Income inequality is not the problem, it's a symptom
blog.rongarret.info
blog.rongarret.info
The op explains very succinctly the problem in this quote:
> what is happening is that the ultra-wealthy are using their disposable income to buy political influence, then using that influence to get laws passed that allow them to collect rents.
My primary beef with American politics is the "solutions" are always in the form of bandaids - they focus on the effect, not the root cause. The recent healthcare laws are a prime example. How to handle the rise of ISIS is another. Both were caused, or at least compounded by misinformed short-sighted policy. The answer is rarely "more laws". Especially when more laws was what lead to most of these problems in the first place. It's like writing more code around terrible code when what is really needed is a total refactor and proper test coverage.
Ending cronyism is fairly straight-forward. But stacking on more law is only going to exacerbate the issue, because like the op explained - the well-connected are just going to buy more political influence and have the laws crafted to benefit them. Taxation is more complex. Increasing taxes is often a solution proposed. Fine, but first - the government needs to prove that they are good stewards of our money before reaching into my back pocket for more. Otherwise, that increase is going to end up as farm subsidies and in the pockets of "defense" contractors.
Sort of the issue is that their is a systemic change taking place globally and it moves at a compounding rate.
Most governments on a micro scale, are inefficient snd comprised of largely unaccountable people. They make (benevolent/naive view) decisions but are ill equipped with the skills to make the proper ones or (cynical) intentionally extract bwnefit. On a macro stage, we are still dumping money into infrastructure in competition with eachother. If we had all the best engineers working on space for example and collaborating, this would be good, or working to solve things collaboratively.
Luckily as PG notes there is a massive defragmentation. I would argue this is great. Agency is redestributed to people in this way and the effects of this will be evident in ~5 years when the laggard affects of technology overtake many legacy industries.
Cable is being challenged.
The monetary system is being challenged.
This election cycle will highlight apathy. It will be realized soon enough that the government will have much less power and is thus, less neccessary.
Etc.
Also, I just saw The Big Short. The L3 money supply (which is super complicated and I don't pretend to fully grasp) is basically mbs in ~2005.
cable tv is being replaced by internet service through the same provider, with the fiber optic deployments being limited by legislation lobbied for by the original cable tv providers.
>The monetary system is being challenged.
Total BTC is about 4 billion usd, much smaller than most nations currency circulation.
Google has bid on spectrum bandwith, don't have time to cite but Chris Sacca mentions it in basically every interview, just to keep Telecom players in check. They are an ISP now and have other holdings in the space.
Facebook is trying to bring internet to india.
People are building their own networks.
NYC announced it would put wifi in where phonebooths once stood.
> BTC marketcap is 4B
It has a cap of ~6.5[1] according to coinmarket. Obviously not a lot however the upside potential is large and there are many uses for the technology. Ethereum and Stellar are pretty awesome and Patrick Collison helming stripe might be keen to expand their BTC. So if stripe increases the infrastructure and people become more receptive it will become larger. I am not saying that it will replace u.s currency next year but obviously paper money isn't the currency of the future and clearly there needs to be oversite on how money is created. So something like BTC will obv win long term.
[0]http://www.wired.com/2015/06/elon-musk-space-x-satellite-int...
His essay is about a _re_-fragmentation, which is the opposite of a defragmentation. If this was just a typo, ignore me, but I wasn't sure if you had misunderstood the metaphor he was using.
I hope this means that as these descriptors fade, people will relate on individual levels and cooperate. Essentially, this is how society improves and the "income inequality" will be offset by the better measuring stick quality of life. i think that fragmentation in pgs sense, from companies and old patterns, is good.
Smart people are getting wealthy and, while am edge case, Elon Musk has had an impact on earth that it could accelerate the pace of technology by decades. So it doesn't matter if income goes down, people can fix the world for a lot less than they used to be able to and things tend to approach their marginal cost.
Tl, dr am bullish on the individual, technology and less structured institutions.
And by the way it is also possible that democracy was only possible because of mass conscription - the state needed the masses so the masses got some share in power.
> The reality is that for the past 40 years, Wall Street and the billionaire class has rigged the rules to redistribute wealth and income to the wealthiest and most powerful people of this country.
I am rather puzzled that this idea gets so much traction. Does anyone really believe that if only the rules weren't "rigged" local shops and businesses would be able to compete against Wal-Mart and Amazon? Do people really believe that it's only because of "rigged" rules that big employers are downsizing and shipping production overseas?
It's wishful thinking. The rules don't drive rewards to the top. It's intrinsic to the free market.
How is it possible that we are completely and utterly optimistic about breaking all sorts of physical barriers, like landing on Mars, and reusing rockets, and communicating worldwide via little handheld microcomputers, and reattaching body-parts, and aiming to live forever, and do all sorts of crazy biological engineering.
And yet trying to imagine a world were you don't have billionaires having lavish parties while people starve or drone in soul-sucking jobs, or where sweatshops are deemed "bad but better than the alternative", or indeed any sort of radically different social arrangement is seen as hopelessly naive or regressive.
He had better examples, something about a dude with a bifurcated tongue. But the idea stuck with me- what's up with the bounds of our imagination? How come they're limitless when it comes to facing off against gravity, and completely defeatist when it comes to erasing class distinctions?
In my experience, that's only true in America.
People in Canada, Australia, England and Argentina and perfectly happy to discuss and debate ideas and ways to remove (or drastically reduce) class distinctions. Politicians even enact policy to do it.
I think the propaganda of "The Communists" has been drilled into the American public so solidly, it's not only un-American to suggest a change to the status quo, it's also considered utterly impossible.
Source? Also what do you mean richer than the UK?
But most people seem to tend to think that communism requires some kind of pure altruism to work (and to be fair, there have been socialist and communists that also believed that), but a central aspect of Marxism is the opposite:
The working class must learn to value its own work and not buy into the subjective moralism of the capitalist classes (that tend to ascribe virtue to wealth: if you're rich, it is generally assumed to be an indicator you have worked hard, while poverty equally is suspect), but be willing to grab the proceeds of their labour. Marx spent a considerable amount of time ripping to shreds early "utopian socialism" (Fourier, Owens et. al) for failing to understand this amongst other failings.
The very insistence of revolution as the mechanism for social upheaval in Marxism is explicitly that Marx did not believe that the ruling classes would be willing to give up privileges willingly even in the face of election defeats, and so once a sufficient working class majority comes into being, sooner or later there would be conflict.
An egalitarian system according to Marx is a desirable, advanced stage of society, but it will come into being, he argues, not because it is the right thing, but because it is the only possible next step: the working classes can only overcome the power of the capitalist classes through sheer numbers, and can unite only because capitalism eventually creates a situation where carving up the pie equally becomes a net improvement for a rapidly growing majority: The rational choice for most of us to maximize our own wealth is an equal distribution the moment the majority of wealth is health by a minority of people, because most of us will otherwise be in the majority that receives less (and for this reason he was insistent that a socialist revolution would fail if attempted somewhere not advanced enough to allow redistribution to eradicate poverty - if it instead merely spread poverty out, class struggles would resume).
I'm skeptical that America has enough social cohesion for such a thing to be fully implemented here. Literacy and median wages are fine for the white majority, so we've got most of the trappings of a social democracy for white America. Why would Americans use the state to benefit all people when Americans aren't even willing to put agents of the state on trial when they kill unarmed black people?
Yes, minimum wage affects different races differently. But so does everything else. And one thing I'm pretty sure about : the rich are pushing down minimum wage for reasons that have nothing whatsoever to do with race. Even if the people involved are racists, it still would have little to do with why this is happening. So race is absolutely not relevant to this discussion.
The way this works is that money is being used to make a subgroup of our society desperate enough to do whatever a number of rich folks want them to do, no questions asked. Nobody really cares who's in this subgroup, as long as it's not them and they're sufficiently desperate.
So can we please shut up about whether the amount of melanin in the upper epidermis of some subgroup of the poor is small, medium or large and start talking about the economics at work here ?
If your solution to a problem requires unity, you probably need to find another solution. America is not united.
https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2014
I guess income inequality measures result in less favorable comparisons than basic measures of wages.
> 98% of the US has completed at least 5th grade.
There's a lot of illiteracy in the US.
https://en.wikipedia.org/wiki/Literacy_in_the_United_States
> The study, the most comprehensive study of literacy ever commissioned by the U.S. government, was released in April 2002 and reapplied in 2003 giving trend data. It involved lengthy interviews of over 90,700 adults statistically balanced[clarification needed] for age, gender, ethnicity, education level, and location (urban, suburban, or rural) in 12 states across the U.S. and was designed to represent the U.S. population as a whole. This government study showed that 21% to 23% of adult Americans were not "able to locate information in text", could not "make low-level inferences using printed materials", and were unable to "integrate easily identifiable pieces of information." Further, this study showed that 41% to 44% of U.S. adults in the lowest level on the literacy scale (literacy rate of 35 or below) were living in poverty.[2]
No it doesn't
https://en.wikipedia.org/wiki/List_of_OECD_countries_by_heal...
As for erasing class distinctions, consider the possibility that we already have. Imagine telling a person in 1915 about the world today; the children of rich struggling hard in school with the goal of getting a job where they can work hard in order to provide consumption for the poor (who mostly don't work). These rich people will wear the same hoodies and turtlenecks as anyone else, live in moderately larger houses than the poor (or at least in moderately nicer locations), and have virtually no goods and services that are unavailable to the poor.
Would this modern world not count as wildly imaginative?
Could you point me to the place in Picketty where he does more than speculate about how the wealthy gain more wealth?
These investments manipulates markets such as real estate to perpetually increase value of their investments without positive impact on society.
You seem to be confusing middle class NIMBYs (the main people manipulating real estate markets) with the very rich. Middle class homeowners are the ones preventing new construction, it's the wealthy developers who are trying (and failing) to be productive.
As they buy up premium estates in major cities around the world, supply gets constrained, more people gets priced out of home ownership and must agree to pay ever increasing rents to those investors.
You are deeply confused. Buying up housing does not reduce the supply of living space; similarly, a rich person investing in a copper mine does not reduce the supply of copper. If the rich person makes improvements (e.g., buying land and building flats on it, buying a copper mine and expanding it) then they increase the supply.
Again, where in Piketty's book do you believe he shows that the rich buy up and artificially limit the supply of a scarce resource? Please cite a page #.
As per Piketty's book, read this paper which has analysis on where major capital gains for rich come from: http://www.mit.edu/~mrognlie/piketty_diminishing_returns.pdf.
A poor person today is richer in many ways to the rich of 1915 thanks to technological advance, but there still is a huge gap between the opportunities of the poor today and those of the ultra rich.
More fundamentally I just don’t think it is good for the ultra rich to live a life that is so different to the rest of society. These people have an enormous amount of power and it is not good for the rest of us if they live a life detached from the worries and concerns of us common folk. You just can’t make good decisions on the basis of bad information and if this is formed from the worries and concerns of your ultra rich friends and you then you are going to end up with a warped perspective of what life for most people.
Why not? So Jay Leno has a 10,000 sqft garage and 500 cars, what do I care? Tom Cruise doesn't affect my daily life. Politicians do, and most of them are rich but not ultra rich.
People will always have a warped perspective of others, that's just how the human brain works. In fact we discuss that on HN frequently, how Silicon Valley can seem so clueless solving "white first-world problems".
The ultra rich have a very large influence over politicians. This is why they are important. If they just spent their time flying around in private jets and talking to each other then it wouldn't matter - once they start to have a very large influence over public policy it matters what they think.
In regards concrete claims the ultra rich appear to far more to the economic right than the average person. I am sure you are aware of this.
Is it therefore reasonable to say "I think the lives of people who read Scott Sumner's blog are fundamentally different to the average middle income person in the same way that royalty lives a different life to a commoner"? If not, why not?
The ultra rich live a life that is very different to the rest of us. This is an interesting article on their views [1].
1. http://articles.latimes.com/2013/mar/22/opinion/la-oe-page-w...
Are you sure that's true? It may be, but there are certainly plenty of counter-examples. Gates and Buffett immediately come to mind, as well as presumably many of the people on this page: http://givingpledge.org/
If I were asked I would be keen to lower taxes on incomes and raise taxes on inheritances. We really don’t need a self-perpetuating parasitic overclass.
The key distinction in this problem is between overcoming fixed barriers of nature and overcoming the dynamic, highly adaptable nature of human beings. Personally, I don't believe we're ever going to come up with a fixed set of laws that could constrain the infinite range of human behaviour to the realm of fairness and make cheating impossible. At least not without eliminating all freedom for everyone.
So any rents-ey looking use of the political process is not free market no matter the wealth of those practicing it. This is what need work.
Wal-Mart in specific originally hired women in rural areas at a wage appropriate as a second income. Their husbands worked at an industrial or agricultural job.
Then they went through an explosion, but as the South Park says, the soul of every Wal-Mart is a mirror. The ag. or industrial job isn't there any more but by sheer momentum, that's the deal.
Wal-Mart is also not exactly a sentence of eternal penury - people who stay a few years, just by self-selection can move up the food chain. I'm not current, but a department manager made enough to raise a family very frugally. A store manager made pretty decent money.
The reason it's Wal-Mart and not Sears is decades of hard work at the logistics end - Wards and Sears shipped by train, even in the '60s. Wal-Mart just overran them with trucks.
But in a way, what's waiting for the end of Wal-Mart seems worse - Amazon. The labor component of production of goods is still disappearing.
Professor Mark Blyth has a very good summary of this:
https://www.youtube.com/watch?v=hmWbkPezgtU
The problem for economics as it's become very mathematical
and technical is that the intrinsic beauty and rigor and appeal
of the models themselves have become an attractor - something
that research gravitates towards. [...] There is a great attraction
in these types of models; they create a world of equilibrium,
a world of stability almost by accident - they are just a consequence
of the model, and it's a beautiful and seductive world.Other things, however, are a lot closer to physics:
https://en.wikiversity.org/wiki/10_Principles_of_Economics
It's very important to understand when you're talking about the former and when you're talking about the latter.
Having a legal/police system to catch people who forcebly take property?
Using trade to exchange property?
This is the core of our system. And that system will always generate inequality.
Not necessarily a bad thing.
You can have laws to take the edge off inequality generated, but at the core of the system you can't really avoid it.
Not the OP, but I think a lot more people nowadays should read (or re-read) Locke's "Two Treatises of Government". That book is famous mostly for the second part, where Locke actually intellectually imposes private property as a thing in the Western world, but I found the first part equally interesting, where Locke fights against a guy called Filmer, who was of the opinion (prevalent until then) that all property was rightfully owned by the King, transferred to him from generations past since Adam.
The thing I'm trying to say is that yes, private property is just a social construct, there's no divine nor moral thing about it, the concept came alive (so to speak) only because some guys in England didn't like that their possessions were in danger of being confiscated by the King's men.
In the end private property is indeed theft, more exactly the imposition of someone's moral values over the other's by intrinsic force (if you "steal" you might go to prison or worst). The sooner we realize this the better, there's no second-guessing about it.
Which, I think, is the central issue regarding property rights and inequality. We should question all rent generating property rights, just as Locke did, and try to find a system of propert rights where rent doesn't create inequality.
Taxation seems to be he popular approach, but why not try to redefine the rights all together? What if such property rights were time limited, and came with a fee equal to the rent potential?
I agree with your stance on component 1. The raw materials, the land, they do in fact manifestly belong to everyone.
On component 2, the labor or improvements, I don't think those do belong to everyone. They belong exclusively to the creator who can transfer title. In fact, society has no moral claim on this component at all in my estimation.
Here is my idea. Stop funding society by taxing labor. It's counterproductive. It's morally wrong. Tax material and land use. This is what society truly has a claim on and how society should fund itself.
What you're pointing out is a monopoly called "The Legal System": a single dispute resolution system everyone must adhere to without choice (Government/Mafia). This monopoly is often based on geolocation. Property will be inherently aggressive if one is forced to use a specific dispute resolution system.
Everyone withholds stuff from others: it is 100% universal. In this way, the notion of "property is theft" can not hold because everyone (even animals) do it: consciously or subconsciously.
There is then the system of dispute resolution. This defines if a particular act of withholding was an act of "theft".
The combination of withholding + dispute resolution results in what we call property.
Competing dispute resolution systems is really that free-market people hope for. Dispute resolution systems do not have to be based on geolocation. In fact, people form millions of these unique systems every day, freely, without resorting to monopolies or the lowest of low dispute resolution: killing one another.
> The sooner we realize this the better, there's no second-guessing about it.
So ya. Property in and of itself is not theft. Forcing others to use a specific dispute resolution could be viewed as the theft.
I'm curious how that follows? Many actions require force but are not theft (depriving someone of rightful resources). If your 'moral' values deprive someone of their own rightful resources you probably deserve to have some intrinsic force applied. In that way private property would seem to me to be close to a moral good.
Private property can't be "theft" if there is no private property.
If you don't believe in private property, you're sort of poisoning the well of any economic conversation, since it's the foundation of basically all of peaceful civilization.
Without private property there is only tribalism and, "might makes right."
http://io9.gizmodo.com/5872764/the-greatest-mystery-of-the-i...
That being said, many things are possible in groups with smaller populations, I've heard stories of large communes being fairly successful with up to several thousand people. However, at some point they tend to become too disorganized and break down, in one way or another.
In contrast, the concepts of private property and trade have enabled our human family to grow to 7 Billion, and population growth is barely even slowing down yet. Civilization allows things to work on an entirely different scale by providing a somewhat standardized framework for our territorial disputes.
This is also the most non-violent time in history by far, according to researchers, presumably due to the end of tribalism.
So, for me personally, there would have to be extremely compelling arguments to even begin to argue against the utility of private property as a social and economic system.
The disconnect here is that property rights are "more guidelines than actual rules", they are quite literally "made up". It used to be that keeping a black person out of your store was a "property right", until we decided it wasn't, and then we got rid of that one. It used to be that preventing airplanes from flying over your farm was a "property right" until it wasn't, and then we got rid of that one. You can only do that if "property rights" are artificial.
I mean just look around you. We live in a world where Smartflash has a "property right" to your in-app purchases, Apple has a "property right" to your iPad, JSTOR has a "property right" to publicly-funded research, etc. etc. That's because we made it that way; let's unmake it, and do it differently!
To a first approximation every single person on the planet had far less in the 1950s/1960s.
"Equality" sucks if it means that everyone is equally impoverished.
It seems like we probably benefit from an arrangement where we control the things in our immediate surroundings that we need in order to maintain reasonably stable and predictable lives. For instance it makes sense for me to control access to things like my glasses, bike, pajamas, etc. Property rights work pretty well for defining that arrangement.
At the other extreme, we have situations where property rights can be overridden, such as taxation and eminent domain, and entities whose value depends on a stable money system provided by the government -- I see no a priori reason why the workable way to manage those things is not through a system of limited property rights. In broad terms, one such limitation is an agreement that taxation is not a violation of a fundamental human right.
The more abstract and artificial "property" gets, the more reasonable that property rights are balanced against other things, such as redistribution.
This is the core of our system. And that system will always generate inequality.
Sure, and to the extent that it works, it's OK. When it doesn't work, then it seems reasonable to manage it in order to make it work better. Some broad-brush ideas are for the government to provide a functioning money system, and a way to redistribute wealth against the tide of inequality.
As a useful legal fiction subject to the same limitations as others of its genus, sure.
As a natural moral right? Not in the slightest, because there ain't no such thing. The history of "ownership" of any given thing today is basically a history of force, fraud and the occasional lucky break. Who should own a piece of land? What moral claim do they have to it? The very best that can be said today is that they can trace a chain of transfers back to the person who most recently was able to stay on that land without being forcibly put underneath it by someone else. What kind of grounding for a supposed moral good is that?
So I believe in Thomas Hobbes' conception of the state of nature -- namely, that there are no rights, no virtues, no morals, nothing but all-out war for resources, where what is "yours" is what you can take and keep by violence -- and in his conception of government as what we introduce when we get tired of that, and that this arrangement is better than the "war of all against all" even though it comes at the expense of sometimes having the government decide that "my" property could be put to a better use.
Now, do you want to try engaging with the actual argument (property is a useful legal fiction, not an inherent moral right)?
If you accept his arguments, you're basically advocating a dictatorship (or his era's equivalent, a king ruling by "divine right").
For another, his notion that humans are motivated purely by ego and self-aggrandizement is demonstrably wrong.
Posit a "desert island" scenario in which an adult is marooned with a small child. Assume that rescue is impossible (or at least wildly unlikely). No legal repercussions to worry about.
The child has collected some fruit, clams, or whatnot.
The adult is hungry.
In this situation, a Hobbes person would simply take the food from the child.
While there certainly are some real people who would do that, most of us would not. They would prefer to collect their own fruit and clams rather than take them from the child by force.
Even if there weren't enough food to go around, many would give the food to the child and choose to go without themselves.
As with many political theories, the Hobbes model says rather more about its originator than it does about people in general.
Many of these philosophers, including John Locke (who Jefferson cribbed heavily from when writing the US Declaration of Independence), wrote as if the morals of Enlightenment-era westerners would magically naturally exist in people living in such a "state of nature", and simply took them for granted.
Hobbes pointed out that this was balderdash. Our entire conception of propriety, of right and wrong, of what is or isn't acceptable, comes not from some natural moral law engraved into our hearts or deduced in an ideal pre-society state of pure reason, but rather is inculcated into us by the culture in which we live. So Hobbes dismissed the idea that people would be respectful and helpful in the "state of nature" and pointed out that, since that stuff only comes into being later with organized society, none of it would exist at that point. Hence the war of all against all.
Which is where your desert-island analogy, and most other attempts to tear down Hobbes' state of nature, fall apart: your stranded people come in with experience of an organized culture which taught a particular set of morals and norms. One of those norms is that the adult should go hungry to let the child eat, but there is no guarantee that some natural moral law written in the adult's heart would have produced the same outcome absent years of indoctrination in a particular culture's moral system (and in fact, in actual nature we can find examples of animal species where adults will kill and even eat young of their own species).
The first two are complicated, because they are extremely political. To own geographic space is entirely divisive from owning just the dirt under a house, or the physical material that composes it. To own an idea, a trademark or a patent, is to assign exclusivity to thoughts. Its much easier to say "we have scarce goods, so those that create them can sell them, and the buyer owns it". Its why I think goods property is a good thing, but our attempts to strong arm real estate and IP into the same formula is a cause of constant economic tension because they aren't a good fit.
Just in this context for reference, I'm an IP abolitionist and think we should adopt homesteading of property again. Both forms of state granted monopoly to space and idea are being rampantly exploited by market forces and were conceived of in an age when technology did not enable the information exchange we have today. It would have been much more complicated to verify usage of a plot of land a hundred years ago than it would now, to know who previously owned it and for how long it has been unused before you could claim it as your own.
That individuals believe government should be directed at investors who risk their property to create wealth in order to take by force that property to redistribute it is perhaps the most offensive sentiment.
> There is no reason why the bulk of the billions taken-in by WalMart should go to the Walton family while their employees live on food-stamps - that is just a legal arrangement. And there is no reason why the Walton family should continue to be allowed to use offshore corporations to loan themselves money to run all their WalMart stores - that is just a legal arrangement which allows them to avoid taxes and hide their billions offshore
No one is arguing the value of the social safety net. The comment goes above and beyond the safety net suggesting it shouldn't be needed and the remedy is redistribution. A safety net is one thing but arbitrarily inflating wages is another.
I don't believe the suggested remedy would be proposed by someone who believes in property rights. Further, as a person who believes in property rights I do find the sentiment of theft of property for redistribution offensive.
(The concept didn't work out so well for Marie Antoinette)
If a revolution comes and you find yourself thrown up against a wall somewhere, remember your comment this evening.
If a violent revolution comes, I'd be thinking more about those pervasive comments touting a belief that theft of private property is somehow justified. I'd suspect those making such comments would be a little more regretful to see their rhetoric fulfilled.
Truly terrifying.
That we are debating the goodness of property rights in this day is a mystery to me.
You can tweak the rules, but you can't run calculations that predict the results. Some of those legal arrangements might be unjust, but their results might be net-good all the same. We can, and should, keep evolving the social bargain, but upending it completely is very dangerous.
People can attempt to ignore the fact that economics is a special application of physics, but they can't escape the consequences of ignoring reality forever. The belief that it's all just conventions and cultural agreements is exactly like believing that the Moon is just a bedtime story.
Nope. Moving 200 million in rock or 200 million in a paper check (or even a promise-based conversation). The extractable amount/usage of Labor and Resources outstrip the human ability to account for it. This has less to do with physics and more to do with "accounting". Without accounting you cannot have negative wealth, for example. This is not tied to physics. This is based on social contracts...all the way down to the currency.
I am a little interested in this physics-based economy you speak of.
Edit: Not sure why I was downvoted. But I was in the room as we reassigned profits to offshore entities for accounting purposes. And I was in meetings with our senior executives who were arranging to pay themselves in undervalued offshore stocks "off the books". Those offshores provided inflated services and inflated goods to the corporation and avoided taxation while making the executives rich. The value of those offshore stocks was "reinflated" with a phone call. And that is just one company - the Big 3 accounting firms provide these services routinely for both the corporation and its executives. (And when we reassigned profits that had the effect of lowering profits - and even making income disappear. I've seen these techniques used at more than one company.)
Off shoring subsidiary profit shaving is a fairly common practice for IRS accounting. But all the profit stays on the corporate parents books in one way or another (they own the subsidiary). The point isn't to make the executives rich, but to make the shareholders richer by avoiding taxes.
Paying people in undervalued stock is common, but "off the books" sounds illegal. I don't know what that means.
Also most companies would never sell shares of it's subsidiaries. They like having total control of the subsidiary.
Big 4 firms wouldn't fuck over shareholders to get executives rich. Executives are small fish compared to the sorts of institutional investors who own F50 companies.
It's the Big 4 instead of the Big 5 because Arther Anderson got caught cooking Enron's books. It destroyed the firm. They aren't going to risk their entire business for some Walmart execs worth a couple million dollars.
F50 executives aren't the people who actually own the world. They are people who work for the people who own the world. If the executives are stealing, it's not something that is accepted. If found they'd be totally fucked.
That's a distinction without a difference, since most of those executives' compensation comes through stocks.
That company is scum.
[1] http://www.forbes.com/sites/clareoconnor/2014/04/15/report-w... [2] http://www.cnbc.com/2014/11/20/wal-mart-defends-employee-foo...
In §13 he says (and I'm going to quote the thing in full),
<blockquote>I shall now advance a thesis which I am sure many will find controversial but which I think is true and, moreover, crucial for understanding the methodological status of the humanities and the relation of the humanities to the sciences of nature. The thesis goes as follows: Just as natural, i.e. non-intentional phenomena are 'governed' by natural laws, i.e. principles which tell us either what will invariably or in statistical average be the case under in principle recurrent and repeatable circumstances, in an analogous manner intentional phenomena are 'governed' by normative rules which tell us what people under given circumstances are (or were) expected or allowed or practically necessitated to do. I am, in other words, pleading for what might be called a 'methodological parallelism' between natural laws on the one hand and laws and other societal rules on the other hand. I am inviting you to see the difference between the humanities and the natural sciences in the light of the difference between the factual and the normative, between rules which state how things in fact go and rules which ordain how they should go according to the conceptions of those who instituted the rules.</blockquote>
Make of that what you will :)
When a convicted felon can do that, the argument that we don't live in a Free Market doesn't hold any weight, imho. A person can find a need, build a business around it, and become powerful and have money.
There's at least one.
Mom and pop can easily compete with Wal-Mart and Amazon if there was a level playing field. You just don't understand how twisted the playing field is because you have zero experience with retail and logistics.
The big boys get tax subsidies when they move in, they get concessions from local governments, they get favorable treatment at the border with customs, etc. and that's just on the surface. They get huge discounts from UPS for infrastructure build-outs, but then UPS again gets subsidized through the roof in the same ways Amazon is directly. So on and so forth.
Mom and pop can get the same prices out of China, it has nothing to do with scale. After you're ordering a container worth of stuff, you're not going to reduce the price of whatever you're selling by buying more. That's why Amazon doesn't manufacture much and relies on the Mom and Pop to do that sort of thing, while still kicking Wal-Mart's ass.
As far as Mom and Pop vs Amazon ... Amazon wouldn't allow them to sell on their platform if they weren't a threat. But they do and they are. There's a reason eBay is a multi-billion dollar company and has been for a while.
What would happen is that Wal-Mart and Amazon, et al. would pay their fair share of taxes, and the owners (or share holders) would not be multi-billionaires, only single-digit millionaires at most. The effect would be that every single person in the United States would have Heath Care, Tertiary Education paid for, excellent unemployment benefits, etc. etc.
There would no longer be desperate people struggling to survive while others have orders of magnitude more money than can be spent in 10 lifetimes.
Mmmm, I don't think your numbers add up...
There are 500 people in the US who have more than a billion dollars. If we made them all "single digit millionaires", we'd be looking at a one time wealth transfer of less than a $1T dollars, or about 25% of the US Federal Budget for one year. Sure, that would make for a good year, but then it's spent and we're back where we started...
I think you're dramatically overestimating how much private wealth there is in the hands of the upper echelon compared to how much the sorts of programs you want would cost.
i.e. let's get Facebook to actually pay something in taxes
Are you proposing a >99% tax rate on capital or corporate income?
No it isn't, we make the rules of the market, and we could just as easily change those rules to force companies to give more of their earnings to their employees rather than filtering it all up to the top. The market is what we make it, it has no intrinsic nature. The rules are rigged, by and for the wealthy, that is a fact.
Less drastically you could make employee/consumer owned businesses dramatically more tax advantaged giving them an economic edge and then just seeing what happens. Might turn out awful but its certainly possible.
[1] https://www.washingtonpost.com/opinions/harold-meyerson-cali...
It's not clear to me that's a win for anyone other than consulting companies, tax prep and CPA firms.
Only if the proposed change in rules contains such glaringly obvious loopholes; but I doubt that'll be the case, as the people trying to solve the problem have thought about it for more than 5 minutes.
I recall the taxpayer making a substantial contribution to my truck purchase.
If you really believe in your system start a company and employ your ideals. I'm sure you will have no lack of talented individuals wanting to work for you for a greater piece of the pie. In no time you should be able to destroy that evil Walmart corporation that practically enslaves its employees. Please try it and prove us all wrong
I don't want to sound harsh but there really are people that deserve what's coming to them. In my high school too many kids wasted their time while trying their best for me to also waste my time. They had all these incredible opportunities to better themselves and still ended up as loosers destined to work minimum wage. And now you are saying that that is unfair and they deserve more. I think not. They deserve what they work for.
The USA will give you rent assistance, medicaid, food coupons, financial aid, student loans and if you still cannot drag yourself to college then it is on you. I know because I come from all the way in the bottom. The only thing that stopped all my friends from following was: nothing.
No one said it wasn't.
> Things that I would fix is decrease corruption as much as possible.
As would I.
> What you are advocating is communism.
No it isn't, tax reform is not communism, I suggest you bone up on what communism actually is before continuing this conversation, nothing I said is in any way communist.
> I don't want to sound harsh but there really are people that deserve what's coming to them. In my high school too many kids wasted their time while trying their best for me to also waste my time. They had all these incredible opportunities to better themselves and still ended up as losers destined to work minimum wage. And now you are saying that that is unfair and they deserve more. I think not. They deserve what they work for.
You are suffering from the just world fallacy.
I think you're projecting. He is saying the world is harsh and unfair, and people need to work hard to mitigate that. That isn't a fallacy.
To look at just one example, how long did it take to force Amazon to collect the kind of sales tax that mom and pop shops had to collect from the start?
We're talking about corruption and you're listing companies best known for getting where they are through aggressive free market competition. Can't we come up with some better examples than that?
AT&T, Goldman Sachs, Bank of America, AIG, Monsanto, Elsevier, Microsoft, Sony, Pfizer, Halliburton, Exxon, Lockheed Martin.
And it isn't that some startup would otherwise show up and dethrone Exxon as the largest oil company in America, it's that Exxon lobbies to make sure it gets a fat stack of cash from Uncle Sam for oil exploration while fighting against tax credits for electric cars. It's that Elsevier lobbies to have taxpayer-funded research behind a paywall.
These things put money in the pockets of the companies doing the lobbying at the expense of all the rest of us.
Monsanto makes Roundup (glyphosate)-resistant crops. As far as anybody can tell the gene modifications have no inherently harmful effect on the resulting food. But then all the crops get sprayed with glyphosate and the food is contaminated with glyphosate.
Monsanto is also very aggressive about asserting ownership of the seeds that grow from the plants that grow from their seeds. If the neighboring farm plants Monsanto crops and the seeds blow into your farm, lawyers follow. It's basically an intimidation tactic; buy seeds from Monsanto or you may end up with them anyway, and then you're going to get sued.
So farmers buy the seeds, to such an extent that it's become a biodiversity problem. Their crops are becoming a monoculture. Think systemic risk like the housing crisis, but this time it's the food supply.
In other words, there are legitimate reasons to object, even if they aren't the ones most popularly aired. So people may want to know when they're buying GMO crops and potentially contributing to these problems. Even if some people start avoiding the GMO crops for other reasons with no rational basis, that still helps with the biodiversity problem. But whenever a bill comes around to label them, guess who shows up to lobby against it.
Roundup doesn't contaminate plant products, because it's applied when the plant is still tiny. It does, however, contaminate rivers.
Farmers don't get sued by Monsanto because they accidentially get seed blown on their fields - that's practically legally impossible, given that Monsanto enforces its policies using licencing laws, not patent laws. If you disagree, please provide an example of such a lawsuit.
Monoculture is popular even without GMOs.
There are many things wrong with GMOs and surrounding industry, but what you list above are not problems, but lies.
No.
> Roundup doesn't contaminate plant products, because it's applied when the plant is still tiny.
Monsanto successfully lobbies EPA to raise levels of glyphosate allowed in food:
https://www.rt.com/usa/monsanto-glyphosate-roundup-epa-483/
Can you explain why they would bother to do that if it doesn't end up in food?
> It does, however, contaminate rivers.
It does also contaminate rivers.
> Farmers don't get sued by Monsanto because they accidentially get seed blown on their fields - that's practically legally impossible, given that Monsanto enforces its policies using licencing laws, not patent laws. If you disagree, please provide an example of such a lawsuit.
I see you're not familiar with the modern process of aggressive legal trolling.
It goes something like this: Some people sneak or lie their way onto your farm to check if your crops are an infringing variety and if they are (regardless of why or how) you get a settlement demand letter. If you pay the money and sign the NDA then it all goes away but nobody ever finds out because you can't talk about it.
If you don't then they file a lawsuit, which will end up costing you a huge pile of money to defend from even if you win, and all the pretrial legal processes get rolling and you start incurring big legal fees.
After they've stuck you with a big pile of legal fees and looked at all the discovery, if you haven't settled yet, then they decide whether their case actually has any merit. If it doesn't then they make the settlement offer very attractive so that you pay almost nothing but sign the NDA to make the legal fees stop accumulating. If you refuse that then they drag it out as long as they can and keep burying you in pretrial legal process hoping you'll change your mind, but if you don't then they ultimately drop the case before trial.
So the only cases anyone can point to of someone going to trial are the ones where Monsanto actually has a case. For example, there was a famous case in Canada where the farmer took it all the way to the Supreme Court and lost. In that case Monsanto had originally claimed patent infringement (note: not a licensing dispute) for the crops from seeds the farmer claimed had blown in from the neighbor's farm, but come to find out that after that the farmer harvested the seeds from those plants (allegedly on purpose) and planted the next year's crop with them. So by the time it went to trial Monsanto had dropped the claim for the original year's crops, even though they had made it during settlement negotiations, and the trial was only about the farmer purposely replanting the patented seeds.
> Monoculture is popular even without GMOs.
I'm trying to imagine what point you think you're making. Something is a problem, so making it worse is OK?
Monoculture occurs when one strain of a thing dominates the market, generally by out-competing all the others under currently prevailing market conditions. GMO crops are obviously specifically designed to do that. It's the same with intentional crossbreeding, but they're better at it so it's worse. Monsanto also claims the rights to seeds bred from their seeds, so farmers who plant Monsanto seeds have little incentive to experiment with creating new derivative varities because Monsanto will claim all of the profits from your work, so why bother?
Now suppose we label GMO crops. That won't actually remove them from the market because they still have the advantages the modified genes provide, but more people will refuse to buy them, increasing demand for non-GMO crops and inhibiting GMO crops from becoming a large supermajority.
The biodiversity within the non-GMO segment of the market will then tend to be larger than it is within the GMO segment because there will be different seed lines with different advantages and disadvantages, and you can't grab exactly the gene you want out of each of them to make seeds that have both advantages at the same time as easily as you can with GMO crops, so more different seeds will be able to carve out a market niche.
Reading the Monsanto vs Schmeiser case, however, it seems pretty clear that Schmeiser infringed the patent (he intentionally used it without having the legal right to do so); we can argue (and probably agree) whether patenting of genes should be allowed or not, but assuming the patent is valid, Monstanto had morally won the case.
That was my point. The process is designed so that any case where that is not the predictable outcome will be settled and put under NDA so nobody can know about it. The process that results in that consequence is the despicable act, and is what causes the intimidation, because it allows them to claim having won every case etc.
Don't confuse Wall Street and Wal Mart. Not the same thing.
Had they left things like that, present inequality would be much less. We don't live in a world of unregulated capitalism. We live in a world of regulated and taxed capitalism and the wealthy have modified those regulations and taxes in their favour.
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Yes, as a first step. Then you use the proceeds to subsidize college tuition and health care to help level the playing field for young people, so they can get into the workplace with an education but without crippling debt. And then as a side-effect, the ultra wealthy will no longer have as much disposable income that they can use to influence politics, so maybe we can get enough non-corrupt legislators in office to roll back some of the unfair laws that were passed that allow, for example, Wall Street bankers to commit massive fraud with impunity.
If you're going to criticize and idea you should at least criticize the whole idea, not just a little piece of it. You can make any proposal look stupid if you ignore 80% of it.
Wealth gains are not a zero sum game. It is about how much we produce. If the economy is not operating at peak productivity (for example with a lot of people out of work), then not as much wealth is created. And this will happen when there a lot of people who can't buy much, making demand low. It is a vicious cycle.
In the US the wealthy have lobbied to push down their taxes, and this is an example of what people mean when they say the system is rigged. This can help those rich people on an individual level and in the short term. But it also effectively takes that money out of the economy, since the rich typically don't go and spend that money but save it instead. If that money went to taxes it would have stayed circulating in the economy, whether it is used to pay for college tuition or used on some pork barrel project.
This is the argument made by some for economic inequality hurting the economy.
Well yes, of course. If the rules weren't rigged, companies would be downsizing to replace humans with machine-labor.
In the past, if you studied and worked really hard, you would usually achieve something. Today you can study and work very hard for a very long time and still end up with nothing.
Being smart or trying hard has very little value, it's all about who you know and what assets you own. Today, most people are just living off of their assets. Assets which they received as a result of a lot of luck and perhaps a bit of hard work.
Instead of the government stepping in to protect the people - The government is facilitating this inequality by allowing corporations to carry-out mutually-beneficial deals with one another at the expense of regular people.
People are being enslaved; not just less-educated people, but also highly educated people (who can actually see/understand what is happening).
I think we have a new economic class in our society, the 'highly educated lower class'.
But yes, from a mid-20th century all-time peak, real middle class wealth in the US is declining.
> This is the problem.
That is a very good way to put it. I agree with that.
> So why doesn't Graham recognize and advocate this?
He doesn't advocate because it won't help his cause. As I posted in the comment of the original article (which got downvoted, nobody likes pg being accused of manufacturing pr? https://news.ycombinator.com/item?id=10827175, hey! it's a submarine ;-).
He created a strawman and a narative around how to interpret and think about income inequality to give his followers and those involved in startups a framework. He understands he is part of what can create inequality, and that's bothersome to him and those around the startup culture. Startup environment needs myths to operate. These are promises to investors, promises to early employees, these are things founders are supposed to be telling others ("I want to make the world a better place") and perhaps themselves as well. There has to be a myth created that addressed income inequality, because it is talked about in the media.
As a joke, someone wrote (and I forgot who) how the wealthy and powerful in this country are devout Marxist followers. They internalize the rules and assumptions of the class struggle. Except they don't identify with the working class, they identify with the bourgeoisie. They understand there are the two classes and what class they belong to. They will actively try to control and supress the lower classes.
Whether this is true or not, we need to realize PG has motives. He doesn't write essays just for his health.
YC itself was one of those ideas - it started out as an experiment [2], derived from a talk at Harvard Computer Society [3]. The easiest way to test if an idea is a good one is to go do it, so he did, and it turned out it was, and that led to profit.
I don't think it's fair to attribute Machiavellian scheming to PG. There are some other people in Silicon Valley that will take a position and then influence public opinion to make that position come true, but it's pretty rare, and I don't think it's the case here. Rather, it's the same reason all VCs talk their book: they start with a hypothesis about how the world is, then invest their book according to the hypothesis, and then tell everyone what the hypothesis is. The worldview comes first, the investments come second.
[1] http://paulgraham.com/speak.html
I think I started reading his essays in 2004 or so, and he was a cool guy, not as cool as jwz, for example, but pretty interesting nevertheless because of his story of actually making some good money out of having used LISP (which back then was like a Nirvana-reaching thing, I mean, making big money out of LISP) and for being a programmer who was actually showing interest for other things outside programming, like Renaissance painting (Christopher Alexander and his Turkish rugs' patterns was also a thing back then among programmers).
But then reddit launched, YC was founded, somehow they started making money, and things like Arc and trying to make LISP a world-dominating language became things of the past. That's when his writings became a lot less interesting for guys like me, i.e. for average programmers who just wanted to read what other guys smarter than them had to say.
Edit: these are representative of talking to him about it:
In London one law was proposed for a minmium wait time of 5 minutes. It was directly aimed at uber.
Mr. Garret gets the definition of the Baumol Effect more or less right, but then mislabels it as trickle down economics and proceeds to attack that. Here is an example of the Baumol Effect:
As improving technology makes computer scientists more productive they will receive higher salaries in the business world. Meanwhile, computer scientist teachers in academia may not see similar productive gains (they still can only teach X number of students a semester). Nonetheless, universities must increase computer scientist teacher pay to prevent them from leaving academia for the business world.
In the context of PG's essay, he is saying that high pay for entrepreneurs forces companies to pay competitive salaries:
>anyone who could get rich by creating wealth on their own account will have to be paid enough to prevent them from doing it.
If Mr. Garret, or others, disagree with this assertion they should attack it directly. Personally, the logic and direct incentives at work seem self evident to me.
Using the political system to reduce the influence of money in politics is prohibitively difficult because the system is already captured by money. We should try, but we need other options when that fails.
When government stops responding to the wishes of the people, revolution is the typical answer. Luckily, we don't have to do that. We can end the influence of wealth on our politics without needing the government to do it for us.
Instead of trying to get the government to stop excess political spending, we should eliminate the incentive to accept excess political spending. People accept money to influence our democracy because they can use that money to get whatever they want from almost anyone, including you. You can't opt out because economic power is invisible. But we can make it visible, and give every individual the freedom to reject economic power that they feel is misused.
This is merit capitalism. http://meritcapitalism.com/
Who's right? The comments I've read today on a few of these posts today are so divisive that I'm not certain they come from the same universe.
FTA: On the other hand, I also want an effective, democratic government to provide infrastructure, protect people from extreme economic contingencies (like war and hurricanes), prevent people from profiting from economic externalities (like pollution) and provide oversight for well-regulated, free and transparent markets. And that's not the direction we're heading. We're heading towards political power being concentrated irreversibly in the hands of a small minority. We're heading towards oligarchy.
And that is a problem.
If you're arguing the problem is the ability of the political class to pick winners and losers instead of creating rules that are beneficial to society generally and applied to all equally - amen.
No. Wealth is a symptom of a system where the winner takes all and the winner is increasingly technologically based companies.
Wealth allow you to increasingly affect the political process but only as a function of you being rich to begin with. No one starts with the political system to gain wealth at least they wont' be wealthy for very long if thats how they came to their wealth.
Income inequality is increasingly a symptom of systems with little friction to become the first or second in a field but a lot of friction to challenge them.
Some harmful effects of inequality when people do not have access to:
* needs (i.e. Maslow Hierarchy); particularly autonomy * ability to express perspective * ability to have perspective considered, paid heed to, & respected * ability to influence local systems * protection from those who are abstracted away from local systems; those who will not feel immediate consequences of their actions
If we can create systems where these concerns are prioritized, then inequality of wealth may not matter.
Some people are good at playing the game of gaining wealth. Some are good at other games. In the end, we all benefit from respecting and having compassing & empathy for all life & natural systems.
However, if you think about it for a second, it's clear that having more money in a bank or on a payslip doesn't make you work harder.
What makes you work harder is the possibility of improving your status, getting richer.
So, one would imagine that a society with drastically reduced inequality (both wealth and income) but with extra high social mobility could work perfectly well.
AFAIK Uber is not a YC portfolio company.
PG on Uber. "No, just a user."
Those that sell to millions will make a lot more than those who only sell to a few.
Instead of trying to force equal outcomes, we should be teaching people about how they can benefit from leveraging technology.
Ron here is saying we shouldn't kill startups (what PG calls "creating wealth"), we should instead fight against practices that actually take money from the poor and give to the rich (what PG calls "zero-sum games"). After reading PG's article, I got the impression that he wants the exact same thing as Ron does. What's there to argue?
PG even has a paragraph in his essay that is almost equivalent to the title of the article:
> There are lots of things wrong with the US that have economic inequality as a symptom. We should fix those things. In the process we may decrease economic inequality. But we can't start from the symptom and hope to fix the underlying causes.
I'm super pro regressive taxes. Regressive taxes are fantastic for the poor. They get more than they put in AND the elite are less able to avoid paying them. The socialized promised lands of Scandinavia are highly regressive.
http://krugman.blogs.nytimes.com/2010/11/17/why-im-soft-on-s...
No, they aren't. Regressive means that the rich pay less, percentage-wise, than the poor do.
Krugman's other reference has a broken link but his text does not sound like your claim either.
But in the big picture, income transfers do seem to be more favoured in strong welfare states than progression in the tax system. The US has a mongrel system with EITC because you get a "negative income tax" by social criteria (basis of which are quite 1950's...) - it's more like a social transfer in many respects than a tax progression.
That's a big "if".
So "the elite are" are certainly avoiding it. Unless by elite you mean the average employee.
I might be wrong here, I hope someone will correct it. I am also pro-regressive taxes, but they need to work. Not sure if they can with the mobility or definition of "the elites".
Oddly this insight is lacking from much the rest of economic literature.
A fun fact: Despite of giving billions and without starting any new blockbuster companies, Bill Gates has managed to increase his wealth by more than 50% since he officially retired. He has sure helped few startups but it would be too funny as well as cruel to think that most of his wealth gain comes via helping startups or causing productivity gains in society. Last I checked his billions are managed by hedge fund like setup who typically have goal to maximize returns through non-productive instruments such as real estate, HFT, commodity market games, derivatives etc and they rarely devote more than 20% of portfolio to truely productive activities such as startups.
It is also marvelous how some of the wealthiest have outright bought the laws for themselves, for example, middle class in US universally pays almost twice the tax rates than top 1%. This would be unthinkable in previous generation. The entire capital tax gimmic is put in to law with a full knowledge that it does not benefit majority of citizens who have little or no savings, let alone investments for short term trading. It is purely designed to benefit top 1% who derives large chunk of income as capital gains. The most depressing thing is that the field is becoming less and less level playing, for example wealthy can buy out admissions in best universities while average citizens are getting priced out from same institutions. The significant increase in mortgage and student debt load combined with long term stagnant wages now eliminates possibility of savings or investments and therefore risk taking. I suppose this wasn't exactly like this in 70s when many more people had decent savings, had ability for some risk taking and lot of them even actually were able to retire. In our generation most people don't even think of retirement anymore except in tech industry which is probably less than 5% of population. We in tech field are perhaps not so much impacted and so world looks little different from our glasses, especially if you had been college dropout or without family. However for a common citizen with a family, mortgage, healthcare bills, no savings, retirement funds uncertainty and student loans it is much more difficult to cross the chasm than it used to be in 70s.
Sure, Uber lobbies city mayors, but what about the financial system that gives $6.6B to a single startup? The inception of all problems.
Politicians and lobbyists? I'd worry about the Fed.
You mean the part where communists murdered 100 million people in the last century? That "propaganda"?
This is the point: The US right tries to label anything they perceive as to the left of it socialist or communist and by extension to equate all of these ideologies with Soviet or Chinese inspired socialism with total disregard for the fact that while it also includes related ideologies, this spectrum also encompasses ideologies that are further apart than Republicanism and Stalinism.
It just becomes comical when e.g. European style social democrats gets lumped in with Stalinists, ignoring that Stalin himself ordered all Komintern member parties to treat the social-democrats as fascists (more precisely they were deemed to be "social fascists") and to oppose them with the same urgency as they opposed Hitler, effectively destroying any chance of a united opposition to Hitler, and draining both.
And it just becomes ridiculous when libertarian and moderate socialists who fought the Bolsheviks authoritarian tendencies tooth and nail and often lost their lives also gets lumped in with them: Millions of socialists and communists and anarchists were amongst the 10 million dead during the Russian Civil War - fighting alongside the White's to oppose Lenin. Thousands died in the Kronstadt rebellion, demanding reinstatement of free speech. Rebellion after rebellion against the Bolsheviks were arranged by SR, Left SR, the Mensheviks and other left wing groups, leading to executions after executions, and starting in 1922 a concerted campaign of political show-trials. Tens of thousands of them were murdered after the Moscow Processes by Stalin in the 30's - at that point Stalin was even purging opposition inside the Bolshevik party.
Many, many more perished in labour camps or had been wiped out together with other political opponents in the years before for standing up for democracy.
So, if you define what you consider socialism and communism, we can nail down which of these groups you are including, and how many of them were actually actively opposing the mass murders you are referring to and/or were victims of them.
You've heard of those people, I take it.
You're trying to set up a "No True Scotsman" argument. Won't work.
http://maoistrebelnews.com/2012/03/16/1-6-billion-killed-by-...
Deaths are counted multiple times, cigarette related deaths worldwide are capitalism fault, children killed by hunger are capitalism fault (especially in North Korea), famine of 1932-33 is capitalism fault (this one is really fucked up, because it is exactly the opposite).
When even Obama - a conservative not much left of Reagan, that not that many years ago could have fit into the Republican party politically - was repeatedly accused of being a socialist there was a watershed.
More and more the response was a "well, I kinda agree with Obama, so if he's a socialist, why do they say it's bad?" curiosity.
The only reason it didn't backfire far worse was that there was no strong social democrat or socialist political organization ready to benefit. But I strongly believe that the only reason Bernie Sanders is getting any kind of hearing this election campaign is that the right laid the groundwork by making the term "socialist" socially acceptable again amongst large groups of the US public
They overplayed their hand massively, and legitimated discussions of socialism by making the category so ridiculously over-broad that they defined people into it and forced those people to re-evaluate socialism rather than re-evaluate their own viewpoints. It's a truly classic failure to understand the psychology of propaganda that deserves treatment in university courses on psychology:
You don't win a propaganda war by saying "these viewpoints you agree with makes this guy you're considering to vote for a [insert label believed to be offensive here]". You win propaganda wars by disassociating your opponent from the views of his base and presenting yourself as the protector of the same views.
The right way to have fought Obama was not to label him a socialist, but to upstage him and paint him as unwilling to go far enough, and twisting the mechanism to fit whatever they'd wanted afterwards. It's not like this is a new strategy: Specifically within the context of welfare and healthcare, it was first used by Bismark in the 1880's, leading to the first welfare state, but at the same time both shoring up the German state by undermining support for revolutionary socialism, and establishing an insurance system that persists to this day that avoided a nationalisation of the entire system.
Instead they walked right into what may turn out to be one of the largest political own goals for decades.