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Debates Forum

  1. Standard member finnegan
    GENS UNA SUMUS
    17 Apr '14 18:46
    I have turned to the Washington Post for a commentary on a new economics book which challenges many standard arguments on this forum

    http://www.washingtonpost.com/opinions/capital-in-the-twenty-first-century-by-thomas-piketty/2014/03/28/ea75727a-a87a-11e3-8599-ce7295b6851c_story.html

    Piketty offers a timely and well-reasoned reminder that there is nothing inevitable about the dominance of human capital over financial capital, and that there is inherent in the dynamics of capitalism a natural and destabilizing tendency toward inequality of income, wealth and opportunity.

    whenever the return on financial capital (investment) is higher than the return on human capital (productivity) for an extended period, it is a matter of simple arithmetic that growing inequality will result. The reason: Those with the highest incomes will save and invest, generating capital income that will allow them to pull away from those relying solely on wages and salaries. It takes only a few generations before this accumulating and accumulated wealth becomes a dominant factor in the economy and the social and political structure.

    Indeed, Piketty says, the data show that it has already happened in the United States, where inequality in the distribution of both wealth and income surpasses that of class-bound Europe of 1900.

    Part of that American story, Piketty writes, reflects the surge in pay for corporate executives and Wall Sreet financiers who make up a large part of the top 1 percent of income earners. As Piketty sees it, their soaring compensation cannot be adequately explained simply by superior education or performance, but also reflects imperfectly competitive labor and product markets that allow the top 1 percent to extract way more than their real economic contribution.

    Notice that the Washington Post review, while it is critical of the author's proposals for the future, does not dismiss the need to tackle inequality and place restraints on capitalism, merely proposes that different remedies might be effective:
    If confronted with unacceptable levels of inequality, why would democratic societies in the future be unable or unwilling to formulate a similar set of institutional restraints on capitalism?


    Let's put this differently. Most wealthy people do not earn their wealth - they inherit it. They do not generate jobs and opportunities with their money either. That is a political smokescreen. The escalating concentration of wealth is harmful to everyone and economically it is not sustainable and requires corrective action by government.
  2. 17 Apr '14 18:55
    Of course they are going to tout economic inequality, it is Obama's big spin at the moment. You are falling for the government's propaganda machine.
  3. Standard member finnegan
    GENS UNA SUMUS
    17 Apr '14 18:56 / 1 edit
    http://www.nytimes.com/2014/03/24/opinion/krugman-wealth-over-work.html?_r=0

    The New York Times has an even more direct discussion of this work. It does not seem to permit me to cut and paste.

    For example it points out that 6 of the 10 most wealthy Americans inherited their wealth. The country is not simply coming under the dominance of the very rich, but an oligarchy. People born to great wealth are in turn getting privileged access to opportunity in a grotesquely unfair society. (The Koch brothers are heirs)

    Bush did not just cut taxes as commonly perceived. Top tax rates on earnings did fall from 39.6% to 35% but top rates on dividends fell to 15% and on the estate tax was completely eliminated.

    When Republicans retook Congress, then Paul Ryan's "Roadmap" called for the elimination of taxes on interest, dividends, capital gains and estates. Under this plan, someone living on inherited wealth would pay no tax at all.

    Why is the political system so favourable to the very wealthy? Surely it is because great wealth purchases great political influence.
  4. Standard member finnegan
    GENS UNA SUMUS
    17 Apr '14 19:01
    Originally posted by Eladar
    Of course they are going to tout economic inequality, it is Obama's big spin at the moment. You are falling for the government's propaganda machine.
    This work is by a French economist. Try again. Try harder.
  5. 17 Apr '14 19:05
    Originally posted by finnegan
    This work is by a French economist. Try again. Try harder.
    Where is the article?
  6. Standard member finnegan
    GENS UNA SUMUS
    17 Apr '14 19:43
    The New York Review of Books is interested:
    http://www.nybooks.com/articles/archives/2014/may/08/thomas-piketty-new-gilded-age/
    It therefore came as a revelation when Piketty and his colleagues showed that incomes of the now famous “one percent,” and of even narrower groups, are actually the big story in rising inequality. And this discovery came with a second revelation: talk of a second Gilded Age, which might have seemed like hyperbole, was nothing of the kind. In America in particular the share of national income going to the top one percent has followed a great U-shaped arc. Before World War I the one percent received around a fifth of total income in both Britain and the United States. By 1950 that share had been cut by more than half. But since 1980 the one percent has seen its income share surge again—and in the United States it’s back to what it was a century ago.


    And a NY Times article focuses on the damage to democracy caused by the power of the oligarchs:
    http://www.nytimes.com/2014/01/29/opinion/capitalism-vs-democracy.html?_r=0

    The New Yorker is in there with an excellent article:
    http://www.newyorker.com/arts/critics/books/2014/03/31/140331crbo_books_cassidy?currentPage=all
    Some people claim that the takeoff at the very top reflects the emergence of a new class of “superstars”—entrepreneurs, entertainers, sports stars, authors, and the like—who have exploited new technologies, such as the Internet, to enlarge their earnings at the expense of others in their field. If this is true, high rates of inequality may reflect a harsh and unalterable reality: outsized spoils are going to go to Roger Federer, James Patterson, and the WhatsApp guys. Piketty rejects this account. The main factor, he insists, is that major companies are giving their top executives outlandish pay packages. His research shows that “supermanagers,” rather than “superstars,” account for up to seventy per cent of the top 0.1 per cent of the income distribution. (In 2010, you needed to earn at least $1.5 million to qualify for this élite group.) Rising income inequality is largely a corporate phenomenon.

    Defenders of big pay packages like to claim that senior managers earn their vast salaries by boosting their firm’s profits and stock prices. But Piketty points out how hard it is to measure the contribution (the “marginal productivity&rdquo of any one individual in a large corporation. The compensation of top managers is typically set by committees comprising other senior executives who earn comparable amounts. “It is only reasonable to assume that people in a position to set their own salaries have a natural incentive to treat themselves generously, or at the very least to be rather optimistic in gauging their marginal productivity,” Piketty writes.

    Many C.E.O.s receive a lot of stock and stock options. Over time, they and other rich people earn a lot of money from the capital they have accumulated: it comes in the form of dividends, capital gains, interest payments, profits from private businesses, and rents. Income from capital has always played a key role in capitalism. Piketty claims that its role is growing even larger, and that this helps explain why inequality is rising so fast. Indeed, he argues that modern capitalism has an internal law of motion that leads, not inexorably but generally, toward less equal outcomes. The law is simple. When the rate of return on capital—the annual income it generates divided by its market value—is higher than the economy’s growth rate, capital income will tend to rise faster than wages and salaries, which rarely grow faster than G.D.P.
  7. 17 Apr '14 20:19
    There is nothing wrong with a system that encourages people to give wealth to their family after they pass away. The idea that we would be better off if people spent everything they own during their lifetime or stopped earning money that they did not plan to consume is just plain false. Inheritance is simply a good thing.
    As for your tax argument, it is a joke. Half this country does not pay income tax. All taxes (sales tax, sin taxes, capital gains, income tax) are at different rates and serve different purposes. Government want businesses to employ people, they want to collect taxes, they want to compete with a global economy and they realize that raising taxes on capital would make everyone worse off. The government already spends too much money and takes on too many functions. If there is a failure in capitalistic government, it will be in its refusal to tell the masses that if they want more they need to contribute because the continual borrowing to support every social program that one can dream up is unsustainable.
  8. Standard member finnegan
    GENS UNA SUMUS
    17 Apr '14 20:28 / 1 edit
    Originally posted by quackquack
    There is nothing wrong with a system that encourages people to give wealth to their family after they pass away. The idea that we would be better off if people spent everything they own during their lifetime or stopped earning money that they did not plan to consume is just plain false. Inheritance is simply a good thing.
    As for your tax argument, it ...[text shortened]... the continual borrowing to support every social program that one can dream up is unsustainable.
    An interesting argument which this economist has refuted with a very convincing research programme. The evidence, my friend, requires discussion and not the blah blah blah of sheep repeating the same old mantras.

    To claim inheritance is a good thing requires supporting evidence. Obviously, it is good that I inherited my late father's overcoat as it saved the cost of a new one. That is all I inherited. What this serious economist is demonstrating with evidence is that the people who inherit wealth are not, as it happens, helping but seriously harming our economy. We need an economy that rewards work, creativity, ingenuity and innovation. This world has an economy that penalises work and rewards an undeserving oligarchy.
  9. 17 Apr '14 20:43
    Originally posted by finnegan
    An interesting argument which this economist has refuted with a very convincing research programme. The evidence, my friend, requires discussion and not the blah blah blah of sheep repeating the same old mantras.

    To claim inheritance is a good thing requires supporting evidence. Obviously, it is good that I inherited my late father's overcoat as it save ...[text shortened]... innovation. This world has an economy that penalises work and rewards an undeserving oligarchy.
    I fail to see why the person who works hard is more entitled to the benefits of his hard work than those he/ she chooses to give the money too. We all try to help our children; one of the ways you can help your family is allow them to inherit. It is untrue that those who inherit are somehow less deserving than those who earned directly.
    You have no "evidence" that inheritance is a bad thing; you simply do have a hatred for people who acquired assets in a certain manner and want a moral justification for taking them away the person.
  10. 17 Apr '14 21:02
    Originally posted by quackquack to finnegan
    I fail to see why the person who works hard is more entitled to the benefits of his hard work than those he/ she chooses to give the money too. We all try to help our children; one of the ways you can help your family is allow them to inherit. It is untrue that those who inherit are somehow less deserving than those who earned directly.
    You ...[text shortened]... uired assets in a certain manner and want a moral justification for taking them away the person.
    'We all try to help our children...'
    --Quackquack

    That's untrue. In some cultures, children are regarded as the property
    of their parents, who can dispose of their lives however they please.
    Many boys and girls have been sold into de facto slavery in sweatshops
    or brothels. Many children would be better off in the custody of a state
    institution than with their 'loving' (sarcasm intended) parents.
  11. Standard member finnegan
    GENS UNA SUMUS
    17 Apr '14 21:24
    Originally posted by quackquack
    I fail to see why the person who works hard is more entitled to the benefits of his hard work than those he/ she chooses to give the money too. We all try to help our children; one of the ways you can help your family is allow them to inherit. It is untrue that those who inherit are somehow less deserving than those who earned directly.
    You have no "ev ...[text shortened]... uired assets in a certain manner and want a moral justification for taking them away the person.
    Your failure to see the evidence presented by the economist, Thomas Piketty, is not in itself a convincing argument, don't you know. Your ignorance is a problem, not an argument.

    I am not the French economist to which this thread refers so basing your position on the assumption that I hate rich people is not terribly effective as a commentary on his research and findings. It is a logical fallacy called "ad hominem" and in this case you have not even attacked the right hominem.

    You are not arguing to protect capitalism. You are arguing to promote an oligarchy. And since you probably do not know what an oligarchy is, try looking it up. e.g. http://en.wikipedia.org/wiki/Oligarchy
  12. 17 Apr '14 21:25
    Originally posted by Duchess64
    'We all try to help our children...'
    --Quackquack

    That's untrue. In some cultures, children are regarded as the property
    of their parents, who can dispose of their lives however they please.
    Many boys and girls have been sold into de facto slavery in sweatshops
    or brothels. Many children would be better off in the custody of a state
    institution than with their 'loving' (sarcasm intended) parents.
    I think in my culture everyone aims (even if they miss their goal) to help their children and at the risk of being ethnocentric, I'd argue that cultures which do not treat their children as property and refrain from selling their children into slavery are superior to those who do.
  13. 17 Apr '14 21:30
    Originally posted by finnegan
    [b]Your failure to see the evidence presented by the economist, Thomas Piketty, is not in itself a convincing argument, don't you know. Your ignorance is a problem, not an argument.
    Yes, I fail to "see" the b.s. you present.
  14. Standard member finnegan
    GENS UNA SUMUS
    17 Apr '14 22:09 / 1 edit
    Originally posted by quackquack
    Yes, I fail to "see" the b.s. you present.
    Washington Post, New York Times, New Yorker, New York Review of Books. These serious (and American) sources find the work of Thomas Pikkety very significant. All agree that Thomas Pikkety is a major figure in economic theory with the added value of being alive and current, not dead and dated.

    Quackquack "fails to see" the "B.S."
  15. 18 Apr '14 01:58
    Income inequality is the perfect propaganda because the "have nots" always have and always will outnumber the "haves". Those that preach such nonsense will always be part of the "haves" and those clamoring to elect them will always be the "have nots".

    It is human nature to covet, and as such, this message will forever be a popular one. And as they elect those who promise to give them income equality, and as the middle class shrinks into oblivion and oppurtunity for economic mobility fades into obscurity, perhaps, just perhaps, this message will eventually fall out of favor.