The best division of wealth in a society

[igor_frankensteen]

What bothers me, is that the tremendous difference in both income and wealth, took place only recently in the US. It occurred during the period immediately after a series of big changes in the late 1970’s and early 1980’s, and has gotten steadily worse since then.

Income and wealth inequality isn’t a problem in and of itself. As has been pointed out, in a capitalist society, there will always be differences. However, one of the most common things that tend to go wrong in capitalist societies, is that those with wealth, tend to want to alter the government in order to increase the flow of capital into their pockets, or at least to preserve what they have, artificially. And a CHANGE in the degree of difference, especially if it occurs over a relatively short time, can, and usually is, a signal or a symptom of exactly that kind of corruption.

It happened in the 19th Century, as the top earners used their wealth and influence to arrange for monopoly control, and after that, to prevent new competition or innovation from occurring at all. Worst of all, some big businesses began to usurp the United States Federal, State, and local governments entirely, actually controlling cities that grew up around their factories.

Then as now, labor’s concerns about pretty much EVERYTHING were actively suppressed by the business powers, and they were assisted in this by the government, again due to the influence that money carries with it.

Therefore, I don’t think that the concern or focus should be on establishing some “prime income ratio” to shoot for. Something much more challenging to deal with, needs to be done, using increasing disparity as a signal that it needs doing. That is, we need to look at HOW great wealth is being “created,” to make sure that the wealth IS actually being CREATED, and who is actually creating it.

I think that “fake wealth” is being created, whenever the change that brings more profit, is the reduction of wages. I think it’s “fake wealth” that is created by speculation for rising and falling stocks. I think it’s “fake wealth” that is created from playing the money exchange game, playing off the shifting trade values of currencies. Fake wealth is created big time, when changes are made in accounting regulations, allowing different things to be called profits and losses.

[septimus]

John Oliver discussed income inequality.

[Aji_de_Gallina]

@E-DUB

The problem is that great fortunes become institutions in and of themselves and, like all institutions, become principally concerned with survival. Wealth is power, and the first use of that power is the accrual of more wealth. Lather, rinse, repeat. I have no problem with folks being rich. Paper your bathroom walls with money. Have butlers for your butlers. Jump stark naked into a vat of ice-cold Roosevelt dimes. ** But the minute you start using your economic power to game the public system, it become’s the public’s business**.

(my bolding)
You nailed it.

---

Income inequeality, per se, is not bad for society. Zero-inequality (or close to that) can only happen is very small, por societies if you want it for a long-term.

If the poorest in a society have all their basic needs covered (water, health, education, safety) then, as E-DUB said, wipe your ass with €500 bills.
Of course, super-extreme inequality may cause problems.

[msmith537]

@rat_avatar

But Finland also has very flat corporate structures, and you tend to call your boss by their first name and consider them as a peer etc…

In 20 years, I don’t think I’ve called my boss by anything other than his or her first name.

@Fiveyearlurker

I don’t think anyone should be born and not have to ever lift a finger in their lives. That’s my line.

That is an unrealistic expectation. Also an irrelevant one. Societies problems have nothing to do with there being too many idle rich people not contributing to the work force. In fact, we may soon experience the opposite where, due to automation and robotics, there might not be enough meaningful work for everyone to lift a finger.

@E-DUB

The problem is that great fortunes become institutions in and of themselves and, like all institutions, become principally concerned with survival. Wealth is power, and the first use of that power is the accrual of more wealth. Lather, rinse, repeat. I have no problem with folks being rich. Paper your bathroom walls with money. Have butlers for your butlers. Jump stark naked into a vat of ice-cold Roosevelt dimes. But the minute you start using your economic power to game the public system, it become’s the public’s business.

It’s the gaming of the system that is the tricky part. People don’t get wealthy in a vacuum. Most people who accrued enough wealth to “game the system” did so by creating or running the very institutions that provide the “systems” infrastructure, financing, technology and communications.

[puddleglum]

@Damuri_Ajashi

I would argue for an estate tax that approaches 100% for amount above a few million dollars with an exclusion for special needs trusts.

What social value is there in leaving more than a few million dollars to your kids? Is there anything good to be gained from having a class of trust fund kids that never have to produce or work in their lives?

We no longer need dynastic accumulations of wealth to fund capitalism, we have the stock market and mutual funds. We don’t need a few really rich people, we can have a shit ton of middle class people fund capitalism.

In general first generation rich people are highly productive and highly motivated by money. If they can give the money to their kids it gives them incentive to keep working to produce as much as possible. Because of regression to the mean their descendants are unlikely to be as productive and motivated. So the tradeoff is more work from the productive person in exchange for less work from the relatively unproductive offspring.

[puddleglum]

@Trinopus

This.

Also, you can track trends, and the middle class has been diminishing since the 1980s and Reagan’s disastrous tax cuts for the wealthy.

We’ve already seen the second greatest re-distribution of wealth in history (the first being money paid to the oil-producing nations.) And the imbeciles in charge are accelerating it!

This is the opposite of what actually happened. In 1979 the poor or near poor were 24.3% of the population, the lower middle class was 23.9%, the middle class was 38.8%, the upper middle class was 12.9%, and the rich were .1%. 35 years later in 2014 the poor made up 19.8%, the lower middle class was 17.1%, the middle class was 32%, the upper middle was 29.4%, and the rich were 1.8%.
So the poor, lower, and middle class shrunk, while the percentage of upper middle class, and rich people skyrocketed.

[Damuri_Ajashi]

@puddleglum

In general first generation rich people are highly productive and highly motivated by money. If they can give the money to their kids it gives them incentive to keep working to produce as much as possible. Because of regression to the mean their descendants are unlikely to be as productive and motivated. So the tradeoff is more work from the productive person in exchange for less work from the relatively unproductive offspring.

I would bet that most people who accumulate more than a few million dollars by the time of their death (in today’s dollars) would produce that much no matter what. That’s part of why I think the 5 million dollar per parent exclusion from the estate tax is a good idea.

I don’t think there are a lot of people who have accumulated $100 million who did so out of concern for the livelihood of their children. They left that concern in the rear view mirror a long time ago.

And pretty much every Steve jobs of the world would have produced just as much regardless of the estate tax.

Also I am proposing a highly graduated estate tax with rates approaching 90% when you get to hundreds of millions of dollars, not a 100% estate tax.

[puddleglum]

@Wesley_Clark

Germany has a GINI coefficient of 31, the US has a coefficient of 41. Both are wealthy western nations with western infrastructure and high R&D spending.

As a nation increases in wealth, income inequality goes down, not up. Governments can pass a wide range of legislations and social programs designed to reduce income inequality.

Both Germany and the US are wealthy western nations but the US is much wealthier. GDP PPP per capita the US is 18% wealthier.
In terms of income inequality the top is poor countries where the ruling elite have taken all the money for themselves. In terms of democracies when comparing similar countries the richer one usually has higher inequality.

[jasg]

I am reading a book, Dream Hoarders that points out that the problem is not so much the top 1%, it is the top 20% - a household income of $200k in 2015.

Once in the top 20%, your kids are much more likely to stay there thus it has become increasingly difficult to move upward in our society. Not just because of estate transfers, just from the ability for the top 20% to help their kids with seemingly simple things. The top 20% benefits from homogeneous neighborhoods, leading to better schools. Parents have the time and money to spend on and with their kids, giving better educational performance. College admissions are eased even more by legacy practices, internships are more easily available (and you parents can support you while you work for free).

All bits of the American Dream which end up locking those on the bottom out from taking advantage of the Dream.

Here is a PDF of chapter 1.

chapter-one_-dream-hoarders.pdf

[puddleglum]

@Damuri_Ajashi

I would bet that most people who accumulate more than a few million dollars by the time of their death (in today’s dollars) would produce that much no matter what. That’s part of why I think the 5 million dollar per parent exclusion from the estate tax is a good idea.

I don’t think there are a lot of people who have accumulated $100 million who did so out of concern for the livelihood of their children. They left that concern in the rear view mirror a long time ago.

And pretty much every Steve jobs of the world would have produced just as much regardless of the estate tax.

Also I am proposing a highly graduated estate tax with rates approaching 90% when you get to hundreds of millions of dollars, not a 100% estate tax.

If rich people are going to produce no matter what, why not tax them at 100% of everything over 100K?
In the real world the responsiveness of the ultra wealthy to taxes can be very high, for example, David Bowie, Mick Jagger, Sean Connery, and Micheal Caine all moved to go to lower tax countries.

[Shodan]

@jasg

I am reading a book, Dream Hoarders that points out that the problem is not so much the top 1%, it is the top 20% - a household income of $200k in 2015.

Once in the top 20%, your kids are much more likely to stay there thus it has become increasingly difficult to move upward in our society.

I think there is a basic misunderstanding, which is that my being able to get my kids into the top 20% is a problem.

I am sorry for the other kids, but OK - my wife and I are still together after 35 years, and we both made sure the schools my kids attended were up to snuff, and that my kids did their homework and behaved, etc. If other people can’t do that, that’s the problem, not that I can, and did. And it’s not a problem that is caused by income transfers.

Regards,
Shodan

[HurricaneDitka]

“Dream Hoarders” LOL

[Steve_MB]

@jasg

I am reading a book, Dream Hoarders that points out that the problem is not so much the top 1%, it is the top 20%

I find this thesis highly implausible in view of the income trendlines – the trendlines for the bottom 20%, the 21%-to-80% range, and the 81%-to-99% range track each other quite closely in their anemic upward crawl over the decades, while the top-1% trendline soars above them.

Worse, it’s a rather pernicious myth that plays into the hands of the plutocratic interests, as in the parable of the struggling blue-collar worker, the somewhat more comfortable white-collar worker, and the billionaire who find a dozen cookies, whereupon the billionaire diverts the other’s attention, stuffs eleven cookies into his pockets, and warns the blue-collar worker that the pampered union pencil-pusher is trying to steal the last cookie.

[Wesley_Clark]

@puddleglum

In terms of democracies when comparing similar countries the richer one usually has higher inequality.

What are you basing that on? Ireland has more per capita gdp than the US and their gini is 31.

The Netherlands is 28. Norway is 27.

Meanwhile poorer developed nations like Italy or South Korea are in the 30s.

There is no connection I’m seeing. Your claim sounds baseless and like an attempt to justify the system.

[WillFarnaby]

@Damuri_Ajashi

I would argue for an estate tax that approaches 100% for amount above a few million dollars with an exclusion for special needs trusts.

What social value is there in leaving more than a few million dollars to your kids? Is there anything good to be gained from having a class of trust fund kids that never have to produce or work in their lives?

We no longer need dynastic accumulations of wealth to fund capitalism, we have the stock market and mutual funds. We don’t need a few really rich people, we can have a shit ton of middle class people fund capitalism.

The “social value” of allowing families that have historically anticipated consumer desires and fulfilled them with less costly inputs is pretty clear. The value in redistributing wealth to those families that haven’t fulfilled consumer desires with less costly inputs is the head scratcher.

[HurricaneDitka]

@Wesley_Clark

… Ireland has more per capita gdp than the US …

As a side note, here is an interesting article on Irish GDP vs GNP:

… The “distortion” of the Irish data led economic analysts- including ESRI- and Irish policy makers to prefer using GNP figures rather than GDP. International bodies- including Eurostat and the OECD use GDP figures but the OECD observer pointed out that Ireland GDP per head might not “accurately reflects Ireland’s actual wealth”.

[Wesley_Clark]

@HurricaneDitka

As a side note, here is an interesting article on Irish GDP vs GNP:

I’m too drunk to read. Can you create a picture that describes the words you just typed onto the internet?

[HurricaneDitka]

@Wesley_Clark

I’m too drunk to read. Can you create a picture that describes the words you just typed onto the internet?

I don’t know, maybe this one. The SDMB doesn’t let me post pictures anyways. Here’s one more summary from Wikipedia:

In terms of GDP per capita, Ireland is ranked as one of the wealthiest countries in the OECD and the EU-27 at 5th in the OECD-28 rankings as of 2008. In terms of GNP per capita, Ireland ranks only slightly above the OECD average, despite significant growth in recent years, at 10th in the OECD-28 rankings. GDP (national output) is significantly greater than GNP (national income) due to the repatriation of profits and royalty payments by multinational firms based in Ireland.

I doubt this helps in your inebriated state though.

[Little_Nemo]

@Shodan

If other people can’t do that, that’s the problem, not that I can, and did. And it’s not a problem that is caused by income transfers.

I don’t anyone would want to take away the opportunities that you had. They just want more people to have those same opportunities.

[Little_Nemo]

I think the central principle should be that the amount of wealth you receive in your life should be proportional to what you’ve accomplished in your life. The amount of wealth you have should not be based on some random circumstance of birth.