20 ms·

IT is the cause of rising income and wealth inequality since the 1970s [pdf]

160 points by o_nate 9y ago

polotics 9y ago
Infuriating! An high-priest of the church of the economists does his job of exonerating politics from ugly social change, with "IT" as the sacrificial goat. The obvious counterpunch "what about politics" gets this answer doubling down slimy-leech style: (Quote) A Final Note The IT revolution has brought about improvements in living standards and its great technical achievements enjoy a very high level of consumer and political support. However, these sources of social benefits are also the cause of social losses and rising inequality that threatens the foudation of our democrastic socieity. Th uniqueness of this study is that it focuses on the effect of technological change on efficiency and distribution and although we show modern developments in IT enabled higher barriers to entry, rising market concentration and increasing monopoly power of firms, we have avoided a policy evaluation. Yet, although these developments enjoy substantial public popularity it is only a matter of time before we shall need to debate the appropriate public policy to response to the social changes we face. To illustrate the need for some urgency consider the exmple of social networks. These are, in fact, privately owned public utilities. Subversive and terrorist groups have used the internet and social networks for coordinating their activities and these social networks have been a key tool for spreading rumors and conspiracy theories or, more generally, for proliferation of "fake news." These are national security problems and are challenges to the proper functioning of an informative press in a Democracy. The question we face is who should make the decisions on how to respond to these problems? Today it is entirely up to the private firms who own these channels to formulate good public policy decisions. This is not likely to remain a satisfactory solution. (End of quote) What about salaries and negotiation powers, financialisation and asset-prices inflation?
- dang 9y ago
  Would you please not post ideological rants to HN? Even if you're right, it lowers the quality of discussion below what we're hoping for here. Actually being right makes it worse.
  - throwayawnotime 9y ago
    is this censorship? the posted article is clearly ideological
  - throwayawnotime 9y ago
    also, how does a two-liner + a quote from the article qualify as a "rant"?
trhway 9y ago
industrial revolution, IT, next is AI (in all shapes, from self-driving to self-kidney-transplanting to self-QM and space-exploring) ... and that is the emotional foundation of that scene from the "AI". Though cyborg-ization of people may open other options. May be it will be natural that "all cyborgs are equal" as a result of being connected to the same global AI net, etc... Though most probably the cyborgization would be subject to heavy market segmentation too. Also, it seems that the short period of lesser "income and wealth inequality" in US (all the other places were just poor, thus there was natural "equality") during around 195x was just a temporary aberration. Not that it wouldn't be good to repeat it, mind you.
- jupp0r 9y ago
  Are you implying that all countries except the US were poor in the 1950s? While the US was at the head of the per-capita GDP ranking in 1950, there were others that followed close: http://www.nationmaster.com/country-info/stats/Economy/GDP-per-capita-in-1950 http://www.nationmaster.com/country-info/stats/Economy/GDP-p... Notably Venezuela was 4th, which seems especially sad given the recent developments there.
acchow 9y ago
Serious question: if technology makes everyone better off but increases inequality, is that a bad outcome? Why or why not?
- ageek123 9y ago
  Some people will claim you can get both innovation and equality if you just throw in enough redistribution, but this is completely delusional.
  - deleted 9y ago
    [deleted]
  - JamesBarney 9y ago
    Yeah only pinko hippies like the IMF believe that :) https://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf https://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf
    - richardknop 9y ago
      You know IMF is not infallible? For example they were one of the architects of the Greek debt crisis. Even after the initial outbreak of Greek debt problem when it was clear to everybody Greece cannot ever repay their debt and it will have to be restructured, they recommended further and further bailouts in order to protect German / French banks, effectively bailing out big banks with EU taxpayer money. Take a look at Greece today and see how IMF policies are working out. Actually you can take a look at the entire Southern Europe which is the end result of policies of IMF/ECB/Council, the so called Troika.
      - ue_ 9y ago
        Perhaps the solution then is not redistribution of money, but common control over the means of production, the way by which people sustain themselves.
        9y ago
paulus_magnus2 9y ago
Noah Chomsky says technology is neutral: it can be used to empower companies, automate jobs away (as it's the case right now). It also could be used to empower employees (into super craftsmen??) but so far this direction isn't pursued.
- jgtrosh 9y ago
  Not to undermine the increasing inequalities between employees and employers in many aspects, but there is a strong increase in work-at-home thanks to telecommuting and there is an increase in self-employed people thanks to ease of access of new technologies.
- contingencies 9y ago
  Makerspaces are sort-of empowering supercraftspeople.
  - madengr 9y ago
    I don't know. Anyone who I'd consider a supercraftsperson usually has their own shop & tools. Most of the stuff coming out of maker spaces are trinkets. You won't find there the old man who builds 1/10 models of steam locomotives.
    - paulus_magnus2 9y ago
      The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment. --Warren Bennis Bu imagine an alternative world without factories. The maker movement is still ahead of us. Imagine there exists an open-hape-wiki with 3d-models of every part of every thing we ever built (actually these models exist already but are not open source). The shop & tools are would be a 3d-printer plus remote controlled robot arms (so that a person from Ukraine can deliver service to you).
      - madengr 9y ago
m12k 9y ago
Here's another possibility: The highly increased value of intellectual property that comes from IT has made transfer pricing a much more efficient means of tax avoidance for companies, who are free to move almost all their profits to the Cayman Islands and other tax havens. Expecting our tax authorities to judge whether a trade between two subsidiaries of a multinational is at 'fair market value' makes sense if they're trading steel bars, not so much if they're trading e.g. a 'license for the Google search algorithm'. Intellectual property, pretty much by definition, is unique rather than a commodity.
- deleted 9y ago
  [deleted]
- aembleton 9y ago
  I'd like to see corporation tax replaced with a Border Adjustment Tax [1]. The tax would be paid on the result of USA Revenue - USA Costs. If you were to move intellectual property offshore and licence it from that subsidiary then that would not be a USA Cost and therefore would not be deductible. If you brought it back onshore then it would only be deductible if there was a cost. If you moved into another company within the US, then it would be a cost but that company would then need to pay tax on that revenue minus the minimal costs that it would incur to store IP. 1. http://www.investopedia.com/terms/b/border-adjustment-tax.asp http://www.investopedia.com/terms/b/border-adjustment-tax.as...
  - hdhzy 9y ago
    Okay sounds good in this case but what if a company really needs to buy a licence from an offshore company, let's say a critical technical part in your manufacturing process. Then you can't deduct it but in reality these are your costs. Remember that the problem is caused by companies abusing the system but the rules are there because honest companies need to operate. The real solution would fix the issue while allowing honest companies to work just like they did before. The problem is that software companies are composed almost purely out of intellectual property, that is intangible and hard to really track.
sexydefinesher 9y ago
Hey its not our fault our line of work provides a highly valuable service of which few people enter.
xiler 9y ago
> The low labor share in the 1980's is then out of line with the rest of our results. However, it is compatible with the fact that wage growth and labor share started to fall early in the 1970's, caused by factors not present in our study. Political factors such as laws to weaken unions, automation, outsourcing, and globalization were operative even before the rise of monopoly power in the 1980's. Hence, by the time monopoly power came into play, wages and labor share were already low. Hence, apart from rising monopoly power, other factors had an impact on the dynamics of wages and labor share which are not examined here. Indeed when we compare the inequality present in different industrialized nations with varying degrees of unionization, nations with stronger unions seem to have lower inequality despite experiencing an increase in automation. As stated in an IMF report [1]: Traditional explanations for the rise of inequality in advanced economies are skill-biased technological change and globalization, which have increased the relative demand for skilled workers, benefiting top earners relative to average earners. But technology and globalization foster economic growth, and there is little policymakers can or are willing to do to reverse these trends. Moreover, while high-income countries have been similarly affected by technological change and globalization, inequality in these economies has risen at different speeds and magnitudes. So perhaps the combination of automation together with weakened unions is responsible for inequality in industrialized nations? [1] https://www.imf.org/external/pubs/ft/fandd/2015/03/pdf/jaumotte.pdf https://www.imf.org/external/pubs/ft/fandd/2015/03/pdf/jaumo...
- heisenbit 9y ago
  IT codes knowledge and techniques into machines and by that makes workers with low and medium skill levels more exchangeable reducing their negotiation power vs. the capital providers. Over time this leads to salaries lagging for this part of the working population. Unions may slow this process but their negotiation power is slowly eroding too. These days it is not unheard of that whole factories are shifting across borders.
nippples 9y ago
I really thought it was corrupt politicians giving away public resources to private mega corporations, irresponsible financing systems, wall street selling lel bonds, the undermining of the national working class, bogus copyright laws that are designed to squish small and upcoming competition, and people purchasing garbage degrees instead of useful ones with money they don't have guaranteeing they'll be indebted for at least two or three decades. But no, it's just IT. How wrong I was.
- kartan 9y ago
  Yes. I work in IT and I'm rich, aren't you rich like the rest on engineers that read Hacker News? Not like the poor people at finance institutions, they create so much value and get so few in return...
  - empath75 9y ago
    They're also enabled by IT.
    - simonh 9y ago
      Financial institutions are all now IT companies. It's an essential core competency. Money is information.
      - eternalban 9y ago
        And that is precisely why (imo) the finance world engineered the outsourcing strategy (and invested heavily in off shore body shops) in late 90s. At least that is how it looked to me in those days. (The official story was that low skill IT jobs are sent off shore to help the bottom line. This, the official reason for a service and information economy to tech transfer its crown jewels, never made any sense. Consider that software craft is mostly learned on the job, thus gutting the entry level insures future deficits in higher levels. And further that by near universal account, outsourced software projects are technically subpar and subject to multiple rewrites. All this while entire floors at investment banks' IT departments were 'let go'. You do the math.)
d--b 9y ago
This is a very long, very technical article. I really won't understand much of it as it is now. And that's a pity because this is a question that needs to be understood and debated. I think that unless there is a digestible version of the arguments along with the general counter arguments, it's not a very useful read. And comments are just going to be undocumented reaction to the title...
tempodox 9y ago
I don't think it makes much of a difference whether it's IT or any other segment of economy that generates the most increase in inequality. Creating and/or maintaining some level of equality is always an uphill battle on ever changing ground and there are enough “capitalism hackers” who know how to leverage “the system”, the market, influence, etc to make that battle harder.
deleted 9y ago
[deleted]
jokoon 9y ago
Yeah, I was kind of afraid to say this, but software is getting really efficient at so many things, so free markets just decided to reward software. Just like everything, once there is an evolution, if you're out of it, you're obsolete and you matter less. Just made me think about this article where those few indispensable engineers that get a high pay. In a capitalist environment, technological improvement goes fast (although technology was also developed under soviet russia), and the reward gets very concentrated. Property means that innovation is not really shared, only sold. One could endlessly talk about how IT seeds from the internet technologies being developed from DARPA and made public. Hard to say if markets really improved what DARPA developed, IMHO I'd say no.
Dowwie 9y ago
Guns don't kill people. People kill people.
youdontknowtho 9y ago
The rise in inequality also corresponds to the availability of "cheap" personal credit. The availability of credit also corresponds to a decreased rate of rise in wages. It's almost like the two are linked. Stop paying people more and give them loans instead.
- pdfernhout 9y ago
  That's exactly what happened. To keep the system working given both rising inequality and rising productivity, the money was loaned to workers instead of provided as salary; see Richard Wolff: http://www.mediaed.org/transcripts/Capitalism-Hits-the-Fan-Transcript.pdf http://www.mediaed.org/transcripts/Capitalism-Hits-the-Fan-T...
hasenj 9y ago
Why is income inequality bad anyway?
- titzer 9y ago
  Generally speaking, income inequality leads to social instability. In the limit, that means violent revolution.
  - himlion 9y ago
    That problem will be fixed once we get robot soldiers.
  - ue_ 9y ago
    I'd rather say that high income inequality leads to people realising class antagonism between the proletariat and the bourgeoisie, and the synthesis of this conflict is Socialism.
    - titzer 9y ago
      Violent revolution is manifested throughout human history, before there was even a concept of Socialism. They were called "slave rebellions." https://en.wikipedia.org/wiki/Slave_rebellion https://en.wikipedia.org/wiki/Slave_rebellion
      - ue_ 9y ago
        This is the point - it is class conflict, Marx took this into account in his materialist conception of history. The antagonism of proletarians and bourgeoisie is the modern manifestation of the class war; slave rebellions the ancient manifestation.
jrs95 9y ago
It isn't the technology that's to blame for how the wealth it creates is distributed. That's just silly. And honestly, an efficient socialist economy is made much more realistic by modern technology. There's a lot that can be done to offset some of the downsides that have been associated with it in the past.
- FussyZeus 9y ago
  Not the least of which is mass automation, which removes one of the worst aspects of socialism and communism; the permanent working underclass. A friend of mine says Communism arrived 100 years too early, I'd say that's an excellent way to put it.
  - davemp 9y ago
    I'm curious as to where this mass automation story originated. I haven't seen any real evidence that anything besides the most basic repetitive tasks will be automated in the future. This automation would also likely just lead to a new set of low pay, desirable jobs. Sure, Moore's law and advancements in machine learning/vision push to make automation more economically viable for certain areas that were already good candidates. For other areas where human's adaptability is even moderately valuable, technology is a long ways away from coming anywhere close to beating out humans. Technology breaking the chains of toil is a very idealistic thought. I can see technology augmenting more jobs and allowing humans to toil more efficiently, but not total automation.
    - jrochkind1 9y ago
      I guess the question is what portion of the population is employed in these "most basic repetitive tasks", and with those automated, how many people getting paid are actually neccesary for capitalist production? If a lot fewer than the people who exist... what is to become of them? Some tech types say "Universal Basic Income" as an attempt at a solution to that.
    - jrs95 9y ago
      Trucking, fast food, and retail could face huge amounts of automation in the next few decades, and thats a massive amount of low end jobs that could disappear. I think the idea of "fully automated luxury communism" is pretty silly, but there's almost definitely going to be substantial job losses, and I think we're approaching a limit where we don't have good low skill jobs to replace them.
jernejzen 9y ago
There is a huge gap between the real and financial sector regarding the value added that goes from 70tis on. https://tcf.org/content/commentary/graph-how-the-financial-sector-consumed-americas-economic-growth/ https://tcf.org/content/commentary/graph-how-the-financial-s...
jrochkind1 9y ago
// Automation replaces men. This of course is nothing new. What is new is that now, unlike most earlier periods, the displaced men have nowhere to go. The farmers displaced by mechanization of the farms in the 20's could go to the cities and man the assembly lines. As for the work animals like the mule, they could just stop growing them. But automation displaces people, and you don't just stop growing people even when they have been made expendable by the system. Under Stalin the kulaks and all those who didn't go along with the collectivization of agriculture were just killed off. Even then, if they had been ready to go along, Stalin could have used them. But in the United States, with automation coming in when industry has already reached the point that it can supply consumer demand, the question of what to do with the surplus people who are the expendables of automation becomes more and more critical every day.... ...As automation spreads, it will intensify the crises of capitalism and sharpen the conflicts among the various sections of the population, particularly between those working and those not working, those paying taxes and those not paying taxes. Out of this conflict will grow a counter-revolutionary movement made up of those from all social layers who resent the continued cost to them of maintaining these expendables but who are determined to maintain the system that creates and multiplies the number of expendables. This in turn will mobilize those who begin by recognizing the right of these displaced persons to live, and from there are forced to struggle for a society in which there are no displaced persons. // James Boggs, _The American Revolution: Pages From a Negro Worker's Notebook_, 1962(!!) http://www.historyisaweapon.com/defcon1/amreboggs.html http://www.historyisaweapon.com/defcon1/amreboggs.html
- 11thEarlOfMar 9y ago
  Another argument for basic income? The displacement of any worker who drives for a living as at our doorstep.
  - jrochkind1 9y ago
    Yeah, I think that's actually the _main_ argument for UBI that's getting tech sector people and YCombinator interested in it.
  - Chaebixi 9y ago
hidenotslide 9y ago
This article shows that IT has emerged as an important new industry, but it doesn't really convince me that it is the primary cause of inequality. One of my favorite surveys of income inequality is a Krugman essay from 15 years ago (before he went full political). http://www.pkarchive.org/economy/ForRicher.html http://www.pkarchive.org/economy/ForRicher.html He briefly covers globalization, technology, and returns to scale for celebrities, but ultimately argues that changing social norms and the resulting drop in taxes from 1980 onward explains most of the dramatic rise in income inequality.
turk- 9y ago
Globalization is the cause of inequality. Technology just facilitates it. Capitalism leads to a concentration of wealth in the hands of a few and periods of globalization have resulted in high levels of inequality. Inequality today is comparable to the levels during the gilded age and there was no IT back in the 1870's.
- ivl 9y ago
  Globalized capitalism has caused the largest reduction in poverty ever. If you had to be randomly born anywhere in the world, only getting to pick the date, you'd be smart to pick today if you wanted a decent shot at life. Now, with regard to inequality in the US, that's mostly self inflicted. Moving production to cheaper areas lowers prices. It just so happens that the US chooses policies that increase inequality, rather than decrease it, like how education is funded.
  - chroem- 9y ago
    >Globalized capitalism has caused the largest reduction in poverty ever. This is a non-sequitur that often gets touted, despite totally ignoring efforts of NGO's, improvements in technology and industrialization, as well as decolonization. Further, the majority of the world's most developed economies, e.g. China, Japan, and the US, all relied on heavy protectionism to at first foster the creation of local industry. Forcing open the economies of developing nations is a surefire way to keep them poor and totally dependent on foreign imports.
- shaggerty 9y ago
  They had telegraph systems.
- bluGill 9y ago
  Inequality is NOT a problem though. Poverty is a problem, but that is a different issue from inequality. Once you have the basics met (food, shelter) everything else is a luxury. A mud hut without enough to eat is not a life I would want to live, but I could live that way. Take away the hut or the food and I won't survive. I like not having to cook over an open fire. I like having lights in the dark, a cell phone, a car, a washing machine, a table saw. Those are all luxuries and I want more of some of them.
paulus_magnus2 9y ago
Throughout my career 90% of my work's aim was to directly or indirectly eliminate jobs. That pushes pressure on labour and lowers / stagnates wages. Corporations rarely use tech to fight other Corpos. When they do the best strategy is to commoditize competitor's main market [1]. Ex1. free Google maps have killed many GIS / mapping businesses. Ex2. Free Google Docs hurts badly MS Office (office is 33% of their revenue) [1] Smart companies try to commoditize their products’ complements. https://www.joelonsoftware.com/2002/06/12/strategy-letter-v/ https://www.joelonsoftware.com/2002/06/12/strategy-letter-v/

160 points by o_nate 9y ago

Infuriating! An high-priest of the church of the economists does his job of exonerating politics from ugly social change, with "IT" as the sacrificial goat. The obvious counterpunch "what about politics" gets this answer doubling down slimy-leech style: (Quote) A Final Note The IT revolution has brought about improvements in living standards and its great technical achievements enjoy a very high level of consumer and political support. However, these sources of social benefits are also the cause of social losses and rising inequality that threatens the foudation of our democrastic socieity. Th uniqueness of this study is that it focuses on the effect of technological change on efficiency and distribution and although we show modern developments in IT enabled higher barriers to entry, rising market concentration and increasing monopoly power of firms, we have avoided a policy evaluation. Yet, although these developments enjoy substantial public popularity it is only a matter of time before we shall need to debate the appropriate public policy to response to the social changes we face. To illustrate the need for some urgency consider the exmple of social networks. These are, in fact, privately owned public utilities. Subversive and terrorist groups have used the internet and social networks for coordinating their activities and these social networks have been a key tool for spreading rumors and conspiracy theories or, more generally, for proliferation of "fake news." These are national security problems and are challenges to the proper functioning of an informative press in a Democracy. The question we face is who should make the decisions on how to respond to these problems? Today it is entirely up to the private firms who own these channels to formulate good public policy decisions. This is not likely to remain a satisfactory solution. (End of quote) What about salaries and negotiation powers, financialisation and asset-prices inflation?

dang 9y ago
Would you please not post ideological rants to HN? Even if you're right, it lowers the quality of discussion below what we're hoping for here. Actually being right makes it worse.
- throwayawnotime 9y ago
  is this censorship? the posted article is clearly ideological
- throwayawnotime 9y ago
  also, how does a two-liner + a quote from the article qualify as a "rant"?

trhway 9y ago

industrial revolution, IT, next is AI (in all shapes, from self-driving to self-kidney-transplanting to self-QM and space-exploring) ... and that is the emotional foundation of that scene from the "AI". Though cyborg-ization of people may open other options. May be it will be natural that "all cyborgs are equal" as a result of being connected to the same global AI net, etc... Though most probably the cyborgization would be subject to heavy market segmentation too. Also, it seems that the short period of lesser "income and wealth inequality" in US (all the other places were just poor, thus there was natural "equality") during around 195x was just a temporary aberration. Not that it wouldn't be good to repeat it, mind you.

jupp0r 9y ago
Are you implying that all countries except the US were poor in the 1950s? While the US was at the head of the per-capita GDP ranking in 1950, there were others that followed close: http://www.nationmaster.com/country-info/stats/Economy/GDP-per-capita-in-1950 http://www.nationmaster.com/country-info/stats/Economy/GDP-p... Notably Venezuela was 4th, which seems especially sad given the recent developments there.

acchow 9y ago

Serious question: if technology makes everyone better off but increases inequality, is that a bad outcome? Why or why not?

ageek123 9y ago
Some people will claim you can get both innovation and equality if you just throw in enough redistribution, but this is completely delusional.
- deleted 9y ago
  [deleted]
- JamesBarney 9y ago
  Yeah only pinko hippies like the IMF believe that :) https://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf https://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf
  - richardknop 9y ago
    You know IMF is not infallible? For example they were one of the architects of the Greek debt crisis. Even after the initial outbreak of Greek debt problem when it was clear to everybody Greece cannot ever repay their debt and it will have to be restructured, they recommended further and further bailouts in order to protect German / French banks, effectively bailing out big banks with EU taxpayer money. Take a look at Greece today and see how IMF policies are working out. Actually you can take a look at the entire Southern Europe which is the end result of policies of IMF/ECB/Council, the so called Troika.
    - ue_ 9y ago
      Perhaps the solution then is not redistribution of money, but common control over the means of production, the way by which people sustain themselves.
      - 9y ago

paulus_magnus2 9y ago

Noah Chomsky says technology is neutral: it can be used to empower companies, automate jobs away (as it's the case right now). It also could be used to empower employees (into super craftsmen??) but so far this direction isn't pursued.

jgtrosh 9y ago
Not to undermine the increasing inequalities between employees and employers in many aspects, but there is a strong increase in work-at-home thanks to telecommuting and there is an increase in self-employed people thanks to ease of access of new technologies.
contingencies 9y ago
Makerspaces are sort-of empowering supercraftspeople.
- madengr 9y ago
  I don't know. Anyone who I'd consider a supercraftsperson usually has their own shop & tools. Most of the stuff coming out of maker spaces are trinkets. You won't find there the old man who builds 1/10 models of steam locomotives.
  - paulus_magnus2 9y ago
    The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment. --Warren Bennis Bu imagine an alternative world without factories. The maker movement is still ahead of us. Imagine there exists an open-hape-wiki with 3d-models of every part of every thing we ever built (actually these models exist already but are not open source). The shop & tools are would be a 3d-printer plus remote controlled robot arms (so that a person from Ukraine can deliver service to you).
    - madengr 9y ago

m12k 9y ago

Here's another possibility: The highly increased value of intellectual property that comes from IT has made transfer pricing a much more efficient means of tax avoidance for companies, who are free to move almost all their profits to the Cayman Islands and other tax havens. Expecting our tax authorities to judge whether a trade between two subsidiaries of a multinational is at 'fair market value' makes sense if they're trading steel bars, not so much if they're trading e.g. a 'license for the Google search algorithm'. Intellectual property, pretty much by definition, is unique rather than a commodity.

deleted 9y ago
[deleted]
aembleton 9y ago
I'd like to see corporation tax replaced with a Border Adjustment Tax [1]. The tax would be paid on the result of USA Revenue - USA Costs. If you were to move intellectual property offshore and licence it from that subsidiary then that would not be a USA Cost and therefore would not be deductible. If you brought it back onshore then it would only be deductible if there was a cost. If you moved into another company within the US, then it would be a cost but that company would then need to pay tax on that revenue minus the minimal costs that it would incur to store IP. 1. http://www.investopedia.com/terms/b/border-adjustment-tax.asp http://www.investopedia.com/terms/b/border-adjustment-tax.as...
- hdhzy 9y ago
  Okay sounds good in this case but what if a company really needs to buy a licence from an offshore company, let's say a critical technical part in your manufacturing process. Then you can't deduct it but in reality these are your costs. Remember that the problem is caused by companies abusing the system but the rules are there because honest companies need to operate. The real solution would fix the issue while allowing honest companies to work just like they did before. The problem is that software companies are composed almost purely out of intellectual property, that is intangible and hard to really track.

sexydefinesher 9y ago

Hey its not our fault our line of work provides a highly valuable service of which few people enter.

xiler 9y ago

> The low labor share in the 1980's is then out of line with the rest of our results. However, it is compatible with the fact that wage growth and labor share started to fall early in the 1970's, caused by factors not present in our study. Political factors such as laws to weaken unions, automation, outsourcing, and globalization were operative even before the rise of monopoly power in the 1980's. Hence, by the time monopoly power came into play, wages and labor share were already low. Hence, apart from rising monopoly power, other factors had an impact on the dynamics of wages and labor share which are not examined here. Indeed when we compare the inequality present in different industrialized nations with varying degrees of unionization, nations with stronger unions seem to have lower inequality despite experiencing an increase in automation. As stated in an IMF report [1]: Traditional explanations for the rise of inequality in advanced economies are skill-biased technological change and globalization, which have increased the relative demand for skilled workers, benefiting top earners relative to average earners. But technology and globalization foster economic growth, and there is little policymakers can or are willing to do to reverse these trends. Moreover, while high-income countries have been similarly affected by technological change and globalization, inequality in these economies has risen at different speeds and magnitudes. So perhaps the combination of automation together with weakened unions is responsible for inequality in industrialized nations? [1] https://www.imf.org/external/pubs/ft/fandd/2015/03/pdf/jaumotte.pdf https://www.imf.org/external/pubs/ft/fandd/2015/03/pdf/jaumo...

heisenbit 9y ago
IT codes knowledge and techniques into machines and by that makes workers with low and medium skill levels more exchangeable reducing their negotiation power vs. the capital providers. Over time this leads to salaries lagging for this part of the working population. Unions may slow this process but their negotiation power is slowly eroding too. These days it is not unheard of that whole factories are shifting across borders.

nippples 9y ago

I really thought it was corrupt politicians giving away public resources to private mega corporations, irresponsible financing systems, wall street selling lel bonds, the undermining of the national working class, bogus copyright laws that are designed to squish small and upcoming competition, and people purchasing garbage degrees instead of useful ones with money they don't have guaranteeing they'll be indebted for at least two or three decades. But no, it's just IT. How wrong I was.

kartan 9y ago
Yes. I work in IT and I'm rich, aren't you rich like the rest on engineers that read Hacker News? Not like the poor people at finance institutions, they create so much value and get so few in return...
- empath75 9y ago
  They're also enabled by IT.
  - simonh 9y ago
    Financial institutions are all now IT companies. It's an essential core competency. Money is information.
    - eternalban 9y ago
      And that is precisely why (imo) the finance world engineered the outsourcing strategy (and invested heavily in off shore body shops) in late 90s. At least that is how it looked to me in those days. (The official story was that low skill IT jobs are sent off shore to help the bottom line. This, the official reason for a service and information economy to tech transfer its crown jewels, never made any sense. Consider that software craft is mostly learned on the job, thus gutting the entry level insures future deficits in higher levels. And further that by near universal account, outsourced software projects are technically subpar and subject to multiple rewrites. All this while entire floors at investment banks' IT departments were 'let go'. You do the math.)

d--b 9y ago

This is a very long, very technical article. I really won't understand much of it as it is now. And that's a pity because this is a question that needs to be understood and debated. I think that unless there is a digestible version of the arguments along with the general counter arguments, it's not a very useful read. And comments are just going to be undocumented reaction to the title...

tempodox 9y ago

I don't think it makes much of a difference whether it's IT or any other segment of economy that generates the most increase in inequality. Creating and/or maintaining some level of equality is always an uphill battle on ever changing ground and there are enough “capitalism hackers” who know how to leverage “the system”, the market, influence, etc to make that battle harder.

deleted 9y ago

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jokoon 9y ago

Yeah, I was kind of afraid to say this, but software is getting really efficient at so many things, so free markets just decided to reward software. Just like everything, once there is an evolution, if you're out of it, you're obsolete and you matter less. Just made me think about this article where those few indispensable engineers that get a high pay. In a capitalist environment, technological improvement goes fast (although technology was also developed under soviet russia), and the reward gets very concentrated. Property means that innovation is not really shared, only sold. One could endlessly talk about how IT seeds from the internet technologies being developed from DARPA and made public. Hard to say if markets really improved what DARPA developed, IMHO I'd say no.

Dowwie 9y ago

Guns don't kill people. People kill people.

youdontknowtho 9y ago

The rise in inequality also corresponds to the availability of "cheap" personal credit. The availability of credit also corresponds to a decreased rate of rise in wages. It's almost like the two are linked. Stop paying people more and give them loans instead.

pdfernhout 9y ago
That's exactly what happened. To keep the system working given both rising inequality and rising productivity, the money was loaned to workers instead of provided as salary; see Richard Wolff: http://www.mediaed.org/transcripts/Capitalism-Hits-the-Fan-Transcript.pdf http://www.mediaed.org/transcripts/Capitalism-Hits-the-Fan-T...

hasenj 9y ago

Why is income inequality bad anyway?

titzer 9y ago
Generally speaking, income inequality leads to social instability. In the limit, that means violent revolution.
- himlion 9y ago
  That problem will be fixed once we get robot soldiers.
- ue_ 9y ago
  I'd rather say that high income inequality leads to people realising class antagonism between the proletariat and the bourgeoisie, and the synthesis of this conflict is Socialism.
  - titzer 9y ago
    Violent revolution is manifested throughout human history, before there was even a concept of Socialism. They were called "slave rebellions." https://en.wikipedia.org/wiki/Slave_rebellion https://en.wikipedia.org/wiki/Slave_rebellion
    - ue_ 9y ago
      This is the point - it is class conflict, Marx took this into account in his materialist conception of history. The antagonism of proletarians and bourgeoisie is the modern manifestation of the class war; slave rebellions the ancient manifestation.

jrs95 9y ago

It isn't the technology that's to blame for how the wealth it creates is distributed. That's just silly. And honestly, an efficient socialist economy is made much more realistic by modern technology. There's a lot that can be done to offset some of the downsides that have been associated with it in the past.

FussyZeus 9y ago
Not the least of which is mass automation, which removes one of the worst aspects of socialism and communism; the permanent working underclass. A friend of mine says Communism arrived 100 years too early, I'd say that's an excellent way to put it.
- davemp 9y ago
  I'm curious as to where this mass automation story originated. I haven't seen any real evidence that anything besides the most basic repetitive tasks will be automated in the future. This automation would also likely just lead to a new set of low pay, desirable jobs. Sure, Moore's law and advancements in machine learning/vision push to make automation more economically viable for certain areas that were already good candidates. For other areas where human's adaptability is even moderately valuable, technology is a long ways away from coming anywhere close to beating out humans. Technology breaking the chains of toil is a very idealistic thought. I can see technology augmenting more jobs and allowing humans to toil more efficiently, but not total automation.
  - jrochkind1 9y ago
    I guess the question is what portion of the population is employed in these "most basic repetitive tasks", and with those automated, how many people getting paid are actually neccesary for capitalist production? If a lot fewer than the people who exist... what is to become of them? Some tech types say "Universal Basic Income" as an attempt at a solution to that.
  - jrs95 9y ago
    Trucking, fast food, and retail could face huge amounts of automation in the next few decades, and thats a massive amount of low end jobs that could disappear. I think the idea of "fully automated luxury communism" is pretty silly, but there's almost definitely going to be substantial job losses, and I think we're approaching a limit where we don't have good low skill jobs to replace them.

jernejzen 9y ago

There is a huge gap between the real and financial sector regarding the value added that goes from 70tis on. https://tcf.org/content/commentary/graph-how-the-financial-sector-consumed-americas-economic-growth/ https://tcf.org/content/commentary/graph-how-the-financial-s...

jrochkind1 9y ago

// Automation replaces men. This of course is nothing new. What is new is that now, unlike most earlier periods, the displaced men have nowhere to go. The farmers displaced by mechanization of the farms in the 20's could go to the cities and man the assembly lines. As for the work animals like the mule, they could just stop growing them. But automation displaces people, and you don't just stop growing people even when they have been made expendable by the system. Under Stalin the kulaks and all those who didn't go along with the collectivization of agriculture were just killed off. Even then, if they had been ready to go along, Stalin could have used them. But in the United States, with automation coming in when industry has already reached the point that it can supply consumer demand, the question of what to do with the surplus people who are the expendables of automation becomes more and more critical every day.... ...As automation spreads, it will intensify the crises of capitalism and sharpen the conflicts among the various sections of the population, particularly between those working and those not working, those paying taxes and those not paying taxes. Out of this conflict will grow a counter-revolutionary movement made up of those from all social layers who resent the continued cost to them of maintaining these expendables but who are determined to maintain the system that creates and multiplies the number of expendables. This in turn will mobilize those who begin by recognizing the right of these displaced persons to live, and from there are forced to struggle for a society in which there are no displaced persons. // James Boggs, _The American Revolution: Pages From a Negro Worker's Notebook_, 1962(!!) http://www.historyisaweapon.com/defcon1/amreboggs.html http://www.historyisaweapon.com/defcon1/amreboggs.html

11thEarlOfMar 9y ago
Another argument for basic income? The displacement of any worker who drives for a living as at our doorstep.
- jrochkind1 9y ago
  Yeah, I think that's actually the _main_ argument for UBI that's getting tech sector people and YCombinator interested in it.
- Chaebixi 9y ago

hidenotslide 9y ago

This article shows that IT has emerged as an important new industry, but it doesn't really convince me that it is the primary cause of inequality. One of my favorite surveys of income inequality is a Krugman essay from 15 years ago (before he went full political). http://www.pkarchive.org/economy/ForRicher.html http://www.pkarchive.org/economy/ForRicher.html He briefly covers globalization, technology, and returns to scale for celebrities, but ultimately argues that changing social norms and the resulting drop in taxes from 1980 onward explains most of the dramatic rise in income inequality.

turk- 9y ago

Globalization is the cause of inequality. Technology just facilitates it. Capitalism leads to a concentration of wealth in the hands of a few and periods of globalization have resulted in high levels of inequality. Inequality today is comparable to the levels during the gilded age and there was no IT back in the 1870's.

ivl 9y ago
Globalized capitalism has caused the largest reduction in poverty ever. If you had to be randomly born anywhere in the world, only getting to pick the date, you'd be smart to pick today if you wanted a decent shot at life. Now, with regard to inequality in the US, that's mostly self inflicted. Moving production to cheaper areas lowers prices. It just so happens that the US chooses policies that increase inequality, rather than decrease it, like how education is funded.
- chroem- 9y ago
  >Globalized capitalism has caused the largest reduction in poverty ever. This is a non-sequitur that often gets touted, despite totally ignoring efforts of NGO's, improvements in technology and industrialization, as well as decolonization. Further, the majority of the world's most developed economies, e.g. China, Japan, and the US, all relied on heavy protectionism to at first foster the creation of local industry. Forcing open the economies of developing nations is a surefire way to keep them poor and totally dependent on foreign imports.
shaggerty 9y ago
They had telegraph systems.
bluGill 9y ago
Inequality is NOT a problem though. Poverty is a problem, but that is a different issue from inequality. Once you have the basics met (food, shelter) everything else is a luxury. A mud hut without enough to eat is not a life I would want to live, but I could live that way. Take away the hut or the food and I won't survive. I like not having to cook over an open fire. I like having lights in the dark, a cell phone, a car, a washing machine, a table saw. Those are all luxuries and I want more of some of them.

paulus_magnus2 9y ago

Throughout my career 90% of my work's aim was to directly or indirectly eliminate jobs. That pushes pressure on labour and lowers / stagnates wages. Corporations rarely use tech to fight other Corpos. When they do the best strategy is to commoditize competitor's main market [1]. Ex1. free Google maps have killed many GIS / mapping businesses. Ex2. Free Google Docs hurts badly MS Office (office is 33% of their revenue) [1] Smart companies try to commoditize their products’ complements. https://www.joelonsoftware.com/2002/06/12/strategy-letter-v/ https://www.joelonsoftware.com/2002/06/12/strategy-letter-v/