13 ms·

Wealth isn’t created at the top, it is merely devoured there

224 points by Futurebot 9y ago

mnm1 9y ago
"But such a revolution will require a wholly different narrative about the origins of our wealth. It will require ditching the old-fashioned faith in “solidarity” with a miserable underclass that deserves to be borne aloft on the market-level salaried shoulders of society’s strongest." This has never happened in the past, but similar things have happened, always driven by violence. Can this happen without violence, I wonder?
- ktRolster 9y ago
  Can this happen without violence, I wonder? If you can get enough people on your side to win a war, you can get enough people on your side to win an election.
  - namarie 9y ago
    If that were true no coup d'état would ever happen in any democratic country.
    - ktRolster 9y ago
      Nah. Look where coup d'états happen, it's invariably in states without a strong democratic system, with a leader who has power to prevent fair elections.
- pekk 9y ago
  Sure, if the wealthy voluntarily decide to do this, or if they can be convinced to do so in civil conversation. Given the heat of pushback on small tax increases, I wouldn't bet on this happening without chaos. I wouldn't bet on it happening with chaos either.
  - rsync 9y ago
    "Given the heat of pushback on small tax increases, I wouldn't bet on this happening without chaos." There's a big difference between pushback on increasing taxes from zero to five percent, or ten to fifteen percent ... and pushback on increases from 40 -> 42% or 45 -> 48%. In the US, it is the latter that we are most frequently discussing and it is the latter that gets all of the pushback that you find so familiar. If you think your chlorine level is too high in your pool, shouldn't you oppose all increases, no matter how minute ? If your blood pressure is too high, shouldn't you be opposed to all increases, regardless of how small or how much "you can afford it" ? Some people (like me) think that effective tax rates of roughly 50% (US, California, Marin County) are too high. I would then, ipso facto, be opposed to further increases and I am troubled by the fact that this is considered a definite political marker. It's not.
    - hexane360 9y ago
      So you think both that rich people would be willing to give more money, and that rich people think they're already giving too much money? Or is there some fundamental difference between marginal tax systems and what OP was discussing?
    - deleted 9y ago
      [deleted]
    - Frondo 9y ago
      Sure, except the wealthy were doing just fine when taxes were significantly higher for them. They weren't suffering--they were still extremely wealthy, far more than everyone else. For them to complain that their chlorine level is too high, when in the past it was twice as high or higher, and they were still living high on the hog? Sorry, don't care how they feel, tax the heck out of them.
      - ed_balls 9y ago
        Do you know was the effective tax back then? (it was much easier to hide money and the deductions were greater)
jostmey 9y ago
I think it sad that there is only one word for wealth. It does not distinguish how a person attained that wealth. Was it inherited? Was the wealth created? Or was it taken at the expense of others? How society treats and taxes the wealthy should depend on how the wealth is attained.
- api 9y ago
  Capitalism should have as many words for wealth as the Inuit purportedly have for snow.
  - ryanx435 9y ago
    We do. We also have as many words for snow as the inuit did. Just of the top of my head for frozen water that falls from the sky: snow, sleet, powder, crusty, ice, slush, hail, wet, thick, dusting, etc... And for wealth : cash, money, asset, value, income, revenue, etc
- kansface 9y ago
  | Was it inherited? old money | Was the wealth created? nouveau riche | Or was it taken at the expense of others? plutocrat/oligarch
- forinti 9y ago
  Indeed, for an economic system that supposedly rewards merit, why should Capitalism even have the institution of heritage?
  - ed_balls 9y ago
    because that's one of the greatest incentives for people to create wealth. Why would I work and create wealth if I can't give it to my children or to charity that I created? Let's consume all of it.
    - jhbadger 9y ago
      A lot of notable scientists have given up all patent rights to their discoveries because they were motivated to help the world. And to be fair, be famous and respected too.
Melchizedek 9y ago
Nor is it created at the bottom, where it is spent or destroyed. It is created in the middle, by the middle class. The middle class is the class that feeds the unproductive classes at both the top and the bottom. And the unproductive have formed a political alliance where the bottom votes for the top in exchange for handouts, all paid for by the middle.
- moomin 9y ago
  You say that, but in American cities, it's the poor paying for municipal services, and the middle class consuming them.
  - FreedomToCreate 9y ago
    Care to elaborate on that?
    - moomin 9y ago
      This was in HN a while back. Take a look at the graph. https://www.strongtowns.org/journal/2017/1/9/the-real-reason-your-city-has-no-money https://www.strongtowns.org/journal/2017/1/9/the-real-reason... Alternatively, read the DoJ report on Feeguson.
      - aaron-lebo 9y ago
        That doesn't suggest that the middle class is consuming and the lower classes are paying. The cited median house of $150k isn't owned nor are taxes paid for by the lower class. The middle class gets taxed as much or more than the lower and they put in more due to simple economics.
        lacampbell 9y ago
        There's a bracket in many countries (which I'm in) where you're taxed the maximum amount on your earnings, but still don't have enough to afford an accountant to find some loop holes for you.
agumonkey 9y ago
I think energy flows where there's energy, so money makers will keep being money makers and thus "wealth" will loop (devoured).
belovedeagle 9y ago
> Every sliver of fundamental technology in the iPhone, from the internet to batteries and from touchscreens to voice recognition, was invented by researchers on the government payroll. This is bullshit, but it's very pernicious bullshit because while it only takes one person to pull this out of their ass, no one person can refute it. No one person can articulate where all the stuff in an iPhone came from; abstraction is one of the true marvels of technology today
- akvadrako 9y ago
  Indeed this would be very interesting if it was true. Because many new technologies coming out of universities are patented, if Apple is using them as it's research arm, Apple is hopefully paying market price for the tech and hopefully that's a fair amount.
  - IIIIIIIIIIII 9y ago
    Somewhat related to this discussion - it's really worth the one hour: Secret History of Silicon Valley https://www.youtube.com/watch?v=ZTC_RxWN_xo https://www.youtube.com/watch?v=ZTC_RxWN_xo TL;DW The foundation for SV was laid during WWII by unrestrained spending (based on a huge amount of debt of course) by the US government on R&D. Private enterprise only came in once the foundation existed.
- jhbadger 9y ago
  We can certainly point out where various technologies were first discovered, and quite often it is academia (with a few exceptions like Bell Labs and Xerox PARC). But I think this is unfair to industry. What industry does is make usable compact products from these discoveries and one shouldn't denigrate this. I remember Steve Mann from U Toronto demonstrating his augmented reality devices in the 1990s. They were very impressive for the time -- but they required him to wear a backpack of equipment and absurdly large goggles. We still aren't there yet, but Google Glass made his ideas into a semi-practical product.
ktRolster 9y ago
The first sentence of that article is a little overwrought.
Houshalter 9y ago
I'm generally libertarian leaning and expected to completely disagree with this. But he's got a point. Does anyone here really believe Facebook deserves to be a multi-billion dollar company? All of their success comes from the luck of being first (ish) and establishing a monopoly because of network effects. Someone might make a vastly better social network. But are you going to use that, or the one your friends and family use?
- lazyjones 9y ago
  > Does anyone here really believe Facebook deserves to be a multi-billion dollar company? Multi-billion what? Revenue? Yes, because they managed to monetize their traffic and keep it up despite fierce competition (attempts... by Google, for example). Market-cap? Yes because enough people who aren't typically extremely careless with their money invested in FB. > All of their success comes from the luck of being first First at what?
  - Houshalter 9y ago
    >Yes, because they managed to monetize their traffic and keep it up despite fierce competition (attempts... by Google, for example). They didn't have to do anything, that's the point. They have such strong network effects. They would have to completely fuck up to lose even a tiny fraction of their userbase.
    - Haul4ss 9y ago
      But they do have to do something. In fact, they're constantly doing a whole bunch of somethings to keep people in their ecosystem. Apps. Messenger. Instagram. They didn't get that network by just being first(ish). They got it by continuously being the best of the imperfect options, and they can lose it just as easily.
    - Magnets 9y ago
      >They would have to completely fuck up to lose even a tiny fraction of their userbase. Look at Blackberry and Nokia. You don't necessarily have to fuck up, it can be you're simply not moving fast enough. Flickr, Myspace, bebo, there are plenty of companies who were early and lost their advantage or went out of fashion.
dahart 9y ago
> but across the spectrum virtually all agree that wealth is created primarily at the top. Good lord, is this really true? I don't know about you people, but the basic pre-reqs for my undergrad had a single overview economics class where we covered among many other things the definitions of capitalism and profit and the idea that profit equals the difference between the sale price of a commodity and the cost of goods & labor used to produce it -- literally the definition of profit disagrees with the idea that wealth is created at the top, whatever that is even supposed to mean. > When you think about it, it’s insane. We are forking over billions in taxes to help our brightest minds on and up the corporate ladder so they can learn how to score ever more outrageous handouts. There's a lot about the world that gets completely insane if you think too much about it. Cars are insane. Jobs are insane. Politics and money are insane. We have to have better options for smart people than highly compensated and interesting work at Facebook and Google. How do we create better options? I don't think pointing it out will cause better options to materialize. > Yet it doesn’t have to be this way. Tollgates can be torn down, financial products can be banned, tax havens dismantled, lobbies tamed, and patents rejected. Higher taxes on the ultra-rich can make rentierism less attractive, precisely because society’s biggest freeloaders are at the very top of the pyramid. And we can more fairly distribute our earnings on land, oil, and innovation through a system of, say, employee shares, or a universal basic income. > But such a revolution will require a wholly different narrative about the origins of our wealth. It will require ditching the old-fashioned faith in “solidarity” with a miserable underclass that deserves to be borne aloft on the market-level salaried shoulders of society’s strongest. All we need to do is to give real hard-working people what they deserve. OH! That's all we need to do, eh? It's so easy! :) It's not the first time this has been suggested. There are even names for this. And it sounds great. But the forces keeping our system the way it is are stronger than this. The narratives we need about the origins of wealth already exist, and they're not strong enough to turn the tide. I don't know what is strong enough to turn the tide.
anon_500 9y ago
This article seems like a classic case of theoretical discussion with little to no practical significance. "In reality, it is precisely the other way around. In reality, it is the waste collectors, the nurses, and the cleaners whose shoulders are supporting the apex of the pyramid. They are the true mechanism of social solidarity." Jobs such as waste collection will be completely automated away in the next decade. I suppose machines then will be the true mechanism of "social solidarity"? "But there is also a second way to make money. That’s the rentier way: by leveraging control over something that already exists, such as land, knowledge, or money, to increase your wealth. You produce nothing, yet profit nonetheless. By definition, the rentier makes his living at others’ expense, using his power to claim economic benefit." It seems like the author believes that any gain to one group can only happen at the expense of another. Yet we know this to be false - the pie can and does get bigger. "revealed that much of the financial sector has become downright parasitic. How instead of creating wealth, they gobble it up whole." Agree, but curious to understand which industry the author doesn't define as parasitic? All companies want to expand and grow relentlessly, that's just the nature of capitalism. Cable/Telecom? Oil and gas? High Tech? All of them have become "parasitic" if that's how the author wants to define it. "Higher taxes on the ultra-rich can make rentierism less attractive, precisely because society’s biggest freeloaders are at the very top of the pyramid. And we can more fairly distribute our earnings on land, oil, and innovation through a system of, say, employee shares, or a universal basic income." Wrong. Higher taxes, though welcome, will not be the solution. Nor will universal basic income. How does one not understand that with the rise of automation, the rich are about to get so much richer, no matter how much you plan on taxing them. And basic income, though beneficial, won't fix class inequality either, in fact it might just exacerbate it. Let's talk about something the author fails to even mention: Education. Class inequality is fixed by education equality. Period. End of story. The rich in the USA have access to far better education, and THAT is the true source of the rising inequality.
danblick 9y ago
Lately I've been thinking about how funny it is that we make heroes out of the heads of tech companies. Especially in technology, does anyone really believe that if these particular individuals hadn't contributed their talents, the world would have turned out much different? Would there be no operating systems without Gates? No social networks without Zuckerberg? No search engines without Page? No e-commerce without Bezos? (Granted, Bezos is pretty exceptional.) Why should particular individuals capture such massive rewards when their success had more to do with circumstance than anything else? (There's a connection here to the "great man theory" of history and its critiques.)
- deleted 9y ago
  [deleted]
- pstch 9y ago
  But then, why should particular individuals capture such massive capital when their success has more to with circumstance than anything else ? It's also funny how we make heroes out of corporations themselves, not only their heads : technological advance is often attributed to some specific companies, and we don't see that as appropriation of the results of particular circumstances, but as a sign of the performance of this company. However; Would there be no XXXXX if we didn't live in an environment that attributes the results of circumstances to specific individuals ? I really don't know.
  - dsacco 9y ago
    I don't find your point coherent. Why should anyone be paid well for anything if their revenue generation is due more to circumstance than anything else? How far down the rabbit hole would we be going to go with this? Who gets to decide what the capital cutoff point is for "too massive" and the contribution cutoff point is for "due to circumstance"? If I don't believe in free will, and thereby claim you make too much money because you technically weren't responsible for any of your actions and never chose the outcome that happened, can I incite a communist revolution and seize your assets? If I feel someone won the lottery because they were lucky, do I get to take all their money because they didn't contribute value or "earn" it in a way that I find agreeable? Can you give me an example of someone who is wealthy who earned their money in a manner that isn't arguably due to circumstance? As it stands, I can't think of an example that is materially different from a tech CEO who happened to be in the right place and right time. Go far enough back and every idea and execution on that idea is due to chance. But that applies to everyone, not just tech CEOs, or whoever the robber baron of the week is.
Booktrope 9y ago
Nothing like a little oversimplified, half baked Marxism, when you want a one-idea panacea for society's problems. Ugh!
- lacampbell 9y ago
  The communism on hacker news is fairly disgusting. Fascism wouldn't be tolerated here, no matter how loudly someone told us that Nazi Germany "wasn't real fascism". But somehow left-wing extremists get a completely free pass, despite their much higher historical death toll.
  - examancer 9y ago
    There is nothing "communist" about the article. It is a critique of the flaws of our existing crony capitalist economies and how the real "welfare" is provided mostly to the elite. It concludes not with some call to junk capitalism and have the state run everything, but instead with advice on modifications we could make to fix the flaws and allow capitalism to work a little more like we all believe it does.
  - deleted 9y ago
    [deleted]
  - dang 9y ago
    Users of every ideological commitment say similar things about Hacker News, so I think it's an optical illusion. In any case, please don't post generic ideological comments here. The genre of the internet thread is unable to do anything interesting with them.
    - lacampbell 9y ago
      If there was a small minority of posters here who advocated fascism with various degrees of subtlety, how would you feel? They're certainly not the majority, but it's evident and tolerated here.
      - 9y ago
vanderZwan 9y ago
Another way to think about it is to see all these platforms as markets. Facebook is a people market. Spotify is a music market. Airbnb a hotel market. Uber a taxi market Amazon and eBay... Well, literally markets, right? And so on. Markets obviously do create wealth, as a lubricant for trade. It's a meta-level of the economy, just like money is a meta-good that makes bartering actual goods and services more efficient. So saying that's it's all "rentier" without creating any wealth might be selling them short a bit. Where I'm troubled is that they're not free markets, in any sense of the word. They are privately owned, and the owners try to control their markets for the sake of their own profit. That's where things get problematic, I'd say, especially when there is a monopoly.
- heynowletsgo 9y ago
  Renting out the market one could say. And therein lies the problem.
  - vanderZwan 9y ago
    Funny that ComputerPhile just talked about using blockchains to potentially solve this with smart contracts: https://www.youtube.com/watch?v=csS1mZFuNSY https://www.youtube.com/watch?v=csS1mZFuNSY
lordnacho 9y ago
One of the comments has an interesting remark: "We’re invited to believe that a CEO can somehow ‘earn’ £10m per year, whereas a teacher ‘earns’ £25k per year. That’s only possible if you divorce the word ‘earn’ from any of its actual meaning. No one can actually work enough hours, or create enough value, to equate to £10m." I think this is the essence of the recent debate about inequality. I think most people would not have a problem with those who are genuinely producing more getting more as well. Think back to school, did you ever complain about your grades if you knew some other kid had worked harder? Me neither. Of course there were times when it seemed arbitrary as well, seemingly having no relevance to quality. It's a big problem creating a notion of fairness when you move on from school, where everyone is the same age, in the same class, doing the same homework. To create software, for instance, what do you typically find? There's people of various ages, some managing, some selling, some writing code, some doing testing. You need all of them to get the job done, and the job has some sort of value, however vaguely defined, that is greater than the sum of its parts. Nobody on the team could do all of the team's work as effectively as the team. So then we have the problem of attribution. There's no real way to say what fraction of the value someone created. The only thing we really have is negotiating positions. If you're able to say "Give me half or I'm taking my ball" convincingly, your teammates will give you half. They'll be thinking about a few things mainly: whether you'll really leave if turned down, whether they think they can replace you, and what deal they can put forth to other potential teams if you turn out to be irreplaceable. This will have some interesting effects. If you're already making a lot, you'll probably need a lot to want to participate. You have more savings in order to hold out for a better offer. CEO guy "genuinely" needs more pay because why wouldn't he just retire now? Janitor guy will take any offer, because he needs to be running to stand still. Actually a lot of people will be in that position, even though their labour is generally seen as useful, like teachers. Which is all just a long way of saying that the negotiating process does not in itself take merit as an input.
- Sacho 9y ago
  > Which is all just a long way of saying that the negotiating process does not in itself take merit as an input. I don't think this is the case. Why aren't you hiring the janitor to do the CEO's job? Are you sure there's no merit in the negotiating process? You even undermined your point right here: > They'll be thinking about a few things mainly: whether you'll really leave if turned down, whether they think they can replace you, and what deal they can put forth to other potential teams if you turn out to be irreplaceable. At least one of the reasons someone is difficult to replace is because they have rare talents, they're particularly good at what they do...they have merit.
Animats 9y ago
Corporate dividends are taxed, while interest paid is not. This encourages debt financing. It's a subsidy program for lenders. It fuels leveraged buyouts; "private equity" usually means converting equity to debt. It also fuels stock buybacks as opposed to dividends. This causes a huge distortion in business financing, and it accrues to the benefit of banks. It would be straightforward to fix this as part of tax reform, but the banks would scream. We're not going to fix this in the US until we have a Goldman Sachs free administration. The other big subsidy program for lenders is borrowing money from the Fed at low rates which can then be lent at much higher commercial rates. That's the welfare state for banks. It doesn't have to be that way. Japan and China inject money into the economy by building, and sometimes overbuilding, publicly funded infrastructure. The banking system plays a lesser role in economic stimulation. This has its advantages; usually the infrastructure is good for something.
- kspaans 9y ago
  And for the individuals who receive the interest, they have to pay regular income tax rates on that income. With dividends they get a different, lower rate.
  - SilasX 9y ago
    Yes, because the corporation is already paying 35% tax on the profits that the dividend was paid out of, while interest payments are deducted from taxable (corporate) income. Nothing is avoiding a tax.
    - ComradeTaco 9y ago
      US Corporations pay an effective tax rate of 12.6%.[1] http://money.cnn.com/2013/07/01/news/economy/corporate-tax-rate/ http://money.cnn.com/2013/07/01/news/economy/corporate-tax-r...
      - SilasX 9y ago
        Yes, through an unrelated tax dodge that wouldn't make the combined dividend + profit tax any more sensible. They're still paying 35% on any profit that hasn't been expensed away somehow, and the dubious ways to expense corporate income are a separate issue from whether this "low" dividend tax is a loophole.
macawfish 9y ago
wealth is create by workers, derived from the sun, love, care and the ecosystem!
dade_ 9y ago
I think this situation perfectly describes the problem: http://business.financialpost.com/executive/cogeco-inc-ceo-louis-audet-says-family-ownership-is-good-for-businesses-and-canada http://business.financialpost.com/executive/cogeco-inc-ceo-l... "Family ownership" and transferring wealth to heirs tax free.
peculiarbird 9y ago
Anyone else tired of seeing this communist bullshit? Starting to get worried at the frequency these types of articles keep popping up here.
Jabanga 9y ago
The shocking level of economic ignorance of the author shows how utterly irresponsible and demagogic the Guardian is. This is rank sensationalism at the expense of public's correct perception of the world. To call earning passive income on assets one owns "rentier" earning of income is to show unquestioned acceptance of socialist assumptions about the right to property, to ignore the value the person's assets contribute, and to totally neglect the role that delayed consumption (aka saving) and investment analysis, both components of investing and acquiring assets, have in wealth generation. This is the quack economics the article is promoting: >To understand why, we need to recognise that there are two ways of making money. The first is what most of us do: work. That means tapping into our knowledge and know-how (our “human capital” in economic terms) to create something new, whether that’s a takeout app, a wedding cake, a stylish updo, or a perfectly poured pint. To work is to create. Ergo, to work is to create new wealth. >But there is also a second way to make money. That’s the rentier way: by leveraging control over something that already exists, such as land, knowledge, or money, to increase your wealth. You produce nothing, yet profit nonetheless. By definition, the rentier makes his living at others’ expense, using his power to claim economic benefit.
mankash666 9y ago
Hilarious!!! To learn more about how socialism is perfect, please buy Rutger B.. (the author) book off Amazon, a "rentier" by the author's own admission. And like good mind washed sheep, buy the book in huge droves to propel the author into "rentier-ship" accelerating a vicious cycle of the author curbing out books demonizing the very thing the he relies on to mind wash you into rentier slavery and socialism.
- misev 9y ago
  Thought the same. I'd recommend checking out "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer" by Dean Baker instead. http://deanbaker.net/books/rigged.htm http://deanbaker.net/books/rigged.htm

224 points by Futurebot 9y ago

mnm1 9y ago

"But such a revolution will require a wholly different narrative about the origins of our wealth. It will require ditching the old-fashioned faith in “solidarity” with a miserable underclass that deserves to be borne aloft on the market-level salaried shoulders of society’s strongest." This has never happened in the past, but similar things have happened, always driven by violence. Can this happen without violence, I wonder?

ktRolster 9y ago
Can this happen without violence, I wonder? If you can get enough people on your side to win a war, you can get enough people on your side to win an election.
- namarie 9y ago
  If that were true no coup d'état would ever happen in any democratic country.
  - ktRolster 9y ago
    Nah. Look where coup d'états happen, it's invariably in states without a strong democratic system, with a leader who has power to prevent fair elections.
pekk 9y ago
Sure, if the wealthy voluntarily decide to do this, or if they can be convinced to do so in civil conversation. Given the heat of pushback on small tax increases, I wouldn't bet on this happening without chaos. I wouldn't bet on it happening with chaos either.
- rsync 9y ago
  "Given the heat of pushback on small tax increases, I wouldn't bet on this happening without chaos." There's a big difference between pushback on increasing taxes from zero to five percent, or ten to fifteen percent ... and pushback on increases from 40 -> 42% or 45 -> 48%. In the US, it is the latter that we are most frequently discussing and it is the latter that gets all of the pushback that you find so familiar. If you think your chlorine level is too high in your pool, shouldn't you oppose all increases, no matter how minute ? If your blood pressure is too high, shouldn't you be opposed to all increases, regardless of how small or how much "you can afford it" ? Some people (like me) think that effective tax rates of roughly 50% (US, California, Marin County) are too high. I would then, ipso facto, be opposed to further increases and I am troubled by the fact that this is considered a definite political marker. It's not.
  - hexane360 9y ago
    So you think both that rich people would be willing to give more money, and that rich people think they're already giving too much money? Or is there some fundamental difference between marginal tax systems and what OP was discussing?
  - deleted 9y ago
    [deleted]
  - Frondo 9y ago
    Sure, except the wealthy were doing just fine when taxes were significantly higher for them. They weren't suffering--they were still extremely wealthy, far more than everyone else. For them to complain that their chlorine level is too high, when in the past it was twice as high or higher, and they were still living high on the hog? Sorry, don't care how they feel, tax the heck out of them.
    - ed_balls 9y ago
      Do you know was the effective tax back then? (it was much easier to hide money and the deductions were greater)

jostmey 9y ago

I think it sad that there is only one word for wealth. It does not distinguish how a person attained that wealth. Was it inherited? Was the wealth created? Or was it taken at the expense of others? How society treats and taxes the wealthy should depend on how the wealth is attained.

api 9y ago
Capitalism should have as many words for wealth as the Inuit purportedly have for snow.
- ryanx435 9y ago
  We do. We also have as many words for snow as the inuit did. Just of the top of my head for frozen water that falls from the sky: snow, sleet, powder, crusty, ice, slush, hail, wet, thick, dusting, etc... And for wealth : cash, money, asset, value, income, revenue, etc
kansface 9y ago
| Was it inherited? old money | Was the wealth created? nouveau riche | Or was it taken at the expense of others? plutocrat/oligarch
forinti 9y ago
Indeed, for an economic system that supposedly rewards merit, why should Capitalism even have the institution of heritage?
- ed_balls 9y ago
  because that's one of the greatest incentives for people to create wealth. Why would I work and create wealth if I can't give it to my children or to charity that I created? Let's consume all of it.
  - jhbadger 9y ago
    A lot of notable scientists have given up all patent rights to their discoveries because they were motivated to help the world. And to be fair, be famous and respected too.

Melchizedek 9y ago

Nor is it created at the bottom, where it is spent or destroyed. It is created in the middle, by the middle class. The middle class is the class that feeds the unproductive classes at both the top and the bottom. And the unproductive have formed a political alliance where the bottom votes for the top in exchange for handouts, all paid for by the middle.

moomin 9y ago
You say that, but in American cities, it's the poor paying for municipal services, and the middle class consuming them.
- FreedomToCreate 9y ago
  Care to elaborate on that?
  - moomin 9y ago
    This was in HN a while back. Take a look at the graph. https://www.strongtowns.org/journal/2017/1/9/the-real-reason-your-city-has-no-money https://www.strongtowns.org/journal/2017/1/9/the-real-reason... Alternatively, read the DoJ report on Feeguson.
    - aaron-lebo 9y ago
      That doesn't suggest that the middle class is consuming and the lower classes are paying. The cited median house of $150k isn't owned nor are taxes paid for by the lower class. The middle class gets taxed as much or more than the lower and they put in more due to simple economics.
      - lacampbell 9y ago
        There's a bracket in many countries (which I'm in) where you're taxed the maximum amount on your earnings, but still don't have enough to afford an accountant to find some loop holes for you.

agumonkey 9y ago

I think energy flows where there's energy, so money makers will keep being money makers and thus "wealth" will loop (devoured).

belovedeagle 9y ago

> Every sliver of fundamental technology in the iPhone, from the internet to batteries and from touchscreens to voice recognition, was invented by researchers on the government payroll. This is bullshit, but it's very pernicious bullshit because while it only takes one person to pull this out of their ass, no one person can refute it. No one person can articulate where all the stuff in an iPhone came from; abstraction is one of the true marvels of technology today

akvadrako 9y ago
Indeed this would be very interesting if it was true. Because many new technologies coming out of universities are patented, if Apple is using them as it's research arm, Apple is hopefully paying market price for the tech and hopefully that's a fair amount.
- IIIIIIIIIIII 9y ago
  Somewhat related to this discussion - it's really worth the one hour: Secret History of Silicon Valley https://www.youtube.com/watch?v=ZTC_RxWN_xo https://www.youtube.com/watch?v=ZTC_RxWN_xo TL;DW The foundation for SV was laid during WWII by unrestrained spending (based on a huge amount of debt of course) by the US government on R&D. Private enterprise only came in once the foundation existed.
jhbadger 9y ago
We can certainly point out where various technologies were first discovered, and quite often it is academia (with a few exceptions like Bell Labs and Xerox PARC). But I think this is unfair to industry. What industry does is make usable compact products from these discoveries and one shouldn't denigrate this. I remember Steve Mann from U Toronto demonstrating his augmented reality devices in the 1990s. They were very impressive for the time -- but they required him to wear a backpack of equipment and absurdly large goggles. We still aren't there yet, but Google Glass made his ideas into a semi-practical product.

ktRolster 9y ago

The first sentence of that article is a little overwrought.

Houshalter 9y ago

I'm generally libertarian leaning and expected to completely disagree with this. But he's got a point. Does anyone here really believe Facebook deserves to be a multi-billion dollar company? All of their success comes from the luck of being first (ish) and establishing a monopoly because of network effects. Someone might make a vastly better social network. But are you going to use that, or the one your friends and family use?

lazyjones 9y ago
> Does anyone here really believe Facebook deserves to be a multi-billion dollar company? Multi-billion what? Revenue? Yes, because they managed to monetize their traffic and keep it up despite fierce competition (attempts... by Google, for example). Market-cap? Yes because enough people who aren't typically extremely careless with their money invested in FB. > All of their success comes from the luck of being first First at what?
- Houshalter 9y ago
  >Yes, because they managed to monetize their traffic and keep it up despite fierce competition (attempts... by Google, for example). They didn't have to do anything, that's the point. They have such strong network effects. They would have to completely fuck up to lose even a tiny fraction of their userbase.
  - Haul4ss 9y ago
    But they do have to do something. In fact, they're constantly doing a whole bunch of somethings to keep people in their ecosystem. Apps. Messenger. Instagram. They didn't get that network by just being first(ish). They got it by continuously being the best of the imperfect options, and they can lose it just as easily.
  - Magnets 9y ago
    >They would have to completely fuck up to lose even a tiny fraction of their userbase. Look at Blackberry and Nokia. You don't necessarily have to fuck up, it can be you're simply not moving fast enough. Flickr, Myspace, bebo, there are plenty of companies who were early and lost their advantage or went out of fashion.

dahart 9y ago

> but across the spectrum virtually all agree that wealth is created primarily at the top. Good lord, is this really true? I don't know about you people, but the basic pre-reqs for my undergrad had a single overview economics class where we covered among many other things the definitions of capitalism and profit and the idea that profit equals the difference between the sale price of a commodity and the cost of goods & labor used to produce it -- literally the definition of profit disagrees with the idea that wealth is created at the top, whatever that is even supposed to mean. > When you think about it, it’s insane. We are forking over billions in taxes to help our brightest minds on and up the corporate ladder so they can learn how to score ever more outrageous handouts. There's a lot about the world that gets completely insane if you think too much about it. Cars are insane. Jobs are insane. Politics and money are insane. We have to have better options for smart people than highly compensated and interesting work at Facebook and Google. How do we create better options? I don't think pointing it out will cause better options to materialize. > Yet it doesn’t have to be this way. Tollgates can be torn down, financial products can be banned, tax havens dismantled, lobbies tamed, and patents rejected. Higher taxes on the ultra-rich can make rentierism less attractive, precisely because society’s biggest freeloaders are at the very top of the pyramid. And we can more fairly distribute our earnings on land, oil, and innovation through a system of, say, employee shares, or a universal basic income. > But such a revolution will require a wholly different narrative about the origins of our wealth. It will require ditching the old-fashioned faith in “solidarity” with a miserable underclass that deserves to be borne aloft on the market-level salaried shoulders of society’s strongest. All we need to do is to give real hard-working people what they deserve. OH! That's all we need to do, eh? It's so easy! :) It's not the first time this has been suggested. There are even names for this. And it sounds great. But the forces keeping our system the way it is are stronger than this. The narratives we need about the origins of wealth already exist, and they're not strong enough to turn the tide. I don't know what is strong enough to turn the tide.

anon_500 9y ago

This article seems like a classic case of theoretical discussion with little to no practical significance. "In reality, it is precisely the other way around. In reality, it is the waste collectors, the nurses, and the cleaners whose shoulders are supporting the apex of the pyramid. They are the true mechanism of social solidarity." Jobs such as waste collection will be completely automated away in the next decade. I suppose machines then will be the true mechanism of "social solidarity"? "But there is also a second way to make money. That’s the rentier way: by leveraging control over something that already exists, such as land, knowledge, or money, to increase your wealth. You produce nothing, yet profit nonetheless. By definition, the rentier makes his living at others’ expense, using his power to claim economic benefit." It seems like the author believes that any gain to one group can only happen at the expense of another. Yet we know this to be false - the pie can and does get bigger. "revealed that much of the financial sector has become downright parasitic. How instead of creating wealth, they gobble it up whole." Agree, but curious to understand which industry the author doesn't define as parasitic? All companies want to expand and grow relentlessly, that's just the nature of capitalism. Cable/Telecom? Oil and gas? High Tech? All of them have become "parasitic" if that's how the author wants to define it. "Higher taxes on the ultra-rich can make rentierism less attractive, precisely because society’s biggest freeloaders are at the very top of the pyramid. And we can more fairly distribute our earnings on land, oil, and innovation through a system of, say, employee shares, or a universal basic income." Wrong. Higher taxes, though welcome, will not be the solution. Nor will universal basic income. How does one not understand that with the rise of automation, the rich are about to get so much richer, no matter how much you plan on taxing them. And basic income, though beneficial, won't fix class inequality either, in fact it might just exacerbate it. Let's talk about something the author fails to even mention: Education. Class inequality is fixed by education equality. Period. End of story. The rich in the USA have access to far better education, and THAT is the true source of the rising inequality.

danblick 9y ago

Lately I've been thinking about how funny it is that we make heroes out of the heads of tech companies. Especially in technology, does anyone really believe that if these particular individuals hadn't contributed their talents, the world would have turned out much different? Would there be no operating systems without Gates? No social networks without Zuckerberg? No search engines without Page? No e-commerce without Bezos? (Granted, Bezos is pretty exceptional.) Why should particular individuals capture such massive rewards when their success had more to do with circumstance than anything else? (There's a connection here to the "great man theory" of history and its critiques.)

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pstch 9y ago
But then, why should particular individuals capture such massive capital when their success has more to with circumstance than anything else ? It's also funny how we make heroes out of corporations themselves, not only their heads : technological advance is often attributed to some specific companies, and we don't see that as appropriation of the results of particular circumstances, but as a sign of the performance of this company. However; Would there be no XXXXX if we didn't live in an environment that attributes the results of circumstances to specific individuals ? I really don't know.
- dsacco 9y ago
  I don't find your point coherent. Why should anyone be paid well for anything if their revenue generation is due more to circumstance than anything else? How far down the rabbit hole would we be going to go with this? Who gets to decide what the capital cutoff point is for "too massive" and the contribution cutoff point is for "due to circumstance"? If I don't believe in free will, and thereby claim you make too much money because you technically weren't responsible for any of your actions and never chose the outcome that happened, can I incite a communist revolution and seize your assets? If I feel someone won the lottery because they were lucky, do I get to take all their money because they didn't contribute value or "earn" it in a way that I find agreeable? Can you give me an example of someone who is wealthy who earned their money in a manner that isn't arguably due to circumstance? As it stands, I can't think of an example that is materially different from a tech CEO who happened to be in the right place and right time. Go far enough back and every idea and execution on that idea is due to chance. But that applies to everyone, not just tech CEOs, or whoever the robber baron of the week is.

Booktrope 9y ago

Nothing like a little oversimplified, half baked Marxism, when you want a one-idea panacea for society's problems. Ugh!

lacampbell 9y ago
The communism on hacker news is fairly disgusting. Fascism wouldn't be tolerated here, no matter how loudly someone told us that Nazi Germany "wasn't real fascism". But somehow left-wing extremists get a completely free pass, despite their much higher historical death toll.
- examancer 9y ago
  There is nothing "communist" about the article. It is a critique of the flaws of our existing crony capitalist economies and how the real "welfare" is provided mostly to the elite. It concludes not with some call to junk capitalism and have the state run everything, but instead with advice on modifications we could make to fix the flaws and allow capitalism to work a little more like we all believe it does.
- deleted 9y ago
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- dang 9y ago
  Users of every ideological commitment say similar things about Hacker News, so I think it's an optical illusion. In any case, please don't post generic ideological comments here. The genre of the internet thread is unable to do anything interesting with them.
  - lacampbell 9y ago
    If there was a small minority of posters here who advocated fascism with various degrees of subtlety, how would you feel? They're certainly not the majority, but it's evident and tolerated here.
    - 9y ago

vanderZwan 9y ago

Another way to think about it is to see all these platforms as markets. Facebook is a people market. Spotify is a music market. Airbnb a hotel market. Uber a taxi market Amazon and eBay... Well, literally markets, right? And so on. Markets obviously do create wealth, as a lubricant for trade. It's a meta-level of the economy, just like money is a meta-good that makes bartering actual goods and services more efficient. So saying that's it's all "rentier" without creating any wealth might be selling them short a bit. Where I'm troubled is that they're not free markets, in any sense of the word. They are privately owned, and the owners try to control their markets for the sake of their own profit. That's where things get problematic, I'd say, especially when there is a monopoly.

heynowletsgo 9y ago
Renting out the market one could say. And therein lies the problem.
- vanderZwan 9y ago
  Funny that ComputerPhile just talked about using blockchains to potentially solve this with smart contracts: https://www.youtube.com/watch?v=csS1mZFuNSY https://www.youtube.com/watch?v=csS1mZFuNSY

lordnacho 9y ago

One of the comments has an interesting remark: "We’re invited to believe that a CEO can somehow ‘earn’ £10m per year, whereas a teacher ‘earns’ £25k per year. That’s only possible if you divorce the word ‘earn’ from any of its actual meaning. No one can actually work enough hours, or create enough value, to equate to £10m." I think this is the essence of the recent debate about inequality. I think most people would not have a problem with those who are genuinely producing more getting more as well. Think back to school, did you ever complain about your grades if you knew some other kid had worked harder? Me neither. Of course there were times when it seemed arbitrary as well, seemingly having no relevance to quality. It's a big problem creating a notion of fairness when you move on from school, where everyone is the same age, in the same class, doing the same homework. To create software, for instance, what do you typically find? There's people of various ages, some managing, some selling, some writing code, some doing testing. You need all of them to get the job done, and the job has some sort of value, however vaguely defined, that is greater than the sum of its parts. Nobody on the team could do all of the team's work as effectively as the team. So then we have the problem of attribution. There's no real way to say what fraction of the value someone created. The only thing we really have is negotiating positions. If you're able to say "Give me half or I'm taking my ball" convincingly, your teammates will give you half. They'll be thinking about a few things mainly: whether you'll really leave if turned down, whether they think they can replace you, and what deal they can put forth to other potential teams if you turn out to be irreplaceable. This will have some interesting effects. If you're already making a lot, you'll probably need a lot to want to participate. You have more savings in order to hold out for a better offer. CEO guy "genuinely" needs more pay because why wouldn't he just retire now? Janitor guy will take any offer, because he needs to be running to stand still. Actually a lot of people will be in that position, even though their labour is generally seen as useful, like teachers. Which is all just a long way of saying that the negotiating process does not in itself take merit as an input.

Sacho 9y ago
> Which is all just a long way of saying that the negotiating process does not in itself take merit as an input. I don't think this is the case. Why aren't you hiring the janitor to do the CEO's job? Are you sure there's no merit in the negotiating process? You even undermined your point right here: > They'll be thinking about a few things mainly: whether you'll really leave if turned down, whether they think they can replace you, and what deal they can put forth to other potential teams if you turn out to be irreplaceable. At least one of the reasons someone is difficult to replace is because they have rare talents, they're particularly good at what they do...they have merit.

Animats 9y ago

Corporate dividends are taxed, while interest paid is not. This encourages debt financing. It's a subsidy program for lenders. It fuels leveraged buyouts; "private equity" usually means converting equity to debt. It also fuels stock buybacks as opposed to dividends. This causes a huge distortion in business financing, and it accrues to the benefit of banks. It would be straightforward to fix this as part of tax reform, but the banks would scream. We're not going to fix this in the US until we have a Goldman Sachs free administration. The other big subsidy program for lenders is borrowing money from the Fed at low rates which can then be lent at much higher commercial rates. That's the welfare state for banks. It doesn't have to be that way. Japan and China inject money into the economy by building, and sometimes overbuilding, publicly funded infrastructure. The banking system plays a lesser role in economic stimulation. This has its advantages; usually the infrastructure is good for something.

kspaans 9y ago
And for the individuals who receive the interest, they have to pay regular income tax rates on that income. With dividends they get a different, lower rate.
- SilasX 9y ago
  Yes, because the corporation is already paying 35% tax on the profits that the dividend was paid out of, while interest payments are deducted from taxable (corporate) income. Nothing is avoiding a tax.
  - ComradeTaco 9y ago
    US Corporations pay an effective tax rate of 12.6%.[1] http://money.cnn.com/2013/07/01/news/economy/corporate-tax-rate/ http://money.cnn.com/2013/07/01/news/economy/corporate-tax-r...
    - SilasX 9y ago
      Yes, through an unrelated tax dodge that wouldn't make the combined dividend + profit tax any more sensible. They're still paying 35% on any profit that hasn't been expensed away somehow, and the dubious ways to expense corporate income are a separate issue from whether this "low" dividend tax is a loophole.

macawfish 9y ago

wealth is create by workers, derived from the sun, love, care and the ecosystem!

dade_ 9y ago

I think this situation perfectly describes the problem: http://business.financialpost.com/executive/cogeco-inc-ceo-louis-audet-says-family-ownership-is-good-for-businesses-and-canada http://business.financialpost.com/executive/cogeco-inc-ceo-l... "Family ownership" and transferring wealth to heirs tax free.

peculiarbird 9y ago

Anyone else tired of seeing this communist bullshit? Starting to get worried at the frequency these types of articles keep popping up here.

Jabanga 9y ago

The shocking level of economic ignorance of the author shows how utterly irresponsible and demagogic the Guardian is. This is rank sensationalism at the expense of public's correct perception of the world. To call earning passive income on assets one owns "rentier" earning of income is to show unquestioned acceptance of socialist assumptions about the right to property, to ignore the value the person's assets contribute, and to totally neglect the role that delayed consumption (aka saving) and investment analysis, both components of investing and acquiring assets, have in wealth generation. This is the quack economics the article is promoting: >To understand why, we need to recognise that there are two ways of making money. The first is what most of us do: work. That means tapping into our knowledge and know-how (our “human capital” in economic terms) to create something new, whether that’s a takeout app, a wedding cake, a stylish updo, or a perfectly poured pint. To work is to create. Ergo, to work is to create new wealth. >But there is also a second way to make money. That’s the rentier way: by leveraging control over something that already exists, such as land, knowledge, or money, to increase your wealth. You produce nothing, yet profit nonetheless. By definition, the rentier makes his living at others’ expense, using his power to claim economic benefit.

mankash666 9y ago

Hilarious!!! To learn more about how socialism is perfect, please buy Rutger B.. (the author) book off Amazon, a "rentier" by the author's own admission. And like good mind washed sheep, buy the book in huge droves to propel the author into "rentier-ship" accelerating a vicious cycle of the author curbing out books demonizing the very thing the he relies on to mind wash you into rentier slavery and socialism.

misev 9y ago
Thought the same. I'd recommend checking out "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer" by Dean Baker instead. http://deanbaker.net/books/rigged.htm http://deanbaker.net/books/rigged.htm