16 December 2012

Comments from the MMM Forums Part 5: OWS / 99%

The 5th of the 5 part series of blog posts taken from the Mr Money Mustache discussion boards, on the politics, economics, ethics and philosophy, of building wealth through frugality.

By COguy:

Your thoughts on the we are the 99% blog?
« on: November 13, 2012, 01:51:08 PM »
At the risk of seeming insensitive, I wanted to see what all of you folks thought of this.  Is it just complaining? 


It seems to me that if one followed mustachian principles they should get out of sticky financial situations much easier.  Ride a bike, in source everything, etc...Yet, I know I was lucky to be born to good parents and some of these people were not and I feel that that stacks the deck against them. 

Obviously, the medical expenses make sense as being very hard to overcome, but what about the rest?

[lots of posts, mostly agreeing that it is in fact mostly whiny pants complainers who dug their own hole and now want bailouts]

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #18 on: November 15, 2012, 12:58:30 PM »
In a just world, instead of the ridiculously excessive wealth of the top 0.01% being redistibuted among the American middle class, who have plenty enough already, it should be distributed among the people of the 3rd world.

I think that's two places where the OWS people get it wrong.  The "1%" share more in common with the 99 than they do with the 0.01, and the 99 really don't need nor particularly deserve a portion.

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #26 on: November 19, 2012, 09:36:10 AM »
I completely agree. Everyone all over the world has a right to decent food, shelter and education. Everything else is pretty much optional. If only there was a way to funnel the excess to those in need... but that is a completely different topic.

I completely disagree.  These are not rights, they are needs

In the most objective sense, there is no such thing as a "right" in the first place.  Its something granted by a government.  In the real world a deer has no "right" to not be eaten by a wolf.  Nor do you have a "right" to not be murdered by a mugger.  Then of course you have no right to "property", never mind privacy or representative government.
For that matter, the rich don't have a "right" to any of their wealth, so perhaps it should just be them and their hired militia to stand between the masses and their stuff, not government sponsored police.


We have all collectively decided to organize society into this thing called "civilization", and we get to decide that basic necessities should be rights. 
If you want to be all philosophical and say that morality is a purely human mental construct, that's one thing (and then rape, murder, whatever you want is ok, so long as you don't get caught), but if we accept the existence of morality as an axiom, then letting some people have yachts and Bentlys with inherited money while others are born into homelessness is wrong.

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #27 on: November 19, 2012, 09:53:56 AM »

Yes, a lot of middle class people make stupid choices and think they are poor.  Yes, a lot of people have an undeserved sense of entitlement.  Whatever random people decide to post a pic to a 99% website don't define the entire movement.  The simple fact is the US has the 2nd highest level of wealth inequality of any first world nation, and the 5th highest in the world.
Its not because we have an unusually extreme distribution intelligence and work ethic (that some Americans are smarter and work harder than anyone else in the world, but most are stupid and lazy), its because we have laws set up that specifically reward already having money, and therefor naturally concentrate wealth to extremes. 

See: http://en.wikipedia.org/wiki/List_of_countries_by_distribution_of_wealth
And especially see the last 5 of the external links at the bottom of that page:

That is what OWS is about.  Not just some whiny self-entitled middle class people with internet connections and a camera.

Comparisons with the American working class and other nations are not apples-to-apples.  There is a big difference between a nation not providing for its people because there simply is no money available, and having an enormous excess of wealth available which is just hoarded by a few people.
Certainly for any given individual personal responsibility and talent and work ethic and frugality all play into success, but for society as a whole there is a finite amount of material resources at any given time, and when 12 people - literally twelve - hold as much wealth between them as the poorest 150 MILLION Americans (thats about 1/2 the entire population) then that limits how much is available to everyone else. That level of wealth is obviously outside of any possible amount that could be justified by differences in natural talent and work ethic. 
We don't have anything remotely resembling a level playing field.

There was once a time where in most of the world the King owned everything, and everyone was his subject.  He got the position by being born into it.  Most of the world has gone out of their way to move away from that model.  Some of us see the current extreme concentrations of wealth (and the influence of money on government) as being a step back towards an aristocracy.
Personally, I'm a fan of democracy, so I feel that is a bad thing.

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #37 on: November 19, 2012, 01:25:24 PM »
It's no foregone conclusion that wealth-inequality is immoral.
I never said "everyone should have exactly the same level of wealth".  There is an enormous range between "12 people hold the same wealth as 300 million people" and "everyone must have the exact same amount, no more and no less".  That is a false dichotomy.
What I said was immoral was some people being born into billions, and other people being born into homelessness.  Exactly how is that situation made better by free market principals?  Are infants poor only because of their own lack of work ethic?  Is it by their own poor choices that toddlers fails to enroll themselves in preschool, which has the largest impact of any variable on future school performance, all the way to college?
You seem to feel a system is bad if it results in inequality. 
I feel a system is bad if it specifically fosters and encourages additional inequality, or it has inequality built in to begin with.  If every human being started out life with access to the same education and medical care, and the same level of inheritance (or lack-there-of), then most of the differences in success can actually be attributed to personal choices, talent, etc.  Of course there will always be differences in the values instilled by parents, there will be nepotism and networking advantages, but we could certainly make a much better effort to live up to the "land of opportunity" mantra.

Capitalism should in theory produce both wealth for the masses and wealth-inequality. This is what we've seen through the decades: a rising standard of living for all and an increase in wealth-inequality. If wealth-inequality is the price of an increased standard of living, then as a society it's worth it to live in envy of a few rich people.
Post-hoc ergo prompter hoc?  On what do you base the assumption that one is a necessary prerequisite for the other?  The big things that have been changing recently are technology growth, outsourcing of labor and importing of goods, and corporate consolidation.  The first leads to raised standards of living for everyone, and does not necessitate any increased inequality (though our system is set up so that it does in fact).  The second two increase inequality, but don't necessarily raise overall standard of living for everyone.  That both are happening simultaneously seems like happenstance to me.  Why look at a timeline of decades?  Historically the gap between royalty and serfs was enormous, but that didn't make the serfs standard of living higher than it would have been otherwise.

Part of the drive towards success or to drive a company to success is the ability to do whatever you want with the reward for your success. That includes the ability to pass those rewards on to your children for their use. The guarantee of a good life for their children is part of the price we willingly pay to those who increase the prosperity of the nation... the system, which motivates individuals by allowing them to accumulate large amounts of wealth, has in general increased wealth and standards of living for the rest of us.

Exactly who are these people who's actions created a higher standard of living for America who, if they had been limited to, say, 1 billion dollars, instead of 10, would have said "fuck it, its not worth it, I'm just going to take a part time job at Denny's instead"?  I don't think they ever existed.  I think that's a story that rich people came up with in order to get the middle class to vote for tax breaks and lax business regulations.  If the only reason people get rich is to pass it to their children, then why do some rich people never have kids, and why are almost a third donating most of it to charity rather than passing it down? http://money.cnn.com/2012/06/18/pf/rich-inheritance/index.htm

We could argue that a lot of our economic activity harms the prosperity of the nation rather than adding to it. The solution there might be regulations on business, but not on the wealth of individuals.
I largely agree with that.  I was never actually suggesting some arbitrary fixed cap on wealth.  I think the vast majority of the problem has to do with regulation - or lack-there-of - on business.  I would just add to that a progressive tax rate that continues to graduate just as far as the levels of wealth and/or income they apply to (i.e. the progressive tax rate curve should look more or less like the wealth inequality curve, rather than leveling off at less than 400k so that the 0.001% pay the same top rate as the 1%)

Rights in the classical sense - freedom of speech & religion, the right to bear arms or pursue happiness - are things people enjoy unless someone else (usually a government) actively takes them away.  That's the diametric opposite of "rights" to food or medical care, which are things that don't exist unless people work to produce them.

Its only "usually a government" BECAUSE we have the privilege of the protection of government to take for granted.  Otherwise anyone who has the bigger muscles / gang / firepower can take away anything they like from you at any time, up to and including your life.  Besides, religions and firearms don't exist unless people work to produce them either.  That's one of the main reasons we have government in the first place - the chances of deliberate premature death at the hands of another person are far lower if you live within a centralized government.  You have no speech or religion if you are stabbed in the back by someone who wants your food or your girlfriend.

Does it really limit how much is available to the rest of us?  I assume those 12 people are the top of the Forbes list?  Yet if you look at that list, you'll find that many of the people there CREATED their wealth, and enriched many other people in the process.  Wealth isn't a fixed quantity: it's continually created (and sometimes destroyed).
How are we defining "wealth", and how are we defining "created"?  What did they create it out of?  Are you suggesting that the value of tangible goods and services would simply never have existed if not for those specific individuals? 
Farming, mining, and other natural resources extraction creates value to humans that was unavailable previously.  Yes, technology can allow the value of raw materials to increase, essentially creating entirely new value that was never there.  In that sense economic growth is not a zero sum game.  This does not mean that any money that anyone acquires increases the total available value for everyone.  Some (individual) wealth generation is just a reorganization of existing value from one individual to another. 
In any event, while the total pot can grow over time, we only live and eat and shop in the present, and at any given moment their is a finite amount of resources that exist.  No matter how smart and hard-working 300million Americans are, there is no possible way they could divide a GDP of 15 trillon and have 1 million each.

Yet looking at the Forbes list, at least 4 of those 12 (Gates, Buffet, Ellison, and Bezos) started from the middle class at best, 4 others (the Waltons) inherited their money from a man who started in the lower middle class.  So maybe the problem is the quality of the players rather than the levelness of the field?
HA!  I'm not following you.  I assume you are disagreeing with me that our playing field is unlevel, but you basically acknowledged that of the richest people in our society, 2/3rds started with a significant advantage - and wait, weren't you the same one who in a different thread said that Obama going to a private primary school and ivy league colleges on scholarship meant he wasn't working class?  But Bill gates went to a private prep school and ivy league college not on scholarship, but paid for by his parents, yet he was "middle class at best"?

The idea that the existence of wealth inequality in itself somehow generates total wealth for society is certainly what the people who benefit most from the arrangement want everyone to believe, and obviously the view has become mainstream, but I'm not convinced that the trickle down theory ever had any merit to it to begin with.
The implication here seems to be that the only reason some people work hard or innovate is because they have the chance to become multi-trillionairs - and pass 100% of those trillions on to their kids.  Therefore, if we had any form of limitation on wealth accumulation or inheritance, no one would ever invent anything, or discover anything, or work more than the least they could get away with to make ends meet.

Except that looking at the scientists and inventors through history who made significant advances to human technology, a lot of them never even tried to get rich from their work.  They did the work out of scientific curiosity, or for the betterment of humanity, or just to see if they could.  No one thought they could patent and sell the invention of fire, or the wheel, and get rich from them. Many scientists and inventors in more modern times have deliberately made their discoveries public for the explicit reason of the betterment of society.
In many cases, if anyone did get rich from the idea, it wasn't the person who actually invented it.
Communist USSR managed to build a satellite before we did - and even our own moon landing was entirely publicly funded.

The mere fact of generating income for one's self does not mean you are actually making society richer.  A good example is an advertising executive.  They are not producing a good for society.  They are merely redirecting existing wealth from consumers to their particular client.  The competition may have a better product, but a good advertiser can overcome the competition's value by using psychological manipulation tricks.  The client will pay them a percentage of the money they generate for them, but society as a whole is actually worse off than if they had done nothing.   I don't understand where this crazy idea comes from that anyone who makes money must be causing the creation of an equal value for society as a whole that would never have existed otherwise.  Gates, for example, didn't create transistors and operating systems in a bubble, one man's genius giving us computers.  If he hadn't come up with MS DOS, we would have one of the other many operating systems that existed at the time, or we would have more competition than just MS and Apple.  There is no equivalent to Gates and Jobs for linux because the hard working innovative people who created it choose not to patent it and create semi-monopolistic corporations.  There are thousands of free open-source software programs, made by thousands of developers who make their work available for voluntary donations who should call into question the theory that people only generate value for society because of the promise of unlimited wealth.

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #40 on: November 19, 2012, 02:06:49 PM »
But the existence of concentrations of wealth sure as hell isn't a sign that we're "a step back towards aristocracy."  "Aristocracy" and "democracy" are words that have actual meanings (hint: they are both political systems and while you can have combinations with bits of each they are not on some vague sort of spectrum).*

I don't think its so vague;
I was thinking of how more than half the presidencies in my lifetime were of men who were wealthy before going into office, or that the median senator's net worth is 2.6 million with a total of 57 members of congress in the "1%".  As much as $30 billion was spent on lobbying in the US last year, $6 billion was spent on the presidential election, of which over 10% was nearly unregulated superPAC money.
Money has significant influence on politics.  If the means to who has access to wealth is determined in large part by which parents you are born to -  http://www.nationofchange.org/self-made-myth-and-our-hallucinating-rich-1348495606 - it makes for a "form of government in which a few elite citizens rule"

In fact, the very idea of an unregulated economy implies that the major decisions of what goods and services will and will not be produced and how they will be distributed is in the hands of the market.  More money = more influence over the collective choices and direction of a society.  This is in contrast to the principal of democracy "in which all eligible citizens have an equal say in the decisions that affect their lives".  The economy - i.e. goods, services, and jobs, most certainly affects peoples lives.

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #54 on: November 19, 2012, 08:04:16 PM »
Is it immoral to bring a child into this world if you can't afford it - god damn right it is! Where the heck is the accountability part of your beliefs.  Here is a thought, don't have a kid if you are broke, and guess what the result would be - oh yeah, no one being born into poverty. 

I agree with you on that 100%
And how exactly is it reasonable to blame the child for being born into poverty?  If it isn't, why is it reasonable for the child to receive the punishment for their parent's lack of responsibility.  It's a bit like saying to a crack-whore seeking an abortion that she should of thought of that before she had sex with her dealer.  How is forcing the child into uneducated poverty making up for a lack of accountability?
Since the answer is "it isn't", your point, however valid, is entirely irrelevant to this discussion.
Eventual commercialization of all these things is the result of investment and many of these things (technology, medicines, etc.) would not have happened without.  Gates/Jobs are monopolies because of this commercialization not in spite of it.  I agree that others could have done it, but disagree that they didn't do it because they didn't want to "sell out", and that it their perogative but they can't bitch about it after the fact.
um, but, others DID do it.  Computer operating systems already existed prior to Apple and MS.  Linux exists today, and is used by many despite the near monopolies - and it is still free and open-source today.
Even the advertiser is doing good, maybe not in your eyes, but they are still facilitating commerce resulting in jobs for people at all levels.  Also, advertising and marketing is necessary at all levels.  The startup needs to get the word out about their new product or service - can't just sit in your room and wait for it to happen (this isn't Field of Dreams - "If you build it they will come").  The established company may be launching a new product or building its brand or reinforcing its product.
What percentage of advertising penetration is by independent start-ups compared to  established large corporations?  The net effect is to make it harder for small business to compete, not easier.  Another example of capitalism, where the amount of income potential is related to the amount of capital you already have.

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #55 on: November 19, 2012, 08:18:50 PM »
Have to echo others here. Total BS. Why do you think people from other countries are so intent on emigrating to the US if they don't see upper mobility?

Because as a whole the US has much more resources to go around, with its enormous GDP?  Because, regardless of distribution, the working poor here have much more than the poor in the 3rd world?  Which is why I said earlier that the most just option would not be to redistribute the wealth of the top 0.01% of Americans to the middle class or even the poor in America, it would be to redistribute it to the 3rd world.

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #57 on: November 19, 2012, 09:06:18 PM »
On what do you base the assumption that one is a necessary prerequisite for the other?

I don't make that assumption. I'm just leaving it as a hypothesis.
Fair enough.
It is true that our current system, the whole liberal democracy moderately-regulated capitalism thing, is the greatest known engine of wealth creation, which makes the assumption reasonable.
depends, I suppose, on how moderately regulated.  I wasn't proposing eliminating the free market entirely in favor of communism.   The version we have in the US is actually not "the greatest known engine of wealth creation" - several other nations have higher GDP per capita than we do.
Note that there is not a strong correlation between average standard of living
and economic freedom http://en.wikipedia.org/wiki/Index_of_Economic_Freedom

In your scenario where personal wealth is limited to 1b, there would be people who would stop generating wealth once they reached a personal wealth of 1b. They would forgo generating 9b worth of personal wealth, in the process depriving the rest of us of all the wealth that the rest of us would have gained in the process.

I question whether anyone can truly "generate" 9b worth of wealth.  When someone initially comes up with a brilliant idea, they are generating wealth that never existed.  When someone is the CEO of a corporation and has hundreds of employees, or is collecting rent on real estate or dividends on investments, or collecting royalties on a patent or book, or whatever, they are no longer generating new wealth, they are simply leveraging their existing capital to skim a portion of the value of the labor of others off the top of each transaction.  If a person stops accumulating wealth after 1b, fine.  I don't understand how them making 9b more benefits anyone other than themselves and their heirs.  If they weren't making it, that wealth would be available to others.  If a CEO only makes 100k a year instead of a million, it can afford to give the employees a raise.  How is them making a million causing the nations GDP as a whole to rise?  Again, sounds like trickle down theory to me, which I just don't see any evidence for.

I think that could be a good idea. It would do both some good (more tax revenue) and some harm (discouraging the production of wealth, etc.). Like you, I suspect that right now a hike in taxes would be a net gain in terms of tax revenue.

However, I also value stasis in government, mostly because static government policies help people make good, confident decisions about their future. If you want to change tax rates, I put a high burden of proof on you because there are people who have made plans under the existing tax rates.

Basically, I agree with you that it is wrong for some to be fantastically wealthy while others starve. But a government solution could destroy wealth for the rest of us. It might be worth it to forgo a certain amount of global wealth in order to forcibly spread what's left more equally, but you could only come to that conclusion after setting a lot of premises and considering the positives and the negatives.

Agreed.  I think one place to start looking might be one of the 22 nations which manages to have a higher standard of living than us, in most cases even despite a lower GDP per capita:

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #60 on: November 20, 2012, 09:21:48 AM »
I agree that the American system specifically is probably not the best. But for us, it could be the best system we can stably achieve.
Non-sense!  We had a more equitable system for most of our history, becoming increasingly unequal in the past few decades, and during that time the economy has become less stable.  That may not be a direct cause and effect relationship (though I believe - and there is evidence to suggest - that it is) but it certainly doesn't imply that the trend we are on is making things more stable.

If a CEO only makes 100k a year instead of a million, it can afford to give the employees a raise.  How is them making a million causing the nations GDP as a whole to rise?  Again, sounds like trickle down theory to me, which I just don't see any evidence for.
The idea is that there are a bunch of these potential CEOs around, and more money will buy a better CEO. You hope to buy a CEO who will produce more wealth for the company than his salary. If you can hire a CEO for $100k who will produce $400k in wealth for the company, that's great. But if you could hire a CEO for 1M who will produce 2M for the company, why not do that?

I know what the idea is.
And, like with so many of the ideas floating around that attempt to justify massive wealth inequality, the idea doesn't reflect reality:
CEOs are like Tulip bulbs in the Netherlands in 1637 - they are expensive because they are expensive.

And again, generating wealth - even if it is not only for yourself, but also for your shareholders - does not mean new wealth was created.

Say I work hard and live frugally for years, use my savings to buy a multi-unit rental house, keep working with my new faster savings rate, and using that income plus leverage existing equity, I buy more rentals.

Eventually, with all the savings from passive income, I buy out a small company that is doing well, from an owner that wants to retire. A few years later I use company funds to buy out our main local rival. I eliminate redundant jobs, increasing profit margin. Now that the company is large and has greater reach, I can invest in automation equipment, which makes the workers more productive, which in turn allows positions to be eliminated. A few years later I buy out another, larger company increasing both our market and market share at once, and again, eliminate redundant jobs. As time goes on I may outsource entire departments, buy out more rivals or companies in different fields, or even hire a lobbing firm to try to get our taxes reduced. All of these steps would be justified in the same of "staying competitive".

When people look at my story, I had no inheritance, therefore I am "self-made".

From the point of view of any shareholders or investors, I have increased efficiency thereby potentially generating higher dividends for them.

Since I own the means of production, I may even be called a "job creator"

But what have I actually created? In the beginning, when I still had a 9-5 I was being compensated for creating something of value. But the rest of the story I am just redirecting existing cash flow to myself. I didn't build new houses (or have them built), I simply purchased houses that were already there. I did not create a business from the ground up, I purchased one that already existed, and then grew by consolidating other existing businesses. All the jobs those businesses provided were already there. In fact, the main way I increased efficiency was by eliminating jobs.

I am not saying that there isn't also some true wealth generation happening at all levels, or that this example represents all upper level economic activity, but its meant to illustrate that the mere fact of making money is not in itself evidence of creating any benefit for society as a whole.

I propose that this sort of thing really does happen, and in fact represents a significant portion of what justified as "staying competitive", "increasing efficiency", "self-made", and "job creator".

Take workplace automation, corporate consolidation, and outsourcing, for example. This done on a large scale would likely result in median wages stagnating, as scarce jobs depress competition for employees, and eventually would drive up unemployment. This would make the overall average productivity per American worker increase, without passing the value of their own productivity to them

At the same time it would result in increases in the stock market, and potentially increases in GDP, though those increases would be concentrated almost entirely at the top of the existing wealth curve.

This isn't a new trend

but you can see sharp increases in the disparity at key times in political history. What happened just before the spike in disparity in the mid 80s? Reagan, with his policies of supply-side economics and laissez-faire capitalism, deregulation and large high-income tax cuts. Then it goes even steeper, with Clinton encouraging outsourcing with NAFTA, corporate consolidation with the telecommunications act, and the repeal of Glass–Steagall

Of course those are only looking at the top 1%, which have done well, but as I've said before, the disparity between the top 0.1% and the top 1% is greater than between the 1% and the 99% (and between the top 0.01 and the 0.1 is even greater still)

Given the number of nations who have less inequality and more socialist policies, yet a higher median standard of living, and given that median income has not in fact grown proportionately with GDP in the US, what reason is there to believe that policies that help the already to rich to become super rich somehow benefits society as a whole?

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #76 on: November 20, 2012, 04:00:22 PM »
The problem is that most people in such situations have bought into a culture that devalues education,

I'll acknowledge that, totally.  I grew up in that culture.  But I don't think its so clear which is cause and which is effect.  I think a large part of the reason for that culture is that public education has failed the communities that have it for generations, going all the way back to "separate but equal" which was never in fact remotely equal.  More recently we had (have?) a system where a school which is in need of more resources is given less, while a school which is already doing ok is given more (test score based funding).  I don't know if you have ever been a public school teacher in a poor inner city neighborhood, but suffice it to say there is a reason there is such high turn-over.  From a student's point of view, its extra challenging to be enthusiastic about learning when the teacher's two main focuses are discipline and standardized test scores (though the teachers themselves don't deserve the blame for this, as they don't really have a choice).  The educational system failed the parents 20 years ago, and they don't see any relevance to science or literature or algebra in their day to day lives, so they don't encourage their children.  Of course there are individual exceptions, examples of people who ignored the culture around them and had intelligence to succeed, but there is a systemic reason the culture exists
So if you want to correct this, there are two alternatives: either you give the poor people more money, or you take the kids out of the poverty culture.  But if you give them money, do you suppose for a second that it will cause them to raise their children with more respect for education?  Or will they just spend the extra money on consumer goods?  And if you try to take the kids out of the culture... why, you're committing cultural genocide!

Those are not the only alternatives.  How about mandating and fully funding pre-school and kindergarten, so that kids who's parents can't afford private pre-school don't enter 1st grade two full years behind? 
How about extending FASFA so that it fully funds everything but living expenses for 4 years of college for anyone who can't afford it?  How about changing the welfare laws so that a parent can go to college without being cut-off
(as it is, anyone on AFDC is required to look for work - any work they can find - or else they are cut-off.  Going to college is not an acceptable alternative.  I know this because it is what happened to my family. My mother just gave up the benefits so she could finish her degree)
How about making education more relevant by, for example, teaching kids about financial management? 
How about fully funding schools on the federal, or at least the state, level, so that schools in poor neighborhoods have the same resources as ones in wealthy neighborhoods (I know of public schools that have a computer for every student, and others where the teachers have to literally bring in their own paper from home in order to make copies), and making that funding increase (or at the very least not decrease) if the students are struggling?

The money for all these programs can come from the savings they would create in the prison and welfare budgets, as well as the increasing GDP from having an entire sub-set of the population become productive members of the economy.

Its easy to point blame at specific individuals, but when its as wide-spread as it is, eventually you have to look for the systemic root and fix it.  Talking about "individual responsibility" doesn't make anything better. 

Sure, history does not force any particular individual to, for example, commit a crime, every individual is responsible for their own choices, and they should be held accountable for their actions.  But when you look at a population as a whole on the macro level, you have to take the big picture into account.  Black people as a whole have a higher crime rate.  And to focus entirely on individual choices while ignoring 250 years of slavery (reparations for which were never paid) followed by almost 100 years of segregation and Jim Crow, with the civil rights movement being only ONE SINGLE generation ago, is well, ignorant.  Literally.  Obviously, regardless of the existence of overt racism or who we elect as president, the effects of this, which has spanned the majority of the history of the country, are not going to simply disappear overnight, especially considering that as a society we have done next to nothing to try to make up for it.  So we continue to see a disparity in poverty rates, crime rates, and, yes, cultural views of education.

Just like tooqs comment that poor people shouldn't have children, blaming individual susceptibility to culture does nothing to improve anything for anyone, so why even bring it up?

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #83 on: November 20, 2012, 07:30:13 PM »

I think a large part of the reason for that culture is that public education has failed the communities that have it for generations, going all the way back to "separate but equal" which was never in fact remotely equal.

If "separate but equal" was the cause, why would we see almost exactly the same process at work in the overwhelmingly white redneck/hillbilly areas, such as the one in which I grew up?

Because my example was just an example.  Its really more about class than race.  Note my mention in the last post of locally funded education, with any federal assistance being test score based.  These both serve to make things more challenging for any community which is already poor, of any color.  Poor rural areas are at a disadvantage just like poor urban areas are.

Everyone keeps pointing out that upward mobility is possible for an individual.  There is no question that this is better than a straight caste system or serfdom, but the point is that some people have to work very hard at it, while others have everything handed to them.  Inequality thats due to differences in talent and work ethic are fine, the problem is a political and economic system designed specifically to help the already rich get richer and make it especially challenging for the poor.
As far as immigrants who have achieved upper mobility, how many of these already had college educations and middle class status in their countries of origin before the immigrated here?

Basically all of the legal ones, at least for the past few decades.

"People who want to become immigrants may apply... according to the following employment based preferences:

First Preference: Priority Workers, including aliens with extraordinary abilities, outstanding professors and researchers, and certain multinational executives and managers
Second Preference: Members of professions holding an advanced degree or persons of exceptional ability (including individuals seeking a National Interest Waiver)
Third Preference: Skilled Workers, professionals and other qualified workers
Fourth Preference: Certain special immigrants including those in religious vocations
Fifth Preference: Employment creation immigrants (investors or entrepreneurs)"

The very fact of having been allowed to immigrate to the US is evidence of already having a head start.  Otherwise they don't let you in. 

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #93 on: November 21, 2012, 09:05:17 AM »
Well, we haven't agreed yet that the most equitable system is the best system.
That would be communism, and I don't think it is the best system.  I was pointing out that increased inequality has not been accompanied by increased average standard of living.

In your get-rich scenario, I see you absorbing risk in the housing market--which makes a greater standard of living possible for those who can't afford to buy
How is it making a greater standard of living possible?  The house was already there, and already being rented out.  If I built a new house, then I could be lowering rent slightly by supply and demand, but from the point of view of the renter, the purchase transaction seems irrelevant.  Besides, if 1/2 of all homes weren't investor owned, homes to live in would be more affordable.
--and identifying and eliminating inefficiencies in local production.
hows that?
You freed up labor to engage in activity in which it would be more needed.
? By laying people off?  There's a nice way to justify it!  If the unemployment rate was 0, and there was a shortage of labor, that would probably be true, but there isn't, and hasn't been in this country.
You probably also lowered costs for the consumer in the process.
For automation, consolidation, and other domestic efficiency gains, the benefits are definitely passed on to the average American. On the consumption side, goods are now cheaper to produce and cheaper to buy. Families then need to work fewer hours to maintain the same standard of living, driving down competition for employment to compensate for fewer work-hours available.

Between 1935 and 1946, unions were formally legalized, minimum wage was instituted, and the 40-hour work week began.  These things, in theory, should have caused greater inefficiency, depressing economic output.  GDP actually raised faster than average during that period. http://www.multpl.com/us-gdp-inflation-adjusted/
The main effect was, as intended, to distribute more of the gain in GDP to the working class.

On the other hand, the 80s and 90s saw deregulation, NAFTA, and the lifting of anti-monopoly laws, which should in theory have driven prices down due to increased efficiency. Yet CPI rose roughly 3.5% during this time, just about the average rate since 1914 http://www.bls.gov/data/#prices
As I already showed in previous graphs, these trends did NOT raise  (inflation adjusted) median income.  In fact, as a percentage of production, wages fell sharply during that time

So if efficiency increased, yet wages didn't, and prices didn't drop, where did all the extra money go?

Corporate profits - i.e. CEOs and shareholders.

Basically, classical economics has an answer for everything except public goods.
If observed reality fails to match up with theory, it is not reality that's wrong.  Its the theory.  Although in this case I think its more a matter of the application of the theory not taking all factors into account.  Smith's classical economics was meant to apply to a system of individuals and small businesses trading directly, with perfect competition, perfect information, etc.  Not a system of multinational conglomerates, stock markets, and lobbyists.

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #104 on: November 21, 2012, 11:20:34 AM »
Everyone keeps pointing out that upward mobility is possible for an individual.

But individuals are what matter.
Would it be possible for everyone who is currently below it to simultaneously reach the median income level, while the upper 1% still maintained there current level of wealth?  If not, then any individual who does so is necessarily an exception, and no matter how culture changed it would not be possible for everyone to succeed.  If it is not possible for everyone to do so, then the promise of upward mobility for any given individual does not make the system fair.
Inequality thats due to differences in talent and work ethic are fine...

How come?  According to your logic, shouldn't we be handicapping those born with (or who have acquired through effort) above-average levels of talent, looks, physical fitness, etc?

What specifically have I said that gives you the impression that this is my opinion?
To be clear:  I am not advocating wealth re-distribution in the communist revolution sense, where property is confiscated from the wealthy and handed to the poor, which seems to be what you and others are arguing against.

What I am advocating is policies that are designed to facilitate upward mobility for the lower classes, and temper the rate at which the already rich get an increasing share of all available wealth. 

Examples on the poor individual's side include the educational suggestions I made earlier (free and mandatory pre-school, needs based funding as opposed to needs based de-funding, free 4 years of college), providing daycare to parents in college, and making enrollment in college an acceptable alternative to job seeking for public assistance.

Examples on the other side include preventing corporate consolidation (which destroys competition and is a gross corruption of the free market), providing disincentives for outsourcing, supporting unions, making minimum wage a "living wage", taxing unearned income (inheritance, dividends, capital gains, rent, business profits, etc) at least as high as wage and salary income, if not higher (instead of taxing them less, as it currently is, which is a very obvious mechanism by rich the already rich will tend to get even richer, as it requires capital to have passive income), and perhaps even mandating some level of profit sharing with employees of corporations.
...the problem is a political and economic system designed specifically to help the already rich get richer and make it especially challenging for the poor.

You claim this, but evidence shows that it is not true.  The rich do not, in general, get richer.
Did you not see the graphs I posted earlier, or do you think the numbers are just made up?  I'm not talking about any particular family.  As a group, the rich are getting much much richer, at a rate faster than any time in the past century.
Here, I'll post it again, so you don't have to find it:

That red line represents "the rich".  Its getting bigger over time.

And of that, the very rich have gotten the majority of those gains

Between 1976 and 2008, US average income increased $12k.  Of that the richest 10% got 100% of it.  The lower 90% got 0% of it.

Those gains have not been due to just increases in real wealth, as the rate of gain of the top 0.01% has significantly outpaced the rate of GDP growth.  The difference has to actually come from somewhere.  Where it comes from is everyone else.
In other words, not only are they getting richer, but they are getting an increasing portion of the total available wealth.

Given that this is population wide, and covers all 300 million of us, and that it changed dramatically at a specific point in time, it can't be explained by individual go getters suddenly generating their own wealth and individual consumers suddenly getting dumber. 
During the 30s and 40s, when government policy changed to encourage relative equality of opportunity, the share of wealth became more evenly distributed.  During the 80s and 90s when government policy was focused on making conditions optimal for big business, wealth became less evenly distributed.

This is why the wealth of the top 0.1% and 0.01% matters.
I don't really get too uptight about the super-rich/elite. 
When wealth is concentrated, it is, by default, not available to everyone else.  Total wealth can grow over time, but there is a finite amount of material resources in existence at any given moment. 
A part time store clerk may not make that much, but store manager makes pretty good coin, and a district manager makes really good coin, and so on and so on.

Nobody gets to the Forbes 400 on only hourly wages.  Its people in upper management, investors, inventors, real estate holders, and other forms of passive income and/or having employees who work for you.  It would not be possible for everyone to do that, because then no one would be doing any of the actual work that creates wealth. 
Since there is no possible way that everyone can be a supervisor, "become the supervisor" is not a valid method by which the working class could succeed.  Same for any of the other methods of passive income.  See first paragraph of this post, above.

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #119 on: November 22, 2012, 12:36:11 PM »
No?  Seems that is exactly what you are arguing for, when you suggest that large amounts of money be extracted from "the rich" via higher tax rates, and given to the poor. 

In short, about 60% of those on the list in 1989 were replaced by 2001.  Even between 1998-2001, turnover was almost 25%.

You seem very intent on disproving the straw man arguments you keep projecting onto me - even after I explicitly stated that was not my argument, and spelled out exactly what it was.  No one claimed things should be made more equal by giving cash hand-outs to the poor, and no one claimed "the rich" was a static group of specific individuals.  Nobody makes those arguments, they are always straw men that conservatives and libertarians project onto "liberals" so that they can seem more credible.  It doesn't even address the actual points I've made, which I won't repeat, because I've written too much on it already.

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #133 on: November 24, 2012, 10:28:22 AM »
So it seems that one of three things must be true:

  1) You are not expressing what you mean well enough for me to understand it;

  2) You're expressing what you mean to say well enough, but I'm too stupid to understand it.

  3) You're saying what you mean, and I understand it, but then when I draw the obvious/inescapable conclusions, you repudiate them because they don't sound so nice in plain language.

You've been claiming that it's more difficult to get on the upward mobility ladder, because - your implication - "the rich" are in some sort of conspiracy to game the system and keep getting richer.  I point out that this is not the case; that "the rich" aren't a fixed group, and that it is if anything ]u]easier[\u] to become upwardly mobile now than say when I graduated from high school, and that if large numbers of people aren't upwardly mobile, it's because they chose other paths in life.  Seems to me as though the third alternative is the best match.

What you believe are "obvious/inescapable conclusions" I see as neither.
I never said anything about a conspiracy!! 
I never said anything about gaming the system.  I never even said it was the rich themselves causing the changes that concentrate wealth.  I pointed out a few very specific federal government policy changes - changes based on an ideology much like your own - which had the effect of encouraging a greater concentration of wealth.
I never said "the rich" is a fixed group - in fact I acknowledged it wasn't the first time you mentioned it, and have again since then.  It doesn't change my point that government policy can make it easier to get super rich based on already being somewhat rich, and that a large portion of that wealth comes from transfers from lower down, not just newly created wealth.

Maybe I can explain it better with an analogy:
Wealth is represented by snow.  Everyone can go outside and make a snowball.  The harder they work at gathering, the bigger their snowball is.  That's just fine, people who work harder deserve bigger snowballs.  The government should not take large hand built snowballs, and give them to people who are just laying around making snow angels. That's what you are arguing against, and I agree with it.  But that's not the whole story.
Some people happen to be born in areas with 6inches of snow, while others just have a light dusting.  This has nothing to do with individual choices (unless pre-concieved spirits decide which parents to have).  Even then, the people born to snow poor areas (for example, with crappy public schools) could still make big snowballs, they just have to work harder at it.  In your mind, that is still fair, because it is possible.  Fine.
In addition, the entire landscape can tilt.  It is tilted steeply to one side so that once a snowball hits a certain threshold, it just starts rolling downhill and gathering snow all by itself.  This is how people get enormous avalanche size snowballs.  In the popular vernacular, these are "self-made", because the core was hand-built. 
What I am saying is that these run-away snowballs take up entire fields of snow with them, leaving less available for others to hand build there own.  I am also saying that government policy determines the slope of the landscape.  If government chooses to, it can make it level, so that everyone has to make their own snowballs by hand.
This will have the effect that less snow is captured in snowballs overall (lower GDP), but I don't see why increased GDP is necessarily a good thing if (as has actually happened) 100% of the increase goes to the very people who don't actually need any more.

Whether or not all the snow melts each summer is irrelevant (as is whether or not the rich are a static group).  Whether or not the rich influence the government (although we all know they do) is irrelevant.
All I am arguing for is government policy that corrects for the inherent inequality and inefficiency of a purely free market, to create as closely as possible the "perfect" market that Adam Smith envisioned.

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #143 on: November 30, 2012, 11:04:55 AM »
Maybe I can explain it better with an analogy:

Loved the analogy...it is spot on for both sides of the argument.  The problem is that the two sides fundamentally disagree.  Just because someone was born into a snowy area doesn't mean it wasn't accumulated from the prior generation, and just because it rolls faster down hill doesn't mean that it is wrong.  By stopping this rolling snow ball would be doing exactly what you said you were against that is - dropping a snowball in front of those making snow angels.
haha!  I wasn't suggesting "stopping" the snowball, I was suggesting leveling the field so that it doesn't begin to roll in the first place.  The person who started making it would still keep it, and they would be allowed to make it as big as they wanted.  The only change is it wouldn't take off under its own weight.
Also: I don't accept the implication of a family as a unit, as opposed to an individual.  I think that line of reasoning leads to the justification of caste systems and aristocracy, and undermines equality of opportunity and upper mobility.  Let each generation - each person - earn their own way.
Whether or not all the snow melts each summer is irrelevant (as is whether or not the rich are a static group).  Whether or not the rich influence the government (although we all know they do) is irrelevant.

The snow melting is exactly what matters if you are saying that upward mobility doesn't exist. And besides the poor influence politicians as much as the rich - one is trying to get more from the government so they can stay poor and the other is trying to give less to government so they can stay rich - these rich people pay 70% of the taxes.
!!!! but I am NOT saying upward mobility doesn't exist, and I never said that!  I have been saying that there is not an equal opportunity of upward mobility.  The poor may want to influence just as much, but that doesn't mean they do.  In 2010 $3.5 billion was spent on political lobbying alone, not even considering campaign donations.  All a poor person has to bargain with is their vote.  A rich person has their vote, plus up to 117 thousand dollars in "donations".
All I am arguing for is government policy that corrects for the inherent inequality and inefficiency of a purely free market, to create as closely as possible the "perfect" market that Adam Smith envisioned.

There is no such thing as a perfect market because there will always be winners and losers - and losers will never see it as perfect.
That's not what I meant by "perfect".  I mean the conditions under which market theory is supposed to operate: perfect information (i.e. no false advertising, no "fine print"), perfect competition (no monopolies, no corporations, nothing to give any one business a competitive advantage other than a superior product and/or more efficient production), and rational consumers (who only make choices that are in their own best self interest), along with other similar theoretical conditionals.
If these conditions don't apply, even the theory predicts market inefficiencies.  And in the real world, these conditions are in fact never there.  What I'm saying is that government can either take steps to move conditions in the direction of a more "perfect" market, or it can take steps to distort it even more.  Sometimes a lack of regulations causes a more distorted market.
Capitalism isn't perfect but it socialism is far from perfect...look at Europe...you can't go on and on allowing people to live off the government at the expense of the people making money - ultimately it collapses, we are on that trajectory.  Canada looks ok but it would be a disaster if not for its natural resources.
What does "look at Europe" mean?  Europe is a big place, with lots of individual countries with their own individual balance of socialism and capitalism.  So, yes, lets look at Europe: of the 22 nations which have an average standard of living higher than the US, 18 of them are in Europe http://en.wikipedia.org/wiki/List_of_countries_by_inequality-adjusted_HDI
If you ignore distribution and take the society as a whole (where the super rich drag the average upwards), and take into account nothing except gross GDP per capita, there are still 7 European nations ahead of us

More to the point, the list of nations that outranks us for GDP per capita have a variety of economic systems, many socialist, with all but 4 of the 13 having less "economic freedom" than the US http://en.wikipedia.org/wiki/Index_of_Economic_Freedom

Near the top of the list for nearly every measure of standard of living is Norway:

"The Norwegian economy is an example of a mixed economy, a prosperous capitalist welfare state featuring a combination of free market activity and large state ownership in certain key sectors. The Norwegian welfare state makes public health care free (above a certain level), and parents have 46 weeks paid parental leave. The income that the state receives from natural resources includes a significant contribution from petroleum production and the substantial and carefully managed income related to this sector. Norway has a very low unemployment rate, currently 2.6%. 30% of the labour force are employed by the government, the highest in the OECD. 22% are on welfare and 13% are too disabled to work, the highest proportions in the world. The hourly productivity levels, as well as average hourly wages in Norway are among the highest in the world. The egalitarian values of the Norwegian society ensure that the wage difference between the lowest paid worker and the CEO of most companies is much smaller than in comparable western economies. This is also evident in Norway's low Gini coefficient. The state has large ownership positions in key industrial sectors... the government controls approximately 30% of the stock values at the Oslo Stock Exchange. When non-listed companies are included, the state has even higher share in ownership..." http://en.wikipedia.org/wiki/Norway#Economy

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #146 on: November 30, 2012, 09:13:27 PM »

And as already mentioned, much of the economic factors in the Norwegian standard of living are the result of it just happening to be located right next to the
North Sea oil fields.  By that same measure (and for the same reason) Saudi Arabia and the Gulf Emirates have very high per capita incomes, but that doesn't translate to quality of life.
I figured someone would mention that.
Indeed, most of the countries with high per capita GDP have large oil reserves. 
Including the US.  Which is #3 in the world for oil production
So, if having oil reserves invalidates a countries economic system as the reason for it's prosperity, then our own high GDP may be despite our economic system, not because of it, as well.

I agree that gdp alone does not translate to quality of life - thats the whole reason the HDI, which measures life expectancy, literacy, education, standards of living, and quality of life, was created.
I suppose if you don't like those factors, you could use this one http://en.wikipedia.org/wiki/Quality-of-life_Index or http://en.wikipedia.org/wiki/Satisfaction_with_Life_Index
I included the GDP per capita because of the sentiment expressed here that wealth generation is inherently valuable.

I think it'd be pretty easy to come up with a better quality of life measure: just use the (population-adjusted) migration ratio.  If 1% of the population of Outbackistan emigrates, but only 0.01% immigrates, then it seems pretty obvious that the perceived quality of life in Outbackistan must be pretty low.
That's an interesting idea, however, I don't know how much that would really tell you.  Some people have more opportunity to travel than others, whether due to having the money to do so, or because of government policy (relatively little emigration from Cuba).  Proximity is often a factor in choosing where to go (i.e. we have more Mexican immigrants than sub-Saharan African).  People are more likely to go where they have family, so a history of immigration may lead to a continuation of it.  Many people decide where to move to without ever having lived there, so they may not really know what it is like until they get there.  Just like using what people buy as an indication of what is most valuable, looking at trends in human choice assumes perfect information, perfect competition (or access to a country), and rational actors, none of which can be consistently guaranteed in the real world.

That said, once again, the US is not at the top of the list
Notice that every single one of the countries that out ranks us in the human development index has a net positive immigration rate, including 5 with higher immigration rates than the US.
So while I don't think your measure is necessarily accurate, it does generally support the same points I made before

By Bakari:

Re: Your thoughts on the we are the 99% blog?
« Reply #149 on: December 01, 2012, 06:20:10 PM »
haha!  I wasn't suggesting "stopping" the snowball, I was suggesting leveling the field so that it doesn't begin to roll in the first place.  The person who started making it would still keep it, and they would be allowed to make it as big as they wanted.  The only change is it wouldn't take off under its own weight.

I get what you are saying - how do you define this point when it starts rolling on its own and why can't it roll on its own, afterall that is the whole point of starting a company and investing and taking risk.  I think we'll just have to disagree.
It can roll on its own - that is, afterall, the literal meaning of capitalism.  I just think the government shouldn't be making rules that accelerate it even more than the market would naturally.
Also: I don't accept the implication of a family as a unit, as opposed to an individual.  I think that line of reasoning leads to the justification of caste systems and aristocracy, and undermines equality of opportunity and upper mobility.  Let each generation - each person - earn their own way.

This too. The whole point is to do as much as possible so your kids have it better than you do - so when a mom who works three jobs so she can afford to live in the suburbs or send her kids to private school so her kid can get a better education and then that kid goes to college gets a good job saves money then pays for their kids college and that kid starts a business and makes millions and has three kids - one takes over the family business, one becomes an artist, and one says I have a trust fund so I will volunteer all my time to charitable endeavors..and so on and so on. 

So it looks like we disagree here as well because I don't see how doing things to better the next generation is bad.
I'm not saying its "bad" for someone to try to help out their kids.  Just like it isn't bad for a fisherman to fish on a communal lake.  The problem is that when everyone does it, at some point the lake runs out of fish, and everyone suffers. 
  Hopefully that is one thing we can agree on - LETS TAKE THE MONEY OUT OF POLITICS.
Yup. :)

There is no such thing and sometimes the lack of regulations do distort the markets but more often then not the government creates (maybe not intentionally) a distorted market.  Take banking right now - the government created huge regulation in Dodd-Frank (btw-the details of all the regs are still being written) to cure the ills that caused the financial crisis - except that the big players went from too big to fail to too bigger to fail, many of the things that caused the mess are still going on, and smaller institions are not being created or going under because they can't afford to comply with the regulations.  The small banks are historically what funds small businesses.  Whoops. 
But those problems wouldn't have happened in the first place if the regulations put in place after the Great Depression hadn't been rescinded in the first place.  The big banks could have never become so big in under pre-Regan/Clinton laws.
Politicians have no clue - they are either career politicians and never really worked or they are ridiculously wealthy people (by earning it, marrying into it, or inheriting it) - they can't solve anything.
What do you propose in its place?  Anarchy?  A benevolent dictator?  Direct democracy?
You know what Europe looks like - don't be koi.  Sure there are a lot of countries but almost every large (really all except Germany) is financially defunct. 
Yes, and many of the countries have market economies, similar to our own.  Their decision to try to make trade even freer between them all by adopting a common currency meant that the downfall of any one affected the others more.  The whole global downturn was led by the US is 2008.
And Norway, really, that is your argument...isn't the population of Norway like a small state in the US and it is a positive that half the population is works for the government, is unemployed or on disability.  Sounds great!  I would love to be business owner there and watch 70% of my income supporting that - awesome, real motivating.  Unlike some of the other European nations Norway gets away with it because it is rich with natural resources - that is the only reason.  Canada similarly benefits from this currently.
Exactly!!  This is why I used it as an example.  You've always implied (or stated outright) that conditions like that would stifle innovation, investment, and production, which would retard the growth of wealth and the end result would be everyone, both the rich and the middle class, would suffer.  And yet, here this place is, not just hypothetical but actually existing, and it has exactly the sort of system you think would be terrible, yet it has consistently had a higher standard of living for its middle class the the US for at least as long as comparisons have existed.
And like I mentioned to Jamesqf, the US has higher oil production than they do, so, if their economic sucess doesn't count for that reason, neither does ours.
Your points are well taken but at the end of the day I think it is you just are against significant wealth however that is defined.

No comments:

Post a Comment

If you ask a question, I will answer it.

NEW: Blogger finally put in a system to be notified of responses to your comments! Just check the box to the right, below, before you hit "publish"