Ownership rights and inequality

One of the theories of conservative economics is that income inequality drives down unemployment. For example, they argue that eliminating minimum wage laws would increase employment, because owners of businesses could afford to hire more workers. (Or, conversely, that increasing minimum wage increases unemployment, because owners have to fire workers.) Or, they argue that lowering taxes on the rich creates jobs, because then they can afford to purchase more goods and services.

In his book, Inequality and Instability, James Galbraith shows that, empirically, the theory is just not true.

Whether measured geographically (between places) or across time, greater inequality is linked to higher unemployment, and higher employment is linked to greater equality. For example, countries with the most income equality (the Nordic countries, for example, or Germany) also tend to have low unemployment. Countries with high inequality, on the other hand, tend to have high levels of unemployment.

Galbraith also shows that income inequality is not mostly a function in differences between pay for work (despite stories of highly paid celebrities and CEOs), but mainly a function of the amount of income that flows to people for owning things, rather than for working.

(Almost all of the income of the richest people in the US, for example, comes from owning things, not from working.)

My argument here, is that almost all that income (income from owning, rather than working) is created and facilitated by the government; and that further, the power that flows from all that income allows the very rich (the ownership class) to protect and further its interests, at the expense of people who work.

Copyright law was invented in England, in 1710. The first copyright law in the US was imposed in 1790, and was modeled after the law in England. It provided authors a copyright of 14 years, with an opportunity to renew for another 14. After that, the work passed into the public domain.

Today, copyrights can last over a century. For corporate (rather than individual) copyrights, the time is the life of the creator, plus 75 years. (The law is sometimes called the “Disney law”, or the “Mickey Mouse” law, because some early Disney cartoons were about to fall into the public domain, and Disney lobbied hard for the keep that from happening. In 2003, copyrights were increased, retro-actively, again.)

Copyrights, of course, are ownership rights. They protect the income stream of owners, against everybody else. They have become, in effect, perpetual, to the extent that copyright owners have the power to change the law, whenever their copyrights are about to expire. This, despite the fact that the US Constitution says the copyrights are only allowed for a “limited” time. (And also, that they’re supposed to serve a “public” purpose - not just the enrichment of the few.)

Patents are also created by government. They allow patent owners to extract fees from anybody who uses their idea. Because owning patents is so lucrative, Apple, for example, spends more on patents than it does on research and development. It’s also locked in a $2 billion lawsuit with Samsung (in a tax-payer funded courthouse), over a patent originally filed covering the “shape” of the iPhone. (***Oops, I see Apple just won, $120 million. Less, I guess, than they were expecting.)

Corporations are another example. The modern corporation was created by the government, in 1844, in England. All the rights and abilities of a corporation - such as protection of shareholders from lawsuits, the right to be treated as a legal person, the use of the courts, and the ability to pay dividends) are created and enforced by government. People whose wealth flows from ownership of stock have the government to thank, because without the government, there would be no corporation.

The list can go on, of course, but the point is that ownership rights - whether it’s the right to own land, or the air above the land, or resources below the land , or other ownership rights - are created by, and enforced by, the government.

The fact that those ownership rights are so valuable - that they produce so much income for their owners - in turn gives them a special incentive to use that wealth (that government provided in the first place) to turn the levers of government in their own favor. For example, securing a lower tax rate for capital gains, than for ordinary labor.

Finally, to the exact extent that some are better off because of ownership rights (because of their ability to consume without producing) others are worse off: because it means they have to produce without consuming.

I don’t disagree that government is a necessary evil: to protect the ownership and patent rights of its citizens.

Where the problem lies is to foment the notion that innovation and economic success is achieved by government rather than through government. It is crucial that the referee call fouls, but not become a player in the game.

All the more reason to strongly consider the ramifications of a policy where government “evens the playing field.”

I think the point is that the government itself IS the playing field as well as the refs. Without the structure imposed by it, there would be no property or corporations to be in the game. Allowing some to have a “home court” advantage, when the court really belongs to all of us, is the problem.

That’s a very poor analogy. The government is already a big player in the game, intrinsically and inevitably: government hires people and so is a huge employer; government buys goods and services and so is a huge customer; government provides grant money and subsidies and so influences research and development; government tax and labor policies influence business decisions whether you like it or not, and on and on. But even more importantly, government has a role in operating certain kinds of organizations, like national defense, local police services, national research programs, and countless others. There are many organizations and even “businesses” that government should run because it does a better job of it than profit-motivated private enterprise can – one good example that the US has perpetually missed out on is the extremely cost-effective ability to act as a simple, unconditional, efficient single payer for universal health care.

So you’re against anti-trust laws and laws that give small businesses a fighting chance to try to compete against megacorporations?

Some may define a “free market” as a marketplace that the government totally stays out of. That sounds terrific, but the unintended consequences are considerably less than terrific. I define that as “anarchy”, and “anarchy” is neither free nor just, it’s just the dominance of the biggest and most ruthless. It’s why pure capitalism will always coalesce into a small oligarchy of super-corporations – think of them as small governments, except governments that are entirely self-serving, internally dictatorial, and accountable to no one except their owners. Except that the word “small” is a bit misleading – companies like ExxonMobil and its ilk have annual revenues far larger than the GDPs of many nations.

There have been economies of a small scale outside of government, and bartering prior, and communal villages prior, and packs prior, etc.

Government did not create the playing field, only improved upon it and set certain rules. It is a relatively new idea, as best I can ascertain, that because of regulation and infrastructure government literally is the economy. I am quite off-put by the so-called intellectuals, who have never run a business, that love to espouse this idea.

And the money to pay for all these government activities came after the government paid for all these activities?

(IOW a successful economy was necessary for the government to have the money to do all this stuff, and now the government wants to claim credit for everything. Is that logical?)

No, I am not.

Indeed, pure capitalism is terrible. Which is why the referee needs to call fouls.

Is this an argument over whether the govt’s hand is up the market’s ass, or vice versa? I’d say it’s one big ouroboros consuming itself and the little people best step aside.

I’ve seen various lefty dissidents confronted with the question of why we should empower the government if the evil private powers are only as powerful as they are due to the government. Their usual answer is the government is at least theoretically accountable to the people, whereas private power isn’t. I guess, but how’s that working out? I don’t see either side amenable to change in the near future. They got a sweet deal on lockdown.

The chances of anyone smashing the state and ushering in a libertarian-socialist worker’s paradise is probably 0%, and that would just tank the economy anyway (and a constantly growing gross national product is the end all be all of human existence) but that’s at least a theoretical solution to the described problem. What’s the modern day lib solution? A couple more regulations? Minor tax increases? More sinecures? Wonder why they can’t get anyone fired up with that rhetoric.

Yeah, there was bartering, and small scale trade among and between villages. Then strong government created the ability to have anything resembling a modern day economy. You could call it an improvement, but it really is a complete game changer. This relatively new idea has brought a tremendous amount of prosperity to all. You can have an economy without strong government, any two people trading goods or services is an economy. You cannot have the sort of multi-trillion GDP economy we enjoy without the structure put into place by it.

BTW, I do in fact run a small business. Only for just under 2 years now, but I have learned quite a bit of what I have to thank having a stable infrastructure and economy in which to grow in. I am quite glad that I do not have to barter with my clients or my vendors. I have clients with good paying jobs to pay for my services. I have an educated workforce to hire from. The bank that I keep my money in is regulated to an extent that I can feel confident that it will be there to pay my bills. I have contracts with clients and vendors and lenders that are backed by the force of the government.

The interference from the government I have received was to put up labor posters, and the fire inspector made me remove an extension cord.

Fair trade, I think.

That is the point, and that’s a good way to put it.

Libertarians/Republicans like to act like the “playing field” - corporations, stocks, copyrights, patents, etc. - are just the “natural” environment (handed down by God or something); rather than specific government interventions explicitly benefiting the rich at the expense of people who work.

It’s odd (and hypocritical, to me), that they favor government intervention on behalf of the owners, but oppose intervention that helps anyone else.

It’s especially ugly that the policies they advocate make the country poorer, rather than richer.

There is no market - free or otherwise - without government.

There would be, for example: no dollar, no corporations, no shares of stock, no copyrights or patents, and in fact and no ownership of anything without government. And of course, no recourse in the case of theft or fraud or other crimes.

If there was a marketplace in a communal village, it’s because the government - however primitive it might have been - set the rules that governed the market, and protected it.

You say the government “improved” the marketplace. Is “improving” the market different from “intervening” in the market?

The government created the copyright and the corporation. Those were improvements, right? Since then, It’s extended copyrights multiple times - retroactively - and reduced the tax on capital gains. Were those also improvements?

Is the question of whether something is an “improvement” or an “intervention” primarily one of whose interests are at stake?

I’m having trouble understanding what the OP is proposing. Can you summarize it in a few sentences?

He means people other than himself should not be allowed to keep what they have. Also, inequality.

Regards,
Shodan

One of the biggest problems with modern liberalism is that it’s failed to confront the ideology of the “free market”, or to expose it for what it really is. To be against the “free market” is the same as electoral suicide. Nobody actually questions what those words actually mean, however, or points out that there is no “free market,” nor has there ever been.

Since you asked, however, some good policy proposals IMHO, would include:

[ul]
[li]Reducing copyrights dramatically, somewhere in the 5 - 10 year range, with possible paid extensions. For the public, that would mean that great older movies - say, the Godfather, for example - could be streamed on Netflix or any competing service, for free or practically nothing. You could also get older books, on your iPad or other device, for free or practically nothing.[/li]
[li]Reducing payroll taxes by eliminating the upper cap and applying the tax to all income, not just income from work. That would mean a dramatic decrease in taxes on work. I’d estimate - and I’m just spit-balling here - reducing the tax to something like 2%.[/li]
[li]Replacing most government assistance programs with a monthly check to everyone who files a tax return. The program would be paid for, not by increasing taxes, but by issuing bonds that would be bought by the Fed, and kept indefinitely.[/li]
[li]Increasing the top marginal tax rate for the very rich, to at least 40%.[/li]
[li]Replacing monetary policy with fiscal policy. That would mean keeping interest rates low, permanently. Keeping interest rates low has multiple benefits. For one, it allows businesses that need money to expand to be able to borrow at low rates. For another, it means debtors would pay less to creditors. Everyone who owes on mortgages, credit cards, student loans, or other loans would get to keep more of their income. It also means that people with lots of money would need to find productive uses for their money - inducing them to invest in start-ups and other businesses - if they wanted to make more than 2% or 3% interest. Finally, high interest rates, historically, have always lead to recessions and unemployment. [/li]
[li]Increasing the tax rate on capital gains to the rate for ordinary income, while allowing capital losses to carry over indefinitely.[/li][/ul]

Oh. I’d also simplify the tax code, by getting rid of itemized deductions, completely. Though that’s mostly an efficiency thing.

Are you capable of honestly analyzing the good-faith and sincere arguments of those who disagree with you? Because this isn’t it.

And if you can’t reasonably and respectfully respond to a good-faith and sincere effort like the OP, then why bother responding?

  1. That contrary to what conservatives say, high employment and economic equality go hand in hand; and that (again contrary to what conservatives say) high levels of inequality do not create jobs. Instead they create unemployment.

  2. That the ideology of the “free market” is bogus. The “free market” is composed of rules, regulations, institutions, and laws that are handed down or created by government. The fact that conservatives/libertarians ignore “government intervention” when it benefits them (or the ownership class, anyway - many of them are not themselves rich) illustrates the bankruptcy of their ideas.

  3. The extent to which some people (owners) are able to consume without working benefits them to the exact extent that other people (workers) have to either work more, or earn less (or both) in order to support them.

Sorry, I probably wasn’t clear. I meant: what do you propose as a solution?

I’ve seen him in other economics threads.

Regards,
Shodan

Got it – you’re snarking the arguer, and ignoring the argument.

Where is the argument that income inequality drives down unemployment? You seem to be using minimum wage as a barometer for income inequality. You haven’t demonstrated this at all. Without this link, the rest of your argument falls apart insomuch as it’s an argument against certain economic principles.

If you are arguing that minimum wage doesn’t increase unemployment, you’ll have to somehow disprove many theories of supply and demand. There may be isolated events where changes in the MW don’t have the exact predicted results due to where the labor market is on the curve, but the theory of price floors and ceilings causing surplus or shortages is sound and widely accepted. This is basic economics.

If true, so what? You’re essentially saying that economic prosperity is precipitated by a functioning government and that people will do what they can to protect and further their interests. Is this supposed to be a profound revelation? We learned this as children. Are you suggesting that it shouldn’t be this way?