13 ms·

Its the power of capital over labor, whereby capital is extremely stratified in the hands of very few people, and they have shifted political power so as to avo

by posguy 10y ago

Its the power of capital over labor, whereby capital is extremely stratified in the hands of very few people, and they have shifted political power so as to avoid investment in the laborers (aka everyone below themselves) and ensure they do not become a threat. Additionally, they will usually influence monetary policy to ensure their status is never challenged, which is why rapidly rising housing prices aren't a major political issue at the state and federal level, despite our tax code & loan incentives encouraging ballooning housing prices. Also, this is a decent piece: https://www.oxfam.org/en/pressroom/pressreleases/2017-01-16/just-8-men-own-same-wealth-half-world https://www.oxfam.org/en/pressroom/pressreleases/2017-01-16/...

thesagan 10y ago
Within capitalism itself, some economists also argue that wealth concentration tends to suppress investment opportunities, because there aren't as many "moneyed eyes" on economic events worthy of capital and management; investment gets tunnel vision. I don't have any links on-hand but there's plenty of material out there (from reputable sources, and not-so-reputable ones) with a quick Google search. https://www.google.com/search?q=wealth+concentration+suppress+investment&rlz=1C5CHFA_enUS734US734&oq=wealth+concentration+suppress+investment&aqs=chrome..69i57.12408j0j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=wealth+concentration+suppres...
- posguy 10y ago
  Seems like basic economic theory, the more capital you have flowing through the economy at a lower level, the more opportunities there are. Whereas these 8 people are siloing their wealth in investments, that same money divided up among people of low income would be spent upwards of 3x, and given to the middle class iirc it was something around a 2x factor. Both are much better for our economy than having that wealth sit siloed as an investment.
- pm90 10y ago
  That makes a lot of sense actually, and has historically been the trend that most societies took. Once you accumulate wealth and power, you do everything to keep it. Democracy and diffusion of political power have been very recent phenomena, in the larger scheme of things.
- breatheoften 10y ago
  It seems like capitalism really needs something like a wealth tax -- ideally with the rate tied to the change in concentration of wealth over the whole society, so during periods of time when capital is concentrating, the wealth tax goes up vs epochs when it does not... Interestingly, I was reading about the idea of a wealth tax and came across this depressing nugget ...: > In 1999, Donald Trump proposed for the United States a one off 14.25% wealth tax on the net worth of individuals and trusts worth $10 million or more. Trump claimed that this would generate $5.7 trillion in new taxes, which could be used to eliminate the national debt.[18] A net wealth tax may also be designed to be revenue neutral as where it is used to broaden the tax base, stabilize the economy and reduce individual income and other taxes[citation needed].
  - antisthenes 10y ago
    Land value tax.
  - prodmerc 10y ago
    Is that accurate? 15% could generate that much? That's mind boggling, I always assumed it would take a 50%+ tax on multimillionaires/billionaires...
    - breatheoften 9y ago
      I can't comment on accuracy but considering the source ... I wonder if there is even a way to find out -- I'm not sure if anything in existing tax code would serve as a good proxy for estimating "net worth".
- mrkgnao 10y ago
  Linus' law? :)
- Frondo 10y ago
  Hey thanks for the link- this is great. Another arguing point for when I get into it with the "what's wrong with income inequality" folks here. :)
- therpe1 9y ago
  It's another way of saying the labor market is weak. (I can imagine certain economists might use this language because they don't want to be mistaken for labor advocates.) As long as the labor market is so weak (and it's much, much weaker than many realize) you'll see the widespread dysfunction suggested in the article and more. It acts as a severe economic drag due to decreasing competition everywhere. See [1] and [2]. The problem is not capitalism. We know exactly how to deal with weak labor markets. It is really no mystery at all and you can open up even notoriously simplified Econ101 books and find the answer[3]. But it won't happen. It's difficult to understand exactly why it doesn't happen but it seems like (based on my own, ongoing research) that for many powerful actors a weak labor market is overall a pretty good thing and these same actors have now acquired virtually complete political power. So I would say the problem isn't capitalism, it's just politics as usual. [1] http://rooseveltinstitute.org/wp-content/uploads/2016/07/Declining-Entrepreneurship-Labor-Mobility-and-Business-Dynamism-A-Demand-Side-Approach.pdf http://rooseveltinstitute.org/wp-content/uploads/2016/07/Dec... [2] http://www.ssc.wisc.edu/~nwilliam/Econ702_files/abch.pdf http://www.ssc.wisc.edu/~nwilliam/Econ702_files/abch.pdf [3] https://en.wikipedia.org/wiki/Keynesian_economics https://en.wikipedia.org/wiki/Keynesian_economics
nostrademons 10y ago
Interestingly, capital holders are complaining all the time as well. There are very few places to put money now with a decent return. Savings accounts pay roughly 0%. Bonds are at inflation, or sometimes less. The S&P 500's P/E is at 25, which is historically very high, implies a rate of return of about 4%, and makes the risk of a correction significant. Real estate is inefficient; property prices are so high that the IRR on rents is only a couple percent. Basically the only place to get decent returns these days are in startups, which is why valuations have gone sky-high. This in turn cuts the average return, although in tech startups this is manifested as a big chance of losing everything and a small chance of a great return rather than a small chance of losing everything and a big chance at a small return. I think what's actually going on is a big innovation deficit. We're at the end of the current scientific & technology paradigm, and there's not enough fundamental research going on to generate new technological opportunities. We see this in the returns to innovation (which are sky-high: if you come up with a technical breakthrough that legitimately makes things better for lots of people, you become an insta-billionaire) and the rareness of those returns. Historically, the last time this happened was the Great Depression, and WW2 broke us out of it because the war department funded a good deal of research that could never have happened in peacetime, which were then commercialized over the ensuing 50 years or so.
- posguy 10y ago
  Savings accounts are basically a negative return due to inflation, even if your credit union will do 1.25%, inflation is still 1.6% to 1.7%. We need to mobilize this capital back into the economy, rather than letting it languish in the financial markets, guarded jealously by a handful of people. The economic stimulus it would provide could easily help kickstart and sustain waves of growth and development, though we should not repeat the errors of the past (urban sprawl, heavy investment in infrastructure in dying suburbs). The last two were borne of an era where sprawl was supposed to distribute the white populace so as to allow some to survive nukes, and it has run its course and proved to be unmaintainable (look at Livingston, TX).
  - creaghpatr 10y ago
    I think most people in the middle class or lower have debt rather than savings so they directly benefit from inflation (while also being directly hit by inflation in terms of purchasing power)

by posguy 10y ago

thesagan 10y ago

Within capitalism itself, some economists also argue that wealth concentration tends to suppress investment opportunities, because there aren't as many "moneyed eyes" on economic events worthy of capital and management; investment gets tunnel vision. I don't have any links on-hand but there's plenty of material out there (from reputable sources, and not-so-reputable ones) with a quick Google search. https://www.google.com/search?q=wealth+concentration+suppress+investment&rlz=1C5CHFA_enUS734US734&oq=wealth+concentration+suppress+investment&aqs=chrome..69i57.12408j0j7&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=wealth+concentration+suppres...

posguy 10y ago
Seems like basic economic theory, the more capital you have flowing through the economy at a lower level, the more opportunities there are. Whereas these 8 people are siloing their wealth in investments, that same money divided up among people of low income would be spent upwards of 3x, and given to the middle class iirc it was something around a 2x factor. Both are much better for our economy than having that wealth sit siloed as an investment.
pm90 10y ago
That makes a lot of sense actually, and has historically been the trend that most societies took. Once you accumulate wealth and power, you do everything to keep it. Democracy and diffusion of political power have been very recent phenomena, in the larger scheme of things.
breatheoften 10y ago
It seems like capitalism really needs something like a wealth tax -- ideally with the rate tied to the change in concentration of wealth over the whole society, so during periods of time when capital is concentrating, the wealth tax goes up vs epochs when it does not... Interestingly, I was reading about the idea of a wealth tax and came across this depressing nugget ...: > In 1999, Donald Trump proposed for the United States a one off 14.25% wealth tax on the net worth of individuals and trusts worth $10 million or more. Trump claimed that this would generate $5.7 trillion in new taxes, which could be used to eliminate the national debt.[18] A net wealth tax may also be designed to be revenue neutral as where it is used to broaden the tax base, stabilize the economy and reduce individual income and other taxes[citation needed].
- antisthenes 10y ago
  Land value tax.
- prodmerc 10y ago
  Is that accurate? 15% could generate that much? That's mind boggling, I always assumed it would take a 50%+ tax on multimillionaires/billionaires...
  - breatheoften 9y ago
    I can't comment on accuracy but considering the source ... I wonder if there is even a way to find out -- I'm not sure if anything in existing tax code would serve as a good proxy for estimating "net worth".
mrkgnao 10y ago
Linus' law? :)
Frondo 10y ago
Hey thanks for the link- this is great. Another arguing point for when I get into it with the "what's wrong with income inequality" folks here. :)
therpe1 9y ago
It's another way of saying the labor market is weak. (I can imagine certain economists might use this language because they don't want to be mistaken for labor advocates.) As long as the labor market is so weak (and it's much, much weaker than many realize) you'll see the widespread dysfunction suggested in the article and more. It acts as a severe economic drag due to decreasing competition everywhere. See [1] and [2]. The problem is not capitalism. We know exactly how to deal with weak labor markets. It is really no mystery at all and you can open up even notoriously simplified Econ101 books and find the answer[3]. But it won't happen. It's difficult to understand exactly why it doesn't happen but it seems like (based on my own, ongoing research) that for many powerful actors a weak labor market is overall a pretty good thing and these same actors have now acquired virtually complete political power. So I would say the problem isn't capitalism, it's just politics as usual. [1] http://rooseveltinstitute.org/wp-content/uploads/2016/07/Declining-Entrepreneurship-Labor-Mobility-and-Business-Dynamism-A-Demand-Side-Approach.pdf http://rooseveltinstitute.org/wp-content/uploads/2016/07/Dec... [2] http://www.ssc.wisc.edu/~nwilliam/Econ702_files/abch.pdf http://www.ssc.wisc.edu/~nwilliam/Econ702_files/abch.pdf [3] https://en.wikipedia.org/wiki/Keynesian_economics https://en.wikipedia.org/wiki/Keynesian_economics

nostrademons 10y ago

Interestingly, capital holders are complaining all the time as well. There are very few places to put money now with a decent return. Savings accounts pay roughly 0%. Bonds are at inflation, or sometimes less. The S&P 500's P/E is at 25, which is historically very high, implies a rate of return of about 4%, and makes the risk of a correction significant. Real estate is inefficient; property prices are so high that the IRR on rents is only a couple percent. Basically the only place to get decent returns these days are in startups, which is why valuations have gone sky-high. This in turn cuts the average return, although in tech startups this is manifested as a big chance of losing everything and a small chance of a great return rather than a small chance of losing everything and a big chance at a small return. I think what's actually going on is a big innovation deficit. We're at the end of the current scientific & technology paradigm, and there's not enough fundamental research going on to generate new technological opportunities. We see this in the returns to innovation (which are sky-high: if you come up with a technical breakthrough that legitimately makes things better for lots of people, you become an insta-billionaire) and the rareness of those returns. Historically, the last time this happened was the Great Depression, and WW2 broke us out of it because the war department funded a good deal of research that could never have happened in peacetime, which were then commercialized over the ensuing 50 years or so.

posguy 10y ago
Savings accounts are basically a negative return due to inflation, even if your credit union will do 1.25%, inflation is still 1.6% to 1.7%. We need to mobilize this capital back into the economy, rather than letting it languish in the financial markets, guarded jealously by a handful of people. The economic stimulus it would provide could easily help kickstart and sustain waves of growth and development, though we should not repeat the errors of the past (urban sprawl, heavy investment in infrastructure in dying suburbs). The last two were borne of an era where sprawl was supposed to distribute the white populace so as to allow some to survive nukes, and it has run its course and proved to be unmaintainable (look at Livingston, TX).
- creaghpatr 10y ago
  I think most people in the middle class or lower have debt rather than savings so they directly benefit from inflation (while also being directly hit by inflation in terms of purchasing power)