You could have this today in the US, it exists elsewhere. Yes, it would probably cost a bit more for the wealthiest people.
Until then, I believe we should not try to justify inequality based on irrealistic theoretical arguments. I see just a ploy to preserve the current situation by people in a good situation.
Because inequality and poverty is all too real. It hurts real people, unfairly. In the US. And it could change.
No, at least in those places you mention, it costs more for the middle class. And I'm not sure it's just "a bit" - the difference in taxes between the US and the multiple European countries I've lived in is quite significant.
It's fine if you believe that's part of a fair social contract. I'm European and I do, mostly - I certainly want everyone to have access to quality education and healthcare. (It's some of the other public expenditure I despise... Public TV in this day and age, seriously?)
At any rate let's not pretend Bill Gates, Warren Buffett and Bezos can shoulder everyone's education in the US.
Only when everybody you care about has a stable health/housing/food/(work) situation you get a chance to do something for yourself. Only if people around you are privileged enough to they have time to invest in you. You can start to build wealth. I don't mean with investing money. Maybe just by
- Lending you their garage - Allowing you to work without income for a few months - Taking care of your kids while you work a few times a week - etc...
TDLR: if all you and your surrounding is doing is directly aimed at surviving you cannot build wealth.
I strongly disagree with this and I think it runs counter to human nature. You're looking at quality of life as if there were some kind of absolute measure of it, but it really doesn't work like that. Quality of life is always measured relative to the people around us or to whom we are exposed in media or social media.
If you look at modern Americans they have fabulously lavish quality of life in comparison to 19th century factory workers or 11th century peasants. Even people in the poorest quintile have access to safety, food, housing and entertainment that would have made people from centuries past gasp in awe. Antibiotics! Virtual reality! Same day shipping!
But what really counts is how we perceive we are doing versus people we can compare ourselves to. That's where the suffering comes from. You have running hot water but your neighbor has a spa tub. You have the iPhone 6 but a friend just got the 12. You have a safe job that pays your bills but a classmate vacations in Portugal. I've been in other countries where the average quality of life was much lower than the US, and no one knew the difference or had any shame or sadness in their smaller cars, smaller bathrooms or lower square footage.
If there were trillionaires but they all lived on Mars or some faraway continent and we knew nothing about them then they wouldn't cause us social suffering.
What I read recently made the case for "relative poverty" being more psychologically damaging than "absolute poverty". e.g. if everyone one in your society is the same poor then it isn't as bad as being poor in a society of wealth. This made a lot of sense to me as I tasted relative poverty a few times, and there seemed to be a feeling of shame around it. Not that anyone tried to shame the (relatively) poor but it just felt shameful. I never wanted to invite my millionaire family classmates over to my tiny, run down house for example, as it was too embarrassing. I eventually moved back to a place where we had similar levels of income and there was only a single millionaire and it felt a lot better.
For something to be human nature, I think it needs more time. And if peasants knew that comparing themselves to the king just does not make sense, maybe we can learn to have the same attitude towards Jeff Bezos.
The fact that Michael Phelps and Usain Bolt have won so many medals without (hopefully) juicing or bribing officials is great, and maybe even a cause for celebration for the human race, but it absolutely does not mean that anyone can do those things.
But if significantly more people tried to do those things, I'm sure some of them would beat those champions.
A plumber in West Virginia is not unhappy because Bezos is so rich. He is unhappy because his welder brother-in-law just got paid after a better paying contract job (or is heavily in debt) and bought a used Audi.
Technology has generally always created inequality.
We should choose a system that gives one guy a billion dollars and everyone else a million, if the alternative is one that gives everyone 100k.
This is an analogy for lifestyle, the actual implications of supply demand are being ignored here.
If you're looking for validation and happiness based on what you see in social media, quality of life is the least of your concerns.
Instead of accepting this as a matter of fact, why don't you look inward at the culture and ask yourself if this is a productive attitude to have, rather than trying to coerce the world to fit your view on human nature.
Wealth, and power carry a social momentum. Antipodal to that is the high amount of frictional cost associated with change at scale. Those properties of our current economy effect what change is possible and when.
The modern economy exists in this unequal hodgepodge for the same reason some animal look alien to you, because it was not planned. Unfortunately for us, unlike animal evolution, the rate of change of the economy, tech progress, political winds, and all the social tendrils that stem from that unholy amalgam grow rapidly and defy organization.
You can call it the expected end result of human nature if it eases you. But. to me, it looks like a problem looking for some good engineering.
One sweet day when everyone is guaranteed the most basic of human necessities, maybe then we'll start caring about the anxiety a (small-minded) percentage of us feel when our neighbor has two Teslas and we only have a Leaf.
This is a crucial point that gets missed in these debates. Labour price inequality is a driving force of globalisation. That is how Nike pays 1$/day wage to Bangladeshi labourers to manufacture shoes and sell them at $500. And the reason people in Bangladesh are OK with it is because they don't have alternatives and the government is happy to flout all sorts of labour and environmental rules to retain Nike.
To elaborate, there are two conditions under which globalisation works to generate massive profits. Low barrier for the international movement of goods and capital and huge barriers (insurmountable in most cases) for free movement of people across the border. If one follows international trade agreements and immigration policies over last 40-50 years a clear pattern emerges where trade/capital movements restrictions have been continuously whittled down and immigration criteria have been tightened. The net result being incredible profits for multinational corporations.
For sure, the manufacturing countries have benefitted from the newly created jobs. India and China are good examples. China, in fact has been enormously benefitted to an extent where hundreds of millions have emerged out of poverty into middle class. To an extent where China's middle class now is a forced to be reckoned with and many believe the next wave of growth will be driven by Asian consumers.
The flip side though is the divide between rich and poor has reached unheard of levels in, paradoxically, the richest country on earth. Not only that, the poor just don't have a community or governmental support to fall back on. It boggles my mind to see the richest nation's health infrastructure crumble in the wake of COVID-19.
From my perspective globalisation is fundamentally broken. Restricting labour flow with unrestricted capital flows between countries is a destabilising force in both economics and politics.
China is also a special case as they fully understood the game that America and the West was playing and hence had a good counterstrategy. The West would promote free trade resulting in investment in developing countries. In return they open up to capital flows and their internal markets, which is what China kept resisting. With the amount of trade deficit most western countries have with China in the past 2 decades, the Chinese market should be a lot more open than it is at the moment. By delaying this the Chinese hope to avoid the middle-income trap that many developing countries fall in to under the globalisation model.
Isn't it? Even when taken to extremes?
Wealth inequality is in direct conflict with a core value of democracy: one person one vote is reduced to a bit of a joke when there are people who can easily afford to pay an army of hundreds of political operatives to flood public discourse with their opinion.
A little inequality doesn't hurt, but the existence of billionaires (even 100 millionaires, really) is a problem for democracy.
90% millionaires and 10% billionaires means the billionaires have 99.1% of the monetary power.
Even if you have 99% millionaires and 1% billionaires, the billionaires still have 91% of the wealth.
So you're saying we need a 100% estate tax? Because the same applies to those lucky enough to be born into rich families.
Extracting more work from the poor is often veiled under the guise of "improved productivity", so this measure of praise is not particularly helpful.
When companies measure labour productivity by the bottom line "Revenue output per Wage input" rather than "GDP output per worker" this ignores a subtle distinction that has severe societal impact.
There are ways to mitigate the negative effects there, but you can't get rid of it entirely; there's only ever so much land around. The more money the affluent have, the worse off the working class are, even if the working class' wealth itself stays constant.
You tend to see this with home prices in booming areas: if your income stays constant as the metro's economy booms, you'll end up worse off than you were before, unless you managed to buy a house before the boom.
Most people are still at the mercy of the zip code they live in. The "global" economy has pushed wages down and made cheap goods cheaper, but claiming that a bottom 10% American has a good life because they are still the top 10% globally is idiotic.
A full-time worker deserves to be paid enough to live, period. Unskilled or not. They deserve a roof over their head, food on the table, and basic healthcare. Cost of living varies greatly based on locale, and comparing that number to the poverty wage in Bangladesh is what the invisible hand does, yes, but it's absolutely not what's fair or what's deserved.
I think the basic issue is: people will disagree vehemently about what "enough to live is", and so your sentiment, while well-meaning, becomes an empty platitude in public discourse.
It'd be a decent start. Yes, America's destitute have enough food, and yes, the "enough-to live" line is arbitrary: if you're poor in France, the government will provide you with a computer and an internet connection. I'd be happy to have a debate about whether we as a society want to pay for something like that.
But providing all citizens with basic shelter and healthcare should be non-negotiable in the richest nation on earth.
Even if "enough to live" is greater than the value they generate?
If paired with robust social safety nets, we can absolutely require jobs to pay a living wage.
I firmly believe that any currently "unskilled" worker can re-tool and become much more productive if given the opportunity.
It's also worth saying that a very easy way of increasing the QoL of those at the bottom is to take a tiny fraction from those at the top.
And generally, people aren't talking about the average small business owner who makes $200k/yr profit. We're talking about people who have more than $50m in a big money vault. It's a straw man to replace people like pg with like, the people who run email octopus or your local credit union.
"Those at the top" don't generally have that much cash. They have shares in companies, often ones they started themselves, which happen to be worth a large amount on paper. If you wanted to distribute that in a form people could actually spend (not just moving shares around) you would have to liquidate the companies those shares represent. In the process you would destroy far more wealth than you distributed and eliminate services and production capacity which were previously working for the benefit of the very people you're claiming to help.
People like to complain about public companies and their alleged focus on short-term gains, but that's exactly what this proposal represents: a short-lived and highly diffuse gain in short-term consumption for the masses at the expense of long-term capital investment and productivity.
> And generally, people aren't talking about the average small business owner who makes $200k/yr profit. We're talking about people who have more than $50m in a big money vault. It's a straw man to replace people like pg with like, the people who run email octopus or your local credit union.
If you have a "small business" in your assets worth $49m, no worries! If you have one worth $50m, that'll be 2% please. This affects something like the richest 100,000 Americans, and they're not going to have to like, sell bricks out of the family's car wash business in order to pay it. They may spitefully lay people off or raise prices rather than pay out of their personal/business assets, but that's capitalism for you. I wouldn't blame taxes, I would blame jerks.
The amount of catastrophizing and backseat economizing around a wealth tax is super strange. Income and wealth inequality in the US is by all measures extremely high. 66% of Americans support a wealth tax, including 55% of Republicans. Does anyone really think it's better to have billionaires than universal health care?
You are looking at this from a world where that isn’t the case. Money would be worth less in that scenario, and that 10% owns 99% of the wealth, which is still going to cause problems.
So even if inequality would be wild, nobody would worry about “issues of the poor”, like food or healthcare bills.
It's a gadget, a depreciating asset.
Actual wealth produces more wealth, which is why the very rich get richer even while they sleep. A gadget makes its owner a tiny bit poorer every day as it depreciates.
> Actual wealth produces more wealth
I used my computer to learn to program getting a higher salary than I"ve ever held previously. It produced quite a bit of wealth for me that would have been unatainable without it. Does that impact your stance in any manner?
Well, "poor", no. But if someone who inherited vast wealth used it all up on depreciating assets (even if it is superyachts instead of phones) then yes, they'll eventually end up with no wealth.
Of course, for sufficiently large amounts of wealth, it is effectively impossible to use it all up so it may take many generations. Jeff Bezos kids will never be able to be poor no matter what.
> Does that impact your stance in any manner?
No. The computer (depreciating asset) didn't produce any wealth. Your hard work and learning, while using it as a tool, is what produced wealth. The computer itself depreciated to zero.
No amount of hard work and learning would have been sufficient without the computer though? The computer is an absolute requirement to become a programmer. No computer, no wealthy career in programming.
You're still trading for a home and land even if you rent. It's just a more temporary arrangement.
Which we are, because inequality enables advantages in grabbing pieces of various natural monopolies. Land is a prime example; real estate is a zero-sum game (the oblate spheroid we call "Earth" has a finite geographical area, and therefore so does any portion thereof), and rich people are able to play it by "investing" in real estate (read: hoarding land with the understanding that its value will increase perpetually on average due to the fixed supply and population-scaled demand). This is inherently exploitative of anyone lacking such an ability, and inherently results in the transfer of wealth from the working class to the ownership class - both directly (via rent) and indirectly (via opportunity costs).
IMO the biggest problem is Z axis and the infrastructure enabling it (public transportation) for example.
However, since Z axis is stuck, we choose to suburbanize and infinitely expand beyond reasonable sized cities effectively making unlimited supply of real estate. Look at Phoenix and Houston.
So, what you're talking about is real-estate in places like Bay Area and New York cities. Which is not a general argument.
But that doesn't account for the decline of opportunity in the USA. As the article points out at the end, just because the rich aren't directly inheriting their wealth doesn't mean that they aren't inheriting opportunities that are restricted to a narrow class, and there's a lot of data showing that to be the case [1].
[1] https://www.weforum.org/agenda/2020/09/social-mobility-upwar...
The French Revolution disproves this.
IIRC it's only extreme poverty (i.e. living off $1.90 a day) that has collapsed; other poverty has seen more modest reductions.
The absolute rate of other kinds of poverty have not collapsed. But that statistic hides the fact that the population who are that poor has changed. People who were there moved up and out, while people who were poorer have moved up to that bracket.
It is only after people stop moving out of extreme poverty to the tune of a quarter million per day that we can expect to see reductions in less severe poverty brackets.
These sorts of discussions also always seem to skim over the surface in many ways. For example, you make statements like this -- "an entrepreneur who gets rich by reducing waste and improving productivity by harnessing technology" -- as if the reasons someone got rich are by reducing waste and improving productivity, in a way that is clearly demonstrable, when the validity of this assumption is the very thing in question. There's a circularity to these kinds of assumptions that is of the form Person A is rich by virtue of their position at X, which has been associated with an increase in efficiency; therefore Person A caused the increase in efficiency at X, and therefore deserve to be rich. The problem with this argument is that not only is the "do they deserve such wealth given the other assumptions?" complex, it's also the case that the "did they cause these desirable things" and "did they alone cause these things?" is in question.
I agree inequality isn't necessarily a problem in itself. What is a problem is inequity, or lack of correspondence between income and "true merit" in a idealized sense (including one with true competition). My sense is that this is the real argument: is it fair that someone like Bezos has the wealth he does, even as one of his workers is struggling to make ends meet? (Consider what would happen if all Amazon workers left their positions simultaneously and permanently, and could not be replaced. Is Bezos responsible for Amazon's operations?) The inequality per se is one level of argument, but the real argument is something more like "is Amazon a good or bad thing? Should Bezos as an individual deserve the credit for whatever net goodness Amazon has accrued? Is it the case that whatever credit he does deserve, do to his actions per se, or the circumstances he found himself in?"
I suspect that in a fair world, incomes would be much less disparate, even globally, and there would be much more movement up and down, and back again. There's too much idolizing of the individual, as a static unchanging thing, one way or another. I think a lot of societal ills stem from this sort of perniciousness, including "cancel culture" and many other things: the fruit you see beneath the tree is due to that tree, and will never change one way or another, and cannot be changed.
I think the lives of the bottom 20% could be improved, and I think that we should ask those at the top 10% to help them out.
I think there are other more specific things we could worry about, like house prices out of control, nobody is paying to clean up the waste they produce, governments baling out rich people etc.
Talking about "inequality" in the abstract is not worthwhile.
> Talking about "inequality" in the abstract is not worthwhile.
I thought the connection between the problems you state and inequality was obvious. I guess it has to be spelt out: inequality means the super-rich become literal rent-seekers by buying houses - not to live in, but for speculative investment purposes - hence current cash-only offers at ridiculous, above-asking prices. They don't care about negative externalities because they want more money now, and there is nothing to act as a check on their desires (since that requires money) so there's a lot of uncleaned waste. Lastly, the government bails them out because they are king-makers and politicians come to kiss the ring during election fundraisers. Elected positions are at risk ever so often during election season, but being wealthy is usually a lifetime "appointment", and wealthy people have more solidarity than politicians - and that's to politicians disadvantage.
Inequality results in power imbalances; the societal problems are second-order effects of the power imbalance. It is not "abstract" to point out that the first-order effect is problematic of, and by itself.
I think there are issues with our Democracy and our Media, not with our Capitalism.
PS: if we wanted to, a democracy could simply make it illegal buy investment property insuring that everybody had somewhere to live. Freeing people from the burden of rent. The government could probably even provide mortgages "at cost" so that the bank leaches didn't take their pound of flesh too.
We could examine our society at large and free ourselves of rent seeking behavior.
The question is, how do you stop Capitalism from subverting Democracy and the Media to perpetuate itself? I think one can successfully argue that capitalism is a human-scale paperclip maximizer, but for capital.
> PS: if we wanted to, a democracy could simply make it illegal buy investment property insuring that everybody had somewhere to live. Freeing people from the burden of rent.
Only if the wealthy allow it. You don't have to look very hard to find dead-in-the-water concepts/projects that have the support of a large majority of Americans across the political spectrum, but are hated by the wealthy, and therefore their politician proxies. These tend to die despite public popularity - alas, that's the downside of representative democracy.
You craft a set of rules that Capitalism must play within. We have a pretty good set of rules now. No murder, no slaves, no obvious pollution. But there is room for improvement.
My suggestions are... 1. More media diversity (Media ownership rules). 2. Cap political donations to something that everybody can afford. (Say for example no more than $500 per person per year, no company donations)
I also sometimes suggest that the media (and social networks) should be held more accountable for the things they print and broadcast. (it's an unpopular opinion)
America is a lot bigger than where I am in Australia. Here, I'm optimistic that we can see small incremental changes that will help us balance power. regardless of the opinions of the super rich.
With a diverse media, enough pressure can occasionally be applied in key areas.
Also, housing prices aren't "out of control" at all. Inflation is reducing the value of the dollar, and it's showing up in the real estate market. Inflation hurts anyone on a salary, not people with income dependent on assets that appreciate alongside inflation.
Also, the they in the "waste they produce" is referencing the richest business owners. They are reaping the benefits of the production processes and leaving everyone else with the pollution.
The root cause of all these things is the upper class either feeding on or taking advantage of the middle and lower classes. "Inequality" is just a term used as a window to look between the different classes.
Here in Australia, house prices are rising significantly faster than inflation. My personal suspicion is that its because everything else is so cheap, the middle class can afford borrow and spend more of their dual income salaries on their houses.
Yes sure, the "they" is business owners, but its expected that the business owners should then pass that cost down to the consumers that buy the products. Yes, the business owners are reaping the rewards, but so are all of us consumers. (It's future generations that will pay the price.)
The root cause may be that we allow some people to have too much power in our society. But the amount of money they have in their bank accounts is irrelevant. We live in a democracy so we can make rules that balances power, but we choose to allow people with a lot of money to have a lot of power.
I think its much more interesting to look at inequality of power than inequality of money.
I think inflation is rising a lot faster than you think. They don't admit there's actual inflation until it's already been here for a while.
> We live in a democracy so we can make rules that balances power
Not true and never has been. This is a pipe dream for suckers. The golden rule is that those with the gold make the rules.
> inequality of power vs inequality of money
Money buys power (lobbyists, legal bribes, media access, etc), so these are basically the same thing if someone with lots of money is interested in spending it on obtaining power.
How does that account for items we have today which were unavailable 20-30 years ago? E.g. even if I were rich in 1990 I wouldn't have a super computer in my pocket with access to infinite knowledge and entertainment.
> Inflation hurts anyone on a salary
And anyone with savings.
> They are reaping the benefits of the production processes and leaving everyone else with the pollution.
A CO2 tax would be more burdensome the further you go down the chain. Everyone is reaping the benefits there. Sure, _some_ mega corp executives get extra benefits, but in general waste producing fossil fuel burning ecosystem destroying processes have been the literal thing that has lifted people out of poverty. (To be clear I am very pro environmental regulation, climate change, etc, but am skeptical the impacts won't be felt the greatest at the bottom of the income brackets)
Anyone with savings that they keep in a mattress, or keep long-term in a checking account designed for short-term savings.
>> the lives of the bottom 20% could be improved, and I think that we should ask those at the top 10% to help them out
Governments are taking money out of people's pockets by running a printing press / increasing taxes and using them for personal gains. Solution? Ask the government to take even more money. They will be ashamed and start working in the interests of every citizen.
The "economy" is so much more than just the extraction of natural resources, and it's not a zero-sum game in general. Maybe you're conflating "money" with "wealth"?
a) it's impossible for everyone to be a (successful) businessman: somebody has to be an employee and do the actual work, y'know?
b) to be "actually rich" -- which is not just "being on the level of personally comfortable standard of living", it's more of "having certain level of personal influence" -- you have to own a share in a commercial enterprise and get the dividends from it; rare exceptions like a prominent lawyer or a genius surgeon notwithstanding.
These two are mostly empirical observations, and you can frame it very differently depending on your liking; the "exploitation of the worker class" is only one such frame, there are many other.
Also, should we perhaps count the people who didn't manage to live to be over 65 in this percentage calculation of "20%"? That'll move that number down quite a bit, I am afraid.
> The rich people today were more often than not the poor and middle class of yesterday.
Well, poor people today are more often than not were the poor and middle class of yesterday too.
And yeah, the common populace did object to the higher-ranking party members and bureaucrats having those privileges. One of the slogans of perestroika was "away with privileges", I kid you not -- people would rather elites be as poor as them. Well, the irony is palpable: thirty years later, the common populace is not much richer than it used to be (teachers used to be able to easily travel by plane on their wage, not anymore), but the top-level government officials are way, way better off than they used to be.
And it's because you can always come to the line personnel and tell them: "Don't you just hate it that while you do most of the actual work, the upper-ups earn hundreds times as much as you? Well, here's a solution: ..." And this solution was socialism and trade-unionism in the XIX century, communism in the XX, heck, even capitalism was sold as one in the very late Soviet Union, no kidding — it was seriously argued in the media that privately-owned firms would pay workers better than the state-owned enterprises, just look at the West, and many people actually belived that, really.
Of course, none of those solution ever worked, and that's exactly why they will always be proposed, in one shape or another — socialism itself didn't appear out of nothing, "when Adam delved and Eve span, who was then the gentleman?" was uttered in 1381. So there you go: the spectre of communism will haunt us all as long as inequality exists, that is, until the humanity stops existing.
What country are you describing, pal? In Soviet Union it was "вольнодумство" ("freethinking"), which was a bad thing, to own personal cars / dachas by the highest members of partocracy only. Because that raised questions concerning their loyalty and belief in the system. But even they bought all that under the name of their wives and children. We've got plenty of memoirs of their scions to stop perpetuating the lies.
The person who "earns by investing and working in both nearly equal proportion" doesnt really exist beyond outliers, this is empirical, the 1% owns as much wealth as the entire middle class, this is where their yearly income comes from,they get money because they own stuff, not by being superworkers, otherwise the inequality wouldnt be growing.
The vast majority of the 1% and 0.1% get most of their income from labor nowadays. This is a phenomenon called “The Rise of the Working Rich”. This looks like CEO compensation, top athletes, too musicians, business owners, and so on. On average, the 0.1% gets about 20% of their income from investments and 60%+ from their actual labor.
70% of the Forbes 400 are self-made, the vast majority of millionaires receive $10k or less in total inheritance, 11% of Americans will be in the 1% for at least 1 year in their lifetime, and the majority of Americans will be in the top 20% for at least 1 year in their lifetime. If you chop off the top 1% in developed countries, their Gini coefficients are very similar, implying that the US doesn’t have exceptional levels of suffering from inequality, it just produces a lot of rich people.
You're correct, but inequality would be far, far lower than it is today.
Check this out: https://en.wikipedia.org/wiki/List_of_countries_by_wealth_eq... Inequality has nothing to do with standards of living, freedom and human rights, or how well developed a country is. It's a completely irrelevant thing. Sweden has more inequality than the Ukraine and most of the world; however, many people will vote to live in Sweden than anywhere else.
Inequality is only bad if you're in a zero-sum game. The rich do have the power to extract rents and "rig the system" to cement their wealth and power. Those are things Graham is clearly against. But an entrepreneur who gets rich by reducing waste and improving productivity by harnessing technology deserves our praise. They're not causing the "poor to get poorer".
And comparing the wealth distribution of today to that of 1980 is pretty silly. We're in a global economy now, so if you want to be fair, you need to look at it from a global perspective. Almost all Americans are going to fall in the top 10% of earners globally. And global poverty has collapsed since 1980. Yes, you no longer get a comfy middle class life just by virtue of being born in the US (regardless of skills) anymore. I personally don't believe that an unskilled worker in the US deserves to be paid 10X what an equivalent worker in Bangladesh makes just because they were lucky enough to be born here.