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>High levels of inequality are a problem—messing up economic incentives, tilting democracies in favor of powerful interests, and undercutting the ideal that all

>High levels of inequality are a problem—messing up economic incentives, tilting democracies in favor of powerful interests, and undercutting the ideal that all people are created equal. I agree with generally all of Gates' thoughts here, but there are two actors to consider when discussing how to address problems associated with inequality - the government, and those who own capital. There is an implicit assumption by both Gates and Piketty that a government is always powerful enough to control what portion of wealth flows to capital owners, and what portion flows to labor. The risk with a powerful government that can do this is it can be bought. A perfect example of this is Gates own story with The Common Core. From everything I've read, his own foundation basically bankrolled the lobbying, acceptance, and implementation of this program, much to the dismay of many educators I know. As long as a democracy bequeaths power to its government, there will be moneyed interests lining up to tilt that power in their favor. The other option is to limit the power the government has to control the flow of wealth. No one wants to buy a democracy that doesn't have any power to protect their interests. What ends up happening is wealthy actors have to figure out other ways to maintain their wealth - consumption in things like yachts and fancy cars goes down and investment goes up. As investment goes up, g goes up because that investment is creating more jobs and more competition for employees, and r goes down because the capital markets become flooded.

dmm 12y ago
The common core is a just a standard of what should be taught and when. It is not a curriculum. It is not a book or set of books. It solves a real problem: schools in the US cover subjects at wildly differing times so when children change school districts they may have huge holes in their education.
- bsbechtel 12y ago
  That's not really relevant to my point. I was trying to demonstrate that it is entirely possible for someone with a lot of money to influence policy in the US, using Gates own activities as an example. Next time, it could easily be someone who is using their own money to push a policy requiring iPads or Windows tablets into every classroom, or using their own money to fight off an anti-trust lawsuit being brought forward by the government.
taeric 12y ago
I'm not sure I understand your other option. If the government doesn't have control over the flow of wealth, why do you think it will not just increasingly flow to those in power? I understand the concern over governments that are not acting in the best interest of the people. However, abstaining from the process seems a very shaky way to actually get it to act in an appropriate way. More to the point, I thought the entire premise was that investment has been going up for the sake of investment lately. Which means the main people benefiting from the investment of the wealthy, are the wealthy that are investing. This odd conflation of philanthropy with investment just smacks of rationalizing high earnings in an "I deserve it" blanket. Yes, more philanthropy is good. No, more investment isn't the same as more philanthropy. And, no, we don't need to eliminate consumption any more than we need to eliminate investment. Or, rather, I don't know as that we do. (I'm not that bright, all told.) What I do think we need is to increase the benefit to everyone from investment and consumption (and philanthropy). Not just those that are controlling it.
- bsbechtel 12y ago
  >I'm not sure I understand your other option. If the government doesn't have control over the flow of wealth, why do you think it will not just increasingly flow to those in power? Up until roughly 1903, the US didn't have any personal income taxes. There was a small business tax, and this was it. Gates' own example of old money no longer existing didn't really point to examples such as the Waltons, but to families who have had wealth for hundreds of years due to large estates. He's correct that this wealth no longer exists. My argument would be that it no longer exists because in the 1800s, neither the wealthy nor the labor class were taxed as individuals, r and g roughly equalized and the wealthy didn't maintain their wealth. This phenomenon of extreme inequality started to occur only in the early 1900s, the same time the US first implemented a personal income tax (thus taxing labor more so than wealth, lowering g and raising r).
  - taeric 12y ago
    Seems like a very small amount of evidence to base such a large idea on. You could probably form the same argument against the more modern consumption taxes. Since for many this translates to a sales tax, and not the early excise taxes that are covered under the same category. (Right?) Though, your argument falls more heavily on the mistake Gates seems to have also made. The type of wealth that the book refers to as "old wealth" really refers to a rentier based society. This is somewhat important, because much of what would have been the "old money" in the US was effectively disrupted by massive technology changes. It isn't that the old wealth just disappeared, it was not created in such a way that it sustained itself. This is important, because wealth in the modern US does sustain itself. Quite heavily, even.
zdw 12y ago
WRT Common Core, I don't think Gates is doing it to serve some personal benefit - I get that his work with that, and things like Malaria reduction are genuinely motivated by trying to improve the world. The problem is that it's one man's perspective vs. a whole world of reality, and as such the model might not fit and in some areas cause more problems than good. So you end up with a multi-billionare like Gates being able to basically treat the entire US .edu system like his own testing lab. (no comment on whether Common Core is good or not - most of thing things I hear about it seem positive)
- bsbechtel 12y ago
  >The problem is that it's one man's perspective vs. a whole world of reality This was the point I was trying to make. I agree I don't think in this case he's trying to serve his own personal benefit. However, given he used his money to to implement a program he wanted, it just demonstrates the opportunity exists to use your wealth to push programs that are to your own benefit.
bluthru 12y ago
>The risk with a powerful government that can do this is it can be bought. Only if it is weak and has incentives to do so. Policies like Citizens' United weaken the government and permit capital to further influence politics.
- bsbechtel 12y ago
  Agreed, although it certainly wasn't the start of it.
crdoconnor 12y ago
>The other option is to limit the power the government has to control the flow of wealth. That's one of the core ideologies UNDERLYING the great shift in wealth from poor to rich: that politics should have no say in wealth allocation. What that ultimately means is that the rules of wealth allocation are decided by the wealthy without democratic oversight. Hence here we are.
- bsbechtel 12y ago
  >That's one of the core ideologies UNDERLYING the great shift in wealth from poor to rich: that politics should have no say in wealth allocation. Please provide evidence or reasoning to back up why you think this causes money to flow from the poor to the rich.
  - crdoconnor 12y ago
    One way: "Limit the power the government has to control the flow of wealth" is a very normal pretext for slashing taxes for the wealthy.
    - bsbechtel 12y ago
      That's what one political party wants you to believe, and quite possibly yes, what the other political party is doing these days. However, if you cut taxes across the board, not just for the wealthy, the concentration of wealth does tend to even out. The statement 'Limit the power the government has to control the flow of wealth' in itself does not mean slashing taxes only for the wealthy. It means the government has limited power to decide who gets what, because what ultimately ends up happening, is the government ends up taking more for itself than providing for anyone else (look at the massive unfunded liabilities in Social Security and Medicare).
      - dragonwriter 12y ago
        > However, if you cut taxes across the board, not just for the wealthy, the concentration of wealth does tend to even out. I don't see any reason or evidence for this, that is, for the proposition that ceteris paribus and independent of the distribution of tax burden, reducing the level of taxation promotes a more equal distribution of wealth. Certainly, to the extent that a given distribution of taxation itself promotes inequality, reducing the level of taxation in with that distribution will mitigate that effect, but your proposition is equivalent to the proposition that every distribution of taxation promotes inequality compared to the absence of taxation, which I don't see any reason to believe. > The statement 'Limit the power the government has to control the flow of wealth' in itself does not mean slashing taxes only for the wealthy. It means the government has limited power to decide who gets what IOW, the thing called government is less the actual vehicle through which society is governed and more of a distracting figurehead for the masses, and the powerful govern through other means -- and still for their own benefit and others expense (but without even the need to provide a show of public participation and concern for the public interest.)
Htsthbjig 12y ago
"The risk with a powerful government that can do this is it can be bought." A government can be bought?, your implicit assumption is that a government powerful enough will serve the interest of others and this is bad. The problem for me is that a government powerful enough will serve their OWN interest, the personal interest of the people in power, and this is bad. Part of my family comes from a former communist country. In theory, it was "the government of the people", in practice it was the biggest concentration of power ever in so few hands, the politburo. And the people there had nothing to do with those that generated wealth. In theory those in the politburo were not rich, in practice they could do or get whatever they wanted. Money was not needed for that. Only one political party, only one company for the entire nation. This meant you could be the best worker in the world, if someone high enough wants you to sweep streets, you seep streets or starve. Not only that, if your brother mother or your sister does something the party does no like(like not getting in bed with someone up), you will pay for it too. People in change of the police(Beria) will rape hundreds of young women and we will only know decades after with zero consequences to those that took part on it. When taxes become too high, over 50% of what you earn, you become a slave of government. The problem is that for people like Piketty taxes are never high enough. Mr Thomas Piketty is French. What we see in countries like France is that 60% of the economy is public. They become more and more communist-central planned. Money is wasted in those societies in terrible malinvestments(like the Great Leap Forward or Qualitative easings), and they never have enough as they are the most incompetent people around until society collapse. If you can buy the government, then you are lucky, it means the power is not monopolized in only one place.
- digikata 12y ago
  I think my concern is that if the power structure is an Oligarchy, it matters little if the label on the government structure is Communism, or Democracy. The worry from increasing inequality in the west is that we are approaching something like the strict power structure of an old communist country, only from the other direction. E.g. the legal system in America seems to apply unevenly to different classes of people.
  - bsbechtel 12y ago

dmm 12y ago

The common core is a just a standard of what should be taught and when. It is not a curriculum. It is not a book or set of books. It solves a real problem: schools in the US cover subjects at wildly differing times so when children change school districts they may have huge holes in their education.

bsbechtel 12y ago
That's not really relevant to my point. I was trying to demonstrate that it is entirely possible for someone with a lot of money to influence policy in the US, using Gates own activities as an example. Next time, it could easily be someone who is using their own money to push a policy requiring iPads or Windows tablets into every classroom, or using their own money to fight off an anti-trust lawsuit being brought forward by the government.

taeric 12y ago

I'm not sure I understand your other option. If the government doesn't have control over the flow of wealth, why do you think it will not just increasingly flow to those in power? I understand the concern over governments that are not acting in the best interest of the people. However, abstaining from the process seems a very shaky way to actually get it to act in an appropriate way. More to the point, I thought the entire premise was that investment has been going up for the sake of investment lately. Which means the main people benefiting from the investment of the wealthy, are the wealthy that are investing. This odd conflation of philanthropy with investment just smacks of rationalizing high earnings in an "I deserve it" blanket. Yes, more philanthropy is good. No, more investment isn't the same as more philanthropy. And, no, we don't need to eliminate consumption any more than we need to eliminate investment. Or, rather, I don't know as that we do. (I'm not that bright, all told.) What I do think we need is to increase the benefit to everyone from investment and consumption (and philanthropy). Not just those that are controlling it.

bsbechtel 12y ago
>I'm not sure I understand your other option. If the government doesn't have control over the flow of wealth, why do you think it will not just increasingly flow to those in power? Up until roughly 1903, the US didn't have any personal income taxes. There was a small business tax, and this was it. Gates' own example of old money no longer existing didn't really point to examples such as the Waltons, but to families who have had wealth for hundreds of years due to large estates. He's correct that this wealth no longer exists. My argument would be that it no longer exists because in the 1800s, neither the wealthy nor the labor class were taxed as individuals, r and g roughly equalized and the wealthy didn't maintain their wealth. This phenomenon of extreme inequality started to occur only in the early 1900s, the same time the US first implemented a personal income tax (thus taxing labor more so than wealth, lowering g and raising r).
- taeric 12y ago
  Seems like a very small amount of evidence to base such a large idea on. You could probably form the same argument against the more modern consumption taxes. Since for many this translates to a sales tax, and not the early excise taxes that are covered under the same category. (Right?) Though, your argument falls more heavily on the mistake Gates seems to have also made. The type of wealth that the book refers to as "old wealth" really refers to a rentier based society. This is somewhat important, because much of what would have been the "old money" in the US was effectively disrupted by massive technology changes. It isn't that the old wealth just disappeared, it was not created in such a way that it sustained itself. This is important, because wealth in the modern US does sustain itself. Quite heavily, even.

zdw 12y ago

WRT Common Core, I don't think Gates is doing it to serve some personal benefit - I get that his work with that, and things like Malaria reduction are genuinely motivated by trying to improve the world. The problem is that it's one man's perspective vs. a whole world of reality, and as such the model might not fit and in some areas cause more problems than good. So you end up with a multi-billionare like Gates being able to basically treat the entire US .edu system like his own testing lab. (no comment on whether Common Core is good or not - most of thing things I hear about it seem positive)

bsbechtel 12y ago
>The problem is that it's one man's perspective vs. a whole world of reality This was the point I was trying to make. I agree I don't think in this case he's trying to serve his own personal benefit. However, given he used his money to to implement a program he wanted, it just demonstrates the opportunity exists to use your wealth to push programs that are to your own benefit.

bluthru 12y ago

>The risk with a powerful government that can do this is it can be bought. Only if it is weak and has incentives to do so. Policies like Citizens' United weaken the government and permit capital to further influence politics.

bsbechtel 12y ago
Agreed, although it certainly wasn't the start of it.

crdoconnor 12y ago

>The other option is to limit the power the government has to control the flow of wealth. That's one of the core ideologies UNDERLYING the great shift in wealth from poor to rich: that politics should have no say in wealth allocation. What that ultimately means is that the rules of wealth allocation are decided by the wealthy without democratic oversight. Hence here we are.

bsbechtel 12y ago
>That's one of the core ideologies UNDERLYING the great shift in wealth from poor to rich: that politics should have no say in wealth allocation. Please provide evidence or reasoning to back up why you think this causes money to flow from the poor to the rich.
- crdoconnor 12y ago
  One way: "Limit the power the government has to control the flow of wealth" is a very normal pretext for slashing taxes for the wealthy.
  - bsbechtel 12y ago
    That's what one political party wants you to believe, and quite possibly yes, what the other political party is doing these days. However, if you cut taxes across the board, not just for the wealthy, the concentration of wealth does tend to even out. The statement 'Limit the power the government has to control the flow of wealth' in itself does not mean slashing taxes only for the wealthy. It means the government has limited power to decide who gets what, because what ultimately ends up happening, is the government ends up taking more for itself than providing for anyone else (look at the massive unfunded liabilities in Social Security and Medicare).
    - dragonwriter 12y ago
      > However, if you cut taxes across the board, not just for the wealthy, the concentration of wealth does tend to even out. I don't see any reason or evidence for this, that is, for the proposition that ceteris paribus and independent of the distribution of tax burden, reducing the level of taxation promotes a more equal distribution of wealth. Certainly, to the extent that a given distribution of taxation itself promotes inequality, reducing the level of taxation in with that distribution will mitigate that effect, but your proposition is equivalent to the proposition that every distribution of taxation promotes inequality compared to the absence of taxation, which I don't see any reason to believe. > The statement 'Limit the power the government has to control the flow of wealth' in itself does not mean slashing taxes only for the wealthy. It means the government has limited power to decide who gets what IOW, the thing called government is less the actual vehicle through which society is governed and more of a distracting figurehead for the masses, and the powerful govern through other means -- and still for their own benefit and others expense (but without even the need to provide a show of public participation and concern for the public interest.)

Htsthbjig 12y ago

"The risk with a powerful government that can do this is it can be bought." A government can be bought?, your implicit assumption is that a government powerful enough will serve the interest of others and this is bad. The problem for me is that a government powerful enough will serve their OWN interest, the personal interest of the people in power, and this is bad. Part of my family comes from a former communist country. In theory, it was "the government of the people", in practice it was the biggest concentration of power ever in so few hands, the politburo. And the people there had nothing to do with those that generated wealth. In theory those in the politburo were not rich, in practice they could do or get whatever they wanted. Money was not needed for that. Only one political party, only one company for the entire nation. This meant you could be the best worker in the world, if someone high enough wants you to sweep streets, you seep streets or starve. Not only that, if your brother mother or your sister does something the party does no like(like not getting in bed with someone up), you will pay for it too. People in change of the police(Beria) will rape hundreds of young women and we will only know decades after with zero consequences to those that took part on it. When taxes become too high, over 50% of what you earn, you become a slave of government. The problem is that for people like Piketty taxes are never high enough. Mr Thomas Piketty is French. What we see in countries like France is that 60% of the economy is public. They become more and more communist-central planned. Money is wasted in those societies in terrible malinvestments(like the Great Leap Forward or Qualitative easings), and they never have enough as they are the most incompetent people around until society collapse. If you can buy the government, then you are lucky, it means the power is not monopolized in only one place.

digikata 12y ago
I think my concern is that if the power structure is an Oligarchy, it matters little if the label on the government structure is Communism, or Democracy. The worry from increasing inequality in the west is that we are approaching something like the strict power structure of an old communist country, only from the other direction. E.g. the legal system in America seems to apply unevenly to different classes of people.
- bsbechtel 12y ago