I blame asset inflation. Oh and that most people have no if not negative assets.
Distribution of New Wealth in US circa 2001
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I guess that's what happens when we tinker with capitalism by redistributing wealth to the top.
socialism for the rich, and a healthy "deal with it" for the rest.
posted by jhostetler on Jul 17, 2008 at 11:52:52 am #
So pink or jh, what's a good distribution and how do we get there?
Rescinding the Bush tax cuts would be a start. Then maybe stop pushing supply-side "voodoo" economics down Americans' throats.
I know that I often come off as combatitive - but with totally non-combative intentions, I am interested in what you guys think about wealth distribution and how it should work.
Assuming the chart above is correct, I agree wholly that the nature and size of our government affects it. I'm not 100% confident about how or how much it is affected by government - but when 20% of GDP is government, it seems inconceivable that government could have anything but a substantial affect one way or the other on wealth distribution.
It would be nice, for the sake of analysis, to start off by envisioning an environment where government has the smallest footprint possible on wealth distribution. That is not to say that there is no government - but to say that government does only what is absolutely necessary to maintain a civil and free society where all market transactions are as free as reasonably possible.
Given that environment, what would the distribution look like? Personally, I believe that it would be more equalized than it is now. But even then, a small portion of the population is still going to end up with a large portion of the total wealth. That seems to be an inevitable function of the diversity of the population across all kinds of indexes including physical ability, intelligence, emotional stability, etc.
So if we were sitting there with that kind of labratory-clean starting point - what, if anything, would we propose to do about the wealth distribution and why?
oops, sorry pink - we were parallel composing. If you don't mind, forget about what we should or shouldn't do in the current environment (ie, like Bush tax cuts). Let's just explore clean starting point as I propose above.
Asset prices have inflated in terms of Real Estate, Market Caps on stock, etc. Blame is tonguue-in-cheek which doesn't translate via text and often in real life.
Ideally the people born rich would get most the wealth, followed by the people who marketed a shitty product or 2 successfully (looking at you Gatesies), then hedge fund managers, bond traders, speculators.... then the people who do legitimate useful hard work for a living. Then the millions of people run out of the job market by de facto economic policy.
Isn't that how you want capitalism to work?
Blame indicates that there is something wrong with the distribution - tongue in cheek or not, I am trying to understand what is wrong.
The way I want capitalism to work is for everyone to be free to participate in whatever value exchange with other people that they want and are capable of. I personally do not make any distinction between a person that extracts value from the market by "[marketing] a shitty product" or by "[doing] legitimate useful hard work". I also don't see any characteristic of market mechanics that causes either person's market activity to cause a barrier to the other person. That is, I don't see anything about the shitty product marketer's market activity that would keep the useful hard worker from marketing shitty products if he wanted or vice versa.
That's why I don't understand what the problem is with an uneven distribution of wealth. Its not that I am cold hearted - its just that I see it as a reflection of the population's makeup on several characteristics. Nothing more and nothing less. It is not bad or good. It's just the way we are and as long as everyone is free to move about the chart, then so be it.
The two perceptions that I sense from some people that do see a problem is 1) they think people are not free to move about the chart and 2) they view the chart as representing a static sum of value in which the bottom 50% don't have wealth BECAUSE the top 1% does.
I don't think that either of those perceptions are valid - but I think between the two of them they make up most of the motivation for worrying about wealth distribution.
That said, while I don't see a problem with the chart above, I do see an opportunity. That opportunity being the economic growth potential of the bottom 50% becoming more capable of (and/or more desirous) of extracting more value from the market both by the services they provide directly and by the return on capital from their savings.
So one way to look at it is to see a problem and choose to solve it by reducing the holdings or ability to earn of the top 1% and the other way to look at it is to see an opportunity and choose to realize it by raising holdings and ability to earn of the bottom 50%.
Why some people see the problem and others see the opportunity seems to be the ultimate question. Again, it seems to go back to the perceptions that either the top 1% are holding the bottom 50% down or that there is a finite pile of cash and as long as the top 1% has it, the bottom 50% can't.
So, for instance, what would happen if a large portion of the bottom 50% increased their capability and desire such that they could provide services that had 5 times the value of their current service in the market place? Like say 20 million or so minimum wage workers turned themselves into engineers making $100k.
It would be bad news for today's engineers because the supply would dump the salary of engineers - say maybe 40% down to $60k. But the previous minimum wage workers would still be making 3x what they did before.
And what about the remaining minimum wage workers? Their demand just doubled because there is only half as many of them around now.
The approach of increasing the wealth at the lower end is the type of approach that I would like to see America obsessed with as opposed to the opposite approach which is to reduce the wealth at the upper end.
But if you see a static pile of cash then the only way to increase the wealth on the bottom is to take it from the top. That's why it is important to not see the value chain as a static sum.
Simple you make more than me, give me some of yours. Now, gimme.
posted by Linecrosser on Jul 18, 2008 at 01:05:46 am #
Takes money to make money. Yeehaw!
Glad to see you're well versed in HS economics.
Are we talking about the real world here?
The banking, automotive, farming, housing, insurance, drug, medical, defense industries all rely on subsidies, bribery, and more importantly self-written rules and regulations to exist/thrive. Obviously there written to benefit some at the expense of others.
The labor market has official policies to keep a certain percentage of people unemployed, a certain percentage underemployed, and certain percentage swept off the map completely. It's called Full Employment and it's completely centralized, results in low wages, low end welfare, crime, stagnant growth/investment, shitty skools, shitty gubbermints, etc.
And your math is atrocious at best. Minimum wage is $5.85/hour. Or $12,168 year based on 40/52 with no benefits or vacation. That's about 1/5th not 1/3rd that $60k total which doesn't include benefits. With benefits that might get popped up to 1/6th. I hope you don't work with numbers for a living.
The current median wage for all engineers is in the 70s. And there's also an ample supply of Indian engineers willing to work for whatever the going rate is at anytime. A few scribbles in the rulebook is all it takes.
Ok, nice criticism of irrelevant details - but do have anything to say about the larger points?
Let's just explore clean starting point as I propose above.
Babbleman, I'm not proposing anything as radical as wiping the system clean and starting over. Capitalism works fine, as long as it's regulated IMO. And if we stop following supply-side "faith-based" (tongue-in-cheek) economics, we'd be better off. The only thing supply-side gets us is a debtor-nation.
...I'm not proposing anything as radical as wiping the system clean and starting over.
No, that's not what I'm saying. I was trying to explore the idea of wealth distribution apart from any existing environment other than a free one. In other words, forget the reasons why you think that any given distribution is the way it is now - what would an ideal distribution look like to you?
In other words, forget about how we get there. Just tell me what it should look like once you are there.
what would an ideal distribution look like to you
I don't think there's any such thing. But that's not to say you can't recognize bad results. I guess if the majority of Americans feel that we're getting bad results with our system and want a change, it would be OK to change the laws (tax laws, welfare, etc). As long as the majority doesn't infringe upon the Constitutional rights of others, of course.
I don't think there's any such thing. But that's not to say you can't recognize bad results.
Ok, so I'll stop short of accusing you personally of being evasive - but what I was trying to get a handle on was the popular complaint from the left that x% of the population owns y% of the wealth. That complaint is what this post plays to.
All we hear about is that it is bad and, by implication, this badness is the fault of non-left policy. So I would think that if bad has been identified then good must also be identified. So if bad can be articulated so graphically, why can't good? And once that is done, how about the plan to get there?
As you can see, my attempts above to articulate my view of the bad, good and pathway between the two are met with personal attacks and irrelevant technical criticism - but still no explanation of what this graph is supposed to mean.
Blame? So there is a problem with this distribution? What is the problem? What would be the ideal distribution for you?
posted by babbleman on Jul 17, 2008 at 07:28:45 am #