
The Rich Can't Get Richer Forever - johnny313
https://www.newyorker.com/magazine/2019/09/02/the-rich-cant-get-richer-forever-can-they
======
opportune
The article mentions globalization but doesn't view inequality through a
global lens. If you look only within rich nations, yes inequality has
increased, because the poor and blue collar middle class have lost a lot of
jobs to poorer countries. But that phenomenon is actually reducing inequality
as measured from a global view.

The biggest issue I have with the article is that it ignores the geopolitical
trends that were actual checks on inequality historically. Inequality
typically only decreases in the face of an existential threat to the wealthy;
when the US passed 90% marginal tax rates, it was to fund a war where the
ability of the wealthy to remain in power at all was in question. Getting
pensions and many other social democratic policies which benefit the poor and
middle class, in many countries in the world, often required blood instead of
the free market.

~~~
Mikeb85
So it's OK to fuck over a large portion of your own population because it's
trickling down to a poor country?

The issue is that nations have a duty to their own citizens, good luck telling
an entire generation that they need to make sacrifices for others while the
rich keep getting richer.

~~~
tim333
I'm not sure the rising inequality in the US is really a result of the poor
countries getting richer. Lots of other developed countries have traded with
the world with much less of that eg. Germany, Scandinavia. It's more a result
of the kind of politics Fox News pushes.

~~~
Mikeb85
Globalism was literally a concerted effort to off-shore blue collar work with
the expectation that the population of richer countries would become more
educated and work in information intensive jobs (also siphoning off value from
said off-shored industries). Where it went somewhat awry is that computers and
automation have meant that less jobs are actually required in those sectors
that we envisioned people having, leaving a large portion of the population
under-employed in low paying service jobs. Globalism was literally a concerted
effort undertaken after WWII, this isn't some sort of Fox News level
conspiracy theory. It's history, literally stuff in economics textbooks and
easily verifiable.

As for why Scandinavia and Germany have managed to keep inequality at bay,
they've got very robust welfare states and strong labour unions.

~~~
tim333
By Fox News politics I mean opposition to stuff like the robust welfare states
and strong labour unions you mention.

------
capnprotonmail
I watched an interesting interview with a billionaire a while ago, who said
that after you reach a given net worth it actually becomes very hard (unless
you're unlucky) to significantly diminish your wealth through consumption, and
that in fact consuming more goods often just increases your net worth: Luxury
cars, apartments, mansions, real estate, parks, yachts or resources like gold
often appreciate in value with time (at least they did for the last 60 years),
so the more of your money you spend on these goods, the richer you'll become.
The words that the interviewee used were "if you're rich you can't destroy
money by consumption", which is of course not 100 % true, but explains really
well why the rich are getting richer.

In addition, many countries have much lower taxes on capital gains compared to
other types of income, which is another factor that favors further
concentration of money with those people that already have a lot of money.

~~~
asdff
Very few things in life are priced for billionaires. Millionaires, sure, but a
lot of people forget that a billionaire is literally 1000 millionaires, or the
equivalent wealth of 80,000 people at the poverty line. It's pretty hard for
anyone to fathom that egregious level of personal wealth.

~~~
ryacko
Millionaires buy products, billionaires buy society.

------
nugget
Implementation may be politically difficult, but the solution isn't rocket
science: substantially raise the inheritance tax and abolish all trust
loopholes.

~~~
toomuchtodo
Also raise taxes on investment income and implement a land value tax.

~~~
nugget
I believe lower taxes stimulate productive investment of both human and
financial capital so I'd prefer to lower income and investment taxes. But this
only seems fair and sustainable if you raise the inheritance tax to a very
high level. The problem isn't wealth so much as dynastic wealth. Land value
tax I support 100%.

~~~
lastofus
Isn’t this a restatement of trickle down economic theory (sans raising
inheritance tax), which has not really panned out when attempted?

~~~
nugget
My understanding of trickle down economics is that you get more economic
activity by putting a dollar in the hands of the bottom 10% than the top 10%,
which makes sense since the propensity to consumer is higher at the bottom. By
investing, the top % supports invention and innovation. By consuming, the
bottom % validates those inventions and innovations that are worthwhile,
versus those that are worthless. Both functions are required in order to keep
the economy humming along producing and consuming new goods and services at a
rapid pace. There would seem to be some function which maximizes the utility
of each group in their respective roles. That's what I would want tax policy
to reinforce.

------
DoreenMichele
_As Kuznets determined, it was after the American Civil War that the gap
between the rich and the poor began to widen._

I wonder how much of that was counting blacks in the South as _people_ (after
slavery was ended). During the post Civil War era, they typically made half as
much as whites for the same work.

I read a history book years ago which, unfortunately, I can't determine the
name of. The current narrative is that minimum wage laws are oppressive racist
nastiness, but this book asserted that the Federal minimum wage was intended
to put a stop to the practice of paying blacks half as much as whites in the
Deep South so as to bring the South more in line with the rest of the nation
generally.

~~~
jnordwick
This is almost exactly opposes the history of union support of minimum wage
legislation. It was pushed and supported by predominantly white unions to
protect their workers from lower skill and cheaper minority workers. The
minimum wage doesn't just say you can't hire a worker for less than an amount.
The other side is that you are not allowed to sell your labor for less than
the floor. White union workers were being out competed on price by workers who
were either trying to gain experience of lived in cheaper neighborhoods.

While some higher skilled and higher priced workers are needed, not all of
them need that level of expertise and it prices out people trying to enter
into a field where the on the job experience would be invaluable. If you can
produce 2/3rs of the value on lower skill tasks but at half the price, it is
better to hire two of you than one higher skilled individual. Plus it allowed
you to build skills for the next job. These minority workers were seen as a
social (racism) and economic threat. There were literally white-only unions
that supported these policies.

The infamous Cabrini Green chicago housing project was a more recent example
of this. It was mostly poor black families, and many thought it would be a
boon for local black employment. In reality, white union workers were bused it
at huge expense to fill the roles.

[https://www.forbes.com/sites/carriesheffield/2014/04/29/on-t...](https://www.forbes.com/sites/carriesheffield/2014/04/29/on-
the-historically-racist-motivations-behind-minimum-wage/)

[https://mises.org/wire/racist-history-minimum-wage-
laws](https://mises.org/wire/racist-history-minimum-wage-laws)

[https://reason.com/2019/01/21/washington-forced-
segregation/](https://reason.com/2019/01/21/washington-forced-segregation/)

~~~
DoreenMichele
I stated up front that it's the opposite of our current narrative, so telling
me this doesn't actually add anything at all to the conversation.

The book was very well documented. At the time, I had no idea it said the
opposite of the usual framing or might have made more effort to remember the
title and author.

The book suggested the Federal policy initially failed in its goal because
racist whites in the South simply fired blacks rather than "pay them a white
man's wage." The start of WW2 helped it eventually succeed, but there was also
a fairly widespread exodus of blacks from the rural South to urban centers
elsewhere in the US as a personal means to solve such problems on an
individual basis.

I was homeless for several years. During that time, I did piece work.
Initially, it was common for my hourly earnings to be well below minimum wage,
like as little as $1.25 an hour. Over time, this changed.

So I am actually a proponent of the idea that we need to make it possible for
people to work for less than minimum wage so they have the ability to better
than themselves. I don't think it's a good idea to allow wage work per se to
be that low because it easily becomes an inescapable personal hell. But we do
need to design work opportunities that can pay less than minimum wage if it
takes you a long time to complete it, but also has the ability to become a
more middle class income if you get good at and thus get faster or otherwise
qualify for similar work that nonetheless pays better.

------
goldcd
As a mind experiment, imagine money randomly appeared in your bank account.

$500 - Bank error in your favour and you move on with your life.

$5,000 - Maybe buy you some breathing space to look for a job you prefer. Pay
off a debt?

$50,000 - Maybe you might quit and retrain in a new career.

$500,000 - Maybe you'd start looking to see whether you could jack it all in
and live off investments.

$5,000,000 - Start that business you'd always fancied, without fear of
failure. Or just invest and kick back.

$50,000,000 - Makes more sense to invest it, and do whatever you want with the
interest.

Yes, I've just made up those sums and outcomes - but I think it's interesting
how we look at "sizes of money" and would all do wildly different things
depending on the size.

e.g. If you got 10x$50,000 you're not going to retrain ten times. But give
$50,000 to ten people and ten people might.

Or 10x$5,000,000 and you might get 10 new businesses - but $50,000,000 is
unlikely to create any viable ones.

------
aledalgrande
As much as in theory inheritance tax is a solution for the problem, I don't
think in practice it works well. The ultra rich will always have avenues to
escape tax. The middle class instead, trying to secure a better future for the
family, will get hit the hardest.

I am conflicted about this way of trying to solve the problem.

Also, this is assuming the tax money gets used efficiently and not to the
advantage of the top earners.

~~~
dlp211
> As much as in theory inheritance tax is a solution for the problem, I don't
> think in practice it works well. The ultra rich will always have avenues to
> escape tax. The middle class instead, trying to secure a better future for
> the family, will get hit the hardest.

The middle class is not subject to Federal Estate taxes. The exemptions are
$11MM and $22MM if the estate first passed to a spouse. Neither of those are
middle class amounts of wealth.

~~~
aledalgrande
Those seem pretty high ceilings for middle class, but would someone who has
10B in assets really pay out? I am skeptical in practice it would happen. But
you never know, in Canada taxes seem to work.

------
ciconia
> The United States was the world’s most egalitarian society.

Is this a joke? And slavery is mentioned indirectly, in passing, only once?
You cannot discuss equality in America without discussing slavery. Not to
mention the dispossession of native Americans.

------
jkmcf
Plutarch: An imbalance between rich and poor is the oldest and most fatal
ailment of all republics

Then look at how the Romans failed during the time of the Gracci and the US
succeeded during the 1930s - 65.

There’s a whole chapter devoted to this in the Durants’ Lessons of History.

------
quietthrow
I see people throwing ideas and most of these ideas rely on politicians and/or
govt doing something.

Is there a non govt or non politician dependent way of solving inequality?
facebook connected the world not govt or politicians. Google made knowledge
and information available to the whole world not a politician or a govt. (I
understand there are down sides to these companies products but so is there to
govts/politicians)

Even as a thought experiment I would like to see some ideas here to solve
inequality in way that just keeps the politician and govt out of it (cos all
they do is make the common people foolishly quarrel against each other while
they retain power and do what they think is right)

~~~
seanmcdirmid
A political solution that doesn’t involve politicians or the government will
just create its own politicians and government to sustain it. Look what
happened during the American and French revolutions, or the Russian
revolution. It always starts out as “we don’t need that” and in the end you
simply recreate that.

~~~
ceejayoz
See also: Bitcoin

~~~
tim333
Bitcoin seems a tool for increasing inequality rather than the other way
around.

~~~
ceejayoz
I’m referring to the way the Bitcoin world has had a crash course in why the
modern financial system has the moving parts it does. Like centralized
exchanges.

------
throwawaysea
The problem with inheritance taxes, property taxes, etc. is that they erode
the meaning of ownership and permanence.

For example, if I as a parent want to save up and give up my immediate
gratification from spending that money so my children have a head start or
even a luxurious cushion, what’s wrong with that? That’s me spending my
utility the way I want.

With property taxes, ownership turns into renting - you never really own
anything and even things you already bought can have their ownership eroded
into nothing by subsequent policy.

~~~
barrkel
Ownership is a human invention. You can't take it with you, you're only ever
really leasing it, and to the degree that you distribute it, what you're
actually exercising is power to get other people do what you want (or
delegating that power).

Ownership will exist for as long as there's support in governance and law for
it. If ownership doesn't deliver enough benefit for the majority in society,
then expect society to alter the terms of the bargain.

~~~
52-6F-62
Seems like a problem humanity has been struggling with for millennia the way
we’ve taken to burying people with their prized objects and riches.

What’s more, in many cases—like Egyptian pharaohs—the wealth was only
inherited and not earned by way of creating anything except through maybe war
and conquest.

The difference in perspective seems fundamental. Wonder if there’s been more
vigorous research on the subject.

------
billions
Is the Hacker News community open to alternative viewpoints on this subject?
It would be informative to read a wide spectrum of opinions, like we get for
things like microprocessor design and code libraries.

~~~
squirrelicus
Generally you get downvoted for doing so, but people still try to argue. I
have a lot to say on the subject, but one thing I still need an argument for
is why inequality is bad intrinsically. I'd love to hear a cogent argument
that addresses that fundamental point, but what I end up seeing in the wild is
camps of people who think inequality is some intrinsic evil, and those that
don't think it's relevant to anything.

~~~
lanstin
Isn’t the problem with inequality that it makes the society less stable? More
envy and less feeling of being part of a group? It is good that poverty in the
world is much less and there are more people in the middle class but it is
also a problem that wages in the US are stagnant for large swath of the
population that feels like it isn’t part of the group anymore and makes
trouble because of it.

~~~
majewsky
> Isn’t the problem with inequality that it makes the society less stable?

Yes. However, too much equality also makes society too static, because no one
is incentivized to innovate anymore. The problem, as always, is maintaining
the right balance.

~~~
yesenadam
>However, too much equality also makes society too static, because no one is
incentivized to innovate anymore.

Sorry if this is a naive question, but is that really true? What's the
evidence for believing that, much less treating it as fact?

~~~
tatersolid
> Sorry if this is a naive question, but is that really true? What's the
> evidence for believing that, much less treating it as fact?

The economic collapse of the Soviet Union, Warsaw Pact counties, Venezuela,
North Korea.

By allowing a free market invasion in their Communist utopia, the Chinese
Communist Party long ago abandoned their core ideology in favor of “pragmatic
authoritarianism.” They get to stay in power, while reaping economic benefits
impossible in a truly communist economy.

~~~
yesenadam
So you see all those places as having "too much equality"? And that,
particularly, caused lack of innovation which made them too static?

~~~
tatersolid
Yes. There was essentially zero upward economic mobility in those societies,
except for the party elite. When only 0.001% of your society has any
possibility of bettering their circumstances, innovation stagnates.

It is still true that most anybody can get rich in a capitalist economy if
they’re some combination of smart, hard-working, or lucky. This causes lots of
people to try.

------
gridlockd
Local inequality may have gone up lately, largely due to loose monetary policy
driving up prices for assets which most workers do not (and choose not to)
own. Such paper wealth can disappear rapidly during an asset repricing (market
crash), as we can see in this graph[1]. Also, this is the result of
Keynesianist monetary policy, a far cry away from the persuasions of Milton
Friedman.

However, global inequality - especially comparing the economic classes across
countries - is way down. For instance, Chinese standard of living is far
higher today than in the past, as is the cost of their labor - relative to an
American worker. In due time, many a Chinese worker will find themselves
uncompetitive due to increased costs - much like the American worker before
them.

What would put things back into balance is a massive global re-pricing of
labor. This is politically unfavorable and those countries that maintain a
reserve currency can put it off for a long time.

[1] [https://ourworldindata.org/uploads/2018/07/Top-
Incomes.png](https://ourworldindata.org/uploads/2018/07/Top-Incomes.png)

------
sys_64738
[https://todayscatholic.org/the-rich-man-and-lazarus-
today/](https://todayscatholic.org/the-rich-man-and-lazarus-today/)

------
becga
All wealth originates from Nature. Destroy enough of it and wealth will
increase for some. Enough people die off, land and property can be reclaimed.

------
k__
If we make more and more of the earth/universe usable for humans and only 'the
rich' own these usables, why not?

~~~
isostatic
Eventually, society revolts, and 'the rich' end up owning a place for their
head in a basket.

~~~
seanmcdirmid
That is optimistic. The rich could also just get rid of all the poor people
they don’t need. Armed drones even reduce the need for human soldiers to get
that done.

Anyways, let’s hope for much more peaceful solutions.

~~~
bt848
Yes, all those laborers the rich don't need:
[https://www.angryflower.com/348.html](https://www.angryflower.com/348.html)

~~~
seanmcdirmid
Automation requires capital, not so much labor.

~~~
imtringued
Someone has to operate the machines.

------
throwawaysea
Why is inequality a problem if everyone else’s quality of life is improving?
Poverty is lower than ever and most adults in developed countries have a
smartphone, an unimaginable luxury that not even the richest could have twenty
years ago. Things are good.

~~~
dv_dt
Globally quality of life is improving, locally the US is regressing to third
world status among larger and larger areas. Financial measures somewhat cover
up the increase in instability in people’s lives.

~~~
throwawaysea
It is a gross exaggeration to claim that the US is regressing to third world
status. See [https://www.marketwatch.com/story/americans-living-
standards...](https://www.marketwatch.com/story/americans-living-standards-
are-at-an-all-time-high-heres-proof-2019-05-02). Americans are better off
today than ever before.

~~~
dv_dt
The UN report on poverty in the US is more informative to me.

[https://www.theguardian.com/world/2017/dec/15/extreme-
povert...](https://www.theguardian.com/world/2017/dec/15/extreme-poverty-
america-un-special-monitor-report)

------
tempsy
This is a bit dark but at a certain point I do think we’ll see assassination
attempts on billionaires (not politicians) for simply being billionaires. It
does feel like we’re at a point where the social fabric of rich nations is
ripping due to rising wealth inequality and at a certain point the bottom will
have had enough.

------
meshr
You can "print" unlimited amount of money but Earth resources are limited,
moreover its usage is overshot (Earth Overshoot Day is 29 July 2019). So the
problem is how the money is spent. We should tax money that spent to decrease
Overshoot Day.

~~~
gridlockd
Earth's resources are limited over a given timespan, but most of these
resources are not _exhaustible_ , particularly not hydrocarbons.

Given that all human populations that have reached a certain standard of
living so far have ceased to grow beyond replacement levels, overpopulation is
likely not going to be a long-term concern either.

It is therefore not a problem to overshoot for a while, assuming that we
_eventually_ reach a level of technology that lets us maintain our standard of
living in a sustainable fashion.

~~~
meshr
Earth's resources are decreasing over a given timespan because we both spent
exhaustible resources and produce wastes for future generations. It can’t be
sustainable system.

There is no evidence that overpopulation is not long-term concern. Look at
Africa, India, China

New technologies are not guaranteed. You can’t simultaneously give less and
less time and resources to your children and ask them to be better than you.
They will choose to continue your tactic until civilization collapse as future
generations can't vote

~~~
gridlockd
> Earth's resources are decreasing over a given timespan because we both spent
> exhaustible resources and produce wastes for future generations.

To my awareness, there is no critical resource that is both exhaustible and
non-substitutable. Waste is not a fundamental issue, it can be stockpiled and
possibly recycled with future technology. Most of it can also simply be
_burned_ with relatively low environmental impact, at least in modern
incinerators [1].

[1][https://en.wikipedia.org/wiki/Incineration#Arguments_for_inc...](https://en.wikipedia.org/wiki/Incineration#Arguments_for_incineration)

> There is no evidence that overpopulation is not long-term concern. Look at
> Africa, India, China.

Yes, _do_ look at these countries:

Chinese fertility today is well below replacement, despite giving up the
disastrous "one child policy".

Indian fertility rates are at 2.2, very near replacement levels.

African fertility rates vary wildly with countries, but here as well you can
see that fertility is inversely correlated with standard of living. Moreover,
a low standard of living also implies relatively low resource usage.

> New technologies are not guaranteed.

New technology isn't strictly required, it just implies a lower standard of
living.

> You can’t simultaneously give less and less time and resources to your
> children and ask them to be better than you.

Of course you can. The more pressure there is, the more likely it is that new
solutions are developed.

Imagine if there wasn't any petrol left, we'd put a lot more effort into
renewables. They wouldn't even need subsidies.

> They will choose to continue your tactic until civilization collapse as
> future generations can't vote

Well, sometimes civilizations _do_ collapse. We may well enter an age of
decline again. We also may launch a global thermonuclear war. I'm not saying a
rosy future is guaranteed, I'm saying resource exhaustion and overpopulation
are not as big a concern as people believe.

