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The rich get richer


Wait, what?  I thought our Messiah was supposed to fix this kind of thing:

We are not all in this together. The UK economy is flat, the US is weak and the Greek debt crisis, according to some commentators, is threatening another Lehman Brothers-style meltdown. But a new report shows the world's wealthiest people are getting more prosperous - and more numerous - by the day.

The globe's richest have now recouped the losses they suffered after the 2008 banking crisis. They are richer than ever, and there are more of them - nearly 11 million - than before the recession struck.
What happened to Hope and ChangeTM?  How about equality?  Deliverance from the clutches of evil bankers and merchants?  Spreading the wealth around?  This is truly horrifying:

Global HNWI (high net worth individuals) population and wealth growth reached more stable levels in 2010, with the population of HNWIs increasing 8.3% to 10.9 million and HNWI financial wealth growing 9.7% to reach US$42.7 trillion. The global population of Ultra-HNWIs grew by 10.2% in 2010 and its wealth by 11.5%.

... The U.S. is still home to the single largest HNWI segment in the world, with its 3.1 million HNWIs accounting for 28.6% of the global HNWI population. Asia-Pacific posted the strongest regional rate of HNWI population growth in 2010 and has now surpassed Europe in terms of HNWI population, expanding 9.7% to 3.3 million, while Europe grew 6.3% to 3.1 million.
Again, what?  The richest Americans actually got a lot richer during the deep recession of 2009 - 2010, with compassionate, justice-loving Democrats like Harry Reid, Nancy Pelosi, and Barack Obama in charge?  How?

I'm confused.  I need to go somewhere and figure this thing out.

(h/t Financial Times)

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Comments (62)

I thought all the 'wealth' ... (Below threshold)
GarandFan:

I thought all the 'wealth' was supposed to get concentrated into fewer and fewer hands.

At least that's a "truth" accepted by liberals.

So how come there are now MORE wealthy people?

Pelosi is the recipient of ... (Below threshold)
Don L :

Pelosi is the recipient of great wealth during this depression -as the liberals say, at the expense of the poor, the little children (who were spared abortion) and disenfranchised. The evil rich (Politicians) keep getting richer at the little guy's expense.

Looks like all the bailouts... (Below threshold)
Matt:

Looks like all the bailouts, stimulus, TARP funds etc were good for somebody. To bad the trickle down theory of economics seems to have dried up.

Of course he rich get riche... (Below threshold)
jim m:

Of course he rich get richer under the dems. Just as their social policies have kept minorities down for decades without any improvement in their lives their fiscal policies are meant to make he rich richer and keep the poor, poor. They get no benefit from lifting the poor out of their poverty and into the middle class. It is far easier to demagogue the issues to the poor and uneducated. Keeping minorities and the poor down means they never have to change their campaign platform.

The Congress, Executive Bra... (Below threshold)
Chico:

The Congress, Executive Branch and Supreme Court are wholly-owned subsidiaries of Big Business and Finance.

This is a permanent condition - they choose the choices you have at the ballot box.

It's called "managed democracy" or oligarchy.

Good observation, GarandFan... (Below threshold)
Michael Laprarie Author Profile Page:

Good observation, GarandFan.

What puzzles me is that we've had Democrats in charge of Congress from Jan 2007 through Jan 2011, and in charge of the White House from Jan 2009 to the present. And during this time, Americans lost over $17 trillion in wealth as a result of the stock market and real estate meltdowns and massive layoffs that occurred in 2008 - 2009.

Yet during the same time, the richest Americans actually became richer! That means that middle and lower middle class Americans bore the brunt of the wealth losses due to the Great Recession. And they are also bearing the brunt of high unemployment and its resulting financial devastation, which has little effect on the super rich.

And I thought the Democrats were supposed to be all about helping poor and middle class people become more prosperous while limiting the unfair advantages of the super rich.

The Congress, Executive ... (Below threshold)
jim m:

The Congress, Executive Branch and Supreme Court are wholly-owned subsidiaries of Big Business and Finance.

Let's make clear that unions, universities and other non-profits should be included under Big Business. Most big universities could land in the fortune 50 given the size of their endowments and non-profits like the Sierra Club and AARP are as big as many multinationals and have far more influence.

Just because you aren't traded on the NYSE or Nasdaq doesn't mean you aren't Big Business.

Well if you want to know wh... (Below threshold)
retired military:

Well if you want to know why the rich got richer just ask Nancy Pelosi. Her net wealth went up by 62% in one year.

I wonder how far up the lis... (Below threshold)
Sep14:

I wonder how far up the list Barry and the wookie have climbed?

For the blue-bloods like Lurchm, Albert and Piggielosi the Great summer to spring BLACK HOLE Depression is a means to an end.

Hey Chico it helps ... (Below threshold)
retired military:


Hey Chico it helps if you are a union member and are owed political favors by the President.

http://dailycaller.com/2011/06/22/private-emails-detail-obama-admin-involvement-in-cutting-non-union-worker-pensions-post-gm-bailout/

New emails obtained by The Daily Caller contradict claims by the Obama administration that the Treasury Department would avoid “intervening in the day-to-day management” of General Motors post-auto bailout.

These messages reveal that Treasury officials were involved in decision-making that led to more than 20,000 non-union workers losing their pensions

What libs say they want and... (Below threshold)
Jeff Blogworthy:

What libs say they want and what they really want are two very different things.

Desperate circumstances make strong prisons.

GTFO who wud've thunk it.</... (Below threshold)
Gladius:

GTFO who wud've thunk it.

Well, I thought under "cons... (Below threshold)
Chico:

Well, I thought under "conservative" orthodoxy, the rich were supposed to be the entrepreneurs who invest and provide the measly jobs that the rest of us should be grateful for. What, you say they're investing in China and Sri Lanka?

In truth, there are only a couple of ways to prevent concentration of wealth - tax policy and law and labor policy and law.

Absent policy and law to keep jobs in the USA and protect collective bargaining, there are a few at the top and a lot of serfs below. This is what the USA is becoming.

Matt: "To bad the trickl... (Below threshold)
PBunyan:

Matt: "To bad the trickle down theory of economics seems to have dried up."

Trickle down economics only works when useful, productive, entrepreneurial types get richer. In the Marxist-lite economy we have now-- thanks to 4 years of Pelosi/Reid and 2 1/2 years of Obama-- entrepreneurs suffer while politicians, union thugs, hedge fund managers, lawyers, and the like get richer. Those types don't add anything of value to society, nor do they create jobs thus their wealth accumulates and concentrates and does not "trickle down".

It is a common belief amongst Democrats/Marxists/Statists/Leftists and public school graduates in the last 25 years, that Marxism creates a classless society. Nothing could be further from the truth. In Marxist/Communist societies-- like what Obama is trying to fundamentally transform us into-- there is (1) a small, ultra wealthy, ruling class; (2) a larger, but still fairly small enforcer class who live quite confortably; and (3) everyone else who lives in poverty.

And we get closer and closer to that leftist utopia every day.

RE: Chico in #5. I think t... (Below threshold)
PBunyan:

RE: Chico in #5. I think that may be the closest to a truthful statement as you've ever posted on this blog.

"Well, I thought under "con... (Below threshold)
DaveD:

"Well, I thought under "conservative" orthodoxy, the rich were supposed to be the entrepreneurs who invest and provide the measly jobs that the rest of us should be grateful for."

I am not sure where you got this impression. Many rising entrepreneurs are not "wealthy". I think that is why they start out as a small business owners or look for venture capital from wealthy investors to bring ideas to the marketplace. I think the very wealthy have the capacity to 'lobby' (cough, cough, re-election donations) to gain favor to stifle upstarts that threaten to too big to fail businesses. So, no, you are wrong about conservatives.

In truth, there are only... (Below threshold)
Jeff Blogworthy:

In truth, there are only a couple of ways to prevent concentration of wealth - tax policy and law and labor policy and law.

Absent policy and law to keep jobs in the USA and protect collective bargaining, there are a few at the top and a lot of serfs below. This is what the USA is becoming.

Not quite. But the other option involves actually getting off your ass and doing something productive rather than waiting for handouts. Not surprising that you would overlook it.

"Policy" is the very cause of the concentrations of wealth.

I am waiting for one of you... (Below threshold)
Chico:

I am waiting for one of you to come up with the brilliant plan to address the concentration of wealth and the demise of the middle class.

Meanwhile, your overlords are borrowing newly-made money for about zero percent at the Fed's windows and making billions lending it to you in a million ways.

@chico:"The Congre... (Below threshold)
ryan a:

@chico:

"The Congress, Executive Branch and Supreme Court are wholly-owned subsidiaries of Big Business and Finance."

Depressing, ain't it?

@jim m:

"Let's make clear that unions, universities and other non-profits should be included under Big Business. Most big universities could land in the fortune 50 given the size of their endowments and non-profits like the Sierra Club and AARP are as big as many multinationals and have far more influence."

That's a good set of points, jim. "Big Business" isn't just WalMart and Coca-Cola, that's for sure.

This whole post illustrates something quite clearly for me: the socio-economic problems we face here in the US aren't simply a matter of left vs right politics. Funny how so many keep casting blame on some politician from across the aisle, yet despite all the changes and elections, similar problems persist from administration to administration (Clinton-Bush-Obama).

Note: Both Bush and Obama were willing to bail out the very folks who were a HUGE part of the financial collapse, by the way. So what does that tell us?

The huge financial collapse of 2008 wasn't merely the result of GW Bush, let alone Obama. It's part of a problem with a longer and deeper history. And these problems are pretty entrenched. Yet the pundits from each side--all vying for political notoriety and power--keep playing the same superficial games:

Liberals: "It's all the filthy Republicans' fault!"

Conservatives: "It's all the socialist Democrats' fault!"

Lather, rinse, and repeat.

@jeff blogworthy:

"Policy" is the very cause of the concentrations of wealth."

Does this mean that you think the free-market will take care of all our social problems? What's your solution to the concentration of wealth issue?

@chico again:

"I am waiting for one of you to come up with the brilliant plan to address the concentration of wealth and the demise of the middle class."

Me too. And hopefully it goes beyond vague proclamations about the magical powers of the "free market."

Does this mean that you ... (Below threshold)
jim m:

Does this mean that you think the free-market will take care of all our social problems?

Yes actually. Policy is causing a distortion of the market which is tipping things in he direction of concentration of wealth.

In a free market wealth is diffused as people come up with new inventions and new services. Consumers have choices and spend their money on these new goods and services. Government, through its regulations, limits the ability of new goods and services reaching the market. Because of this only those already wealthy have the ability to bring things to market or the ability to influence government regulation in order to make their way clear.

Large multinationals like GE can afford to spend millions on lobbying for tax breaks that give them a competitive advantage over smaller players.

For too long the Republicans have been the party of big business (and truth be told the dems are beholden to big business as well). There are signs that the GOP may be becoming the party of the free market. Let's hope that is the case.

"The huge financial collaps... (Below threshold)
Hank:

"The huge financial collapse of 2008 wasn't merely the result of GW Bush, let alone Obama."

That's correct. jim m correctly points out the harm of over-regulation and the following explains what happens when clueless democrats interfere with the economy.

According to a new book, "Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon" by Gretchen Morgenson, currently at The New York Times and financial analyst Joshua Rosner, The 2008 collapse was:

"An unholy alliance between Wall Street, the Democratic establishment, community organizing groups like ACORN and La Raza, and politicians like Barney Frank, Nancy Pelosi and Henry Cisneros."

"If Morgenstern and Rosner are to be believed, the American dream didn’t die of old age; it was murdered and most of the fingerprints on the corpse come from Democratic insiders."

Quotes from http://blogs.the-american-interest.com/wrm/2011/06/07/fanniegate-gamechanger-for-the-gop/

As they say, read the whole thing.

Yes actually. Policy is ... (Below threshold)
Chico:

Yes actually. Policy is causing a distortion of the market which is tipping things in he direction of concentration of wealth. In a free market wealth is diffused as people come up with new inventions and new services.

If the free market had had its way without government intervention, every gas station would be a Standard Oil station. Or by now, they'd be bought out by CNOOC or Lukoil.

Not to mention AT&T and telecommunications.

We're pretty much in the direction of Bank of America and a couple of other banks controlling retail banking, and Goldman Sachs and JP Morgan controlling investment banking - now that they knocked out Lehman Bros.

@ jim m:"Yes actua... (Below threshold)
ryan a:

@ jim m:

"Yes actually. Policy is causing a distortion of the market which is tipping things in he direction of concentration of wealth."

Ok. So you're giving me the stock econ 101 answer about markets. Great. Now, beyond this idealized conception, how do markets take care of problems like corruption, power differentials, crime, etc? They don't. The market system is just as prone to the concentration of power and wealth as any strong state--and that's part of the bigger problem. Free marketeers like yourself pretend that the problem *only* exists on one side of the equation.

You do realize that "the free market" is an idealized abstraction, right? Please provide a real world example of the free market, if you don't think it's just an abstraction that economists use to talk about their theories. What free market society do you have in mind as a model?

@chico:"If the fre... (Below threshold)
ryan a:

@chico:

"If the free market had had its way without government intervention, every gas station would be a Standard Oil station."

Bingo. That's the other side of the problem, even if Milton Friedman fans look the other way.

The problem is that people have this belief in the self-correcting powers of the "free market," but those beliefs are based in faith and not much more.

Time to go back and re-read Adam Smith and realize that he did not think that markets could magically take care of everything, despite what many economists go around saying.

@Hank:"jim m corre... (Below threshold)
ryan a:

@Hank:

"jim m correctly points out the harm of over-regulation and the following explains what happens when clueless democrats interfere with the economy."

So let me get this straight. You think that the 2008 crash was the result of *too much* regulation? This means that you think the traders on Wall Street should have been regulated even less? And this would have solved the problem...how? Have you read much about what was happening with derivatives trading, etc? Do you think that Wall Street should be able to gamble with investors money with no worries about silly things like laws and just let the magical market sort everything out?

Also, how would the free market take care of people like Bernie Madoff? Just wondering.

Ryan a,Sorry, I sh... (Below threshold)
Hank:

Ryan a,

Sorry, I should have been clearer.

With respect to the crash of 2008, I agree with the conclusion drawn by the book:
"Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon".

Not too much regulation, but democrat greed and manipulation of the housing market institutions.

"As they say, read the whol... (Below threshold)
ryan a:

"As they say, read the whole thing."

Ok, Hank. I read it. And it's nothing more than another one-sided piece that is more about politics than actually trying to present a well-rounded assessment of what went wrong. But then, at least the article is pretty up front about its political intentions:

That at least is the story of Reckless Endangerment. No doubt Johnson’s memoirs will tell the story in a different way. The housing bubble and the financial market meltdown were very complex phenomena, many cooks were required to spoil this broth and the arguments over what caused the crash may never end.

Truth is one thing; politics is another. Politically, this story is a killer app for the GOP. It demonizes Dems, lends itself to attack ads, divides Democrats between their Wall Street and union bases, and combines GOP hate figures in ways calculated to unify the GOP and heighten the intensity of the faithful.

The story illustrates everything the Tea Party thinks about the corrupt Washington establishment and the evils of big government. It demonstrates the limits on the ability of government programs to help the poor. It converts a complicated economic story into a simple morality play — with Dems as the villain.

If all you care about is finding ways to get "your side" to win, then this kind of tripe is great. But if you want to move beyond this, well, that requires something a little different.

Hank:"Not too much... (Below threshold)
ryan a:

Hank:

"Not too much regulation, but democrat greed and manipulation of the housing market institutions."

Ok. So how do you feel about Republicans who were also part of the problem? Do you really think this is a problem that comes only from one political side? What was the GOP doing during all of this? Sitting around with halos spinning over their heads?

If you read the article carefully the author makes it clear that the book's argument is an oversimplification that serves the political interests of one side (clearly).

"Time to go back and re-rea... (Below threshold)
DaveD:

"Time to go back and re-read Adam Smith and realize that he did not think that markets could magically take care of everything, despite what many economists go around saying."

I have to confess I have never read The Wealth of Nations. Since this thread will die before I couldr ead his book could you provide some excerpts in this regard. Genuine interest.

Ryan A. Re: "Ok. S... (Below threshold)
Hank:

Ryan A.

Re: "Ok. So how do you feel about Republicans who were also part of the problem?"

They weren't. In 2003 Bush wanted a regulatory overhaul of the housing finance industy. That was opposed and stopped by the dems.

In 2005, McCain co-sponsored a bill to prohibit the GSEs from speculating on the mortgage-based securities they packaged.
Again, shot down by the dems.

I'm reminded of my congressman, Barney Frank, then-ranking member and once chairman of the House Financial Services Committee, who said, “I want to roll the dice a little bit more in this situation towards subsidized housing”?

As far as the crash of 2008 is concerned, the democrats own it.

"Ok. So how do you feel abo... (Below threshold)
Sep14:

"Ok. So how do you feel about Republicans who were also part of the problem? Do you really think this is a problem that comes only from one political side?"


Last time I checked, Frank and Dodd were not in a federal pen and are probably still drawing interest and will most likely collect pensions for fleecing the public trust.

Any repubs involved in this manner should be there as well.

Hey Dave,Well, Smi... (Below threshold)
ryan a:

Hey Dave,

Well, Smith had two different projects that investigated the economy & society. One was The Wealth of Nations, and the other was his Theory of Moral Sentiments (which was a project that he worked on for a longer period of time and kept revising). Many people have heard a lot about the former, and almost nothing about the latter.

The wiki page on "the invisible hand" does a decent job of addressing some of the problems/conflicts with how people have used Smith's ideas over time:

http://en.wikipedia.org/wiki/Invisible_hand

Check out Amartya Sen's introduction to the Theory of Moral Sentiments if you have time (this is the link to the book, but you can't actually access Sen's essay here):

http://books.google.com/books/about/The_Theory_of_Moral_Sentiments.html?hl=eN&id=iS5f-xlvRrwC

Here is another good essay by Sen that talks a lot about Smith:

http://www.nybooks.com/articles/archives/2009/mar/26/capitalism-beyond-the-crisis/

Lastly, here is a great post by the late economist Alison Snow Jones (aka Maxine Udall) that talks a lot about Smith:

http://www.maxineudall.com/2010/10/the-invisible-hand-is-risk-aversion.html

Interesting stuff, especially considering how much people use Smith's ideas. This is one of my favorite side projects right now--although reading through all this stuff takes lots of time. But I find it pretty fascinating.

Hope some of that helps. The basic issue is looking how and why Smith talked about markets, and then looking at how he talked about the role of the state in relation to the poor, etc. He certainly was not all about some pure market system with no government whatsoever. Lots of people only pull from a very slim version of "Adam Smith," if you know what I mean.

Hank,"As far as th... (Below threshold)
ryan a:

Hank,

"As far as the crash of 2008 is concerned, the democrats own it."

They definitely own their fair share of it, that's for sure. But there are plenty of Republicans who do as well. I am not so sure, as you seem to be, that Republicans simply sat around with little halos glowing over their heads. Check this out:

http://factcheck.org/2008/10/who-caused-the-economic-crisis/

Last time I checked, Frank ... (Below threshold)
Sep14:

Last time I checked, Frank and Dodd were not in a federal pen and are probably still drawing interest and will most likely collect pensions for fleecing the public trust.

Addendum: CRIME PAYS!!

Ryan:Does this ... (Below threshold)
Jeff Blogworthy:

Ryan:

Does this mean that you think the free-market will take care of all our social problems? What's your solution to the concentration of wealth issue?

That is the difference between us, apparently. You believe that it is possible to "take care of all our social problems." I do not. In any case, government paternalism causes far more problems than it solves. The answer to the happiest, most peaceful society is the same today as it has always been. As much freedom as possible while still protecting life and property.

Next time, try reading, Jef... (Below threshold)
ryan a:

Next time, try reading, Jeff.

That is the difference between us, apparently. You believe that it is possible to "take care of all our social problems."

Actually, that was a rhetorical question that I asked. Nowhere did I state that I somehow think that all social ills can be magically swept away. But that was a nice attempt at making a facile point by twisting my question around.

Do I think it's possible to take care of all our social problems? Nope. But that doesn't mean that we should simply giving up on trying to do what we can, while we can. But then, I am more of a pragmatist than some sappy idealist anyway. So...do you have any other lame straw man points you would like to bring up?

The answer to the happiest, most peaceful society is the same today as it has always been. As much freedom as possible while still protecting life and property.

Ok. You do realize that the government has always played a role in the US economy, right? So what, in your opinion, is the ideal role of the govt when it comes to the economy? Do you have a certain time period that you feel best exemplifies what you're talking about? Seriously. I'm interested to know, since so many people talk about how much they support the "free market" and "less government" but are often hopelessly vague about what they really mean by all this. When was the economy in the US ever really unfettered by government laws and regulations?

Ryan,I can read ju... (Below threshold)
Jeff Blogworthy:

Ryan,

I can read just fine. You asked the question assuming that "taking care of all our social problems" is a given. Like it is as axiomatic as you live and breath. Now, when I call you on it, you want to backpedal.

As long as your talking about straw men, why did you direct the question to me in the first place? You brought it up, not me.

Are you suggesting that government force is the only way to cure social ills? You do realize that charity existed long before government, right?

But that doesn't mean that we should simply giving up on trying to do what we can, while we can.

And just who is this "we?" If that means individuals choosing to help others of their own volition, then we don't have a problem. The trouble is, that involves WAY too much freedom of choice for some. Do you believe that the job of identifying, cataloging and prioritizing "ills" is yous? If not, whose? That is the inherent problem with centralization, you see. No two people agree on which ills are important or if they are even ills at all. Yet this is another implicit assumption you make. The monolithic "ills" that "we" must try to cure. I have a good feeling I know the meaning of "we."

When was the economy in the US ever really unfettered by government laws and regulations?

Weak. Very weak. Because the U.S. economy has only ever been, say 90% free, there should be no opposition every encumbrance with which we wish to chain it. The "economy" is not an abstract thing. It is the products and services produced by people. The economy at its root is PEOPLE. We the people do not want to be your slaves to direct according to your, or anyone else's, subjective ideas of central planning.

ryan a #32Much app... (Below threshold)
DaveD:

ryan a #32

Much appreciated. I will be doing this homework assignment over the next day or two.

D.

Jeff B,"I can read... (Below threshold)
ryan a:

Jeff B,

"I can read just fine. You asked the question assuming that "taking care of all our social problems" is a given. Like it is as axiomatic as you live and breath. Now, when I call you on it, you want to backpedal."

I asked you a yes or no question, Jeff. I didn't present an argument one way or another about the possibility of fixing all social problems. I asked you the question in the context of talking about the concentration of wealth, and I figured you would get what I was asking (i.e. if free markets take care of problems like wealth concentration, corruption, etc). Tell me when you're done making this more difficult than it needs to be.

"As long as your talking about straw men, why did you direct the question to me in the first place? You brought it up, not me."

Because you argued that "policy" is what leads to the concentration of wealth. So I asked you if you think that the free market would automatically take care of that problem.

"And just who is this 'we?'"

We, being the citizens of the United States. You know, like "we the people"? Is that clear enough for you?

"If that means individuals choosing to help others of their own volition, then we don't have a problem. The trouble is, that involves WAY too much freedom of choice for some."

So you're arguing for a society in which individuals have no obligations to anyone beside themselves? How do you feel about selective service and the draft?

"Do you believe that the job of identifying, cataloging and prioritizing "ills" is you[r]s? If not, whose?"

It's everyone's job. Meaning, it's the job of we the people, just like it says in the preamble of the constitution:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

"That is the inherent problem with centralization, you see. No two people agree on which ills are important or if they are even ills at all."

Granted--and that's a problem with any group of 2 or more people. It only gets worse when we talk about government, whether local or national. So...what's your point? Are you saying that we should just avoid these kinds of discussions altogether? Then what?

"Yet this is another implicit assumption you make. The monolithic "ills" that "we" must try to cure."

Are you arguing that there are no social, political, and economic problems that the US population, as a whole, faces? If there are no monolithic problems or "ills" that our society faces, then why were the founding fathers concerned with talking about upholding "justice" and promoting the "general welfare"?

"I have a good feeling I know the meaning of 'we.'"

Hmmm. Nope. I have a good feeling that you;'re missing the boat and prone to making wild assumptions that are way off base. But, on a side note, that's one book that I would like to read someday. Especially since Orwell apparently ripped it off with 1984. Thanks for the tip.

"Weak. Very weak. Because the U.S. economy has only ever been, say 90% free, there should be no opposition every encumbrance with which we wish to chain it."

Not my point at all. I am not saying that since the US has never had a pure free market system we should all somehow give up and allow some Stalinist state to control our lives--far from it. Why do you make these massive logical leaps? My point is that people often talk about freedom and free markets, but forget that there has been a close connection between states and markets from the get go--for better or worse.

"We the people do not want to be your slaves to direct according to your, or anyone else's, subjective ideas of central planning."

What on earth are you talking about? Have you been reading too much Ayn Rand lately, or what? How do you feel about the federal system laid about by the founding fathers? Do you want to get rid of that too?

"I am waiting for one of yo... (Below threshold)
Wolf:

"I am waiting for one of you to come up with the brilliant plan to address the concentration of wealth and the demise of the middle class."

Boil down the rich and extract all their wealth from their over-moneyed hides.

DaveD:"Much apprec... (Below threshold)
ryan a:

DaveD:

"Much appreciated. I will be doing this homework assignment over the next day or two."

Cool! Let me know what you find out. The whole debate about the "invisible hand" gets economists all fired up, so I'll be interested to hear your take. I still have lots more to read about all this, but the whole debate (and how people take sides) is really fascinating.

Oh, and here's a PDF of an article that Sen wrote about Smith on the 250th anniversary of the publication of The Theory of Moral Sentiments:

ejpe.org/pdf/3-1-art-3.pdf

I have a laugh at the idea ... (Below threshold)
Chico:

I have a laugh at the idea that loans using ghetto real estate as collateral because of the Community Reinvestment Act collapsed the world's financial markets. If you believe that, you are truly retarded. If that had been the case, the crisis would have been milder than the Savings & Loan bubble in the early 90s. Even at the inflated values, there wasn't enough equity in the ghetto to create the kind of obligations to cause a big crisis.

Overvalued ghetto real estate was a small part of the problem, yes, along with huge exurban subdivisions, home equity loans on soaring suburban housing values, consumer debt, and commercial property mortgages.

The real causes of the collapse were the ways all these loans were bundled into securities, and overrated as grade A debt. The mortgage backed securities were in turn used as collateral in highly leveraged loans to buy more stuff, including more mortgage-backed securities, insurance on those securities (credit default swaps), and stocks. A house of cards, or Ponzi scheme. None of the securitization of the loans and the gambling on defaults had anything to do with the ghetto.

Chico I know you're not goi... (Below threshold)
PBunyan:

Chico I know you're not going to be able to understand this (since you are "truly retarded" by your ideology), but without the revisions to the Community Reinvestment Act which forced the banks to make the bad loans there would have been no need for the loans to be bundled into securites nor for credit default swaps. So yes, the loans were the ultimate cause.

Ryan,I've given yo... (Below threshold)
Jeff Blogworthy:

Ryan,

I've given you too much credit. I see I'm going to have to slow it down.

"Policy" is the very cause of the concentrations of wealth."

Does this mean that you think the free-market will take care of all our social problems? What's your solution to the concentration of wealth issue?

I saw through your rhetorical question from beginning to end. The only possible answer to the question is "no" from which I suppose you draw the conclusion that the free market is somehow deficient. That is the crux of your argument isn't it? In which case the basic premise of your argument is faulty. That is the heart of the matter and I went straight for it. Plug anything you like into the question. NO economic system is capable of curing all society's ills because such a thing is impossible. If that is not the premise of the question, (as you certainly implied) then why ask it? Are you telling me now that you have no point? Sorry I'm making this "more difficult than it needs to be" by not playing by the rules in your head.

"What's your solution to the concentration of wealth issue?"

I do not accept the premise of the question. There is no "concentration of wealth issue" that needs curing in a free market. Productive work and creativity produces wealth. Lack of productivity reduces wealth. That's not a problem, it's an incentive. In Communist countries, on the other hand, the "concentration of wealth" problem is self evident.

What generally happens when government gets involved is this. One company or producer becomes more successful than others because it serves its customers better than its competitors. Consumers win. Other companies see this success and, rather than competing in the free market, they lobby the government to "punish" the successful competitor(s). In this way they use government to do by force what they could not do in a fair market. They seize wealth that they do not earn. The more they lobby, the more they seize. Thus, their incompetence is rewarded while the competence of others is punished. As time goes on, wealth is "concentrated" in the hands of the corrupt and incompetent (GM / Chrysler, for instance.)

This is crony capitalism in a nutshell and it is how government policy rewards the evil doer while punishing the fair player.

"Have you been reading too much Ayn Rand lately, or what?"

I don't know. Is that possible? I think the problem is, you have been reading too many Marxists and you don't even know it.

That's all I have time for at the moment.

Jeff B,"I've given... (Below threshold)
ryan a:

Jeff B,

"I've given you too much credit. I see I'm going to have to slow it down."

Ya, that's it. Your argument is so complex that you need to bring it down a notch. You keep telling yourself that one.

"I saw through your rhetorical question from beginning to end."

Good for you. It wasn't all that complicated.

"The only possible answer to the question is "no" from which I suppose you draw the conclusion that the free market is somehow deficient. That is the crux of your argument isn't it?"

Of course the market (in the real world) has deficiencies. Are you arguing that our market systems are somehow flawless? Outside of the pages of econ textbooks, real world markets are definitely imperfect, and anything but the self-correcting machines that some folks pretend they are.

This is where it's time to move past faith and theory to looking at markets as they exist in practice. This doesn't mean that markets are all bad, it means that they don't simply fix themselves magically.

"In which case the basic premise of your argument is faulty."

Are you arguing, then, that the free market has no deficiencies? How so?

"NO economic system is capable of curing all society's ills because such a thing is impossible."

Ok, that's a start. Thanks for answering the question.

"I do not accept the premise of the question. There is no "concentration of wealth issue" that needs curing in a free market."

You must be talking in ideal, theoretical terms here. Right? I asked you a pragmatic question about wealth concentration (which is the subject of the main thread), and you're giving me idealized answers about the free market. Ok, so there is no concentration of wealth problem in the theoretical free market system envisioned by economists. Great. So, moving on to the real world, how do we deal with concentrations of wealth that exist here in the US today?

"Thus, their incompetence is rewarded while the competence of others is punished. As time goes on, wealth is "concentrated" in the hands of the corrupt and incompetent (GM / Chrysler, for instance.)"

I don't disagree with you that these kinds of scenarios can and do occur. State systems certainly can lead to wealth and power concentrations, not to mention corruption, etc. But let me ask you this: Do you think that the private sector is free from these issues? Is the concentration of power and wealth an issue in the private sector? I think the problem can exist on both fronts, and looking *only* at governments as the source of all problems misses a big part of the picture.

"I don't know. Is that possible?"

Yes, I think it is possible to read too much Ayn Rand especially if you take her argument to heart a little too much. Her conceptions of the free market, for starters, are incredibly idealistic and oversimplified. I can understand her motivations, considering her experiences, but her overall arguments (about human nature, the economy, capitalism, markets) are less than convincing.

"I think the problem is, you have been reading too many Marxists and you don't even know it."

Reading too much of anything is a problem, especially if you don't question basic assumptions of particular schools of thought (i.e. classical liberalism, marxism, neoliberalism, free market economics, etc). So trust me, I know what I'm reading.

"You must be talking in ide... (Below threshold)
Jeff Blogworthy:

"You must be talking in ideal, theoretical terms here. Right?"

Wrong. I'm not talking theory at all. A case study of James J. Hill and the shysters he had to compete against illustrates every point I've made. James Hill being the proud market individualist and his opponents being corrupt lobbyists. In fact, Hill is an extremely good illustration of why collusion or cartels do not work. They tried that against him before robbing both Hill and the public together by buying politicians. See a pattern here? The politicians are the problem, not the solution.

Why don't you give me some real world examples of "concentrations of wealth" that were created by markets and not government? Market "concentrations" exist only on a temporary basis until others find a way to compete more effectively or new technology is introduced. This is not something that requires correcting. It is a natural and beneficial cycle and the necessary reward of industry. If anything in our conversation is "theoretical" it is the Nirvana that incessant state intervention is supposed to produce, but never comes to fruition. By contrast, there are many "real world" examples of the monstrous consequences of state intervention.

The state destruction of freedom and personal wealth is happening right here, right now, before your very eyes. For all your talk of the "real world" one must wonder what world it is that you occupy, where you can so easily turn a blind eye to the obvious.

BTW, the wikipedia entry on... (Below threshold)
Jeff Blogworthy:

BTW, the wikipedia entry on Hill is quite a hatchet job. The story has been better told. Hill is a fascinating and admirable character.

Jeff Blogworthy wrote:"By c... (Below threshold)

Jeff Blogworthy wrote:"By contrast, there are many 'real world' examples of the monstrous consequences of state intervention."

Today, in this country, a prime example of this would be the hijacking of Fannie Mae and Freddie Mac by fat-cat Democrats working with banking special interests. Together, they totally wrecked institutions that were supposed to provide a fair and equitable opportunity for Americans to establish home equity wealth by awarding home loans to qualified borrowers. But of course, because Fannie and Freddie were joined with the Federal government, no one will go to jail, and taxpayers will be stuck with the cost of bailing them out and restoring solvency.

Michael,We're on t... (Below threshold)
Jeff Blogworthy:

Michael,

We're on the same page. How about the legalized Ponzi scheme otherwise known as Social Security? After decades of government lies, corruption, and incompetence the program is predictably bankrupt. Now we are supposed to believe that the solution is... more government! Any objective person must wonder at the insanity.

Jeff,"Why don't yo... (Below threshold)
ryan a:

Jeff,

"Why don't you give me some real world examples of "concentrations of wealth" that were created by markets and not government?"

1. How about the traders and bankers in the financial sector who contributed to the 2008 crisis? Or do you simply blame the government for every choice, decision, and action that those bankers and traders made?

2. People like Carlos Slim are a good example of wealth concentration due to the market.

3. Private universities that have massive endowments (Yale, Harvard, etc) and paying their presidents millions while increasing tuition, cutting courses, and paying instructors less and less.

4. The increased ratio between CEO and average worker pay in the US over the last 40 years or so:

The ratio of CEO pay to factory worker pay rose from 42:1 in 1960 to as high as 531:1 in 2000, at the height of the stock market bubble, when CEOs were cashing in big stock options. It was at 411:1 in 2005 and 344:1 in 2007, according to research by United for a Fair Economy. By way of comparison, the same ratio is about 25:1 in Europe.[Source]

I have a strange feeling, however, that you will blame anything and everything on government, pretty much no matter what. I agree with you that government can certainly be a part of the problem. Absolutely. But it's ironic that you think the market and the private sector are somehow magically free from issues with power and wealth concentration, not to mention corruption. As the lateAlison Snow Jones once said (read the whole post if you have time):

We live in a strange world. A world where the avarice of mythical "welfare queens" is accepted blindly and without question and ornate public policies are formulated to guard against it, but the demonstrated avarice (or incompetence if you really believe they didn't understand what they were doing) of real investment bankers, avarice that has done far more harm to all of us, produces public policies, public sentiments, and public rhetoric (at least among some) that encourage more of the same.

"Market "concentrations" exist only on a temporary basis until others find a way to compete more effectively or new technology is introduced. This is not something that requires correcting. It is a natural and beneficial cycle and the necessary reward of industry."

All you are doing here is repeating economic mantras. Concentrations of wealth are not automatically rectified by changes in technology or some natural market cycle. You're talking in completely ideological, idealistic terms here.

"If anything in our conversation is "theoretical" it is the Nirvana that incessant state intervention is supposed to produce, but never comes to fruition. By contrast, there are many "real world" examples of the monstrous consequences of state intervention."

Haha. Yep, I agree with you here. There are definitely plenty of people who romanticize the state and think that that magical marxist nirvana is just around the corner. Plenty of ideological thinking on that front. But then, the ideological folks aren't just the marxists--the free marketeers are just as blinded by their beliefs. That's my argument. And you're providing plenty of fodder for my case by continually making excuses for the private sector. Funny.

"The state destruction of freedom and personal wealth is happening right here, right now, before your very eyes. For all your talk of the "real world" one must wonder what world it is that you occupy, where you can so easily turn a blind eye to the obvious."

I have already acknowledged the fact that the state can be (and is) a part of the problem when it comes to these issues. No argument from me there--and all those politicians who line their pockets are exhibit A. But the state isn't the only problem, and for some reason you are willing to give the private sector (and the market) a free pass. And the ultimate irony is that YOU are making all these charges about willful ignorance and "turning a blind eye"! Don't let the irony smack you in the face, Jeff.

Ryan,I can only co... (Below threshold)
Jeff Blogworthy:

Ryan,

I can only conclude that you are incapable of rational thought or you would not come to me with these examples. Carlos Slim? Really? He is the epitome of the crony capitalists who I was just railing against. If you can't, or refuse to tell the difference, we can't have a meaningful conversation.

Even according to SLATE of all places:

First, the scale of Slim's fortune, and the extent to which it was built on a government-sanctioned monopoly, is scandalously unique. This Wall Street Journal profile provides the background on how Slim leveraged his personal ties to then-President Carlos Salinas de Gortari (and his financial backing of the ruling party) not only to prevail as a bidder in the early 1990s privatization of Mexico's telephone monopoly but to ensure that Telmex remained a poorly regulated monopoly long after its privatization.

Banks? Banks are quasi-government institutions that do exactly as directed.

You mean the 2008 financial meltdown that was precipitated by monetary policy and government coerced "sub-prime" mortgages?

Theoretical? Please. To the extent that financial markets are given a free hand we all prosper. To the extent that the state meddles in financial markets, we all suffer. There is absolutely nothing theoretical about that. Did you follow the Hill link and read it? That's a real man, Ryan. Who built a real transcontinental railroad superior to all the crony-capitalists' with ZERO government help when people "theorized" it was impossible.

Let me try to explain why I have such unshakable faith in the free market. It is simply because it represents the free choices of free people. That's it. When you spend dollars, it is very much the same as casting votes. No one should have the power to force you how to vote. The decision is yours what to choose to improve your life or the lives of others. When the state robs your "votes" and directs them to the "causes" that it deems worthy it is immoral.

Back to our conversation about the definition of "ills." The state has decided that unwanted children are "ills" that must receive the state-subsidized "cure" of abortion. A vote robbed from me to cast for evil.

The state has decided that the incandescent light bulb is an "ill" that must be cured through the subsidy of CFL manufacturers. Another vote robbed.

The state has decided that "carbon footprints" (i.e. human beings and their activities) are "ills" to cure through population and activity reduction. More votes and freedoms robbed.

The state decides that some good is accomplished by forcing my votes for the NEA so "artists" can defecate on and denigrate religious icons, among other things. State subsidized deconstructionism.

I could give a hundred such examples. The state is my master. It is the great decider. It deems its centralized wisdom greater than the collective choices of free individuals.

These are votes that I would never cast on my own, though others might. But those choices have been taken from me, and I am made a slave. If you're cool with that, no amount of argumentation or reasoning will convince you otherwise.

Obviously, I do not argue for zero government. But we are long passed the realm of reason and respectability. Some act as though any reduction in the size of government is equal to anarchy.

Jeff,"I can only c... (Below threshold)
ryan a:

Jeff,

"I can only conclude that you are incapable of rational thought..."

Ok, anytime you're ready to drop this kind of personal crap, let me know.

"Carlos Slim? Really? He is the epitome of the crony capitalists who I was just railing against."

So Slim is a good example of govt/business collusion, which is incredibly common. So how do you determine the boundaries of "the market"? What counts as the free market for you? Absolutely no ties to politics and government? Part of the problem here is that you have an overly-idealistic conception of the market.

"Banks? Banks are quasi-government institutions that do exactly as directed."

So you're saying that bankers and traders made no decisions that were their own, and that the ENTIRE financial collapse was simply due to government intervention? You're telling me that all of the Wall Street traders were simply acting according to government mandates? Hardly.

What about the other examples I brought up? The concentration of wealth among CEOs? Private universities? What about others who have amassed wealth through the market--massive corporations like Google and Microsoft? Are you going to write those off as crony capitalism as well? So what's left?

"Did you follow the Hill link and read it? That's a real man, Ryan. Who built a real transcontinental railroad superior to all the crony-capitalists' with ZERO government help when people "theorized" it was impossible."

Ya, I know about Hill. I saw your reference and let it slide. The Von Mises Institute article is a bit romantic and limited, and it takes pains to avoid making mention of Hill's deep political relationships and connections with Taft, Cleveland, and McKinley. Sorry, but he's not as heroic and free from politics as you seem to believe. He made his share of political contributions--the issue was that he didn't always get what he wanted (especially from people like Teddy Roosevelt). Hill had close personal relationships with more than one president, and he certainly received his share of favors. For more check out the 1988 article about Hill by W. Thomas White: "A Gilded Age Businessman in Politics: James J. Hill, the Northwest, and the American Presidency, 1884-1912."

By the way (and somewhat OT), I first heard about Hill because he is the grandfather of a photographer that does some interesting work, Peter Hill Beard:

http://www.peterbeard.com/

"These are votes that I would never cast on my own, though others might. But those choices have been taken from me, and I am made a slave. If you're cool with that, no amount of argumentation or reasoning will convince you otherwise."

I hear you about the problems with centralized planning and state power, not to mention inefficiency, etc. Markets can serve the purpose of limiting and challenging state power and control, and freeing up local actors from coercive governments, etc. I get it.

At the same time, I don't think that markets automatically take care of themselves, and that if left alone they will automatically correct themselves. I think that's way too utopian and idealistic. Markets are, as I have been arguing, just as open to corruption and power concentration. So there needs to be a balance on all fronts. If you can't accept that, well, then we can agree to disagree. Note, however, that I am not simply dismissing all of your points.

Anyway, thanks for the discussion. Maybe at some point you'll realize that people who disagree with you aren't automatically rabid Stalinists. Just something to keep in mind...

ryan,Please define... (Below threshold)
Jeff Blogworthy:

ryan,

Please define your conception of the "concentration of wealth problem." Do you mean that everyone's wealth should be the same and that no one should be permitted to rise above the mean?

"Government big enough to s... (Below threshold)
Jeff Blogworthy:

"Government big enough to supply everything you need is big enough to take everything you have. The course of history shows us that as a government grows, liberty decreases."
— Thomas Jefferson

Argue with Jefferson, then.

"Markets are, as I have been arguing, just as open to corruption and power concentration."

Baloney. You can't back that up. Capitalism didn't kill 100 million people, starve millions, or send them to death camps.

I do not assert that capitalism is free from corruption. The point is, it is much freer of corruption. Capitalism created the freest and most prosperous nation on earth, and will continue to do so if allowed. Capitalism doesn't force anyone to do anything. Government does. All free-market capitalism needs is a level playing field. The government's role should be limited to prosecution of fraud and enforcement of contracts. Beyond that, I really don't see the point.

As best I can tell, you seem to think that mere inequity of wealth is somehow inherently immoral or unjust. There are serious problems with that view. What is it to me if someone has more money than I do? Does that harm me in some way? No. I am harmed when my OWN wealth is unjustly seized. Capitalists don't force me to do anything. Great wealth is not immoral if it is come by honestly.

You cited Bill Gates (finally.) I actually think he is not a bad example of a capitalist. He didn't take anything from anyone. He earned his wealth by creating and innovating. He makes products that millions of people want and are willing to pay for. The horror!

The problem is not Bill Gates' wealth, it is others' jealousy of it. It is their own greed that cries "seize him and redistribute his wealth!" For no other reason than the fact that he has it.

Jeff,Sorry for the... (Below threshold)
ryan a:

Jeff,

Sorry for the lag in getting back to you. A busy day today.

Please define your conception of the "concentration of wealth problem."

Well, that would be a good term to define, since we are both using it. We could go with the terms mentioned in the main post: HNWI's (high net worth individuals) and UHNWI's (ultra high net worth individuals). The former is defined as someone who has financial assets (not including primary residence) of more than one million dollars, while the latter are above 30 million. So the concentration of wealth "problem," I suppose, would be when the rates of HNWI's increase dramatically. Like when CEO's start making a much higher rate of pay compared to average workers.

The whole point of the main post is about the supposed "concentration of wealth problem," isn't it? What do you think about these numbers? Would you define the term differently?

Do you mean that everyone's wealth should be the same and that no one should be permitted to rise above the mean?

No, that's not what I mean at all. Definitely not. What we are talking about here is when wealth is concentrated in fewer hands at a much higher rate.

"Baloney. You can't back that up. Capitalism didn't kill 100 million people, starve millions, or send them to death camps."

What are you talking about? Now you are confusing the issue a bit. We are talking about markets and state systems, and now you are making specific references--to the USSR I am guessing.

Yes, markets and the private sector are quite open to corruption, wealth concentration, and power concentration. The financial collapse of 2008 illustrated that quite well. Open markets can challenge and curtail the power of states, but they can also be abused. There is no guarantee that individuals who participate in markets systems will automatically act in moral or scrupulous ways. I mean, go check out what Bernie Madoff was up to.

"I do not assert that capitalism is free from corruption. The point is, it is much freer of corruption."

Much freer than what? Look, capitalism is an economic system. It's not as if it guarantees moral behavior. Capitalists have done all sorts of unscrupulous things, from the colonial era to the present day. Have you read much colonial history? How about the histories of slavery in the Americas? Slaves were, after all, one of the main sources of capital in the US south. This doesn't mean that capitalism is automatically bad--it's not. It means that the freedoms of the market, especially without any sort of law or guideline, open up the possibility for profit, yes, but also exploitation. The same can be said of other economic systems, even if they are arranged in very different ways (e.g. feudalism, etc).

"Capitalism created the freest and most prosperous nation on earth, and will continue to do so if allowed."

That make no sense. The US was created by a collection of individuals who rebelled against colonial control and built a new government based upon representational democracy. Many of the founding fathers like Jefferson had strong ideas about limited government, but they also supported trade tariffs, etc. So it wasn't as if capitalism was taking place in the Americas and the US just appeared. The US may have many capitalist elements (even though it has always been a mixed system), but it was not simply formed by capitalism. That's just a weird argument you're making.

"All free-market capitalism needs is a level playing field. The government's role should be limited to prosecution of fraud and enforcement of contracts. Beyond that, I really don't see the point."

Look, go take the time to read about the histories of capitalism and the creation of market systems. You probably won't like him, but check out the work of economic historian Karl Polanyi. Markets were created alongside governments, and have always had a close relation with them (yet they can provide a check on the concentration of power in govts). But governments have always created the rules and set the stages in which markets function.

"As best I can tell, you seem to think that mere inequity of wealth is somehow inherently immoral or unjust."

Nope, not my argument at all. My argument is that great concentrations of wealth and power are problematic, whether we are talking about government or the private sector. Why? Because dramatic concentrations of wealth and power can lead to some seriously unjust, immoral, or unfair social conditions. Wealth in and of itself isn't a problem. But when state governments amass wealth to the detriment of their people, or when ridiculously powerful international corporations run amok over poor populations through the use of sheer political and economic power, we have a problem. You seem to agree with me about the problems with governments, but are unwilling to see what the private sector--whether we're talking about Coca-Cola or some international development firm--is just as capable of corrupt actions.

"Capitalists don't force me to do anything."

Ok. Good for you. But plenty of private sector folks DO force others to do things they don't necessarily want to do, or agree with. And this happens because individuals or international corporations have tremendous political and economic power. Read about some of the histories and politics of international development, then get back to me.

"You cited Bill Gates (finally.) I actually think he is not a bad example of a capitalist. He didn't take anything from anyone. He earned his wealth by creating and innovating. He makes products that millions of people want and are willing to pay for. The horror!"

You asked for examples of concentrations of wealth via the market. I wasn't making any judgments about Gates (Microsoft), just providing an example. Gates isn't evil simply because he's ridiculously rich--and as far as I know he has acquired his wealth in a pretty fair and square manner.

"The problem is not Bill Gates' wealth, it is others' jealousy of it. It is their own greed that cries "seize him and redistribute his wealth!" For no other reason than the fact that he has it."

I guess. For me we have an issue when we have just a few people with TONS of wealth and lots of people eking out a living. Do you think it would be a problem if the rates of the super rich kept increasing dramatically so that a few people held all the wealth and power? I don't. But this doesn't mean that I think wealth is automatically bad. It's all a matter of keeping wealth and power balanced to a certain degree, and this is what the relationship between government and the market/business is all about. Each has to provide a check, since we really do not want power/wealth to be concentrated in any one sector. That's my basic argument here.

PS:Just FYI, and i... (Below threshold)
ryan a:

PS:

Just FYI, and interesting note is that Karl Polanyi's brother Micheal Polanyi was part of the Mont Pelerin Society along with Ludwig von Mises, Frederich Hayek, and Karl Popper, Milton Friedman, and Henry Hazlitt, among others. This was the group that formed the foundation for what is often referred to as "neoliberal" economics:

http://en.wikipedia.org/wiki/Mont_Pelerin_Society

Interesting that the two Polanyi brothers were in such different camps--Karl Polanyi was arguing directly against Hayek in his 1944 book The Great Transformation. Interesting stuff.

Ryan,Since this th... (Below threshold)
Jeff Blogworthy:

Ryan,

Since this thing is scrolling off the page, I'm prepared to end the debate, though I could go on for some time. Soon I would have my own book. This will be my last response. If you choose to reply, I will read it.

anytime you're ready to drop this kind of personal crap, let me know.

You're right. I want to offer my heartfelt apologies.

Regarding the "concentration of wealth problem," I had a feeling we wouldn’t be on the same page.

“What do you think about these numbers? Would you define the term differently?”

I think that any specific numbers you apply are completely subjective, irrational and rooted primarily in emotion. I think that you probably hold to many economic myths from which you will refuse to be shaken. First is the idea that wealth is static. Second is the idea that financial transactions are comprised of winners and losers or predators and victims. I really don’t feel like trying to talk you out of it. Suffice to say, those are fallacies. Because someone else has a lot of money does not mean that there is less in the pool for me. Wealth for one person can be created irrespective of the wealth of others.

Your arbitrary plan to punish the ultra-wealthy would completely destroy the economy within a few years, if not sooner. What people like you fail to understand is that the destruction of the “ultra wealthy” is a disincentive to the very wealthy and in turn would cascade right down the pyramid to the bottom economic strata in short order. The destruction of “them” leads directly to the destruction of “us.”

I am a person of modest means. I have never had a great deal of money and likely never will have. There are a number of reasons for this, not the least of which is that I do not really hunger for money. It is far from the most important thing in my life. I am not obsessed with my wealth or the wealth of others. More would always be nice but I am not willing to pay too high a price in sacrifice and long hours to achieve great wealth. I do own a business though many times I ask myself why. I could have abandoned it long ago to work for others much more profitably. It is likely due to the freedom and independence I would have to give up. It is a trade-off.

Nevertheless, I am privileged to know quite a few millionaires. I am their servant. My business is dependent on their success and I can tell you this; When they catch a cold, I get pneumonia. If they get pneumonia, I die. Do you understand that? My existence is dependent on their ability to be successful. Everything that I can do to help them be successful profits me. That’s the way it works in the real world. The Warren Buffets and Bill Gates of this world do not exist in a vacuum. Multitudes of people sink or swim with them. The ripple effect of their demise would have consequences that you cannot imagine.

Not surprisingly, I define a “concentration of wealth problem” differently from you. I did not pick up the term from some Marxist screed. It has nothing to do with the amount of money anyone has. It has to do with artificial barriers to entry and protectionism that allows one to bar competition from the marketplace and create an unassailable empire. Such a thing can only be accomplished one way: government lobbying and rulemaking. Subsidizing favored industries while taxing others. Granting permits and licenses to some while denying others. Awarding government contracts to industry pets. Rewards for campaign contributions. Propping up prodigal, failing industries that would be permitted to perish in a free market.

You just don’t get it. You have a winning plan for trickle-won misery.

Jeff,"You're right... (Below threshold)
ryan a:

Jeff,

"You're right. I want to offer my heartfelt apologies."

Thanks. Much appreciated.

"I think that any specific numbers you apply are completely subjective, irrational and rooted primarily in emotion."

First of all, they aren't my numbers--I was going with the terms that were brought up in the original post. Second, yes they are subjective. Any limit of that sort is going to be subjective/arbitrary on some level or another. In order to talk about something like this there has to be some sort of starting point in order to move forward--otherwise we are just talking past one another. I agree with you that picking such starting points is quite subjective--but the, defining what "concentration of wealth" means isn't going to be easy, and we would have to start somewhere. I think that a *better* definition would have to include something about the ratio of wealth, rate of change, and also some connection with political power/corruption. I don't know, I'd have to think about this some more to come up with something usuable--and that was why I asked you what you thought. But I definitely understand your critical response.

"I think that you probably hold to many economic myths from which you will refuse to be shaken. First is the idea that wealth is static. Second is the idea that financial transactions are comprised of winners and losers or predators and victims."

Try me. I am not really prone to sticking to a particular economic camp just for the sake of doing so. Don't put me in boxes with your assumptions just because we disagree about some key issues. You keep wanting to color me as some die hard marxist (or something), but you have the wrong person. I have just as many issues with the overly zealous marxists as I do the followers of Milton Friedman. Just sayin.

To continue, I certainly don't think that wealth is static--the wealth of any individual, company, or even nation is always in flux. Wealth is simply a snapshot of financial assets at one point in time. Second, I certainly do not think that finance is simply a zero-sum game. I do think that wealth and concentrations of power can lead to abuses of power, corruption, etc. But this is not automatically so.

"Your arbitrary plan to punish the ultra-wealthy would completely destroy the economy within a few years, if not sooner. What people like you fail to understand is that the destruction of the “ultra wealthy” is a disincentive to the very wealthy and in turn would cascade right down the pyramid to the bottom economic strata in short order."

I didn't actually mention a specific plan, let alone say that I wanted to implement the destruction of the ultra wealthy. For some reason you keep reading a lot into what I am saying here. I DID say that we need a system that check power/wealth concentrations in the public (state) and private (market) sectors. We need a system that is somewhat balanced. Here is what I wrote at the end of the last comment:

But this doesn't mean that I think wealth is automatically bad. It's all a matter of keeping wealth and power balanced to a certain degree, and this is what the relationship between government and the market/business is all about. Each has to provide a check, since we really do not want power/wealth to be concentrated in any one sector. That's my basic argument here.

If you have time, check out a post or two from one of my favorite economists, the late Alison Snow Jones (who was an avid supporter of capitalism, by the way):

http://www.maxineudall.com/2010/10/the-invisible-hand-is-risk-aversion.html

http://www.maxineudall.com/2010/09/private-sector-efficiency.html

"Everything that I can do to help them be successful profits me. That’s the way it works in the real world. The Warren Buffets and Bill Gates of this world do not exist in a vacuum. Multitudes of people sink or swim with them. The ripple effect of their demise would have consequences that you cannot imagine."

Ya, I hear you, even if you don't think I do. Read what I wrote again. I am NOT arguing that we need to simply make everything equal. There are the Bill Gates of the world, and then there are international corporations like the former United Fruit (now called Chiquita) that use their economic power in corrupt ways. My basic argument is that private sector actors like United Fruit can abuse power just as much as any interventionist state government. So there has to be a check on the power/corruption of the market just as much as there has to be a check on any government. I am not sure how else to say it.

"Not surprisingly, I define a “concentration of wealth problem” differently from you. I did not pick up the term from some Marxist screed."

I started using the term after you (and a few others) had already used it here. And since it was never clearly defined, we were clearly talking past one another. That's the problem with not being clear about terms in the beginning--and we both kind of went on tangents based upon our own conceptions of the conversation. It happens. But I am not sure what "marxist screed" you are referring to here. I read everything from Adam Smith and David Ricardo to Marx, Polanyi, von Mises, Hayek, Friedman, Keynes, and so on. I don't belong to some "camp," and am less interested in cheerleading for one side than learning more about contemporary political economy.

"It has nothing to do with the amount of money anyone has. It has to do with artificial barriers to entry and protectionism that allows one to bar competition from the marketplace and create an unassailable empire..."

Ok. Look at the definition you provided for the "concentration of wealth problem." Your definition is so specific that it already includes YOUR answer within the definition. So there isn't much room for any discussion, since you already have your mind completely set. You aren't talking about the concentration of wealth in general, you are speaking specifically about state intervention, period. Your definition doesn't even ALLOW the possibility of wealth/power concentration in any other form, so this discussion is already set before we even start.

I am saying that the concentration of wealth and power is a problem no matter where it happens, whether in state systems or the private sector. You categorically deny even the possibility of the latter, so our conversation can't really go anywhere. I disagree with you, yet I can respect your position. Basically, we are only left with the option of agreeing to disagree, IMO.

Thanks for taking the time to reply to my comments. I always appreciate these kinds of discussions, especially once they actually get going into a more substantial discussion (often many "debates" online don't move much past personal flame wars). I also enjoy these conversations because they are always learning experiences. So I appreciate your perspectives and the time you took to respond. Thanks. I can only ask that you take the time to consider my perspective as well. Until next time.

-Ryan

Ryan, read it. Thanks.... (Below threshold)
Jeff Blogworthy:

Ryan, read it. Thanks.

Quickly. "Your definition doesn't even ALLOW the possibility of wealth/power concentration in any other form, so this discussion is already set before we even start."

Of course it does. A concentration of wealth is nothing more than its uneven distribution. How could one deny that? What I am saying is that "concentration of wealth" is not a problem at all unless it is artificially built and artificially protected. In a free market such concentrations are always temporary because they are subject to fair competitive forces. It may take decades, but nothing lasts forever except government programs. When this country first started it was a popular argument that weak "fledgling" industries (like steel) must be subsidized to "get them on their feet." Guess what? Apparently they never got got on their feet because the subsidies never ended.

If you do not believe that wealth is static, then why would the fact that some have "too much" be a problem as though they were depriving others of the same opportunity? That's illogical.

If you place an artificial ceiling on wealth, you kill the incentives to innovate, experiment, and take risks to make more. This would have the effect of destroying industry as a whole despite your protestations to the contrary.

BTW. The American revolution was chiefly economic. It was a rebellion against British Mercantilism. It was set in place by such things as the stamp act -- economics. Adam Smith's treatise was a diatribe against mercantilism. Shortly after the revolution, men like Hamilton set about betraying it by re-instituting the same system here. It took centuries, but that is what we now have. Capitalism built America. Hamiltonians have nearly destroyed her. Hamilton is a revered figure among the left for good reason.

P.S. I don't mean to put wo... (Below threshold)
Jeff Blogworthy:

P.S. I don't mean to put words in Micheal's mouth and he can correct me it he likes. But the subject of the post was not about UHNW individuals or the "concentration of wealth" problem. That is only what you think and you entirely missed the point. The post is about hypocrisy. Democrats have built their entire identity attacking the wealthy and accusing Republicans of catering to them. A situation that Democrats claim will be remedied if you only vote for them. The point of the post is that their entire identity is based on lies.

Jeff,Sorry again f... (Below threshold)
ryan a:

Jeff,

Sorry again for the lag. You may or may not read this, but I am going to respond anyway. Soon we are going to have an entire book here...

"A concentration of wealth is nothing more than its uneven distribution. How could one deny that?"

Ok, then we agree, at least, on a basic definition of the concentration of wealth. That's a good start.

"What I am saying is that "concentration of wealth" is not a problem at all unless it is artificially built and artificially protected."

How do you define "artificial"? Is cheating, dishonesty, collusion, or corruption in the private sector "artificial" as well?

"In a free market such concentrations are always temporary because they are subject to fair competitive forces."

Always? Again, you are speaking in ideals terms here. But real markets are do not always work this perfectly. People find ways around fair, competitive forces all the time.

"It may take decades, but nothing lasts forever except government programs."

What government programs have lasted forever?

"If you do not believe that wealth is static, then why would the fact that some have "too much" be a problem as though they were depriving others of the same opportunity? That's illogical."

High concentrations of wealth become a problem when they translate to political power, corruption, and unfair practices. Wealth in and of itself it not the problem per se. I have already said this more than once. To use an analogy, political "power" is also anything but static, but there are times when someone can indeed have too much power, no?

"If you place an artificial ceiling on wealth, you kill the incentives to innovate, experiment, and take risks to make more. This would have the effect of destroying industry as a whole despite your protestations to the contrary."

Industry has been subject to regulations and laws from the get go, and yet it has not been destroyed. I am not sure why you think that certain limits or rules will all of a sudden kill all incentives now. I am not talking about putting in some artificial ceiling, but instead of keeping certain rules and safeguards in place. Does it really kill all incentive to tell food producers that the products they make actually have to be somewhat safe and edible? Does it kill financial investors to tell them that they have to give their investors accurate information?

"BTW. The American revolution was chiefly economic. It was a rebellion against British Mercantilism. It was set in place by such things as the stamp act -- economics."

Economics was certainly a big part of the issue, but to boil the entire American Revolution down to an "economic" issue is way too simplified. It was also about politics and political power, about rights, about representation, and about breaking away from colonial control. If it was merely an economic issue, then why did the founding fathers take so much time to write so much about rights, government, and freedom?

"Adam Smith's treatise was a diatribe against mercantilism."

Adam Smith wrote more than one treatise at the time, and two of them (The Wealth of Nations and the Theory of Moral Sentiments) were highly connected projects. Smith was not simply concerned with railing against mercantilism. He was also a moral philosopher who had concerns about individual rights and the obligations of society as a whole.

"Capitalism built America."

Now you're just repeating a mantra. Capitalism is a concept, and an economic system that takes different forms depending on where it takes place. Yes, the US was certainly ingrained in a capitalistic economy--but it was never some pure capitalistic system, even at the start. The US was created by people, with different and sometimes competing ideas and philosophies about governance, economics, politics, and religion. To say that capitalism built America is to severely reduce all other factors that went into the creation of this nation.

"But the subject of the post was not about UHNW individuals or the "concentration of wealth" problem."

Ok, Jeff, now you're getting kind of petty. Yes, the post was about the hypocrisy of Democrats. I get that. Pretty much every post here at W-bang is about that. But HNWI is also the subject, since it is the main issue that is used to call Democrats out on their BS. Don't start devolving into superficial arguments, please.

"The point of the post is that their entire identity is based on lies."

Thanks for pointing out the obvious. I talked about HNWI because it is what was used to make the argument. My intention was to discuss some of the issues of the argument, to debate about the overall point of the author, which is usually pretty much the same around here: Democrats and the left suck, and the Republicans and conservatives are awesome. I have no qualms about calling out the Dems for their BS, but my critical view about them extends to the "other" side as well. Maybe that's where we differ. Who knows.

TYPO. Should read:<p... (Below threshold)
ryan a:

TYPO. Should read:

"My intention was to discuss some of the issues of the argument, NOT to debate about the overall point of the author, which is usually pretty much the same around here: Democrats and the left suck, and the Republicans and conservatives are awesome."




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