds are building bigger houses but what "regular" person builds new homes?
> Who has better healthcare?
This has more to do with advancements in medicine and technology than people becoming richer.
> Who spends more on entertainment? How much do they spend on the family pet? Who spent more time furthering their education?
Furthering education is largely on credit, so this is a bad measure.
> and the modern "regular" person would be wealthier in every one of these categories.
> This has more to do with advancements in medicine and technology than people becoming richer.
It's impossible to separate people becoming richer from advancements in technology. We didn't grow GDP by 77 times, because we work 77 times harder.
Improvements in underlying technology are what help us create more wealth. The problem is that the new wealth being created and benefits of that new technology is being shared so proportionally.
Fifty years ago, my grandparents built a 3 bedroom, 2 bath house on 4 acres of land with cash saved up from my grandfather's manual labor job (he stopped going to school in 8th grade) working for a sugar cane plant. They never, in the entirety of their lives, took out a loan. The simple fact of the matter is that they saved and invested back when it was easy to save and invest and thus never needed to rely on a bank for anything other than a place to store money. Oh, and they sent their 5 kids to college.
Try to do that today in the same area. The foremen at the same sugar house could never afford a regular residential lot, much less the a house to put on it. It would take them 20+ years to save the money.
> it's usually the wealthy that benefit from inflation
Inflation is a regressive feature of modern currencies. It transfers wealth from lenders to borrowers and away from investors. The degree to which it does so is a function of the amount of wealth one has.
The wealthy absolutely do not benefit from inflation, and lose the most money due to it in reality. Inflation depreciates the value of your liquidity, which is why every major company (except apple, it seems) dumps as much currency as possible into appreciable and tax deductible assets. However, that's more difficult for persons, and most of the super wealthy end up holding a plurality of their money on their person. Part of the reason for this is that they have enough money that they can't easily enter the market with a sizable amount of their total funds without moving the market against themselves.
> Inflation depreciates the value of your liquidity, which is why every major company (except apple, it seems) dumps as much currency as possible into appreciable and tax deductible assets.
When you read stories that Apple (or whoever) has $X billion "in cash" it's not actual cash. They keep some around in money markets and the like for near term expenses, but the majority is in bonds that pay more than inflation. In fact, if Apple were classified as a bond fund they would be the largest in the world:
That makes sense. Morningstar groups all near term liquidity together, and so I figured Apple had to be constantly expanding aggressively or something and needed a warchest 7x the size of microsoft's to do it. Sitting on bonds as amid-near term solution makes more sense.
Yes, they absolutely do. Without inflation, it would be almost impossible to borrow money from a bank. No borrowing = no new investment. Most super-wealthy people are constantly borrowing money because the rates they borrow at are lower than their return on investing that money.
Yes, it is definitely possible and expected. Your line of reasoning is a pretty common one and is sometimes referred to as the "zero-sum fallacy" or "fixed pie fallacy"[0].
As many other commenters have pointed out, it is possible for net global wealth to increase (e.g., the increase in total real GDP). As far as I understand, the main reason this is possible is the development of new "technology" -- in the very general, economic sense of the word technology [0], which includes anything that increases the productivity of a single worker; this can include everything from new technology in the traditional sense to new processes (e.g., agile vs. waterfall for software development, or more optimal supply chains) and investment in infrastructure (e.g., better road networks).
For example, a single farmer today can not only produce many times more crop compared to a farmer 100 years ago, but also safely and efficiently distribute this produce to consumers across the globe. In general, assuming everyone in the economy works equally hard, the total production (i.e., the global net wealth) can increase as long as technology is increasing.
Rich people tend to have most of their worth in stock. In theory, assuming your stock got more expensive, you get richer without anyone in particular getting poorer.
Or. everyone with debt - which is usually a very large portion of the population - had their burden reduced.
edit: Ability to pay grows with inflation, by definition. Unless you have a particularly unusual type of debt, the principle is constant and the interest is based on the remaining principle and is therefor a pre-inflation value. Wages grow in absolute terms (even though their purchasing power is otherwise constant), so the debt is easier to pay off.
The theory is naive, dismissive, and wrong. Stock value increases are coming from optimizations within companies that reduce employee benefits and compensation. On the consumer side of things, profits also come from taking advantage of deregulation, lowering the quality and safety of consumer products and services. Executive leadership and investors are pocketing gains made from making everyone else's lives worse.
Getting richer has a strong relationship with making others poorer.
Are you saying stock value increases only come from reducing employee benefits and compensation or from lowering the quality and safety of products and services? Seems like that is simply not true across the board. If a company sells say software they could easily grow revenue and profits without changing their product or reducing employee benefits and compensation. Their earnings would be higher and their stock would go up.
How much of this opinion is coming from being involved in the management of companies vs news articles tuned to generate outrage so that they can generate clicks?
I'm serious. Do you have first hand knowledge of what you speak, or are you just looking for someone to be angry at?
Also, looking at your comment history, you've literally only ever commented on the misery of the proletariat and related topics, which makes me suspect this is an astroturfing account.
> Getting richer has a strong relationship with making others poorer.
This theory is naive, dismissive, and wrong. You have accurately seen some bad examples, and it has led you to incorrectly conclude that the bad examples are the bulk of what is going on.
The central idea of capitalism is the extraction of surplus value via property relations and wage labor.
Voluntary exchange is not capitalism. Voluntary exchange has existed since the dawn of society. Capitalism is a form of production that developed with the industrial revolution. I can't tell if you've fallen for or are employing a sleazy equivocation.
To assert the existence of surplus value, one must also declare the baseline. For Marxists, the baseline is the “labor-value.”
That the labor theory of value is entirely bunk is trivial to see. If you present to a buyer two indistinguishable instances of the same good but describe how one was meticulously hand-crafted by skilled artisans and the other produced by machines in a factory, in the prospective buyer’s view the former is no more valuable than the latter. Value is imputed by the end consumer who is willing to pay only so much for a pair of shoes, a hat, a computer, a book, an automobile, a house, whatever. Marxists object that this is “commodity-fetishism,” but their many syllables fail to camouflage their deep confusion.
Even employers — rather than exploitative expropriators — are sellers of goods or services but buyers of labor, one of many factors of production. Consumers set prices with their willingness to buy. Producers seek to meet this demand at a profit. (Running a break-even operation is a bad model: at best you end up back where you started and otherwise book red ink.) To take profit, they must produce at a cost below what the consumer will pay, the prevailing price. Raw materials must be bought ahead of time. Employees expect regular paychecks. The employer must risk all of these costs by paying up front for a chance of turning a profit in the end.
Employees likewise are sellers of labor, a role that Marxists fail to recognize or else they’d have to slap expropriator labels all around. Employees shop their skills to find the buyer who values them most highly. When a better offer comes along, we usually congratulate the person for finding a better situation even though it is the same worker now supposedly “extracting” more value. The downside is sellers compete against one another. When the value proposition grows too rich, we buyers start shopping elsewhere. “Cheap labor” is nothing nefarious; everyone is looking for a better deal. Sellers of goods, services, and labor must all continue to improve their offerings.
From top to bottom, this is a network built on voluntary exchange with no extraction or exploitation. The ruthless player is the fickle consumer whose tastes, demands, foibles, and sense of urgently are always changing. There’s also Mother Nature, sometimes gentle and sometimes furious. We live in a world of scarcity with the future uncertain. Where will tomorrow’s dinner come from? How will parents pay for their kids’ college years down the road? How will I pay the light bill next month? Capitalism’s aforementioned complex network of voluntary exchanges — “the market,” for short — is a search process for how best to allocate what we have now in order to obtain what we need and want tomorrow.
Yours is a very shallow reading of Marx. A common, but nonetheless shallow reading. The only thing I can really do is refer [0], sections 5 and 6 starting on page 35 as an answer to such an interpretation.
> From top to bottom, this is a network built on voluntary exchange with no extraction or exploitation.
I mean, this is just preposterous. Are we going to ignore how capitalism developed with enclosure, forcible transformation of the commons into private property, and colonialism? Do you really want to make the claim that, say the Dutch East India Company's involvement in India was based on voluntary exchange with no extraction or exploitation? Or how about today, when the computers we use to write these messages rely on conflict minerals? Give me a break. Your analysis is ridiculous at face value. My only question is how you could type that out with a straight face.
No, the central idea of capitalism is the re-investment of the surplus produced, rather than consumption of the surplus, no matter where the surplus came from. The surplus can come from one's own labor, or from a sole proprietorship.
I can tell that you've fallen for Marxist rhetoric.
I've always found this idea that capitalism was "invented" to be so strange.
e.g. When an ancient king had land, and let poor people work the land in exchange for a part of their production, what would you call that? Sure sounds like, "the extraction of surplus value via property relations and wage labor" to me.
Same story if the lord has a mill and charges people to use it. Or a bridge and charges people to cross it. Technology was worse, so there weren't as many physical forms of capital, but it definitely existed.
Some people seem to have this need to see capitalism as this invention created by bad people. Because to admit now natural and organic it is would be to admit how much enforcement and violence their ideology really demands in order to obtain the real world.
I didn't use the word invention, I used the word development. There was no connotation about naturalness in what I said. Neither did I make a moral judgment on the development of private property. So, why are you imposing on my words an argument that I wasn't making?
> e.g. When an ancient king had land, and let poor people work the land in exchange for a part of their production, what would you call that? Sure sounds like, "the extraction of surplus value via property relations and wage labor" to me.
Ok, if you want me to be more precise, private property relations, which are very different from feudal property relations. In fact, since property is a legal construct, this aspect of the development of capitalism could be called an invention, and the idea that capitalist forms of property are particularly ""natural and organic"" compared to other forms is quite suspect-- at least without any argument provided for it. As a foot note, one of the processes that developed private property was Enclosure [0] which was by no means nonviolent.
But I'm not going to try to be as precise and rigorous as a history textbook in Internet comments I compose in between compiles. Feel free to believe that capitalism is natural and organic, or read a history book. Idk.
> When an ancient king had land, and let poor people work the land in exchange for a part of their production, what would you call that? Sure sounds like, "the extraction of surplus value via property relations and wage labor" to me.
There is an extent to which it is true (well, the first part, not wage labor!), but it's a different set of property realtions than the ones which are the defining feature of capitalism.
> Same story if the lord has a mill and charges people to use it. Or a bridge and charges people to cross it. Technology was worse, so there weren't as many physical forms of capital, but it definitely existed.
Feudalism is also a system by which value is extracted by property relationships; a different set than capitalism, and (while some quantity of wage labor may exist within feudalism) not one where wage labor plays a central role.
Capitalism replaced the system of property relations underlying feudalism with a different set.
> Some people seem to have this need to see capitalism as this invention created by bad people.
Traditionally, that's not even how the socialist critics that first identified it viewed it; it wasn't “an invention created by bad people”, but the state resulting from a number of related changes to the model of property driven by a combination of opportunity created by physical and other social technologies and self-interested people seeking their own gain. (This isn't inherently bad, the same people saw socialism the same way, though they saw the class driving and benefiting the preservation of capitalism against further change as narrow and inherently narrowing with the continuance of capitalism.)
I'm not really sure, then, what people you are referring to, since neither capitalism's defenders nor it's main critics hold the view you are attacking.
If it is asymmetric, the superficially apparent mutual gain may be illusory, because—while many people think for moral or aesthetic reasons that this should not be the case—there is enormous empirical evidence that the actual experience of utility related to material position is very strongly driven by relative material position, which is often far more significant than absolute material position.
But is that empirical evidence talking about peoples' overall position, or their position with respect to one particular exchange?
That is, it can be true that I feel rich or poor by comparing myself to others, not based on my absolute wealth. It can also be true that I look at any individual transaction and decide whether to make it or not based on whether it makes me better off in absolute terms.
> But is that empirical evidence talking about peoples' overall position, or their position with respect to one particular exchange?
It's about overall position, but the outcome of every particular exchange is a change to overall position; now, if the asymmetry in exchanges were essentially random, this wouldn't matter, but when you have a system with distinguishable classes, and there is a clear relationship between class role and which side of the asymmetry of exchange you tend to fall on across exchanges—say “capital” having the greater gain and “labor” the lesser—then you can end up with a situation where the pattern of exchange, each seemingly mutually beneficial but asymmetrically so, ends up producing more disutility from increasing inequality on one side than utility from absolute gain.
> So you're saying that it would be better if everyone was poorer individually, as long as they were more equally poor?
No, it's not at all that simple; there's both disutility associated with inequality and utility associated with absolute material position; how those net out is more complex than either “everyone getting more is better regardless of distribution” or “more equality is better regardless of how much per everyone gets”.
>So you're saying that it would be better if everyone was poorer individually, as long as they were more equally poor?
Why are you creating this either/or? Are you proposing that if we don't allow people like Gates and the Kochs to hoard billions of dollars that everyone will be poorer individually?
In real terms this could happen if productivity increased, and was able to lead to increased standard of living for everyone. This probably did happen for some large subset of the population, by some definition of "standard of living."
It's a pretty well understood and accepted fact at this point. It's been a major talking point in economic and political circles for the past 5 - 10 years.
The sources below are from a quick Google search. They mostly reference income stagnation and are about the US. But income stagnation leads to wealth stagnation and there are similar trends world wide. Thomas Picketty's Capital in the 21st Century is largely about this issue, as is Robert Reich's documentary Inequality for All. There are those who challenge the conclusions drawn in both, but few seriously contest the data they point to.
You don't need any data to support that fact, any regular person can see for themselves that this is true just by looking at their own situation and that of their family members, friends, neighbors and acquaintances.
There was an interesting study posted (I believe here) on how a flat 10% re-distribution (10% taxed from everyone, then redistributed evenly across everyone, aka basic income), created a more stable "society" in simulation. It did this by helping support a larger "middle class". Does anyone know the link/can point me to the study? Google is failing me at the moment...
When people have the economic security from a UBI not to have to worry about job security, they can more easily take a stand against bosses/landlords through collective organising efforts. Basically, the UBI can act as a strike fund, giving workers/tenants/etc. more power in the class struggle.
We would first need to correct the monopolistic behaviors by corporations which is currently being encouraged by the US government. Then UBI would work.
OR
We could do a daily proportional wealth redistribution (i.e. UBI based on a percentage of total wealth, including assets, rather than a static number - and we could do this at a daily cadence). This system would hurt corporations which have goods of lower price elasticity of demand, but at least it would be good for individuals.
OR
We could have it as state run/sponsored, i.e. the government runs farms and sells food, or companies run food production and sales, but the government pays for it. This has quality concerns, especially when it comes to regional distribution. But hopefully, like the US schooling system, maybe a combination of both government run, and government sponsored (i.e. charter school), and privately run (i.e. for the ultra wealthy), would create a healthy enough environment. Ideally, since this doesn't depend on the quality of local teachers (i.e. food doesn't care if it is getting re-allocated to rural Arkansas), it would work out better than the US schooling system. Note: This doesn't work as well for housing.
Since big city landlords are no longer in an exclusive position to sell the ability to make a living, I would expect rents to crater as people can move without so much concern for commutable jobs.
I don’t know about you but myself and the people I know love the city cuz of convenience, social reasons, and jobs.
Even today I could spend 3x less on rent if I moved and endured a 30min commute. I don’t. Having a job is not the primary priority for why I’m paying high rent.
"Why do you need a raise? You get $xxx in minimum salary."
Salaries (except maybe minimum wage) are set by demand and supply. UBI will do nothing to demand, will do nothing to supply of high skilled jobs and may actually reduce supply for low paying jobs by providing an alternative that isn't starving.
:) where is the competition in SF to stop landlords from ever increasing rents?
Thought experiment: If we redistributed all the liquid capital that currently exists, one year later the people who own infrastructure will end up the 1% again.
You can see this through some basic economics. People have more money, they are willing to spend more money. Meanwhile, supply remains constant. What happens? Prices go up.
Everyone has to eat, everyone has to buy medicine, everyone needs to sleep, everyone needs the internet. Everyone “needs” to gamble. The people who own that infrastructure would be the richest again.
With UBI everyone will have more money but overall production would drop which is the only meaningful way to improve peoples lives. So people would be worse off because prices would adjust to the decreased supply and the increased demand of goods and services.
I think there's a few things you're missing. I'm a bleeding-heart liberal, but I think that with UBI in place, I'd be willing to let go of minimum wage. Of forcing companies with enough full time employees to provide benefit X. Of laws forcing employees to join a union. Etc.
Also, worker productivity is through the roof. Perhaps we can talk about giving back some of those production gains, if it funds things we like.
If by production you mean GDP, it's not as simple as that. Increasing production is not the only meaningful way to improve peoples lives.
GDP is a very rough indicator for a society's standard of living and well being. GDP is really bad at measuring things like health, household productivity, technology changes, education, leisure, environment, etc - all which may not show up in GDP.
Another way to think about it is that the 500 oligarchs of the world were able to capture a worldwide average of 26.63¢ from each person. In the course of 365 days it's as though each person in the world bought each of the 500 oligarchs in the world a full $0.26/$1.50 = nearly 1/5th of a single vending machine 20 ounce bottle of coke. Multiply that by 500 and you can have a very proper sit-down meal anywhere in the world.
Of course, maybe they generated $500, or $1000, or $3,000 in wealth to do so.
After all, the worldwide real income increased by well over twice that.
But it's that fifth of a bottle of coke that bothers me, personally. Why should bill gates get a quarter from me? He obviously didn't work for it as much as I did. If anything he should be paying me. Why, you ask?
What did I make that he uses? Why, I might as well ask: what do the 500 oligarchs of the world make that anyone uses - wait, don't answer that, I have a point to make here and it would kind of ruin it to know the answer.
My point is, the rich need to stop getting richer. It's just not right.
This isn't interesting at all, and should not be a headline in a respectable newspaper. The wealth gains are on par with market gains. The absolute dollar value of the gains is almost certainly not headline worthy. The richest individuals lost trillions a few years ago in the crash, they gain trillions in a boom. That's exactly what one would expect.
I'm fiercely opposed to the regressive turn the economy has taken, but I'm just as fiercely opposed to hysterical garbage journalism. We won't correct the broken social contract by heaping nonsense upon injustice.
I'm all ears for constructive policies to tie earnings for the least wealthy to market gains, since the real problem is lack of ability to invest wages in the market, but I don't see that on offer here.
If the wealthy had any interest in self-preservation, they would advocate higher taxes on themselves or some sort of UBI. But I'm sure Sam Walton's kids think they deserve everything they have.
A small percentage of bank accounts should be randomly swapped each year, and the owners of the swapped accounts become part of a reality TV show to follow how they dealt with their change of fortune
Curious are the ways in which a world born of binary, "carries over" and manifests the very same patterns in broader social settings, into seemingly unrelated levels of abstraction. Similarity across scales.
Binary winner-take-all, all-or-nothing markets?
There seem to be deeper natural forces at play; the proposed evil divide between the rich and poor just incidental symptom. Surface ripples in a powerful river.
Sure, but that's been the case for thousands of years.
The novelty is in the global nature of the competition, the physical and informational proximity that accelerate evolution of patterns. That's what makes them spread so quickly and prominently, across seemingly unrelated scales and disciplines.
Another curious manifestation is how humans are changing the way they treat each other, how they structure their (human) relationships. Did humans tame the computers, or did computers tame the humans?
So what? Inequality should only matter to you personally if it means the lower bound on income, the poorest of the poor, is going down. If the richest is getting richer, maybe that means the poorest are becoming poorer as a consequence, but not necessarily, in fact, most likely not.
It matters to me personally that a small group of people have such a massive amount of power. It's already completely uneven regarding voting power - I can vote once in an election, but if I had a trillion dollars I could vote once, and then I could pay lobbyists, and fund advertisements, etc. I, as a single person or small group, with a trillion dollars, can have a massive influence.
This is regardless of how poor anyone else is.
No one should have this kind of money, it's really absurd.
The situation is more complex than candidates' election spending. For example, many of the groups in [1] influence various radio and television programs, and through those, elections.
Katy Perry has a massive amount of political power compared to you as well. How should we handle her and other celebrities? How about unions and union bosses? News media heads?
If we're going to be fair, shouldn't we control anyone at all who has influence?
For purely practical reasons, we should make efforts to disperse power within society away from severe concentrations. Not uniformly, not absolutely, but we should work to keep the trend from becoming too strong in the direction of concentrated power. Otherwise, the vast masses are liable to suffer and experience reduced capacity to alleviate that suffering. See: All of human history
Some people are more influential than others. Money is only one vector of influence. He's rhetorically asking whether we should regulate the other vectors with hope that no one person has more influence than anyone else.
Because with large amounts of money comes enormous power -- especially in a mostly unregulated free market system. Power to influence the political conversation through media. Power to directly influence law makers through lobbyists and donations. Power to buy your way out of punishment ($100 speeding ticket or parking ticket is nothing to someone with millions or billions of dollars. It provides zero disincentive.)
When inequality gets high enough and power concentrated enough, Democracy decays towards oligarchy, social mobility grinds to a halt, what was a free and relatively classless system becomes an ossified aristocracy and freedom slowly devolves to a dystopian tyranny.
We're already seeing the beginning of this process in American society. Already, we have substantial evidence supporting the idea that Democracy has decayed into Oligarchy -- and it did so several decades ago. [1]
This matters if you value a free and just society. It matters a lot.
His wealth came from siphoning off profits from his employees and charging exorbitant prices for his products. The monopoly microsoft held was used to strangle smaller companies out of the market. None of these actions were directly targeted at me but the world is much larger than you or I.
He used his power to push shitty and proprietary software into my industry, thus limiting the impact that properly developed software could have created. I had no choice in this and he used everything from back-room deals to flat out lies to achieve this.
The poorer are getting richer, too. But the rich gets richer faster. I don't see a problem with it, but it's funny to see how besides having more regulations, higher taxes and more government intervention (most of the time in the name of making society more equal) increases inequality at a faster rate just to see the very same people saying "we need higher taxes and more government intervention!"
Top 500 YouTubers see their subscribers_count increase by 100 million this year. Meanwhile, I got 0 increase in subscribers. It's not fair!
Just imagine how much influence these popular YouTubers have compared to regular folks, the impact they have on cultural and political life. Should we allow a tiny group of YouTubers to have such a massive subscribers_count and influence?
I say NO! Behind every popular YouTube channel lies a great crime.
The creation of wealth, in various forms, is what adds "value" to the economy; rich people ending up owning/controlling that wealth isn't the same thing as those rich people having created that wealth.
Edit: Don't passive-aggressively revel in victimhood. If you feel misunderstood, explain better - don't blame your audience.
Providing capital to those with talent IS providing value. Thats why entrepreneurs exchange a portion of their company for the capital - capital has value and helps the entrepreneur. Money doesn't appreciate in value by doing nothing. Once you have wealth you can use it to make more wealth by taking risk based on the demands of the market.
That is a much better comment than your previous one.
I would counter that right now, money is ridiculously cheap. Interest rates are breathtakingly low. There are enormous amounts of money running around begging to be borrowed. As such, if this system you posit was accurate, then the very wealthy would be seeing the smallest returns on their money for decades, as they effectively competed to be the lender/investor to the people creating wealth.
But that's not what we're seeing.
It's also not what we see with investing in the stock market; that provides nothing to a company beyond the first time a stock is sold (barring a secondary argument that there is value in demonstrating that people are trading shares in the company which makes everyone feel good about the company and there's a value in that), but the rich are seeing some fantastic returns on their money in the stock market, extracting a nice steady stream of dividends and capital value increases, without having given a penny to the company named on the stock.
As an aside and speaking purely from my own experiences, I draw more each year from the stock market than my country's median salary, and I'm generating no wealth whatsoever for that (although I expect some would argue that by not selling all my shares, I'm providing value and that's what I'm being rewarded for). I could retire and get by for the rest of my life, entirely on the backs of others. The rich do the same to a breathtaking degree.
Using the commonly accepted safe withdraw rate of 4%, if you inherit $3 million (which is not even that much), you can safely collect $120,000 of capital gains/dividend income every year without doing anything. This also frees you up to work on other things that will acquire you even more wealth. People whose parents didn't leave them a large inheritance have to rely on salary, which is taxed at a higher rate and more difficult to earn.
In effect, late stage capitalism becomes the anti-thesis of the spirit of capitalism - devoid of competition, free innovation, and upward mobility. In an ideal capitalism society, the most talented should earn the most, but the compounding effect of capital makes it so that whoever holds wealth the longest earns the most.