The developed world has incredible productive capacity. With 1% of the workforce in agriculture and 8% in manufacturing, the US produces as much stuff as China. There are no significant shortages of any manufactured good anywhere in the developed world. Quality is pretty good across the board, too. This is unique in history.
That's great. But there's less productive work to go around. We're out of buying power. Labor is worth less because there's a labor glut. Our economic system can't cope with that. On top of this, more of what most people can do is being automated, and for less money. Automation used to be expensive. Now, if a computer can do it, it will be far cheaper than a human.
The financial system has become primarily self-serving, running on self-generated zero-sum tasks. It's part of the problem, not part of the solution. If we had a capital shortage, that might be a problem. Instead, we have a capital glut, and no place to put it that produces good returns on investment. This is "secular stagnation", as the article puts it.
Japan hit this around 1989, when their real estate bubble collapsed. Japan never came back from that. There was hope that the Japanese would figure out something. 25 years later, they haven't. They've built up their safety net and put money into infrastructure projects, so that fewer people are suffering. That's the best they could come up with.
We have no successful model for dealing with this. What capitalism gives us by default is a small number of rich people and a large number of poor people competing for a shrinking pool of low-paying jobs. Nobody really knows what to do about this, including the people who say they do.
There is not less productive work to go around, it's just not being done in the US. We are in a difficult situation because we have free trade with lower cost labor markets. Until labor market costs in free trade enclaves reach equilibrium, capitalism will continue to raise more people out of poverty, and prevent wages from rising in places where they are above the demand level in the global market.
The extraordinary amount of government debt being created is an interesting phenomenon, as it is failing to cause inflation in most large currencies as they are increasing the money quantities in a correlated fashion. The financial entities are spending a lot of energy pricing these various instruments, and can make low risk money on the spreads.
Japan did have a real estate bubble. The thing about bubbles is not "coming back", it's that the wealth wasn't real in the first place. We weren't as rich as we thought we were. Their problem is demographics, an aging population, low birth rate, and a society that is not practiced at encouraging positive immigration.
"What capitalism gives us by default is a small number of rich people and a large number of poor people competing for a shrinking pool of low-paying jobs." This is just wrong in every way...the number of rich people in the world is growing, the number of jobs in the world is growing. Just because every country is not moving linearly up and to the right does not mean things are falling apart.
What, precisely, do you believe poor Americans are suffering from? The only concrete answer I usually hear is envy (I.e. "oh noes the inequality").
And that is at best. A lot of us are unemployed, and families are collapsing in on themselves as you have fewer and fewer breadwinners.
what? not even remotely true.
i frequently buy 6 lb bags of frozen broccoli/cauliflower/carrot for 8 bucks. There is cheap, healthy food out there, some people just aren't buying it.
You have to remember that for a nontrivial percentage of people - like the homeless - this is a survival situation, where 'healthy' has a much lower priority than 'calories per dollar'.
I cook and eat a lot of healthy stuff, and I do it at a pretty reasonable price. But it is definitely a luxury that I pay for in time, and it still only works because I have decent infrastructure.
For those who did not grow up poor, it's worth reading John Scalzi's "Being Poor" to get a feel for the experience: http://whatever.scalzi.com/2005/09/03/being-poor/
But these "free" products are going to me, my wife, and our family. We're both well-educated, have good jobs, and live a comfortable life. What ultimately gets me the free stuff is time, access to technology (computer, printer, etc.), relationships built to acquire extra coupons, ability to drive to a nice suburban store that runs deals and doubles coupons.
I guess what I'm getting at is that a lot of people don't have access to get these good deals or aren't prepared for them. In many urban environments, if you don't have a car, your only access to groceries are small convenience stores or very small local grocers, who tend to have bad prices, bad selection, old items, etc. Either that, or you take a bus to the bigger grocery store, wasting a lot of time and having to adhere to the bus' schedule.
Have you ever had your car break down? Last winter, mine did less than a mile from my house on the interstate in the middle of the night, and I was completely stranded. Relatively, I travel hundreds of linear miles a month and have never felt that way, because "I'm only ever a few hours away from home." Your world gets a helluva lot smaller when you don't have mobility, and anyone who doesn't appreciate that really can't understand the problem with calling pulling up farmer's markets in a 20 mile radius on Google a solution.
That implies access to a working freezer, electricity, and transportation to drive out to Costco or wherever; things that are nowhere near granted for everyone.
For comparison, India and Bangladesh are likely to have electricity percentages around 50% (no good data is available) and car ownership rates in the single digits.
This is entirely in the control of most poor Americans. India's GDP/capita is $5500 after adjusting for cost of living, yet India has a 20% savings rate. Poor Americans could reduce consumption and save if they wished.
in perpetual debt having to eat subpar foodstuffs because fruits and vegetables cost way more than dollar menu cheeseburgers per calorie.
Poor Americans tend to be fat. That means they can reduce calories and increase the quality of food while spending the same amount of money.
And if you don't have a working kitchen you can't cook farmers market produce.
3% of poor Americans lack a complete kitchen (see table 2-4).
tl;dr; Poor Americans have some self inflicted problems. That's not much of an argument for protectionism against poor Bangladeshi's suffering from externally inflicted problems.
I'd take the rural village or even the urban slum over the American inner city any day.
It might look from the outside that life "is entirely in the control of most poor Americans". But nothing could be further from the truth. The amount of forces conspiring against you as a student or young would-be worker in the ghetto is simply unfathomable to anyone with a middle-class or wealthier background (like myself). I'd argue you have a much better chance at moving up in the world as a poor person in Vietnam than America. There, you start a small business (eg; selling goods on the street) and work hard to grow it. Here, you can't just do that: people don't buy anything off the street. And don't tell me "they can just learn to code": I tried to teach them. They don't have computers. Not in the schools. Not at home.
Also, consider that unhealthy foods are often genuinely addicting and addictions are really, really hard to break. Especially when you're stretched then.
I don't want this to turn into a rant, so I'll just say that before you start blaming the American poor for their problems, spend some time living there, talking to them, and understanding their problems.
Your argument would be wrong, at least as of the last time we ran this experiment. Back in the 80's we took a bunch of Vietnamese and turned them into poor Americans. Now they are not poor. In contrast, the Vietnamese who stayed behind are still very poor. That includes the ones who started small businesses like selling goods on the street.
Comparing income (even adjusted income) in one society to that of a very different culture makes little sense. This applies both to poor people as well as the rich (who buy different things in different cultures), although the differences are much bigger among the poor because they are less exposed to foreign fashions.
Even if the economy was completely fair (and it isn't -- access to education and to key contacts plays a major role in your chances for success), there are so many social pressures surrounding us (and while all of us are subject to some social pressures, those the poor experience are usually much more choice-limiting) that describing economic behavior as a free choice is completely disconnected from reality, and from everything we've learned in about a century of sociology.
EDIT: And as to your original question, what do the American poor suffer from, they suffer from poor healthcare, bad education, constant financial dread, constant encounters with the law, life in high-crime neighborhoods and probably dozens of more very serious problems that I'm lucky enough not to have experienced. Your patronizing attitude, suggestion that people not in imminent danger of starvation are not suffering (or that there suffering is their own choice) is completely ignorant. If I recall correctly, we've had a similar argument over feminism, and there, too, you've shown complete disregard and disdain to any actual research on the subject by people devoting their lives to it. You can either learn about property -- or not -- but you should know that if you don't, you're arguments stand on ignorance, which, unlike poverty, is actually your own choice.
The problem then with being poor in America is not that you're rich compared to a farmer in vietnam, the problem is that you're poor compared to the people you see on your crappy TV.
To quote the report: "Mental health is also a key pathway through which inequality impacts on health. There is
overwhelming evidence that inequality is a key cause of stress in itself and also exacerbates the
stress of coping with material deprivation"
The best solution I see to the problem of envy is directing social opprobrium towards people who exacerbate the problem (e.g., politicians appealing to envy, celebrity news publicizing lifestyles of the rich and famous).
The cause of their problems is not just from celebrity news or politics. It's the very society we live in. You can't just ban advertisements for cars, or decide that cars can't look new on the street. In other words: it's not just the things they see on tv that can spark these problems. Everything around them lets them know they're at the lowest rung of a very large ladder to the socio-economic top.
You're suggesting that we try to make the ladder appear shorter, or somehow hide the top from view. Apart from the fact that, as outlined above, this cannot effectively be done in my opinion. I also find it morally offensive that you'd rather defend a system that is likely not perfectly compatible with human nature. You'd rather try to remove the perception of inequality than the inequality itself.
If we cannot change how humans react to inequality: we get jealous, get sick, turn criminal or exhibit other negative traits. Then we should instead change our society to address the real issue: the inequality itself, and not just it's perception. Now doing that would be a whole other barrel of fish obviously.
If you'd rather use the a different term to avoid inspiring negative feelings about me, feel free to suggest one. For the remainder of this post I'll use the term "Mind State X" to describe an unpleasant mental state resulting from the observation that other people possess qualities that you wish you had.
I'm confused. Is inequality intrinsically bad? If so, then Mind State X is irrelevant, and you should be able to make that argument without it. If Mind State X is the thing that is bad, then inequality is irrelevant if it does not cause Mind State X.
Lets also generalize this discussion of Mind State X. Many non-money related things cause Mind State X - I'm tall and good looking, some people are short and ugly. I have sex with many women, some people are involuntarily celibate. I'm somewhat skinny, other people are far more muscular than me. These things can also cause Mind State X.
For example, a woman I used to sleep with is now sleeping with someone who is much stronger and more muscular than me. I feel Mind State X as a result. I believe the solution is that she shouldn't inform me of this. You believe the solution would be for her to be prevented from doing this, I take it?
On to practical matters: Everything around them lets them know they're at the lowest rung of a very large ladder to the socio-economic top.
Residential segregation and targeted advertising would seem to be a great way to address this. Luckily the world is moving in that direction anyway.
And yes, this means that inequality is bad in and of itself.
What the difference is is clearly outlined in the report I previously posted:
"It is abundantly clear that the chronic stress of struggling with material disadvantage
is intensified to a very considerable degree by doing so in more unequal societies. An extensive
body of research confirms the relationship between inequality and poorer outcomes, a relationship
which is evident at every position on the social hierarchy and is not confined to developed nations. "
"Mental health, resilience and inequalities
Box 9: Poverty and powerlessness
is evident that the consequences of an individualized view of poverty can often be devastating....
The sheer lack of respect and understanding given to the disadvantaged in Britain is highly corrosive of
wellbeing, and all the more so because it is constant and overwhelming. We have had welfare recipients
tell us how every interaction they have with the official welfare world is negative: no one has a good
word to say to them; they spend hours shuttling between agencies in grimy offices that reinforce their
powerlessness. Their time is of no account because they are considered to be of no account.
Jones et al 2006 p. 439"
"Economic analysis based on WHO data on the global burden of disease (see Box 4) suggests that of
total health burden,
just under half is attributable to premature mortality and just over half to non-
fatal outcomes (morbidity and disability). Mental illness, including suicide, accounts for less than 5%
of all premature mortality but for over 30% of all morbidity and disability. No other health condition
(apart from cardiovascular disease) accounts for more than 10% of the total burden of disease within
the population (WHO 2005; 2006)"
These are the mental, and apparently also physical, problems I'm talking about. And they are the result of inequality, be it perceived or real.
As for your example, you seem to want me to agree with you that you should 'prevent her from sleeping with someone else'. Which would be a morally apprehensible thing to do.
I'll stop you right there, in no way is your sexual life in any way comparable to the way poverty impacts the mental wellbeing of people. I'd call what you sketch in your example envy. But that is not what these people are suffering from.
As for your idea of residential segregation, this seems to be another try to 'hide' the inequality. You're still attacking the perception instead of the real problem. I restate that you can't hide the inequality in our society. Say you do separate (forcibly?) all poor people from the rest. How do you stop them from seeing the people on TV? Radio? On the street, where they work?
Even if you somehow work it so that there's absolutely no contact between the former poor people and the rest of society, you've only succeeded in sawing of 1 rung from the ladder. Will you do the same with the new 'bottom rung'? As outlined in the rapport and by me, the issue is not wealth in absolute, it's the perceived gap in wealth between you and your peers, the people you see on tv that are no different from you except they got wealth and you don't.
If inequality were bad in and of itself, then you wouldn't need to refer to Mind State X to explain why it is bad.
I.e., suppose inequality doesn't cause Mind State X. Do you still care? If so, why?
I'll stop you right there, in no way is your sexual life in any way comparable to the way poverty impacts the mental wellbeing of people.
Suppose, hypothetically, I dig into the psychology literature and discover that the distribution of sexual partners causes Mind State Y which is just as bad as Mind State X. Would that make restricting the actions of others moral?
More concretely: what specific psychological properties determine that Mind State X justifies restricting the actions of others, but not Mind State Y? And if I could dig into the psychology literature and show that Mind State Y satisfied those properties, would you change your opinion?
I also postulate that you aren't really recognizing how devastating Mind State Y can be. Your Box 9 quote describes quite accurately my impression of the lives of less attractive men. Feel free to browse various "manosphere" subreddits (e.g. "red pill", seduction) to read many examples of this.
The real problems they face are debilitating sickness, taking care of a family member with debilitating sickness, struggling to continue sleeping where they are presently, struggling with maintaining a human identity in a society that treats them subhumanly, trying to get hired as a felon, trying to secure the trust of any financial institution, trying to break drug habits and cope with psychosis and other mental illnesses without access to a pharmacy or non-ER doctor.
Its hard to empathize with people with an outlook so different, that they can't imagine working their way out of poverty. Because I can.
Let's assume that you aren't able to use any existing education or connections, you start off with significant debt, and you are located in an area with high unemployment. If you are able to be back in your apartment in a month, I'll eat this computer.
Edit: If we threw the idea up on kickstarter, I'm sure that there would be more than enough support to pay for your opportunity costs (assuming you're not independently wealthy). It'd be an interesting experiment.
Scratch Beginnings: Me, $25, and the Search for the American Dream
And what's with the debt-but-no-education? How was that supposed to work? One or the other.
It's not very often in life that the phrase "check your privilege" is appropriate or reasonable, but right here, right now, that's picture perfect.
I mean, you can't think of a single possible way that one could get into debt besides ivy-league loans, and you're saying that you understand what poor people have to deal with?
I'm not sure there's an ethical way to set up the experiment where you apply for a bunch of minimum wage jobs to see which ones you can get; and I doubt there's a way you can spend the time to do it.
But I'd be really interested to know if you could get a minimum wage job within a fortnight.
I live in a small community. Most of the families are self-employed. Who created their job? They did. Didn't wait for some company to decide they were worth paying.
So I have a problem with folks that wait for somebody to make a place for them. That's no way to run your life.
Perhaps. Certainly, the advantages of a relatively privileged condition aren't limited to money and property, but include lots of deeper advantages that (among other things) are useful for the gain of money and property. That's among the reasons why generational poverty is is generational, and requires active effort to break the cycle rather than simply the absence of active effort to maintain it.
> What's a guy to think, when folks complain about how its too hard to move, to get an education, to save money, when I know I can do it?
You could maybe use that ability to get an education you are so proud of to learn enough to have some broader basis for understanding the world than simply your experience of what you are able to do given your own particular circumstances.
I would definitely watch that experiment and I think people would support it on Kickstarter. (People don't want to support the actual folks doing this that much -- it's depressing -- but it would be interesting to see someone with all the advantages of education, marketable skills, previous steady employment, and ease with middle- or upper-class mores and culture try to make it come together.)
Yes, you likely would be back in an apartment with a job. because when you grew up your mistakes didn't result in a felony charge, and because you have not had to burn through so much credit you can nolonger even open an account.. because you had enough resources to graduate high school rather than sling drugs. Because until now most of your health issues until now have been solved rather than pushed off and allowed to worsen.
And most importantly, because you've developed social ties to the institutionally established rich class.
That is a much more striking statistic, and there's reason to believe it may be higher, since marginalized Americans are both the most likely to be suffering lack of basic resources and the most likely to be unrepresented by the US census. Further, this study only measured households, and ignores the homeless and incarcerated, which represent another 2% of the population.
Considering that 10-15% of adults in the US live in poverty, your reference suggests that anywhere between 30% and 50% live without a complete kitchen.
Well, just for starters, they're suffering from entirely treatable diseases and injuries because they don't have health insurance, or don't have non-shitty health insurance. Quite a few of of them are suffering from childhood malnutrition, leading to lifelong cognitive and developmental defects. On the lowest rung, they are suffering from homelessness and all the deprivation and desperation that comes with it.
You're trying to tell us that someone to trying to raise kids in a rotting, roach-infested apartment in a drug-haunted slum, with no chance at a decent education and no real hope of advancement, is really perfectly all right because at least they're not actually living in a Delhi sewer. Or are you not even aware that this happens in America? You sound like the closest you've ever come to actually knowing a poor person is tossing a quarter to a homeless man in the subway.
If that were the case, the increasing access to health care should make them healthier. It didn't.
Do you have evidence for childhood malnutrition?
Once you come up with a definition of "rotting, roach-infested", feel free to check what fraction of poor Americans actually fit that definition. See table 2-4: http://www.census.gov/prod/2008pubs/h150-07.pdf
Suffice it to say, probably the majority of my friends are poor by American standards. But then again, I live in India. And even when I was a poor American I still lived better than they do. Though I'm usually told that grad school doesn't count as poverty, even though the economics of it are the same.
What evidence for your position do you see in that article? It seems to say the opposite of what you think it does. I'm looking at "Medicaid increased the probability that people report themselves in good to excellent health (compared with fair or poor health) by 25 percent" and "Medicaid reduced observed rates of depression by 30%."
> Do you have evidence for childhood malnutrition?*
The WHO doesn't seem to have much data on actual malnutrition rates for many nations, including the US, after a few minutes of searching, but "Some 13 million American children live in homes with limited access to food, and an average one in three children receive food assistance via the food stamp program..." (http://www.livestrong.com/article/487412-malnutrition-in-ame...)
It is absolutely true that poverty in India is deeper and more widespread than in America. That doesn't remotely mean that American poverty isn't real or that people aren't suffering. By your logic, a man with a broken finger isn't allowed to complain if a man with a broken leg exists, and that man isn't allowed to complain if a paraplegic exists, and so on down the oneupsmanship scale of wretchedness. Where, exactly, is the cutoff point beyond which we're no longer allowed to care about human misery?
If you want to argue that poverty in India and worldwide is a huge problem, and that the Western world could and should do more to address it, I'll agree heartily. But what you said was that poverty in America is not a problem and that poor Americans aren't suffering, and that's bullshit.
And, if that is the case, which direction do we go? Do we push the poor people in the US down or raise up the poor people elsewhere or a combination of both?
I'd rather raise others up while helping our own. Free markets are fine as long as they don't become a race to the bottom and create perverse incentives to keep the poor poor.
As the world economic power, along with our wealthy allied nations, we need to tie positive social movement, like raising the minimum wage, access to nutritious food, clean water, medical care, social mobility etc. to access to our markets.
If the people's lot doesn't improve, their elites don't get rich. Simple as that.
I argued that it would be horrendously immoral to do so.
If the goal is to pull everyone out of poverty, is there a way to accelerate the process? I'd say, yes. Predicate the elites selling their people's labor to wealthier powers on improving labor's situation in that country. They are not doing it on their own, at least not fast as they could.
I think we can help both the poor people in the US and everywhere else. We just need to squeeze the top a bit harder.
Also, using a pre-2008 crisis census report to argue that everything is fine today is extremely intellectually disingenuous. It's almost like he's openly trolling.
Better health insurance makes people feel better. That's not the same thing as making them healthier.
If you think the data changed between 2008 and the next AHS survey, feel free to prove it. Or just call me a troll, far less work.
That's BS, that report only presents no change in points on some physical health metrics which are dependent on lifestyle and not medical attention anyways.
> If you think the data changed between 2008 and the next AHS survey, feel free to prove it.
Sure, have a go at it: http://en.wikipedia.org/wiki/United_States_housing_bubble
It's clearly disingenuous to claim that the housing situation today is represented by a report concluded before the crisis where everyone lost their homes and/or jobs.
Diabetes was diagnosed more.
Even if that was the only thing and the only source of suffering for poor Americans was relative deprivation compared to others in their immediate context, so what? Relative deprivation is an important, extensively empirically demonstrated, source of disutility. If one is interested in alleviating actual human suffering that exists, rather than artificially creating self-justifying excuses to defend perpetuating suffering, one would recognize that it is an important problem (not necessarily something which we should blindly bear every cost to minimize, as doing so may at some point do more to exacerbate other sources of suffering than it does to alleviate the suffering directly attributable to relative deprivation, but likewise something that should be considered, weighed, and addressed to the extent practical without doing more harm than good.)
If you feel that forcing more people to poop in the field in order to reduce feelings of envy among wealthy Americans is a good thing, make that argument.
wealthy Americans aren't the ones facing relative deprivation (which is why the reference upthread was to "poor Americans"), nor is it a problem only in America -- inequality (with a strong and persistent ethnic basis to the inequality) is something that neoliberal international trade regimes promote on both the more developed and less developed sides of trade arrangements.
See, e.g., World On Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability, Amy Chua (2003).
So, 14.3% of US Households don't have enough food. Food insecurity is another way of saying "Hey, we may not eat today but we eat enough calories on average to survive.".
You think these people are paying their power bills over food? Seriously?
"69 percent of households that rely on food charities to survive have been forced to choose between paying for utilities and paying for food."
"66 percent of households said they’ve had to choose between paying for food and paying for medicine or medical care. Thirty-one percent said they had to make that choice every month."
I'm guessing some people are letting the power bill go unpaid based on that, eh?
So when you say its "Envy" are you saying you are ignorant or that 14.3% of the people in this country are envious, ungrateful bastards for thinking they deserve 3 square meals a day?
You seem to be confusing "food security" with "very low food security".
None of these things are hunger, however.
The natural consequence of not getting enough food is weight loss. Where are the skinny poor people? Note that here in India, even in a well developed city, they aren't hard to find. In the poor parts of the US where I've lived, you mostly just see fat people.
From the link:
"Food insecurity—the condition assessed in the food security survey and represented in USDA food security reports—is a household-level economic and social condition of limited or uncertain access to adequate food."
"reports of reduced quality"
What do you think quality means in a nutritional context? How it tastes? No, that is desirability.
> The natural consequence of not getting enough food is weight loss. Where are the skinny poor people? Note that here in India, even in a well developed city, they aren't hard to find. In the poor parts of the US where I've lived, you mostly just see fat people.
You do realize you can just eat a bunch of starchy foods and suffer malnutrition but not lose weight right?
I think the issue here is you are trying to be pedantic without understanding the context of the words being used. That and complete ignorance of "sufficient calories to gain weight" != "3 square meals a day".
"(Especially of food) having different elements in the correct proportions:
a healthy, balanced diet"
"A substantial, satisfying, and balanced meal:"
So your argument is basically:
"Well 14.3% are alive and not starving to death"
2-3,000 people a year die from malnutrtion in the US.
This isn't evidence either btw. Its anecdotal. You are refusing 5% of the population doesn't get enough to eat and people dying every year in the US as "well, I don't see it".
But hey, 2-3,000 people dying a year isn't a problem for you eh? Because its just envy. Nope. No material impact whatsoever.
Then I don't think you've really been listening. Their lives are extremely unpleasant. Spend some time in a poor neighborhood in America, talking to people. I haven't read it but the book On the Run by Alice Goffman might paint some helpful vignettes.
We have an entire industry--advertising--devoted to making people want more things.
So something like envy, which is to say wanting something that someone else has, is a significant driving factor behind economic activity. Mental suffering and physical suffering amount to the same thing: unhappiness with the current state of affairs. It does not matter if one person wants to not die of cholera while another wants a new smartphone with a faster processor. It only matters what that person is willing to do or to forego to get that thing.
The first person may be willing to spend a week with a shovel in a pit filled with sewage to get adequate sanitation for the rest of the year. The second person already has a flush toilet, complete with sewer and treatment plant, so maybe they're just giving up new tires for their second car.
All of economics is just individual humans making choices about what they want.
Poor Americans have been told throughout their lives that they can have a certain lifestyle--pretty good in comparison to a lot of other countries--if they are willing to follow certain rules and spend some time working rather than playing. Many of them are finding that to be a lie. So perhaps they are suffering instead from a perceived betrayal of a social compact? Everyone willing to produce shall be able to consume in equal measure?
What I am seeing through my biased eyes is that significant limitations are being placed on ordinary people's ability to produce valuable goods and services, and so their ability to consume is falling below that required by their former customary standard of living.
Replace "India or China" with "Black or Hispanic" to see how sad this comment is. It still surprises me to see that we live in a world where racism is condemned but discriminating people for the place they were born in is socially accepted.
Now, to answer your question, we should care about people in India or China because they're people. Human beings. The place they were born in, just like the color of their skin, should be an irrelevant factor. Something assigned to you randomly just before birth.
The irony is that people in India and China understand this simple dynamic perfectly well. You don't need to explain to the average Indian or Chinese person why they should care more for the plight of their neighbors than that of, say, even poorer people in Africa.
However, if you favor some sort of protectionism, I'm curious why you think I should care about poor Americans. Supposing I were to give up humanism and revert to tribalism, as you seem to have done, why would I allow poor Americans into my tribe? Why not simply define my tribe as wealthy white males?
(I personally have practical reasons not to do this. A minority of my friends are American and a smaller minority of the Americans are white males. But those are just practicalities, not moralities.)
I'm also curious whether you favor imperialism. After all, if our goal is simply to maximize American utility, why not just pillage and plunder everyone else?
In any case, I'm not advocating for political change overseas. I'm simply advocating against threatening people with violence for engaging in mutually agreeable trade. I.e., if I want to hire an Indian person to work as my secretary, it's not right to forbid this in order to force me to hire an American.
China is already a middle income country, India is a high lower income country. if you want poor, look at Africa.
It was posted here about 6 years ago: https://news.ycombinator.com/item?id=373041
I don't think we should look at poverty as a solved problem, but I think it would be overly cynical to not acknowledge how much the "system" has done for the poor.
FWIW, I'm less enthusiastic about the current system/situation than mattmcknight appears to be.
It's not 1/3, and poverty is a relative term, but really the fraction doesn't matter.
"The Census Bureau today released data indicating that the overall poverty rate in 2013 was 14.5 percent – a decrease from 15.0 percent in 2012. This change was the first decrease since
The US poverty rate does not include the price of non-cash government benefits. The average cost per Medicaid enrollee, which all people at the poverty line qualify for by income, in all states, is $5,563. It doesn't include food assistance. It doesn't include housing subsidies. These vary, but are widely received.
>What kind of callous person could look around at all the suffering and think this system's working great?
What kind of callous person could think helping a person with more money in a country that provides them numerous benefits is better than helping a person with less money?
"Or do you not look around at all, holed up in a tacky mansion of your own?"
I have traveled the world many times over the past 20 years. The positive change I have seen world-wide is perhaps invisible to you because you choose to focus on actions which cause others to consider you to be helpful, instead of actions which are actually helpful.
My house may be slightly tacky.
i dont think anyone is saying the system is working great. Capitalism the worst system, except for every other system tried. What do you suggest?
I live in a country in the EU. 90% of the population does not understand supply and demand. Even more people do not understand the notion if "rhetorics".
You want those people to participated in making decisions? Do you really believe that?
I am so fed up with this vain anarcho bullshit. WAKE UP. People are dumb. Dumb as a brick. If you want to help them, you have to drag their body over to the finish line.
Any attempts to temper with the social framework by largely un/poorly/mis-informed masses of people leads to catastrophes.
Some enlightened people will always try to exploit people's resentment to gain control and use it as they see fit. Soon the system is far worse than before.
I saw a definition of being rich as "never having to worry about money". Now take being poor as "always having to worry about money".
Doesn't matter if you have got a widescreen TV. If you sell it off you may eat better for a few weeks, but after that you will still be in the same situation, in constant worry about money.
Did you even read the article? It's a four-page, in-depth consideration of global economic issues; "tacky" does not even begin to play into it.
You must be new to HN ;)
In their defense: German school curriculums lack a fundamental economic education. IMHO this non-education is one reason that everyone who has read "Economics in One Lesson" knows more about economics than 99% of German journalists.
Thats because many more people become poor. I'm not saying they are directly exploited but indirectly they are, because it is a zero-sum game.
That the USA has failed to adopt sufficiently sensible policies to deal with these changes is not the fault of capitalism per se, and indeed in the case of things like a shockingly unequal education system is often driven by left wing people who dislike capitalism.
Also, note that Europe (richest content) is undergoing a never-ending crisis which has broadened extremely the poor class, especially in South Europe and Ireland. But things in Britain and France are not looking good either.
Economics, and capitalism in particular are not a zero-sum game http://www.povertycure.org/issues/the-zero-sum-fallacy/
However, povertycure.org seems to be embraced by quite a few neo-libertarians, neo-cons and the specific page you linked to is high on platitudes and fairly low on facts, in my opinion.
Between the strange mix of a libertarian worship of a unicorn "free market" combined with religious overtones, they strike me as a somewhat confused group with quite a few ulterior motives running in the background.
For example, this charmer from povertycure.org's board:
That's not to say I think povertycure.org is all bad and I disagree with everything they all say and do, but I take them collectively with a grain of salt. For example, I think Michael Fairbanks has some very smart ideas here and there, but I'm still wary of anyone that embraces a "free market" blanket solution to so many issues as well.
As far as the crisis in Europe goes, I think the damage that austerity measures have caused aren't given enough credence by a lot of the corporate media for obvious reasons.
More on this:
It's ignored too much, in my opinion.
Look at it this way. Money causes corporations to become powerful entities (through propaganda, lobbying, internal R&D, etc.), and this reinforces the loop. There is a selective component, in that competition leads to corporate casualties. In other words, capitalism causes agglutination of money. Hence, capitalism leads to some people becoming rich, and most people becoming poor (because they are now out of business).
The effect will be directly noticeable to people here on HN when Google invents strong AI, and puts every programmer in the nation out of business :)
People working, manufacturing and creating things are what creates wealth. Not a magic money tree.
An over-valued financial asset is thin air and creates nothing only the illusion of money. Add to that the ability of our current banking system to give Y-times more debit then their deposit (where Y -> OO+ ) one the one hand, on the other hand there are people producing items of value that we can actually use.
The rate at which over-valued asset are sold and re-priced + banks giving away loans that they will never get back and didn't had the money to support them anyway is orders of MAGNUTUDE bigger than the primary sector and secondary sector can produce.
There's also the problem of automation of the mainly the primary sector which makes things even worst. Now we have to create virtual scarcity in order to maintain this totally insane system because, let's face ... With today's technology 1 country could produce enough wheat for 5 planets.
More efficient options may exist but to the best of my knowledge none currently do
Canada seems to have had pretty good success with that basic income town. And no major western democracy has really attempted it yet.
I like it because it lets you have a completely deregulated economy, because both employer and employee would be participating in voluntary negotiation without a huge bias towards the employer - when one side is starving and need shelter and the other just wants a third yacht, the incentives are skewed. If both of them want money for luxuries and not necessities (worker wants a TV, boss wants a movie theater wing on his mansion) you don't need as stringent workers protection regulations and you don't need a minimum wage, because all employment is voluntary and a worker could just walk without fear of homelessness if a boss cannot offer him enough to keep him working.
It also means people can pursue what they think is valuable, rather than what the market can show is valuable, which like you say it is becoming worse and worse at over time. It means every artist could draw all day, any recluse could stay in their bedroom trolling reddit all day, and everyone who wanted to help starving children in Africa could help starving children in Africa whenever they wanted.
People already love getting those income tax returns - when you pay in more than you needed to, and you get the difference back. Basic income is the exact same thing - most people would be paying in significantly less than they get out, while those above a threshold (preferably the peak happiness threshold of income, that varies by location but in general on an individual basis is around 75k a year, src: http://content.time.com/time/magazine/article/0,9171,2019628...).
No, they aren't. Presumably, this is intended to refer to Social Security, which is not at all like a basic income (even aside from age):
1) Eligibility to receive benefits at all isn't unconditional (again, even discounting age), its based on qualifying contributions -- your own or someone else's -- and other factors.
2) The level of benefits if you are eligible isn't constant, but varies based on the same factors that go into eligibility.
> or that anyone on unemployment is getting a temporary basic income
Unemployment insurance is also not like basic income, as the benefit level as controlled by qualifying income in the preceding period.
> or that if you ignore the beuracratic overhead and injustice of welfare then food stamps + section 9 + the free electric programs sum to a near basic income
You probably mean section 8 housing vouchers, but, again, nothing like a basic income; all of those are conditional program with both means and behavioral tests (and in many cases aren't fungible benefits, so they also have use restrictions).
The jump is not from anarchy to UBI. It is from conditional basic income to unconditional.
Also, I might be mixing up my district nines and section eights. I wonder why...
On the other hand, if everyone works really hard and is super productive and starts businesses and etc then at some point their market wages totally swamp the basic income and it's essentially un-needed and kind of a joke. And if that were to happen, prices would rise to the point where the basic income isn't anywhere near enough to live off of comfortably and it's existence is worthless. Let's call this 100% workforce participation.
There exists a whole spectrum of workforce participation between 0% and 100% and some of them might be stable-ish such that there isn't a positive-feedback loop that quickly runs society off the rails.
The problem that the champions of basic income haven't really addressed is that people fear the degenerate case of 0% workforce participation (or nearly so) and the mental calculation that people seem so able to do but which proponents of basic income seem to find impossible: where does this money come from? Why will I as a worker have to pay for things that non-workers get? Why do I not get to keep the fruits of my labor?
Ultimately money is useless by itself, and the economic system is one which allows us to divvy up the limited physical goods (the planet is finite, our ability to manufacture is finite, roboticized production lines don't operate at infinite speed, neither are they free, we still need SOME farmers, etc) to people. A system which says that everyone can have even if no-one works sounds an awful lot like a perpetual motion machine and thus people are skeptical.
If everyone takes the basic income, they will spend their 16 free hours a day doing things that they find value in, but not necessarily valuable enough to others to support their basic needs.
In the degenerate case, a self-sustaining automated economy produces a massive surplus for human consumption. Robotic slave labor, programmed not to want anything or complain, will serve all your basic needs.
A good portion of the robotic production army is already in place, but it still requires human maintenance and operators. All that is required is a sub-economy that produces more than it consumes, and requires zero inputs from anyone outside it.
Autotrophic organisms already do this. Everything else on the planet eats them. If you want to feed more people for free, you just design a better algae or plankton, and they build themselves. The rest of the ecosystem simply builds on top of them.
If people only buy domestic (including the case of a global BI) then when "everyone stops working" then we see supply of most things shrink dramatically. This raises prices, which means that the BI people are receiving doesn't go as far. This motivates people to get back to work. Note that it does so before the purchasing power of the BI is negligible - it does so as soon as it falls below "what you can live on with the comfort we want", which itself will have variation. I would expect such a dynamic to be self-stabilizing, not self-destructive, though it certainly depends on the constants involved.
In reality, some things are purchased from abroad for cheap, some things at a premium over domestic goods, and some things can only be provided domestically. Your point is most strongly an argument against too high a BI in too small an area.
The flip side, 100% participation, doesn't seem like something liable to be caused by the basic income, and it if is it should be self limiting for exactly the reason you note - we quickly find ourselves in a situation where the basic income is approximately zero in real terms.
As an aside, out of fears over feedback loops I have said before that a BI should not be pegged to actual inflation, but to targeted inflation. I think that would help it generally track the real value that we are best capable of providing.
That's actually an argument for basic income. It's the mirror image of money politics, only its actually democratic.
You said "That's actually an argument for basic income" in response to my statement "if everyone stops working and starts taking basic income" which I don't understand. I thought I laid out a fairly clear argument that if everyone stopped working everything falls apart.
To me, the logical next events are that with not enough taxes the government either prints money or defaults on its debt. That leads to either to massive inflation (undermining the value of basic income and perhaps resulting in civil unrest like in the Arab Spring when food prices got too high) or in the case of default, quite possibly the government ceasing to exist.
So how does everyone taking the basic income solve a problem? Is the goal to get rid of the government? I can't take that seriously because if people are serious about a basic income, then it stands to reason that they want it to continue, and if the government fails, so does the basic income which it provides.
I'm not saying US-style capitalism is great and perfect; it's clearly flawed in huge, huge ways. But that doesn't somehow make the flaws of a basic income system non-existent does it?
We would then have a vacuum of a large number of poorly payed jobs that are now in demand - would this not immediately raise the wages for these jobs? Would employers not have to raise wages to attract workers? They would either have to raise wages or automate in some way - this would be a big shakeup for companies, but with basic income even people losing jobs or companies going under would not be a huge deal since basic needs will be met for all those people
So what if everyone quit their jobs and withdrew from the workforce all at once?
Well, i think that wont happen - Would warren buffet quit his job? Would professional athletes? actors? Corporate accountants? Would your average HNer close up his startup? Would the bureaucrats running basic income quit? Would the bank tellers stop processing the checks?
If they all did of course that would be chaos - food would immediately stop getting produced, water would stop flowing - sounds like a serious problem that hundreds of millions of people now have all the time and motivation to solve - but lets be honest, the likelihood of EVERYONE quitting their job is laughable, at worst the wages for most jobs will raise and some jobs will more rapidly be automated
You've made two assumptions here:
1. People are ENTIRELY rational (they're not)
2. No black market exists
If you could guarantee that those conditions could be met, I would be much more willing to engage in the rest of your comment further. But they can't be met, not even close.
In order to be useful the basic income has to be a substantial fraction of the median income, or else you can't really argue that it's basic. If receiving it means that you're still in poverty by a wide margin I don't think it's useful enough to talk seriously about.
But once it's a substantial fraction of the median income, working looks less and less attractive. What I mean is that say $2000 for 0 hours worked in a month is very nice, and $2020 for 1 hour worked is at least in percentages, infinitely less desirable. Perhaps once you get up to 30 hours per week worked and $4400 in income you're starting to see some benefits from working in some kind of a meaningful way.
The issue is that working has both a fixed amount of hassle and a marginal amount of hassle. Once you don't need to work to eat, now you're just doing gut-feeling comparisons of hassle/reward ratios. On days that I have to work I have to get out of bed, get dressed, commute, etc. That's a fair amount of hassle. There's also the marginal hassle of being at work and not getting to do exactly what I want.
It wouldn't be worth it to do all the fixed overhead hassle to only work a hour a day because that would make such a small different in the total monthly income. So that leaves people wanting/needing to work more, probably at least a 4-6 hour day to amortize the fixed overhead of hassle into a reasonable number of hours to make the total amount of hassle substantially less than the money received so that working makes sense.
So now that lots of people aren't willing to do low skill, low pay jobs the pay obviously would have to go up. But that means that prices are also going to go up. And that means that the basic income isn't basic anymore; it means that it's sub-basic since it can't provide for your basic needs. That then requires a bigger basic income, which leads to higher prices, which leads to higher basic income, until you've got at least the potential to have a zimbabwe-style hyperinflation.
"Crucial to both components is discipline over the creation of additional money. However, the Mugabe government was printing money to finance involvement in the Democratic Republic of the Congo and, in 2000, in the Second Congo War, including higher salaries for army and government officials." http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
Once those people (government officials and army) got more money and started to spend it, everyone started to realize that the money was not worth as much as they thought it was. That led to prices going up, which led to more money printing to keep salaries ahead of the curve and this spiraled out of control very quickly.
Granted there's no guarantee that a similar kind of runaway would happen under the basic income. But it's definitely a very real risk.
EDIT: I forgot to touch on the black market. If a person wants to accumulate income it might be better to do so on the black market. That allows a person to avoid high taxes (basic income has to come from somewhere, that somewhere is always proposed to be higher taxes). That makes the black market (or working "under the table") attractive. The shadow economy of Europe is already by one estimate 17% of the total economy. Basic income would further encourage such things: http://www.huffingtonpost.ca/salman-sakir/black-market-econo...
"wealthiest 1 percent of Americans control 35.6 percent of the total wealth of the country"
"the top 1 percent of income earners took home 17.67 percent of the total income"
In other words, there is one guy with $1mm in the bank and 99 people that make $50k per year. Which is more important to you if you make and sell stuff?
The guy with $1mm in the bank could theoretically buy $1mm worth of your stuff but after that he'd be out of money. The 99 people who make $50k a year collectively could buy just under $5mm of stuff EVERY YEAR. So while the guy with $1mm has more power from any one instant to another, everyone else has a lot more power over any longer time-scale.
The reason so many are unemployed, after all, is that it takes fewer people to sustain a given 'standard of living', right? So now, with our free market, those unemployed drop into poverty since their bank account of imaginary points goes to zero.
Put points back into those bank accounts, and what happens? Those small tallys are not going to affect what the big folks are doing with all those trillions.
The value of money is directly derived from its purchasing power. If you can't buy anything with money, it's worthless.
The point is that the vast majority of the money in the US is in flow, not tied up in the rich 1% bank accounts.
So if 95% of people suddenly have 2x cashflow (on average, let's say) then prices should roughly double within a fairly short period of time. We won't suddenly have more gasoline or milk or beef or whatever if everyone has twice as much money every month. So more money chases the same amount of goods and prices rise. This is really simple economics.
Would doubling the price of everything erode the purchasing power of the rich too? Yeah, absolutely. At least for all the money that they have tied up in cash. But considering that the FDIC only insures you up to $250k I suspect that most wealthy people are going to have their money in assets like stocks, bonds, and real estate. Real estate prices will definitely rise and I suspect that the other asset classes will go up in price too.
There might be a period of a few weeks to a couple of years where people actually do get more stuff before the prices start to rise. But with how just-in-timed everyone's supply chains are these days it's not as though it would take 20 years for everyone to catch up to what's happened.
Woah thats a pretty crazy assumption - basic income only needs to provide enough income for basic needs to be useful - are you trying to say that the median salary in the US is the bare minimum to meet necessities?
Median income is the amount which divides the income distribution into two equal groups, half having income above that amount
currently the median household income is estimated to be $51,371 - if you think that this is the MINIMUM amount of basic income for the program to be useful then its clear you have a core misunderstanding of basic income at its core.
>What I mean is that say $2000 for 0 hours worked in a month is very nice, and $2020 for 1 hour worked is at least in percentages, infinitely less desirable.
You say that people are not entirely rational at the beginning of your comment, yet you are now assuming they are - many people enjoy work, do you think PG only does ycombinator purely for the money? warren buffet? does tom cruise still act only for the paychecks?
Also, you are missing another key point of my last comment, and that is that the price of labor will rise. I agree that working for 20 extra dollars isnt going to seem as worth it when you already have enough to serve your needs - that is the whole point. wages will rise, people will be choosier about what work they are willing to do, and the less desirable jobs will have to pay more - that is how simple supply and demand work
>EDIT: I forgot to touch on the black market. If a person wants to accumulate income it might be better to do so on the black market. That allows a person to avoid high taxes (basic income has to come from somewhere, that somewhere is always proposed to be higher taxes). That makes the black market (or working "under the table") attractive. The shadow economy of Europe is already by one estimate 17% of the total economy. Basic income would further encourage such things:
First, you are somehow overlooking that the incentive to work under the table is already there, yet the vast majority of workers do not get paid cash under the table - it is in both the employer and employees interest to subvert the tax system for wages already yet this isnt happening - what makes you believe that this would so dramatically change that MOST of the labor market chooses this option?
This is to ignore that fact that there are regulatory bodies that actually enforce this, and will go to job centers to make sure employees are being payed legally - this happens all the time and is a common method is trying to find illegal aliens (I have years of experience cooking in restaurants where i have seen this first hand many times)
I appreciate the discussion thanks
When I stated "substantial fraction" I guess what I mean is that it's at least 20% or 40% or something. A basic income of 5% of median personal or household income is going to be little more than a sick joke. Note I didn't say "exactly the same as" but rather "a substantial fraction"
To compare people who make millions of dollars a year to people who are eking out subsistence wages is a mistake I think. These people tend to be highly motivated and thus for them it's often not strictly about the money anyhow, but the money sure is nice as it affords them the ability to work on the thing they're passionate about. When you're making $9/hr at mcdonalds I suspect that passion has less to do with it and a need to eat and have shelter is a bigger factor.
The higher taxes go, the more incentive there is to work under the table. I don't know if the black market in the US is bigger than in Europe, but I can tell you that in the US taxes are lower and so there's less incentive. I agree that policing can do a fair amount, but what if you push people into entirely invisible jobs? It doesn't have to change MOST of the labor market, but if right now the black market is 10% of GDP and the taxes rise enough to push it to 15% or 20% then you're growing crime. I don't think that's a good outcome.
Now a great question to ask is which is worse? Would it be worse to raise crime and have a basic income? I don't know. Trying to think about the unintended consequences of policies is really hard, so few do it. I think that's part of the reason our laws tend to be so full of obvious loopholes.
Or the price of labor goes up. In a system where money buys the legislature, your only real recourse is to say "Fuck it, I'm out." Basic income would enable labor to vote by withholding labor. That's a feature, not a bug.
That's actually why I'm really in love with mayday.us; Lawrence Lessig's PAC to get money out of politics by supporting people who want to do actual reform rather than just saying that want to. If we can actually vote the bastards out and get better people who won't be bought in, we've got a chance to shake things up and maybe fix some of the underlying problems that basic income seems like a solution to.
I maintain that everyone could stop working and prices could rise enough such that basic income is a joke and everyone has to work again in order to eat, which kind of defeats the purpose of basic income.
But I do appreciate your response.
There is a pretty neat solution, if enconomy goes down then basic income goes down in such a way that no many people would like to be on basic income. If this seems harsh, I think that some force must be applied to restore the system.
Anyway, to control any kind of system we have to take into account the lags in the feedback to make the system stable. If all people quit their jobs at once then there is no force (cops, military, and so) to restore the system to its orginal state and we lose control. We need to study how elastic is this desire to quit your job and act in accordance.
I'd say (and then pointing out my lack of formal or amateurish study of economics) that the issue you're pointing at is that capitalism doesn't function well in a post-scarcity environment, which we're entering. This is because our means of determining value is primarily based on supply/demand dynamics - aka, scarcity. As scarcity goes away, our ability to determine value goes away, and with it, our ability to distribute energy throughout our civilization.
Burning Man (which is definitely NOT a viable economic model and I am NOT aruging that) demonstrates the viability of a new principle: YOUR value is based on what you give away.
Which gets really interesting when you look at economics as a sort of directed thermodynamic problem: What defines where energy (aka money) goes? Right now, it's defined by supply/demand dynamics and wants and needs - what if it were primarily defined by altruism?
You can come at this from a different angle, going back to that grade school career question: If you had a million dollars, what would you do? Or to rephrase, if all your needs were taken care of, what would you do?
Blah, blah, blah, I'm throwing out a bunch of ideas to see how they react. What're your thoughts, given what I've described?
A literally post-scarcity environment is not a problem because it makes the price of everything zero. Food is free, shelter is free, medical care is free, you don't need a job. Do whatever you want all day, it's not a problem.
The problem is that what we're entering is not a post-scarcity environment, it's an environment where things many people don't already have, like energy or land, become more scarce and thus more valuable than the things they do have, like the ability to perform unskilled labor.
In theory capitalism works fine in that situation. If people can't afford rent or home ownership then the price of housing should come down, because the supply of housing and the number of people who need it haven't really changed, so if people have less money then landlords and home sellers can no longer charge as much.
The problem is that we interfere with that process -- the housing crash was a market correction. Instead of letting that correction happen all at once, we bailed out the banks. So now the banks that didn't file for bankruptcy and liquidate their assets are sitting on thousands and thousands of foreclosed homes and intentionally keeping them off the market in order to backstop housing prices and prevent even more foreclosures. But the result is a significant artificial inflation of housing costs that comes directly out of the pockets of people in poverty.
This estimates the number at 85-90% of foreclosures:
You can literally see it with your own eyes. Walk down a street in a working class neighborhood. You'll see plenty of homes with a piece of paper on the front door saying the house has been foreclosed and "winterized" but no realtor's sign or other indication that the house is on the market.
Not selling foreclosures is completely rational behavior for the banks. The houses are usually on their books at the price the original owner paid for it, so selling it at the current market value causes them to take an accounting loss and makes the bank's CEO look bad. Meanwhile the homes are still assets they can collateralize and trade as securities without actually allowing anyone to live in them, which is all the bank was ever interested in anyway, and not allowing anyone to live in it keeps overall housing prices higher, which is more important to mortgage banks than anyone else in the world. Meanwhile the value of the home isn't actually going down, which is what would happen if they sold them at scale.
It's a fun question, but I think the answer is less entertaining: we would all be less happy. The fact is that most people are better at guessing what they themselves really want than other people are. It's a question of information. I know more about my desires than my friends do, for the most part.
Altruism is nice, but inefficient.
Spending quality time with friends & family, on the other hand, truly is priceless. I don't want them to be nice to me - I just want to be with them. So finding an economic (and cultural) system - be it a few tweaks on the current one or a radical rethink - that gives me more opportunities for a healthy social/family life ought to be the goal, in my opinion.
It is happening. The average manufacturing wage in China is up 700% in fourteen years.
It isn't happening in the US and Europe, but that's because the average worker here still makes absurdly more money than the average worker in the developing world. The gap is closing quickly. As it does, we'll be able to see more evenly spread growth again.
But purely from a humanitarian standpoint, it's hard to argue that it's a bad thing for workers who make $7000 a year to be getting bigger raises than workers who make $37000.
IE, you built factories and call centers and all manner of things to service western tastes, and even when the western money dries up by then you should have enough in your own little money cycle plus the infrastructure to produce enough to compete globally to maintain equilibrium.
It is an efficiency game. You start out with a farmer who has no tools, but because they live in an impoverished nation he sells his crops for next to nothing and that next to nothing money is considered a lot where he comes from. That money gets him funds to buy tractors and plows and other productivity boosters or maybe self driving combines to just outright replace some of his labor.
Now while a lot of that might come from the same western market, he will still spend some of it locally, and macroeconomically that effect will spread wealth in the local area assuming locals can buy something from each other. As long as the equation has money flowing out of another country into yours you are boosting your economy through your citizens productivity.
By the time the equation equalizes, the farmer should have all the modern tools of the farming trade such that there is price equalization between himself and all other farmers - their countries economic deficit gave him an opportunity to invest in his farming, yielding a more efficient farm that can produce significantly more food and by the time it is done sell it at western market value because their economy has equalized with the first world.
Of course, the farmer could also blow all his temporary profits on drugs and women, and end up screwed when he cannot produce enough crop to sustain himself as the cost of living rises with a modernizing economy.
That's the problem you can't be sure once there is no more "western jobs" that they will remain enough money in the country. You are just assuming without proof. The exact thing neocon have been doing for years.
It's not enough to explain it, but it is a relevant piece of the puzzle.
Well, boards often approve costly "incentive plans" for employees, but would a board approve 10 billion dollars to be distributed to employees every year? What would that mean for the future stock price?
Keep also in mid the other 50% ownership - probably pension plans funds.
You also mention already accrued wealth in form of stock, not income originally. How would distributing that work exactly? Would you add some kind of extraordinary tax on every WMT stakeholder? Their dividend alone (6 billion) is not enough to cover the wage increase.
Let's say you're selling cars for 100 dollars, and make 10 dollars in profit from each car sold. There's a lot of folks who have only 99 dollars and can't afford a car. If you give such a person one dollar, they will buy your car and you'll be 9 dollars richer.
Now, of course that's just a market segmentation scheme in disguise. If you could identify the folks who have 99 dollars and give them a 1 dollar discount instead, you'd profit even more, because they wouldn't be able to spend it on anything except buying a car from you. That's how companies do it today, they use employee discounts to get all the benefit of raised wages without actually raising wages.
That's an incorrect assumption, possibly wildly so. Likely, more than half of Walmart employees are part-time and temporary employees, partly to avoid giving them legally required employee benefits.
Also, I appreciate that you've done the math in more detail than I did. I did a quick calculation in my head based on the 2 million employees to come up with $2, but you've been more precise and provided numbers, and I appreciate it. Even though we disagree on what the starting numbers for the calculation should be. Basing the discussion in reality is nice, and what I like about HN.
A century ago there were hardly any regulations or taxes. Today every segment of the economy is highly regulated outside of tech and nearly everything you can taste, touch, smell, eat or look at is taxed (often multiple times).
In the 80s we started massive deregulation including killing Glass-Steagall, opening up banks to so destroy the global economy that we're having this discussion today.
Your history of regulation and relative wealth is backwards.
Edit: I'll acquiesce that the tax code is laughable, but mostly in how upper-class income tax levels are half what the middle class pays.
In fact, countries like the USA should give it a try again. It worked quite well for them last time.
What logic is this? "Anything which is not a designed system works fine"?
That said, "be careful" and "do nothing" are two very different propositions. Being careful may motivate doing nothing, or it may motivate doing quite a lot. While I don't think it was present in Hayek's reasoning, this frequently spills over into something that looks like "We're dealing with people's lives/rights here! How can you be so crass as to talk about numbers and make decisions?" When things are difficult and important, that's precisely the time you need to be most careful in your reasoning.
Abstaining is still an action. Proposals for reduced or constrained intervention are still proposals, and only deserve reduced scrutiny to the degree that they are supported by "we've done that before and it worked out well".
Improved safety net and infrastructure projects so fewer people are suffering? Sounds terrible. Please don't sign me up. /sarc
Seriously, what is wrong with improving the safety net and infrastructure projects? It's far better than the solutions being tried in the west, i.e. high unemployment and the gutting of social safety nets in the name of austerity. Once we can at least match Japan, then we can consider better still models of dealing with a lack of demand for labour, e.g. Basic Incomes or Job Guarantees (or whatever else).
Is this situation new in history?
Is this a transitory state?
Is this related to corruption?
How can find a new job those that wered cancellet out because automatization?
Do we really control our future?
Are our goverments trying really to find solution to those problems, that is allocating the necessary resources to dealt with those problems?
Some people could think that making it difficult for people to live in a country increase productivity in the sense that people are disponed to work more for less pay, macroeconomically this can make sense but what about those that can stand up?
Do we really vote with our heart or are we at the end of the day voting to continue living in a such competitive system that no one knowns were it is heading?
Here in Spain, I sometimes consider that people don't value really how well we are with low tuition rates and free health care. Without being able to value what's really important is very difficult to design any kind of sensible approach to solve the really important problems we face.
Perhaps any of those questions can be answered?, I don't know.
Balance sheet recession.
Mistaken policy response-austerity, German unhelpfulness in Eurozone.
Globalization-i.e. cheap labour
Financial industry acting against interests of wider economy.
Dunno if anyone has yet mentioned one of the basic contradictions inherent in capitalism which could very well be at the root of what we experience. Means of production are private (factories, etc) and the owners as almost all players in capitalism take care to maximize _their_ profit and not society's well being. That maximization involves dumping down workers wages (another commodity in capitalism). Interestingly enough, workers are also consumers so dumping their wages erodes their purchasing power. And that's just one of the contradictions that stem from having a social mode of production driven by private interest.
The name of the most prominent economist that pointed out this and other contradictions some decades ago is Marx (which interestingly enough is never mentioned when capitalism crisis are on the table).
No one forces you to purchase what's "produced". If you purchased a Windows computer - and so helped Mr. Gate's well being - that was your choice! The list of examples is long. As to "Windows" - whether society is better off ...
Here is my initial premise. Across the entire economy, current consumption is paid for by current production, with any difference buffered by available filled stockpiles and empty stockpile capacity.
If you eat an ear of corn, someone has to grow an ear of corn, and transport it to you. If that person grows more corn than other people want to eat, it has to be stored somewhere until those people get hungry again. And the transportation and storage themselves consume resources.
This is the economic gradient. Goods and services are brought to market by producers, and taken away by consumers. In order to make this worthwhile--remember that bringing something to market is not a zero-resource operation--the consumers must give the producers something of greater value to them than whatever it is they produced.
Because this is sometimes tricky, we all agree for convenience that everyone always wants "money"--whatever it may be--more than whatever it is that they produce.
This works just fine when all producers are also consumers.
Now introduce industrial capital. Now a producer can, via the multiplying effect of capital, potentially single-handedly satisfy the entire worldwide demand for a good or service, at lower cost than any other producer who lacks the required capital. Again, this still works fine, so long as that person can manage to somehow consume all those resources.
But then we run into a problem. What if that person cannot manage to spend that much? The excess has to be stockpiled, according to the premise. Without the convenient fiction of money, that super-producer would have to start filling warehouses with goods and services. (We will pretend for the moment that services can somehow be stockpiled.) But even then, until the imbalance is rectified, that guy will simply keep filling warehouses that can never be emptied. Those resources are lost to everyone else. The super-producer simply has everything he could possibly need or want, and there's nothing anyone could possibly give him in trade without first tricking him into thinking it is better than anything he already has. With money, the problem of warehouse space is solved by reducing all that surplus to a number, which is stored in a computer.
But then we run into another problem. The value of the money is determined via continual market recalculations by the amount currently in circulation. Warehoused money might as well not exist. The super-producer has to keep moving it around, or prices will adjust to accommodate the fact that it is not being spent. He therefore gets less in exchange for his production. Then, whenever he goes to buy something, prices rise again temporarily. So the super-producer "invests" his money stockpile, which is a fancy way of saying that he moves it around from being owned by him in his own name to owned by him in a fictional business name. Or it approximates virtual warehouse space for his owned physical goods and for his owned services. The point is that investment is not consumption.
Whenever someone produces at a level that far exceeds their level of consumption, someone else's production is essentially being thrown into an economic black hole.
That's the problem with Capitalism. It can concentrate wealth so much that the owner cannot possibly consume it all, over his entire lifetime, or even in the lifetimes of his heirs. And until someone in the line of inheritance can become creative enough to embark upon some consumption megaproject, the concentration of capital sucks the life out of the productive economy.
Marxism solves this problem by diluting the concentration right at the source, by distributing the capital production in the hands of more spenders. But then there are no megaprojects without re-concentrating that wealth via government.
The capitalist solution to this problem is to give rich people more expensive things to consume. If, for some reason, they don't want to consume, the system fails. And nowadays, rich people are mostly investing rather than spending. If they do not change their ways, and quickly, the traditional release valve is to take back ownership of resources by force.
So, I'm afraid that if you expect things to change via rich themselves changing their ways (e.g. see the light and start redistributing their own wealth) you're gonna wait for long. After all just imagine being one of them. Why invest in the declining west with worker wages say 50% more expensive than in China? Never mind that competition will inevitably do the same thing to undercut you and this will end only when both of you are out of customers. In some ways, as a rich man, you can see the customers/labor as a dwindling common source where the tragedy of the commons apply under the rules of the capitalism.
(1) That's not to put a distinction between good industrialists that create jobs and bad bankers that create hot air. For one thing they largely are the same people and even if they were not they still have to play the game to stay ahead of competition.
PS: I bear no affiliation to this page but it seems to explain the point I'm trying to make much better than my limited English can: http://www.massline.org/PolitEcon/crises/Crises01.htm
You can sell a rich man a luxury yacht. You can't sell him a one-room habitat on the Moon, for other people to visit and live in, because it hasn't yet occurred to him that doing so might one day lead to more luxurious yachts. They are instead saving up their money to afford the next thing they want, the thing that doesn't exist yet, because no one seems willing to consume resources on research that other people might just copy and use for free.
If the rich don't start buying (not just investing in) costly megaprojects to employ them, the poor folk will simply build the default megaproject--war. And that will be used to redistribute some of the wealth and start over.
And as I said earlier, hoarding money is different from stockpiling actual goods and services. Hoarded money is ignored until someone actually tries to spend it, and then it triggers inflationary distortions. A stable economy requires that most of its money circulate continuously, rather than stagnating in pools.
wrong on that front
But these improvements aren't allowed to be implemented. (The moment enough people peaceably, legally assemble to plan a more serious democracy, armed government bureaucrats come along to break it up.)
Shovel ready jobs, the ACA, none of this was done to benefit the everyday worker, their employment or fulfillment were not part of the equation.
I'd consider whether perhaps I might be wrong. Maybe my worldview is a bit skewed by the situation I find myself in. Maybe my country isn't very fair at all, and it's not right that I have the privileges I do whilst my fellow citizens suffer. And maybe it's not the Government's fault, either. Perhaps those Europeans with their welfare states aren't all socialist nutcases, but maybe they have something right that America has got wrong.
Often I hear Americans say "this isn't real capitalism! we need more capitalism! less government!". And I look at the state of homelessness in their country, or those without health insurance, and I think "really? Do you really need more of that? Maybe instead you need to spend a little less on your military and a little more on looking after the least fortunate in your society, the sick, the vulnerable. Maybe that would make a difference."
The "more capitalism" mantra always makes me think of communists who argue "well, this wasn't real communism! That's why it failed!" And it's so ironic, because those most vocally against communism are the same people who are cheerleading extreme capitalism, failing to notice that they are simply on the other side of the mirror.
There's a bit of a straw man or, at least, mischaracterization hidden in here. It's true that the U.S. does a pretty poor job of dealing with the mentally ill and those at the very bottom who simply cannot take care of themselves. And I think if you push people, even those on the far right, they'll acknowledge that we probably need to do something to help those people.
But, outside of this group, nobody is digging through trash for food. We live in a society where clothes and food are as cheap as they've ever been. And there are government programs to fill the gaps. Arguments like yours only further distance you from the people you're trying to convince, because it's obvious to just about anyone, including (especially?) those who have actually been poor, that they're just not true. I've been poor. And it sucks. It sucks for lots of reasons, all related to access to resources, lack of successful friends and coworkers, its drain on your motivation, and so on and so on. But I never feared missing a meal. That's not the experience of most poor folks in the U.S.
I'm not an expert on the U.S. However, I have seen people digging through trash for food in Atlanta. I have also seen the extreme state of homelessness in Philadelphia, and the problems in San Francisco.
It is certainly true that many people in the UK struggle to afford food , and given that the US has a much greater disparity of wealth, I assume that the US has this problem on a great scale.
So, no, I don't agree that it is an exaggeration.
But this is not the typical experience. Most poor people never end up homeless. And those who do are typically homeless for a short period of time (and do get help).
It might be surprising to hear, then, that those people using food banks in the UK by no means consist entirely of the chronically or mentally ill. I'd say that would be a small minority. Most of them simply use food banks because they can't afford to buy food - the number one reason being their welfare payments being ended or delayed. See, in the UK in the process of dismantling our welfare state and I look across the Atlantic to see our fate. :-s
The times they are a-changin': http://www.rollingstone.com/culture/news/the-sharp-sudden-de...
There are also economies of scale that are difficult to achieve on a local level. Drug purchasing, for example. A federal government is going to have far more negotiating power.
But I take your point. Perhaps the right answer is that laws and oversight are the domain of the federal government, and implementation is local.
I note these bits in particular:
"After a financial and banking crisis, the first order of business is to clean up the banks, and to do it quickly and radically. Institutions that are not viable need to be shut down while the others should be provided with capital."
"Their central thesis was that the key to [Western] success was not climate or religion, but the development of social institutions that included as many citizens as possible..."
I'm also reminded of a good article on what Iceland did after the collapse - I'm having trouble finding the article, but part of it was that, instead of taking on the debt from their collapsed banks, they issued arrest warrants so Interpol could chase down the executives. (The initial government was going to acquiesce and take on the debt, and that's when the "revolution" happened.)
Finally, someone gave me a really good quote a couple months ago: "Death is the way for an older organism to gift it's energy to a younger one." I then note that part of the financial problem is that failing institutions are not actually allowed to die - thus keeping that energy stagnating in the aptly-named "zombie" corporations.
Until I encountered your post, I was reading the comments here with dismay - "capitalism" this and "capitalism" that...
Folks, please, recognise what the system we have today is; It's Corporatism. I have yet to see in my 45 years on this planet anything resembling laissez faire capitalism.
The creature and symtpoms as described by that article, and what you're all discussing, is Corporatism and its inevitable outcomes. As a variation you could probably call it Crony Capitalism. Go look both terms up and see which seems the most fitting for what we have today, for it is most definitely /not/ laissez faire capitalism in any way.
Capitalism is mainly about having markets that have competition. NO organization is suppose to have market power. This isn't really possible, but that is the concept. And we are so hugely away from it we can't call what is going on now capitalism. We have allowed people to convert what is called capitalism into an extreme political view that believes government is bad and huge corporations are good. That isn't capitalism, it isn't even an economic belief, it is a political belief.
A capitalist country has to be focused on maintaining a fair marketplace where companies can compete for business and consumers (including companies buying from each other) have the freedom to buy in a competitive market (not a market dominated by trusts, monopolies and oligopolies that break the function of markets to advantage themselves).
The Chinese and Russian ssytems are very corporatist. In both cases huge corporations completely dominate the domestic economy. In Russia's case these are technically privately held, but the oligrachs are so closely tied to the political ruling elite that this realy is just a technicality. In China the major corporations are owned by the government and explicity run by government place-men. In both cases these corporations enjoy economic, financial and political patronage and privillege that makes it functionally impossible fror 'independent' corporations, companies or individuals to effectively compete with them.
You might argue we have a similar ssytem in the west, but we realy don't. es there are instances of political patronage. Yes there are cases of undue political influence by corporations through lobbying. However the scale of such cases is absolutely riny and marginal compared to the standard order of business in Russia and China. There just isn't any reasonable comparrison. The rule of law, vita to the funcitoning of viable markets, it'sn just weak in China and Russia, it's functionally nonexistent.
No matter what weaknesses and flaws you can pick at in the rule of law in the US or Europe, the difference compared to China and Russia is several orders of magnitude.
Could our system(s) be better? Yes, of course. Is the situation gettign worse? In some ways yes. Are we in the same boat as Russia and China? No, not by any reasonable measure.
So I agree the USA is less bad. But it is bad. And it is getting worse the last 20 years. And it is getting less and less capitalistic with relatively free markets (not the political extreme, might-make-right-markets, but actual economic markets that are free of monopolistic pricing power).
The USA has many advantages and does some things well (like having a marketplace where businesses can indeed grow quickly and prosper - even if it is far from perfect). This has given us great economic advantages. The huge amount of wealth we had and built up after world war two is a huge part of why the USA is where it is today. The USA mainly did well enough not to squander too much of that wealth advantage - it certainly could have done much worse. It could also have done much better.
The USA's health system is by far the worst in the rich world (double the cost and no better results - and this is the most expensive area of economics so being twice as bad as everyone else - and much more than twice as bad as the good health care system - is very bad). This problem is very much tied to the non-capitalist pro cronyist policies that are in general bad for the USA. Health care is just far worse here than anywhere (maybe some tiny, nearly insignificant markets are as badly broken relatively in the USA - say sugar quotas or something but economically it is just giving billions to a few people and costing everyone very small amounts of money). Health care is hugely broken and massively costly to the economy.
In most other areas the USA is mediocre or comparatively good but there are numerous where there are problems (and many are getting worse in the last 15 years).
Other than health care I don't so much see that the USA needs to turn to other examples of countries doing a better job of using capitalism to improve results to society (though there are examples such as new Zealand for farm policy…).
But the USA is creating great loss to our people by not taking advantage of capitalism (letting markets work - which is not what political talking heads mean, letting big business distort markets with monopolistic power). I want the USA to stop throwing away the benefits capitalism would allow us to gain.
There are many individual facets of society we could benefit from improving (and have lots of examples of countries doing much better - education, policing, foreign policy…).
But I would agree with your point that most other countries are even worse at taking advantage of the gains possible with a capitalist economic system.
In fact the USA is often responsible for making those other countries worse. The huge damage done by the copyright cartel (and associated patent messes) is the worst in the USA and the USA uses its political and military might to demand that its vassal states in Europe, Japan, Australia, etc. (I know they don't think of themselves as basal state but they really just bow down to whatever the USA actually demands only given token resistance where the USA allows it) allow such pitiful policies to flourish. The constitution of the USA had an appropriate understanding of the government GRANTING rights to private citizens/companies that DON"T exist WITHOUT government granting them (copyrights and patents). The economic theory is to balance the benefit to society from encouraging innovation through government granted monopolies with the cost of the GOVERNMENT taking from society to give to the private entity. The current USA policy is purely about supporting big business and allowing markets to be broken with extremely bad policy and no evidence they even have the vaguest understanding of capitalist or any economic theory on how the government should be acting in taking from society and giving to individuals.
Ah well, I doubt anyone will actually read this far. Obviously I am emotional on this topic. Which I know is odd. I just have seen how many people across the globe suffer because we don't get nearly the benefits from capitalism we could if we didn't allow the idiotic ides that capitalism means those with the power make the rules to break markets and direct the benefits to their own pockets.
I think a problem we have in the west (I'm a Brit) is that our generation has inherited a capitalist free market system under the rule of law, but we're treating it like a rich kid that doesn't value or truly understand our inheritance and doesn't manage it responsibly.
I don't think the situation is as bad as you say. But then my wife is Chinese and I have a good udnerstanding of how bad things can be. When people talk about the erosion of the rule of law and corporatist policies in the west I have a counter-example I can use for comparison and I see a much more nuanced picture in the west. Yes we do need to recalibrate our social contract, particularly in the US, but we do have the institutions and mechanisms available to do that. At least we are capable of having the debate here without getting censored or thrown in jail.
This is naive wishful thinking. It's popular to create simplistic models to explain basic economic principles, models that assume perfect markets. However, reality does not (have to) comply to such models.
Analytically, the principle of economies of scale (1) strongly favors, through market mechanisms, the development of large entities. A large corporation, dividing its marketing and R&D costs over a large market share, has significantly lower costs than upstart small competitors. This enables it to out compete smaller upstarts, and serves as a natural barrier of entry to a specific market. Upstarts are either relegated to a small niche, or, having stumbled upon an entirely new market with no dominant players yet, grow to be a large dominating player in their respective market.
Empirically, every single market is dominated by a handful of large actors. This pattern is observed in local markets, national markets and global markets. Quick example for the HN crowd, the cloud hosting market. Amazon, Microsoft, Google, Rackspace account for more than half the market share (2). In a young market, with little regulation, where a lot of people on this site have plenty of technological skills to engineer an IAAS service from scratch. But few have the business skill, capital and timing to actually enter the market successfully.
Bailing out banks and hoping they will spend it on industry just after they bankrupted themselves by gambling shows an unquestioning and total belief in the institutions of capital.
Socialists would have just lent cheap money directly to industry and full on communists would have thought it a great opportunity to dismantle the monetary system.
edit - Thinking about it, it may be a weird form of cargo-cult capitalism. As in, the political business of managing capitalist economies has been replaced by a belief in preserving the current institutions of capital, irrespective of how those institutions are behaving.
On the contrary, it betrays deep distrust in the actual institutions of capitalism: market prices and bankruptcy.
"Institutions of capital" cannot just mean "the people who hold the capital", because by that definition every oligarch since prehistory was a capitalist. That contradicts even Marx, who saw capitalism as a distinct modern development.
Now you can argue that what happened was bad economic theory, however the intent behind bailing out the banks was not to steer away from capitalism, but to prop it up, so even if you think it stinks from an economic theory perspective, it was at least intended as capitalist.
The tendency for power to accumulate into the hands of a few, who then manipulate the economy to their own ends, is a problem endemic to all social power structures. No system yet invented has proven immune to it merely through built-in assumptions of the model.
Hopefully we'll be able to do this in a less-than-literal fashion.
It's still too early to know if this is a sufficient safeguard. But things must be getting close - those Occupy Wall Street protests only needed to have a few hotter heads leading things, and we may have seen impromptu armies numbering in the thousands taking over corporate America. I don't know how the government would react to such an uprising.
However, I had more in mind an ideological revolution transcending the tired left-right paradigm. In this matter, the right sees a centralized concentration of power in the government as a problem but fails to see the role that concentrated capital plays in controlling that political power, while the left sees a centralized concentration of power in the economy as a problem but fails to see the role that concentrated government plays in concentrating wealth. Little do both sides realize that both concentrations of power are one in the same.
I think the 2nd Amendment is a "meta" amendment. It's a recognition that power tends to concentrate, and that to stop this some chaos needs to be maintained in the system.
Not clear to me the executivies were charged for anything applicable to the overall collapse
3 from Iceland, 2 for stock manipulation and 1 for fraud.
Not viable institutions - that would be retirement and mutual funds with hundreds of billions invested in real estate tranches?
> older organism to gift
Not sure where all those energetic millenials would be living now if mom & dad lost their house on that HELOC and their 401K to a crushed Goldman or Fidelity.
I'm for nihilism as long as people admit they're ok with more than old corporations dying.
The fact that bad debt was issued required two parties to be willing partners, one to issue the debt and another to take it on and that's something that didn't have to happen. Taking on debt without having the means to pay it back is supremely stupid.
As for the 401k, don't you get a say which funds that money gets invested in? Don't you get a say on whether or not you contribute to them anyway?
As far as I get it it is mostly a tax deferment scheme, pay out later (after (hopefully) compounding for a number of years) for when you're earning less than you do today.
A flat taxation regime would take care of that in a heartbeat (then deferment has no advantages).
Personally I wouldn't trust any institution with my pension, but that's me being paranoid. If you do choose to put your money in the hands of others for increased long term return you have to keep in mind that any kind of returns indicate an increase in risk and if you're unaware of where those risks stem from then you are probably assuming a good part of that risk yourself.
I don't know if it's similar enough, but, a good extreme example is Al Capone. He wasn't charged with organized crime, but I don't think you could argue he wasn't jailed for it. Conversely (although that may be the wrong operation) and by design, you can do a Wrong Thing and not be jailed because it's a new Wrong Thing and thus there's no law against it - there's actually a technical term for this, and AFAIK it's one of the basic principles of our judicial system.
> Not viable...
I think you're reading in that I think we shouldn't have bailed out those institutions, since you're using examples with emotional impact.
And actually, there may be an interesting correlation here... What do you think of the "Right to Die"? To continue with the medical analogies, if you have someone in a vegetative state (for the purposes of the analogy, they are no longer a viable person), you don't pull them off life support immediately, because it IS about more than just them. But you do let them die, eventually.
So let's say you have this retirement and mutual fund that has - by virtue of a CONTINUED need for financial life support - demonstrated that it has entered a zombie state. Well, if you consider the invested funds as the organism's energy... redistribute that energy to new organisms (aka, break up the company). Energy still exists, energy is still invested - and yes, of course I'm simplifying this and it could be non-feasible due to the effort involved in that break-up, but the idea remains.
> Where all those...
Joking aside, well - again, that energy isn't lost. Where does it go? I'm very much not enough of an economist to say what circumstances money is actually destroyed, but... as Lewis CK put it: nothing's on fire and nobody's dead.
Now, want to say that energy doesn't go someplace appropriate? We could go the angry route and say it's going to the wall street bankers that caused the collapse, which in turn then looks like a whale eating krill. At some point the whale needs to die so there can be nourished krill, and the Cycle Continues, as they say.
I'm OK with more than old corporations dying but I don't think either of these positions have anything to nihilism. Then again, SMBC is my understanding of nihilism. (http://www.smbc-comics.com/?id=2394)
When in places like Spain they create a bubble in real state but then try to support the prices by any means, including the creation of "bad banks" so prices don't sink it is called Capitalism or central planning?
When States do not control what they spend and the increase the debt by 10x it is called Capitalism or central planning?
This is not capitalism, but capital-comunism: Capitalism when prices go up on the riches, private profit, communism or public sharing of the losses.
When I lived in Japan and prices went down, it was very good for the people living there, but in the international news it was a catastrophe, because the markets could not make money in the stocks.
People(family and friends) always told me: Are you ok? like I had gone to the war or something, because of what they heard on the news.
We bemoan capitalism, but what we are really seeing is corrupt administrations with ex-banker moles everywhere supporting the financial industry's black sheep at all costs, against all rules of capitalism and the free market.
Yet every time there's a minor blip in that massive, massive rise in wealth and standards of living, people band together t blame Capitalism, forgetting the massive improvements to quality of life it's given us.
Actually what we have now, despite all that is somewhat broken and it's not even Capitalism in its truest sense. We're constantly battling against the feverish symptoms of Corporatism. Big business bail-outs, state monopolies, printing fiat currencies and the inflation it causes.
So whilst there are problems, don't blame 'Capitalism', blame those who try to 'improve' or 'skew' the heart of Capitalism. Which is free-trade, entrepuanlerialism and innovation. Not price fixing, inflation or quantitive easing.
Clearly there are many problems in the financial sector and even more in our governments (there many good things too). Unfortunately nobody can - in my opinion - convincingly articulate how to fix them or even exactly what they are and what causes them. And this author is worse than most!
And banks are so heavily regulated they're de facto agents of the state. The banking crisis isn't an indictment of capitalism at all - quite the opposite.
Are you saying thats not what happened?
So in this case, over-regulation and the monopoly it bred had quite a large hand in the financial crisis.
Capitalism isn't itself the problem. It's the way out of our current doldrums. But there's this idea that government institutions have no way to intervene to kick-start capitalism's more virtuous cycles.
As Keynes first recognized, and as Bernanke and Krugman both clarified in respect to 1990s Japan: when you hit an economic slump driven by lack of demand and your control over interest rates has hit its natural limit (you can't set an interest rate lower than zero... you wouldn't want to risk deflation in any case), the only way out (besides waiting) is to increase demand.
So how do you do that? Well, we have tons of options. Governments can take the opportunity to borrow at essentially zero interest and use the money to build stuff we need and fix stuff that's broken. Build out gigabit Internet to every house in the country; commit to curing diabetes in 20 years; build 200mph+ high speed rail networks between clusters of large cities, and improve airport capacity for longer-distance travel; replace aging water and sewer systems; invest in offshore wind and tidal power sources; build out a national power grid to maximize efficiency; provide research grants to increase battery efficiency x100 by 2025.
All of this will create millions of jobs, in addition to providing the cash to soak up all the industrial overcapacity that's out there. But there are more direct routes as well. Raising the minimum wage would stimulate a huge amount of new consumer spending and debt reduction, while increasing payroll and income tax revenues for the federal government and putting upward pressure on wages across the board, which would lead to additional spending, tax revenues, and growth.
Or if you want to go full Bernanke, just have the central banks print money and drop it out of helicopters. That, or just mail everyone a check. That money'll get spent, and add jobs, and then we can let capitalism take back over from there.
Why isn't that fact that interest rates are zero not interpreted to mean that we are simply at capacity? Capitalism isn't broken, it's just full...
There are some 50-60 million people living in poverty in the US. Schools don't have books or desks. People are quite literally fighting insurance companies for their lives on a daily basis. That's quite a lot of demand out there for pretty basic things. There are staggering numbers of unemployed and underemployed people out there as well, so we're not hurting for supply-side capacity either.
There's simply more profit to be made by "investing" capital in playing financial games than there is in meeting actual demand. We can quibble about whether this is a failure of capitalist theory or a failure caused by too much regulation, or probably a dozen other claims. But whatever the case, it's a pretty cut and dried case of the bleeding obvious that we're not at capacity in our economic system.
From my perspective "playing financial games" is caused by the simple desperation of people who have large amounts of money and are having trouble coming to terms with the current reality. They face the horror of actually having to spend their capital...
In any case, the current debate will perhaps be fruitful. Wealth disparity. Acceleration of Automation. Jobs evolving so fast that the paradigm of eduction-qualification-work is getting very clumsy. A resurgence of the old leftist idea that wealth distribution is inevitably political, mores than nationalism, religion or anything else.
It's all interesting.
Personally, I think the major force at play in our time is technology. Fraking for all its controversial implications has already lowered energy prices. Perhaps all the research and motivation to develop other energy sources will give us the awaited revolutionary 10X increase in energy availability. Computing continues to generate wealth and promises of more wealth.
The communication mediums open between most people on earth are developing at a blistering pace. The effects of cultural globalization may dwarf those of economic globalization.
It's not surprising that we have an appetite fro radical thought.
Going back to the start of the DAX tracking (mid-2011), we see okay performance in German DAX index, stagnation for the French CAC and British FTSE, and strong performance in the US S&P 500 and Japanese Nikkei.  Eurozone unemployment has soared into double digits of late, while in the US and Japan it is converging with the natural rate, <6%.
The economic situation in Europe is truly awful, in contrast to the US and Japan where growth has been respectable. But you would never have guessed this from the tone of the article.
The article raises a second narrative about inequality. Fair enough! But this is an orthogonal issue to Europe's economic malaise. The US is infamous at not distributing the benefits of growth. In the US, we have one thing that's working (growth) and one thing that's not (inequality). This is due to many institutional problems and governance decisions and it will be a lot of work to improve the situation.
The thing I found alarming about this was the way they denigrated stimulus. This is an area of major divergence between Japan/US and Europe. Nominal GDP growth, the measure of the 'easiness' of money (it's the sum of all money trading hands), has stagnated under the European Central Bank (ECB) while the US Fed (FOMC) has used stimulus to keep it growing in the United States . If anyone believes the central banks have "run out of ammunition" as the article suggests, look what happened just last Friday in Japan: The BoJ announced unexpectedly high stimulus and the Nikkei instantly soared 4%, despite the fact that interest rates were already 0. 
The ECB needs to be more like the FOMC and BoJ. The Spiegel seems to think the opposite. It seems like the ECB's policy reflects this hawkish European perspective. And that's scary for Europe.
PS It's true that Japan has been stagnating for decades. That is likely related to the ultratight monetary policy they've pursued since the early 90's (as well as structural issues of course); NGDP actually shrunk there over 2 decades . But they've been moving in a different direction lately, and the shift seems to be paying dividends.
 Drag the slider here back to mid-2011 to get a long-ish view: https://www.google.com/finance?chdnp=1&chfdeh=0&chdet=141499...
They are kind of "left" which reflects in their articles "raises a second narrative about inequality". They'd support basic income any time.
The Spiegel has turned into yellow press lately, I am surprised to see a (english) article on HN.
Thank you HN for unveiling that there are some spots in Europe that are doing fine and that there are structural problems (I can see them, the borders are open and ppl come to Germany from other European countries).
2. You have a basically American audience on HN. I underpinned "kind of left" with the "basic income discussion", which -with no doubt- the Spiegel has a (very) positive stance for it (just search Google, the German terminology is "(bedingungsloses) Grundeinkommen").
3. No, it's not my opinion v.s. your's (that would be deficient)
 It's the co-editor ... and his appointment "was received with great controversy within der Spiegel":
He is also the one responsible for "the online-resort", so the articles on their web site.
Still this particular piece is well written and (seems) quite well researched.
That depends very much on where you're looking. Spain or Germany are worlds apart in this respect.
One aspect worth considering is _why_ the article is representing such a different perspective to the perspective USA readers would consider "sensible".
A reasonable answer on the growth side is that Germany's perspective is not solely focused on GDP, other factors such as employment and wage growth are important. On the stimulus side the German central banking system has always been hawkish (possibly due to their history) and this has continued to a large degree with the ECB.
The same country's economy grew at double digit rates while recovering from their entire country being leveled to the ground.  It's not clear that supply shocks [necessarily] suppress growth at all.
They've stagnated because instead of generating real growth, they were faking continued prosperity by accumulating massive sums of debt. It was all meant to cover the fallout from the late '80s / early '90s asset bubble exploding.
Debt servicing costs are roughly 23 trillion yen, compared to tax revenue of 45 to 47 trillion yen for 2014. So half their budget is now just going to paying interest on debt. That's a fiscal death spiral. Things are about to get a lot worse in Japan.
It's already so bad they've taken to destroying the Yen to buy a very short amount of time, which is accelerating the overall erosion and rapidly dropping the standard of living. All of their projections for recovery have fallen flat (the failed Abenomics), as anybody with a basic understanding of non-Keynesian economics would have known ahead of time.
Want to know what comes next? A more dramatic debasement of the Yen, as a means to stave off default a bit longer. It won't work, their debt situation will get worse, and the cost to service that debt will climb, sapping even more of their tax revenues; confidence in the Yen will fall, and their ability to prop up the debt situation by debasing the Yen will begin to weaken; sooner than later, they will no longer be able to maintain the facade.
This is an interesting perspective. If the falling yen is so bad for consumption, why is the yen anti-correlated with equity performance? Equity performance should be a measure of real expected national income. If a falling yen meant less income, equities should drop as well, just as inflationary shocks in the 1970s were met with sagging equity prices.
Also the Nikkei is up roughly 50% from the time Abenomics was announced in late 2012.
If you are correct that Abenomics will fail, you should be able to make a killing in the markets.
This inequality business is a new modern day scam just like communism of last century. Some anointed people want power for themselves and want to still money from people like us who are working hard in the name of poor people nothing else.
When government creates incentives where it steals money from hardworking people like us and gives it to irresponsible people like teenage mothers in the name of "compassion", we are creating incentives for many people to remain poor. This is a perpetual poverty into which we have let the government condemn them. That is the problem.
Capitalism is a hope.
If you don't own capital to sustain your lifestyle, you're almost certainly part of the poor you want to spit on. Nobody has serious designs on your slightly bigger slice of the scraps that the middle and lower classes have, and I have this sneaking feeling that you know that. But Steinbeck predicted you most of a hundred years ago.