Something is wrong and broken with "modern capitalism" if a mere 90,000 people have more wealth than 90% of the planet. All the arguments about investment and job creators falls flat; we have gobs and gobs of excess capital desperately seeing some productive investment. Capitalists don't need any more capital at the moment.
(Reminds me of the hedge fund carried interest exemption, which primarily benefits less than 100 people in the USA, with the vast majority of the benefit to the tune of > 1 billion dollars going to about ~5 people. So much so that they spent millions lobbying Congress to stop any attempt at closing the loophole and succeeded.)
I wish the old Soviet Union was still around. The communist revolution scare put the fucking Fear of God into the capitalist class.
Complaints about the carried interest issue bug me. (It's not an exception -- it's just how partnerships work.)
IMO the problem has nothing to do with carried interest or hedge funds in particular. I think the real issue is our bizarre idea that certain types of income (long-term capital gains) are special and should be taxed less. Hedge funds (and only the kind that generate long-term gains) are just easy things to pick on.
Have you noticed that pretty much every large corporation carefully avoids corporate taxes and arranges for its principals' income to be mostly long-term capital gains or qualified dividends? It's the same failure mode, minus the hedge fund.
So yes, I think Congress should fix the problem, but I don't think that carried interest is the problem.
In a perfect game system you'd probably make labor income taxes less than capital gains on investment. Yes you want to encourage investment but you also want to feed the economy with monetary velocity or cash money.
The fact is lower/middle class labor income workers put more directly back into the economy than the wealthy "job creators", so who are the real job creators? Demand is the job creator!
Demand comes from people that spend having cash. Capital locked up in hoarding does not help the economy as much especially in downturns. Lower/middle class spend almost all their incremental income dollar while the rich typically spend less than 5% of each incremental dollar. If the lower/middle class has cash then you have demand, demand leads to investment, and jobs/growth.
> In a perfect game system you'd probably make labor income taxes less than capital gains on investment
Indeed you would [1]. According to some legal scholars, wages earned from labor were/are not supposed to be taxed at all in America. The tax code was designed to tax investment gains only. Just imagine if that were upheld
> The fact is lower/middle class labor income workers put more directly back into the economy than the wealthy "job creators"
By doing what? Consuming consumables marketed to them by Corporations? The same Corporations that would just as soon replace most of their menial labor with robots.
Also, I'd curb your exuberance towards believing the lower/middle class "puts more back into the economy", because to the extent the lower/middle class is increasingly replaced by robots or cheap foreign labor, if this is your true belief then we should institute a universal income. Because that's going to "put more back into the economy".
> Demand comes from people that spend
But for example, planned obsolescence encourages spending. But is planned obsolescence really a tangible benefit for the "people that spend"?
Also, imagine if "cash" was of fixed supply (Bitcoin) rather than inflationary. In which case, you could make paper gains over time by not spending it or investing it. Wouldn't this provide more people with financial security given the risks and complexity of investing money in general?
> Also, imagine if "cash" was of fixed supply (Bitcoin) rather than inflationary. In which case, you could make paper gains over time by not spending it or investing it. Wouldn't this provide more people with financial security given the risks and complexity of investing money in general?
New currencies are needed but bitcoin and old school gold for that matter encourage hoarding, gold is worse because the control of gold is owned by physical mining. At least bitcoin doesn't leave monetary value up to physical mining, but still it does encourage hoarding. If a currency gains value over time doing nothing then investment will be lower.
Fiat currencies encourage investment because the value of your money goes down if it sits and is hoarded. Even though control of the currency is by the Fed and shadowy banking cabals, at least it spawns investment by wealth as they like to increase their money not see it slowly fade away to inflation.
Investment is key to growth/innovation but there has to be some demand there. Demand creation is always overlooked, when wages aren't raised, when companies move out of the US etc. These things directly impact demand and purchasing power of consumers at all levels eventually.
What will the robots build, sell or manage if noone has any money to buy anything? I don't necessarily buy that robots will remove all work. Computers were supposed to do the same, it has just enabled productivity gains to do more with less. There will always be more work to do, we haven't even explored very far off this rock. We need robots at every level but it won't mean less work, we'll have robot armies and it will enable entrepreneurs to do more with less.
Consumers don't buy 2% more chicken at the grocery store just because "inflation is 2%". That's total nonsense with no basis in reality. And investors will still make traditional investments in a deflationary environment, BTC denominated loan markets and "IPOs" are the case in point to that end.
Granted, in a deflationary environment, investments will be less profitable if the projects being invested in are dependent on consumers spending money frivolously.
> Investment is key to growth/innovation but there has to be some demand there. Demand creation is always overlooked, when wages aren't raised, when companies move out of the US etc. These things directly impact demand and purchasing power of consumers at all levels eventually.
Society gains purchasing power at large in a deflationary environment.
And note that, if the American economy grows 10% in a year, the Fed will still strive for inflation. If economic growth is 10% and inflation is 1%, the upper echelons of society will have skimmed 10% off the top, robbing society of that growth. Conversely, in a Bitcoin world, the 10% economic growth is returned to the savers in the form of more purchasing power.
>What will the robots build, sell or manage if noone has any money to buy anything? I don't necessarily buy that robots will remove all work.
I believe we will witness the rise of the leisure economy. Most people who still hold jobs will perform them in fields related to tourism and leisure activities, such as yoga teachers, tour guides, climbing, diving, boxing, golf instructors, etc. Basically robots/computers will eventually perform all tasks which do not necessarily require a human. Or in other words: The leisure industry will always require humans because it's catering for human experiences and not human needs.
For the aspect that you're referring to, see the question for "The income tax cannot apply to wages, because that would be a “direct tax” that must be apportioned in accordance with the Constitution":
> The income tax that was challenged in the Pollock decision was similar, and the majority opinion first struck down the tax on incomes from property (i.e., rents, interests, and dividends), but then went on to state that, if only the tax on interest, rents, dividends, and other income from property were ruled unconstitutional, “this would leave the burden of the tax to be borne by professions, trades, employments, or vocations; and in that way a tax on capital would remain in substance a tax on occupations and labor.” Pollock v. Farmers’ Loan & Trust Co., 158 U.S. 601, 637 (1895). The majority opinion therefore held that the entire tax act was unconstitutional, believing that Congress would invalidate the entire tax act rather than tax only “occupations and labor.” (The minority opinion in Pollock believed that the entire tax was constitutional, and so did not need to distinguish between income from property and income from employment.)
> That a tax on wages and other compensation for labor would have been constitutional even before the adoption of the 16th Amendment was confirmed by the unanimous decision of the Supreme Court in Brushaber, in which the court stated:
>> “Nothing could serve to make this clearer than to recall that in the Pollock Case, in so far as the law taxed incomes from other classes of property than real estate and invested personal property, that is, income from ‘professions, trades, employments, or vocations,’ (158 U.S. 637), its validity was recognized; indeed it was expressly declared that no dispute was made upon that subject, and attention was called to the fact that taxes on such income had been sustained as excise taxes in the past. Id. p. 635.”
It's interesting because, as a layman, this sounds a lot like what Keynes said: aggregate demand is the most relevant factor. Hell, using those ideas pulled us out of the great depression.
Then there's the Friedman supply-side argument that only aggregate supply matters. The demand curve is effectively vertical. Arguably, this seemed to have heaved Britain out of stagflation thanks to Thatcher. We now see raging inequality that these policies seem to promote.
Between these two theories of macroeconomics, it seems to mW that we swing between either extreme without considering a middle ground - both are important. Either extreme seems to have a long-term negative effect. When aggregate demand falls sharply in a recession, measures to rectify seems appropriate. This keeps people spending in a time where they typically wouldn't. When businesses struggle, due to a shock in supply, measures to ease this on that end too seem appropriate.
In a way, it seems a lot of economics is used with political bias. Certain all-or-nothing theories tend to be used as the means to an ideologue's ends within a democratic system.
What if the middle ground just gives you the worst of the both worlds. What if the idea of measuring the success of an economy via an aggregate quantity is flawed?
It seems to me that optimizing for aggregate demand or aggregate supply will merely result in redistributing to politically connected individuals who are able to convince the authorities that their programme will improve that metric.
In fairness, if economics is the study of allocation of scarce resources, which is implicitly a study of human behaviour wrt a limited resource in individuals, slightly larger functional groups (families and firms) and then large populations as a whole, then surely we are within the realm of psychology and sociology.
The thing is that psychology gives us ideas that shows how humans can be influenced individually (think foot in the door or an incredible offer that ain't really an incredible offer). Sociology gives us ideas of how humans can be influenced in groups that, in literal terms, will give away their freedom and rights with tears of happiness in their eyes to a charismatic speaker who says the right things in hard times.
How does supply and demand fit in all of that when the assumption in the model is that we behave rationally? How does the work on habit formation fit into that? How does peer pressure?
I smoke cigs. I pay for take out food and chocolate. Before I got a car, I'd get a cab to work even though I had a bus pass. Now I'm not holding myself up as a model of the actual man but that's the point: the homo economicus is like the description of someone's ideal of homo sapiens. Ideally, that's how we should make decisions about resources. In actuality, I think it's just far off the mark to cause what would be sound decisions to work out not so well.
Economics to me is like a social science trying to be used as a hard science and in a position to be quite dangerous.
Taxing capital gains less than ordinary income is a crude method to ensure that you're not being taxed on your losses (in terms of real purchasing power). Unless that's fixed first, there is no way you should be paying for losses.
Based on today's taxation laws, if you bought a stock for $100 10 years ago, and sold it for $110 today, you'll be taxed for the $10 "gain" even though in real terms you lost a fair amount of money. Calculating the real loss (not the nominal gain) is complicated because you need to consider inflation each year into the calculation and the IRS doesn't allow for that.
Not disagreeing that capital and labor need to be taxed at the same rate, but the situation is trickier than just saying "lets tax all gains and wages at the same rate".
The benefit of inflation is punishing unproductive investments and keep capital in play. Which is why economists want 2-3% not 0. As such low long term capital gains taxes are a bad idea economically. Ideally the tax rate should increase for every year an asset is held. Such that there is no bias for liquidating new assets instead of old ones.
Which is effectivly the same as paying capital gains each year. On the flip side the annual rate could be set as low as 5% or capital gains = 1 - (0.95^(number of years)). Which is actually rather close to inflation targets.
The downside of inflation is that is screws the poor and redistributes wealth to the already rich. The former is evidenced by our need to continually increase the minimum wage and the latter occurs because the middle class is pushed into investments to beat inflation, socializing business risk while leaving the gains to the already wealthy.
Inflation punishes people who assets. Poor people only suffer when their nominal wages don't grow to match inflation -- but that's exactly the same as their employers lowering wages in an inflation-free environment. Inflation is only superficially related to the problem of real wage reductions.
"..in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis."
In other words there is this aggregate value called "employment" that it's politically expedient to optimize, and the way to do that is to tweak the markets to screw the poor and transfer that wealth to the rich.
Well, yes, if you create a moving wage treadmill that forces people to work harder or fall off, you will get higher employment rates.
I would argue that as a design it has nothing to do with inflation (I'd be happy to consider any evidence that this is its purpose but I am not aware of any). Rather it is more to do with the "bunching" of income when assets are sold. If I earn a return of 10%/yr for 10 years and sell and asset I have to consider all of those gains as income occurring all in the year I sell it rather than 10 years of income.
It is complicated to account for inflation, and there would certainly be a lot of debates about the details, but I think we should do it anyway. It's ridiculous that in a low-inflation environment such as the one we've been in for several years, capital gains are still taxed at a much lower rate than income. In a normal- or high-inflation environment, we should do our best to estimate the real gain, and tax that at the income rate.
But personally, instead of increasing the capital gains tax to match the income tax rate, I'd rather see us lower the income tax to be closer to the capital gains rate, and make up the difference with a federal VAT. Taxing consumption just makes more sense than taxing income.
>carried interest [is] not an exception -- it's just how partnerships work
Oh bollocks. Carried interest is blatantly income for the fund managers. Treating it as anything else for tax purposes is down to basically bribing politicians. The whole concept of calling it "carried interest" rather than income is a US only invention.
The trouble with high taxes on capital gains and dividends is that the corporation itself is subject to a rather high tax already. So the underlying productive activity in a corp is taxed twice on its way to the ultimate owners. (Barring trickery.)
If I could rewrite the tax code myself, in addition to treating capital gains and ordinary income the same, I'd seriously consider sharply reducing or even eliminating the corporate tax.
As you said, the corporate tax is an annoying form of double taxation, but governments have also proven to be terrible at actually collecting the corporate tax from big corporations. So really it's the smaller corporations' owners being double taxed.
The one thing I don't like about that scheme is that it makes C corporations into a way for anyone to defer taxation as long as they like. This isn't necessarily a terrible thing, but it could make sense to force owners of corporations (or at least of new fancy untaxed corporations) to realize their gains periodically.
Obviously this isn't 100% thought out. But neither is the current US tax code.
Also, how can we expect companies to be not evil, when this is a winner-takes-all economy, where a move in favor of environment or society can result in the downfall of the company?
Capitalism is said to promote competition, but in reality, eventually only one or two big companies survive in a certain market (see Google, Facebook, Amazon, &c). In my view, antitrust laws should be extended so that we can have more competition.
I hold a similar, not exact, position as you. Namely, the trickle down is bullshit part.
But reading your comment made me think and question. The mega-elite's capital is growing due to their investments and it's showing no clear signs of slowing down [1]. How are they continuously extracting income of the middle and lower classes (and upper too)? How are they feeding their wealth at a mostly positive rate? Insider trading isn't enough to answer this question. Nor is stagnant wages because some sectors are paying well.
I think if economists can state how the wealthy are getting wealthier, in a granular way, then maybe the masses can find a better way to fight back. I.e. there is excessive profits to reap and only the wealthy are finding it, let's expose it and use it to the masses advantage.
[1] The great recession is a clear sign where the mega-elites came out with MORE wealth than before the bubble.
> How are they continuously extracting income of the middle and lower classes (and upper too)?
1. Through ownership of the means of production. Profit from said means largely goes to the very rich, or to the upper-middle class - almost everyone below them does not really participate in the stock market, and most definitely don't participate in ownership of non-public firms.
2. As such, as lower classes create wealth, it flows upward. When the economy grows quickly, that wealth tends to get re-invested into building more means of production. But at the end of the day, those investments are on aggregate, expected to generate returns.
So, through growth, you can postpone the trickle-up, but unless there's a huge societal shift, at the end of the day, even if the pie grows, the lower classes won't get any more pieces of it.
Caveats:
(Yes - quality of life has gone up in the developed world thanks over the past century. That is due to technological advancement. Yes - quality of life has gone up in the developing world due to globalization. But how many people in Bangladesh making sneakers own shares in their employer? How much of the Western economy will the people doing all the work that keeps it running have come to own over the past 30 years?)
> I think if economists can state how the wealthy are getting wealthier, in a granular way, then maybe the masses can find a better way to fight back.
Actually, I think the refusal of moderate, science-literate professionals to "listen to the people" unless it's parsed and vetted by a professional like an economist is part of the problem. It takes urgency away from the problem, makes it some interesting thing to ponder on breaks from working on an app for a yuppie consumer, rather than a big ominous issue that requires vast amounts of thought and dedication.
This Marxist academic (from UChicago I think) had an eloquent blog post [0] about, from which here I take some highlights:
> My problem isn’t with numbers, pie charts, and databases as such. My problem, rather, is with this celebration of a depleted epistemological ecology—not because I love epistemological diversity as such, either, but because I think poli.sci’s ongoing and dead-on impression of an epistemological wasteland functions as a prophylactic against the immediacy, urgent, and (as Bartels would admit) valid claims made in other epistemic registers.
> But that’s what liberalism is, really: the absorption of the immediacy of a political sense into the studied, slow time of useless intellection, the conflation of taking-time and having-a-(truer-)thought.
> I used to giggle at the scientism of early Marxism—Marx and Engels, Lenin and Luxemburg, Lukacs and Althusser, on and on. But now I’m beginning to think that this scientism wasn’t supposed to achieve any kind of scientific positivity, that Marxism’s valorization of the scientific didn’t intend a valorization of positive knowledges. (Stalin, we might say, wasn’t part of the plan.) What Marx desired in seizing hold of the term “science” was to create and defend a space in which plebeian forms of knowing could be entertained as knowledge—a knowledge that doesn’t require validation from positive or theoretical science, but rather productive transcription into it.
I think you could go through the Forbes 100 list and ask "where did that money originally come from?"
You'll find a lot of variance, but most of them boil down to: provided a good or service that people were willing to pay money for (meaning they preferred the good or service more than the money it cost them).
I don't doubt that most of them worked very hard and took a lot of risks to get where they are now. I respect these people immensely. But no human could work hard enough or provides enough of a service that they deserve to earn tens of thousands of times more than the people who actually do the labor.
Bardeen co-invented the transistor and the theory of superconductivity, yet even though his work was recognized with two Nobels, he didn't die a billionaire. Zuckerberg made a social network barely different from the others, but because he was able to market it better, or was just at the right time at the right place, he's now a billionaire. I respect Zuckerberg, but if he is able to earn 35e9 USD and Bardeen isn't, even though both did what they loved, the system is broken.
They were compensated based on whatever they agreed to. What beyond that should they get? And who would decide such an arbitrary thing - what government panel of bureaucrats should that be left to?
At the very front-end is the founder, who typically works without pay as necessary, and typically works far harder than their employees, while shouldering far more responsibility. Millions of businesses get started under that exact scenario every decade.
Employees get paid for their labor. An entrepreneur doesn't have such legal protections or guarantees and is paid for their risk (it's critical to note that 95%+ of all new businesses fail over five years). When I create something, I do so without taking a paycheck initially - perhaps for a very extended period of time. Try convincing an employee to do that at a routine job bagging groceries.
If the employee didn't like it, they were welcome to go through the extremely difficult process of starting and building a successful business instead. It's dramatically more difficult to build a business to the point where you can earn $60,000 per year, than it is to get a job making $60,000 per year.
Sam Walton didn't start out being rich. If his 37th employee didn't like the terms of employment, they were welcome to compete with him if they could. He contributed a million fold more to the business succeeding than any given grocery bagger, and also took on drastically more personal risk. Beyond that, the morality of it is such that the property of Wal-Mart belonged to Sam Walton, and there's no need for entrepreneurs like him to apologize for that ownership, it belongs to them fair and square (the sole counter argument is to say that violence should be used to steal property and to mostly or entirely abolish private property rights). If an employee wants their own property, then let them create it, and let them provide the money to pay employees for their labor.
You make an excellent and fair point if it stops at this. The problem starts when the successful business starts to take advantage of loopholes with their wealth(lobbying, offshoring income, jobs) to advance their ability to make profit at the expense of the labor that doesn't have this ability. So although the pact seems equitable in the beginning- it breaks down one side take unfair advantage of their position. German labor is an example of where the workers have managed to gain from the productivity of the companies mostly through organized labor but also because the companies realize its better to share the wealth. Hence- I'm only guessing we don't see super-rich German billionaires.
This would all be fine and good (just, even?) if nobody was ever coerced into agreement or agreed under duress. You seem to neglect the role of power in extracting preferable terms (and thus wealth).
There often isn't anything "fair and square" except in this idealized notion of some perfect environment you've painted.
What would help equal the playing field in negotiations is if the potential employee had the backing of a union to enforce a fairer contract.
A single laborer vs a well-monied and well-lawyered corporation is not a fair negotiation. See Apple & Google colluding to keep wages down for software engineers.
Union contracts with employers could also ease the damage to the middle and lower classes done by automation.
> Sam Walton didn't start out being rich.
Sam Walton is an outlier. His actions are responsible for driving down the wages and benefits of a sizable number of people and making them dependent on government services for what should be be provided by their employer.
> I wish the old Soviet Union was still around. The communist revolution scare put the fucking Fear of God into the capitalist class.
This is to an odd degree very right, it also forced leaders in nearby countries to take their social responsibilities seriously which lead to the Scandinavian brand of Social Democracy (which is now eroding away due to the lack of any perceived 'real' solution on the left).
Most that wealth only exists on paper sadly. If they were to actually withdraw it all at once and spend it, the value of the money itself would rapidly decrease.
Likewise if you tried to tax all the wealth they are actually consuming, e.g. all their income or all their consumption, the amount doesn't come out so big either. IIRC it's between a few hundred and a few thousand dollars per person in the US.
But that's exactly a sign of the problem! The money represent abstract power, not specific goods and services. This IMHO runs completely against the idea of free market, and the expectation that people will either consume or invest, instead of saving money (in order to gain power by postponing the economic decision).
> Capitalism trends towards greatest total utility (in the economics sense).
No it doesn't. Having the majority of wealth concentrated in a few people who have way more than they'll ever need, many of that wealth being unearned (eg. rent seeking, inheritences), does not maximize total utility.
Capitalism trends towards greatest total utility (in the economics sense)
That's arguably a bit misleading, since greater equality gives greater utility, for a fixed-size pie.
It's pretty well established that utility is approximately proportional to the log of monetary value. So in your example of what capitalism prefers, total utility would be significantly higher if the $1500 were distributed equally over the 11 people.
$100 in capital held by each of 100,000 people, where chances are at least one will utilize the capital to invest in an innovative new idea or trade in a marketplace, or $10,000,000 held by 1 person, where chances are that person is an heir who plays videogames all day
I think the best way to look at Capitalism is as a popularity contest. Popular products win. When technology advances to the point that it doesn't take as much labor to produce them, there are high barriers to entry, and distribution and communication of popularity are frictionless, you end up where we are - massive inequality.
Technology, i.e. 'increased economic efficiency' is the cause. It leads to a world where small players either become popular quickly or lose. And 99% of small players fall into the latter category.
People don't see this. They complain about inequality while they sport their iPhone apparently unconcerned that they are contributing to inequality by buying a popular product from a company that is sitting on more cash than some nations. But will they buy a phone from a small hardware startup, allowing a diverse phone market to thrive, employing an order of magnitude more people? Nope. And yet they complain about inequality, totally ignorant of its systemic nature and their part in it.
I'm wary of ever using the term "Capitalism" in any discussion, it's been misused, abused and overused so often it hardly ever means anything specific anymore. Nowadays it appears to be just a cue for people to engage in wild accusations. Let's rather talk of methods of allocation; for example a market based versus a state controlled distribution of goods.
> Something is wrong and broken with "modern capitalism" if a mere 90,000 people have more wealth than 90% of the planet.
Honestly, I don't think so. I believe we are merely returning to a state of the world that we've always been in - with the exception of the last 70 years or so. The existence of a large middle class is a distinct phenomenon of the 20th century, and specifically of the western countries. If I'm not mistaken then such a thing as a large middle class did never exist before anywhere else. It was always this heavily skewed distribution where 99% of the people own next to nothing compared to the 1%. I dont wan't to advocate for either of these two distributions here, just stating the historical context.
One of my favorite Professors once made the point that in Soviet Russia you could replace ''political power'' with ''wealth'' and it became a very similar system to the West. By law no Russians owned any personal property but the 1% ruling class (and really the 1% of the 1%) had more political power than everyone else combined. It was a capitalist system that used political power as its currency instead of dollars, which meant it was much less efficient (and personally cruel in many cases), but still tended towards extreme inequality.
As far as America today, aren't we ever just one election away from massive wealth redistribution?
As the ranks of the ''educated poor'' swell at the expense of the middle class, and we transition from an ownership economy to a sharing economy (wherein the average person now rents a condo forever and uses on-demand transpo and other services and owns very few material possessions), and access to the polls is increased as voter suppression is decreased and the impact of social media is fully realized (inevitable at some point), then we are in for some interesting times.
This is actually a good point that I never considered. I'm trying to think of a historical counterpoint, but the best I can come up with is the pseudo-middle class of ancient Greece. All the other long-term civilizations seem to have been composed of a royalty-level class and everyone else, from ancient Egypt through Rome and the Middle Ages.
Could you clarify how the investment and job creation arguments fall flat?
My view is that invested money does not magically compound: While invested cash may be directly applied to financial instruments, the amount invested changes hands many times, and generates extra liquidity in the market, and will eventually, indirectly be spent on the Real Economy endeavours, where it will generate productive jobs.
If these endeavours are successful, they will generate dividends for those participating in the endeavour's risk. Ultimately, those guys who have no idea of the effects their "purely financial" investments had on the market, are indirectly paid by the real economy.
All of this of course considers a fair playing market, which does not happen in practise: Manipulators are parasitic and should be combatted.
Not being sarcastic: Please tell me where I'm wrong.
Personally my issue is lack of freedom in choosing currency. What if I don't want to use CAD in my store, but something else, something more local. It says a lot when as a Canadian I'm not free to choose what kind of money to trade in. What if I don't trust those who manage the currency? Additionally, a TON of cash is being siphoned into redistribution programs aka grants, social, etc plus their supreme administration costs. This money is making the bureaucrats rich and the people at the bottom doing the labor with less wealth to invest. I still believe there are the political capitalists and the market capitalists, we need more of the latter and more transparency as to who exactly is the latter in order to understand who is really contributing.
I'm not aware of the CRA disallowing you from doing business in USD/EUR/GBP? And you can open bank accounts in those currencies right inside of Canada (have done it myself for GBP, USD).
If you think this is a bad idea, how else do suggest we redistribute the pool of capital to something more evenly distributed? Oversimplifying a bit but the choices are either, 1) Tax income 2) Tax wealth 3) Seize wealth.
Option #1 clearly isn't working as long term those with wealth (i.e. capital) grow their power, influence, and wealth further. Thus increasing the divide.
Option #3 doesn't work because there's an inherent "unfairness" to arbitrarily seizing the assets of others.
Option #2 has it's merits. Arguably a billionaire is getting a larger value from the security/tranquility of a peaceful existence than a pauper. Should the billionaire not pay more as a result? Think of it like negative interest rates but rather than doing it on just cash in the bank, it's on total assets. If I own a bunch of stores in a city, I arguably have more incentive to prevent riots and looting.
Land is the largest source of unearned revenue (rent-seeking).
The more you tax of something, the less you get, usually to the detriment of society. The one thing this does not apply to is land.
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In theory I'm in support of taxing wealth and much prefer that to taxing income, but it's just too unrealistic. Wealth is so easy to hide (eg. offshore) and hard to value (since it's more than just counting money in the bank). The only plausible way I could see us taxing wealth effectively is if the world collectively got rid of physical cash and implemented negative interest rates on currency, but obviously that's not happening anytime soon.
> Something is wrong and broken with "modern capitalism" if a mere 90,000 people have more wealth than 90% of the planet.
Nothing is wrong or broken.
Have that other 90% start and run their own businesses or go to school and get a degree in business that allows them to become a C level exec or invent a product and launch a startup.
90% of the people on this planet don't do SHIT. Because doing shit is HARD. Most are content working for someone who's willing to take risks, often with consequences to their own personal lives.
And that's OK. There's nothing wrong with that. Not everyone can be an entrepreneur or C level exec. Most people prefer simpler life.
For nearly a decade I lived across the street from a retired fireman. He put twenty years or so on the job and retired with a very generous pension and full benefits, for life. I watched as he amassed RV's, boats, jet ski's, Harley's, cars, etc. Living the life, as they say.
At the same time, almost everyone on the same block got up at five or six in the morning to go to work every day. Office workers, customer service folks, a couple of engineers, a couple of doctors, I know them all. And, in my case, well, it was 18 hours a day 7 days a week in the garage working on developing a product. For two years the external view was that I didn't have a job or didn't go to work, when, in reality, I was doing the equivalent of five jobs and was working every waking hour.
So, a couple of years later the product launches and it does very well. Seven figures per quarter very well. I decided it was time to replace our two cars, which had nearly 200K miles and were in bad shape. When the two mid-range (nothing fancy) cars appeared on my driveway the comments I got were, well, incredible. "Wow! You must have won the lottery!". "Dude! Did you rob a bank!". "You don't work, how did you buy these cars!". "Are you a drug dealer?".
Nobody EVER made a comment about the fireman being set for life when he did not contribute a dime to his pension plan that paid him six figures a year and his gold-plated health plan. No, the entrepreneur was the "drug dealer" on the block.
I created dozens of jobs through an incredible personal effort and sacrifice and somehow didn't deserve what I had. I was compared to the 99% purely based on my wealth.
Funny how everyone sees people who make money as undeserving purely based on how much they make yet have no clue what it may have taken to get there and can't be bothered to ask.
Please stop this nonsense of comparing the N percent to the M percent based on how much money they make or have. If you are going to do that, include HOW they got that money and, in particular, WHY the M percent couldn't be bothered to even try to do better, educationally or in business.
Hint: You are not going to become wealthy working at McDonalds or, in general, working as a employee at 99.99% of companies. The only corner case being joining a startup that goes public and your stock options make you wealthy. Like I said, corner case.
It's funny how people who often make the argument for this unfairness have their brains short-circuited when you ask them if it was unfair for Steve Jobs to become incredibly wealthy or, to use someone who's around today, Elon Musk.
You're trying to justify extreme inequality with an emotional moral argument over hard work. The fallacies you're making are:
1. Assuming wealth is earned (counter-example: inheritances, rent-seeking)
2. Assuming wealth is compensation for contributing to society (counter-example: rent-seeking)
Even if those two bullet points were true as you've assumed, I'd still argue that capitalism in its current form of extreme wealth inequality is NOT leading to a socially, economically, and technologically optimal society.
For one, poverty is a very real man-made problem. When all your energy is dedicated solely to surviving and you live paycheck to paycheck, of course you won't be able to do things like contemplate and pursue business opportunities (and then people like you call them lazy).
.01% of the population having more wealth than the other 90% is akin to being on an island of 100,000 people where 10 people own more land, bananas, etc. than 90,000 people.
Even if these 10 people were all Einsteins and Elon Musks like you'd probably claim, it's clear that this most likely isn't an optimum allocation of resources. Land that could be put to better use for the community (eg. farming, manufacturing) is hoarded for the pleasure of a few people. Resources are allocated for the pleasure and whims of 10 people (eg. luxury goods). Money sits vacant in bank accounts while business opportunities and opportunities to otherwise help the community go unrealized. Capital and power is so concentrated that it's effectively a monopoly, leading to a totally lopsided system that places the interests of these 10 people above the other 99,990. Want to start a business requiring a large investment? Not happening unless the "owners" approve, and probably not on favorable terms to you. You start to see things like debt slavery being required simply to partake in society (eg. education). The list goes on.
Also, you need to recognize that making a profit does not necessarily correlate to contributing to society (eg. renting out land you own, jacking up an HIV drug's price 5,000%, high-frequency trading, planned obsolescence), and contributing to society does not necessarily correlate to making a profit (eg. open source software, scientific research, taking care of a kid, teaching and having an educated populace). I'm not saying we need to abolish capitalism. Just that we need to recognize the imperfect nature of it, and seek to alleviate those problems.
You can always find extreme cases to support any conclusion. There are bad players at every level, rich and poor.
I do not appreciate victim mentality because i am the grandson of genocide survivors who made it despite having not a dime to their name, no education, no language and the most tragic experience one could possibly imagine. I have zero sympathy for victim mentality.
That does not mean I am not sensitive to the plight of those trapped by circumstances almost impossible to escape. We, as a society, must help them. I do what I can as often as possible.
I see lots of people complaining about the poor while sipping their $5 latte from Starbucks and typing their comments from a $2,000 Apple laptop. Very few of them will stop drinking their lattes and buy a $400 computer so they can donate money and time to help others. As they finish their latte they blame the rich and capitalism for all of the worlds problems. A mirror is a powerful device.
> Have that other 90% start and run their own businesses or go to school and get a degree in business that allows them to become a C level exec or invent a product and launch a startup.
Why not let them eat cake while they are at it too.
I think the issue people have isn't that 90,000 people have 90% of the wealth, it's the implications behind that figure. It's the imbalance between 6.6 million people who die every year from poor diet or malnutrition, something preventable by providing people with basic necessities such as food and clean water, and having 90,000 people owning collectively tens or hundreds of trillions of dollars.
Your argument would hold merit as soon as the the single mother of three in Somalia has every opportunity to do what you did. We are decades, if not centuries away from that. And until that point, I don't find it unreasonable that people will take issue with wealth imbalances.
The single mother in Somalia is a very different problem and it has nothing whatsoever to do with an entrepreneur in the Valley becoming wealthy because she pitched an idea to YC that got traction and worked her ass off to execute.
Let's make sure we are discussing things that are actually related.
Yes, we have to do more for people like the woman you describe. And, in some cases, they have to do something for themselves as well. In your hypothetical scenario (and that's all it is) it would be fair to ask why and how she ended-up with three kids before being able to provide for them. Is there a limit? Should anyone be able to have eleven kids, or fifteen, and we still look at them as responsible individuals?
> The single mother in Somalia is a very different problem and it has nothing whatsoever to do with an entrepreneur in the Valley becoming wealthy because she pitched an idea to YC that got traction and worked her ass off to execute.
The Venture Capitalists who invested in her idea could have just as easily put the 10s of millions of USD toward supporting single mothers in sub-Saharan Africa.
> Yes, we have to do more for people like the woman you describe. And, in some cases, they have to do something for themselves as well. In your hypothetical scenario (and that's all it is) it would be fair to ask why and how she ended-up with three kids before being able to provide for them. Is there a limit? Should anyone be able to have eleven kids, or fifteen, and we still look at them as responsible individuals?
There's a good chance it's some combination of having been raped, forced into an arranged marriage, and living in a community which punishes women harshly for undertaking abortions and having careers.
PS. Using "she" for a prototypical entrepreneur is just as sexist as using "he". Try using "they" next time.
I think you're putting the elite class on quite a pedestal. Most of them aren't like you: they didn't get to where they are via hard work. Rather, they stole, cheated, played politics and took credit for other people's accomplishments. Yet others were born into wealthy families and had everything - education, jobs, connections, promotions - handed to them on a silver platter. In fact there's quite a few who haven't worked an ounce in their whole lives (unless you think playing golf with daddy's friends counts as work).
There are also MILLIONS of people fucking off at work every day who do not deserve to have a job. GM had (has?) a clause in their union contract that did not allow them to fire people if their job was automated away. They had a building where 10,000 people would show up every day, year after year, get paid full salary and benefits only to read the paper and drink coffee all day.
I've worked with so many people, both as just another employee and as an entrepreneur, who fuck off all day or work sub-optimally that I sometimes wonder how some companies run.
I know a guy, a sales guy, who "worked from home" for a large multinational while earning six figures. He spent most of his time doing home improvement projects. He replaced his roof (himself), he built and installed new kitchen cabinets, he remodeled the entire house and painted it all.
My point, in case it isn't clear, is that if we are going to start to pass judgement based on who deserves what they have or they are getting let's make sure we are honest about passing said judgement at all levels. There are millions of people who do not deserve the jobs they have and millions more than are being carried by the work of others.
What do we do about them? Where is the evil?
I don't have a problem with the whole inheritance thing. If someone is born to a wealthy family and they get to float through life because of it, fine with me.
Let's bring it down to a lower level. If you have kids and you are fortunate enough to be able to buy them a car and pay for their college education, that's OK. Is is OK for some guy to think less of your kid or think ill of you for this? No, of course not. You might not be wealthy but you love your kids and want to help them get launched into the world. Different scales? Sure, but it is exactly the same thing.
The right attitude in life isn't to envy those who have more than you do but to try to better yourself and strive to help others as you do better in life. The first sentiment is destructive at a personal and national level. The second is constructive at a personal, national and global level. Only one of these outlooks in life result in improving life for everyone.
Sure, there are lots of assholes with money. There are lots of assholes without money. What else is new? The vast majority of people are good, money or not.
> I know a guy, a sales guy, who "worked from home" for a large multinational while earning six figures. He spent most of his time doing home improvement projects. He replaced his roof (himself), he built and installed new kitchen cabinets, he remodeled the entire house and painted it all.
You seem surprisingly judgmental about this given how upset you were about others not recognizing the effort you put into the business in your garage.
> There are also MILLIONS of people fucking off at work every day who do not deserve to have a job. GM had (has?) a clause in their union contract that did not allow them to fire people if their job was automated away. They had a building where 10,000 people would show up every day, year after year, get paid full salary and benefits only to read the paper and drink coffee all day.
Can I get a source for the GM thing? That sounds fascinating. I wonder how the incentives got perverted in that manner.
> My point, in case it isn't clear, is that if we are going to start to pass judgement based on who deserves what they have or they are getting let's make sure we are honest about passing said judgement at all levels. There are millions of people who do not deserve the jobs they have and millions more than are being carried by the work of others.
But I also wanted to point out that it's perfectly fine to pass judgment on these people as well. Do not create a false dichotomy. Addressing the systematic wealth-hoarding of the top 0.01% is far more impactful than addressing wasteful middle managers and workers purely because of the size of wealth involved.
I believe said poster is thinking of Toyota, where it is a lot less then 10,000 people. As a top Japanese corporation, this is expected of them - as an employee, you give your life to the company, in exchange for the company taking care of you, through thick or through thin.
The greatest crime a capitalist can imagine is an employee getting paid the amount they are promised, in excess of that they deserve. The greatest virtue a capitalist can imagine is an employer making profits in excess of their contribution.
"I don't have a problem with the whole inheritance thing."
Lowering or eliminating estate taxes results in extreme concentrations of wealth in only a few generations. The inheritance tax ("death tax") in the USA should be revived; it was a mistake to reduce it.
"Funny how everyone sees people who make money as undeserving purely based on how much they make yet have no clue what it may have taken to get there and can't be bothered to ask."
Funnier than that is how most people assume that the capitalist earned his/her wealth and thus deserves to keep it, when in actuality wealth is accrued largely through chance rather than skill. Should one be allowed to keep all winnings in a game that are due to chance? Or should one be limited to that portion of the winnings due to one's skill plus a bit of the portion due to chance (and let government take the remainder)?
"Wealth condensation in a simple model of economy
Jean-Philippe Bouchaud, Marc Mezard":
* The simulation studies of Bouchaud & Mezard show that, regardless of initial conditions, wealth distribution ends up a Pareto distribution with a small percentage taking almost all of the goods. The take-away of Bouchaud & Mezard's studies: the very rich aren't rich because they earned it (i.e., because they are skillful or knowledgeable), they are rich mostly because they are lucky.
All my life I've assumed that, when people had a going concern or were rich, that they _earned_ their wealth. But Bouchaud & Mezard says they're, for the most part, simply very lucky.
If luck, rather than skill, is the source of one's wealth, then has one "earned" that wealth? How can one lay exclusive claim to something given by chance? I would contend that no such claim can be made.
In particular, I would contend that income gained through luck is fair game for government acquisition through taxation, and if it is possible to distinguish that portion of wealth due to skill from that due to luck (and such appears possible), then the "lucky" portion is open game for acquisition to be spent or redistributed as decided by the powers-that-be.
Go start a business and see if the reality you experience agrees with your current ideology.
Let's make it simple: Start a great local coffee shop wherever you live. People like coffee. It's a safe business, right? You know there's demand. All you have to do is create an excellent product that is more appealing than the competition. Then go get some funding, get a loan, mortgage your home or, if you have it, dump your entire life savings into the business to fund it.
Come back in five years and read what you just wrote.
That is a cliche'. FWIW been there, done that, got the T-shirt. I still think Bouchaud/Mezard is onto something almost revolutionary.
Bouchaud/Mezard's claims have a novel perspective but are consistent with other studies over the years. Society remains in a state of ignorance and denial of this simple idea:
The rich are lucky, not skillful. A person may benefit from his/her skill, but not necessarily from his/her luck. Society should determine the partition of luck/skill in wealth, tax the luck and reward the skill.
[Yes, I would tax lottery winnings very heavily, since they are nearly 100% luck!]
I suppose you were either there and knew what it entailed or are clear on your facts? The Soviet Union at one late stage couldn't even supply sanitary towels for half its population and thus women had to tear up old clothes to take care of menstruation. But who cares as long as it put "the fucking Fear of God into the capitalist class". It didn't of course and thank goodness because the last 20 years of capitalism has seen the greatest decline in world poverty ever in the history of humanity. That's the result of letting individual humans make decisions about how they want to trade goods and services with other human beings.
By the way, the Gini index ranks Bosnia, Ukraine, Ethiopia, Bangladesh, Egypt and Vietnam as more equal than the UK. But in which of these countries is it better to be poor?
I suppose you were either there and knew what it entailed or are clear on your facts? The Soviet Union at one late stage [...]
I think you missed the point. As long as there was still socialist idealism in the hearts of a sizeable proportion of the Western population, there was always the fear of a revolt in your factory or even country. So, people with capital had to keep their workers happy.
Now that virtually everyone in the West believes in the capitalist doctrine, not making it means that you are just a sucker who did not work hard enough, did not make the right choices, etc. So, you don't protest, you just work harder.
However tenuous the connection may be, this makes me thing of the central 'point' of the book Trying Not To Try. The author argues that societies oscillate between favoring conservative and 'liberal' values over time, and that neither extreme is ideal.
In a way, perhaps capitalism can be seen as the 'liberal' side, where there is an explosion of development and innovation at the expense of stability, social cohesion and safety.
Maybe our biggest long-term challenge is figuring out a way to maintain a balance and keep either 'side' from winning or at least stabilizing the oscillation a bit.
Something is wrong and broken with "modern capitalism" if a mere 90,000 people have more wealth than 90% of the planet. All the arguments about investment and job creators falls flat; we have gobs and gobs of excess capital desperately seeing some productive investment. Capitalists don't need any more capital at the moment.
The wealth they have isn't doing nothing. It's in investments.
Secondly, if it was in nothing, that would only reduce the velocity of money, effectively making your money worth more. You could spread that money around, but the likely result of that is less investment and more consumption.
Savings fund investment. The more savings there are, the cheaper it is to find funds for investing in a project. The cheaper the capital expenditure, the easier it is to turn a profit.
The first thing you do before investing in a new market is asking the question: "What's the return on this? Will anyone buy the things I'm selling? Are the margins positive?"
Having a lot of money searching for an investment won't do you any good when your widget factories don't have customers. Yes, borrowing money to build the factory will be cheap - but you still expect the factory to produce a return on your investment!
It's kind of absurd to blame capitalism, when the vast majority of countries implicated are nothing close. Calling Russia or China capitalist is laughable, they are oligarchies greasing the wheels at every turn with extreme levels of corruption.
The US and others aren't immune, but your entire post is ridiculous. These are nations where the government officials pull all the strings, there's nothing free market about that at all.
(Reminds me of the hedge fund carried interest exemption, which primarily benefits less than 100 people in the USA, with the vast majority of the benefit to the tune of > 1 billion dollars going to about ~5 people. So much so that they spent millions lobbying Congress to stop any attempt at closing the loophole and succeeded.)
I wish the old Soviet Union was still around. The communist revolution scare put the fucking Fear of God into the capitalist class.