
The rich are hoarding economic growth - rubicon33
https://www.vox.com/policy-and-politics/2017/8/8/16112368/piketty-saez-zucman-income-growth-inequality-stagnation-chart
======
cs702
The title and the tone of the OP are a bit inflammatory for my taste, but the
data and graphs from the research paper are eye-opening: most economic growth
in the US over the past three decades has indeed gone to the top 1%, and
particularly to the top 0.01%, leaving everyone else behind.[1]

Here's the money shot: [https://cdn.vox-
cdn.com/uploads/chorus_asset/file/9013427/Sc...](https://cdn.vox-
cdn.com/uploads/chorus_asset/file/9013427/Screenshot_2017_08_08_12.34.47.png)

However, rather than debate the causes of this divergence, or accuse "the
rich" of anything, we should instead be coming up with WORKABLE SOLUTIONS for
increasing the income -- and therefore the spending power -- of the masses in
a sustainable manner.

I imagine a tremendous amount of pent-up consumer demand would be unleashed,
because THE MORE THE MASSES EARN, THE MORE THEY SPEND ON PRODUCTS AND
SERVICES, including those created by entrepreneurs.

[1] Here's the paper: [http://gabriel-
zucman.eu/files/PSZ2017.pdf](http://gabriel-zucman.eu/files/PSZ2017.pdf)

~~~
manicdee
For every problem there is a solution which is simple, elegant, and completely
wrong.

So here's my attempt:

1\. Remove subsidies including tax writeoffs like depreciation. Either an
asset brings value or it doesn't.

2\. Tax revenue not profits. Either you make a profit selling a thing or you
don't. Fancy tricks like buying an item from a fully owned subsidiary and
selling it at a loss to compensate for profits from services is not realising
the value your services and products bring to the economy

3\. Change the paradigm from employees serve the company to companies serve
the employees. Companies are a way to insulate participants from economic risk
of a capital-intensive activity, not a way to structure tax affairs.

Edited for formatting

~~~
loserboss
Meat industry would collapse due to 1. Daily foods like steak, bacon, eggs,
milk would get extremely expensive leaving the population to lousy
unsatisfying vegetables.

Might solve the obesity epidemic :) Might also cause riots because people are
not used to eating yucky foods like vegetabables.

~~~
jaredklewis
Vegetables in the sense of wheat, peanuts, and such? Sure (but since these
things will get processed, so I wouldn't hold out that it helps with our
obesity).

Vegetables like kale and broccoli? No way. The ratio of labor and land
required per produced calorie for these kinds vegetables is far too high. In
addition to existing farmland, we would need to convert large amoutns of
existing natural environments areas like forests into farms.

But back to your point, why would the industry collapse? Wouldn't prices just
increase?

~~~
loserboss
> _Wouldn 't prices just increase?_

Prices are already astronomically low given the subsidies. No one would pay
for a $15-20 burger.

> _In addition to existing farmland, we would need to convert large amoutns of
> existing natural environments areas like forests into farms._

[https://web.archive.org/web/20081216230507/https://www.ers.u...](https://web.archive.org/web/20081216230507/https://www.ers.usda.gov/publications/sb973/sb973.pdf)

Well, given that the majority (more than 80%) of land is used for growing
grass, wheat, soybean and corn for cattle there's no fear for vegetables.

Although soy grown for human consumption is not popular now, it's the most
efficient legume there is. More protein than a steak.

This went a little bit off topic, although my point was that removing
subsidies on food makes things tricky. Given that in some parts of US burger
price is halved if not 20% of what it should be due to subsidies on water and
corn and soybean etc.

~~~
jaredklewis
> No one would pay for a $15-20 burger.

Why not? There are places in the world where burgers cost this much and people
still buy them.

~~~
loserboss
The average guy that was living on McDonalds menu won't do it every day as he
does now.

------
victor106
This quote by the fed chairman during the Great Depression, Marriner S.
Eccles, seems apt

"As mass production has to be accompanied by mass consumption, mass
consumption, in turn, implies a distribution of wealth -- not of existing
wealth, but of wealth as it is currently produced -- to provide men with
buying power equal to the amount of goods and services offered by the nation's
economic machinery. Instead of achieving that kind of distribution, a giant
suction pump had by 1929-30 drawn into a few hands an increasing portion of
currently produced wealth. This served them as capital accumulations. But by
taking purchasing power out of the hands of mass consumers, the savers denied
to themselves the kind of effective demand for their products that would
justify a reinvestment of their capital accumulations in new plants.In
consequence, as in a poker game where the chips were concentrated in fewer and
fewer hands, the other fellows could stay in the game only by borrowing. When
their credit ran out, the game stopped."

~~~
WalterBright
The GD was caused in large part by the Fed's poor understanding of economics.
I wouldn't take what the chairman of the time said too seriously.

------
pg_bot
Why is there no talk about the dramatic increase in the supply of workers over
the last 40 years? Globalization has brought millions out of poverty and those
people are now competing with Americans when they wouldn't before. It makes
sense from an economic standpoint that the price of labor would not rise when
the supply is increased and is likely the cause of income inequality in the
US.

~~~
AlexandrB
> It makes sense from an economic standpoint that the price of labor would not
> rise when the supply is increased and is likely the cause of income
> inequality in the US.

So why are CEO salaries still going up? Is there not increased competition for
C-level positions in companies from globalization? If not, why not?

~~~
eikenberry
One explanation would be because of the cheaper labor and favorable legal
frameworks the corporation can grow much larger today. Pushing the pay of the
top level positions to rise even higher. You could look at C-level positions
50 years ago as a mid-level manager today in terms of managed organization
size and economic impact.

~~~
AlexandrB
> One explanation would be because of the cheaper labor and favorable legal
> frameworks the corporation can grow much larger today.

But that means there are _fewer_ C-level positions/capita today. So:

* supply of C-level candidates has gone up (more MBA graduates, larger supply of candidates from overseas)

* demand for C-level candidates has gone down (fewer, larger corporations, so fewer C-level jobs overall)

And yet C-level compensation is going up. Doesn't this contradict all the
supply/demand theories I keep hearing about lower/middle class employees?

~~~
mrep
In the big 5 that I work for, MBA's become product managers and make less than
programmers (per years in industry). They then have to compete for more than a
decade (with programmers going into management), for a shot at even VP level.

Guess what, there are some VP's that have 5 more layers of VP, Senior VP's...
before C suite.

You want to incentive people to work hard at their jobs to get promoted to the
next level so you need to constantly pay them more. When you have 10 layers in
your company and people at the bottom are making 6 figures (for software
engineers, easily the case), the top level employees are going to make a lot
of money.

------
gscott
This is why I appreciate the $15 an hour minimum wage movement. Paying people
more is better then taxing the rich more. The super-rich own congress but at
the city and State level there is depending upon the state some room to grow
wages. Higher wages equals fewer people on public subsidies which is good for
cities and states.

~~~
derping69
Why stop there? Just make it 100$ and hour and everyone will be rich!

Oh wait, arbitrary wage increases don't really work out in real life.

[https://fivethirtyeight.com/features/seattles-minimum-
wage-h...](https://fivethirtyeight.com/features/seattles-minimum-wage-hike-
may-have-gone-too-far/)

Seattle's socialist member of the city council fired the Unversity of
Washington team after the results came out and hired an anti-capitalist
professor from berkeley to ensure the study finds the right results.

[http://www.foxnews.com/politics/2017/06/29/seattle-
commissio...](http://www.foxnews.com/politics/2017/06/29/seattle-commissions-
new-minimum-wage-study-after-dismissing-first-results.html)

~~~
chipotle_coyote
_Why stop there? Just make it 100$ and hour and everyone will be rich!_

This argument -- "well, if you think a little increase in the minimum wage is
good, then you must think _any_ increase in the minimum wage is good, or
you're not being consistent!" \-- gets trotted out by somebody on HN every
time the subject comes up. And c'mon. If I believe that San Francisco's
minimum wage hikes to $14 and $15 an hour are _not_ going to cause undue
economic collapse here, that does not somehow obligate me to believe "hey, if
that works, we can raise the minimum wage to ELEVEN BILLIONTY DOLLARS AN HOUR
with minimal impact, too!" Real life is full of examples, from salt in your
soup to water behind a dam, where we understand that's good to increase the
level to a point, but _only_ to a point.

 _Oh wait, arbitrary wage increases don 't really work out in real life._

"Most past research has found that modest increases to the minimum wage have
little impact on employment, and that if employers do eliminate jobs or cut
back hours, those losses are dwarfed by the income gains enjoyed by the
majority of workers who keep their jobs." That quote is...from the
FiveThirtyEight article that you linked to. The evidence so far seems to be
that some of the time, for some levels, minimum wage increases _do_ really
work out in real life. The UW study criticizes the methodology of past
studies, but it's at least worth acknowledging that there's criticisms of the
UW study which are not, despite Fox's take, "this is not the result the
socialists wanted." Notably, UW's study excludes businesses with multiple
locations but only one account with Washington State's unemployment office,
which eliminates _38% of the state 's workforce_ from consideration, including
all chain fast food and retail workers. They exclude them specifically because
they can't get "location-based" data for workers in those cases; while that
may be true, being inconvenient to UW's methodology doesn't render that data
irrelevant.

~~~
kgwgk
> Real life is full of examples, from salt in your soup to water behind a dam,
> where we understand that's good to increase the level to a point, but only
> to a point.

And somehow this point is lost on many proponents of raising the minimum wage,
who find obvious that any increase in minimum wage can only be good and anyone
saying otherwise is evil. Sometimes the soup would be better with less salt,
minimum wages could be too high already!

------
sokoloff
1% real income growth per year is still fairly substantial IMO. Over a 41 year
career, your purchasing power goes up by half, yet that's treated as
"stagnating" which implies something far worse than 1% per year.

~~~
johngarrison
Not if inflation is 3-4% per year.

~~~
sokoloff
Real income growth is, by definition, after accounting for inflation.

The opposing term is "nominal income growth" which does not account for
inflation.

------
refurb
It's important to note that the top 1% (pick whatever bracket you want) is not
static. There is a lot of turnover.

 _According to research from Cornell University, over 50 percent of Americans
find themselves among the top 10 percent of income-earners for at least one
year during their working lives. Over 11 percent of Americans will be counted
among the top 1 percent of income-earners (i.e., people making at minimum
$332,000 per annum) for at least one year._

[1] [https://www.cato.org/blog/high-turnover-among-americas-
rich](https://www.cato.org/blog/high-turnover-among-americas-rich)

------
jkroso
So what caused the change in 1973?

~~~
atlih
Financialization of the economy. The fall of Bretton-Woods. The fall of the
gold standard. The repeal of Glass-Steagall.

~~~
viridian
>The fall of the gold standard.

>The fall of Bretton-Woods.

1971, not 1973

>The repeal of Glass-Steagall.

1999, not 1973

~~~
atlih
Macroeconomic changes take longer than just a few hours to have an impact. I
included Glass-Steagall repeal because merely focusing on 1970's and nothing
that happened there after is myopic

------
flatfilefan
Can the stagnation be caused by the oversupply of the labor that has started
about the 1965 (the pill?) [https://tradingeconomics.com/united-states/labor-
force-parti...](https://tradingeconomics.com/united-states/labor-force-
participation-rate)

------
gehwartzen
Nobody seems surprised when all wealth is accumulated by one player at the end
of a game of Monopoly. The figures in the article should then also not
surprise anyone. This is not some flow in our system, this is the natural
progression of capitalism as designed.

~~~
Deadolus
Monopoly was actually originally designed to demonstrate the "surprising"
effect of accumulation of wealth by a single player (via rents). With the
implied moral judgment that this is unfair/unjust:
[https://en.wikipedia.org/wiki/The_Landlord%27s_Game](https://en.wikipedia.org/wiki/The_Landlord%27s_Game)

edit: via rents, not property taxes

------
jgalt212
I don't want obfuscate correlation and causality but over the same time period
we have seen the greatest bond bull market in history.

The upshot is that the rich, more specifically the super rich, benefit
disproportionately from lower/lowering interest rates.

------
the_cat_kittles
if your rich as hell, give it away. if your voting, vote for people who want
to tax the higher earners more and lower earners less. seems pretty reasonable
to me

------
ekiminmo
Forgive my ignorance, but why wouldnt we expect to see exponential growth in
wealth, and as a result a greater discepency between the top 1% and everyone
else?

~~~
quickben
Technically we would, but not at the cost of such discrepancy, as it usually
had a violent ending in the past. Costing lives and entire countries social
stabilities.

------
Temasik
that's why a lot of people opt-out of working

people are not stupid if it's not worth their time they rather not do

------
Animats
We know.

------
ilaksh
We know there are serious problems. I think the general direction we are going
to try to solve them is a good start, but without severely improving the
current plans, will be completely inadequate and repeat history in some ways.

Many people have looked at the US' economic situation and compared it to China
or other areas and predicted that the relatively high wealth and consumption
in the US just cannot continue due to things like math (large deficits, low
production of real goods, retired workers) and political pressure. The
expectation for many is that there will eventually start to be a much more
equitable distribution of resources and power towards places like China and/or
Africa or India. This will mean there is significantly less real wealth for
Americans. This, combined with the pressure to increase sustainability, means
that the real world economy in the US is either not growing or growing very
sluggishly.

When the economy is not really growing, our current systems don't function
well, people start looking to conserve and cooperate rather than compete so
much. A general trend of increasing socialism is good for the US to some
degree I believe, but won't solve the problems.

What we have now are very large technopolies like Amazon, Google and Uber
controlling large segments of our economy. Because the power is so
concentrated, it is actually almost as bad as having government agencies
control these things. Now people are talking about technocracy, which is
essentially high-tech communism.

I used to advocate for a Resource Based Economy and all of that stuff, and I
still think RBE and technocratic-type ideas are a good starting point to think
about solutions, but it seems like the thought process is stuck in the 50s.
Having very large organizations controlling everything is not going to work
out,no matter how much technology you add to it.

The real problem for America is going to be less fossil fuels being able to be
imported. Just because there is a big imbalance now, and unless we actually
start nuking countries, within a few decades the demands will be such that
those countries are forced to fight the US for those resources. In order to
avoid WWII there has to be a plan that allows the US and other high-
consumption countries to significantly reduce real-world consumption and still
have functioning economies.

The problem is that we are looking at these giant tech companies just becoming
more official and entrenched. This does give us platforms for efficiency, but
the fact that these are centralized organizations means big problems in terms
of power distribution and freedom as well as the evolvability of systems.

The solution is going to be technical upgrades to our social frameworks. A
concrete example: Amazon has a streamlined website and logistic network.
Instead of leaving this in the hands of one company, we need to come up with
equivalent decentralized distributed protocols and systems that accomplish the
same things without making Bezos the unofficial Minister of Distribution. I'm
not saying it's easy, because we need systems with almost the same level of
holistic integration and analysis on some levels that Amazon has, but still
flexible enough to evolve and allow freedom.

We are also going to need these advanced distributed but holistic on some
level evolvable systems to be properly integrated into societal structures in
order to properly measure and plan if we want to have something like universal
basic income. Although I must also say that we need also to facilitate free
competition more at the same time otherwise the technopolies strangleholds
prevent most from rising past the basic level and participating.

------
aiyodev
People who buy this garbage have no perspective of how much the federal
government taxes and spends. Everything discussed here is insignificant in the
scope of the federal agencies spending $11 billion a day. Personal incomes are
less than their rounding errors.

~~~
tamcap
I'm curious, in what sense is it insignificant? Quoting from (likely faulty)
memory, 30% of federal budget comes from income tax directly, and the another
20% or so is covered by employer associated employment taxes. So out of that
$11bn a day, Americans pay in $6.5bn every day. If we were to adequately tax
the 0.01%, the budget would feel the difference.

