US right at the bottom of the pile in terms of social mobility according to these guys :
Financial Times too:
The trickle down theory works very well if you are at the top. and believe you should get even richer.
For the most part believers in trickle down economics fall into a few categories:
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People who aren’t rich but think they will be someday
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People who already are rich
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Teabaggers and other right wing authoritarians whose get their opinions from a small number of media outlets, usually the ones designed to service the interests of group 2.
In the last 30 years taxes and expenses have gone up dramatically for the middle class. So has productivity. Wages have stagnated.
Almost all the tax cuts and income gains have gone to the top 5% and corporations. None of it trickled down.
The corporate profit rate went from $600 billion to $1.4 trillion in just 6 years under Bush. None of it trickled down.
We spend about 2.6% of GDP on R&D. So about $370 billion, of that about $100 billion comes from the federal government, and a good deal (although not all) of R&D is done at public universities. So private industry puts maybe $250 billion a year into R&D.
http://www.aaas.org/spp/rd/guitotal.htm
Bonuses to bankers on wall street in 2009 made up 1% of GDP, about $145 billion.
http://market-ticker.denninger.net/archives/1893-Weekend-Roundup-123.html
So your argument in favor of supply side economics doesn’t phase me. We barely averted a depression, and a small number of financial workers will earn 1% of GDP in bonuses for causing that. That isn’t the same as the 1.7% of GDP that private industry invests into R&D. But even so, there is something wrong with your argument. If you give money to the wealthy, they just keep it. They do not invest it in R&D. Why are bankers alone making bonuses that are 60% as large as the entire private sector’s investments into R&D if supply side economics improves R&D? Corporate profits for 2009 were probably 1 trillion or so.
Confiscatory tax rates combined with tax credits for companies that invest in R&D would improve R&D levels.
The biggest problem with his argument is that it isn’t a slippery slope, it’s a slippery cliff. Saying that radical income redistribution is bad says nothing about the benefits of moderate income distribution.
I didn’t realize that bonuses were 1% of GDP. That is frightening.
Two things to extend your argument. One, there is R&D and there is R&D. R&D work funded by the government, and done by universities, is mostly fundamental work that can lead to major advances. Most R&D work done by industry is much, much shorter term. It leads to new products, but usually isn’t the kind of game changer that university R&D can be. Except for Microsoft, and maybe Google, the kind of corporate lab like AT&T and IBM had is long gone. IBM still does research, but they are encourage to work much more in the short term than they used to work.
I’m not sure I totally agree that the wealthy will just keep their money. But, even if they want to invest it in more production, the masses of people who haven’t benefited from the increase in productivity have no money with which to buy the results of that production. The, the wealthy will make bets on unproductive instruments like we saw a few years ago, and we have a bubble. The only alternative is to drive demand and provide cheap credit to let people without money borrow and consume - and it is clear what the results of that were.
Treacle is the shit juice that runs down your leg.
With such thriving markets (compared to today), I would think investors would do very well. And wouldn’t those hundreds of millions of buyers be a sufficient incentive for any car company (to use one example) to try to out-research and out-develop its competitors?
We don’t all squander our excess cash at the craps tables. I’m sure that if we had all our needs met, plus a little extra, some of that would find its way into the capital markets. A million people with a buck each can buy as much R&D as a single millionaire.
For the last couple decades, most people in this country have been working hard and kicking ass, and have seen no improvement in their economic situation. For them, a stalled economy would be a step up.
Do you have an cites for this statement? What major “game changing” inventions have come from university labs?
The guy went to MIT and as far as I know has worked in scientific industry for several decades.
I know when I was in college much of the research was more about basic science or finding new information or new ways of doing things rather than taking a product to market. My impression is industrial R&D is more about bringing a product to market. Both serve a purpose, but they aren’t the same thing. My brother, who does graduate work in math, said it isn’t uncommon for innovation to be done in and for it to sometimes take decades before people find uses for it in novel ways in private industry. Private industry cannot take those risks (investing in R&D that might not be useful for several decades or may be useful in unexpected ways).
But an example is Pharma. Groundbreaking ideas come from the public sector, then the private sector brings them to market and/or creates new forms of those ideas. But the pioneering R&D is done by the public sector.
Off the top of my head, Tagamet, the ulcer drug. The underlying discovery behind it was done at a university. Smith Kline productized it.
Oh - and Google, of course. Game changing enough for you? Multi-user operating systems were developed first at universities also.
Think back 20 - 50 years, and far more game changers came out of industrial research labs - the transistor, lasers, the mouse and Ethernet, the GUI. In my opinion this is a better way of innovating, since those researchers are more in contact with real problems and can get real examples more easily. But those days are gone, alas.
MIT just as an undergrad, so no game changing there. I did work at Bell Labs for 15 years, with half the funding for my group coming from development (1 - 2 year out stuff) and the other half what we called research, which was 3-5 year out stuff. I wasn’t in Area 11, which was > 5 year horizon stuff, (though it often was more focused) but I worked with them very closely. In some cases we supplied them with software infrastructure which they added on to. I had a personal research project with a budget for $2 million for a while. Anyhow, we talked about this stuff all the time, and the differences between the various types of R&D affected my group’s bottom line quite a lot.
Just wanted to address the bolded part of your post.
Yes, Bill Gates or Warren Buffett or whoever may spend their money only on themselves, but that means the money is being spread around to everyone else. Mr. Gates may be able to make good software (ha!), but he can’t fire his own bricks and build his own house. He doesn’t make coffeemakers or high-end cosmetics or any other consumer good he buys. So if he drops $10,000 on a suit, that money does down the ladder and pays the tailor, the fabric maker, etc.
Everyone who consumes things adds to the pool of money available. My addition may only be $25 for a new coffeemaker, but his contributions add millions of dollars to the pool. If he had not made that money, those contributions wouldn’t have been made.
Yes, but -
There is a somewhat finite limit on how much stuff a person can buy, own, eat. The wealthier a person is, the smaller the percentage of their wealth this is. The remainder of their wealth goes to savings/investments or charity. So, on a percentage of dollar owned basis, the rich are potentially contributing less to the consumer economy than the less rich.
Your $25 dollar coffee maker (multiplied by all the people like you buying $25 coffee makers) contributes more than the rich guy buying a $10,000 suit (multiplied by the number of guys buying $10,000 suits).
Exactly. And if we reach a point where the great bulk of “consumers” can’t afford to consume, the economy will lock down in a hurry.
Bill Gates, IIRC, has given away something like $4 billion of his personal wealth to various charities…and this doesn’t count the impact his products and company have had on the economy as a whole or the lives of the people who have worked directly or indirectly for Microsoft. So…how does that scale, on the broader issue of $25 coffee makers, say? Seems like you could buy nearly every $25 coffee maker in the world for $4 billion, ehe?
What are the indications that such a dire result is impending?
-XT
And much of that is to be admired, however, I don’t think he deserves all the credit and all the reward for the gains in productivity over the past few decades. Thanks in part to tools made by people like Bill Gates, one person can do the work that it used to take two people to do. So why doesn’t that one person now have twice the lifestyle and twice the purchasing power? It takes people at all levels to make the economy grow, but for a generation the only people seeing the benefits of that growth have been the rich.
Ask again after the credit card/debt crash.
I doubt Gates believes in the trickle down theory. Though he might have more money to trickle down if he didn’t do it, my impression is that Microsoft employees get treated very well both in terms of money and stock. I don’t know about Bill, but in 2001 or so his father specifically came out against the Bush tax cuts for the rich.
I disagree - our generation has access to all sorts of things that weren’t available to our parents. It’s both high-end things like new medical technology to affordable air travel to low end things like cheap new clothing and home decorator products.
Think of something like the internet - we have all the world’s knowledge available to us, for a small fee. My dad called me today looking for suggestions on where to buy a good German-English dictionary. I told him to check the internet for translations. So, instead of having to drive around and look for a good dictionary, and pay something like $25 for it, he gets what he needs, and a million other facts, for $30 a month.
Perhaps it’s how you define “benefits”, but I can clearly see that the opportunities available to me are far richer than those available to my father. And neither one of us is “rich”.
Well…why should they? Why do you suppose that it necessarily has to translate that someone doing essentially the same work (i.e. with the same skill set, ability, training, etc) today as someone 20 years ago who is more productive (not through their own skills but through the use of technology) SHOULD make twice as much, or enjoy twice the life style?
And this leaves aside the fact that we ALL (including our theoretical worker bee) enjoy the benefits of the increase in productivity because we all pay less for products and services today than we did 20 years ago.
Well, that’s good rhetoric, but in practical real world terms it’s complete horseshit. We ALL benefit from the ‘rich’ because, frankly, they are the ones with the capital and investment abilities and desires to not only fund most of the places where real people work (such as Microsoft, to use that example), but also pay a fairly large percentage of the taxes, which again, we all benefit from. This isn’t to say that it doesn’t take people at all levels to make the economy grow…that part isn’t complete horseshit…but that the rich aren’t the ONLY people to see a benefit from the growth of the last several decades.
As I said in another thread, I think the problem here is that people expect US wages and standards of living to just go up and up, for no other reason than that it should because, well, we’re Americans (and those dirty rich folks are getting rich, blah blah blah). But the truth is that this isn’t how things really work. Labor is just another resource, just another market factor, and it’s worth is determined by how marketable ones skills are, and how in demand they are, and how replaceable ones skills are. If ones skills are in demand, if there are only a limited number of others who have similar skills, or if some other factor that makes ones skills desirable and in demand, then ones standard of living, wages, benefits, etc, are all going to go up. If not, then…not.
Personally, my own standard of living has gone up fairly steadily, despite a number of setbacks in my own industry. If my own skills become common place, or if technology renders them obsolete (which could happen, considering the expert network systems that continue to evolve), then my choices become A) hoping to hold my job and hold the line at some fairly static pay grade and standard of living, or B) adapt, get new training, shift careers to a newer, more dynamic path or C) hope to win the lottery. There really isn’t any magical reason that my standard of living and wages/benefits HAVE to keep going up and up, after all, and I can see several technologies that would render my own skill set, if not obsolete then at least less in demand…and if that happens, why exactly SHOULD my salary and standard of living keep rising? Just because companies like CISCO, Microsoft, HP, etc continues to make a profit??
-XT