As I wrote above, the resentment isn’t over the people who have earned their wealth. The resentment many people feel is directed towards those people who don’t have what it takes to become wealthy but are wealthy anyway because their grandfather had it. Nobody who got Bs and Cs questions it when the guys who got As are more successful. But they do when the guys who got Ds and Fs are more successful. A meritocracy would say that the most capable people achieve the most success. Inherited wealth is a huge exception to this ideal. People receive rewards they did nothing to earn.
Will you people get the fuck over calling anyone proposing a 3% tax increase for the rich socialists. It didn’t work for Palin and it doesn’t work for you. We’re not talking socialism vs capitalism here, we’re talking trickle down. So, try again.
Do try to read the cites. They say that the effort of the American worker in growing the pie (shown by increased productivity) did not get them anything. So your claim is contradicted by the facts.
So, CEOs who are not founders, who didn’t start the company and take the risks don’t deserve all this money? Works for me. Founders typically have a lot tied up in stock, and lose big when the company loses big. Hired CEOs have very little risj - big starting bonuses, high pay, and big firing bonuses. A lot of the time they don’t hold much stock except for what they get given. That’s not always true - some of the finance CEOs lost big (as they should) but they don’t have to look up the location of the local welfare office just yet in any case.
That does happen, but in the past few years unemployment has actually fallen, so it can’t explain this. Plus, you’d think the average salary under your scenario would increase, since skilled workers make more, but it hasn’t. Plus, automation means that skilled workers often aren’t more productive at simple production tasks.
No, globalization and automation means that it is possible to outsource manufacturing to CMs which have better economies of scale. Giant factories can afford engineering time to increase productivity, since it benefits many products and customers. Any single product factory will have a hard time with this, and will lose engineering talent with each downturn. CMs usually smooth out demand fluctuations, though they still can get screwed, for instance with the dot com bust.
Automation doesn’t create commodity items, in fact it tends to allow products with shorter lifetimes and less required market, because the setup costs are so low. Are watches, the manufacture of which is heavily automated, commodities? Hell no. I just bought one for my daughter, and there are ten times more choices than when I was a kid. In an interesting book called Competing Against Time there was a case study of a Japanese watch manufacturer who introduced two new products to manufacturing a day. If your watch was late, it never got to market, since there were no later windows. Automation tends to create quantity one products. Dell’s system test strategy is based on the fact that there are millions of possible PC configurations. Your PC comes preloaded with software not because Dell are nice guys, but because there is no way of testing it without loading all the code and running some apps to see if they actually work together.
The problem is that the definition of skilled keeps getting tighter. We need more skilled workers, but our school systems and culture aren’t producing them any more.
This is exactly why I’ve never wanted to be involved with a startup. I know plenty of people who have - one or two made it big, a few maybe made back what they lost in salary when they sold the company, but most have nothing - even if the company is still alive.
I think most people don’t process that the media only covers the very few who actually made money, and ignore the masses who didn’t.
We should remind them that pets.com and other brilliant internet startups weren’t funded by the government or poor people. Not much wealth is actually spent. Some goes to productive investments, but a lot goes to bidding up stock prices or in clever financial instruments. One reason for the subprimes was the demand from investors for this high interest supposedly safe investment. So much for the brilliance of the rich. I think we would have been in better shape if the money invested and lost in that crap went to fix some bridges and roads.
To expand this thought further (and I am sure an economist will give a better expanation than me)…
(Assuming) Consumer spending gives utility, not all spending gives the same amount of utility due to the law of diminishing returns, simply put this means that for every additional dollar I spend, I get LESS THAN one additional happiness.
To put it another way, a Lamborghini costs roughly ten times as much as a Subaru WRX STI - does it deliver ten times as much “hapiness”? Now of course the spending on a Lamborghini does create the ripple effect. HOWEVER we would largely also assume that it costs ten times the Subaru price because it consumes 10 times the resources in production.
What does this mean in terms of inequality? Well if instead of buying the Lamborghini, the rich person bought a Subaru for himself and noine other less well off people the TOTAL utility (or happiness) would be much higher…the inequality in wealth has ineffect skewed the most “effcient” allocation of resources to maximise happiness.
On the other hand of course aspiring to a Lamborghini is a motivator to “create” more - an effect we can’t yet entirely measure…
Of course they are. They’re just skilled in things that can be taught at school, which happens to lag behind reality by a few years. Even trade schools will lag reality. This is not a problem when it takes fifteen years to make an advancement. It is also not a problem when an employee can expect to stick with a job her whole life, as she will become skilled in what the company needs. But neither of these hold for today’s definition of “skill.”
In response to both of these, the benefits come in the form of lower prices and lower goods. Accumulating wealth, i.e. an increase in GDP, is not just money. That’s why I don’t think income inequality doesn’t really matter. If you try to own capital outright, that’s a completely different game which involves a shitload of risk and skewed expectation values, somewhat comparable to SmartAleq’s experience (though I completely disagree with it as standard reality). Does it make more sense to pay labor more money when it becomes easier to produce goods and said goods have prices drop?
It’s not that I’m expecting schools to teach stuff that can be used immediately, but they should be teaching the basics so that graduates can pick up on them. And I’m not particularly blaming schools alone - our culture of anti-intellectualism is a lot to blame also. When I was in school teaching skills would involve COBOL, Fortran and PL/1. Not to useful today, but I got a good background in the basics of programming languages, and could pick up anything.
The skill of the future is in logical thinking and adaptation - or specific skills for jobs that can’t be automated or outsourced.
Well, I’m sorry your startup business failed, but at no point in your post did I see you state anything that you or your partner could have done differently. Plenty of people start businesses that take off or pay them handsomely. A lot of them are just mundane, run-of-the-mill businesses like pizza places or roof contractors. A lot of them fail the first couple times out. My old boss had several unsuccessfult tech start ups before becoming the head of one of the groups at the billion dollar consulting firm where I work. While he isn’t the most awesome guy in the world and he’s not Warren Buffet wealthy, I’m sure he did quite well for himself.
There are plenty of CEOs and executives who were not born into wealthy families:
Lee Iacocca - Former CEO of Chrysler - was born in Allentown, Pennsylvania to Nicola Iacocca and Antonietta Perrotta, Italian immigrants who had settled in Pennsylvania’s steel making belt and operated the restaurant, Yocco’s Hot Dogs.
Bill Gates - CEO of Microsoft - born in Seattle, Washington. His family was upper middle class; his father was a prominent lawyer, his mother served on the board of directors for First Interstate BancSystem and the United Way. Not exactly poor, but hardly upper crust either.
Michael Bloomberg - CEO of Bloomberg and mayor of NYC - born to a Jewish family of Russian and Polish descent in Boston. Note that he was fired from Solomon Brothers for gross incompetance.
So, while compelling to the working class masses, your post is not based in reality.
Yes, if you are born into a wealthy family, things are definitely easier for you. I saw that in my old job. Most of our interns would be some clients niece or some directors brother or some senior managing directors godson. When I worked in the Big-4, one of the guys in my training group was the son of the family who owned a major office supply company. That company also happened to be a client of ours. For the record, I used to give him a hard time because he has long “surfer” hair and all his male relatives in the company photos were as bald as the ball-point pens they sold.
Just being born into a wealthy family allows you to do things that would be very difficult for those without means - starting a small vanity business, taking a few years off from work to go to law school, etc.
So I will agree that, yes, things are definitely easier for those born with wealth. I will also concede that those with wealth often hold themselves as elite, not through any superior skill or merit, but simply because they have wealth and think that in and of itself makes them superior.
However, I don’t agree that there aren’t opportunities for those that have the “gumption and sticktoitiveness” as you say. The chances of you becoming the next Bill Gates are overwhelmingly small. If it were easy to become a billionare, everyone would do it. And I would say it probably does take a bit of shrewdness and underhandedness. No one is just going to hand you millions of dollars and people will always be trying to take what you have.
Again, people who spend their own money maximize their own utility. (People will also maximize their own utility also when spending someone else’s money.) It’s also more efficient in terms of costs – the government has a non-zero cost to redistributing wealth. The wealth, once it gets to where it needs to be (in poor people’s hands, in government programs, etc.) also has a non-zero administrative cost. This is all true in the market and in just the general sense of “spending.”
[rant]
We as a governed society have to decide on how much market distortion we want and other costs associated with government interference and what goals we want in light of what is best for society overall. I think anyone but anarchists agrees with that notion. The problem is that there are a bunch of moving goal posts (minimum wage, wage gaps, wealth inequality, homelessness, poverty, etc.) and the more government intervenes and tries to control these goal posts or identify new ones to rectify, the more society suffers. I’ve stated this before, and I’ll state it again, the most efficient way to redistribute wealth is to simply give needy people money. They will use that money in the market, and let market efficiency handle distribution of those things that the needy people need. Of course, this wrought with a whole host of problems, namely free riders and people using the money not as intended (booze, drugs, alcohol, gambling and other vices). In my opinion, these are easier problems to identify and control and is the least distorting and least costly to the market. But, as our society has developed, it’s probably too late to employ these measures.[/rant]
I’m not sure what you’re getting at. If you’re claiming that being part of society means that government gets to confiscate what they want, from who they want, then why don’t we just let the government dictate what I should earn and control the entire market place?
Sure we have lower prices - but now we have a lot of people who can’t afford to buy things even at these lower prices. Before they bought on the supposed equity in their houses or on credit. That’s not a sustainable situation. Plus, the GDP growth had all gone to the rich.
The question is how we are going to deal with the fundamental problem of making the consumption our economy needs possible without excessive debt. Taxing the rich for infrastructure is not going to decrease consumption a lot from them, but may increase it by getting money to thosw who will spend it.
I’m curious as to why you think SmartAleq’s post isn’t reality. Do you have experience in this area?
I agree with you that this is the hope. But this is why I always look for data on real wages which accounts for this kind of thing. Still, I must reiterate my ignorance of how this is actually calculated.
Actually I think GDP is a poor indicator of wealth. If I make enough money to work less, GDP may barely go up, even though I consider my total benefits to have increased considerably. Still, it is probably the best we have.
No, absolutely not, I want to be clear on my position on this point. I’m not faulting anything anyone is doing on that particular front. Prices on labor change like prices of anything else. My concern is simply that benefits really aren’t being shared. For instance, msmith makes a comment about starting one’s own business; I agree with the sentiment but it is a hopeless position. Even if we were all somehow exactly even in skills, we can’t all own our own business. It would be a horrible way to run an economy. People would naturally tend to specialize. Suggesting that the only way to accrue benefits is to run a small business or become a CEO or upper management type is, frankly, offending to my sensibilities about economic organization (not some pie-eyed sense of fairness).
As stated before, unemployment was low. I don’t have the statistics handy, and I’m not about to go digging through the BLS reports at my library, but I assume that technological gains have decreased demand for skilled labor. Unskilled labor demand increases, but since these people are interchangeable, and since skilled labor will compete for these jobs (skilled blue collar labor has less wage stickiness than white collar labor), wages stay the same or are lower.
I will disagree with your last sentence, but I’m too busy to dig up cites. I won’t disagree that they have accumulated more wealth, but that’s because they benefited the most from the tax cuts. But, then again, they did contribute the most to taxes so that makes sense that they receive the most benefit. And, since they own the operating capital (corporations and private institutions aside), since it’s easier to do business with less taxes, it makes more sense that they have increased profits, too. Is this fair? Yes, in the sense that for whatever reason, their operations and risk have been rewarded. But, it probably doesn’t help out societal goals of helping the needy. That is a more sustainable and realistic goal than overall wealth equality.
I would lower taxes for those in the lower tax brackets and keep taxes the same for the highest brackets. That should free up some money for most people, particularly since tax time is around the corner. If consumer spending is what is needed, then I would (ugh!) do another rebate check, but it would target those making $105,000 or less (if I remember my tax brackets right). Those making $28k or less will have the lion’s share. If more capital is needed for business growth, then I would empower existing FHA type lenders and small business lenders (but these guys (SBA) seem to be just as awful as large banks when it comes to lending money). To solve this, I would empower FNM to guarantee those loans, but with more oversight (this isn’t as simple as it sounds, and the economy might actually correct itself by the time this happens). Oh, re-focus government spending on infrastructure rebuilding. To combat the increase in debt, the US economy has to be more business friendly. So, I would also close a bunch of business loopholes while decreasing the overall corporate rate.
In terms of VC funding in tech start-ups, my experience is somewhat the same as SmartAleq’s. The way to decrease control of IP is to issue warrants in the business, and a hefty cut of the IPO. I used to do this in private practice all the time. It’s the most fair way to do it because these things are really risky. Most VCs don’t even break even at IPO. To say that there isn’t risk with those with the purse strings is a misnomer. This is also a long protracted process, especially for first-time inventors, who clearly have little negotiating leverage. If the tech is good enough, VCs will part with control if they control the IPO/manufacturing process. The problem, of course, is knowing what is good enough, and what the market wants. Why does Amazon.com succeed where pets.com fails (bullshit one-click ordering technology aside)? I think even pets.com has even had some sort of infrastructure that could be sold off at bankruptcy. IIRC, Amazon (and Yahoo?) didn’t even have light fixtures.
However, just in terms of doing well, most of it is just hard work and knowing the market. I have friends who are not college educated that just picked up the family business. Most of those friends are white who have have opened gas stations. They do better than I at my corporate gig, but they work more, so I guess it balances out, though they are their own bosses. My Indian friends all own hotels. These guys are loaded. My friend’s dad started in this country doing small repairs for this absolute garbage, by-the-hour motel. He bought it and turned it around. Now, he has a veritable empire of motels.
These businesses have an easier time securing financing because banks and other financial institutions understand these business and have many, many comparables as to how these business will operate and can find a way to recoup losses from what could be a bad investment. Tech start-ups are completely alien to lenders. At best what they could hope for is that the tech might be worth something to someone else, so they can possibly sell it off to someone else.
I guess I feel that we are, but you have to look at it from an employee’s point of view. Their incentive to invest in themselves cannot possibly improve by company loyalty decreasing or even disappearing altogether. And this impacts not just what they take out of school (I got a wonderful education from the same public institution that others barely walked out of knowing how to add) but what they will take out of their job. Working for a small company, I’ve noticed that it is extremely difficult to find people who are willing to stick their neck out and learn something even remotely outside of their field. At first I was a bit miffed at society, but now I’m beginning to think that these people are responding to the information they get: you can be dropped at any time. In other words, for them the potential rewards are not generally worth the additional work.
(Which is not to say this has been some kind of explicit calculation on their part.)
This is Joel Sposky’s problem with the breadbasket of new programmers: he can’t tell the wheat from the chaff. But I feel like companies in general are asking too much without promising anything in return, and people respond to those incentives by standardizing and passing tests. Business gets exactly what it asks for; it, unreasonably, just doesn’t think it’s asking for this.
I agree. And I am 100% certain the human race, nevermind the population of any particular country, is up for the task, if the incentives are right.
How is increased profit that resulted from a tax cut a reward for risk? What was the risk they were taking by having their taxes reduced? What was the improvement in their operation?
If I run a coffeehouse and the price of coffee drops 25% because there was a good crop in Brazil, I can do nothing different at my business and make more profit. I’ll be rewarded for something I had nothing to do with. It’s a myth that everyone who’s making money somehow earned it - sometimes people just get lucky and fall into a pile of money.
We are laying off skilled workers. We are laying off educated workers. We are laying off all sectors. We do not need any kind of workers. The jobs are not here anymore. We thought that the financial institutions would thrive but they inflicted some serious blows to themselves by gross mismanagement. The result of course is workers not involved in those decisions are losing their jobs too.
I just mention that as one road to wealth. Not everyone is cut out to be a business owner and not every buisiness will make their owner rich. Some people, are much better suited to working for someone else than being their own boss. And you can still be very successful at it.
Maybe I should clarify. I’m sure SmartAleq’s VC experience was accurate. Especially in today’s climate. However I don’t think that it is accurate to say that all businesses great and small are owned by the superwealthy and their idiot overprivileged offspring.
A lot of those laid off investment bankers are going to take their business knowledge and the money they saved from their bonuses over the years and start new businesses.
See now, one of the things we could have done differently was to be underhanded and try to fuck them back–and there were several ways I came up with that we could have done just that. Problem is, though, that we’re both honest type people who have those pesky ethics things so we elected to just drop back, recoup and wait for the new administration. We’re very much hoping that Obama comes through with the $$ for alternative energy, because I’ll be all over our grant/loan proposals when it does. Shoot, I have most of it already written up just waiting for the go-ahead.
Our major sticking point is that we’re very committed to keeping our business local here in the PNW. We want to increase employment here, and give back to our community as well as supporting local businesses for our manufacturing. We could easily have jobbed it out to China, but we’d rather put the business on hold than allow that to happen, even if it means we take it in the shorts for a while. We could have taken their money and probably raked in five to ten million just for ourselves on the half million investment we were going for, but the risk of having it stolen and moved overseas was unacceptable to us, even though we personally could have made out like bandits. The other thing was that they were trying to get control of future developments as well, which would have included an already R&D’d improvement that’s an order of magnitude more efficient than our prototype but which has some challenges in manufacturing that need to be worked out–as designed, the thing would be VERY expensive to manufacture compared to our prototype. The money bastards knew we had something else up our sleeves, although we kept the details from them, and even though the prototype design has a huge potential for profit they just couldn’t resist trying to grab the whole enchilada. Greedy fucks.
Well, business owners have the option of distributing their wealth directly by improving wages and benefits for their employees, and by expanding the number of jobs they provide to the community. This has the effect of reducing their overall profit, which lowers their tax burden as well. Since the trend for businesses has been to keep wages stagnant, or to reduce wages and benefits, as well as to cut jobs to increase their profits, they are increasing the burden on society as a whole by reducing the spending power of the employed class and increasing the numbers of jobless. Therefore, since it’s the government that provides the safety nets to these underemployed and unemployed workers, it’s perfectly fair to use increased tax burdens to relevel the playing field and recoup some of the damage the businesses are creating with their shortsighted insistence on improving short term profits at the expense of long term stability.