As an avid learner, I’m certainly convinced we ought to keep an eye on unscrupulous parasites who you say would drag me from my home to immolate me with a burning tire around my neck; I’d rather live and let live, but – as per your warning – will reluctantly settle for using lethal force in self-defense before they lay a hand on me.
If your entire objection is based on these premises, then you can rest easy. Turns out it’s not a problem after all. Whew! That was close.
When has that ever happened in a democracy?
Just you wait. Come the revolution, it will all be clear.
I’m trying hard to think of historical examples where the sole or even primary reason was straight up income inequality but I really can’t. I suppose you could point at the French Revolution or the Russian Revolution, but there were a lot of other things going on in both nations that had little to do with income inequality. What historical examples were you thinking of that we should take to heart as lessons so history doesn’t repeat?
…not a problem for who?
He’s saying your premises are flawed, so your conclusion isn’t valid.
DinoR’s trick was to use to “purchasing power,” something that isn’t all that objective* given how different most of what we purchase today is from what was for sale in 1966 or 1960. Consider the now biggest sector of the economy, health care. Whether paid out of pocket or through insurance, most of today’s health care services were unavailable in the 1960’s. Other items that were commonly purchased in the 1960’s – say, cigarettes – are far less often used. Start asking what purchase is being measured, and the impossibility of comparing 1960 and 2012 purchasing power per dollar becomes apparent.
More objective is to compare per capita income – everyone’s total income divided by the number of people – to the cited salaries.
A teacher in 1960 made $5,135, which was 1.78 times the 1960 per capita income of $2,881.
A teacher in 2012 made $53,090, which was just 1.03 times the 2012 per capita income of $51,450.
So there is an enormous relative decline between, 1960 and 2012, in the individual teacher’s share of national income, of (1.78 - 1.03) / 1.78, or 42 percent.
Now, this isn’t only because of more money going to the rich, and to people who inherited money from the rich. It’s also because of women entering the work force. And there probably are some other reasons, such as a declining fertility rate. But more money going to the rich is a big factor, and all the factors together do wind up meaning that nurses have probably fallen behind some, and teachers have fallen behind a lot.
- To be more precise, it isn’t objective when used for the purpose DinoR did. The underlying statistics are meant to measure inflation rates, and do so reasonably well.
Why yes, as a matter of fact, if you dig a little deeper and look past the superficial mythologies of capitalist idealism, there actually is more truth to that than you might think.
For one thing, as already stated, middle and lower class spending is far more sensitive to available cash than it is for the wealthy, for whom it barely matters at all. When the wealthy get wealthier, the extra money just winds up on Wall Street or, better yet, in the Cayman Islands and other tax havens. When the rest of us get extra money, we spend it on goods and services.
Another myth is that tax cuts for the wealthy and their corporations “create jobs”. The only thing that has ever created a job is demand for a product or service, and that largely comes from the general population. Otherwise all tax cuts do is give more money to corporations and their owners, which they’re happy to take. I doubt that in the entire history of free enterprise any business owner has ever hired anyone just because he had some extra money to spend, rather than because he needed them. As a matter of fact there are some spectacular stories of companies getting generous tax breaks and then laying off hundreds or thousands, and shutting down entire divisions. Of course it’s not the tax breaks that caused the layoffs; they were already in the works as part of the eternal corporate drive to cut costs, but it’s an illustration of how totally unconnected tax cuts and extra revenue are from job creation.
As for stocks and bonds, yes, it sounds ideal: a corporation can raise money by borrowing it from the average schmuck, the corporation grows, and both corporation and schmuck benefit. What could be nicer? A lot of things, actually.
Just for starters securities markets, as a rule, disproportionately benefit those who can best afford to exploit them. Yes, I realize that retirement funds and other common-Joe situations derive some benefits, too, but they generally get highly diluted by the time they trickle down to Joe. But financial markets are far more complex than that. I wonder if you’d care to explain, for instance, how derivatives – a multi-trillion dollar industry generally far disconnected from the real world – actually help anyone but the rich. What, for instance, have collateralized debt obligations, credit default swaps, or mortgage-backed securities ever done either directly for the economy or for the average person? I’ll tell you: those three named derivatives in particular, among others and other factors, were among the drivers of the financial meltdown that cost many ordinary people their jobs, their homes, and sometimes their life savings while enriching the already rich. And they did so because of a lethal combination of lack of transparency, lack of regulation, and the fact that they incentivized unethical if not downright criminal behavior by the aforementioned capitalists.
I could go on. As endearing the image might be of Joe Schmuck profitably investing and benefiting from the success of giant Acme Corporation, the point is that the reality is often quite different, distorted in favor of the wealthy to such a degree that even the most determined and well-meaning regulators can’t control. It isn’t Joe Schmuck who is the predominant investor in Exxon Mobil; over the past decade or two, in many years among the largest investors in Exxon Mobil – a company whose exorbitant revenues are larger than the GDP of many small nations – has been … Exxon Mobil, disposing of obscene profits by buying back their own stock.
And bonds sound like a great deal for Joe, when he wants to put his money away somewhere safe. But it turns out that new bond issues, the kind that pay above-average returns, are hugely in demand and demand for these premium issues greatly outstrips supply. So guess who has access to these prized, lucrative new issues? If Warren Buffet or David Koch wants some, they’re offered to them on a silver platter. As for Joe, well, he’ll probably have to settle for ultra-low-yield government savings bonds.
I do believe that capitalism overall is the best and most efficient basis for an economic system, as I said in another thread. I just think the best system is one of regulated capitalism, combined with direct government operation of functions for which free enterprise is not well suited, like basic essential public services. And I object to what I regard as the naive view that capitalism doesn’t intrinsically favor capitalists – that is, the rich. It certainly does, and that’s why insufficient regulation and an overwhelming tendency to legislate in favor of the rich has been leading to more and more income inequality. I don’t claim to be a financial expert, but these views are also held by those who are, like Thomas Piketty and Paul Krugman. I’m sure that someone from Wall Street could articulate many persuasive-sounding arguments for why things are just as they should be. And based on prior experience, I would reply to that with two simple words – “look closer!” Because such arguments invariably turn out to be superficial and self-serving.
Although that is probably so now and for the near future, I don’t know if that will be true forever. Revolutions cost money, both in terms of paying people to fight and in buying equipment and supplies. One could certainly imagine a future situation where the oppressed are simply too poor to be able to afford rebelling and have no choice but to continue working, much like the antebellum South. Of course, I don’t think this world will ever happen, but it’s a possibility.
The other problem is whether this is desirable–revolutions are fantastically expensive, both because people aren’t working because they are busy killing each other, and because great quantities of human capital and physical capital are permanently destroyed. The elite are smart, and they would probably acquiesce to some minimum improvements in the standard of living to permanently stave off revolution.
[QUOTE=wolfpup]
Another myth is that tax cuts for the wealthy and their corporations “create jobs”. The only thing that has ever created a job is demand for a product or service, and that largely comes from the general population. Otherwise all tax cuts do is give more money to corporations and their owners, which they’re happy to take. I doubt that in the entire history of free enterprise any business owner has ever hired anyone just because he had some extra money to spend, rather than because he needed them. As a matter of fact there are some spectacular stories of companies getting generous tax breaks and then laying off hundreds or thousands, and shutting down entire divisions. Of course it’s not the tax breaks that caused the layoffs; they were already in the works as part of the eternal corporate drive to cut costs, but it’s an illustration of how totally unconnected tax cuts and extra revenue are from job creation.
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Except this is a strawman argument…I didn’t say anything about tax cuts for the wealthy or for anyone else.
If you are saying ‘yes’ that the poor literally have nothing to spend and that stocks, bonds and funds literally do nothing for the economy except act as little money making machines for the rich then you don’t know what you are talking about. If you aren’t saying that then you aren’t addressing my post or what I was responding too.
Except stocks aren’t a form of borrowing from the ‘average schmuck’, they are selling a small piece of the company that gives the stock holder that small piece and a stake in the company, no matter how small. BONDS are usually the GOVERNMENT asking the ‘average schmuck’ for a loan, and the money doesn’t go into a black hole never to be seen again unless you think the government wastes it (which I doubt, given your political leanings). Bonds, are, of course, ‘little money making machines’ as long as the entity giving the bond is trustworthy (I wouldn’t trust, say, Greek bonds right now, but that’s just me), but they are really loans in the end that give a small but generally stable return.
You are saying why stocks and funds are better for the rich, basically (as well as wandering off on tangents about transparency and such), but you aren’t addressing my question. Simply, what do YOU think happens to the money? Does it go into a black hole never to be seen again? Is it in the equivalent of a rich guys mattress, inaccessible except to the evil Capitalist from them on? Because the guy I was addressing my comment too obviously was stating that they do nothing at all except make rich people money. Do you agree with that assessment, yes or no?
(Yes, I realize it’s a nuanced question and there are many aspects to all of this, but I wasn’t going there…just asking a simple question to a simplistic statement)
It’s funny that you seem to think the average American is basically ‘Joe Schmuck’ and only the Scrooge McDuck types get anything out of this stuff. And it’s funny how you are answering stuff I didn’t address (like the fact that the rich benefit more from investment than the average American does which is like saying water is wet with a triumphant wave of your had as if this were really in dispute). According to this (perhaps biased) cite, over 52 million Americans are actively invested in 401K retirement funds. Alone. That’s more than half of the work force. And that’s just one investment instrument. And none of this addresses my point, which is the money doesn’t simply go into a black hole never to be seen again except in Scrooge McDuck’s swimming pool. The money is used. It’s invested. It acts as liquidity for various companies. The fact that the rich benefit more than you or I isn’t addressing the point I was making. Stocks, bonds, funds…they we are talking literally trillions of dollars in capital…capital that drives the economy, provides jobs, builds infrastructure, schools, hospitals and myriad other things. Yes, the rich benefit more from all of this because they have more to invest AND they have gamed our political system to give them every advantage. But poor people in the US or Europe have money to spend and buy things, and stocks, bonds and funds aren’t worthless to anyone but the rich.
Bummer. Really. But, again, you are talking about stuff I wasn’t addressing. Certainly one would hope the person I was addressing has read your fine, fiery post and feels righteous wrath AND has been educated a bit. However, what you aren’t mentioning here is what the bonds DO. What they are FOR. How they are USED. Which was MY point, and one you just blew past in your effort to correct yet ‘Another myth’ that no one was making.
Has anyone in this thread…ANYONE…asserted that capitalism in the US or anywhere else shouldn’t be regulated? Has ANYONE said that we should lower the amount of regulations? As far as I know, no one has…certainly not me, and you quoted me to kick off your post there. This is what’s called a ‘strawman argument’.
Like I’ve said in other posts and in other threads, I don’t think you and I agree where the bar should be set, since we are coming from such different political directions. But we both do agree there needs to BE a bar…and, basically, I think everyone in this thread is on board with that already. My own point that I was trying to make was to ask the poster I was addressing what s/he actually thinks things like stocks, bonds and funds do. Where does the money go? Because s/he made a flat out statement that ‘The vast, overwhelming majority of his money is going to go into stocks, hedge funds, bonds, and other saving tools. There it sits, generating possibly the most useless commodity in the world; more money for already very rich people.’. This is, simply put, wrong. You know this but you didn’t address either this comment or what I was getting at, instead going off on a tangent about how the rich benefit more from these investment instruments than the average person and how they have gamed the system so that this is so. All of that is true and water is certainly wet.
Maybe never. But that is irrelevant to this discussion. The US is a plutocracy.
You’ve complained about this twice now, and I’m curious about what you think stock sales do for the economy. IPOs are definitely good for funding new and growing companies, that is the traditional model of stock as ownership. But what percentage of proceeds from stock sales do you think go into the economy in the form of purchases of goods and services?
When a stock is sold in my investment account the proceeds go into the purchase of other stocks or funds. In fact our excess money goes into our investment account, and not into the purchase of goods which would help grow the economy. I’m definitely part of the problem. In a few years I’ll finally be taking money out, but a lot of my money has been locked up in these investments for over 20 years, and not helping.
When I buy stocks I increase demand ever so slightly and increase the price. (a miniscule amount, of course.)
Income inequality did decrease when the market crashed, which shows you where the rich have their money. With the exception of the bankers who got canned and the idiot CEOs who had all their money in their now dead companies, they seem to have soldiered on, unlike those who lost their homes from the machinations of Wall Street.
Wealth creation from the Obama boom™ in the market has mostly gone to the rich. Do you dispute that?
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Why? Why should this be addressed? I’m thinking it’s near universal that parents want positive outcomes for their children and work pretty damn hard to provide them with advantages that they are able to. You better believe that I do the same for my kids - I want them to have an advantage.
You make two assertions here and both are unsupported. First - CEOs in the 1950s were just as smart and entrepreneurial and hardworking as they are today. How are you measuring this?
Second - that somehow higher wage discrepancy between the highest and lowest paid at a company is due to changes in laws and regulations. That seems like a significant leap of logic. I know you said “it’s likely that part of the reason” but this phrasing makes it difficult to analyze what you are actually saying. How big a part do you think? Do you have any basis for this statement?
And just when do you think this phenomenon began? Are you saying that this is something new, or that it’s impact has dramatically increased with increases in income inequality?
It doesn’t bother me a single bit. People thinking it’s a problem bothers me more than the fact that some people can afford whatever they want.
I think you have to define what you mean by middle class first. There’s a pretty big freaking difference between the requirements for an RN, a teacher, and a firefighter. I think of middle class as a tranche of income earners with respect to all other income earners, that make up a set portion of the total, such that the middle class by definition cannot shrink. The income range that brackets the middle class would move up and down over time, but the relative quantity of people would remain static. How are you defining it?
You are talking about equality of ability here, not of opportunity.; Equality of opportunity means that those of equal abilities, regardless of social class or parental income, will have the same opportunities to advance. Which is not even close to being true, whether your IQ is 50 or 150.
Do you want them to have an ADVANTAGE? As in, do you want their odds of having a successful and happy life to be higher than their peers? Or do you want it to be as high as possible in isolation? Those are very different things.
In any case, why that should be is a pure straight desire for fairness, and if you disagree, then we may just disagree. In addition, there’s a practical consideration… we both agree, I assume, that companies like Apple and Microsoft and Google are great for the American economy, and for American society in general. How many kids are born each year with the potential to be the next Bill Gates or Steve Jobs or Mark Zuckerberg? How many of those kids will never be able to fulfill that potential because they spend all their time in elementary school dodging gangs and going through metal detectors rather than learning?
Occam’s razor. If you want to claim that there are fundamental differences between average characteristics of people then and now, go ahead, but be aware that you’re making a somewhat extraordinary claim. In general, I think the accomplishments of J D Rockefeller and his brethren speak for themselves.
It’s just a guess. And what else could it be? SOMEthing has to explain the discrepancy. But even if it’s not true, my point still stands, because the increasing influence and vicious cycle will still apply.
I believe this phenomenon has increased recently. If you’re skeptical, I will google around and try to find some data.
I feel like your use of “people thinking it’s a problem” implies “people thinking it needs to be fixed” implies “people wanting to make laws that interfere with parents ability to send their children to good schools” or something like that. It’s entirely possible to observe that something is a part of, or a symptom of, a problem; without demanding some heavy-handed solution to it. Why would it bother you that I think it’s a problem that there is decreased contact and communication between social classes? (Assuming there is, I agree that it is for now an unproven assertion.) I think that contact between people of various walks of life (“bridging social capital” as it’s called) is a good thing. I think a decrease in it is a bad thing. I think it has decreased. How is that observation even the slightest bit sinister?
My (admittedly not super-precise) definition was right there in the OP: “(someone who) will be able to afford a house, and a car, and if they scrimp and save they’ll be able to send their children to college and take an occasional nice vacation.” In other words, someone is middle class if they live a middle class existence.
[QUOTE=Voyager]
You’ve complained about this twice now, and I’m curious about what you think stock sales do for the economy. IPOs are definitely good for funding new and growing companies, that is the traditional model of stock as ownership. But what percentage of proceeds from stock sales do you think go into the economy in the form of purchases of goods and services?
[/QUOTE]
I’m not sure if you are focusing on ‘stock sales’ for a reason or if you think that ‘stock sales’ are the only important part of the stock market or what stocks (full stop) actually do. From here:
The middle one is probably the one I was getting at the most. Stocks give a company liquidity and allow them to expand their work force, invest in new marketing and research new products. It gives the the cash to do these things.
Increased in the stock MARKET have provided a great deal of wealth to the wealthy, no doubt, but it’s also fueled what some are calling the second tech bubble…angle investors are giving great deals of money to start up companies, especially but not solely in the tech field for the last 5 or so years and allowing them to do their thing. Some are worried about another tech bubble bust as we had around 2000, but the point is that the money from the great increases in stock market values doesn’t always just sit around collecting dust in some rich guys garage.
When a lot of us collectively buy stock in, say, Apple, this provides Apple with the liquidity to do things like hire workers, build new plants and stores and innovate new products or refine or market existing ones. Now, you might think that’s no big deal, but all of those things mean someone gets a job and we all get new iPods, iPhones, iPads and iWatches, though that last one might not be a bonus.
Nope. But the Obama Boom(arr) has also seen us drop from nearly 9% unemployment to less than 6%, and much of this has to do with increases in stock value allowing companies to get out of their bunker mentality and start hiring, innovating and moving forward. Again, MY point was that stocks, bonds and funds aren’t worthless things doing nothing except making rich people richer. Do you deny THAT, because, again, that’s what I was responding too and that was the point I was trying to make.
(sorry for the drive by here but I’m out of the country for a few days…thanks all for the interesting discussion)
I had a bet with myself that someone would bring that up. Guess I won!
If I had a nickel for every time a one-off paper gets published and people think it’s definitive consensus, I’d be in the plutocracy myself. The US is a democracy. People vote and elect their representatives. If they really, really don’t get what they want, they are free to vote the bums out. If they don’t, then they are either getting what they want or don’t care enough about to even vote differently. If they aren’t willing to vote differently, they aren’t going to pick up guns and revolt.
Why yes, i was thinking of the French and Russian revolutions. Do you think income inequality is happening in a vacuum? Gerrymandering and vote suppression is fostering apathy in the electoral system. The US has one of the highest incarceration rates in the world. There are lots of things that that are putting pressure on the lower and now the middle classes that could lead to revolution. Not in the near future, but if things keep going the way they are, it could become a reality in 20-30 years. You can’t keep bleeding a majority of the country forever without consequences.
Opportunity inequality is the real spectre. Prevent enough people even the chance at modest prosperity, nevermind income equality, and the guillotines come out.