I was going to speculate that many of these countries are significantly older then the US, and that intergenerational wealth probably plays a larger role in their wealth inequality than it does in that of the US.
So … yeah. I agree – at least as a likelihood.
I think that the round of globalization that we’ve been undergoing the last few decades has been especially beneficial to the global rich and the global poor.
Globally, income inequality is decreasing and has been for decades. Likewise, the percentage of the human population earning two dollars of income or less a day is the lowest it’s been in history.
The most plausible models indicate a relationship there.
If people care about poverty, what kind of poverty do we care about? That of people earning a buck fifty a day? Or that of people earning 50 dollars a day?
This is the same as asking: Do we care about all people? Or only citizens? It’s difficult for me to imagine that people think inequality is a genuine issue, when they focus on a subset rather than the whole. I lean, again, toward status anxiety. People look up and make noises of consternation. They look down and remain silent. Or rather, they just don’t look down at all.
Could you be explicit about what you’re asserting here? Are you saying that inequality needs to go up locally in rich countries for it to go down globally? Are you saying that poverty needs to continue at the same rate or get worse in rich countries for it to be lessened in developing countries?
I would certainly agree with that.
But some measure of that was a negative sum game, particularly where outsourcing took formerly solid middle-class jobs away from entire US communities.
Which was totally foreseeable.
One of the things I’ve said here before is that the ‘ownership’ class made conscious (and gleeful) decisions to displace substantial domestic workforces in large swaths, leaving them Dollar General and OxyContin in exchange.
We created the rust belt in – relatively – extremely short order.
Did we lift the fortunes of huge numbers of desperately poor people in other parts of the world ? Yes. But the dramatic degree to which it happened, and the degree to which, domestically, it was a huge zero sum game was unnecessary.
And now we have a significant amount of domestic poverty, which – while nowhere near as crushing as the kind of poverty seen elsewhere in the world – is nearly intractable, because the infrastructure for upward mobility doesn’t really exist where US poverty is the worst.
Which are the kind of problems we could identify, quantify, and attack, with both the will (to your point, it would require less navel gazing) and the dedication of resources.
But – America being America – we default to the solutions that create profit for somebody, rather than seek to address root causes or ameliorate the misery piece directly.
That is the plausible outcome, yes.
If you suddenly increase the number of workers, but keep the same level equipment, then the wages of the previous workers should be depressed from what it would otherwise be. (Fixed K, bigger L => lower marginal productivity for L => lower wage.) Simultaneously, more workers give more total output, out of which the relatively fixed stock of capital takes its share, which is now bigger.
That’s the standard story. Foundational, even.
And what have we seen in reality since the beginning of globalization in the 1970s?
We’ve seen rather outsized rewards for capital (…check…) along with relatively stagnant real wage growth, as conventionally measured, for most workers in the US (…check…), along with much higher wages for the new workers introduced into global markets (…check…).
I can’t turn back the clock a few decades and run the experiment 1000 more times, half the cases with globalized markets and half the cases without. But this is pretty core stuff. The relationship between the stock of capital per worker, and the wage that workers receive, is well understood in essentially every other context. It’s extremely clear historically, and it shows up in cross-country comparisons.
A policy of stronger trade barriers in the US would have plausibly led to less income inequality in the US. But the inevitable result of that would have been slower development for some of the poorest regions of the world, and less total production, both globally and domestically.
I don’t have any “solution” for this.
There has likely been some adverse political feedback from our current economic situation. I doubt this is the most important political undercurrent but I’d guess it is part of it. People in certain parts of the country feel they aren’t being well represented. When people like me point to “comparative advantage”, what we are implicitly admitting is that this is true: we don’t really care about them. We don’t prioritize their concerns. Our utilitarian calculations don’t favor rustbelt voters over subsistence-level peasants in the developing world.
That is, aha, potentially a problem.
But it is very very very hard to box yourself out of a dynamic world. Maybe impossible if the elites unambiguously gain from stronger international market connections. Which, of course, they do.
I don’t think it’s a coincidence that a major political split is opening based on education level. This might be more cultural than economic, really, but the economic difference still provides ammo for the culture wars.
I don’t know what to do about any of this.
Other than “Don’t shoot yourself in the foot while looking for a solution.”
I think there’s a strong case that globalization is a cause behind both lifting people around the world out of extreme poverty and increasing inequality in rich countries. However, it doesn’t automatically follow from that that if you let globalization happen and then try to promote anti-poverty or anti-inequality programs in rich countries that it prevents the good effects of globalization.
I think this discussion would again come down to whether or not social democratic reforms could mitigate the inequality problem without stifling innovation.
I thought about bringing this up, and I think it’s one of the biggest problems with trying to maintain the current status quo. Even if it’s completely right from an economic perspective in a country like the US that increased inequality at home and decrease global inequality are inseparable and it’s a zero-sum game, there is no political way to maintain that long-term in a democracy. We would either have to accept that voters will want to make our society more economically equitable at home at the expense of the global poor, or you have to replace our market system with a centrally planned system that allows more direct interventions into maintaining social welfare, or you have to get rid of democracy. And of course there are tons of examples in history of both of those other options leading to a much worse standard of living for bottom 50% rather than the other way around.
It’s obviously uncertain where the line is before you see significant damage to the economy locally or globally when you try to intervene to benefit social welfare/reduce inequality. I think there are tiers of interventions that are comparatively less risky.
The easiest would be to implement some common sense policies like universal healthcare - in the US now there is effectively a tax on people and employers by our patchwork public/private insurance system and it’s just handled extremely inefficiently. A more effective single payer or multipayer UHC system would cost more, but efficiency increases would reduce the price tag in comparison with almost anything else.
The next would be to stay within the general way we tax but make the combination of taxes and the rest of the welfare system more progressive.
After that I think reforming the way we prevent monopolies and giant financial institutions is a reasonable step.
If you do all of that and you still have an intractable problem, then I think you have to seriously look at how something like a wealth tax or another kind of more direct redistribution system would work.
They had workers a labor force who aided them in creating and continuing to generate that value.
What if their workers are stupid - or, to be more generous - short-sighted? I used to work at Amazon and you’ll hear people endlessly grouse about how rich Bezos is - what they don’t like you to point out is how rich they should be. Almost from the get-go, Amazon has had employee profit-sharing, where all employees got shares of the company for free. Jeff Bezos is rich because he’s still got his shares. His ex-wife and a couple of former employees have the next largest amounts of privately held shares, making them billionaires.
The vast majority dumped theirs, immediately, for cash, typically about a grand.
I worked there for 3 years and accumulated 15 shares, worth about $45k now. There were people who’d been there long enough to get hundreds of shares, just doing entry-level warehouse work. They took those magic beans and made soup.
I’m a big supporter of socialist policies, but the ones regarding limiting wealth ignore the fact that 70% of lottery winners and NBA players go bankrupt, and 60% of the NFL to the same (they have classes on financial literacy). Wealth inequality isn’t a problem with the system, it’s a problem with humanity. You could equally redistribute all the wealth in the US to everyone, and about 5 years later we’d be back where we started.
It depends on the techniques used, yes.
The issue is that the most politically popular ideas are, perennially, “Let’s shoot ourselves in the foot to fix our problem. Let’s do that again and again.”
I would agree, entirely, with massive reform of our health care system. I’d agree with reform of regulations. I’d agree with higher taxes on the most conspicuous consumers of our society. It’s the specifics of these reforms that where issues arise, and where careful analysis is most needed.
But too often what we see instead is “billion sure is a big number, so that can’t be a good thing”. That’s not going to get us anywhere. We need, at bloody bare minimum, an understanding of the difference between ownership and management of the capital stock, compared to final allocation of the service flow. That’s true regardless of individual political value or ideology.
That pretty well sums it up.
I am still reading through the thread, but a minor nitpick… this is certainly not true. You can do some astounding things, when it comes to industrialization, without being capitalist.
Not that I’m putting them or this process up as a model to follow, but the Soviets certainly industrialized - from a rotten state of serfs ruled by a weak Czar with a military that collapsed the second it met German forces, to a military juggernaut that managed to halt the Nazi war machine and drive it back. All while relocating much of their industrial capacity from land the Germans were taking in the West across mountains and tundra to the East. And unlike the other European powers, the Soviets came out of the war with enough military might and industrial capacity to scare off the Americans, and enough technical knowledge to match the atomic bomb and spaceflight in short order - much sooner than the US expected.
Now, obviously, the American model beat the Russian in the end (though how long our own model survives into the future remains to be seen). And there were many flaws to the Soviet model; I certainly wouldn’t want to live in the USSR. But I think it is pretty clear that fascism, capitalism, and communism are all more than capable of building and running advanced societies; their failure in the past shouldn’t lead to their dismissal. Fascism, for example, is still dangerous, even if the Nazis lost.
But at the end of the day, different systems do well in different areas, and struggle in others. Imagine if the United States got invaded and had to move its industrial capacity; our capitalist model doesn’t really have a great way to cope with that situation.
The Soviets used American trucks and locomotives to relocate their industrial capacity.
There is a decently high chance they would have lost to the Germans without the early lend-lease support.
[re: revenue/GDP]
While this suggests that tax policy (as historically practiced in the US) has little effect, I do wonder how much tax burden (if that’s the right term) as a function of income has varied with these policy changes.
Not asking you to do my work for me. I’m just noting as something I should look into when I’m suffering from free time.
This sort of thing ?
The interdependence of the US/USSR in WWII doesn’t really put either ideology in its most flattering light. It demonstrates that neither alone was supremely competitive over fascism. It also demonstrates the sort of sick contract where capitalism’s main contribution is a portion of economic output, while others sacrifice thousands and millions of human lives.
If the US suddenly had to relocate its industrial capacity in an emergency, I wonder if anybody at all would step in to assist, or everybody would just shrug their shoulders and rebalance the rest of their trade to China. I mean, hey, competition is good for everybody, right?
No. Good and enjoyable effortpost there, thank you, but I’m not articulating my . . . wondering (“question” seems to imply something too specific for my current state of mind) well. We could construct any number of brackets and CG and corporate rates where the end result is ~17% of GDP. But the effective rates for people in different income situations may still be very different even if the overall revenue doesn’t change much.
So it’s still worth talking about those rates (not that I recall anyone here saying we shouldn’t.) It’s just not overall revenue that’s necessarily getting optimized.
At the risk of no true scotsmaning, I would not say that the Soviets were truly communist, certainly not in the way that is discussed in the OP. There were no worker councils that looked out for the betterment of the workers, there was an authoritarian tyranny that mandated what the workers had to do.
There was quite a move towards industrialization before the overthrow of the Russian empire, and most of the capitalists and landowners simply became authoritarians who had not just the invisible hand of the market, but the very visible hand of the government, to ensure that they remained in power.
I’d say that that was less a military juggernaut, and more horrible terrain, worse weather, and a willingness to sacrifice as many of those workers as it took. Germany absolutely had the better military force as it came to technology and capacity to produce mechanized weapons. If Germany weren’t already fighting a whole other war at the same time, or if they had chosen a better time of year to invade, and if the Soviet military were not more afraid of their own officers and commanders than the invading enemy, then that may have turned out very differently.
The Soviet Union had nearly twice the population of Germany at the time, if Germany threatened them at all, much less push as far as they did, then that’s a pretty poor showing on the Soviets part.
Some of it was relocated, most of it was just destroyed.
Unlike the other European powers, most of the Soviet Union was untouched by the war. And I wouldn’t really say that the Americans were “scared” off. If that were the case, we would have left Europe to the Soviets, rather than spend the next 60 years supporting those European nations against Soviet aggression. That we didn’t invade is a whole different story, if nothing else, the terrain and weather are horrible, and there would be very little to be gained.
I’d say that the Berlin airlift, if nothing else, showed the might of our military and economic power, something the Soviets never imagined we would be able to pull off. They certainly could not have.
There was quite a bit of espionage involved there, as well as them getting a number of German scientists. One of the pitfalls of their system was that things like the space program were very much the work of a very few or singular people, where the death or loss of political favor of an individual can set back the whole project substantially.
I would say that two of those end up being more political systems, and only one is actually an economic system. And I would also say that their failure, along with all the damage that they did to themselves and to their neighbors while failing, should serve as a very stark warning to anyone entertaining thoughts of emulating them.
I don’t think that we would have that much issue. For one, not having a centralized system means that our industrial production is already fairly well distributed. There is also the fact that it would not require the government to move what production needs to be moved. Private companies and individuals would figure out what was the most valuable production to be moved, rather than government officials deciding which of their pet projects they wanted to save.
So, yes, both Communism and Fascism sprang up, and seized control over the production that had been built by capitalism. They then proceeded to loot their own countries, invade others, and ultimately fail. Now, an argument could be made that the Soviet Union did not truly represent communism in its pure unadulterated form, and in fact, I made that very argument just now, but that just goes to show how unworkable those ideas are, as long as people are involved in the decision making process. An argument for communism needs to explain not only how it will avoid the failures that have come about every time that someone has tried it, but to also explain how we will keep people from failing and corrupting the system.
The one thing that capitalism has going for it is that it is decentralized. The competition of the capitalists keep them in check, their greed reins in the greed of the others of their class. If one gets too greedy, then someone may come up from the worker class to supplant them. If a need is not being filled, then someone in the worker class can find a way to fill that need themself, and profit off of it.
The difference between communism and capitalism, IMHO, is that rather than compete, in communism the capitalists cooperate to prevent any form of competition.
Kinda the whole problem with this socialism/communism ideal is that no one is getting paid, they are just doing it because they love the work.
Okay, I’m totally unfamiliar with that form of “socialist” utopia. I’ve talked to people who argued that instead of money you’re paid with like, commodity vouchers, or you’re paid with perks that come with your job. Obviously there are some jobs that wouldn’t be done without a sufficient incentive. If you say socialism is incompatible with positive incentives (“getting paid”), and we’re ruling out utopia or automaton scenarios, the only alternative is to coerce people.
~Max
Your post exhibits a lack of understanding of socialist systems.
You might benefit from “Great Basin Kingdom: An Economic History of the Latter Day Saints” or “Always With Honor” an account of the Tsarist General Wrangles occupation of a functioning Communist society in the Crimea.
I’m not promoting socialist systems, I just believe some understanding of them is necessary for meaningful discussion.
That really is not socialism.
It is sad that so many people hate socialism without knowing what it is. I have heard so people hate Biden because he is a socialist! (The joke in the UK is that all US presidents are right wing - but some are more right wong that others).
In the UK, the Labour party had a socialist policy, which has now been removed: ‘each to his ability, each to his needs’.
So, doctors get paid more than bus drivers, and a bus driver whe needs an operation gets it.
FWIW, bourgeois capitalists also want basic needs to be met, as that’s the only way that workers can remain productive and consumers buyers.
This might explain why the world population tripled in only a few decades as infant mortality rates dropped and life expectancy rates rose.