This is also why wealth redistribution works far less well than people who imagine it as money redistribution think it will. Part of the wealth is tied up in the owner, and that can't be redistributed without loss, sometimes great loss.
Let's take a concrete example. Suppose that class warfare rhetoric utterly wins, and as its first scalp The People decide that the filthy rich Bill Gates needs to have 100% of his wealth confiscated for the good of The People. For simplicity, let's assume that 100% of his wealth is in Microsoft stock. So, The People United take all of his stuff. What do they get? Well, they don't several billion dollars. They get "several billion dollar's worth" of Microsoft stock. Well... that didn't accomplish much. We can't clothe or feed the people Microsoft stock. We need to liquidate it into money to get anywhere, and The People aren't too happy about the filthy capitalist stench of suddenly owning that much stock anyhow, so they immediately sell it all. Of course, dumping all that stock on the market at once immediately sends the price plunging; depending on how foolish The People in terms of wanting to be rid of it immediately it could well plunge to nearly zero. The People destroyed billions of dollars of wealth to obtain probably hundreds of millions of dollars, and quite possibly destroyed Microsoft in the process, hardly a net gain. The stock was as valuable as it was partially because it was in Bill Gates' hands.
In practice, you can't just "claw" wealth from the wealthy and hand it to "the poor" and have the effect you're expecting. You can certainly destroy large amounts of wealth, and yes, the poor will come away with something, but it's far less efficient than the "it's all just money" model leads you to believe. You aren't taking "$100 dollars" away from the wealthy and giving "$100 dollars" to the poor; at scale, you're moving a $100 asset out of the hands of "the wealthy" and into the hands of "the poor", and that's not going to produce the results you were looking for. And again, let me emphasize, it does work to an extent, it just doesn't work as well as you might naively think.
Politics being what they are, people are going to assume that I'm a fan of this truth because I'm saying it. I'm not. It would actually be really cool if redistribution worked as easily as people thought it does! I mean, seriously, awesome. How wonderful it would be if equality could be engineered so trivially! And let me be clear, no sarcasm there. However, it is still true, and it is something we ignore at our own peril. Also, does that mean all our social engineering schemes are hopeless? Well, no, again regardless of whether I'm a fan of them or not, but it does mean that, again, it's harder than we'd like to produce the results we're looking for, and it's a lot easier to overestimate the benefit to the poor and underestimate the damage to the wealthy and the general societal wealth (and even if you don't really care about the wealthy, you ought to care about the general societal wealth) that such schemes can have.
Liquidity is an irrelevant side issue. Gates would have exactly the same problem if he tried to sell all that microsoft stock to buy turnips; he could destroy billions of dollars of wealth just as easily as the people you so despise. (In fact, if you turn it around, Gates doesn't really have 100 billion dollars. He has something that looks like it's worth that much, but only for as long as he doesn't try and use it. If you destroyed 99% of his shares, you wouldn't be destroying any actual wealth - Gates' life wouldn't become any less comfortable, and microsoft would still exist and still be making the same products. So you're not damaging the societal wealth at all).
The interesting question is who will make better use of the dollars, or indeed microsoft shares. And the available evidence is that the poor make much more efficient use of their money than the rich (indeed on some level they have to, because someone 1000x as rich as me certainly isn't getting 1000x the value from their money). They spend money rather than hoarding it, improving the economy, and each marginal dollar improves their lives much more than it would for a rich person.
It seems noteworthy to point out in the GP in how he expresses class warfare. When this is invoked (here and elsewhere) it's always the poor who are committing "class warfare" against the rich. When in reality, with evidence abound throughout history it is the rich who actually commit class warfare on a continuous basis against everyone else. Even HN is not immune to this propaganda.
Historically this has been true, but nowadays it's not (at least in the US). To quote Paul Krugman on the topic, from way back when he still did economics:
"...growth in inequality is not a simple picture. Old-line leftists, if there are any left, would like to make it a single story--the rich becoming richer by exploiting the poor. But that's just not a reasonable picture of America in the 1980s. For one thing, most of our very poor don't work, which makes it hard to exploit them. For another, the poor had so little to start with that the dollar value of the gains of the rich dwarfs that of the losses of the poor. (In constant dollars, the increase in per family income among the top tenth of the population in the 1980s was about a dozen times as large as the decline among the bottom tenth.)"
None of the facts he stated have changed. The poor have not started working. And citing the growth in inequality since the 1990s only makes his point about dollar gains/losses more stark.
>citing the growth in inequality since the 1990s only makes [Krugman's (1990)] point about dollar gains/losses more stark.
Actually, nothing is different nowadays as from long ago in history: the class-warfare is still the rich (capital) waging class-warfare on the poor (labor). Krugman, whom you quote, realizes this as well and rescinded his comments from that time:
"I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications. But I think we’d better start paying attention to those implications."[1]
"The pie isn’t growing the way it should — but capital is doing fine by grabbing an ever-larger slice, at labor’s expense."[2]
Neither of the posts you cite contradict Krugman's original argument. They merely argue that the rich have a new way of becoming richer without exploiting or the poor (namely robots).
The mood affiliation is different, certainly. But I'm citing arguments, not tone.
There’s an implicit notion here that we’re waiting for the poor to start working. Perhaps it's coincidental, but I’d like to call out a possible conflation, because it's something I've seen expressed from time to time on Hacker News, and I think it perpetuates erroneous beliefs about poverty.
Krugman here is talking about the very poor; this is a relative statement, and it is almost a tautology to say that most of them don't work. (Rather, one should be quite scandalized that anyone who works could still be very poor.) Whatever the merit or relevance of his point may be, he’s not trying to characterize the conditions of poverty. He's trying to express the scale of the wealth disparity between rich and poor, and point out that a simple model of rent-seeking cannot account for it.
‘Poverty’ itself is a somewhat relative term, but only somewhat. People recognize hardship when they experience it, and a plateau in the relation between happiness and wealth has been identified. At some point down the sloping portion of that relation, we have to recognize poverty.
I do not think that any scholar has disputed that there are a significant number of Americans who work as much as they can, willingly, and yet live in poverty. One can argue whether most of the impoverished have work, but one cannot dismiss those that do. It is inhumane and does not honour their effort.
Maybe they are stupid people, with bad lives, who make bad decisions. Let’s allow every secret prejudice we have, just so long as we do not ignore that they work and go wanting for things we regard as essential. It is not by choice nor lack of action that they experience hardship. There is no more justice to their income than there is justice in the grades of a bell curve. They cannot work any harder or smarter than they are working already.
I can't read your link. It's my impression that two-worker households are much more common now among the poor, in which case the poor are working more on the whole, and they're certainly being paid a smaller share of the value of their labour (see the worker productivity vs. income graph).
There is no relationship between "worker productivity" (real GDP/worker or real GDP/hour of labor) and the value of labor. When capital substitutes for labor, it reduces the denominator in the GDP/worker equation, thereby increasing productivity without increasing the value of labor.
Further, most graphs of the sort you mention compare mean productivity (you can't measure any other kind in aggregate) to median income, which is a statistical fallacy.
If you have data suggesting the poor work more than in the past, please present it.
"Class warfare" is waged through assets, not cash. See: expensive real estate, and other socially exclusionary asset allocation mechanisms, such as college educations.
This just seems like a complaint about illiquidity of certain assets, which is a legitimate concern, but also a pretty commonly addressed one, because it already arises semi-frequently. If you were one of Sam Walton's heirs, for example, you can't just dump all your Wal-Mart stock on day 1. But if you want to turn that in-practice-fairly-illiquid holding into more liquid and diversified holdings, you are not SOL. It might take a few years, but it's perfectly possible to liquidate most such positions without destroying them, and it's done routinely. There are even financial folks who specialize in exactly that, who you can hire if you'd like.
That's only the example, to make it easy to grasp. The same thing happens at scale in real life, too, it just isn't so obvious because it looks like merely the background state of the world, rather than something that is actively occurring.
Again, people are going to have a hard time reading this as a morally neutral statement, but the fact that taxes exist depress the value of assets on the market. It's already priced in to the value of the asset, so it doesn't look like something that is "occurring", but it's still there. This is a morally neutral statement, and yes, taxes can fund things of value that can bring wealth to the society at large, etc etc, but all of that adds to the truth, it does not somehow "undo" this fact.
> and yes, taxes can fund things of value that can bring wealth to the society at large, etc etc, but all of that adds to the truth, it does not somehow "undo" this fact.
Isn't the net effect what people are interested in? If you impose taxes and then do nothing useful with the money, sure, that's an easy negative. And if you tax only unproductive private-sector assets and use them for public goods, that's an easy positive. The real-world situation is that you typically tax assets or income that are at least partly productive, and use them to produce things that are at least partly valuable. You come out ahead if the things you do with the tax money are better than what would've happened absent taxation, for some value of better.
The contention of people who support high taxation (as most of us in Denmark do) is that the net value is positive, and we are therefore overall better off and more prosperous than we'd be if we did not have taxation, or had much lower taxation. Partly this is because of a view that certain systemic problems can be much more efficiently solved by the public sector: it's difficult to imagine the private sector producing Copenhagen's public transit system, or the Danish healthcare system, especially for the same money. And partly it's because the prosperity we enjoy seems to generally require a backdrop of "things working well" that the state partly provides: good transit, low crime, few homeless people, safe buildings, functioning court system, educated populace, etc.
Unfortunately, I think this concept is totally lost on inexperienced disciples of Rand. An understanding of the world and its historical development is a perfect cautionary tale as to why purely "meritocratic" systems will never produce anything of lasting value.
The industrial revolution was bankrolled by extreme government spending at draconian (compared to present) tax rates during the World Wars. Every technological and scientific breakthrough of the last hundred years was bankrolled by the state either directly or indirectly. This fact is lost on a generation that takes all of this for granted, because they naively believe that progress is the natural state of civilization.
Today, a president like Eisenhower would be called a hopeless bleeding heart liberal. Who cares that the USA became a dominant scientific, technological and economic powerhouse under administrations like his?
History is the best teacher. Personally, I will watch the disintegration of these naive "meritocratic" policies with great interest in the coming years. Who needs public investment in infrastructure, science or healthcare?
as a guy who's modeled and built economies for mmos, i can confidently say the more movement and activity in your economy, the healthier your economy is. consistent, steady growth and activity, rather than spikes (unbridled liquidity events) and valleys (accumulation stagnation), is the most desirable mode.
for a real world microcosm view, just look at the last six months of bitcoin activity. who on earth would consider that healthy?
> There seems to be no quick way to liquidate that much wealth without destroying some in the process.
That's not actually wealth that exists being destroyed, that's a poor measure of the wealth represented by a stockpile being revealed to be poor. The quoted market price of a unit (which is basically the marginal price of the last/next unit sold) times units held is not an accurate measure of the total value (wealth) represented by a stockpile of a marketable asset.
Strawman. Safety net programs aren't about "wealth redistribution", they're income redistribution. Further, there are social factors and goals beyond aggregate economic growth to consider.
It's called a strawman when you shoot down an idea that nobody else gives a shit about, however explicitly you do it and however many latin tags and semicolons you use.
Groups who capitalise phrases like The People traditionally want to redistribute control over the means of production, ie. they would have community ownership over microsoft itself. There aren't any socialist revolutionaries who want to break open the bank vaults and just start handing out cash, except in the popular imagination.
The other side of it, the one that's actually practiced in europe etc, is income redistribution, and that's different again.
Wrong; that's only part of it. Strawmanning is when you impute a weak argument to other-side proponents that isn't actually representative, so that you can knock it down, leaving the impression that there remains nothing against your side of the issue.
Following the logic of this post, you can't redistribute wealth, only money. ” The People” don't want to own companies, they want enough money to feed their families. The problem isn't that Bill Gates has a lot of money, it's that wealth is a system of exponential growth. It is somewhat unfair that his money allows him to make more money at such an outsized rate.
Taxes are a way to put wealth on an logarithmic scale instead of an exponential one. We don't want to forcibly take money from rich people, we want to make it harder for them to make more of it. The point of the post its that wealth is related to having something that can be traded for value. Higher taxes (potentially to support a Basic Income) would leave the rich with their ”wealth” while taking only money from them, hopefully leveling the playing field for everyone else.
I'm not sure I would say that "The People" don't want to own companies. This report from Give Directly suggests that giving money directly to the poor resulted in a "+116% percent increase in monthly household investment in land, farm inputs, livestock, housing and household durables..."
These purchases are money generating assets. I think you touch on an important point though. It's much easier for a random individual to turn money into a money generating asset than it is for them to take a random money generating asset (MSFT stock) and turn it into cash. Ownership of a money generating asset requires domain knowledge, whereas you can choose to spend money where you already have domain knowledge.
Both wealth and money (as defined in the article) can be distributed. What good is money if a person doesn't have a "wealth of knowledge" in order to make good choices with that money? Wealth === value, truly useful, Money === Exchangeable notes or coins or electronic funds which individuals may use to meet an agreed upon metric of value in a trade
Increased money available to the consumers who have non-zero demand for a set of goods can reasonably be expected, under most circumstances, to increase the market clearing unit price for the goods -- but with most reasonable sets of assumptions the relative increase in unit price will be less than the relative increase in available funds to consumers, and redistributing money from one group of people to another will increase the latter groups purchasing power, decrease the former groups purchasing power, and increase the number of units sold of goods and services which the latter group has a greater marginal propensity to purchase than the former.
It does when it's a nanny state telling people to spend.
First, taxation is not redistribution of wealth. In practice, it's always a lot heavier on the middle class than on the elite, the later have better means to avoid taxation. Second, this money is never just handed over to the poor. Here in Brazil, for instance, it's used to back credit programs by state-owned banks, and interest rates are high.
If you want to see the result of this politic in practice instead of theory, just fly down here. The poor are buying more and drowning more in debt because wages still don't follow prices, and still have poor access to education and health. Heavy taxation and 7% "official" anual inflation rate (the real one is double that) erodes away the middle-class purchasing power. All that while banks break anual profit records.
Then the president makes an announcement claiming there aren't poor people in Brazil anymore. Mission accomplished right? They successfully moved the population from unskilled poor people to unskilled indebted people. Screw that.
> It does when it's a nanny state telling people to spend.
This seems to be an article of faith (and one using buzzwords with no objective meaning) for which neither evidence nor argument is offered.
> Second, this money is never just handed over to the poor.
Concrete proposals to do just that (e.g., Unconditional Basic Income) have been made.
> Here in Brazil, for instance, it's used to back credit programs by state-owned banks.
And there might be all kinds of valid critiques of that specific use of tax funds, but it would be fallacious to conclude from the validity of those critiques of that specific use that using tax as part of a policy to redistribute economic returns from the wealthy to the poor is universally improper.
> This seems to be an article of faith (and one using buzzwords with no objective meaning) for which neither evidence nor argument is offered.
What do you mean? The argument is my entire comment explaining what's happening here.
Brazil also has what would be equivalent to a basic income, it's called "Bolsa Família" and guarantees a certain income for families based on the number of members. In practice it has been used to manipulate votes, every election there are rumors the program could end so poor people keep electing the same (already proven corrupt) party that championed the program.
In theory those ideas are beautiful, but I'm not seeing it work in practice, and I'm cynical it can ever be.
> Brazil also has what would be equivalent to a basic income
No, it doesn't.
> it's called "Bolsa Família" and guarantees a certain income for families based on the number of members
Bolsa Família is a combination of a variety of traditional social welfare programs of the type that Basic Income is laid out as an alternative to, not an equivalent of Basic Income; it features a variety of means-tested and other qualification-based components. The part you seem to be referring to is a benefit with a fixed cash value per vaccinated child attending school to families whose total family income is below a certain threshold. It involves both means-testing (the family income threshold to qualify) and behavioral testing (based on vaccination status and school attendance) of exactly the type that Basic Income is laid out in opposition to.
>It does when it's a nanny state telling people to spend.
States are not magic. Economics does not suddenly turn into a zero-sum game just because consumers are spending food stamp money instead of "real money" from jobs.
In my experience, as part of my family is from ex communist societies, when you distribute money, there is concentration of power.
A government powerful enough to distribute all assets is super powerful, and those that control this government(the party) have all the power.
Having all the power, they have all the material resources for them, their families and friends, even when they don't have "money". They want a car, they ask for a car with any excuse and the day after they have the car, they want to travel and so on.
The rest of the society live in conditions of near slavery. They could ask for a car, as they are "equal", but it takes years to come, and when it comes, it is a horrible car you could not choose anything about.
Also corruption is levels of magnitude bigger than anything in something near capitalistic(even paying more than 40% to the state) societies. If your wife is beautiful and the people of the party wants to fuck with her, they will blackmail her with the working conditions of her family. The same party that controls the media and justice and the only company that hires people.
That was the reason my family emigrated, all at once.
>The rest of the society live in conditions of near slavery. They could ask for a car, as they are "equal", but it takes years to come, and when it comes, it is a horrible car you could not choose anything about.
Wait, you mean they have homes? As in, stable places to live that don't put them in debt peonage their whole lives?
Wow, that's a pretty big rise in their standard of living versus current-day neoliberal capitalism ;-).
For the love of God, pick a movie about eastern Europe 30 years ago and watch it. You don't know what you're saying.
The only way to arrive at an opinion like that is lack of perspective.
Some people say that living as humans in the wild is preferable to "debt slavery" or "peonage" or whatever the leftists-word-du-jour is. Would you agree with them ? Can you see that you may be suffering from a similar delusion ?
Bill Gates is a special case -- I would imagine the vast majority of stock (surely over 95%, maybe 99%) does not have value because of who owns it.
Also, if the rich are sitting on wealth which loses values as soon as it is spent, perhaps quite a lot of the "wealth" was never really there in the first place? (although there we are perhaps getting into philosophy)
If there is a revolution, then all financial assets are worthless overnight, stocks, bonds, whatever. Even physical assets lose a lot of their value - a factory that can't get raw materials and can't get their product to retailers is worth a great deal less than an identical factory with identical workers that is a going concern.
It's arbitrary who owns it, it just has to be owned. On a very superficial level, it's supply and demand. Increase supply without increasing demand causes price to fall.
It was really there because it generated a lot of wealth, eg: Windows 8 (if you think it has any value heheh). In the hands of the poor, the company got destroyed and it won't produce any more windows.
I have always found it odd people who are so against wealth (or income) redistribution always talk about the taking of money from the rich to the poor. Where have you been the last 30 years (in the US)? The only redistribution has been from the working poor and middle class to the rich.
Really against wealth redistribution? Talk about a bottom up approach to tweaking our economy instead of trickle down...
Actually... the redistribution is closer from "the old rich" to "the new rich".
50 years ago, when you said "the rich", it would mean descendants of Carnegie, Hersey, or other big name company builders who created monopolies in the late 1800s and early 1900s. The majority of "the rich" were lawyers and doctors with Ivy League degrees and long pedigrees.
Today's rich are Bill Gates, Mark Zuckerberg, Warren Buffet, Gabe Newell, Elon Musk. While you'd call them perhaps middle class, or upper middle class (Gates and Zuckerberg went to Harvard afterall), their empires are clearly self-built and self-sustained. These people did not inherit their riches like "the old rich" did.
The "new rich" suffer from boom and bust cycles. 20% of Americans will find themselves in the position of "New Rich" for at least a year, before their self-built empire falls back down to middle-class or lower status.
I admit... this is partly because college tuition rates were much much lower for Generation X / Baby Boomers than it is today. Government programs for education were never stronger than in those years. Today's young face rising tuition rates as education costs are cut... and for-profit schools have started up to more or less steal money from today's youth.
I don't understand the point of your comment? We should feel bad about people who were rich only for a "little" while? I feel bad about people who lose their jobs that were out sourced and then need to take a lower paying job to survive.
Sorry, still plenty of rich people who earn their money the old fashion way... They inherited it.
I wasn't even talking about individuals but a system that rewards people who already have wealth over the working poor and middle class. Worse, now with the "Citizens United" ruling we are creating a plutocracy that our Founding Fathers feared more then anything.
according to another article I read the new rich 10M+ wealth are mostly money mangers taking a cut of the money moving around. and collecitng it thtough capital gains.
As far as I know there are no proposals to redistribute wealth by seizing assets from wealthy people. They mostly revolve around increasing taxation.
Right now, when Bill Gates wants to use some of his wealth that is tied up in Microsoft stock, he has to sell it. When he sells it, he pays a capital gains tax of 15%. If we increase that tax, Bill gets less money and more of it goes to the government to be redistributed according to the wishes of the people (in theory!). There's no question of what the government is going to do with a bunch of stock.
The government ends up with cash, not a pile of Microsoft stock, which is the situation the OP was advocating against. The difference is the government doesn't have to sell off and devalue the stock to extract the value from it.
Yes, technically the government is inserting itself into the transaction and seizing some of the value. But that's what all taxes do.
The government is also the party that is responsible for enforcing the terms of the transaction (via the justice system) if one party where to try to defraud the other. In effect it's more like a transaction fee.
Eliminating the favorable taxation of capital income compared to labor (and most other) income is eliminating a feature of the status quo tax system, which amounts to major capitalists seizing wealth from everybody else.
^This. It's easy to see this when you look at the numbers that show productivity rising while lower income wages stagnate. Higher income earnings have gone up an extreme amount. We've built a society where gains in productivity are not shared and that's not an accident.
This is a really salient point. I would go a step further and ask whether or not that $100 is better in the hands of a wealthy person (in the context of this article - a person who would put that money to work in the local/national economy to make more of it), or in those of the poor person. Certainly the latter can put it to great use buying necessities of life, but in the hands of the former it might increase the latter's ability to find a productive job. I'm not really a fan of trickle-down economics, but I think it's more realistic than Robin Hood economics, for the reason you espouse.
I agree that in theory it would be awesome if wealth redistribution worked the way we think it might. I'd love to live in a Trekkie world where everybody seems to have all needs and wants met. In reality, redistribution is very much like throwing money away, considering the long-term impact of such. I think people are mostly either wealth generators or destroyers. Money in the hands of a benevolent generator has the possibility of benefiting many (even though in practice only a few wealth generators actually benefit the average person). In the hands of a destroyer it benefits only them, and only for a short time. Trickle down sucks, but it might be the most realistic option.
That said, while redistribution doesn't work, getting rid of tax shelters and deductions for the wealthy would.
> I would go a step further and ask whether or not that $100 is better in the hands of a wealthy person (in the context of this article - a person who would put that money to work in the local/national economy to make more of it), or in those of the poor person.
That's a testable hypothesis, and as it turns out it's already been refuted: research has shown that dollar-for-dollar, tax cuts are a net drag on the economy, and food stamps deliver the biggest bang for buck economic stimulus. Even investments in infrastructure don't deliver as much of a GDP boost as food stamps. Giving that $100 to a wealthy person is one of the least productive things you can do with it.
And I actually think that furthers the idea that "money == wealth" isn't a helpful way to look at the world. Why are food stamps so effective? Because when you're hungry, food stamps are astonishing wealth to the recipient, far more than the societal costs of providing it.
Unfortunately for people who read this as a strong endorsement for general redistribution, it is indeed the "biggest bang" and once you have filled someone's belly (and generally filled in the lower Maslow levels), you no longer have such simple options to take a bit of wealth from one and give a lot of wealth to another. At the margins that's not the choice we face; usually it looks more like my original post.
I am a libertarian, but I greatly value the social safety net. It is an incredible, incredible source of societal wealth. The problem is that there's no way to scale the safety net up beyond being a safety net, because again let me emphasize that would be awesome, but it just doesn't work.
Yes, wholeheartedly agree here. I was not thinking of having the basic Maslow levels met, as I think that kind of social net should be somewhat guaranteed, and the economic benefit is obvious. Once those needs are met, does a redistribution of $100 have a net positive or negative on the overall economy? Not sure, but gut tells me negative. The wealthy will invest, which has a tiny net positive on the economy that compounds over time. The non-wealthy will consume, which has a positive immediate benefit on the economy, but poor long-term benefit along with terrible environmental consequences. Really, we probably need both for any economy to survive, but consumption is what the middle class is for anyway.
Economy is driven by consumers so making sure consumers have more money is surefire way to improve economy. Giving the money to business owners (or not taking it away) doesn't improve anything beacuse their investments are not limited by money owned but by their customer base which does not change. At best they'll spend additional money on advertisment which will just steal some customers from their competition at almost no benefit to the economy apart from increased activity in advertisment agencies.
>I would go a step further and ask whether or not that $100 is better in the hands of a wealthy person or in those of the poor person. Certainly the latter can put it to great use buying necessities of life
There has been a lot of thought and data on this already. The answer is in - giving money to poor people is much "better" as the money travels much further. They buy the "necessities of life" quite quickly, and the money changes hands several times, benefiting other (mostly poor) people along the way. Wheras in the hands of a rich person the money is unlikely to do that. It mostly goes into an investment as there are no necessities of life urgently needed. (lower Marginal Propensity to Consume http://en.wikipedia.org/wiki/Marginal_propensity_to_consume#... )
I found these posts interesting, and I don't know what to think of them. In terms of large corporations, I do think it would be more beneficial to split the money more evenly amongst the people who helped create the wealth, and, with bill gates in particular, is having money in stock actually generating wealth? Sure, if he sold it all at once it would crash, but if he slowly started getting rid of it and turning it into cash, what would Microsoft actually be losing? Wealth, more evenly distributed, would give more people a greater chance at, in turn, creating more wealth. I think one of the things, or at least one of the things that perturbs me, is the huge difference in salary that key players are able to command, through connections or plainly through the non-unionable work that employees can offer, limiting, collectively, their negotiation power.
This was just a guttural post, I'll probably need to re collect my thoughts and edit this or post something again more in line with the op
I think I get what you're saying... mainly that when wealth is so centered in that 0.1% upper crust of power brokers, that it keeps potentially wealthy people off the boat. Combine that with the fact these people are well connected and intertwined, and it becomes
> Wealth, more evenly distributed, would give more people a greater chance at, in turn, creating more wealth.
Yes and no. Look at lottery winners (or other windfall recipients) as an example that the average person cannot create wealth. Some people are able to create wealth and most are not. Let's say Bill Gates does indeed give every person that shares his picture on Facebook $5000 dollars. Most people will waste it, some will use it to pay down debt, and a small percentage will create wealth from it. I think there are two groups that could potentially benefit the most from this. Upper lower class folks can easily put this money toward education and skills that would have a net positive. Upper middle class folks might potentially start new businesses and markets which have a definite impact.
If people have a problem with current wealth distribution, there is a very easy (not easy in the sense of doing it, rather in understanding it) way to reallocate it - get out of debt. Debt is one of the main ways rich people get richer, by reallocating money from the poor to the rich. Getting rid of their main source of income would force them to invest in real, tangible businesses that solve real problems (because presumably without debt, nobody is buying a new TV yearly anymore). I believe debt is the primary source of economic stratification right now, not income.
> In terms of large corporations, I do think it would be more beneficial to split the money more evenly amongst the people who helped create the wealth.
Amen to this. This culture where CEOs earn 20x the average employee salary is screwed up. Also, it would be beneficial if they didn't own every politician ever created, but that's another story.
The process you imagined will only produce the opposite outcome: when the price of MS stock plunges to zero, Gates himself will likely buy back all his (confiscated) stock and since MS the company operates independently from the stock market, the real value of the company is not destroyed, and will likely bounce back when Gates buys back all his stock. Soon he will regain all his lost wealth and be filthy rich again. This actually happened in 90s Russia: when the former Soviet Union was no more, then Russian government issued every citizen shares of the SU state owned entities - factories, OIL FIELDS, etc. As you rightly pointed out, ordinary Russian citizen didn't know what to do with these "shares", they dumped them cheap. Some enterprising individuals then acquired them cheap and that's how the Russian Oil Oligarchs got their wealth.
Wealth is also perception based and circumstances based. The value of a product or a stock can be increased with the help of smart marketing. Does it mean the wealth has increased? Many entertainment product would lose the value if suddenly, say a serious war is declared, or a better alternative product appears. Where the wealth disappeared?
A similar story was illustrated in Carl Barks' Scrooge McDuck story.
A tornado lead to Scrooge losing all his money to everyone. This lead to everyone leaving their job and going on vacation. Soon, goods became scarce, so they had to turn to Scrooge who were selling produce from his farm at inflation-level prices. Soon everything returned to its usual equilibrium.
(Scrooge owns a lot of businesses, anyway, so that would be another avenue for him to recoup his losses.)
I don't think that story means what you think it does. It's a tale of wealth and power. Money is just one part of the equation.
It also perpetuates the right-wing myth/prejudice that poor people are lazy and can't handle larger amounts of money than they "need", which has been proven wrong repeatedly.
> I don't think that story means what you think it does. It's a tale of wealth and power. Money is just one part of the equation.
You automatically take me for a fool when all I did was present the story, not my interpretation of it. Fiction can be interpreted in many different ways, independent of the author. I think the story is saying that there is more to wealth than just money; that you can't just throw money at things or people and magically get the equivalent amount of wealth.
How is it about power? Scrooge recouped his money by just working on a farm and selling the produce. If it was about power and/or assets, he would have recouped it through his businesses (of which he owns a considerable amount of), as I hinted at in my post.
> It also perpetuates the right-wing myth/prejudice that poor people are lazy and can't handle larger amounts of money than they "need", which has been proven wrong repeatedly.
Maybe it does. I think it has more to do with the fact that you can't just inject money (or redistribute it) into an economic system that is more-or-less closed (there is a more or less fixed amount of labour in the system and so on) and get the desired effect. Without some restructuring of the system, you're probably going to get a lot of undesirable effects like inflation, which might just return you to where you were (or leave you in a worse state). Scrooge had been hoarding all of that money for decades... to put it back into the system has the same effect as to print money.
If the story was motivated by some right-wing philosophies, I think it was more motivated by the simplistic model of human motivation for wealth and and incentives (everyone immediately goes on vacation when they have met a windfall). Scrooge is more motivated by money itself than wealth so he was able to buckle down and get his money back.
But I'm not an economist so my opinions might be wrong. Nonetheless I don't consider myself a "right-wing", which is a rather vague concept in this discussion since you're from Brazil and I'm from Norway.
I'm sorry, I got the impression you were corroborating the parent comment's idea that money is better kept within the rich.
The whole economy could go bust and society revert to bartering, yet Scrooge would still come out ahead because he owns the means of production (the farm/businesses) - assuming he has the power to uphold his ownership either by force or politics.
Re. motivation, I wasn't implying it's intentional, cultural/social context is carried into everything we do. An alternative ending would have people starting their own businesses, producing value and growing the economy as a whole. If written by a norwegian, maybe Scrooge would have found oil within the city borders and distributed the proceeds to all residents :)
Let's take a concrete example. Suppose that class warfare rhetoric utterly wins, and as its first scalp The People decide that the filthy rich Bill Gates needs to have 100% of his wealth confiscated for the good of The People. For simplicity, let's assume that 100% of his wealth is in Microsoft stock. So, The People United take all of his stuff. What do they get? Well, they don't several billion dollars. They get "several billion dollar's worth" of Microsoft stock. Well... that didn't accomplish much. We can't clothe or feed the people Microsoft stock. We need to liquidate it into money to get anywhere, and The People aren't too happy about the filthy capitalist stench of suddenly owning that much stock anyhow, so they immediately sell it all. Of course, dumping all that stock on the market at once immediately sends the price plunging; depending on how foolish The People in terms of wanting to be rid of it immediately it could well plunge to nearly zero. The People destroyed billions of dollars of wealth to obtain probably hundreds of millions of dollars, and quite possibly destroyed Microsoft in the process, hardly a net gain. The stock was as valuable as it was partially because it was in Bill Gates' hands.
In practice, you can't just "claw" wealth from the wealthy and hand it to "the poor" and have the effect you're expecting. You can certainly destroy large amounts of wealth, and yes, the poor will come away with something, but it's far less efficient than the "it's all just money" model leads you to believe. You aren't taking "$100 dollars" away from the wealthy and giving "$100 dollars" to the poor; at scale, you're moving a $100 asset out of the hands of "the wealthy" and into the hands of "the poor", and that's not going to produce the results you were looking for. And again, let me emphasize, it does work to an extent, it just doesn't work as well as you might naively think.
Politics being what they are, people are going to assume that I'm a fan of this truth because I'm saying it. I'm not. It would actually be really cool if redistribution worked as easily as people thought it does! I mean, seriously, awesome. How wonderful it would be if equality could be engineered so trivially! And let me be clear, no sarcasm there. However, it is still true, and it is something we ignore at our own peril. Also, does that mean all our social engineering schemes are hopeless? Well, no, again regardless of whether I'm a fan of them or not, but it does mean that, again, it's harder than we'd like to produce the results we're looking for, and it's a lot easier to overestimate the benefit to the poor and underestimate the damage to the wealthy and the general societal wealth (and even if you don't really care about the wealthy, you ought to care about the general societal wealth) that such schemes can have.