This reasoning is flawed. It depends what your cost of living is in the region of the planet you call home. Yes, I suppose you could move to a lower cost of living region, but there are issues with that as well (Oppressive government, Lack of hospitals, Sanitation, no English speakers, etc.)
Who cares about socialist propaganda like this? There is no evidence that "equality" in the distribution of wealth is good for middle class and low income persons. For example, if the distribution were more equal on a relative basis, but all brackets had less money than before, is that supposed to be an improvement?
Equality and massive inequality are both bad because working harder doesn't help one get ahead. You want enough inequality so that those who work harder are awarded more, but enough equality so that everyone has a chance to work harder and get ahead (compared to current day where some of the hardest workers are barely hanging on).
`compared to current day where some of the hardest workers are barely hanging on` I am not sure if I agree. A software developer and a waitress at a restaurant perhaps works equally hard. However one job can be done by a thousand, other can be done by a million different people. One requires mastery, another may not. To me, only people does not work `that` hard are government workers and most academia. And boy they are a lot.
The lower-classes care about it now, and the middle classes are beginning to care more about it; and many of them don't care about the type of evidence you have mentioned. This is why left-wing politics is seeing a resurgence with Corbyn in the United Kingdom and Sanders in the United States.
The happiest countries in the world are those where income equality between the residents of the country is more evenly distributed, people want fairness. The greater concentration of wealth to fewer people and businesses will likely in the near future cause further social upheaval amongst the masses, i.e. those that consider the current system unfair.
The wealth distribution is remarkably skewed. Today it might not mean anything but give it a few years of people having no money yet having bills, loans, mortgages, etc. to pay with no possibility of retirement and you have yourself a prime situation for another French revolution or oppressive police state.
It's not something that you can just let sit, it's going to get bloody if it is not addressed soon. We have seen this everytime in history. It is not possible to sustain such levels of income inequality.
It's fine for some to own nothing in order to have bigger economy on the whole world? Who are we competing with Mars? What a billionaire need more than billion for anything?
You comment just funny since it's the perfect billionaire's first world problem.
> The point is that we should all be deciding what we all need.
Gently, there. There's a big difference in practical outcome between "we've all decided that we need fairer rules" and "we've all decided that we need your stuff".
That's part of why the US isn't actually a democracy. There is wisdom in limiting people's ability to "decide what we all need".
The majority of citizens in a democracy are fooled into thinking they have any influence in their government's decisions:
"Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial
independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no
independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of
Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism."
The US Constitution has been designed to minimise the effect of majority rule. It often takes a hyper majority to get populist laws enacted. The resistance is the strongest in the Senate.
Lots of countries to pick from if you don't like how yours is governed. Vote with your feet if you want to leave, or with your time if you want to stay and change the system. I vote with my time and (more so) my dollars.
It is actually, because we know that relative equality is a bigger contributor to happiness than any sort of absolute growth. Put simply, people would rather be poorer and in the "same boat" as others than be slightly wealthier but face massive inequality. So if you think part of the job of the economy is to maximize human happiness it absolutely matters. http://inequality.org/happiness-and-inequality-study/
I don't think it's ever been about perfect equality. That would never work. Rather it's more about having less inequality.
There will still be a hierarchy and it's not a bad thing but we need to reduce the leverage and power being concentrated in a few hands that have the potential to change everyone else's lives (for better or worse).
I'm a big supporter of capitalism and believe in everyone being able to do what they want and to succeed to whatever levels they can, but we need to have checks and balances when it comes to how wealth can affect the rest of society.
People who work hard and contribute to the economy but still live paycheck to paycheck due to stagnant wages care.
It's an extraordinary proposition that sifting more money to the top instead of paying people fair wages would somehow help the economy.
Turning your example on the head: what if making the distribution more equal would in the long term give all brackets more money, even the very rich ones? Would you then support distributing the wealth for the common good?
Well, according to this report, if you have two families both earning exactly the same (by contributing to the economy in the same manner), but one has $50,000 in the bank, while another has used that $50,000 to put a down payment on a house (perhaps by assuming a $200,000 mortgage), the wealth disparity between the two is enormous.
Debt (when used prudently) is a useful financial instrument and an enabler. In low-rate environment are we really that surprised it's being used extensively?
> Debt (when used prudently) is a useful financial instrument and an enabler. In low-rate environment are we really that surprised it's being used extensively?
Not surprising, of course. I think the difference is, central banks expected the ZIRP to be a chainsaw used to clear enough space for a village, not tear down the entire forest.
What gives you that impression? The second family now has a $250k asset and a $200k debt, so they're worth the same. If you wait ten years and one of them collects 1% interest and the other gets their house value doubled then there's a difference.
Yes it does. The article has some poor wording but the report itself is clear and plenty of people in the thread clarified that:
>The original report states:
Once debts have been subtracted, a person needs only USD 3,210 to be among the wealthiest
half of world citizens in mid-2015. However, USD 68,800 is required to be a member of the
top 10% of global wealth holders, and USD 759,900 to belong to the top 1%.
Which is more clearly stated and uses the same numbers as the Guardian article. https://news.ycombinator.com/item?id=10493143
This is from the Nick Hanauer article I posted above:
"We rich people have been falsely persuaded by our schooling and the affirmation of society, and have convinced ourselves, that we are the main job creators. It’s simply not true. There can never be enough super-rich Americans to power a great economy. I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my “manager pants.” I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn’t do the country much good."
The real problem might just as well be obesity, teenage births, imprisonment, educational performance or drug use.
If inequality is just one of the symptoms and not the real devil, then eradicating inequality would probably be rather destructive. Just like eradicating drug use seems to be destructive, because the underlying cause is mental problems.
Large wealth inequality causes greed, and where there's greed there's corruption.
Furthermore, rich people are powerful and influential. As a result, rules and regulations and choices and decisions are made for them first, then maybe the poor. When it should be the other way around, also known as the [1] option for the poor. Yes, this negatively effects society.
Let's take an extreme case: every person in the world has their wealth increased by 10% over what they have today, except for one person who has his wealth increased by $1 quadrillion.
Everybody is better off, right? Except that wealthy person is going to rule the world, and stack the deck to help himself, and there's nothing that says he's only going to do it in such a way that everybody else keeps increasing their wealth too, or even keeps their wealth at all.
We can see this at work in the US where the political process has become pretty corrupted, to the point that half the politicians act like wealthy people in the US suffer under a tremendously high tax burden when they actually pay less as a percentage than the average person, and the other half pays lip service to getting the wealthy to pay more but only proposes weak measures that never go anywhere, and where systematic lawbreaking in the financial sector that led to a gigantic financial crises went completely unpunished, except for the one guy who made the mistake of ripping off wealthy people.
I agree, wealth and power are closely related right now. But why? We could focus our energies on the distribution of power instead of the distribution of wealth. We could create a world where power and wealth were not so closely correlated. Arguably, our original constitutional government was a lot closer to that than we are today. That was when we had apportionment of 1:100000 in the U.S. House. That was when State governments elected their senators. That was when it was assumed that any State could withdraw from the Union, that any county could withdraw from a State. It was before a massive, centralized federal government.
Wealth is ultimately the codification of power. A dollar is the representation of the power to get somebody else to give you a dollar's worth of value, or do a dollar's worth of stuff for you.
They are not perfectly linked, but I think they tend to come together. If someone has a lot of economic power, which they can use to get a bunch of people to give them things or do things for them, that's an avenue to political power. If someone has a lot of political power, they can leverage that to get economic power.
Your statement about how the original US government was closer to this than today doesn't sound right to me. Weren't only people^H^H^H^H^H^men^H^H^Hwhite men who owned land allowed to vote?
No but thats not the only outcome and it's disingenuous to try and cherry pick one just so that you can make a overly simplistic point.
The Scandinavian countries re-distribute their wealth quite heavily and yet are still some of the richest countries in the world. I.e. everyone is better off.
So do you think this can be applied to say, D.R.Congo, Peru or India? There is a reason Scandinavian countries can have semi-socialistic governments. I have repeatedly say this: it is easy to play Socialism when your population is 1-10 million (All Scandinavian) , when you have natural resources (Norway) or high profit strong liberalized private industry (All). Clearly they will be tested by the coming crises such as emigration, declining prices of production and declining oil prices.
Thats not the point. The point is that re-distribution does not mean that you can't increase the wealth of everyone which was that intended claim my OP.
Germany has a pretty big welfare state and are 80million people and they even had to take on eastern germany.
There are quite huge challenges in keeping the wealth of the nation with current redistribution systems in Nordic countries.
Of course, Norway has oil, so selling it gives money. And Sweden has lots of old money, from the time when ball bearings were selling for good money while everyone else was at war, but it has fallen from the top place of the wealthiest nations where it was decades ago. Finland, on the other hand, is in deep trouble with the same model.
Well, yes. There is currently a problem that economy is choking because the system has caused a massive loss of incentives to giving and taking employment. 10 % unemployment is not very good.
And debt is not yet high but the debt growth is really really bad.
There are some statistical studies that show that in completely free market most of the wealth gets accrued on a few individuals. I.e. the population generates the wealth but only a few gain maximum benefits for a statistical fluke and no specific high performance input of their own. The question is - do we want to modify the free rules with income balancing or not. It's not about in the larger context about should a few pay money from their own pockets for the many - with the statistical view it all never was theirs in the first place. Economies which redistribute all wealth are probably quite inefficient. Economiea which do not redistribute are quite unfair. There's a sweet spot between these two extremes.
I do not think there is a sweet spot, or better to say you cannot stop in the sweet spot. Once you start redistribution, it never stops growing. Governments use social welfare as a bribe for votes. Every election new and larger benefits are introduced to overcome the overly generous competition. Taxes goes higher with different forms. Government hires more and more people. The more nationalization you make the more taxes you collect. Investment, profit and culture of entrepreneurship diminishes So you deviate from the hypothetical sweet spot quite fast. What comes sure next is economical depression.
I don't think there is any civilized government that does not perform redistribution. Taxes are a form of redistribution. Any government functions such as free schooling, are a one way to redistribute the wealth back to society.
My claim is that all governments tend to grow by social means and populism. This may be slow or fast. After a point, prosperity disappears and slowly impoverishment starts.
This sounds to me as an overestimatation of populism as a political force against against defenders of vested inteterests and capital.
Political institutions can and do decay but not all of them so this is not a general rule. As an example, Britain, Sweden, Switzerland have quite old governmemts and they are among the most prosperous countries in the world. When speaking of redistribution of wealth sweden has taken it as far as it can in economic terms and they seem to be going strong ahead - it seems they balance social and business needs quite well.
Nick Hanauer (first non-family investor in Amazon and self-described zillionaire who sold one of his companies for $6.4 billion in cash) believes if current income inequality continues then the pitchforks will come because there is no long term stability in such a society. The middle class are essential to growth and prosperity.
But the problem isn’t that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.
And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last.
If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.
---
The thing about us businesspeople is that we love our customers rich and our employees poor. So for as long as there has been capitalism, capitalists have said the same thing about any effort to raise wages. We’ve had 75 years of complaints from big business—when the minimum wage was instituted, when women had to be paid equitable amounts, when child labor laws were created. Every time the capitalists said exactly the same thing in the same way: We’re all going to go bankrupt. I’ll have to close. I’ll have to lay everyone off. It hasn’t happened. In fact, the data show that when workers are better treated, business gets better.
Just one point: the minimum wage ensures that the disabled, the incompetent, the inexperienced, the frankly semi-useless, the old and a few other losers - anyone beaten to the post by a smart productive young blade - will never ever get a job but can be thankful to subsist, courtesy of the taxpayer, until he or she fades away.
> The evidence suggests that the channel through which inequality hurts growth
is asset bubbles and financial-market instability, so policies that impose adequate oversight in that sector also flow from this research
> The evidence is strongly in favour of one particular theory for how inequality affects growth: by hindering human capital accumulation income inequality undermines
education opportunities for disadvantaged individuals, lowering social mobility and hampering skills development.
There is evidence that the current level of inequality contributes to toxic asset bubbles and the quality of human labor available to industry. I'm not sure how improving both those situations are "bad" for the average person?
> For example, if the distribution were more equal on a relative basis, but all brackets had less money than before, is that supposed to be an improvement?
Yeah, that isn't how it works. Hint: The biggest gains are via education subsidization & shifting the tax burden.
Hell, it can be done with just shifting money from Defense -> Education and removing clauses in the tax code that primarily benefit those making 6 figures. [i.e. Capital gains tricks for multiple residences, mortgage interest exemptions]
No one says "get rid of inequality at any cost" but rather "How can we improve growth by reducing inequality?"
> Reforms to increase human capital are important for improving living standards, and
are also likely to reduce labour income inequality. New analysis shows that a rise in the
share of workers with upper secondary education is associated with a decline in labour
earnings inequality (Fournier and Koske, 2012). Examples of policy initiatives to raise
upper secondary education attainment include inter alia enhanced accountability for
schools, better teacher recruitment and training, and special support for pupils at risk of
dropping out.
> Raising social mobility by making educational outcomes less dependent on personal
and social circumstances should boost GDP per capita by enhancing entrepreneurship, the
overall quality and allocation of human capital and, ultimately, productivity.
> Taxes do not only affect the distribution of income; they also affect GDP per capita by
influencing labour use and productivity, or both (Johansson et al., 2008). Some tax reforms
appear to be win-win options – improving growth prospects while narrowing the
distribution of income. Many, however, may imply trade-offs between these objectives.
Following the same approach as for labour market, product market and education policies
discussed above (Table 5.2), these complementarities and trade-offs are drawn out in
> Reduce distortions in taxing capital income. Tax relief – such as reduced taxation for capital
gains from the sale of a principal or secondary residence – often distorts resource
allocation without boosting aggregate savings and growth, and benefits mainly
high-income groups. Specific tax relief may also provide tax avoidance instruments for
top-income earners. In particular, there is little justification for...
You are right, a discussion of inequality would not be propaganda. But this piece presupposes a solution for a perceived problem and appeals to the popular without supporting its conclusions. The Guardian has a long history of leftist puff pieces. Let's not pretend they are fair and balanced.
The point someone else already made, it seems you are the only one presupposing anything here. Likely because you are abhorrently opposed to "wealth redistribution" or any type of socialistic policy. Based on your OP.
I'd prefer a world where propaganda wasn't mistaken for journalism. I think it's important to label things what they are. Why is this piece propaganda? Because it presupposes a solution for a perceived problem and appeals to the popular. The problem is that the middle class and poor feel like they are struggling. But that's not what this piece says, it simply says that some people have more. Some people have too much. Way too much. It implies that the solution is to "fix" the income of the people that have "too much". See?
As the other response said, this isn't really a propaganda piece. Unless you are reallllly overanalyzing it, which it seems you are. Based on your comment it seems like your own beliefs and opinions were also hard at work projecting themselves on the intentions of the author. Maybe income inequality pieces are appealing so some populist yearning of the middle and lower class. But it is also frustrating because your comment seems to be linked with some underlying belief that socialism is an inherently bad thing. Which, IMO, belongs on a facebook thread of the uneducated and unthoughtful.
Everyone gets mad at me when I say propaganda. But just take a step back for one moment to consider the preposterousness of this wealth inequality meme.
A San Franciscan has a cost of living index that is ten times higher than a resident of Flint Michigan for the same standard of living. Read that statement twice, then realize that the San Franciscan _must_ pay more than twice as much in taxes as a percentage of income just to afford the _same_ standard of living. The hypothetical San Franciscan working an identical job as the Michiganite will not be able to afford the same standard of living. In what world is this "equality"? This is the problem with drawing arbitrary numbers out of thin air and labeling one number "rich" and one number "poor".
Granted, all things diminish on a relative scale in the extremes. A billionaire is rich in San Franciso or Flint Michigan. But how about a millionaire? Who gets to decide to draw the line between them, the citizens of Flint or the citizens of San Francisco! If you just said popular vote you fail. The problem is again with scale, you can't have millions of people voting on the fate of a minority.
This is why a centralized Federal government will never be equitable or fair. The Federal must necessarily be subordinate to the State, and the State subordinate to the municipality.
> The report defines wealth as the value of assets including property and stock market investments, but excludes debt.
How does this make the slightest bit of sense? Counting property but ignoring debt is going to exaggerate the wealth of many Americans by an order of magnitude, for example. Beyond that, one person's debt is another person's investment, so you're double counting all that money.
Even if that's their methodology, I don't think it's that ridiculous. It's not like just anyone can go get an $800k mortgage. On top of that, you would stand to personally profit on any gains the home might see in the real estate market.
To offer a slightly extreme example, I'd consider a recently minted surgeon with $300k in loans, a mortgage, and a $500k base salary to be considerably wealthier than the debt-free small-town auto mechanic making $35k.
Your extreme example is only going to be backwards for a few months, then the surgeon's proper net worth is going to pull ahead. So I'm not sure that's really worth considering too much.
The fact that not everybody can go get an $800,000 mortgage is pretty much accounted for by the fact that you have to put down some sort of down payment, which translates into equity in the house. If you have an $800,000 mortgage then the purchase price for the house was probably $1 million or more, and if the value has held then that's at least $200,000 in net worth.
It's true that the owner stands to profit from any gains the price sees in the real estate market, but they also stand to suffer from any losses.
It really just makes no sense to count a house's value but not the (negative) value of the mortgage on it. For an extreme case in the other direction, someone with a $1 million house that has a $1 million mortgage on it (because, for example, they bought at a higher price and then prices fell) and who can barely afford their payments (perhaps because they took part in mortgage fraud, or just lost their job) should not be counted as wealthier than somebody with a $100,000 house and no debt.
Fortunately, it looks like the actual study does count debt and the wording in the article was just horrible.
> To offer a slightly extreme example, I'd consider a recently minted surgeon with $300k in loans, a mortgage, and a $500k base salary to be considerably wealthier than the debt-free small-town auto mechanic making $35k.
Is this your perception or is it reality? If your hypothetical surgeon overleverages himself to the point where he has less on paper than the auto mechanic, his financial position sounds very brittle. What if there is a large unexpected expense? Like $50k to clean up a mercury spill...
It's reality. The surgeon's monthly gross paychecks will exceed the entire gross annual income of the auto mechanic.
I actually crunched some numbers so you can see exactly what I mean. The surgeon's going to make about $26,000 per month after taxes in Texas (picked somewhat arbitrarily as that's where I live). They're going to pay about $3400/month in loans. And if they got an $800k mortgage, their mortgage payment is going to be something like $4800/month.
Net income: $17800 (i.e., almost 4x their mortgage payment).
Now for the mechanic. Net income: $2400/month. Let's say he gets a $100k home. His payment is about $540/month. So he's got $1860/month left over (i.e., about 3.4 times his mortgage payment).
He's actually less equipped to handle any sort of financial duress than the surgeon, all while living a much more constrained and frugal lifestyle and occupying a house with literally one tenth of the value. The mechanic's situation is actually vastly more brittle than the surgeon's, as on top of all of this the surgeon also has drastically better job security.
Now, sure, you can cook up an example where the surgeon is stretched too thin (e.g., $3-4M home instead of a $1M home, or a collection of exotic sports cars, etc.). However, the fact that the surgeon was even capable of making those unwise purchases in the first place means that they cannot be lumped into the same financial category as the mechanic.
I think the Guardian article meant that they had subtracted debt from assets, but they stated it in a confusing way. The original report states:
Once debts have been subtracted, a person needs only USD 3,210 to be among the wealthiest
half of world citizens in mid-2015. However, USD 68,800 is required to be a member of the
top 10% of global wealth holders, and USD 759,900 to belong to the top 1%.
Which is more clearly stated and uses the same numbers as the Guardian article.
Yes, I believe you're correct. Holy crap is that a terrible way to put it. I wouldn't call "excluding debt" confusing, but just outright wrong. Unless this is one of those dialect things that means something different to the Brits?
Brit here. I wouldn't read "... but excludes debt" as meaning "... but subtracts debt from people's wealth when doing statistics", no. I'd guess I'm about as surprised to see it being used that way as an otherwise-similar non-Brit.
More of an accounting/finance thing, similar to how net price is price excluding tax, net wealth is wealth (assets) excluding debt (loans/liabilities).
I'm not sure if that helps, because here in the US "price" is by default listed before taxes! I would read "net price is price excluding tax" as "net price is price, ignoring taxes," and thus "net wealth is wealth, ignoring debt."
Poor people are not allowed to go into all that much debt. If you have somebody who is $2M in debt, chances are they are wealthy and were only allowed to accumulate all that much debt because of their influence and reputation or some other kind of leverage.
The average graduate who is $40K to $50K is not actually poorer than the homeless beggar who is in the green. They don't live as poor of a life and they have the potential to earn for more.
I'd say that's an argument for counting (discounted) future earnings as part of current wealth, but not for ignoring debt.
Sure, that student isn't poorer than a beggar. But they are poorer than their classmate who has the same degree, same skills, and same financial situation in all other respects, but has no debt.
Somebody with a $500,000 house and a $400,000 mortgage and no savings isn't five times wealthier than somebody living an apartment with $100,000 in savings.
I really hate to break it to you guys: It's always been like this. Maybe not quite THIS extreme, but a very small group of wealthy white men have run the United States since the beginning.
We can learn from it though, the history of inequality does suggest that inequality is an attractor, and equality is an unstable state that would require active management to maintain.
According to census.gov http://blogs.census.gov/2013/03/21/household-wealth-and-debt... at least in the US "changes in overall median net worth observed over the past decade have been driven primarily by changes in one of its major components – equity that American households hold in their homes".
The recipe for greater wealth equality is to subsidize mortgages and restrict new construction, so that everybody's house values move up a notch, which makes everyone feel a little bit better about themselves.
> The recipe for greater wealth equality is to subsidize mortgages and restrict new construction, so that everybody's house values move up a notch, which makes everyone feel a little bit better about themselves.
I assume this suggestion was made "A Modest Proposal"-style, right?
Those are the policies we've been following, and they cause great harm. It's already nearly impossible to buy a home in many American cities if you're not upper middle class at a minimum, and even then you're paying an unsustainable portion of your income. Restricting construction further and subsidizing mortgages (so that home prices simply float up to their current value + subsidy) will put homes even farther out of reach.
I don't think this is particularly surprising or interesting on a global scale. Not least because of the difficulty in data collection that could lead to different conclusions the next time someone tries.
Wealth distribution within a country is an interesting thing to look at, but I think at the global level it's not nearly as compelling as, say, wealth distribution among countries.
Where's the surprise here? It's a variation of Sturgeon's Law.
EDIT: the top 1% of wealthy americans are better producers than everyone else, yes. They are not better people than everyone else, no. How is this so hard to understand to HN-level people?
I don't think you read the stats right to be honest. The top 1% of producers aren't better than the other 99% combined.
And another point: I don't think all of Sam Walton's kids are even in the top 1% of producers even though they are at the very tip-top of wealth owners.
And the top 1% of owners don't have the same wealth as the other 99% in other countries, or even in this country in the past. It's not a normal thing at all.
Wealth disparity may be growing, but I think folks disagree about the source. Some point to tax havens which allow the rich to accumulate wealth without a bit being shaved off and redistributed. They say we need to increase taxes and disallow tax havens to limit wealth accumulation.
I don't think taxes paint the full picture. For the past 7 years or so central banks in the US, Japan, and UK (and recently the European Central Bank) have embarked on aggressive quantitative easing programs, printing and injecting into the economy massive amounts of new cash, propping up banks and stock markets. The first layer that this cash passes through is filled with wealthy folks (i.e. bankers and those with lots of investments). The people at the lower end of the wealth spectrum benefit indirectly through living in an economy which survived and having their investment-backed retirement/pension packages in-tact (for the most part). Thus quantitative easing is fundamentally a regressive stimulus package, with most of the new cash going into the pockets of the most wealthy, and the least wealthy getting table scraps by comparison.
Quantitative easing may have spared us a collapsed global economy, but the effects are increasing wealth inequality. I don't know what the best solution is, and in fact I don't think anybody does. Everyone is kinda shooting in the dark here.
We are living in a consumer economy where an increasing number of jobs are becoming automated. QE is effective in relaxing capital constraints for private industry to thrive but trickle down economics not only doesn't work it certainly doesn't work when you take into account the increasing automation. More than half of Americans live on less than $30k a year. If we want to jump start America we need a minimal viable income. Guaranteed checks to every citizen for them to do what they want. You can argue inflation all you want but without free market economics working for labor we need to tax the rich and siphon that cash back into the hands of the consumer.
I'm not sure if this was addressed in the Credit Suisse report, but these kind of comparisons can be very misleading. The problem is that a lot of people in the bottom 10% have net negative assets (every fresh grad with college loan debt for eg). This skews the distributions, making the wealthy seem richer than they really are.
Suppose A has 50$, B has 30$ and C has -20$ (owes a creditor).
A seems to control ~82% of all the wealth, but B is actually in much better shape than that number suggests.
It’s clear we need government intervention that punishes those that profited richly from the collusion between government and big business. I would recommend letting industry draft any legislation intended to fix this problem.
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[ 3.6 ms ] story [ 152 ms ] threadPrices between country are adjusted to Power parity purchases (PPP)
The happiest countries in the world are those where income equality between the residents of the country is more evenly distributed, people want fairness. The greater concentration of wealth to fewer people and businesses will likely in the near future cause further social upheaval amongst the masses, i.e. those that consider the current system unfair.
It's not something that you can just let sit, it's going to get bloody if it is not addressed soon. We have seen this everytime in history. It is not possible to sustain such levels of income inequality.
Democracy exists for stability on national and international levels. Everything else is just a side effect.
You comment just funny since it's the perfect billionaire's first world problem.
To your point, who are the very wealthy to decide who needs what all on their lonesome?
Gently, there. There's a big difference in practical outcome between "we've all decided that we need fairer rules" and "we've all decided that we need your stuff".
That's part of why the US isn't actually a democracy. There is wisdom in limiting people's ability to "decide what we all need".
"Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism."
http://scholar.princeton.edu/sites/default/files/mgilens/fil...
There will still be a hierarchy and it's not a bad thing but we need to reduce the leverage and power being concentrated in a few hands that have the potential to change everyone else's lives (for better or worse).
I'm a big supporter of capitalism and believe in everyone being able to do what they want and to succeed to whatever levels they can, but we need to have checks and balances when it comes to how wealth can affect the rest of society.
It's an extraordinary proposition that sifting more money to the top instead of paying people fair wages would somehow help the economy.
Turning your example on the head: what if making the distribution more equal would in the long term give all brackets more money, even the very rich ones? Would you then support distributing the wealth for the common good?
Debt (when used prudently) is a useful financial instrument and an enabler. In low-rate environment are we really that surprised it's being used extensively?
Not surprising, of course. I think the difference is, central banks expected the ZIRP to be a chainsaw used to clear enough space for a village, not tear down the entire forest.
>The original report states: Once debts have been subtracted, a person needs only USD 3,210 to be among the wealthiest half of world citizens in mid-2015. However, USD 68,800 is required to be a member of the top 10% of global wealth holders, and USD 759,900 to belong to the top 1%. Which is more clearly stated and uses the same numbers as the Guardian article. https://news.ycombinator.com/item?id=10493143
"Economy" is the measurement of the movement of money.
Rich people hoarding money slows the movement, thereby slows the economy.
Any one wanting to help the economy would logically oppose the ever growing inequity.
"We rich people have been falsely persuaded by our schooling and the affirmation of society, and have convinced ourselves, that we are the main job creators. It’s simply not true. There can never be enough super-rich Americans to power a great economy. I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my “manager pants.” I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn’t do the country much good."
There is a vast amount of evidence. For example, much of it is cited in the famous book "The Spirit Level".
The real problem might just as well be obesity, teenage births, imprisonment, educational performance or drug use.
If inequality is just one of the symptoms and not the real devil, then eradicating inequality would probably be rather destructive. Just like eradicating drug use seems to be destructive, because the underlying cause is mental problems.
Taking a quick glance at the book, they are over 400 such references made in the text.
Furthermore, rich people are powerful and influential. As a result, rules and regulations and choices and decisions are made for them first, then maybe the poor. When it should be the other way around, also known as the [1] option for the poor. Yes, this negatively effects society.
[1] https://en.wikipedia.org/wiki/Option_for_the_poor.
Let's take an extreme case: every person in the world has their wealth increased by 10% over what they have today, except for one person who has his wealth increased by $1 quadrillion.
Everybody is better off, right? Except that wealthy person is going to rule the world, and stack the deck to help himself, and there's nothing that says he's only going to do it in such a way that everybody else keeps increasing their wealth too, or even keeps their wealth at all.
We can see this at work in the US where the political process has become pretty corrupted, to the point that half the politicians act like wealthy people in the US suffer under a tremendously high tax burden when they actually pay less as a percentage than the average person, and the other half pays lip service to getting the wealthy to pay more but only proposes weak measures that never go anywhere, and where systematic lawbreaking in the financial sector that led to a gigantic financial crises went completely unpunished, except for the one guy who made the mistake of ripping off wealthy people.
They are not perfectly linked, but I think they tend to come together. If someone has a lot of economic power, which they can use to get a bunch of people to give them things or do things for them, that's an avenue to political power. If someone has a lot of political power, they can leverage that to get economic power.
Your statement about how the original US government was closer to this than today doesn't sound right to me. Weren't only people^H^H^H^H^H^men^H^H^Hwhite men who owned land allowed to vote?
The Scandinavian countries re-distribute their wealth quite heavily and yet are still some of the richest countries in the world. I.e. everyone is better off.
Germany has a pretty big welfare state and are 80million people and they even had to take on eastern germany.
Of course, Norway has oil, so selling it gives money. And Sweden has lots of old money, from the time when ball bearings were selling for good money while everyone else was at war, but it has fallen from the top place of the wealthiest nations where it was decades ago. Finland, on the other hand, is in deep trouble with the same model.
Finland has slow growth but still doing relatively well. And low (by EU standards) debt.
And debt is not yet high but the debt growth is really really bad.
I don't think there is any civilized government that does not perform redistribution. Taxes are a form of redistribution. Any government functions such as free schooling, are a one way to redistribute the wealth back to society.
Political institutions can and do decay but not all of them so this is not a general rule. As an example, Britain, Sweden, Switzerland have quite old governmemts and they are among the most prosperous countries in the world. When speaking of redistribution of wealth sweden has taken it as far as it can in economic terms and they seem to be going strong ahead - it seems they balance social and business needs quite well.
http://www.politico.com/magazine/story/2014/06/the-pitchfork...
But the problem isn’t that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.
And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last.
If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.
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The thing about us businesspeople is that we love our customers rich and our employees poor. So for as long as there has been capitalism, capitalists have said the same thing about any effort to raise wages. We’ve had 75 years of complaints from big business—when the minimum wage was instituted, when women had to be paid equitable amounts, when child labor laws were created. Every time the capitalists said exactly the same thing in the same way: We’re all going to go bankrupt. I’ll have to close. I’ll have to lay everyone off. It hasn’t happened. In fact, the data show that when workers are better treated, business gets better.
Just one point: the minimum wage ensures that the disabled, the incompetent, the inexperienced, the frankly semi-useless, the old and a few other losers - anyone beaten to the post by a smart productive young blade - will never ever get a job but can be thankful to subsist, courtesy of the taxpayer, until he or she fades away.
Wealth and Democracy: A Political History of the American Rich http://www.amazon.com/Wealth-Democracy-Political-History-Ame...
http://www.pbs.org/now/transcript/transcript_phillips.html
> Who cares about socialist propaganda like this?
Discussing inequality in society isn't "socialist propaganda".
> There is no evidence that "equality" in the distribution of wealth is good for middle class and low income persons.
https://www.americanprogress.org/wp-content/uploads/2013/12/...
> The evidence suggests that the channel through which inequality hurts growth is asset bubbles and financial-market instability, so policies that impose adequate oversight in that sector also flow from this research
http://www.oecd.org/social/Focus-Inequality-and-Growth-2014....
> The evidence is strongly in favour of one particular theory for how inequality affects growth: by hindering human capital accumulation income inequality undermines education opportunities for disadvantaged individuals, lowering social mobility and hampering skills development.
There is evidence that the current level of inequality contributes to toxic asset bubbles and the quality of human labor available to industry. I'm not sure how improving both those situations are "bad" for the average person?
> For example, if the distribution were more equal on a relative basis, but all brackets had less money than before, is that supposed to be an improvement?
Yeah, that isn't how it works. Hint: The biggest gains are via education subsidization & shifting the tax burden.
Hell, it can be done with just shifting money from Defense -> Education and removing clauses in the tax code that primarily benefit those making 6 figures. [i.e. Capital gains tricks for multiple residences, mortgage interest exemptions]
No one says "get rid of inequality at any cost" but rather "How can we improve growth by reducing inequality?"
http://www.oecd.org/eco/growth/49421421.pdf
> Reforms to increase human capital are important for improving living standards, and are also likely to reduce labour income inequality. New analysis shows that a rise in the share of workers with upper secondary education is associated with a decline in labour earnings inequality (Fournier and Koske, 2012). Examples of policy initiatives to raise upper secondary education attainment include inter alia enhanced accountability for schools, better teacher recruitment and training, and special support for pupils at risk of dropping out.
> Raising social mobility by making educational outcomes less dependent on personal and social circumstances should boost GDP per capita by enhancing entrepreneurship, the overall quality and allocation of human capital and, ultimately, productivity.
> Taxes do not only affect the distribution of income; they also affect GDP per capita by influencing labour use and productivity, or both (Johansson et al., 2008). Some tax reforms appear to be win-win options – improving growth prospects while narrowing the distribution of income. Many, however, may imply trade-offs between these objectives. Following the same approach as for labour market, product market and education policies discussed above (Table 5.2), these complementarities and trade-offs are drawn out in
> Reduce distortions in taxing capital income. Tax relief – such as reduced taxation for capital gains from the sale of a principal or secondary residence – often distorts resource allocation without boosting aggregate savings and growth, and benefits mainly high-income groups. Specific tax relief may also provide tax avoidance instruments for top-income earners. In particular, there is little justification for...
A San Franciscan has a cost of living index that is ten times higher than a resident of Flint Michigan for the same standard of living. Read that statement twice, then realize that the San Franciscan _must_ pay more than twice as much in taxes as a percentage of income just to afford the _same_ standard of living. The hypothetical San Franciscan working an identical job as the Michiganite will not be able to afford the same standard of living. In what world is this "equality"? This is the problem with drawing arbitrary numbers out of thin air and labeling one number "rich" and one number "poor".
Granted, all things diminish on a relative scale in the extremes. A billionaire is rich in San Franciso or Flint Michigan. But how about a millionaire? Who gets to decide to draw the line between them, the citizens of Flint or the citizens of San Francisco! If you just said popular vote you fail. The problem is again with scale, you can't have millions of people voting on the fate of a minority.
This is why a centralized Federal government will never be equitable or fair. The Federal must necessarily be subordinate to the State, and the State subordinate to the municipality.
How does this make the slightest bit of sense? Counting property but ignoring debt is going to exaggerate the wealth of many Americans by an order of magnitude, for example. Beyond that, one person's debt is another person's investment, so you're double counting all that money.
To offer a slightly extreme example, I'd consider a recently minted surgeon with $300k in loans, a mortgage, and a $500k base salary to be considerably wealthier than the debt-free small-town auto mechanic making $35k.
The fact that not everybody can go get an $800,000 mortgage is pretty much accounted for by the fact that you have to put down some sort of down payment, which translates into equity in the house. If you have an $800,000 mortgage then the purchase price for the house was probably $1 million or more, and if the value has held then that's at least $200,000 in net worth.
It's true that the owner stands to profit from any gains the price sees in the real estate market, but they also stand to suffer from any losses.
It really just makes no sense to count a house's value but not the (negative) value of the mortgage on it. For an extreme case in the other direction, someone with a $1 million house that has a $1 million mortgage on it (because, for example, they bought at a higher price and then prices fell) and who can barely afford their payments (perhaps because they took part in mortgage fraud, or just lost their job) should not be counted as wealthier than somebody with a $100,000 house and no debt.
Fortunately, it looks like the actual study does count debt and the wording in the article was just horrible.
Is this your perception or is it reality? If your hypothetical surgeon overleverages himself to the point where he has less on paper than the auto mechanic, his financial position sounds very brittle. What if there is a large unexpected expense? Like $50k to clean up a mercury spill...
I actually crunched some numbers so you can see exactly what I mean. The surgeon's going to make about $26,000 per month after taxes in Texas (picked somewhat arbitrarily as that's where I live). They're going to pay about $3400/month in loans. And if they got an $800k mortgage, their mortgage payment is going to be something like $4800/month.
Net income: $17800 (i.e., almost 4x their mortgage payment).
Now for the mechanic. Net income: $2400/month. Let's say he gets a $100k home. His payment is about $540/month. So he's got $1860/month left over (i.e., about 3.4 times his mortgage payment).
He's actually less equipped to handle any sort of financial duress than the surgeon, all while living a much more constrained and frugal lifestyle and occupying a house with literally one tenth of the value. The mechanic's situation is actually vastly more brittle than the surgeon's, as on top of all of this the surgeon also has drastically better job security.
Now, sure, you can cook up an example where the surgeon is stretched too thin (e.g., $3-4M home instead of a $1M home, or a collection of exotic sports cars, etc.). However, the fact that the surgeon was even capable of making those unwise purchases in the first place means that they cannot be lumped into the same financial category as the mechanic.
See page 11 from: https://publications.credit-suisse.com/tasks/render/file/?fi...
Poor people are not allowed to go into all that much debt. If you have somebody who is $2M in debt, chances are they are wealthy and were only allowed to accumulate all that much debt because of their influence and reputation or some other kind of leverage.
The average graduate who is $40K to $50K is not actually poorer than the homeless beggar who is in the green. They don't live as poor of a life and they have the potential to earn for more.
Sure, that student isn't poorer than a beggar. But they are poorer than their classmate who has the same degree, same skills, and same financial situation in all other respects, but has no debt.
Somebody with a $500,000 house and a $400,000 mortgage and no savings isn't five times wealthier than somebody living an apartment with $100,000 in savings.
The recipe for greater wealth equality is to subsidize mortgages and restrict new construction, so that everybody's house values move up a notch, which makes everyone feel a little bit better about themselves.
I assume this suggestion was made "A Modest Proposal"-style, right?
Those are the policies we've been following, and they cause great harm. It's already nearly impossible to buy a home in many American cities if you're not upper middle class at a minimum, and even then you're paying an unsustainable portion of your income. Restricting construction further and subsidizing mortgages (so that home prices simply float up to their current value + subsidy) will put homes even farther out of reach.
This is a recipe for increasing wealth equality, an abstract statistical value the press tells us we should be outraged about.
https://chrome.google.com/webstore/detail/%E2%9A%A1%EF%B8%8F...
Does seem odd me to point that out on a Guardian link - it's never struck me as particularly slow (on mobile or otherwise).
Wealth distribution within a country is an interesting thing to look at, but I think at the global level it's not nearly as compelling as, say, wealth distribution among countries.
Top 1% singers better than the remaining 99%.
Top 1% sprinters better than the remaining 99%.
Top 1% producers better than the remaining 99%.
Where's the surprise here? It's a variation of Sturgeon's Law.
EDIT: the top 1% of wealthy americans are better producers than everyone else, yes. They are not better people than everyone else, no. How is this so hard to understand to HN-level people?
And another point: I don't think all of Sam Walton's kids are even in the top 1% of producers even though they are at the very tip-top of wealth owners.
And the top 1% of owners don't have the same wealth as the other 99% in other countries, or even in this country in the past. It's not a normal thing at all.
I don't think taxes paint the full picture. For the past 7 years or so central banks in the US, Japan, and UK (and recently the European Central Bank) have embarked on aggressive quantitative easing programs, printing and injecting into the economy massive amounts of new cash, propping up banks and stock markets. The first layer that this cash passes through is filled with wealthy folks (i.e. bankers and those with lots of investments). The people at the lower end of the wealth spectrum benefit indirectly through living in an economy which survived and having their investment-backed retirement/pension packages in-tact (for the most part). Thus quantitative easing is fundamentally a regressive stimulus package, with most of the new cash going into the pockets of the most wealthy, and the least wealthy getting table scraps by comparison.
Quantitative easing may have spared us a collapsed global economy, but the effects are increasing wealth inequality. I don't know what the best solution is, and in fact I don't think anybody does. Everyone is kinda shooting in the dark here.
Suppose A has 50$, B has 30$ and C has -20$ (owes a creditor). A seems to control ~82% of all the wealth, but B is actually in much better shape than that number suggests.