Let's debate wealth inequality

[BrainGlutton]

@Bone

No one starts with power, it is acquired in one way or another. That is an outcome. If you believe that everyone should start with equal money/power more or less, I can accept that. I would strongly disagree with you, but alas, no big deal. However, your statements don’t seem to reconcile.

Perhaps I didn’t express my thoughts too well . . . Look at it this way: We’re all born with an equal share in political power in the form of the vote. We’re not supposed to have to earn that, and every vote is supposed to count the same as every other. But it doesn’t work out that way, does it, when the rich can buy control of the media, can buy influence over the outcome of elections, and buy access to politicians once they’re elected?

Furthermore – economic power isn’t just a matter of how much money you have to spend. The superrich, who predominate in the upper executive ranks of the corporations most of us work for, get to make decisions which affect the rest of us and in which the rest of us have no say. When GM CEO Roger Smith decided to shut down the GM plant in Flint, Michigan, and outsource the work to Mexico, no auto worker in Flint could do anything about that – and Smith’s job was not in jeopardy.

[Age_Quod_Agis]

@foolsguinea

Sure. But when ten people, or one Great Man, can put together $5 million, that makes it about $500,000 a vote. Is your vote worth that much? So what makes you think the poor can get enough voice to beat it?

Actually, my vote is worth more than $500,000. No amount of money can buy my right to vote from me, or convince me that a position that I support is incorrect.

The right to vote, and the right to convince others to vote like you, control our system. No matter what you’ve read, elections are not won by how much money each politician can raise, but by who gets the most votes. Money can make your voice heard by more people, but it can’t convince them that your ideas are correct.

Unless we’re talking about bribery, which is a totally different subject.

[Age_Quod_Agis]

@Demorian

$5 million buying a senator’s seat is worth more than 5 million votes that put him/her there, though.

What good does it do you to give $5 million to some schmoe who wasn’t voted into office?

[Demorian]

@Age Quod Agis

Actually, my vote is worth more than $500,000. No amount of money can buy my right to vote from me, or convince me that a position that I support is incorrect…

See, but that doesn’t matter if someone buys a senator you voted for (which they have), or influences the media to give you incorrect facts and influence your vote.

[BrainGlutton]

@Age Quod Agis

No matter what you’ve read, elections are not won by how much money each politician can raise, but by who gets the most votes. Money can make your voice heard by more people, but it can’t convince them that your ideas are correct.

Unless we’re talking about bribery, which is a totally different subject.

Actually, it’s not a different subject. Campaign contributions are our modern, legal form of bribery.

And elections are won by money – because in the U.S., no matter how persuasive your ideas might be, you can’t hope to win, or even be taken seriously as a potential candidate, unless you have the funding to buy very expensive TV advertising. That’s called the “wealth primary.” (In France, paid campaign ads are not allowed, and every broadcaster is required to allot every candidate in the election an equal amount of air time.)

From The Next American Nation, by Michael Lind (The Free Press, 1995), pp. 256-259 (from before the McCain-Feingold Bill, but I don’t think the picture has changed all that much since it passed):

Campaign financing is by far the most important mechanism for overclass influence in government. The real two-party system in the United States consists of the party of voters and the tiny but influential party of donors. The donor party in the United States is made up of an extraordinarily small number of citizens. In 1988, according to one study, only 10.2 percent of the American public made a contribution to a candidate, party, or partisan group. . . . The group of large political donors is a still more exclusive club. According to a study by Citizen Action, in the 1989-90 election cycle only 179,677 individual donors gave contributions greater than $200 to a federal candidate, political action committee (PAC), or party: “Thirty-four percent of the money spent by federal candidates was directly contributed by no more than one-tenth of one percent of the voting age population.” One may reasonably doubt that this one tenth of one percent is representative of the electorate or the population at large.

<snip>

Special interests buy favors from congressmen and presidents through political action committees (PACs), devices by which groups like corporations, professional associations, trade unions, investment banking groups – can pool their money and give $10,000 per election to each House and Senate candidate. Today there are more than 4,000 Political Action Committees (PACs) of various kinds registered with the Federal Election Commission; in 1974, when they were sanctioned by law, there were only 500. PAC money is driving campaign costs to new heights. In 1992, the average Senate incumbent spent more than $3.6 million for re-election; that is the equivalent of raising $12,000 a week in a single six-year term. Members of Congress, by comparison, spend only an average of $557,403 to be re-elected – a “mere” $5,000 a week for a two-year term. The average cost of a House campaign has risen to this level from $140,000 in 1980 – and $52,000 in 1974.

The chief beneficiaries of rising campaign costs and PAC contributions have been incumbents. In 1972, 52 cents of the average PAC dollar went to incumbents, compared to 25 cents to challengers (the rest went to candidates for open seats); in the 1988 House elections, incumbents received 84.4 cents of each PAC dollar and challengers only 8.6 cents. It makes more sense for lobbies to buy access to established members of Congress and senators – particularly those with important leadership positions – than to fund challengers, who, if elected, would have no seniority and little influence. . . . Former Senator Barry Goldwater has lamented, "The Founding Fathers would frown in their graves if they saw us rationing candidacies sheerly on the basis of money: who has – or can raise – the millions necessary to run for office."

Democrats, when they were members of the majority party, received more PAC money than Republicans, though both parties are saturated with it. Contrary to conservative claims that liberal lobby groups dominate Congress, PAC funds come overwhelmingly from business: in 1990, 65 percent of PAC contributions came from business PACs, compared to 24 percent from labor and only 11 percent from ideological groups (including conservative as well as liberal pressure groups). “At one point,” John Judis has pointed out, “the American Petroleum Institute employed more lobbyists in Washington than the entire labor movement.”

One of the effects of the postpartisan PAC system is to weaken the link between members of Congress and senators and the districts and states they are supposed to represent. Out-of-state money from special interests often flowes into House and Senate elections. This means that many senators are, in effect, at-large representatives of free-spending national business constituencies.

Some argue that special-interest expenditures have no significant influence on public policy. If all of this money is not buying special favors from congressmen and senators, a great many groups and individuals who are otherwise careful with their resources are acting in a highly irrational manner, year after year.

They don’t come much more libertarian than Goldwater, and even he was appalled at this state of affairs.

[Age_Quod_Agis]

I’m not saying that money has no effect. In addition to other things, it enables people to get their message out to more people.

I’m denying that money is the most important power in America. If I believe that we, in America, should have a holiday celebrating Hitler’s birthday, then no amount of money would buy enough influence to get that passed. And that’s because any Congressman who voted in favor of such a holiday would be voted out of office. And that’s even with billions of dollars in his/her campaign chest.

No matter what you’ve heard, you can’t buy a seat in Congress. You can only get there by being voted into office. In 1992, H. Ross Perot lost the Presidential election despite having waaaay more money than both the other candidates combined (in 2000, his net worth was estimated at $3.7 billion). Steve Forbes never won the Republican nomination despite having a net worth over $435 million. If we gave Lyndon Larouche $1 billion, he’d still lose the next election unless he changed his stance on the issues (and maybe didn’t look so goofy).

I’ve never denied that money buys a lot of cool stuff. In fact, I admitted it. But you can’t say that merely because Presidential candidates raise obscene amounts of money, that money is the most important power in America.

[kung_fu_lola]

@Age Quod Agis

But you can’t say that merely because Presidential candidates raise obscene amounts of money, that money is the most important power in America.

I’ll tell you exactly why money is the most important power in America, using Maslow’s Hierarchy Of Needs. Luckily for us, oxygen is free. But money is required to acquire food, shelter, clothing and a place to rest.

Without money, we go hungry, naked, and without sleep. The less money you have, the less likely it is that you will be able to provide for your basic bodily needs or for your own safety.

It’s hard to feel proud of your rights as a voting citizen when you have to choose between paying the rent or feeding your kids.

[Wesley_Clark]

Many wealthy people are only wealthy on paper or have their wealth tied up in investments that are not too liquid. The people who are rich in the stock market (gates, buffet, jobs, etc) probably have several trillions in wealth combined but most of it is tied up in paper. So I don’t think that is the same thing, they just own things that are worth money. Hell alot of people own houses worth 200k or more that doesn’t mean they have 200k to burn at will, it just means they could if they wanted to do so.

I don’t really mind income inequality, I mind the fact that a comfortable, secure & desirable lifestyle is becoming hard to attain for middle class people. With housing (in many parts of the US, but in others housing is still cheap and affordable), education and healthcare costs rising at 2-5x the rate of inflation and 2-5x the rate of wage increases things are going to get worse and worse.

[BrainGlutton]

@Wesley Clark

Many wealthy people are only wealthy on paper or have their wealth tied up in investments that are not too liquid.

But those people are still much likelier than the rest of us to have connections, influence, comfort, a safe and interesting job, etc.

@Wesley Clark

I don’t really mind income inequality, I mind the fact that a comfortable, secure & desirable lifestyle is becoming hard to attain for middle class people.

And do you doubt that those two things are connected?

[Ramanujan]

if the contention is that an increasing wealth gap is, in and of itself, a problem, i think the onus is on the contender of that position to demonstrate it. if we are to have a meaningful debate, we must know what exactly it is about the wealth gap that you find problematic, BrainGlutton.

money’s just money. anything regarding it is not, in and of itself, a problem. if money, by right, belongs to someone, yet is in the possession of someone else, we can consider that a problem. but what is it about the wealth gap that leads you to believe that it alone causes problems?

[kung_fu_lola]

@Wesley Clark

I don’t really mind income inequality, I mind the fact that a comfortable, secure & desirable lifestyle is becoming hard to attain for middle class people. With housing (in many parts of the US, but in others housing is still cheap and affordable), education and healthcare costs rising at 2-5x the rate of inflation and 2-5x the rate of wage increases things are going to get worse and worse.

AFAIAC, this is what I get concerned about when we talk about wealth inequality. As my mom pointed out, it cost her five times more to send me to University than it cost her father, but she doesn’t make five times what her father made (and her job can be considered to be in the same tier as his was). It just doesn’t even out.

[BrainGlutton]

@Ramanujan

if the contention is that an increasing wealth gap is, in and of itself, a problem, i think the onus is on the contender of that position to demonstrate it. if we are to have a meaningful debate, we must know what exactly it is about the wealth gap that you find problematic, BrainGlutton.

money’s just money. anything regarding it is not, in and of itself, a problem. if money, by right, belongs to someone, yet is in the possession of someone else, we can consider that a problem. but what is it about the wealth gap that leads you to believe that it alone causes problems?

The problem is that creates a society where the superrich get to call the shots – in both political and economic decisions (see above post mentioning Roger Smith) – without considering the needs or desires of the rest of us. That is a common feature of “gilded ages.” It was true in the late 19th Century and it’s true today. Were it not so, perhaps Wesley Clark would not have so much to complain of WRT to troubles of the middle class.

Now, I don’t deny that there will always be a socioeconomic pyramid. I just think a society is a lot healthier if it’s a shallow pyramid, with the top and the bottom a lot closer together than they are here-and-now.

From The Lion and the Unicorn: Socialism and the English Genius by George Orwell, 1941, Part 3, chapter ii:

I suggest that the following six-point programme is the kind of thing we need.

<snip>

2. Limitation of incomes, on such a scale that the highest tax-free income in Britain does not exceed the lowest by more than ten to one.

<snip>

2. Incomes. Limitation of incomes implies the fixing of a minimum wage, which implies a managed internal currency based on the amount of consumption goods available. And this again implies a stricter rationing scheme than is now in operation. It is no use at this stage in the world’s history to suggest that all human beings should have exactly equal incomes. It has been shown over and over again that without some kind of money reward there is no incentive to undertake certain jobs. On the other hand the money reward need not be very large. In practice it is impossible that earnings should be limited quite as rigidly as I have suggested. There will always be anomalies and evasions. But there is no reason why ten to one should not be the maximum normal variation. And within those limits some sense of equality is possible. A man with L3 a week and a man with L1,500 a year can feel themselves fellow creatures, which the Duke of Westminster and the sleepers on the Embankment benches cannot.

A similar income-rationing scheme was applied in the most persuasive and realistic utopian novel I have ever read, Kim Stanley Robinson’s 1990 Pacific Edge. Everybody gets $10,000 a year, nobody is allowed more than $100,000 after taxes, and there’s still plenty of room for ambition and competition because “Everybody wants to be a Hundred.” On the other hand, it’s not a state-socialist system. Practically all economic activity is in private hands; the government’s main role, apart from regulating incomes, is to break up any business enterprise that grows too large for all its managers and employees to know each other on a personal, face-to-face basis. See http://en.wikipedia.org/wiki/Three_Californias_Trilogy.

[Ramanujan]

@BrainGlutton

The problem is that creates a society where the superrich get to call the shots – in both political and economic decisions (see above post mentioning Roger Smith) – without considering the needs or desires of the rest of us.

i would suggest, first of all, that the super rich do not get to call the shots in political decisions. for example, in the recent general election, if bush was not viewed as such a common fellow, he would not have won. he may not be doing a lot for the poor (nor do i think it’s his place to) and he may be doing a lot for the rich (which i don’t think it’s his place to do), but they all had equal power to elect him. it may be that the poor were persuaded by the rich, but i think that’s a cultural problem rather than one that results directly from a margin of incomes.

That is a common feature of “gilded ages.” It was true in the late 19th Century and it’s true today. Were it not so, perhaps Wesley Clark would not have so much to complain of WRT to troubles of the middle class.

i think we can get more to the heart of my question here. what problems are people experiencing that are a direct result of the income gap? if they are underrepresented politically (a point obviously in dispute), that in and of itself is not a problem, so long as they are happy. i think xtisme made a great point, and i have not yet seen it refuted, that if people are generally better off with a wider income gap, how can it possibly be considered problematic?

Now, I don’t deny that there will always be a socioeconomic pyramid. I just think a society is a lot healthier if it’s a shallow pyramid, with the top and the bottom a lot closer together than they are here-and-now.

i think the grade of the walls of the socioeconomic pyramid that would be best for society are the least artificial walls. i think the more we try to shape those walls, the more harm we do to the general happiness of the populace. however, this is not a point about the grade itself. it may be that we are moving away from the natural incline, and i’d like to see how this is true, and why the shape of the pyramid itself is important to society’s happiness.

A similar income-rationing scheme was applied in the most persuasive and realistic utopian novel I have ever read, Kim Stanley Robinson’s 1990 Pacific Edge. Everybody gets $10,000 a year, nobody is allowed more than $100,000 after taxes, and there’s still plenty of room for ambition and competition because “Everybody wants to be a Hundred.” On the other hand, it’s not a state-socialist system. Practically all economic activity is in private hands; the government’s main role, apart from regulating incomes, is to break up any business enterprise that grows too large for all its managers and employees to know each other on a personal, face-to-face basis. See http://en.wikipedia.org/wiki/Three_Californias_Trilogy.

here, you offer solutions to what you consider the problem. i don’t yet see the problem, and i can think of numerous ways how policies like this would be detrimental to society as a whole, including those at the bottom of the pyramid. however, it does not seem germaine to the discussion, as we have yet to establish that there is a problem, so we need not yet discuss how to correct it.

[John_Mace]

@BrainGlutton

The problem is that creates a society where the superrich get to call the shots – in both political and economic decisions (see above post mentioning Roger Smith) – without considering the needs or desires of the rest of us. That is a common feature of “gilded ages.” It was true in the late 19th Century and it’s true today. Were it not so, perhaps Wesley Clark would not have so much to complain of WRT to troubles of the middle class.

The problem with your thesis, BG, is that statements such as this, from your OP (my bolding):

Today most economists, regardless of their political persuasion, agree that the data over the last 25 to 30 years is unequivocal. The top 5% is capturing an increasingly greater portion of the pie while the bottom 95% is clearly losing ground, and the highly touted American middle class is fast disappearing.

are laughable on their face. Most economists agree that the middle class is FAST DISAPPERING? Do you really believe that? Wesley Clark talks about the problem of home ownership, and yet according to Census data, home ownership in the US has been increasing, not decreasing– from about 63% in the 1960s to about 68% in recent years.

To the extent that **poverty **exists, I can understand a concern for the stability of society. But I just don’t see how the rich being 100x richer than the poor or 1000x makes any significant difference.

[SentientMeat]

The problem in and of itself is that of democracy becoming plutocracy. We would all agree that this thing called “progress” is important, and that the chance to become rich and powerful is an important motivating factor in the hard work and investment risk which progress depends upon.

But the problem with the current kind of inequality is not with those rising up society’s strata by hard work and innovation: it is those individuals and institutions who simply hoard wealth which has already been accrued a long time ago. The problem lies not with Bill Gates or Steven Spielberg, but with their children and great-great grandchildren. It is these financial entities who behave in a far more “zero-sum-like” manner, who suppress social mobility and ensure that, like an unstirred drink, those on the bottom stay on the bottom despite the odd molecule which rises up the strata in a statistically anomalous manner.

Indeed, it is this ability of the wealthy to hold onto their wealth by any means necessary for generations which ultimately defeats the monetarist notion of ‘trickle down’ and led Milton Friedman to declare that

@Financial Times

“The use of quantity of money as a target has not been a success,” concedes the grand old man of conservative economics. “I’m not sure I would as of today push it as hard as I once did.”

Game theory tells us that it is inevitable that the Game of Life will produce a few Big Winners and lots of Big Losers (regardless of whether the pot shows annual growth) since a position of advantage facilitates consolidation of that advantage towards eventual domination. Put simply, what use is “progress” if millions still suffer and die because such economic coercion denies them its benefit?

Welfare economics, especially as practised in those countries near the top of BrainGlutton’s lists, has shown that social democratic policies can bring the benefits of progress universally without slowing the rate of progress significantly. The pursuit of progress need not make people bankrupt for calling an ambulance.

[John_Mace]

Sentient: I don’t understand your use of that quote by Uncle Milty. He was simply taking about how the central bank of a government should set interest rates (in order to control money supply), not about the discrepancies of wealth in an economy. “Targeting money” mean, IIRC, the primary use of M1 as an indicator of how to manage monetary policy. In fact, if you look at the actual article, you find nothing along the lines of where this thread is headed, but rather quotes like this:

He adds, with an air of disappointment, that spending under George W Bush is back on an upward trend. “The second President Bush appears to have inherited the free-spending tendencies of the first,” he says dismissively. What, then, of the tax cuts that the president recently signed into law? “His insistence on tax cuts is good,” he concedes. “That is the only real way of bringing pressure on Congress to hold down spending. In my view, the size of government is determined much more by how much they can raise in taxes than by any ideological theory.”

<snip>

“To go back to your original question, the tide of public opinion has continued to go against government. People are as suspicious as ever of government - big or small. Unfortunately, the slowness with which public opinion affects policy has not changed.”

<sni>

Nonetheless, Friedman’s passion for shareholder primacy remains undiminished. The fashionable idea that companies should balance the needs of shareholders, employees, customers, communities and other “stakeholders” strikes him as wrong-headed. “The stakeholder notion is a very dangerous notion. It is a socialist notion. It says that employees are major stakeholders. It is really a movement towards employee-run enterprises.”

All standard Friedman fare.

[Rashak_Mani]

We’ve had discussions about the “middle-class” being under threat… and I think its particularly appropiate. Even if one claims that the middle class is better off than 20 years ago. Eventually accumulation on the top will mean a smaller middle class… and the middle class is what fuels consumption and high level working skills.

Now if you claim its not a zero sum game… that the middle class is the same as before… but the rich richer… then I see the “plutocracy” scenario as scary… to me it seems quite clear that corporations are having an ever greater clout in american politics (they’ve always had it in poorer countries). This marriage of government and slush funds should be a problem. No ?

To think that a vote is a vote... and that money won't get things done is to disregard the last election. It was record in raising funds. If voters were well informed I would agree that the power of the vote would be unconditional and guarantee democracy... but we know that is not true. 

I once read a text about the social and moral implications of life extending technologies of very high cost… where you would have two tiers of humans. Those that could afford multi million dollar treatments and longevity never before possible… versus the commoners. Absurd amounts of money have effects… and to claim that Bill Gates’ kids are at the same level as black inner cities kids is an illusion.

Though i don't beleive in wealth redistribution... I certainly think the "chances" should be as equal as possible. Aristoteles touched this equal chances ideas millenia ago. Without this minimum of "equality" it eventually ceases to be anything similar to a democracy or a "free" country... and becomes some sort of stratified feudal state.

[XT]

@Rashak Mani

We’ve had discussions about the “middle-class” being under threat… and I think its particularly appropiate. Even if one claims that the middle class is better off than 20 years ago. Eventually accumulation on the top will mean a smaller middle class… and the middle class is what fuels consumption and high level working skills.

Why? Why would accumulations at the top mean a smaller middle class? Historically this is just the opposite of whats actually happened after all. Again, this sounds like zero sum game, smaller portions of a shrinking pie, blah blah blah. Can you explain why you think this is so?

@Rashak Mani

Now if you claim its not a zero sum game… that the middle class is the same as before… but the rich richer… then I see the “plutocracy” scenario as scary… to me it seems quite clear that corporations are having an ever greater clout in american politics (they’ve always had it in poorer countries). This marriage of government and slush funds should be a problem. No ?

No. Historically the companies and wealthy in the ‘golden age’ in the US had a hell of a lot more clout and a lot larger share of the over all US pie than today. The middle class is a LOT larger today, as is the wealthy class. The lower classes are a lot smaller today as well than they were during the ‘golden age’. Where do you see zero sum? I see a larger pie.

@Rashak Mani

To think that a vote is a vote… and that money won’t get things done is to disregard the last election. It was record in raising funds. If voters were well informed I would agree that the power of the vote would be unconditional and guarantee democracy… but we know that is not true.

How is it any different than at any time in the past RM? Look at Kennedy Sr. for gods sake…he pretty much bought his son into politics, bought him office and even helped buy him the presidency. And yet, the republic survived. I think you are exaggerating how different things are just because GW won this election.

@Rashak Mani

Though i don’t beleive in wealth redistribution… I certainly think the “chances” should be as equal as possible. Aristoteles touched this equal chances ideas millenia ago. Without this minimum of “equality” it eventually ceases to be anything similar to a democracy or a “free” country… and becomes some sort of stratified feudal state.

How would you make the ‘chances’ more equal than they are today? What exactly would you do to make them ‘more equal’?? How do you back up this nonsense that the US is moving towards a ‘stratified feudal state’?

-XT

[John_Mace]

Sentient: The US has been in existence for well over 200 years, most of which time we operated under a system that could be considered farily unfettered capitalism. Who are these plutucrats that arose during the last 200 years and are hoarding all the money and suppressing socal mobility today? How much of our economy and our political system is being controlled by them? It seems that there has been plenty of time to validate your thesis. If, on the other hand, you are talking about something that will take another 200 or 300 years to be noticeable, then I can’t get too excited about embarking on a bold new social experiment to evert that alleged, forthcoming disaster.

[Demorian]

@John Mace

Sentient: The US has been in existence for well over 200 years, most of which time we operated under a system that could be considered farily unfettered capitalism. Who are these plutucrats that arose during the last 200 years and are hoarding all the money and suppressing socal mobility today? How much of our economy and our political system is being controlled by them? It seems that there has been plenty of time to validate your thesis. If, on the other hand, you are talking about something that will take another 200 or 300 years to be noticeable, then I can’t get too excited about embarking on a bold new social experiment to evert that alleged, forthcoming disaster.

Depends, do you count antitrust cases?