11 ms·

The Self-Destruction of the 1 Percent

143 points by wallflower 14y ago

tomasien 14y ago
The reality that "the tippy-top, of the economic pyramid who have been most effective at capturing government support" is canon in my opinion. I'm not insanely liberal or anything, so I don't want to go too far down the road of "who does the government REALLY serve" - but the Constitution was built around building a state that could enforce contracts. And for good reason, but that reason was NOT that they were worried about serving the poor.
- sillysaurus 14y ago
  You should expand on what you're trying to say, because you've said nothing but started with a very interesting premise. So I'd like to hear more.
  - tomasien 14y ago
    So I think the best resource on this topic, by far, is Woody Holton's Unruly Americans. http://books.google.com/books?id=w-IiCowd8_4C&printsec=frontcover&dq=inauthor:%22Woody+Holton%22&cd=1#v=onepage&q&f=false http://books.google.com/books?id=w-IiCowd8_4C&printsec=f... But essentially what really motivated those behind the Constitutional convention was the diminishing value of their assets under the Articles of Confederation. Contracts weren't enforceable because the federal government wasn't strong or effective enough, especially across state lines. Man, this just reminds me of one of the truly amazing things about American history: virtually the same people who wrote the Constitution tried to form the country under a different set of documents, and it failed so thoroughly that they TOTALLY re-did it (arguably illegally) 6 years later.
    - sillysaurus 14y ago
      That's very interesting. Thank you for the book reference! If you have more time, would you philosophize on how all of this might relate to present-day circumstances? (In addition to the topic of the original motives for the constitution, it might be interesting to include some discussion of what those those "at the top" could/should infer from history.)
      - tomasien 14y ago
        So the only thing I can say for certain is to remember that the rich always benefit from the existence and strength of government more than the poor unless that government is extremely hostile toward business. Despite some rhetoric that is out there, that is extremely far from the case in the case of the US government. What the US government has almost always done a fantastic job at (not necessarily above and beyond other governments, just in a vacuum) is creating a system where financial transactions can occur without much risk (monetary policy, moving off the gold standard frictionlessly, etc.) and where contracts can be enforced. And that's business pretty much right? The argument from there about taxes and regulation are details, and we can argue about that all day. But they are details that are minor compared to the ability to conduct business with confidence in a general since, not the slight variations we see these days. I'm a liberal, but it's for the above reason I supported the financial bailout. If I fear for anything, it's either of those core securities being diminished.
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        tomasien 14y ago
        Wow, that comment made no sense until I edited "unless that government is extremely hostile toward government" to "unless that government is extremely hostile toward business"
        001sky 14y ago
        There is a lot of very good insight here, in particular the focus on foundational economic institutions (ie, truth telling and promise keeping). Even so far as the taxes and regulations being details (a couple percent here or there, not a crisis). The issue that we are facing though, is starting to become of another sort. It is evidenced by the shift of wealth from the commercial centers to the DC area. It is evidenced by 80% of government spending not being on running government or protecting the population or even enforcing laws, etc. It is evidenced by (what was quoted in the article) of goverment borrowing (and printing money) to support the oligarghical too-big to fail banks. It is evidenved by the nationalization of private sector debt via student loans and via housing loan guarantees. It is evidenced by the failure to regulate derivatives or split investment banks from commercial ones. It is evidenced by "Economists" in the keynesian tradition who support uncritical borrow and spend (as the answer to everything), all of which provides stability but none of which provides actual earnings/power to the working classes...etc. It just provides benefits to the rich and debt/taxes to the poor. The "Liberal" current administration has underwritten the most perverse transfer of weatlth from the poor/middel to the top, its almost comical they pretend to be for anyone other than themselves. They make the Tea Party, in Contrast, look almost perversely rational. There is too much fear. In the Left. Of change.
tomasien 14y ago
The iOS 6 maps reference is incredibly forced
adrianbg 14y ago
"the libertarian writer Charles Murray blames the hollowed-out middle for straying from the traditional family values and old-fashioned work ethic that he says prevail among the rich" "Following the June Seventeenth uprising the secretary of the Writers' League had leaflets distributed on Stalin Allee where one could read that the people had forfeited the confidence of the government and could regain it only through redoubled efforts. Wouldn't it be simpler under these circumstances for the government to dissolve the people and elect another one?" - Berthold Brecht
001sky 14y ago
Exhibit A is the bipartisan, $700 billion rescue of Wall Street in 2008. Exhibit B is the crony recovery. The economists Emmanuel Saez and Thomas Piketty found that 93 percent of the income gains from the 2009-10 recovery went to the top 1 percent of taxpayers. The top 0.01 percent captured 37 percent of these additional earnings, gaining an average of $4.2 million per household. -- The $8 Trillion "bridge loan" that finances this? Split pro-rata, of course, amongst the lower and middle class.
- ryanwaggoner 14y ago
  Could you expand on this?
  - 001sky 14y ago
    Yes. The main point is you need to follow both the asset base (how it is being financed), as well as the ancilliary revenue streams (coming from the assets). Its one thing to skew income to the group X. Its another thing to finance that with financial contracts, being paid for by another group Y. The latter is even more perverse from a perspective of social equity. Capitalism is (even for its most ardernt, free-market supporters) premised on ~proportional returns (ie, x% capital, pro-rata % share of earnings).[1] The liberal-left position is that this should skew somewhat[2]. The illustrated example is worse than both, it skews opposite, making a "sucker" class of the general group Y. If you are in group Y (no matter if you are on the right or the left), you should be thinking WTF, because it is not only contradictory to both principles, it's all self serving to X (incl. both left and right, etc). ______________ [1] Nuance: RAROC'd [2] To the poor, or in this example to Y
    - ryanwaggoner 14y ago
      I agree with the fact that most of the benefits are going to X, but I'm not at all sure that the cost is being borne by Y, where Y is defined by the poor and middle class. I say this because the reality is that the poor and a big chunk of the middle class in this country do not pay any Federal income tax, which is where the cost of this will be paid from. The lion's share of this will probably be borne in the end by Z, which are the upper middle class and wealthy with earned income who pay the highest marginal tax rates and a huge share of the tax revenue. In fact, the top 20% of households pay 94% of the Federal income tax [1]. They're the ones who are going to pay for this boondoggle, and while that does include hedge fund managers and Donald Trump, it also includes dentists and professors and small business owners. Of course, this is all just debt right now, so who knows what will end up happening. But given the conversation happening in this country right now, I can't see a big change in the 20% / 94% number above. 1. http://taxfoundation.org/blog/top-20-percent-households-pay-94-percent-income-taxes http://taxfoundation.org/blog/top-20-percent-households-pay-...
kamaal 14y ago
There are some errors in this article. Or I rather must say the author might be unaware of the certain things that he is talking about. >> Extractive states are controlled by ruling elites whose objective is to extract as much wealth as they can from the rest of society. and >> That was the future predicted by Karl Marx, who wrote that capitalism contained the seeds of its own destruction. The world has changed drastically since Karl Marx, in fact so much that Marx wouldn't ever recognize the world if if he were to suddenly thrown here. The biggest change is the definition of wealth as a dynamic entity which can be created and expanded with work. Unfortunately this didn't exist in the time Marx, or even if it did- the access to such an activity was limited to only a certain set of individuals. >> You can see America’s creeping Serrata in the growing social and, especially, educational chasm between those at the top and everyone else. At the bottom and in the middle, American society is fraying, and the children of these struggling families are lagging the rest of the world at school. I laugh when people write things like these. I am an Indian, staying in Bangalore. If you say the US is struggling, I would say you have no clue about other parts of the world. You have no clue what struggling means, no clue what hunger means, no clue what poverty or lack of education or health care means. Think of it this way, even the poorest in the US would be like 10x better of than the poorest in the other parts of the world. >> Economists point out that the woes of the middle class are in large part a consequence of globalization and technological change. I would say these changes are good for the US and the world in general. A lot of co operation and competition means things will move quickly. >> Tolerance for high executive compensation has increased, even as the legal powers of unions have been weakened and an intellectual case against them has been relentlessly advanced by plutocrat-financed think tanks. Sorry, is the word Tolerance the right word? It makes it sound like some sort of a criminal scam is going around in those circles which every one needs to put up with. Sorry but the author seems to point what we generally call as 'Socialist guilt'. The problem is people automatically label the ambitious, hardworking and people who look for big rewards as greedy. This problem is an unfortunate consequence of communism and to an extent socialism in general. Unless these people are made to believe that there is inherent evilness in money and desire for it, they really can't sell their philosophy. The direction in which a communist thinks is to visualize money and in general wealth as a minimal thing merely required for survival. And other things are also pushed, like for example glorifying poverty- Promoting rationing of things etc. The author fails to understand why there are 1%'s anyway. Which is that a capitalist society believes the rewards are not fixed, but vary with effort applied towards the work done to achieve goals. Its not like somebody just called a person in the cabin and wrote them $1 million check. You are selling something and somebody is ready to pay a price for it. This of course requires working hard, taking risks and going through tough times to get there. Not everybody would like to do that, because some people are just happy with what they have now. But just because those people don't want a little extra, it doesn't mean those who want it and earn must share their rewards with others. The fact is nearly everybody wants to be rich, some just convince themselves they don't want to after considering the effort they need to expend to get rich. But later when they look at somebody getting rich, they just happen to either proceed with all this drama. Unless you are ill, or disabled or limited for another genuine reason can't work to get successful, you just can't blame somebody else for your problems.
AutoCorrect 14y ago
So, the article is saying that government giveaways and government rule-making is entrenching the rich even more, and it's the fault of the rich? Wow, what perverse thinking that is. It seems to me that if the government made less rules and gave away less of OUR money, there would be a more even playing field. That doesn't mean NO rules, just a minimum. The title of the article should be "Government and it's role in causing wealth disparity".
- tsotha 14y ago
  This. The problem isn't that the government doesn't have enough rules to control business. The problem is the government is so involved in every aspect of life it's become far more efficient to co-opt the state than to compete with other companies in your sector. For some reason people on the left think if only the government was more involved, this time it would work to rein in powerful people instead of making them more powerful like the last 97 times.
  - chernevik 14y ago
    I once maintained that Senate Republicans on the Banking committee supported a complex regulatory regime because their influence and status derived from the value they provided helping banks navigate that regulatory apparatus. My left-wing friends regarded this as the most cynical thing they'd ever heard, but they didn't have much evidence or analysis against it. Politicians want a powerful state because their power derives from their influence over that state. They want their power to grow because no one is ever satisfied with what they have. If the US has a Serratta, it would be in the impossibility of doing business without managing political relations, and thus the exclusion of people with serious interests from any serious effort to reform the state. I'm not sure we're there yet, but if we aren't we're dangerously close.
- EricDeb 14y ago
  I think most liberals would agree with you. I want the absolute minimum amount of regulation that effectively manages the free market as well as minimal basic social safety nets.
- 14y ago
sbierwagen 14y ago
pg's written a couple essays defending income inequality: http://www.paulgraham.com/gap.html http://www.paulgraham.com/gap.html http://www.paulgraham.com/gh.html http://www.paulgraham.com/gh.html
- pstuart 14y ago
  Income inequality is ok; the problem is the amount of fraud involved.
- noahth 14y ago
  Gee, I wonder if he has a vested interest in advancing that viewpoint? Not that there's anything wrong with writing smart essays that advance one's interests.
  - pdonis 14y ago
    > Gee, I wonder if he has a vested interest in advancing that viewpoint? Of course he does. Does that make what he says wrong?
    - msellout 14y ago
      It doesn't make it wrong, but that knowledge might encourage you to think of counter-arguments.
      - pdonis 14y ago
        So can you think of any?
      - tomjen3 14y ago
        Shouldn't you always tink of counter arguments when you are reading something? Even (or especially) if you agree with it?
  - pg 14y ago
    If you mean Y Combinator, both of those essays were written before we started it.
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MordinSolus 14y ago
Liberty produces far more equality than the pursuit of equality could ever achieve, if I may borrow a line from Milton Friedman. It really is the fault of us citizens that we've allowed our government to grow so large and unaccountable. More accurately, we've allowed it to grow far outside its constitutional limits. And we accept this and deem it necessary. In fact, some of us still think it needs to be bigger to protect us from calamities like the housing crisis! Yet we don't realize that it was precisely the largeness of the government and its influence on the market and money that caused the crisis. All of this really does have its roots in the Great Depression. At the time, people blamed the crash on capitalism when the real causes were anything but, and as a result people were more than willing to let the government become bigger so it could 'protect' them. It's unfortunate that we the people were, and still are, so shortsighted. On a side note, robber barons are largely a myth. As well, blaming the fall of the middle class on globalization and technology is simply absurd; how would we afford iPhones and all of the miracles of modern technology without globalization and.. technology? You can't look only at one side of the equation (jobs moving to China) without considering the other (much cheaper products). While it may hurt certain workers when some kinds of labor leaving the U.S., consumers as a whole benefit. Not to mention that people elsewhere on the globe benefit from these jobs.
- hazov 14y ago
  Reading too much from Mises Institute I presume. I am really amazed anyone can take anything published there seriously, these guys always talk how mainstream economists always try to simplify human action in their models, such as when discussing the nature of money and how it came to exist, anthropologists are making the same points all the time. But they certainly do love to forget this exact argument when they write their diatribes against ideas from people they disagree with them. Like you assuming what people in the past thought about an event without searching from some data to support your assertions. Mind you I do not like the tone of the link and I thoroughly disagree with the premise of class struggle that those fond of Marx almost always take for granted.
  - MordinSolus 14y ago
    I don't read Mises, but thanks for the assumption. The causes of the housing crisis are and were, for lack of a better word, obvious. You don't need to read this or that, or even subscribe to a certain form of political thought to see why things happened as they did. > Like you assuming what people in the past thought about an event without searching from some data to support your assertions. They elected Roosevelt how many times in a row?
frozenport 14y ago
Don't forget that the income gap in Venice was immeasurably worse then in the USA today. Contrast the doge with the sailer who had nothing but a life of indenture. Although the income gap is fact, it is hard to say that America is become less inclusive and hence I find it hard to support this author's argument.
- mhartl 14y ago
  immeasurably worse I think you mean inequality was higher, not worse. Executing all American billionaires would lower inequality in this country, but it wouldn't make it better.
acslater00 14y ago
I have several comments. 1. We're talking about literally 400 years between the height of Venetian power and the creation of the Libro d'Oro (1315) and its decline (17th to 18th century). Forgive me if I'm not quite ready to accept the author's core premise here. 2. This sentence made me LOL: "Public schools are starved of funding... This is the new Serrata". The premise of the statement, that public schools are starved of funding, is preposterous. NYC spends upwards of $20,000 per pupil per year. But even beyond that, comparing moderate variation in school funding levels to the creation of an ACTUAL OLIGARCHY is just, hack-city. That might be the kind of tortured analogy that gets you a favorable slot in the NY Times during election season, but it's sheer nonsense. Look, I can make any argument, on any part of the political spectrum, that way! "High income taxes ... this is the new Serrata." "Occupational licensing ... this is the new Serrata." "Immigration limits ... this is the new Serrata." "The Yankees spending $200m a year on their payroll ... this is the baseball Serrata."
- stretchwithme 14y ago
  The rapid increase in home prices also pushed up property taxes and still starved for funding.
  - taf2 14y ago
    In CA at least there is prop 13 so unless you also have many new home buyers you have a percentage of the population still paying at 1970's tax rates... Slightly f'ed if you are correct about the spending increase - more detail here - http://en.m.wikipedia.org/wiki/California_Proposition_13_(1978) http://en.m.wikipedia.org/wiki/California_Proposition_13_(19...
    - stretchwithme 14y ago
      Thee are many factors. There were a lot of new buyers. Those older owners had more incentive than ever to cash out during the housing bubble. There was enormous turnover in ownership. And for all of the old owners, their taxes can be increased by 2% every year. So they do eventually go up, even as values are dropping, until they reach a ceiling of 1%. Here's what the data looks like for the last 17 years: http://www.indexmundi.com/facts/united-states/state-taxes/california/property-tax/tax-revenue/2011/q3#graph http://www.indexmundi.com/facts/united-states/state-taxes/ca...
nathanmarz 14y ago
The article only touches on lobbying, but that's the key mechanism by which wealthier people gain an unfair influence on government. As campaigns have gotten more expensive, the system selects for those politicians that raise enormous amounts of money – people who cater to the lobbyists. Lawrence Lessig did a phenomenal job breaking down the campaign finance / lobbying problem in his book Republic, Lost: http://www.amazon.com/Republic-Lost-Money-Corrupts-Congress/dp/0446576433 http://www.amazon.com/Republic-Lost-Money-Corrupts-Congress/... I also found the Lawrence Lessig / Jack Abramoff interview very illuminating in understanding the corrupting influence of money on government. It's long but worth watching: http://www.youtube.com/watch?v=pkvIS5pZ0eI http://www.youtube.com/watch?v=pkvIS5pZ0eI
- stretchwithme 14y ago
  We'd all be better off without winner-take-all elections. It takes money to pretend to be all things to all voters.
twoodfin 14y ago
The economists Emmanuel Saez and Thomas Piketty found that 93 percent of the income gains from the 2009-10 recovery went to the top 1 percent of taxpayers. The top 0.01 percent captured 37 percent of these additional earnings, gaining an average of $4.2 million per household. Shocking that income gains during a stock market rally (typically a leading economic indicator) go to the investor class while employment income (a lagging indicator) continues to struggle. This is agitprop. Isn't there anyone other than Saez folks like the author can cite? Saez could have put out a "study" to show that the rich took a real bloodbath during '07-'08 while the middle class barely felt a prick for just the same reason. But he didn't: he'd rather be a hack and win unending favorable references in Times thumb suckers.
- iamdave 14y ago
  * the rich took a real bloodbath during '07-'08 while the middle class barely felt a prick for just the same reason.* Explain? Curious to know; if you have a blog link or article to check out I'd appreciate it.
  - twoodfin 14y ago
    Between 2007 and 2008, the median household income nominally increased, and inflation adjusted dropped $1900 out of $54,000.[1] From December 1, 2007 to December 1, 2008, the value of the S&P 500 was cut in half. Somehow I suspect if you compared tax returns from 2007 and 2008, you'd see that high income taxpayers lost huge.[2] That's how it looks to me when I eyeball it. Look at taxpayers with more than $10,000,000 in income vs $50,000-$75,000, for example. The former dropped $160 billion in AGI, while the obviously much larger latter group dropped only $15 billion. That's the mirror image of the kind of data that allows Saez to claim that 90% of income gains in 2009-10 went to the top 1%. [1] http://www.davemanuel.com/median-household-income.php http://www.davemanuel.com/median-household-income.php [2] http://www.irs.gov/pub/irs-soi/07in12ms.xls http://www.irs.gov/pub/irs-soi/07in12ms.xls http://www.irs.gov/pub/irs-soi/08in12ms.xls http://www.irs.gov/pub/irs-soi/08in12ms.xls
- phillmv 14y ago
  Barely felt a prick? Really? That's 9+% unemployment to you? Or the millions of foreclosures?
lionhearted 14y ago
After spending quite a bit of time outside of America, articles like this seem strange to me. Not right or wrong in assessment, just... very American-centric and lacking a lot of perspective (Venetian anecdotes aside). I mean... pretty much everyone in America is rich. Stupidly ridiculously rich. The working poor in America are fabulously fantastically stupendously ridiculously rich compared to most of the world. I mean, staggeringly so. It's like, as time passes, luxuries become conveniences become necessities... and thus, there's always this keeping-up thing going on. But the majority of American "necessities" are truly luxuries in, like, 2/3rds of the world's eyes.
- andrewcooke 14y ago
  the article is about how rich places start to decline. so it makes sense only as an article about somewhere that is rich. or maybe you're not criticising the article at all, just keeping us informed about the rest of the world? [rather than downvote, try clarifying how an article on the decline of rich communities should be written about somewhere that is not a rich community...]
- kamaal 14y ago
  Well if you really mention this you are likely to be badly admonished to keep this to yourself. I can't even imagine how anybody in the US can even describe themselves as poor. I mean the definitions of poor so badly put down in this case, it makes the actual poor look like they don't exist at all. Sometime back there was a post here about blacks(in the US) in some place not having good sanitation facilities. They were considered very poor. And they had cars, good enough homes, food, electricity, roads, park and ask what not. In my country they would qualify as very rich people(In India). Its law of diminishing utility, a massive hedonic threadmill to describe at the best.
  - seanmcdirmid 14y ago
    Its about social equity and respect. I remember a story where a redneck in Appalachia made about as much money as a highly regarded doctor in Africa, but the redneck was definitely worse off: he had no respect from the community, his social contribution was very low, and very low self esteem, while the doctor got to eat with the president of their country, had connections abroad, and so on. The war against poverty isn't finished once survival needs are met, people want meaningful lives, to thrive in society also and not just survive. I very much admire Europe (or at least Switzerland) where the upper class treats the working class with a lot more respect. Everyone is important, you don't treat the guy at the fast food rudely, even if you have much more money than them. Everyone's life seems meaningful and people are happy. Now, compare this with China where I now live, where very little respect is given from the middle class to lower-working class that cleans their houses, makes their food, drives them around... Edit: I didn't mean to use redneck here as a pejorative, it just seemed to get the point across more quickly.
blackhole 14y ago
The one fundamental error in this article is the assumption that money solves everything. As many have pointed out, we spend lots of money on education - it has had little to no effect on the quality of that education.
efuquen 14y ago
I'm always dismayed to read comments in HN when an article like this comes up because their is always such a complete backlash against it. Don't get me wrong, I saw problems with the article too, but I don't necessarily disagree with overall premise and I find it sad that there isn't even an inkling of an opinion of someone trying to defend it.
- hudibras 14y ago
  There's definitely a vocal faction of HN who will defend to the death against any threat to the beleaguered highly-educated upper-class white American male.
- crucialfelix 14y ago
  It's kind of funny. The article is pro entrepreneurship, pro capitalist and pro free market. So many here are taking it as an attack on success or the rich. Theres a huge misreading of the article and a lot of attacks on minor points and statements and nobody addressing the basic premise.
avoutthere 14y ago
Marxist tripe.
- msellout 14y ago
  Capitalist tripe?
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pg 14y ago
This is not the generally accepted view of the cause of Venice's decline, to put it mildly. Venice owed its power in the medieval period largely to geography. When trade between Europe and the rest of the world was almost entirely something that happened via the Mediterranean, Venice was the most important port. After the Spanish and Portuguese discovered sea routes to the Americas, Africa, and the Far East, that was no longer true. It would have been surprising if Venice hadn't declined after that. It didn't help, either, that at about the same time, the whole Italian peninsula became a prize fought over by the now very powerful kingdoms of France and Spain. City-states in general were becoming obsolete. Maybe there is some sort of badness going on in the US, but almost any other failing empire would have made a better example than Venice. There have been few where the external causes of failure were clearer.
- enraged_camel 14y ago
  Still though, civilizations usually collapse for more than one reason. The discovery of alternative sea routes certainly contributed to Venice's fall. But the thing is, if it wasn't for the Serrata, perhaps they would have enough entrepreneurs to find other means of powering their economy. At the end of the day, if you want to be able to solve difficult problems and make progress, then you need risk-takers.
  - pg 14y ago
    I already listed two. If you want a third, add the Ottoman Empire. Venice was a trading empire. Its empire became worthless. To bounce back from that would have required a transformation unprecedented in history. In fact, even knowing the history that followed, if I had been summoned back by time machine to advise the council about what to do to repair Venice's fortunes, I probably would not have been able to give them advice that would have worked, short of telling them about all the scientific and engineering discoveries that had been made since, and sending them off on a Riverworld-like future.
    - enraged_camel 14y ago
      I was going to mention the Ottoman Empire as well to support my argument that civilizations collapse for more than one reason. In the case of the Ottomans, the discovery of alternative trade routes definitely reduced the amount of gold going into the coffers. But there were also many other problems, such as growing income inequality and rampant corruption among the ruling class. These economic and social issues eventually led to the stagnation of the empire. Then competitors caught up and surpassed them technologically, which directly translated into defeats on the battlefield. That said, you're right that Venice was a trading empire, so losing that competitive edge hurt them a lot more.
ktizo 14y ago
This article is fairly myopic and overly congratulatory about the history of the US. Phrases such as: "The history of the United States can be read as one such virtuous circle." "Historically, the United States has enjoyed higher social mobility than Europe" "IN the early 19th century, the United States was one of the most egalitarian societies on the planet." "For Jefferson, this equality was at the heart of American exceptionalism: “Can any condition of society be more desirable than this?” Would seem to completely ignore the history and even the existence of African Americans and their experiences in this supposedly classless society.
akamaka 14y ago
The article seemed pretty cool until he started talking about the "$700 billion dollar rescue of Wall Street". Why do authors constantly love to throw out this number without any context? It just makes me think that the author is either stupid or full of crap. Here's some basic info right from the Wikipedia page: http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program "The TARP program originally authorized expenditures of $700 billion [...] reduced [...] to $475 billion. [...] total disbursements would be $431 billion. [...] $245 billion handed to U.S. and foreign banks. [...] $169 billion has been paid back." And here are the latest numbers: http://www.forbes.com/sites/steveschaefer/2012/10/11/cbo-updates-tarp-tally-24b-cost-to-taxpayers-14b-from-aig-bailout/ http://www.forbes.com/sites/steveschaefer/2012/10/11/cbo-upd... "the latest update from the Congressional Budget Office projects the Troubled Asset Relief Program (TARP) will ultimately wrap up at a cost of $24 billion." "The ultimate losses from TARP will not come from that first round of spending, as all of those initial bank investments have been repaid, but instead from the use of TARP funds to help smaller banks (minimally), as well as the extension of the program to pump $79 billion into automakers General Motors and Chrysler and contribute to the bailout of insurer American International Group."
- ryanwaggoner 14y ago
  If true (I want to investigate more), this kinda blows my mind. I haven't heard this from either side, and you would expect someone would bring it up at some point. I've always been against the bailout, partly due to the cost, but given how much we spend on the most ridiculous of endeavors, $24 billion hardly seems a drop in the bucket. I still am not in favor of the bailout because of moral hazard, but that's a discussion for another time. Thanks for this!
  - bmelton 14y ago
    Having seen only bits of the information in the wild, I was also impressed to see the GP's summary there. I had already known that many of the banks that received bailout funds had already repaid it, but (as the GP mentions) for many of the smaller banks, but I didn't know that the initial outlay came down to as little as $431 billion.
Futurebot 14y ago
Like the "education gap" explanations (and its solutions, like "more education is the answer"), this explanation is about the last battle, not the current one. It mentions briefly the role of automation (AKA "technological unemployment"), but that's it. The chief driver of unemployment in the future is going to be labor automation, and that is that. The new battle lines are going to be over "how do we get taxes - _and a culture that supports levying them_ - to the level needed so we can supply a guaranteed income, universal healthcare, and free/low-cost housing to support the mass of permanently unemployed, zero marginal product (ZMP) workers that are going to be created over the next 20-30 years." Countries like Denmark have a real leg up on the US policy-wise here, as they already have some of these things in place along with what appears to be a populace that is fairly supportive of keeping them. When you see someone under 10 from now on, ask yourself "what is the likelihood that this kid will have a job 25 years from now?" The answer is becoming "less likely every day." The world is only going to need so many politicians, managers, programmers, and robot designers. Even the hard-to-automate jobs (as per Autor: http://economics.mit.edu/faculty/dautor/papers http://economics.mit.edu/faculty/dautor/papers) are slowly getting automated,and there won't even be jobs in "food service, cleaning and gardening, health support, child care, personal appearance, security guards, recreation, and miscellaneous services" for them to do. We should be thinking about the current and next battle, not the previous one(s), though that's (sadly) often the pattern when it comes to political economy.
yehia 14y ago
These comments aren't taking into account the deterioration of the quality of teachers. One reason for this is due to smart women leaving the field in the '70s when the rest of careers opened up to them. My sister quit teaching English and became a lawyer. She earned a lot more and got a lot more respect. And, yes, in order to attract those people back to teaching the country will have to pay a lot more. These women have options and they walked. Further, there is a serious problem with the fact that classroom discipline is so compromised by unruly students that many competent teachers no longer want to be with these children. This is not just in the US. I was in Chile last year, taking an ESL teaching class, and watched a video of a Chilean teaching English to a class of 10 year olds. The whole room was in complete chaos. An older man in the class with me who was my age (early 60s) had been a teacher and said that the video depicted why he would no longer go into the classroom. Curiously, the 2 younger students in the class, recent college grads, felt we didn't accept normal in students. Well, the new normal is devastating to learning. Parents are responsible for this mess. Christine
- sjg007 14y ago
  The way we will mitigate this is expanding things like Teach for America. Basically, the gov't will start canceling student loan debt based on years of service. You can imagine a scale from 2-10 years. They already do this for the medical research field. That's the only way. It will be a "hidden" indirect cost.
christkv 14y ago
I found Niall Fergusons last lectures to be quite eye opening in regards to possible reasons to the wests apparent decline and what is driving it. www.bbc.co.uk/programmes/b01jms03/episodes/guide
tokenadult 14y ago
This New York Times Sunday review opinion essay, "The Self-Destruction of the 1 Percent," is an interesting read and has prompted a very interesting set of comments here on HN overnight in my time zone. As I turned in yesterday, the top comment was by kamaal, pointing out that India provides a useful reality check on some of the assertions about the United States in the article. As I woke up this morning, the top comment was (and is) by acslater, posted not long after kamaal's comment, pointing out that United States public schools are well funded by international standards. Can both comments be true? Yes they can. I agree with the main claim of the submitted article that a society in which many people have opportunity to make it into the top earning echelon of the society is a better society all around. "Like all open economies, theirs was turbulent. Today, we think of social mobility as a good thing." And I still think of social mobility as a good thing, having lived in more than one country in my life. International rankings with annual revisions produced by nonprofit, nongovernmental organizations reveal that the United States enjoys huge advantages outside its government-operated school system. One of those advantages is an exceptionally high level of political and economic freedom for ordinary citizens and residents, as reported in The Freedom House rankings of countries by freedom (both political and economic): http://www.freedomhouse.org/report-types/freedom-world http://www.freedomhouse.org/report-types/freedom-world Another advantage the United States has for progress and prosperity is low level of corruption in private business and government as reported by The Transparency International rankings of perceived public corruption: http://www.transparency.org/research/cpi/overview http://www.transparency.org/research/cpi/overview Both of those societal advantages continue to draw into the United States bright, high-initiative persons from around the world who received their primary and secondary schooling in other countries. It is simply a matter of fact that public spending on government-operated schools in the United States has long been high by world standards. http://usatoday30.usatoday.com/news/education/2003-09-16-education-comparison_x.htm http://usatoday30.usatoday.com/news/education/2003-09-16-edu... "'There are countries which don't get the bang for the bucks, and the U.S. is one of them,' said Barry McGaw, education director for the Paris-based Organization for Economic Cooperation and Development, which produced the annual review of industrialized nations." http://economix.blogs.nytimes.com/2010/12/08/education-spending-and-those-international-test-scores/ http://economix.blogs.nytimes.com/2010/12/08/education-spend... "As you can see, the United States is exactly on the line of best fit [on a scatterplot of country GDP and country means on reading test scores]. American students scored about as well as you’d expect them to if all you knew about them was their average standard of living. . . . . "So if money doesn’t appear to have a strongly predictable impact on students’ test scores, what does? "How educated their parents are seems to play a bigger role." From "America's Assets" section of the OECD report "Strong Performers and Successful Reformers in Education: Lessons from PISA for the United States": http://www.oecd.org/pisa/46623978.pdf http://www.oecd.org/pisa/46623978.pdf "One of the American assets is the amount of money American citizens are willing to invest in public education – more per student than any other country save one. This means that there is a lot of room to get better performance by reprogramming what is currently being spent." Eric Hanushek, an astute economist who has many peer-reviewed publications in a variety of journals about education evaluation and education reform in the United States and other countries, has repeatedly examined the vexing issue of teacher quality and how to measure it. His latest publication on the issue, "The Distribution of Teacher Quality and Implications for Policy" Eric A. Hanushek, Steven G. Rivkin, September 2012, Annual Review of Economics, pp. 131-157, http://hanushek.stanford.edu/sites/default/files/publications/Hanushek%2BRivkin%202012%20AnnRevEcon%204.pdf http://hanushek.stanford.edu/sites/default/files/publication... points out that variance of teacher quality within each school is generally much greater than the mean quality of instruction differences between schools. The paper examines what data are necessary to fairly assess "value added" of individual teachers in classroom service. Hanushek's article "The Economic Value of Higher Teacher Quality," Eric A. Hanushek, June 2011, Economics of Education Review, pp. 466-479 http://hanushek.stanford.edu/sites/default/files/publications/Hanushek%202011%20EER%2030%283%29.pdf http://hanushek.stanford.edu/sites/default/files/publication... provides evidence supporting the proposition that simply encouraging the bottom 5 to 8 percent of teachers currently in service in the United States to change occupations, replacing them with teachers of average effectiveness, could move the United States, with its current diverse population, to near the top of international mathematics and science rankings and add trillions of dollars of economic growth to the United States economy. So to the point of the submitted article, yes, let's make sure that ALL young people in the United States (and everywhere, for that matter) enjoy schoolteachers who are effective at teaching, societies that are free, governments that are not corrupt, and thus upper economic classes that are open to new participants. That will help all of us and all of our children and grandchildren prosper.
deleted 14y ago
[deleted]

143 points by wallflower 14y ago

The reality that "the tippy-top, of the economic pyramid who have been most effective at capturing government support" is canon in my opinion. I'm not insanely liberal or anything, so I don't want to go too far down the road of "who does the government REALLY serve" - but the Constitution was built around building a state that could enforce contracts. And for good reason, but that reason was NOT that they were worried about serving the poor.

sillysaurus 14y ago
You should expand on what you're trying to say, because you've said nothing but started with a very interesting premise. So I'd like to hear more.
- tomasien 14y ago
  So I think the best resource on this topic, by far, is Woody Holton's Unruly Americans. http://books.google.com/books?id=w-IiCowd8_4C&printsec=frontcover&dq=inauthor:%22Woody+Holton%22&cd=1#v=onepage&q&f=false http://books.google.com/books?id=w-IiCowd8_4C&printsec=f... But essentially what really motivated those behind the Constitutional convention was the diminishing value of their assets under the Articles of Confederation. Contracts weren't enforceable because the federal government wasn't strong or effective enough, especially across state lines. Man, this just reminds me of one of the truly amazing things about American history: virtually the same people who wrote the Constitution tried to form the country under a different set of documents, and it failed so thoroughly that they TOTALLY re-did it (arguably illegally) 6 years later.
  - sillysaurus 14y ago
    That's very interesting. Thank you for the book reference! If you have more time, would you philosophize on how all of this might relate to present-day circumstances? (In addition to the topic of the original motives for the constitution, it might be interesting to include some discussion of what those those "at the top" could/should infer from history.)
    - tomasien 14y ago
      So the only thing I can say for certain is to remember that the rich always benefit from the existence and strength of government more than the poor unless that government is extremely hostile toward business. Despite some rhetoric that is out there, that is extremely far from the case in the case of the US government. What the US government has almost always done a fantastic job at (not necessarily above and beyond other governments, just in a vacuum) is creating a system where financial transactions can occur without much risk (monetary policy, moving off the gold standard frictionlessly, etc.) and where contracts can be enforced. And that's business pretty much right? The argument from there about taxes and regulation are details, and we can argue about that all day. But they are details that are minor compared to the ability to conduct business with confidence in a general since, not the slight variations we see these days. I'm a liberal, but it's for the above reason I supported the financial bailout. If I fear for anything, it's either of those core securities being diminished.
      - deleted 14y ago
        [deleted]
      - tomasien 14y ago
        Wow, that comment made no sense until I edited "unless that government is extremely hostile toward government" to "unless that government is extremely hostile toward business"
      - 001sky 14y ago
        There is a lot of very good insight here, in particular the focus on foundational economic institutions (ie, truth telling and promise keeping). Even so far as the taxes and regulations being details (a couple percent here or there, not a crisis). The issue that we are facing though, is starting to become of another sort. It is evidenced by the shift of wealth from the commercial centers to the DC area. It is evidenced by 80% of government spending not being on running government or protecting the population or even enforcing laws, etc. It is evidenced by (what was quoted in the article) of goverment borrowing (and printing money) to support the oligarghical too-big to fail banks. It is evidenved by the nationalization of private sector debt via student loans and via housing loan guarantees. It is evidenced by the failure to regulate derivatives or split investment banks from commercial ones. It is evidenced by "Economists" in the keynesian tradition who support uncritical borrow and spend (as the answer to everything), all of which provides stability but none of which provides actual earnings/power to the working classes...etc. It just provides benefits to the rich and debt/taxes to the poor. The "Liberal" current administration has underwritten the most perverse transfer of weatlth from the poor/middel to the top, its almost comical they pretend to be for anyone other than themselves. They make the Tea Party, in Contrast, look almost perversely rational. There is too much fear. In the Left. Of change.

tomasien 14y ago

The iOS 6 maps reference is incredibly forced

adrianbg 14y ago

"the libertarian writer Charles Murray blames the hollowed-out middle for straying from the traditional family values and old-fashioned work ethic that he says prevail among the rich" "Following the June Seventeenth uprising the secretary of the Writers' League had leaflets distributed on Stalin Allee where one could read that the people had forfeited the confidence of the government and could regain it only through redoubled efforts. Wouldn't it be simpler under these circumstances for the government to dissolve the people and elect another one?" - Berthold Brecht

001sky 14y ago

Exhibit A is the bipartisan, $700 billion rescue of Wall Street in 2008. Exhibit B is the crony recovery. The economists Emmanuel Saez and Thomas Piketty found that 93 percent of the income gains from the 2009-10 recovery went to the top 1 percent of taxpayers. The top 0.01 percent captured 37 percent of these additional earnings, gaining an average of $4.2 million per household. -- The $8 Trillion "bridge loan" that finances this? Split pro-rata, of course, amongst the lower and middle class.

ryanwaggoner 14y ago
Could you expand on this?
- 001sky 14y ago
  Yes. The main point is you need to follow both the asset base (how it is being financed), as well as the ancilliary revenue streams (coming from the assets). Its one thing to skew income to the group X. Its another thing to finance that with financial contracts, being paid for by another group Y. The latter is even more perverse from a perspective of social equity. Capitalism is (even for its most ardernt, free-market supporters) premised on ~proportional returns (ie, x% capital, pro-rata % share of earnings).[1] The liberal-left position is that this should skew somewhat[2]. The illustrated example is worse than both, it skews opposite, making a "sucker" class of the general group Y. If you are in group Y (no matter if you are on the right or the left), you should be thinking WTF, because it is not only contradictory to both principles, it's all self serving to X (incl. both left and right, etc). ______________ [1] Nuance: RAROC'd [2] To the poor, or in this example to Y
  - ryanwaggoner 14y ago
    I agree with the fact that most of the benefits are going to X, but I'm not at all sure that the cost is being borne by Y, where Y is defined by the poor and middle class. I say this because the reality is that the poor and a big chunk of the middle class in this country do not pay any Federal income tax, which is where the cost of this will be paid from. The lion's share of this will probably be borne in the end by Z, which are the upper middle class and wealthy with earned income who pay the highest marginal tax rates and a huge share of the tax revenue. In fact, the top 20% of households pay 94% of the Federal income tax [1]. They're the ones who are going to pay for this boondoggle, and while that does include hedge fund managers and Donald Trump, it also includes dentists and professors and small business owners. Of course, this is all just debt right now, so who knows what will end up happening. But given the conversation happening in this country right now, I can't see a big change in the 20% / 94% number above. 1. http://taxfoundation.org/blog/top-20-percent-households-pay-94-percent-income-taxes http://taxfoundation.org/blog/top-20-percent-households-pay-...

kamaal 14y ago

There are some errors in this article. Or I rather must say the author might be unaware of the certain things that he is talking about. >> Extractive states are controlled by ruling elites whose objective is to extract as much wealth as they can from the rest of society. and >> That was the future predicted by Karl Marx, who wrote that capitalism contained the seeds of its own destruction. The world has changed drastically since Karl Marx, in fact so much that Marx wouldn't ever recognize the world if if he were to suddenly thrown here. The biggest change is the definition of wealth as a dynamic entity which can be created and expanded with work. Unfortunately this didn't exist in the time Marx, or even if it did- the access to such an activity was limited to only a certain set of individuals. >> You can see America’s creeping Serrata in the growing social and, especially, educational chasm between those at the top and everyone else. At the bottom and in the middle, American society is fraying, and the children of these struggling families are lagging the rest of the world at school. I laugh when people write things like these. I am an Indian, staying in Bangalore. If you say the US is struggling, I would say you have no clue about other parts of the world. You have no clue what struggling means, no clue what hunger means, no clue what poverty or lack of education or health care means. Think of it this way, even the poorest in the US would be like 10x better of than the poorest in the other parts of the world. >> Economists point out that the woes of the middle class are in large part a consequence of globalization and technological change. I would say these changes are good for the US and the world in general. A lot of co operation and competition means things will move quickly. >> Tolerance for high executive compensation has increased, even as the legal powers of unions have been weakened and an intellectual case against them has been relentlessly advanced by plutocrat-financed think tanks. Sorry, is the word Tolerance the right word? It makes it sound like some sort of a criminal scam is going around in those circles which every one needs to put up with. Sorry but the author seems to point what we generally call as 'Socialist guilt'. The problem is people automatically label the ambitious, hardworking and people who look for big rewards as greedy. This problem is an unfortunate consequence of communism and to an extent socialism in general. Unless these people are made to believe that there is inherent evilness in money and desire for it, they really can't sell their philosophy. The direction in which a communist thinks is to visualize money and in general wealth as a minimal thing merely required for survival. And other things are also pushed, like for example glorifying poverty- Promoting rationing of things etc. The author fails to understand why there are 1%'s anyway. Which is that a capitalist society believes the rewards are not fixed, but vary with effort applied towards the work done to achieve goals. Its not like somebody just called a person in the cabin and wrote them $1 million check. You are selling something and somebody is ready to pay a price for it. This of course requires working hard, taking risks and going through tough times to get there. Not everybody would like to do that, because some people are just happy with what they have now. But just because those people don't want a little extra, it doesn't mean those who want it and earn must share their rewards with others. The fact is nearly everybody wants to be rich, some just convince themselves they don't want to after considering the effort they need to expend to get rich. But later when they look at somebody getting rich, they just happen to either proceed with all this drama. Unless you are ill, or disabled or limited for another genuine reason can't work to get successful, you just can't blame somebody else for your problems.

AutoCorrect 14y ago

So, the article is saying that government giveaways and government rule-making is entrenching the rich even more, and it's the fault of the rich? Wow, what perverse thinking that is. It seems to me that if the government made less rules and gave away less of OUR money, there would be a more even playing field. That doesn't mean NO rules, just a minimum. The title of the article should be "Government and it's role in causing wealth disparity".

tsotha 14y ago
This. The problem isn't that the government doesn't have enough rules to control business. The problem is the government is so involved in every aspect of life it's become far more efficient to co-opt the state than to compete with other companies in your sector. For some reason people on the left think if only the government was more involved, this time it would work to rein in powerful people instead of making them more powerful like the last 97 times.
- chernevik 14y ago
  I once maintained that Senate Republicans on the Banking committee supported a complex regulatory regime because their influence and status derived from the value they provided helping banks navigate that regulatory apparatus. My left-wing friends regarded this as the most cynical thing they'd ever heard, but they didn't have much evidence or analysis against it. Politicians want a powerful state because their power derives from their influence over that state. They want their power to grow because no one is ever satisfied with what they have. If the US has a Serratta, it would be in the impossibility of doing business without managing political relations, and thus the exclusion of people with serious interests from any serious effort to reform the state. I'm not sure we're there yet, but if we aren't we're dangerously close.
EricDeb 14y ago
I think most liberals would agree with you. I want the absolute minimum amount of regulation that effectively manages the free market as well as minimal basic social safety nets.
14y ago

sbierwagen 14y ago

pg's written a couple essays defending income inequality: http://www.paulgraham.com/gap.html http://www.paulgraham.com/gap.html http://www.paulgraham.com/gh.html http://www.paulgraham.com/gh.html

pstuart 14y ago
Income inequality is ok; the problem is the amount of fraud involved.
noahth 14y ago
Gee, I wonder if he has a vested interest in advancing that viewpoint? Not that there's anything wrong with writing smart essays that advance one's interests.
- pdonis 14y ago
  > Gee, I wonder if he has a vested interest in advancing that viewpoint? Of course he does. Does that make what he says wrong?
  - msellout 14y ago
    It doesn't make it wrong, but that knowledge might encourage you to think of counter-arguments.
    - pdonis 14y ago
      So can you think of any?
    - tomjen3 14y ago
      Shouldn't you always tink of counter arguments when you are reading something? Even (or especially) if you agree with it?
- pg 14y ago
  If you mean Y Combinator, both of those essays were written before we started it.

deleted 14y ago

[deleted]

MordinSolus 14y ago

Liberty produces far more equality than the pursuit of equality could ever achieve, if I may borrow a line from Milton Friedman. It really is the fault of us citizens that we've allowed our government to grow so large and unaccountable. More accurately, we've allowed it to grow far outside its constitutional limits. And we accept this and deem it necessary. In fact, some of us still think it needs to be bigger to protect us from calamities like the housing crisis! Yet we don't realize that it was precisely the largeness of the government and its influence on the market and money that caused the crisis. All of this really does have its roots in the Great Depression. At the time, people blamed the crash on capitalism when the real causes were anything but, and as a result people were more than willing to let the government become bigger so it could 'protect' them. It's unfortunate that we the people were, and still are, so shortsighted. On a side note, robber barons are largely a myth. As well, blaming the fall of the middle class on globalization and technology is simply absurd; how would we afford iPhones and all of the miracles of modern technology without globalization and.. technology? You can't look only at one side of the equation (jobs moving to China) without considering the other (much cheaper products). While it may hurt certain workers when some kinds of labor leaving the U.S., consumers as a whole benefit. Not to mention that people elsewhere on the globe benefit from these jobs.

hazov 14y ago
Reading too much from Mises Institute I presume. I am really amazed anyone can take anything published there seriously, these guys always talk how mainstream economists always try to simplify human action in their models, such as when discussing the nature of money and how it came to exist, anthropologists are making the same points all the time. But they certainly do love to forget this exact argument when they write their diatribes against ideas from people they disagree with them. Like you assuming what people in the past thought about an event without searching from some data to support your assertions. Mind you I do not like the tone of the link and I thoroughly disagree with the premise of class struggle that those fond of Marx almost always take for granted.
- MordinSolus 14y ago
  I don't read Mises, but thanks for the assumption. The causes of the housing crisis are and were, for lack of a better word, obvious. You don't need to read this or that, or even subscribe to a certain form of political thought to see why things happened as they did. > Like you assuming what people in the past thought about an event without searching from some data to support your assertions. They elected Roosevelt how many times in a row?

frozenport 14y ago

Don't forget that the income gap in Venice was immeasurably worse then in the USA today. Contrast the doge with the sailer who had nothing but a life of indenture. Although the income gap is fact, it is hard to say that America is become less inclusive and hence I find it hard to support this author's argument.

mhartl 14y ago
immeasurably worse I think you mean inequality was higher, not worse. Executing all American billionaires would lower inequality in this country, but it wouldn't make it better.

acslater00 14y ago

I have several comments. 1. We're talking about literally 400 years between the height of Venetian power and the creation of the Libro d'Oro (1315) and its decline (17th to 18th century). Forgive me if I'm not quite ready to accept the author's core premise here. 2. This sentence made me LOL: "Public schools are starved of funding... This is the new Serrata". The premise of the statement, that public schools are starved of funding, is preposterous. NYC spends upwards of $20,000 per pupil per year. But even beyond that, comparing moderate variation in school funding levels to the creation of an ACTUAL OLIGARCHY is just, hack-city. That might be the kind of tortured analogy that gets you a favorable slot in the NY Times during election season, but it's sheer nonsense. Look, I can make any argument, on any part of the political spectrum, that way! "High income taxes ... this is the new Serrata." "Occupational licensing ... this is the new Serrata." "Immigration limits ... this is the new Serrata." "The Yankees spending $200m a year on their payroll ... this is the baseball Serrata."

stretchwithme 14y ago
The rapid increase in home prices also pushed up property taxes and still starved for funding.
- taf2 14y ago
  In CA at least there is prop 13 so unless you also have many new home buyers you have a percentage of the population still paying at 1970's tax rates... Slightly f'ed if you are correct about the spending increase - more detail here - http://en.m.wikipedia.org/wiki/California_Proposition_13_(1978) http://en.m.wikipedia.org/wiki/California_Proposition_13_(19...
  - stretchwithme 14y ago
    Thee are many factors. There were a lot of new buyers. Those older owners had more incentive than ever to cash out during the housing bubble. There was enormous turnover in ownership. And for all of the old owners, their taxes can be increased by 2% every year. So they do eventually go up, even as values are dropping, until they reach a ceiling of 1%. Here's what the data looks like for the last 17 years: http://www.indexmundi.com/facts/united-states/state-taxes/california/property-tax/tax-revenue/2011/q3#graph http://www.indexmundi.com/facts/united-states/state-taxes/ca...

nathanmarz 14y ago

The article only touches on lobbying, but that's the key mechanism by which wealthier people gain an unfair influence on government. As campaigns have gotten more expensive, the system selects for those politicians that raise enormous amounts of money – people who cater to the lobbyists. Lawrence Lessig did a phenomenal job breaking down the campaign finance / lobbying problem in his book Republic, Lost: http://www.amazon.com/Republic-Lost-Money-Corrupts-Congress/dp/0446576433 http://www.amazon.com/Republic-Lost-Money-Corrupts-Congress/... I also found the Lawrence Lessig / Jack Abramoff interview very illuminating in understanding the corrupting influence of money on government. It's long but worth watching: http://www.youtube.com/watch?v=pkvIS5pZ0eI http://www.youtube.com/watch?v=pkvIS5pZ0eI

stretchwithme 14y ago
We'd all be better off without winner-take-all elections. It takes money to pretend to be all things to all voters.

twoodfin 14y ago

The economists Emmanuel Saez and Thomas Piketty found that 93 percent of the income gains from the 2009-10 recovery went to the top 1 percent of taxpayers. The top 0.01 percent captured 37 percent of these additional earnings, gaining an average of $4.2 million per household. Shocking that income gains during a stock market rally (typically a leading economic indicator) go to the investor class while employment income (a lagging indicator) continues to struggle. This is agitprop. Isn't there anyone other than Saez folks like the author can cite? Saez could have put out a "study" to show that the rich took a real bloodbath during '07-'08 while the middle class barely felt a prick for just the same reason. But he didn't: he'd rather be a hack and win unending favorable references in Times thumb suckers.

iamdave 14y ago
* the rich took a real bloodbath during '07-'08 while the middle class barely felt a prick for just the same reason.* Explain? Curious to know; if you have a blog link or article to check out I'd appreciate it.
- twoodfin 14y ago
  Between 2007 and 2008, the median household income nominally increased, and inflation adjusted dropped $1900 out of $54,000.[1] From December 1, 2007 to December 1, 2008, the value of the S&P 500 was cut in half. Somehow I suspect if you compared tax returns from 2007 and 2008, you'd see that high income taxpayers lost huge.[2] That's how it looks to me when I eyeball it. Look at taxpayers with more than $10,000,000 in income vs $50,000-$75,000, for example. The former dropped $160 billion in AGI, while the obviously much larger latter group dropped only $15 billion. That's the mirror image of the kind of data that allows Saez to claim that 90% of income gains in 2009-10 went to the top 1%. [1] http://www.davemanuel.com/median-household-income.php http://www.davemanuel.com/median-household-income.php [2] http://www.irs.gov/pub/irs-soi/07in12ms.xls http://www.irs.gov/pub/irs-soi/07in12ms.xls http://www.irs.gov/pub/irs-soi/08in12ms.xls http://www.irs.gov/pub/irs-soi/08in12ms.xls
phillmv 14y ago
Barely felt a prick? Really? That's 9+% unemployment to you? Or the millions of foreclosures?

lionhearted 14y ago

After spending quite a bit of time outside of America, articles like this seem strange to me. Not right or wrong in assessment, just... very American-centric and lacking a lot of perspective (Venetian anecdotes aside). I mean... pretty much everyone in America is rich. Stupidly ridiculously rich. The working poor in America are fabulously fantastically stupendously ridiculously rich compared to most of the world. I mean, staggeringly so. It's like, as time passes, luxuries become conveniences become necessities... and thus, there's always this keeping-up thing going on. But the majority of American "necessities" are truly luxuries in, like, 2/3rds of the world's eyes.

andrewcooke 14y ago
the article is about how rich places start to decline. so it makes sense only as an article about somewhere that is rich. or maybe you're not criticising the article at all, just keeping us informed about the rest of the world? [rather than downvote, try clarifying how an article on the decline of rich communities should be written about somewhere that is not a rich community...]
kamaal 14y ago
Well if you really mention this you are likely to be badly admonished to keep this to yourself. I can't even imagine how anybody in the US can even describe themselves as poor. I mean the definitions of poor so badly put down in this case, it makes the actual poor look like they don't exist at all. Sometime back there was a post here about blacks(in the US) in some place not having good sanitation facilities. They were considered very poor. And they had cars, good enough homes, food, electricity, roads, park and ask what not. In my country they would qualify as very rich people(In India). Its law of diminishing utility, a massive hedonic threadmill to describe at the best.
- seanmcdirmid 14y ago
  Its about social equity and respect. I remember a story where a redneck in Appalachia made about as much money as a highly regarded doctor in Africa, but the redneck was definitely worse off: he had no respect from the community, his social contribution was very low, and very low self esteem, while the doctor got to eat with the president of their country, had connections abroad, and so on. The war against poverty isn't finished once survival needs are met, people want meaningful lives, to thrive in society also and not just survive. I very much admire Europe (or at least Switzerland) where the upper class treats the working class with a lot more respect. Everyone is important, you don't treat the guy at the fast food rudely, even if you have much more money than them. Everyone's life seems meaningful and people are happy. Now, compare this with China where I now live, where very little respect is given from the middle class to lower-working class that cleans their houses, makes their food, drives them around... Edit: I didn't mean to use redneck here as a pejorative, it just seemed to get the point across more quickly.

blackhole 14y ago

The one fundamental error in this article is the assumption that money solves everything. As many have pointed out, we spend lots of money on education - it has had little to no effect on the quality of that education.

efuquen 14y ago

I'm always dismayed to read comments in HN when an article like this comes up because their is always such a complete backlash against it. Don't get me wrong, I saw problems with the article too, but I don't necessarily disagree with overall premise and I find it sad that there isn't even an inkling of an opinion of someone trying to defend it.

hudibras 14y ago
There's definitely a vocal faction of HN who will defend to the death against any threat to the beleaguered highly-educated upper-class white American male.
crucialfelix 14y ago
It's kind of funny. The article is pro entrepreneurship, pro capitalist and pro free market. So many here are taking it as an attack on success or the rich. Theres a huge misreading of the article and a lot of attacks on minor points and statements and nobody addressing the basic premise.

avoutthere 14y ago

Marxist tripe.

msellout 14y ago
Capitalist tripe?

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pg 14y ago

This is not the generally accepted view of the cause of Venice's decline, to put it mildly. Venice owed its power in the medieval period largely to geography. When trade between Europe and the rest of the world was almost entirely something that happened via the Mediterranean, Venice was the most important port. After the Spanish and Portuguese discovered sea routes to the Americas, Africa, and the Far East, that was no longer true. It would have been surprising if Venice hadn't declined after that. It didn't help, either, that at about the same time, the whole Italian peninsula became a prize fought over by the now very powerful kingdoms of France and Spain. City-states in general were becoming obsolete. Maybe there is some sort of badness going on in the US, but almost any other failing empire would have made a better example than Venice. There have been few where the external causes of failure were clearer.

enraged_camel 14y ago
Still though, civilizations usually collapse for more than one reason. The discovery of alternative sea routes certainly contributed to Venice's fall. But the thing is, if it wasn't for the Serrata, perhaps they would have enough entrepreneurs to find other means of powering their economy. At the end of the day, if you want to be able to solve difficult problems and make progress, then you need risk-takers.
- pg 14y ago
  I already listed two. If you want a third, add the Ottoman Empire. Venice was a trading empire. Its empire became worthless. To bounce back from that would have required a transformation unprecedented in history. In fact, even knowing the history that followed, if I had been summoned back by time machine to advise the council about what to do to repair Venice's fortunes, I probably would not have been able to give them advice that would have worked, short of telling them about all the scientific and engineering discoveries that had been made since, and sending them off on a Riverworld-like future.
  - enraged_camel 14y ago
    I was going to mention the Ottoman Empire as well to support my argument that civilizations collapse for more than one reason. In the case of the Ottomans, the discovery of alternative trade routes definitely reduced the amount of gold going into the coffers. But there were also many other problems, such as growing income inequality and rampant corruption among the ruling class. These economic and social issues eventually led to the stagnation of the empire. Then competitors caught up and surpassed them technologically, which directly translated into defeats on the battlefield. That said, you're right that Venice was a trading empire, so losing that competitive edge hurt them a lot more.

ktizo 14y ago

This article is fairly myopic and overly congratulatory about the history of the US. Phrases such as: "The history of the United States can be read as one such virtuous circle." "Historically, the United States has enjoyed higher social mobility than Europe" "IN the early 19th century, the United States was one of the most egalitarian societies on the planet." "For Jefferson, this equality was at the heart of American exceptionalism: “Can any condition of society be more desirable than this?” Would seem to completely ignore the history and even the existence of African Americans and their experiences in this supposedly classless society.

akamaka 14y ago

The article seemed pretty cool until he started talking about the "$700 billion dollar rescue of Wall Street". Why do authors constantly love to throw out this number without any context? It just makes me think that the author is either stupid or full of crap. Here's some basic info right from the Wikipedia page: http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program "The TARP program originally authorized expenditures of $700 billion [...] reduced [...] to $475 billion. [...] total disbursements would be $431 billion. [...] $245 billion handed to U.S. and foreign banks. [...] $169 billion has been paid back." And here are the latest numbers: http://www.forbes.com/sites/steveschaefer/2012/10/11/cbo-updates-tarp-tally-24b-cost-to-taxpayers-14b-from-aig-bailout/ http://www.forbes.com/sites/steveschaefer/2012/10/11/cbo-upd... "the latest update from the Congressional Budget Office projects the Troubled Asset Relief Program (TARP) will ultimately wrap up at a cost of $24 billion." "The ultimate losses from TARP will not come from that first round of spending, as all of those initial bank investments have been repaid, but instead from the use of TARP funds to help smaller banks (minimally), as well as the extension of the program to pump $79 billion into automakers General Motors and Chrysler and contribute to the bailout of insurer American International Group."

ryanwaggoner 14y ago
If true (I want to investigate more), this kinda blows my mind. I haven't heard this from either side, and you would expect someone would bring it up at some point. I've always been against the bailout, partly due to the cost, but given how much we spend on the most ridiculous of endeavors, $24 billion hardly seems a drop in the bucket. I still am not in favor of the bailout because of moral hazard, but that's a discussion for another time. Thanks for this!
- bmelton 14y ago
  Having seen only bits of the information in the wild, I was also impressed to see the GP's summary there. I had already known that many of the banks that received bailout funds had already repaid it, but (as the GP mentions) for many of the smaller banks, but I didn't know that the initial outlay came down to as little as $431 billion.

Futurebot 14y ago

Like the "education gap" explanations (and its solutions, like "more education is the answer"), this explanation is about the last battle, not the current one. It mentions briefly the role of automation (AKA "technological unemployment"), but that's it. The chief driver of unemployment in the future is going to be labor automation, and that is that. The new battle lines are going to be over "how do we get taxes - _and a culture that supports levying them_ - to the level needed so we can supply a guaranteed income, universal healthcare, and free/low-cost housing to support the mass of permanently unemployed, zero marginal product (ZMP) workers that are going to be created over the next 20-30 years." Countries like Denmark have a real leg up on the US policy-wise here, as they already have some of these things in place along with what appears to be a populace that is fairly supportive of keeping them. When you see someone under 10 from now on, ask yourself "what is the likelihood that this kid will have a job 25 years from now?" The answer is becoming "less likely every day." The world is only going to need so many politicians, managers, programmers, and robot designers. Even the hard-to-automate jobs (as per Autor: http://economics.mit.edu/faculty/dautor/papers http://economics.mit.edu/faculty/dautor/papers) are slowly getting automated,and there won't even be jobs in "food service, cleaning and gardening, health support, child care, personal appearance, security guards, recreation, and miscellaneous services" for them to do. We should be thinking about the current and next battle, not the previous one(s), though that's (sadly) often the pattern when it comes to political economy.

yehia 14y ago

These comments aren't taking into account the deterioration of the quality of teachers. One reason for this is due to smart women leaving the field in the '70s when the rest of careers opened up to them. My sister quit teaching English and became a lawyer. She earned a lot more and got a lot more respect. And, yes, in order to attract those people back to teaching the country will have to pay a lot more. These women have options and they walked. Further, there is a serious problem with the fact that classroom discipline is so compromised by unruly students that many competent teachers no longer want to be with these children. This is not just in the US. I was in Chile last year, taking an ESL teaching class, and watched a video of a Chilean teaching English to a class of 10 year olds. The whole room was in complete chaos. An older man in the class with me who was my age (early 60s) had been a teacher and said that the video depicted why he would no longer go into the classroom. Curiously, the 2 younger students in the class, recent college grads, felt we didn't accept normal in students. Well, the new normal is devastating to learning. Parents are responsible for this mess. Christine

sjg007 14y ago
The way we will mitigate this is expanding things like Teach for America. Basically, the gov't will start canceling student loan debt based on years of service. You can imagine a scale from 2-10 years. They already do this for the medical research field. That's the only way. It will be a "hidden" indirect cost.

christkv 14y ago

I found Niall Fergusons last lectures to be quite eye opening in regards to possible reasons to the wests apparent decline and what is driving it. www.bbc.co.uk/programmes/b01jms03/episodes/guide

tokenadult 14y ago

This New York Times Sunday review opinion essay, "The Self-Destruction of the 1 Percent," is an interesting read and has prompted a very interesting set of comments here on HN overnight in my time zone. As I turned in yesterday, the top comment was by kamaal, pointing out that India provides a useful reality check on some of the assertions about the United States in the article. As I woke up this morning, the top comment was (and is) by acslater, posted not long after kamaal's comment, pointing out that United States public schools are well funded by international standards. Can both comments be true? Yes they can. I agree with the main claim of the submitted article that a society in which many people have opportunity to make it into the top earning echelon of the society is a better society all around. "Like all open economies, theirs was turbulent. Today, we think of social mobility as a good thing." And I still think of social mobility as a good thing, having lived in more than one country in my life. International rankings with annual revisions produced by nonprofit, nongovernmental organizations reveal that the United States enjoys huge advantages outside its government-operated school system. One of those advantages is an exceptionally high level of political and economic freedom for ordinary citizens and residents, as reported in The Freedom House rankings of countries by freedom (both political and economic): http://www.freedomhouse.org/report-types/freedom-world http://www.freedomhouse.org/report-types/freedom-world Another advantage the United States has for progress and prosperity is low level of corruption in private business and government as reported by The Transparency International rankings of perceived public corruption: http://www.transparency.org/research/cpi/overview http://www.transparency.org/research/cpi/overview Both of those societal advantages continue to draw into the United States bright, high-initiative persons from around the world who received their primary and secondary schooling in other countries. It is simply a matter of fact that public spending on government-operated schools in the United States has long been high by world standards. http://usatoday30.usatoday.com/news/education/2003-09-16-education-comparison_x.htm http://usatoday30.usatoday.com/news/education/2003-09-16-edu... "'There are countries which don't get the bang for the bucks, and the U.S. is one of them,' said Barry McGaw, education director for the Paris-based Organization for Economic Cooperation and Development, which produced the annual review of industrialized nations." http://economix.blogs.nytimes.com/2010/12/08/education-spending-and-those-international-test-scores/ http://economix.blogs.nytimes.com/2010/12/08/education-spend... "As you can see, the United States is exactly on the line of best fit [on a scatterplot of country GDP and country means on reading test scores]. American students scored about as well as you’d expect them to if all you knew about them was their average standard of living. . . . . "So if money doesn’t appear to have a strongly predictable impact on students’ test scores, what does? "How educated their parents are seems to play a bigger role." From "America's Assets" section of the OECD report "Strong Performers and Successful Reformers in Education: Lessons from PISA for the United States": http://www.oecd.org/pisa/46623978.pdf http://www.oecd.org/pisa/46623978.pdf "One of the American assets is the amount of money American citizens are willing to invest in public education – more per student than any other country save one. This means that there is a lot of room to get better performance by reprogramming what is currently being spent." Eric Hanushek, an astute economist who has many peer-reviewed publications in a variety of journals about education evaluation and education reform in the United States and other countries, has repeatedly examined the vexing issue of teacher quality and how to measure it. His latest publication on the issue, "The Distribution of Teacher Quality and Implications for Policy" Eric A. Hanushek, Steven G. Rivkin, September 2012, Annual Review of Economics, pp. 131-157, http://hanushek.stanford.edu/sites/default/files/publications/Hanushek%2BRivkin%202012%20AnnRevEcon%204.pdf http://hanushek.stanford.edu/sites/default/files/publication... points out that variance of teacher quality within each school is generally much greater than the mean quality of instruction differences between schools. The paper examines what data are necessary to fairly assess "value added" of individual teachers in classroom service. Hanushek's article "The Economic Value of Higher Teacher Quality," Eric A. Hanushek, June 2011, Economics of Education Review, pp. 466-479 http://hanushek.stanford.edu/sites/default/files/publications/Hanushek%202011%20EER%2030%283%29.pdf http://hanushek.stanford.edu/sites/default/files/publication... provides evidence supporting the proposition that simply encouraging the bottom 5 to 8 percent of teachers currently in service in the United States to change occupations, replacing them with teachers of average effectiveness, could move the United States, with its current diverse population, to near the top of international mathematics and science rankings and add trillions of dollars of economic growth to the United States economy. So to the point of the submitted article, yes, let's make sure that ALL young people in the United States (and everywhere, for that matter) enjoy schoolteachers who are effective at teaching, societies that are free, governments that are not corrupt, and thus upper economic classes that are open to new participants. That will help all of us and all of our children and grandchildren prosper.

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