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As capitalism matures, it's clear to anyone with a thread of financial literacy that most wealth is created through capital gains rather than salary. We're appr

by volgo 9y ago

As capitalism matures, it's clear to anyone with a thread of financial literacy that most wealth is created through capital gains rather than salary. We're approaching a state (at least in developed countries) where productivity is so high, that you can literally park your money in 500 of the biggest businesses and you're almost guaranteed a 7% annual return (if you hold stocks for the long term). Using the commonly accepted safe withdraw rate of 4%, if you inherit $3 million (which is not even that much), you can safely collect $120,000 of capital gains/dividend income every year without doing anything. This also frees you up to work on other things that will acquire you even more wealth. People whose parents didn't leave them a large inheritance have to rely on salary, which is taxed at a higher rate and more difficult to earn. In effect, late stage capitalism becomes the anti-thesis of the spirit of capitalism - devoid of competition, free innovation, and upward mobility. In an ideal capitalism society, the most talented should earn the most, but the compounding effect of capital makes it so that whoever holds wealth the longest earns the most.

vinchuco 9y ago
There may be a bitcoin parallel here.
sillysaurus3 9y ago
This is one of the best comments I have ever read. Thanks for writing this. Mostly because of how succinct it is. How can anyone argue with this? This is the central problem, in three paragraphs. The only people who could argue "Well, but it's fair because..." are those who benefit from the status quo. But my mind is open to being persuaded otherwise. What can be done? Throughout history, revolution seems to be the only way to shake up the system, and those don't even work. (It worked for the US because an ocean separated it from its enemies.) And once the revolution settles, the system simply converges back on capitalism, e.g. China. Or Russia's feudal "maybe you can make a business, but if it becomes successful, the government will take it" model. (Also China.) I think the uncomfortable truth is that life just sucks, and the big will hold down the small and fuck them for eternity. I don't like phrasing it like that, but if it's the truth then we should face it. EDIT: Damn, this thread was marked as a dupe, so there's no chance of discussing this here. But we should revisit this topic by pointing out this exact comment next thread.
- LyndsySimon 9y ago
  > This is the central problem, in three paragraphs. It's only a problem if society as a whole decides that this is not the way they want to do things. > The only people who could argue "Well, but it's fair because..." are those who benefit from the status quo. But my mind is open to being persuaded otherwise. Hmmm. I disagree, but I must acknowledge that I definitely benefit from the status quo. I would not consider myself nor my family "wealthy" relative to the rest of the US, but relative to the rest of the world, absolutely. My parents in particular have made an enormous increase in their relative economic position over their lifetimes. As for "fair"... well, I think that's a term that is both very significant for most people and whose definition differs from person to person. Fair, to me, means that individuals are not subject to the forceful interference of third parties. If fair to someone else means that force should be used to lessen wealth inequality then those concepts are mutually incompatible and both goals cannot be pursued simultaneously. > And once the revolution settles, the system simply converges back on capitalism, e.g. China. It is my belief that this is part of the inherent nature of things. Societies tend toward greater liberty, while government tend toward greater power. These forces reach are both balanced and opposed, and where they find equilibrium depends on the value system of the governed. Further, I believe that as a species we are trending toward greater individual power. To borrow a quote from Martin Luther King, Jr. (who in turn borrowed it from Theodore Parker): the arc of the human society is long, but it bends toward free-market Capitalism. > I think the uncomfortable truth is that life just sucks Now this, we can agree on :) > and the big will hold down the small and fuck them for eternity. I don't like phrasing it like that, but if it's the truth then we should face it. My views on economics are always implicitly suffixed with "... but this cannot happen in my lifetime, so we have to work with what we have." That said, while I have no illusions that I'll see the end of forceful government, I'm confident that my descendants will. I see it as my duty to do what I can to move society in that direction, just as I see it as my duty to impart my value on my own children and to provide for their future in the best ways I know how.
imron 9y ago
> In effect, late stage capitalism becomes the anti-thesis of the spirit of capitalism - devoid of competition, free innovation, and upward mobility One of the benefits of an inheritance tax is that it can help prevent this.
vixen99 9y ago
And if guaranteed minimum income takes off everyone will be able to have an income without doing anything or at least, that's how it's supposed to work. Apparently it's the antithesis of the spirit of capitalism if the current rich accrue wealth like that but perhaps it wouldn't be viewed in quite that light if we all benefit.
LyndsySimon 9y ago
> In an ideal capitalism society, the most talented should earn the most, but the compounding effect of capital makes it so that whoever holds wealth the longest earns the most. From the perspective of an anarcho-capitalist, this does not describe the "fitness function" of Capitalism. Capitalism optimizes for the best management of capital, not for talent or productivity. To reduce this to a fundamental level, if two entities - A and B - comprise the entire global economy, and entity "B" consistently achieves a greater increase in capital for a given unit of time, B's share of global capital will approach 100% as time approaches infinity. This is true regardless of disparity in starting capital. In practice, it's not at all surprising that a small number of people end up controlling a large majority of wealth - in fact, if this were not the case, I would strongly suspect a forceful market distortion existed. This is not a bug. It's a feature. That said, in practice, entities do not consistently achieve the same ROI over time. Families acquire wealth, companies form and are dissolved, fortunes are made and lost. There is a balance point that is reached where there are a relative few rich and powerful peoples/companies/families, and members of this group come and go even within a single generation

by volgo 9y ago

vinchuco 9y ago

There may be a bitcoin parallel here.

sillysaurus3 9y ago

This is one of the best comments I have ever read. Thanks for writing this. Mostly because of how succinct it is. How can anyone argue with this? This is the central problem, in three paragraphs. The only people who could argue "Well, but it's fair because..." are those who benefit from the status quo. But my mind is open to being persuaded otherwise. What can be done? Throughout history, revolution seems to be the only way to shake up the system, and those don't even work. (It worked for the US because an ocean separated it from its enemies.) And once the revolution settles, the system simply converges back on capitalism, e.g. China. Or Russia's feudal "maybe you can make a business, but if it becomes successful, the government will take it" model. (Also China.) I think the uncomfortable truth is that life just sucks, and the big will hold down the small and fuck them for eternity. I don't like phrasing it like that, but if it's the truth then we should face it. EDIT: Damn, this thread was marked as a dupe, so there's no chance of discussing this here. But we should revisit this topic by pointing out this exact comment next thread.

LyndsySimon 9y ago
> This is the central problem, in three paragraphs. It's only a problem if society as a whole decides that this is not the way they want to do things. > The only people who could argue "Well, but it's fair because..." are those who benefit from the status quo. But my mind is open to being persuaded otherwise. Hmmm. I disagree, but I must acknowledge that I definitely benefit from the status quo. I would not consider myself nor my family "wealthy" relative to the rest of the US, but relative to the rest of the world, absolutely. My parents in particular have made an enormous increase in their relative economic position over their lifetimes. As for "fair"... well, I think that's a term that is both very significant for most people and whose definition differs from person to person. Fair, to me, means that individuals are not subject to the forceful interference of third parties. If fair to someone else means that force should be used to lessen wealth inequality then those concepts are mutually incompatible and both goals cannot be pursued simultaneously. > And once the revolution settles, the system simply converges back on capitalism, e.g. China. It is my belief that this is part of the inherent nature of things. Societies tend toward greater liberty, while government tend toward greater power. These forces reach are both balanced and opposed, and where they find equilibrium depends on the value system of the governed. Further, I believe that as a species we are trending toward greater individual power. To borrow a quote from Martin Luther King, Jr. (who in turn borrowed it from Theodore Parker): the arc of the human society is long, but it bends toward free-market Capitalism. > I think the uncomfortable truth is that life just sucks Now this, we can agree on :) > and the big will hold down the small and fuck them for eternity. I don't like phrasing it like that, but if it's the truth then we should face it. My views on economics are always implicitly suffixed with "... but this cannot happen in my lifetime, so we have to work with what we have." That said, while I have no illusions that I'll see the end of forceful government, I'm confident that my descendants will. I see it as my duty to do what I can to move society in that direction, just as I see it as my duty to impart my value on my own children and to provide for their future in the best ways I know how.

imron 9y ago

> In effect, late stage capitalism becomes the anti-thesis of the spirit of capitalism - devoid of competition, free innovation, and upward mobility One of the benefits of an inheritance tax is that it can help prevent this.

vixen99 9y ago

And if guaranteed minimum income takes off everyone will be able to have an income without doing anything or at least, that's how it's supposed to work. Apparently it's the antithesis of the spirit of capitalism if the current rich accrue wealth like that but perhaps it wouldn't be viewed in quite that light if we all benefit.

LyndsySimon 9y ago

> In an ideal capitalism society, the most talented should earn the most, but the compounding effect of capital makes it so that whoever holds wealth the longest earns the most. From the perspective of an anarcho-capitalist, this does not describe the "fitness function" of Capitalism. Capitalism optimizes for the best management of capital, not for talent or productivity. To reduce this to a fundamental level, if two entities - A and B - comprise the entire global economy, and entity "B" consistently achieves a greater increase in capital for a given unit of time, B's share of global capital will approach 100% as time approaches infinity. This is true regardless of disparity in starting capital. In practice, it's not at all surprising that a small number of people end up controlling a large majority of wealth - in fact, if this were not the case, I would strongly suspect a forceful market distortion existed. This is not a bug. It's a feature. That said, in practice, entities do not consistently achieve the same ROI over time. Families acquire wealth, companies form and are dissolved, fortunes are made and lost. There is a balance point that is reached where there are a relative few rich and powerful peoples/companies/families, and members of this group come and go even within a single generation