The question people should be asking is not whose income grows and who gains the most. To me, the only relevant question is: did this person stole the money or made it honestly? If he stole it, then he should be in jail. If he didn't, then it's none of anyone else's business how much he has and what he spends it for. And by honestly I mean he didn't force people to pay him and he didn't coerce anyone to pay him. If one can't convince a rich person who made his money honestly to share or help the poor or invest in a project that would supposedly create more jobs, then maybe it's that person's problem that he can't convince.
Most people reject this Libertarian framing of the issue. The progressive point of view is that income redistribution is justified if it leads to a "better" or "more just" society; it's not about punishing successful people. They also don't think the world is anywhere close to a meritocracy, therefore the wealth people create is at least to a very large part a function of good fortune so there is no moral issue with wealth redistribution.
The US busted unions and fought organised labor in general since the 1970s, and deregulated industry enormously. Also taxation is at a historic low. Those are the causes of the massive wealth presently accumulating at the top -- wealthy people today are not more meritocratic or harder working than wealthy people from the 1950s. But they're much, much wealthier. The reduction in real wages since the 70s has pushed regular people into debt (in an attempt to live a middle class lifestyle) with all the predictable negative consequences.
This is even terrible from a libertarian point of view. Because a country without a middle class is a country without consumers.
Most people rejected the idea that slavery is a bad thing for the most of human history. The problem with the idea that one's success somehow lies on the shoulders of the rest of the society (and therefore one is forever in debt to it, some may say) is that you can't prove it. You can say it, but you can't prove it. Some people got successful despite the hurdles society put in front of them.
When you say taxation is at historic low you have to remember that it is those who are at the top and are in bed with politicians who can afford to pay low taxes. Starting entrepreneurs and mom and pop businesses pay a lot. That's not even mentioning the fact that they have a lot less options to protect their savings from inflation (which is also a tax). If you look at the US govt share in the economy it grew from about 8-10% in the 1930s to more than 50% now. Those who get enormously rich these days are mostly those who are in bed with the government.
I don't understand what you are trying to say in the first paragraph.
You can easily say that no one would be successful without roads or electricity, so there is always some percentage of a person's success derived from society.
Society lowers the cost of innovation far more than any perceived hurdles it may place in front of people, in all but the most extreme cases (like Syria maybe?).
> You can easily say that no one would be successful without roads or electricity
You can? A lot of people became successful without roads or electricity in the past. Actually, I'm pretty sure those who built roads or invented electricity became successful without those things. Then others paid them to use their invention and that paved way to their success.
Of course everyone's success depends on many things that were built before. But to claim that only a government can build those things and therefore you are forever indebted to the society as a whole is just plain wrong.
Are you willing to pay Apple for the rest of your life because it invented the modern smartphone?
I'm willing to pay Apple for a smartphone. Why would I pay them for life? Even if I did pay them for life, what would that have to do with anything?
Nowadays, everyone uses roads. If you claim today that you are a self-made person that doesn't owe anything to anyone, I could just point out that roads exist and without them you would not be successful. I guess Genghis Khan was pretty successful without roads, but what does that have to do with anything?
Right now, other people make things that allow individuals to succeed. Right now, if you succeed and claim other people did not have anything to do with it, you are lying to yourself and everyone else.
Edit: And therefore, the idea of a rich man who made his money 'honestly' is too simple to be useful in any framework that manages a modern society. The definition of 'honest' is missing.
One could argue that Ghengis Khan had to owe a part of his success to the culture he grew up in and the ability to use combined arms.
We do have a way of rewarding innovators: patents and copyrights. Now, those systems have been abused from everywhere to Texas, but it can be reformed. At least I would like to think so.
What I don't get is why people just don't look at the labor side of this argument. A wealthy person certainly didn't create a work force and educate them. He didn't provide them with a stability and other basic needs. Even at a more basic level where do all the consumers come from? Don't they buy products based on their desires that are largely due to society as well?
I really do think we find ourselves in an economic "web of life."
I don't like the idea of framing it as honest and dishonest either. I would much rather make sure that the wealthy don't have too much leverage overs others in society.
An example I would give is how credit card companies have basically pushed the risks out to merchants. Yes combat fraud. Also push for chip and pin in the states so that less of it occurs and figure out something with online purchases.
To a lesser extent we have taken steps when we recognize this imbalance. Cigarette companies can no longer market to minors. Young minds being the most impressionable ones.
I'm trying to say here that government is not the only possible provider of things it currently monopolistically provides. If you claim everyone uses roads therefore everyone should pay taxes to keep those roads well maintained I'd say you're only partially right. Government, for the most part, keeps private companies away from owning roads. If there was no government, do you think there would be no roads? Of course there would! And people would be willing to pay for using them. Except that those who use roads once a week wouldn't subsidize those who use them every day.
> if you succeed and claim other people did not have anything to do with it, you are lying to yourself and everyone else
No, I don't claim that. What I claim is that I would like to know exactly who those people are. If I use a road to deliver what my company produces, I would like to pay for this road before I actually use it. Now my business may fail, or it may succeed, but the owner of the road gets paid. I don't owe anyone more than they asked me to pay at that moment in time. Nor do they. I think that's fair. Don't you?
Typically if you have a guy build a road and you let that guy control the pricing, he charges a lot because he has a monopoly. That transfers wealth to the road builder at the expense of all the would-be businessmen who would build institutions that use the road.
So societies use governments to control a relationship between the manager of the road and the people that use the road. The price to use the road dips because of the enhanced bargaining power of the people that use the road through the institution of government. Typically governments even subsidize the unit cost of using the road by paying the road manager directly up front, because the corresponding increase in business is worth it across a society.
I think that if you have a system that focuses on individuals and their relationships to roads and road builders without regulation by a large third party that represents all members of the society, you'll get a situation where the road builder uses the monopoly power to price road usage so highly that business investment is hampered. Usually people use government institutions to manage this sort of thing, and usually it works pretty good.
So why do you believe a company which manages the road is a monopolist? Where did you get this? Why is it impossible to build another road? Or go by train? Or by air? By no means road companies would be monopolies.
A government, on the other hand, is a monopoly. Furthermore, if for some reason I dislike the quality of the services that are provided or I dislike the way they are provided (for example, I ride a motorcycle and government requires me to wear a helmet, even though it is only my life I risk by not wearing it) then I still have to pay. If I don't pay, I get fined and may go to jail. It's not just a monopoly, it's extortion.
Imagine your ISP knocks on your door and says: "Hello sir. You are going to pay us this amount a month, we will provide you with internet access. The quality is going to be completely up to us, you can't unsubscribe and if you stop paying, you'll be fined and may go to jail. Oh, and there are practically no competitors, only very expensive ones. And if you use them, you would still have to pay us." How would you like that? Why roads are different? Nearly everyone uses Internet these days, just like they use roads.
Finally, you made this point "Typically governments even subsidize the unit cost of using the road". Actually, taxpayers subsidize it, not government. Government doesn't have any money.
> But to claim that only a government can build those things and therefore you are forever indebted to the society as a whole is just plain wrong.
It is wrong because it doesn't make sense, but I don't think tks2103 equated government and society (am I wrong?). Are you equating them? Government does not represent society in any meaningful way. Almost always it's a foreign body on society.
No, I am not equating government and society. I am questioning the simplistic view that a person can exist today and succeed independent of the society they grew up in.
What do you mean government is a foreign body on society? Society is made of people, and people usually make up governments.
> No, I am not equating government and society. I am questioning the simplistic view that a person can exist today and succeed independent of the society they grew up in.
Then we are in complete agreement on that. I was pretty sure you didn't equate them, but asked because snitko made it seem like you did. I assumed he just read that into what you wrote, but better to check.
> What do you mean government is a foreign body on society? Society is made of people, and people usually make up governments.
Governments are generally not there to benefit society, but to impose the will of those in power on it. You can, of course, cite many philosophical speculations that it isn't so, but the reality doesn't support those speculations. Almost all good any government has done for the people who are not in power was fought for by those not in power, or is simply a preemptive scheme to calm down the masses.
Globalization and technology has played a much more important role than union-busting and deregulating industry (not sure how that last one factors in at all to be honest).
Think about it, before the lowest 90% were competing with themselves. Now they're competing with the Chinese, Indians, and robots who are happy with a few dollars a day or a nice greasing.
> the wealth people create is at least to a very large part a function of good fortune
Massive-scale wealth is created by the labor of others, and you become massively wealthy by figuring out how to keep more of the wealth than the laborers keep.
No one creates a billion dollars on their own. The "good fortune" is merely finding yourself in that position; the wealth was created by collaboration, on purpose.
The thing is that distribution of income refers only to the shape of the graph. Unfortunately in English the word is overloaded in the sense of "the giving of stuff". That clouds any discussion.
Please do not pollute the discussion with this Orwellian libertarian redefinition of words.
> And by honestly I mean he didn't force people to pay him and he didn't coerce anyone to pay him.
Every economic transaction takes place within the context of coercion, because property rights are themselves coercion. For instance, people who need to work to pay the rent "choose" to work because they will be evicted from their shelter by law enforcement if they do not pay.
Libertarians like to pretend that this sort of force doesn't exist, and only use the term "force" when other people enforce their right to property via taxation. It's totally intellectually dishonest, and I suspect most libertarians are aware of this but continue to use such terminology because it makes it less obvious that they are merely arguing for entrenchment of their own privilege.
Government is simply one way to enforce property rights. It's a monopoly on force. If you had 3 or more major players on the market (and working on the same territory) you'd have your property rights enforced alright. The problem with the government is that because it is a monopoly, it is very easy for it to abuse the force it has.
Of course you can't (although I do believe we can and should be free from unwanted, unpleasant labour). But hey, you asked a value based question and got a value based answer. ;)
And who's to say what's fair? People keep talking about fairness, but the problem is that it's always the other guy or some corporation who's being unfair. It's never me.
I'd say it is completely unfair that a government takes a portion of my income away from me and spends for what it considers to be important, while not giving me the slightest chance to spend it on things I consider to be an ultimate good for the world. Are people in the government somehow know the ultimate truth? Are they the ones who only do good, while taxpayers are evil?
> And who's to say what's fair? People keep talking about fairness, but the problem is that it's always the other guy or some corporation who's being unfair. It's never me.
I do. I pay a 50% tax rate, and I like it. I love that my country has virtually zero crime. I like that education is free. I absolutely love that medical care is free.
Some tasks are better taken care by the society as a whole, not by individuals. If that society as a whole is the demonized government, so be it. As long as they are not too inneficient.
I think the proper way would be to take force buy his house and land for 50% of the value and transport him to the border of the country. Then kick him out.
If you live somewhere you have to observe the rules of the society there. If the rule is 50% tax then that's it. "But I don't wanna." and "It's not fair." are not the valid points. It's not like it was in eastern block countries that you couldn't leave.
Humans are social species. The reason you can own things is that people sort of agreed over the years that it's beneficial for the society to allow you to decide about what's to be done with some things. Within reasonable bounds of course. If you decide to slaughter the cow you own and use the remains to create biohazard you can expect to be disowned of some stuff pretty quickly.
So there are around 10% of libertarians in the US. Would you say it would be fair to give those libertarians 10% of the land the US owns and let them live there as a separate country? After all, they have no less rights for the land of the country you live in than you, they were born here.
People who in reality own things are the ones with the army. Almost every group of people who chose to disobey their respective governments quickly discovered that. I see no point why US government should give libertarians any land it controls. Unless it's a small wasteland and libertarians could practically threaten the government in any way as US citizens so it would be beneficial to kick them out of the system.
And the whole "fair" thing basically ends as you graduate from high-school or college. Adults like to talk about it but don't practically concern themselves with it when they do business.
I think it's a great point. You've just demonstrated very eloquently how people with guns and monopoly on power simply don't give a shit about anybody else who tends to disagree with them.
But you do have a huge opportunity to send your income to causes you deem worthy. If you're in the US you can generally donate up to 50% of your income to registered charities before paying federal taxes on it[1].
Society isn't free. You still have to contribute to the common good, but you do have a choice as to where a very large chunk of that contribution ends up.
> the problem is that it's always the other guy or some corporation who's being unfair
Self-interest doesn't make someone incorrect. Isn't that one of the tenets of libertarianism? Also, it's not like the free market is some kind of objective tie-breaker. Outcomes in a market are highly sensitive to regulatory conditions. Before you suggest doing away with as many regulations as possible, consider that "regulatory conditions" can include things as basic as the definition of property, which is a problem that cannot be dodged in even the most libertarian of societies. Does society have a notion of intellectual property? If not, how do you propose to fund drug development? Can infrastructure be privately owned? If so, how do you stop natural monopolies from destroying competition? Should a company be allowed to buy up property surrounding your house and then ransom travel through their property off for all you are worth plus all you can borrow? The list goes on.
> I'd say it is completely unfair that a government takes a portion of my income
Whoa, there! You're assuming what you set out to prove: that the government's slice was yours to begin with. The social contract comes as a bundle deal. You "sign away" your tax dollars by being part of a society that provides services to you. Obviously no explicit consent is involved, but that's because it can't be involved. Voting is the best compromise we've been able to come up with.
Even in a libertarian society, government provides one very important service that disproportionately benefits the rich: enforcement of property law.
> Are people in the government somehow know the ultimate truth?
No, the existence of government is a compromise between a free market that has flaws and a system of absolute control that also has flaws. We delegate responsibility for the areas where one system is hopelessly flawed to the other system (which merely has to do a better job, not a flawless job). Adam Smith himself acknowledged that the free market is not suited to provide certain services (police, infrastructure, military, etc). The goverment isn't aware of any "ultimate truth" here, but they aren't going to pull the whole "box you in and take all your money" stunt either.
The are plenty of ideas and solutions that answer your questions. I wouldn't like to repeat them now as it happens in every thread when I mention some libertarian ideas. I think the important thing to understand is that a government is not some magic cure for all the problems you mentioned. If you take a simple idea that a government is a monopoly on almost all of the things that it does, then you can go from here. Monopolies are mostly not good for consumers; and a huge one with an access to an unlimited force is certainly not.
> I wouldn't like to repeat them now as it happens in every thread when I mention some libertarian ideas.
Funny, I feel like the whole "free market knows best" idea pops up in every thread even though I have no trouble providing counterexamples. I'm genuinely curious to see how you would solve the problems I brought up, especially the ones surrounding the subjectivity of property law.
> the important thing to understand is that a government is not some magic cure for all the problems you mentioned
I'm pretty sure my post said precisely that. We agree on this point; no need to belabor it. My statement amounts to the trivial counterpart regarding free markets, but I'm pretty sure you don't actually think free markets are perfect (or even always a better option), so how about we continue on to the part where we discuss specifics?
> Monopolies are mostly not good for consumers; and a huge one with an access to an unlimited force is certainly not.
A monopoly without profit-maximizing incentives, universally shared ownership, and checks+balances (relatively speaking on both counts, of course) seems preferable to one with profit-maximizing incentives, without broad ownership, and without checks+balances. Especially when it comes to force.
Ok, let me tackle this one specific point first (I'll address others a bit later, as I have to leave now).
> A monopoly without profit-maximizing incentives and with universally shared ownership (relatively speaking on both counts, of course) seems preferable
Now, that's in theory. In practice, where are those angels who work in the government and don't seek profit for themselves? Where do you find those people who would be immune to lobbyists and always serve the people of the country? Because if you don't have a very precise workable procedure on how to elect such individuals and also the one that wouldn't allow them to become corrupt in the process, then you can't claim an existence of such a monopoly is better than its absence.
Politics attracts people who like power and would willingly lie to and coerce the people who elected them. The only way I see is to deny such people opportunity to have this power. Free market may not be perfect, but it fosters virtue to a much greater degree than politics. A politician must first get power to do some good, while a businessmen must first do some good to make money.
But many people make money without doing good. Why not look at evidence rather than cute aphorisms? People in high-tax social democracies enjoy measurably better outcomes in health, education and happiness.
What do you mean by many people make money without doing good? If they steal, they should go to jail. If they gamble, it's their choice. If they produce something other people are willing to buy, they are doing good. What are the other ways of making money I am not aware of?
Alright, clearly a libertarian or similar with that kind of nose-dive into the problems of taxes while seeing no problem with the privileges of the wealthy.
Regarding assumptions; I hope you realise how many assumption you made in your first post. Who's to say what's stealing, honesty, force etc.
Do you really want to remove all the social responsibilities (taxes, fair wages etc) but keep all the privileges of the wealthy (private-property)?
Why is that? For example: a number of libertarians would say that the government is stealing a part of their income. I wouldn't. And on opposite side one could argue that the owner(s) are stealing a part of the workers income.
1. When a worker decides to work for an employer, he does so voluntarily. No one forces him to sign the contract.
2. When a government collects taxes, it does so threatening taxpayers with penalties and jail, even though those taxpayers never signed a contract saying they have to give a certain share of their income to the government.
That's still his decision. He has options: he may choose among different employers, who, may I remind you, compete with each other to get the best labor for the money. He may also educate himself and get a better paying job over time. Taxpayers have no options at all, except going to jail, not matter how educated or good they are.
You're trying to paint a reality that doesn't really exist. In practice the employer competition you mention comes down to competing who can pay the least, not who can pay the most. Income statistics show this trend very well, real income for workers is steadily declining. There is a fundamental imbalance of power, which can only be corrected with workers organizing into unions (and only somewhat if we're talking about conventional bureaucratic unions).
I don't know where and in what social circles you live in, but most people on this planet can not simply choose to get an education that can significantly change one's material status. It costs money. Lots of money.
Mind you, I'm in no way a supporter of state or taxes, but saying people who face real existential risks tied to not having a job or having only access to low paying jobs have more choice than people who don't like paying taxes is ultra cynical. It is not my intention to offend you, but it simply is. Get some perspective please.
>> And who's to say what's fair? People keep talking about fairness, but the problem is that it's always the other guy or some corporation who's being unfair. It's never me.
Nonsense.
Our household is in the top 1% of households for earnings. We have no problem paying taxes. We'd like them to be lower for everyone (less waste) but we earn a lot and we contribute a lot to the world around us. This is a good thing.
Because it's different in different countries and hints that USA is extraction economics like all the world before XIX century and modern dictatorships where elite is more interested in redistribution of existing wealth than creating new.
Wait. So we're not in a country that is purposefully moving backwards when it comes to distribution of wealth? /s.
I think the more interesting part of these graphs is that economic mobility can regress in society and the USA has not hit a point in its development where that is not true. It's like the price of freedom being eternally vigilant thing except most of society is unaware or powerless.
Maybe the title of this link should be "When Value is Created, Who Captures it?" That is the more relevant question. When someone invents something new that creates more value for society, it can go to 5 different parties - customers, the business founder, shareholders, employees, and the government. Right now, most value creation is shared between customers, founders, shareholders, and the government, with very little going to the employees. If the innovation that created more value was invented by an employee within a firm, why is it that the other four parties are the ones to receive the majority of the wealth created by the innovation?
The Facebook 'like' button has arguably created billions of dollars in wealth for Mark Zuckerberg and Facebook's early shareholders. What percentage of that wealth went to the employees who came up with the idea? This is the question we should be asking.
For me the chart loaded at a point the average income shrunk, and the richest actually got most of that shrinkage. Since that point there seems to have been no point at which the average income had shrunk. But, the graph goes until 2008, which was the start of the recession. Isn't the period after 2008 not the most interesting period? Didn't the average income drop? Who took the heaviest blow there?
Not that the rich would feel much if they would lose 50% of their income, but it would at least mean that some of the theory is true, and the rich really do carry more risk, and in that way protect the stability of the overall economy.
At least over the past 25 years, the picture is fairly different for other developed countries; in the UK, over that time period, there have been significant inflation-adjusted pay increases across all wage categories:
The graph is pretty consistent up until the 1970s (the last 40 years).
What the graph does not tell you is that US dollar was no longer pegged to gold after 1971 (Bretton Woods). The currency devalued over time and the wealthy were in diverse asset classes that retained or grew in value over time (such as equities, forex, real estate, etc). The rest of society kept most of their money in cash.
> The rest of society kept most of their money in cash.
Not true. Regular people have most of their wealth in their house and cars. That's if they have net wealth in the first place. (And 401ks and other mutual funds, which is also not cash money).
According to the census bureau households(depending on income or asset quintile) have between $200 and $1800 in their checking account. (http://www.census.gov/people/wealth/)
Sorry, I did generalize quite a bit. But your right, they did not keep their money in cash. Much worse, they converted their excess cash to illiquid and/or depreciating assets.
Also, many people do not have access to a 401k:
50.6% of Americans work for an employer that sponsors a retirement savings plan.
40.4% of employees utilized a 401(k) or pension in 2008.
If they do have a 401k plan, it really depends what assets you can buy. If the plan offered only allows you to purchase mutual funds with high load and yearly fees, your wealth is being transferred to others. Over time, you will lose money vs the index. There are also penalties for early withdrawals.
Also, people are not forced to put money in a 401k or to buy a house or car. They could save that money and do something productive with it. On that link you posted, the wealthy DID NOT have most of their wealth in a 401k, it was in equities, equity in their business, rental properties, and other assets.
So, the point I was making was - the wealthy put the money to work for them rather than other way around. Imagine if you had excess money during the 2008 recession, you could have had many opportunities to make money. Most had their money (as you mentioned) tied up in their house or car. So, really it is about the wealthy being in a position to advantage of all available opportunities.
Does anyone know why this must be so? I.e., is there any fundamental reason that, provided no-one breaks any laws, in an increasingly globalized, interconnected, technology-centric world, the majority of economic gains must always go to those who own more capital than others in a free market?
I think the more interesting question is what changed around the 1980 time frame that caused such a dramatic increase in the share of wealth for the top 1 percent? There appears to be a slight ramp up from the early 1900's to 1970's but in 1980 the slope jumps up.
It starts in the 1910's and 20's with Henry Ford: mass production of goods while paying your workers a high enough wage to buy your own products. This gets further codified in the 1930s with the New Deal: tax supported social safety nets, government support for unions and corporate regulation. The upshot of this is a new social consensus: the rich cannot get richer by taking a bigger slice of the pie, only by growing the pie.
Then World War II has two more effects: it finally kicks the U.S. economy into gear through massive government spending but maybe more important the rest of the first world (Europe and Japan) has most of it's infrastructure heavily damaged. The only other potential competitor, the Soviet Union, disengages from the capitalist economies of the 1st world and builds it own 2nd world of communist countries. This leads to spectacular growth in 1950s and 1960s for the U.S. and with the New Deal consensus it mostly goes to the working class and the middle class.
In the 1970s, the consensus starts to break down primarily due to two factors: automation and globalization. The rest of the world begins to recover and compete. And because thy haven't had the same sort of growth the U.S. did, their workers are much cheaper. Additional automation begins to create an ever-lowering ceiling on how much a low skill job is worth. Once the machinery to automate a job becomes cheaper than the worker, that worker is out of a job.
In the 1980s, the business owners (who never really like the New Deal) use their newfound leverage to create a coalition with libertarians and social conservatives to essentially dismember the government portion of the New Deal. Once this is done, the pie continues to grow, but the rich have start to grow their portion of it.
I'm fascinated by the period between 1945 and 1970. People have such a rosy view of that time period. The graphs shows that is really the only time that the middle class made gains at around the same rate as the richest 10%
one problem with this graph is it based on gross income before transfers. it is quite possibly that if we take the actions to make a more 'just' society by increasing taxes on the rich and making greater transfers to the poor that this graph will look even worse. i think after tax and after transfer income is what really matters so I think it would be better if the graph showed this. but possibly it doesn't because the story would not be as bad.
The richest and most leveraged always gain and lose the most. Pretty obvious but nice graph. And you can link to any period, like the dotcom bubble bursting
