
Wealth isn’t created at the top, it is merely devoured there - Futurebot
https://www.theguardian.com/commentisfree/2017/mar/30/wealth-banks-google-facebook-society-economy-parasites?CMP=share_btn_tw
======
Animats
Corporate dividends are taxed, while interest paid is not. This encourages
debt financing. It's a subsidy program for lenders. It fuels leveraged
buyouts; "private equity" usually means converting equity to debt. It also
fuels stock buybacks as opposed to dividends. This causes a huge distortion in
business financing, and it accrues to the benefit of banks. It would be
straightforward to fix this as part of tax reform, but the banks would scream.
We're not going to fix this in the US until we have a Goldman Sachs free
administration.

The other big subsidy program for lenders is borrowing money from the Fed at
low rates which can then be lent at much higher commercial rates. That's the
welfare state for banks.

It doesn't have to be that way. Japan and China inject money into the economy
by building, and sometimes overbuilding, publicly funded infrastructure. The
banking system plays a lesser role in economic stimulation. This has its
advantages; usually the infrastructure is good for something.

~~~
unityByFreedom
> Japan and China inject money into the economy by building, and sometimes
> overbuilding, publicly funded infrastructure

I wouldn't point to these as a panacea for economic policy. China has ghost
cities which they won't populate: the people for whom they were built can't
afford to live there.

Japan is overworked, sleeping in the office and drinks with the boss are
mandatory. Is that the society towards which we ought to advance?

Not excusing the short term interests of America's big banks, however, you
need to be ready for other disadvantages if you change the way the game is
played in America.

~~~
chongli
China has ghost cities, yes, but it also has some incredibly impressive new
high speed rail networks [0]. This scale of infrastructure building looks like
it would be impossible to do in the US, given the difficulty of building just
a single line between SF and LA [1].

[0] [https://en.wikipedia.org/wiki/High-
speed_rail_in_China](https://en.wikipedia.org/wiki/High-speed_rail_in_China)

[1] [http://www.latimes.com/local/california/la-me-bullet-cost-
ov...](http://www.latimes.com/local/california/la-me-bullet-cost-
overruns-20170106-story.html)

~~~
dvtv75
An immediate relative of mine worked at the Hillside Workshops in Dunedin, at
the time the Chinese were given a contract to build the passenger carriages. I
remember very clearly the stories he told me, when the carriages arrived:

every single one of them had to be rebuilt. Welds that should have run the
length of plates were often just enough to get it to hold together, and not
the full length. Pipe were substituted for solid metal bars. Low quality steel
was used, stuff that would disintegrate when struck with a hammer by one of
the engineers. The "cheap" contracts that the National Government sought ended
up costing much more than what it would have cost them to build locally.

I wouldn't be very keen to ride on the high speed Chinese rail networks.

~~~
Animats
Li Keqiang admits China has a quality problem, and it's becoming a state
priority to address that.

It's getting better. Jet brand machine tools used to have huge quality
problems around 2002, and now they mostly work out of the box. It was clear at
one time that Jet was shipping their rejects, but that seems to have stopped.
They're still below Hardinge, but up there with Delta now.

------
danblick
Lately I've been thinking about how funny it is that we make heroes out of the
heads of tech companies.

Especially in technology, does anyone really believe that if these particular
individuals hadn't contributed their talents, the world would have turned out
much different?

Would there be no operating systems without Gates? No social networks without
Zuckerberg? No search engines without Page? No e-commerce without Bezos?
(Granted, Bezos is pretty exceptional.)

Why should particular individuals capture such massive rewards when their
success had more to do with circumstance than anything else?

(There's a connection here to the "great man theory" of history and its
critiques.)

~~~
pstch
But then, why should particular individuals capture such massive capital when
their success has more to with circumstance than anything else ?

It's also funny how we make heroes out of corporations themselves, not only
their heads : technological advance is often attributed to some specific
companies, and we don't see that as appropriation of the results of particular
circumstances, but as a sign of the performance of this company.

However; Would there be no XXXXX if we didn't live in an environment that
attributes the results of circumstances to specific individuals ? I really
don't know.

~~~
dsacco
I don't find your point coherent. Why should anyone be paid well for anything
if their revenue generation is due more to circumstance than anything else?

How far down the rabbit hole would we be going to go with this? Who gets to
decide what the capital cutoff point is for "too massive" and the contribution
cutoff point is for "due to circumstance"?

If I don't believe in free will, and thereby claim you make too much money
because you technically weren't responsible for any of your actions and never
chose the outcome that happened, can I incite a communist revolution and seize
your assets? If I feel someone won the lottery because they were lucky, do I
get to take all their money because they didn't contribute value or "earn" it
in a way that I find agreeable?

Can you give me an example of someone who is wealthy who earned their money in
a manner that isn't arguably due to circumstance? As it stands, I can't think
of an example that is materially different from a tech CEO who happened to be
in the right place and right time. Go far enough back and every idea and
execution on that idea is due to chance. But that applies to everyone, not
just tech CEOs, or whoever the robber baron of the week is.

~~~
Frondo
Who gets to decide? How about all of us voters, taxpayers, and citizens,
collectively, in a democratic fashion?

I'd be fine having a discussion about what's "too massive" for a company and
trying to figure out how to balance the interests of society and any given
company (and its constituent individuals). But I'd like to start from a
position of, what do we want society to look like? rather than a position of,
how do we preserve the status quo?

~~~
papabrown
You do get to decide. You either reward them by being a consumer of their
products/services or you don't.

Sorry, looks like you got outvoted.

Now you want to sit on some panel of judgement to overrule the public.

I love it when people say stuff like this. Society has spoken. You simply
don't like their decision so your answer to is to create some super-powerful
organization that can veto the public and instill its own version of what
society should look like.

~~~
Frondo
What? Those companies exist because society has granted them permission. That
"super-powerful organization" is the government. Always has been, always will
be.

Fortunately, now, for the most part, in the west, we all get a say in that
super-powerful organization.

It, and everything it spawns, like mega-corporations, exists to serve us, not
the other way around.

------
lordnacho
One of the comments has an interesting remark:

"We’re invited to believe that a CEO can somehow ‘earn’ £10m per year, whereas
a teacher ‘earns’ £25k per year. That’s only possible if you divorce the word
‘earn’ from any of its actual meaning. No one can actually work enough hours,
or create enough value, to equate to £10m."

I think this is the essence of the recent debate about inequality. I think
most people would not have a problem with those who are genuinely producing
more getting more as well. Think back to school, did you ever complain about
your grades if you knew some other kid had worked harder? Me neither. Of
course there were times when it seemed arbitrary as well, seemingly having no
relevance to quality.

It's a big problem creating a notion of fairness when you move on from school,
where everyone is the same age, in the same class, doing the same homework. To
create software, for instance, what do you typically find? There's people of
various ages, some managing, some selling, some writing code, some doing
testing. You need all of them to get the job done, and the job has some sort
of value, however vaguely defined, that is greater than the sum of its parts.
Nobody on the team could do all of the team's work as effectively as the team.

So then we have the problem of attribution. There's no real way to say what
fraction of the value someone created. The only thing we really have is
negotiating positions. If you're able to say "Give me half or I'm taking my
ball" convincingly, your teammates will give you half. They'll be thinking
about a few things mainly: whether you'll really leave if turned down, whether
they think they can replace you, and what deal they can put forth to other
potential teams if you turn out to be irreplaceable.

This will have some interesting effects. If you're already making a lot,
you'll probably need a lot to want to participate. You have more savings in
order to hold out for a better offer. CEO guy "genuinely" needs more pay
because why wouldn't he just retire now? Janitor guy will take any offer,
because he needs to be running to stand still. Actually a lot of people will
be in that position, even though their labour is generally seen as useful,
like teachers.

Which is all just a long way of saying that the negotiating process does not
in itself take merit as an input.

~~~
lazyjones
> _No one can actually work enough hours, or create enough value, to equate to
> £10m_

It's a tiresome discussion. Why do we always bring up CEO compensations, but
never Hollywood actors', professional athletes' or even painters' (or art
traders' \-
[https://en.wikipedia.org/wiki/No._5,_1948](https://en.wikipedia.org/wiki/No._5,_1948))?

Salaries don't need outside validation by people why have no idea what the job
involves, but try to assign some "value" to it anyway. It's a free market and
CEOs don't get hired if they have outrageous demands and there are better
candidates available.

~~~
dvtv75
> Why do we always bring up CEO compensations...

I certainly bring up professional athlete salaries. Given that they produce
absolutely nothing of value beyond a marketing opportunity, they're all
overpaid for very little real work. It's not like they're curing cancer.
Actors? Memorize some lines, and have lesser-paid minions tell you how they
should be repeated.

All that's really happened is that a class of people have managed to market
themselves to a section of the population - sports stars, actors, CEOs and
politicians. They've made themselves superstars, and unfortunately, sufficient
numbers of people believe in the legends that they can ask for whatever excess
they like and get it.

~~~
papabrown
If having Jack Nicholson in your movie guarantees at least $20 million more in
box office revenue than someone nobody has ever heard of, they're creating
value.

Likewise, a professional athlete plays on a sports team. That sports team
generates millions of dollars a year in television contracts. Hundreds of
people are employed both at the stadiums at which they play as well as at the
television stations that air the games. Millions more are made from
merchandising, jerseys, hats, etc from the sports team. Hundreds more are
employed making and selling those products.

And yes, they also become marketing machines. Yet that marketing machine sells
products and people are employed at those companies that make and sell those
products.

The ripple-on effect of a super-star professional athlete like Michael Jordon
or LeBron James generates wealth for tens of thousands of people.

------
vanderZwan
Another way to think about it is to see all these platforms as markets.

Facebook is a people market. Spotify is a music market. Airbnb a hotel market.
Uber a taxi market Amazon and eBay... Well, literally markets, right? And so
on.

Markets obviously _do_ create wealth, as a lubricant for trade. It's a meta-
level of the economy, just like money is a meta-good that makes bartering
actual goods and services more efficient.

So saying that's it's all "rentier" without creating any wealth might be
selling them short a bit.

Where I'm troubled is that they're not _free_ markets, in any sense of the
word. They are privately owned, and the owners try to control their markets
for the sake of their own profit. That's where things get problematic, I'd
say, especially when there is a monopoly.

~~~
heynowletsgo
Renting out the market one could say. And therein lies the problem.

~~~
vanderZwan
Funny that ComputerPhile just talked about using blockchains to potentially
solve this with smart contracts:

[https://www.youtube.com/watch?v=csS1mZFuNSY](https://www.youtube.com/watch?v=csS1mZFuNSY)

------
Melchizedek
Nor is it created at the bottom, where it is spent or destroyed. It is created
in the middle, by the middle class.

The middle class is the class that feeds the unproductive classes at both the
top and the bottom. And the unproductive have formed a political alliance
where the bottom votes for the top in exchange for handouts, all paid for by
the middle.

~~~
crooked-v
> Nor is it created at the bottom, where it is spent or destroyed.

You're ignoring the economic effects of money being immediately spent on
consumer goods and services.

[https://www.ers.usda.gov/topics/food-nutrition-
assistance/su...](https://www.ers.usda.gov/topics/food-nutrition-
assistance/supplemental-nutrition-assistance-program-snap/economic-linkages/)

> An increase of $1 billion in SNAP expenditures is estimated to increase
> economic activity (GDP) by $1.79 billion. In other words, every $5 in new
> SNAP benefits generates as much as $9 of economic activity.

~~~
aaron-lebo
That doesn't discount the argument though.

1) SNAP is cyclical - so it's gonna naturally boost a struggling economy, as
would most other expenditures

2) there's a natural limit - there's only so much food a family needs

~~~
cc439
"2) there's a natural limit - there's only so much food a family needs"

There's also a point where a family may demand more food but providing them
with it actually harms society. The obesity epidemic is the biggest health
crisis this country has ever faced and when _40% of SNAP recipients are obese
(compared to ~32% of nonrecipients), we 're basically paying to sentence these
people to a litany of expensive, chronic medical issues. Of course, merely
reducing benefits does nothing to solve this and harms the 60% of recipients
who are at a healthy weight, I'm just pointing out that the natural limit of
demand is far beyond the optimal level of supply for a program meant to
provide a net benefit to society.

_Source: [https://www.fns.usda.gov/sites/default/files/ops/NHANES-
SNAP...](https://www.fns.usda.gov/sites/default/files/ops/NHANES-
SNAP07-10.pdf)

------
jostmey
I think it sad that there is only one word for wealth. It does not distinguish
how a person attained that wealth. Was it inherited? Was the wealth created?
Or was it taken at the expense of others? How society treats and taxes the
wealthy should depend on how the wealth is attained.

~~~
jhbadger
The problem is in the definition of "created". A CEO of a company may say he
"created" the wealth of the company through his decision to create a new
gizmo. The engineers may say they created the wealth because they designed the
gizmo. The workers who built the gizmo can also say the created the wealth in
the most literal sense. Capitalism, technocracy, and socialism disagree on the
importance of the three types of creation.

~~~
mancerayder
I believe in classical economics the terms are Production and Distribution,
the latter being in reference of profit, or value-add.

I totally agree that the ambiguity you described is an issue. It's unfortunate
that common political parlance isn't in a habit of defining its terms as a
step 1a before proceeding in a discussion.

------
belovedeagle
> Every sliver of fundamental technology in the iPhone, from the internet to
> batteries and from touchscreens to voice recognition, was invented by
> researchers on the government payroll.

This is bullshit, but it's very pernicious bullshit because while it only
takes one person to pull this out of their ass, no one person can refute it.
No one person can articulate where all the stuff in an iPhone came from;
abstraction is one of the true marvels of technology today

~~~
akvadrako
Indeed this would be very interesting if it was true. Because many new
technologies coming out of universities are patented, if Apple is using them
as it's research arm, Apple is hopefully paying market price for the tech and
hopefully that's a fair amount.

~~~
IIIIIIIIIIII
Somewhat related to this discussion - it's really worth the one hour:

Secret History of Silicon Valley

[https://www.youtube.com/watch?v=ZTC_RxWN_xo](https://www.youtube.com/watch?v=ZTC_RxWN_xo)

TL;DW The foundation for SV was laid during WWII by unrestrained spending
(based on a huge amount of debt of course) by the US government on R&D.
Private enterprise only came in once the foundation existed.

------
Houshalter
I'm generally libertarian leaning and expected to completely disagree with
this. But he's got a point. Does anyone here really believe Facebook deserves
to be a multi-billion dollar company? All of their success comes from the luck
of being first (ish) and establishing a monopoly because of network effects.
Someone might make a vastly better social network. But are you going to use
that, or the one your friends and family use?

~~~
lazyjones
> _Does anyone here really believe Facebook deserves to be a multi-billion
> dollar company?_

Multi-billion what? Revenue? Yes, because they managed to monetize their
traffic and keep it up despite fierce competition (attempts... by Google, for
example). Market-cap? Yes because enough people who aren't typically extremely
careless with their money invested in FB.

> _All of their success comes from the luck of being first_

First at what?

~~~
Houshalter
>Yes, because they managed to monetize their traffic and keep it up despite
fierce competition (attempts... by Google, for example).

They didn't have to do anything, that's the point. They have such strong
network effects. They would have to completely fuck up to lose even a tiny
fraction of their userbase.

~~~
Haul4ss
But they do have to do something. In fact, they're constantly doing a whole
bunch of somethings to keep people in their ecosystem.

Apps. Messenger. Instagram.

They didn't get that network by just being first(ish). They got it by
continuously being the best of the imperfect options, and they can lose it
just as easily.

------
mnm1
"But such a revolution will require a wholly different narrative about the
origins of our wealth. It will require ditching the old-fashioned faith in
“solidarity” with a miserable underclass that deserves to be borne aloft on
the market-level salaried shoulders of society’s strongest."

This has never happened in the past, but similar things have happened, always
driven by violence. Can this happen without violence, I wonder?

~~~
pekk
Sure, if the wealthy voluntarily decide to do this, or if they can be
convinced to do so in civil conversation.

Given the heat of pushback on small tax increases, I wouldn't bet on this
happening without chaos. I wouldn't bet on it happening with chaos either.

~~~
rsync
"Given the heat of pushback on small tax increases, I wouldn't bet on this
happening without chaos."

There's a big difference between pushback on increasing taxes from zero to
five percent, or ten to fifteen percent ... and pushback on increases from 40
-> 42% or 45 -> 48%.

In the US, it is the latter that we are most frequently discussing and it is
the latter that gets all of the pushback that you find so familiar.

If you think your chlorine level is too high in your pool, shouldn't you
oppose _all increases, no matter how minute_ ?

If your blood pressure is too high, shouldn't you be opposed to _all
increases, regardless of how small or how much "you can afford it"_ ?

Some people (like me) think that effective tax rates of roughly 50% (US,
California, Marin County) are too high. I would then, ipso facto, be opposed
to further increases _and I am troubled by the fact that this is considered a
definite political marker_. It's not.

~~~
Frondo
Sure, except the wealthy were doing just fine when taxes were significantly
higher for them. They weren't suffering--they were still extremely wealthy,
far more than everyone else.

For them to complain that their chlorine level is too high, when in the past
it was twice as high or higher, and they were still living high on the hog?
Sorry, don't care how they feel, tax the heck out of them.

~~~
rsync
"Sure, except the wealthy were doing just fine when taxes were significantly
higher for them. They weren't suffering--they were still extremely wealthy,
far more than everyone else."

Income taxes were never significantly higher than they are now in the United
States.

You are thinking of the anti war profiteering tax brackets that were put into
place after the entry into WW2. This was not a tax increase in the way you
think of it and it was not designed to generate revenue or redistribute wealth
- it was a patriotic act to ensure that nobody benefited financially from the
prosecution of the war.

If you compare tax rates and use those as an anchor, you don't know what
you're talking about.

~~~
jack9
> Income taxes were never significantly higher than they are now in the United
> States.

Uh...you might want to check on that.

------
dahart
> but across the spectrum virtually all agree that wealth is created primarily
> at the top.

Good lord, is this really true? I don't know about you people, but the basic
pre-reqs for my undergrad had a single overview economics class where we
covered among many other things the definitions of capitalism and profit and
the idea that profit equals the difference between the sale price of a
commodity and the cost of goods & labor used to produce it -- literally the
definition of profit disagrees with the idea that wealth is created at the
top, whatever that is even supposed to mean.

> When you think about it, it’s insane. We are forking over billions in taxes
> to help our brightest minds on and up the corporate ladder so they can learn
> how to score ever more outrageous handouts.

There's a lot about the world that gets completely insane if you think too
much about it. Cars are insane. Jobs are insane. Politics and money are
insane.

We have to have better options for smart people than highly compensated and
interesting work at Facebook and Google. How do we create better options? I
don't think pointing it out will cause better options to materialize.

> Yet it doesn’t have to be this way. Tollgates can be torn down, financial
> products can be banned, tax havens dismantled, lobbies tamed, and patents
> rejected. Higher taxes on the ultra-rich can make rentierism less
> attractive, precisely because society’s biggest freeloaders are at the very
> top of the pyramid. And we can more fairly distribute our earnings on land,
> oil, and innovation through a system of, say, employee shares, or a
> universal basic income.

> But such a revolution will require a wholly different narrative about the
> origins of our wealth. It will require ditching the old-fashioned faith in
> “solidarity” with a miserable underclass that deserves to be borne aloft on
> the market-level salaried shoulders of society’s strongest. All we need to
> do is to give real hard-working people what they deserve.

OH! That's all we need to do, eh? It's so easy! :)

It's not the first time this has been suggested. There are even names for
this. And it sounds great. But the forces keeping our system the way it is are
stronger than this. The narratives we need about the origins of wealth already
exist, and they're not strong enough to turn the tide. I don't know what is
strong enough to turn the tide.

------
anon_500
This article seems like a classic case of theoretical discussion with little
to no practical significance.

"In reality, it is precisely the other way around. In reality, it is the waste
collectors, the nurses, and the cleaners whose shoulders are supporting the
apex of the pyramid. They are the true mechanism of social solidarity."

Jobs such as waste collection will be completely automated away in the next
decade. I suppose machines then will be the true mechanism of "social
solidarity"?

"But there is also a second way to make money. That’s the rentier way: by
leveraging control over something that already exists, such as land,
knowledge, or money, to increase your wealth. You produce nothing, yet profit
nonetheless. By definition, the rentier makes his living at others’ expense,
using his power to claim economic benefit."

It seems like the author believes that any gain to one group can only happen
at the expense of another. Yet we know this to be false - the pie can and does
get bigger.

"revealed that much of the financial sector has become downright parasitic.
How instead of creating wealth, they gobble it up whole."

Agree, but curious to understand which industry the author doesn't define as
parasitic? All companies want to expand and grow relentlessly, that's just the
nature of capitalism. Cable/Telecom? Oil and gas? High Tech? All of them have
become "parasitic" if that's how the author wants to define it.

"Higher taxes on the ultra-rich can make rentierism less attractive, precisely
because society’s biggest freeloaders are at the very top of the pyramid. And
we can more fairly distribute our earnings on land, oil, and innovation
through a system of, say, employee shares, or a universal basic income."

Wrong. Higher taxes, though welcome, will not be the solution. Nor will
universal basic income. How does one not understand that with the rise of
automation, the rich are about to get so much richer, no matter how much you
plan on taxing them. And basic income, though beneficial, won't fix class
inequality either, in fact it might just exacerbate it.

Let's talk about something the author fails to even mention: Education. Class
inequality is fixed by education equality. Period. End of story. The rich in
the USA have access to far better education, and THAT is the true source of
the rising inequality.

------
Jabanga
The shocking level of economic ignorance of the author shows how utterly
irresponsible and demagogic the Guardian is. This is rank sensationalism at
the expense of public's correct perception of the world.

To call earning passive income on assets one owns "rentier" earning of income
is to show unquestioned acceptance of socialist assumptions about the right to
property, to ignore the value the person's assets contribute, and to totally
neglect the role that delayed consumption (aka saving) and investment
analysis, both components of investing and acquiring assets, have in wealth
generation.

This is the quack economics the article is promoting:

>To understand why, we need to recognise that there are two ways of making
money. The first is what most of us do: work. That means tapping into our
knowledge and know-how (our “human capital” in economic terms) to create
something new, whether that’s a takeout app, a wedding cake, a stylish updo,
or a perfectly poured pint. To work is to create. Ergo, to work is to create
new wealth.

>But there is also a second way to make money. That’s the rentier way: by
leveraging control over something that already exists, such as land,
knowledge, or money, to increase your wealth. You produce nothing, yet profit
nonetheless. By definition, the rentier makes his living at others’ expense,
using his power to claim economic benefit.

------
dade_
I think this situation perfectly describes the problem:
[http://business.financialpost.com/executive/cogeco-inc-
ceo-l...](http://business.financialpost.com/executive/cogeco-inc-ceo-louis-
audet-says-family-ownership-is-good-for-businesses-and-canada)

"Family ownership" and transferring wealth to heirs tax free.

------
macawfish
wealth is create by workers, derived from the sun, love, care and the
ecosystem!

------
agumonkey
I think energy flows where there's energy, so money makers will keep being
money makers and thus "wealth" will loop (devoured).

------
Booktrope
Nothing like a little oversimplified, half baked Marxism, when you want a one-
idea panacea for society's problems. Ugh!

~~~
examancer
I'm not going to bother dissecting the logical fallacies and projection oozing
from your post. Instead I'll point out the factual inaccuracy: The author does
not provide a "one-idea panacea". He uses a single over-arching idea (rent)
and shows the subtle ways in which it pervades our society and economy. He
then concludes with a laundry list of possible solutions (the "panacea") and
alludes to even more. The author is under no illusion that this is a simple
problem to solve. The illusion appears to be your own.

~~~
jack9
> he author does not provide a "one-idea panacea"

> He uses a single over-arching idea (rent)

 _literal eyeroll_ Yay for semantic arguments.

------
mankash666
Hilarious!!! To learn more about how socialism is perfect, please buy Rutger
B.. (the author) book off Amazon, a "rentier" by the author's own admission.
And like good mind washed sheep, buy the book in huge droves to propel the
author into "rentier-ship" accelerating a vicious cycle of the author curbing
out books demonizing the very thing the he relies on to mind wash you into
rentier slavery and socialism.

~~~
misev
Thought the same. I'd recommend checking out "Rigged: How Globalization and
the Rules of the Modern Economy Were Structured to Make the Rich Richer" by
Dean Baker instead.

[http://deanbaker.net/books/rigged.htm](http://deanbaker.net/books/rigged.htm)

------
ktRolster
The first sentence of that article is a little overwrought.

------
peculiarbird
Anyone else tired of seeing this communist bullshit? Starting to get worried
at the frequency these types of articles keep popping up here.

