Income inequality: left and right
It’s a topic you hear a lot about these days, especially from the left: the growing gap in income inequality, and what it means for the country.
If you’re interested in reading a fascinating perspective on the concept from the conservative side, take a look at this piece by William Voegeli, in which he reviews two recent books on the subject, one by Timothy Noah and the other by Joseph E. Stiglitz.
And if you’re interested in a far greater rarity, a conversation between a conservative (Voegeli, who tore Noah’s book apart in his review) and a liberal (Noah) that’s respectful, content-based, and really quite illuminating, then read this as well.
If you’d like to read even more from Voegeli, here’s a book of his that sounds interesting: Never Enough: America’s Limitless Welfare State.
Whats funny, IMO, is that before this recession income inequality had not really changed much since before all the social programs. I took a sociology class before the recession and the US governments figures showed that income distribution had not changed since the 30s. On the other hand; the pie or wealth in question had grown so you had the ‘poor’ with TVs, ac, cars, cell phones, et cetera…. So; I’d like to lefties to show their sources for claiming it has changed (pre recession; we’re getting hit hard by that).
I have read Voegeli’s book and found it quite interesting. His principle idea is that the left has no defining principle that says “we’ve done enough” for those whom the left want to help. In other words, according to welfare state advocates, we have essentially a bottomless pit of need that we’re supposed to fill. Hence the title of his book: Never Enough.
What many people are referring to when they talk about the 1% are CEOs who receive outlandish salaries and perks, high income investors (hedge fund managers), trust funders, (who didn’t earn their wealth), and anyone who has ostentatious wealth that seems to be unearned. Of this group, only the high end CEOs are a real target for criticsm. Many of them receive outlandish payment for very little value received by their stockholders. Their managerial skills that are overcompensated actually produce less wealth for the stockholders and take capital that could be better employed away from the companies they manage. When companies are poorly managed, it hurts the employees and stockholders (mostly middle class) of those companies.
The trustfunders, investors, and other high earners (movie stars, professional athletes, etc.) all contribute to the economy of the country through investments, spending, and charitable contributions. None of them are adfversely affecting the middle class or poor by being wealthy.
The rise of wealth in this country has been amazing to me. In the 30s people just wanted a sound roof over their heads and a full larder. Today, when I see the many marinas, country clubs, housing developments with McMansions, high end stores, and more; all of which require a lot of spending to exist, I smile inwardly even though I cannot afford any of those things. Their existence shows me that an awful lot of Americans are doing pretty well financially.
It goes without saying that those who lament income inequality seldom include entertainers or professional athletes in their rant. Nor, as a matter of fact, do they mention the growing inequality between pay for government jobs and similar jobs in the private sector. It is only CEO and Wall St inequality that counts.
The problem is that their remedy, which is to confiscate a “fair” amount of earned income, is demonstrably ineffective. The recent news out of France that the very wealthy are emigrating is a fresh reminder. The wealthy know very well how to protect themselves. In this country we have the rather ridiculous confluence of two issues, income fairness and taxes to fund a profligate government, as if there were an actual linkage.
Truth is that for the most part, the incomes of very high flyers in the business world are subject to control by Boards of Directors and/or stockholders. If income disparity is the issue, then proxy elections are where the pressure should be applied. It seldom is. Truth is the market place can impact the incomes of entertainers and athletes very directly as well. If the public were truly disturbed by inequality, they would vote with their pocketbooks. They seldom do. At any rate, keep the government out of this issue.
But, as we know, achieving more income equality is not the issue. Political bombast about inequality is the issue.
I’m tacking on to my last post as I remember details; what has changed is not income distribution but wealth holding. The wealthy hold a higher percentage of the country’s estimated wealth.
That would be an interesting public policy discussion. Re: is this an actual problem? Should tax policy be changed? Et cetera. But from what I know about econ; I’d need to hear some actual arguments as to why it is a problem before agreeing anything needed to be done. Dollars saved and invested don’t make others poor. Wealth ‘controlled by’ the few are still used by the public (loans, capital equipment via stocks, et cetera). They actually fund economic growth… but I can’t think of any democrat leaders that we could have a honest talk about the subject with.
Also; a lot of us are loosing our accumulated wealth day by day due to the Obama double dip. Check your 401k and other investments.
Somehow this is blamed on ‘the system’
How is there ever going to be income equality, when upwards of 40% of urban young people do not graduate high school? What does that qualify you to do?
What a thoughtful, intelligent and civil discussion.
Both have valid points to make, though I did sense a difference between the two in their willingness to acknowledge a valid point made by the other.
Noah, the liberal, declined to address the social issues that Voegeli raised, agreeing that social consensus is preferable, while avoiding agreeing to the undeniable consequences of a society losing societal consensus and clearly views it as an ‘inconvenient truth’ best ignored. That is a form of intellectual dishonesty.
Voegeli acknowledged Noah’s pointing out the societal negatives of too great an income disparity between the haves and have not’s but failed to offer a viable solution, not out of avoidance but rather I suspect because he hasn’t a viable answer.
Each failed to address why there has been little growth in median income, despite huge gains in productivity. Each choose to offer a surface, facile answer that failed the ‘rational basis’ test.
Noah essentially claimed that a selfish 1% failed to ‘share the wealth’ keeping it all for themselves. Ignoring that statistical analysis invalidates that explanation.
Voegeli points out that in the 50’s, America had “7 percent of the world’s population in the late 1940s, America possessed 42 percent of the world’s income and accounted for half of the world’s manufacturing output. American workers produced 57 percent of the planet’s steel, 43 percent of electricity, 62 percent of oil, 80 percent of automobiles.”
Voegeli approvingly points to John Kenneth Galbraith’s ‘The Affluent Society” in which Galbraith states, “the facts are inescapable. It is the increase in output in recent decades, not the redistribution of income, which has brought the great material increase in the well-being of the average person.”
Failing to perhaps realize that Galbraith wrote that in 1958 and that the income disparity each points too began in 1979.
What changed? Entitlement programs reached a tipping point in output vs input and the disconnection by Nixon (for reasons of recovery from recession) of the US money supply from the gold standard, which created our fiat money system in which printing money bares no relation to actual wealth.
IMO, a fiat money system disconnected from a physical measure of wealth, that encourages devaluation of the dollar is largely responsible for derailing the gains in medium income that would otherwise result from greatly increased productivity.
Living on credit has consequence, not just for an individual or family but for nations as well.
I’m going to strike out philosophically (pun intended) on this one. Money is a metaphor. A properly functioning metaphor will attach a correct meaning to an action– money is used to represent exchange, social relationships, to account for value, all of which reduces to human labor. What Keynes noticed is that it is the circulation of currency that is crucial to a financial system- in a liquidity trap, the price of holding cash falls to zero, which means that anybody holding a lot of cash can simply withdraw it from the overall economy, causing a shortfall in demand. The inequality of incomes in the United States is indicative of this situation: the concentration of wealth fragments society, and suddenly we find ourselves unable to sympathize, or effectively communicate, across cultural boundaries. Without a return to full employment, without real economic growth, a return to positive interest rates, etc- we are looking at living in a world where justice will be distributed at the behest of the wealthy. And if that were to happen, money as a metaphor would be transformed: rather than being the useful tool of exchange, it would become a mere method of control.
Two posts in one here . . .
*** POST #1 ***
Henry Scuoteguazza, 11:37 am — “In other words, according to welfare state advocates, we have essentially a bottomless pit of need that we’re supposed to fill. Hence the title of his book: Never Enough.”
I’m reminded of a hypothetical question some libertarian/conservative type put to a hypothetical left-oriented person — maybe Sam Random could take a stab at this, if he were so inclined:
Assuming a vague definition of conservative, in the sense of being ^resistant^ to policies such as taxing higher-income taxpayers more; supporting marriages between (how ’bout among????) homosexuals; affirmative action – type quotas; looking the other way vis-a-vis Hollywood-generated violence and debauchery; et cetera . . .
*** Could you describe a society in which ^you^ would be conservative? ***
(This amounts to a challenge to draw a line limiting what’s “enough”; I’m not going to say “never enough” for some lefties, but I am going to say that I’d love an answer to the question I just posed.)
*** POST #2 ***
thomass, 12:12 pm — “Also; a lot of us are losing our accumulated wealth day by day due to the Obama double dip. Somehow this is blamed on ‘the system’.”
Let me put a little more meat on this one, as a recent retiree.
The environment of microscopic interest rates has redefined traditional retirement planning. To vastly oversimplify, at one fairly recent time, a retiree could live off interest on savings without touching the principle.
[I’m omitting stock / bond / real estate / commodity investments, for example, as well as annuities; I’m not even cranking in accumlated price increases due to inflation. As I already pointed out, I’ve ^vastly^ oversimplified, so my not inconsiderable butt ought to be covered for now. But I think the point for which I’m aiming has validity.]
My point, akin to that of thomass, is that if we try to tread water, we lose, big time. We retirees ^have^ to either dip into our reserves or assume unwanted risk in a world that’s become much more risky lately.
There are two relevant issues in this context. First, income inequality should be considered with respect to cost of living (not including luxuries). Second, income inequality becomes relevant when inflation is an issue, which is why trillion dollar account deficits (among other things) are so loathsome, as it devalues both capital and labor.
Sam Random Says:
Who actually takes money out of circulation? You loose it due to inflation if you do.
M J R Says:
Yes; and the government’s throwing money from helicopters for years is causing extra inflation. Which is just another tax. Its hitting people like you and laying waste to my savings also (I’m still working).
Sam Random, 12:58 pm — “Without a return to full employment, without real economic growth, a return to positive interest rates, etc- we are looking at living in a world where justice will be distributed at the behest of the wealthy. And if that were to happen, money as a metaphor would be transformed: rather than being the useful tool of exchange, it would become a mere method of control.”
This is already true ^ to an extent ^. That state of affairs not ^entirely^ evil. I think a lot of mischief is generated by trying to make the evil better, but humans are very adaptible, and the evil can actually get worse. A lot worse. Humans should have an incentive to accumulate (sufficent!) wealth; the incentive to let the collective do the providing is ^deadly^.
Was it Robert Kennedy who proclaimed (to the effect), some look at things as they are, and ask why; ^I^ look at things as they can be, and I ask, why not? Very utopian, and very misguided, in my rarely humble opinion.
Lefties have this habit of comparing what is, to a perfect society, and proceed to excoriate righties for not partaking of their vision of Eden on Earth. But the socialist utopias have this annoying way of not living up to expectations. WHY? Is it because humans are, wellll, ^human^, and the utopian society is suitable for angelic robots but not for real flesh-and-blood human beings?
The collectivist measures designed to forge a “more perfect union” almost inevitably involve trampling on others’ freedom. The overriding issue is to resolve the two competing visions of lower-case-c collectivism and lower-case-l libertarianism. Lefties tend to favor the first and righties tend to favor the second (we already knew that).
But there is no resolution. There used to be compromise, but as Margaret Thatcher pointed out, pretty soon you run out of other peoples’ money. “R” people once were happy to compromise; not so much now. (The ugly demonization of the “R” people by the “D” people doesn’t help.)
And the beat goes on yeah the beat goes on . . .
MJR,
I don’t know if Robert Kennedy ever said that but if so, he was almost certainly quoting his brother who had already said it.
Sam Random,
When you speak of money, essentially categorically, as a ‘metaphor’, you reveal an understanding limited to fiat currency. Money is far more than a metaphor, unless within the context of a fiat money system. And it is the disconnection of the money supply from any real measure and physical store of wealth, that turns money into a mere metaphor.
In addition, money only “reduces to human labor” when you dismiss the category of commodity. Unextracted ‘treasure’ in the ground has intrinsic value, otherwise a diamond mine and beach sand would have the same intrinsic value.
It is erroneous to assert that the circulation of currency alone is crucial to a financial system. Significantly, you mention liquidity but fail to mention solvency. In a ‘liquidity crisis’ a firm or country has a temporary cash flow problem. (1980’s)
Its assets are greater than its debts, but some assets are illiquid (e.g. it may take a long time to sell a house. Plus a bank can’t suddenly demand a mortgage loan back) Therefore although in theory assets are greater than debts, it can’t meet its current payment requirements upon its debt.
A ‘Solvency crisis’ occurs when a country has debts that it can’t meet through its assets. i.e. even if it could sell all its assets, it would still be unable to repay its debts.
To be insolvent is much more serious because even if you have access to temporary funds, it can’t solve the underlying problem of excess debt.
That is where we are today and the only reason we haven’t experienced sovereign bankruptcy yet is because we are attempting to print ourselves out of debt by massively devaluing the dollar and attempting to pay off the debt with pennies on the dollar. You can only do that when you have a fiat currency that is entirely imaginary.
The Chinese, our main creditor, haven’t acted upon this because it is not in their economic interest to call the debt by refusing to loan to us by buying up our debt. That is why they have begun to buy up real American assets; such as businesses, land and various property, while they can, so that they can insure themselves against a complete loss.
Inequality of income and concentration of wealth is necessary and unavoidable in an economic system that is in alignment with natural economic laws. As long as there is a robust middle class and free movement across economic classes, disparity between the poor and rich is not a threat to societal consensus.
A fragmented society is the result of the loss of consensus in societal values. Cultural ‘boundaries’ are a symptom, they are not causal. One example is the failure to assimilate by immigrants, which has created cultural boundaries, another is the left’s incessant war against capitalism and American traditional cultural values, still another is the entitlement state and another, the racial animosity and class warfare that Obama and the left are encouraging.
None of these have anything to do with inequality of income. That is the rationale being used to reinforce cultural boundaries.
Real economic growth and a return to positive interest rates, etc- cannot occur in a socialistic system, once it has reached a solvency crisis. Which is exactly what the EU and the US are starting to experience. In the EU’s case Germany is keeping the EU afloat. In the US, it is our position as the world’s default currency and our willingness to devalue the dollar, gradually wiping out the middle class’s savings and wealth, that is keeping the Ponzi scheme going.
I’m somewhat on the money is an abstraction side but I see it from a different level. One that questions how much power the wealthy really have over having it.
example: You own 10 share of stocks in a company. So that drill press, a few bricks, and three phones are ‘yours’… while the company is run by the employees and CEO… Multiply it all you want. 1000 shares, 10,000, whatever. As a middle level manager I managed +100,000 dollar projects for my company. But the rich guy has the power or ‘controls’ things? The lefty has to switch into their crazy mode about control (as in the rich control the media and make it right wing and stuff) to argue it.
A diamond mine has “intrinsic” value?
Certainly not. It all depends on supply (which varies by place both on and off earth) and demand which in part is determined by what you use the diamond for. A diamond mine is worthless if you need food and can’t, for whatever reason, make an exchange.
Diamond is just another form of carbon, after all.
Also; the things or actual material value of a company only partially cover it’s market value (I mean; that drill press, three used bricks, and a few old phones are worth how much on ebay right now?). Value also comes from the team running the assets. From workers to managers (your phones and bricks have more value as part of a whole with the employees… on the basis of the returns they generate as a whole)… and ‘owning’ the company or it’s assets does not cover this really since you don’t own the staff… ergo this limits the wealthy’s ‘control’ of both wealth and the economy by virtue of money. Heck; if anything this explains the media from the conservative viewpoint. Doesn’t matter who own’s the camera and the sat dish. The power of the employees subverts the private goals of many of the owners of a news company…
It also explains why some high level managers are deemed worth more, than what leftists might think they are, by the actual stockholders…
“Real economic growth and a return to positive interest rates, etc- cannot occur in a socialistic system, once it has reached a solvency crisis. Which is exactly what the EU and the US are starting to experience.”
We are all Greek.
“In the US, it is our position as the world’s default currency and our willingness to devalue the dollar, gradually wiping out the middle class’s savings and wealth, that is keeping the Ponzi scheme going.”
The demise of the dominance of the USD approaches. China, Russia, India, Brazil, Iran, South Africa, and others are quickly forming alliances to conducted trade in their own currencies. The event horizon arrives when petroleum is no longer priced in dollars. Drill baby drill will become the mantra that even democrats will chant.
Regarding inequality….it’s a bit odd that in one sphere of our society in which those people who like to term themselves ‘progressives’ reign pretty much uncontested – higher education – we can find some of the most extreme examples of inequality.
The tenured professors teach little get paid a lot while their minions do most of the work and get paid almost nothing with zero job security.
}}} Never Enough: America’s Limitless Welfare State.
Oh, there’s a limit, and we’re fast approaching it…
A couple of thoughts:
The Obamasuckers like to whine about all of the capital being hoarded by the rich, which is keeping the economy from booming. That used to be called savings and it was considered to be a good thing. It will come out of the company mattress when there is a chance it can be invested with a reasonable return.
Secondly it seems that the stock market is seeing some increases (the rich are getting richer). Meanwhile unemployment is increasing (the poor are getting poorer). I’m so confused… I thought that only happened when the evil, out of touch Republicans were in office.
One thing that has bugged me at least since the Kemp Gore VP debate is the tendency of politicians to conflate the federal budget and the national economy. When Mr. gore made this mistake Mr. kemp blew right past it and went on to make some lame point. The correct response would have been “No the federal budget is a dependent of the US economy! At best it can be symbiotic with the economy if it works to provide an environment which allows commerce to thrive. At worst it grows into a parasite that deprives the economy of the capital it needs to grow, be productive and provide jobs.”
The current plan to increase taxes on the wealthy, also known as the investor class, will only serve to drain more of the life blood out of our economy.
How appropriate that one of the more visible symbols of the new parasitism is a woman named Fluke.
parker Says:
“The demise of the dominance of the USD approaches. China, Russia, India, Brazil, Iran, South Africa, and others are quickly forming alliances to conducted trade in their own currencies.”
Yes; and their use of dollars was a boost to our economy. Which in turn helped create a brain drain in our favor… its all reversing… while progs shout forward…
Otiose Says:
“Regarding inequality….it’s a bit odd that in one sphere of our society”
Its not just one. Leftists do best with wide class divisions and their policies never resolve that situation.
parker concludes, 9:26 pm — “Drill baby drill will become the mantra that even democrats will chant.”
You seriously underestimate Democrats’ determination to elevate ideology(ies) over common sense and even the common good.
No sweat, brother parker; I often do it as well.
“You seriously underestimate Democrats’ determination….. I often do it as well.”
Fair enough, but I think we should note the widespread panic in NJ & NY post Sandy as democrat inclined voters waited impatiently for a few gallons of gasoline: http://tinyurl.com/d6y7u73
And for your enjoyment, great cover of a Leonard Cohen song by Jann Arden that (IMO) transcends the master: http://tinyurl.com/85fzce4
But everyone’s mileage may differ.
parker, 2:33 am — “I think we should note the widespread panic in NJ & NY post Sandy as democrat inclined voters waited impatiently for a few gallons of gasoline.”
Betcha they’re all still loyal Democrats.
(should’ve added) it’s an abusive relationship.
Nobody tops Maggie Thatcher on income inequality:
“They would rather the poor be poorer, as long as the rich aren’t richer”
Clip – with Maggie supplying visual aids:
http://www.youtube.com/watch?v=okHGCz6xxiw
Big Hint: the Left only start mewling about the “gap in income” when capitalism has made even the poor comfortable…. need to cast about for any thin claim to keep the embers of class warfare smoldering, and fan it into envy and animus.
Brad @ 8:14,
“A diamond mine has “intrinsic” value?”
It most certainly does and while supply and demand will certainly to some extent affect the value, that most valuable form of carbon (due to its intrinsic properties) will always have far more intrinsic value than beach sand.
“A diamond mine is worthless if you need food and can’t, for whatever reason, make an exchange.”
Anything is worthless, if you are starving and cannot make exchange. Other than a brief period, immediately after a civilizational collapse, diamonds will always rate quite high as a store of value and universally accepted as a medium of exchange.
“Diamond is just another form of carbon, after all.” True and if that was relevant to the heart of the issue, you would have a point.
Such tumult and confusion, in the fleeting light of this winter solstice day. There are too many here to respond to each, so I’ll take them all at once and say:
I like thinking in terms of fiat money: it makes things simpler. Why is money? Because Federal Reserve. And that’s all there is to it. You can make a career out of explaining what’s wrong with that, and some people do, but it really is much easier to accept it and get on with it.
I have in the past, in other places, attempted to explain how all that works, how the US Debt is a really important asset for banks, how transfer payments are a part of the mechanism that keeps the dollar circulating, etc. It seems unnecessary to explain too much here. The point is reflected in the performance of Speaker Boehner, which was, from the outset of his tenure, heavily constricted by the unruly caucus of tea party conservatives. The House Republicans seem unable to fully articulate their vision, past the insistence on spending cuts. I claim, this is because they do not really know what they want. Or more precisely, they know what they want, they are merely ashamed to admit it.
And that’s part of inequality. Many Americans fear the future, fear the government, and fear money. So we go in search of an order that is defined by something else- and this is folly. Right now, the economy is built to circulate money through growth. If the money stops circulating, the whole system falls apart. And that means, if we go into recession, we are wasting resources- the long term unemployed become the permanent unemployed, but what are we supposed to do with someone who cannot support themselves? Kick them out to the curb? The longer the economy stays depressed, the more we constrain the future. And for what? Because we are afraid to live in a world that isn’t just like the one we grew up in?
“I have in the past, in other places, attempted to explain how all that works”
But we are just too stupid and ignorant to understand, we have these foolish little notions that you shouldn’t just print money at will and ought to live at least somewhat within our means instead of selfishly deferring the debt payments to our children and grandchildren. Let us all defer to the greater wisdom of Sam Random. He will run the Fed and the Tresury and tell us all how things really are.