Who Will Stand Up to the Superrich?
nytimes.com
nytimes.com
It's striking how dumb this fine sounding claim becomes when you actually get specific. What "systemic damage" is being done by Larry & Sergey having become so much richer than they used to be, or more recently, Mark Zuckerberg doing the same? None at all that I can see.
Forget the morality of wealth distribution. How long do you think 90% of a democracy can go without an increase to their standard of living before they realize they need to drastically change the system?
http://www.cbpp.org/cms/index.cfm?fa=view&id=3309
If you are looking for a systematic problem with income concentration, look at Figure 2 in the link above. Notice any correlation between the peaks of income inequality?
I think you are conflating two distinct concepts. Standard of living is not identical with the percentage of national income you have. The former could increase while the latter decreased, if the total amount of income increased. And that is exactly what has happened.
Or to get specific again, in the subset of society consisting of just me and Larry Page, my percentage of the total income has decreased dramatically. But my standard of living has not declined.
I totally agree and didn't mean to imply this. My point is that the median income level as an absolute, adjusted for inflation, has not increased significantly since 1970. I believe this does correlate fairly well to standard of living over the long term.
EDIT: Here's one source. Open to criticism. http://www.stanford.edu/class/polisci120a/immigration/Median...
It may be a moot point, since no one can objectively compare their standard of living to that of an equivalent person 40 years ago (or even themselves 40 years ago.)
Personally I'm fine with people who are superrich, if they have learned to be responsible with that money. OTOH I do want superwealth to be a little more transparent in its effects on my environment.
Little stars, big stars, are all fine by me. But I don't like'm black holes. They're eff'n scary.
The cases you cite -- tech entrepreneurs whose startups generate vast wealth -- aren't really that relevant to Rich's argument.
While I guess they do make up a portion of this class of superrich (without any research, my hunch is a small portion), the larger problem Rich describes is that society just isn't rewarding people the way it used to, and that there's been a deliberate rigging of the system for the past 30 years that is allocating capital in the hands of a very select few. Pretending like those few are all Zucks and Sergeys is a deliberate misreading and has nothing to do with this problem.
I think your reaction to this, judging from your writing, comes from the fact that you are very much surrounded in a culture of startups and tech innovation, where money is made by creating new things and expanding the pie, not reallocating its slices. That's great, but isn't a reason to deny some obvious -- and depressing -- realities about what's happening to America's social and economic fabric.
The tech startup scene may be a bright light in this pretty dark trend, but is not a reason to deny the trend exists.
Lastly, this is bad for startups. The allocation of capital based on merit is the linchpin of an innovative and growing economy, and the lifeblood of what you do day in, day out. You really should be on the other side of this argument.
It wouldn't have taken long to test that hunch.
http://www.forbes.com/wealth/forbes-400/list
The superrich basically consist of company founders, their kids, and hedge fund managers. So unless your dark conspiracy = hedge funds (in which case why not just say so?), there's no evidence of it.
Here's some quick research you could've done to test YOUR hunch:
"These numbers actually understate the wealth of America’s top 1 percenters. Each Fed Survey of Consumer Finances, as Kennickell notes, specifically excludes from the survey sample any of the people wealthy enough to make the most recent Forbes 400 list of America’s richest. In 2007, the Forbes 400 held a collective net worth of $1.5 trillion.
But in 2007, even without the fortunes of the Forbes 400, the top 1 percent still held a whopping 33.8 percent of America's total family wealth. Families in the bottom 90, all together, only held 28.5 percent."
http://www.alternet.org/story/137540/solving_the_mystery_of_...
As for any dark conspiracy, I'll say it again -- just because it isn't a part of your reality doesn't mean it isn't real.
The point is that the same people doing the same things are getting much more than they used, and it's a direct result of actual policy changes. I'm not sure why identifying these people as individuals and professions is all that relevant. But do I think that tech entrepreneurs are a minority in those few million people? Yes. Call me crazy.
I think the real question is: Do you have reason to believe that the pretty well-documented overhaul of tax, monetary, and regulatory policy that has taken place in this country over the last few decades didn't actually happen?
If so, that's a conspiracy I'd love to hear about.
Point being, the people surveyed clearly didn't have a principled reason for thinking 30-35% was an "appropriate" amount of wealth for the top quintile; they hadn't done the math. In light of this, I want to ask you: do you have a principled argument as to how much wealth the top 1% or 5% or 20% should have?
Instead I'd prefer to turn to studies of social class, such as Thompson & Hickey 2005 [1]. This study defines the upper-class as "largely constituted by the heirs to multi-generational fortunes".
[1]: http://en.wikipedia.org/wiki/Social_class#Thompson_.26_Hicke...
So you can't make an exception for people who "create new things". Because the precedent you've set is that Government should be the one judging what someone's individual efforts are worth and in order to even make that judgement Government has to then evaluate everyone's contribution.
Hence there are no exceptions because everyone must be judged.
So in the case of someone like Sergey Brin you'll get people asking if what he did is really worth $15.9 billion dollars? Or those who ask "Isn't $1 billion more than anyone needs? Wouldn't society be better off if we took the other $14 billion and distributed it to poorer people"
Government policy since the founding of the Federal Reserve seems designed to discourage the accumulation of wealth. Government taxes income (i.e., the productive use of time), earnings on savings (capital gains), profits, accumulated wealth directly (by the death tax).
In addition, the value of money has been steadily eroded. A century ago, when the federal reserve was founded, an ounce of gold was $20. Now it's about $1400.
Besides penalizing the accumulation of wealth, the government encourages it's opposite: debt. Interest is tax-deductible. Government aid for food, housing, education, and medical care is available, as long as you haven't accumulated any wealth. Big (wealthy) businesses are under more regulation than small (mainly poor) businesses.
With this kind of government policy, it's no wonder that more people don't accumulate wealth.
Accumulated wealth is a good thing. It makes liberty worthwhile and meaningful. It enables innovation. It provides security. Wealth also allows for independence which is why most politicians tend not to like it: a wealthy person's vote cannot be bought so easily with a government handout.
PG is in the business of helping people become wealth accumulators (i.e., rich). He counsels saving money, minimizing expenses, living frugally, avoiding debt, so that a person can devote the maximum energy towards building wealth. I don't see why he would support government policies designed to encourage the opposite.
There is no specific damage done specifically by Larry and Sergey having become rich. There is damage if too many super rich people aren't contributing enough money to pay for national defense, roads, sewers, clean water, education, etc. They benefit from living in a society with decent levels of each of these things.
Since the middle class and the poor don't have much more money left to contribute to pay for these things then an argument can be made that the super rich ought to be taxed more. Part of the existence of income inequality comes from tax inequality. In the U.S. this is coming from the fact that much of the money the super rich make comes from capital gains and not earned income. The capital gains tax is quite low.
There is also the fact that money does bring with it power. If it gets concentrated too much into too few hands then that's a problem for a lot of people.
If it were just about sewers, roads, education, etc., then the top tax rate could be 10% and the middle class could pay no taxes at all.
The class warfare argument is a substitute (relied upon by politicians) for the real issue which is the imprudence and utter lack of responsibility of those allocating the money collected via taxes.
Note that Obama, for all his class warfare schtick on the campaign trail, has spent billions more on the wars he promised to end. His promise to fix social security by turning it into a welfare program (so at least we know what we're not getting) has also vanished.
The fact remains, though, that too much wealth inequality is bad. It's bad for power to be concentrated too much into too few hands.
By the way, Social Security does not need to be fixed. Medicare and Medicaid do though.
There is a branch of economic theory that says all taxes should be on land ownership.
It's sort of a chicken/egg problem. Heritability of land ownership does lead to entrenched wealth with little incentive (or need) to further develop the land, but one could argue that many sorts of investments also fit the criterion of sometimes providing long term returns far in excess of what the original purchaser could have imagined or intended.
Money buys political influence. Income inequality thus leads to political inequality. The government is corrupted to serve the interests of the superrich.
Sounds like systemic damage to me.
There's no evidence of pharma companies lobbying for more lax FDA regulations.
There's no evidence of the automative industry lobbying against higher CAFE standards.
There's no evidence of utilities companies lobbying against net neutrality.
There's no evidence of the last midterm election cycle seeing an amount of private spending nearly double the previous record.
Meanwhile there's an abundance of evidence that poor people are successfully lobbying for a higher living wage, longer unemployment benefits, and access to quality healthcare.
What this discussion is about is the purported "systemic damage being done by the ever-growing income inequality between the wealthiest Americans and everyone else." Merely pointing out that lobbying exists doesn't support that. In fact, some of your examples are actually counterexamples: e.g. the companies lobbying against net neutrality are less controlled by the superrich than Google, which is lobbying for it. What you have to show is that lobbying is increasing, and that it's increasingly being driven by the agenda of the superrich (rather than merely large corporations).
Is lobbying a result of income inequity? I think it has more to do with the increasing power and competition between corporations than individual wealth. The more competitors one has, the more likely that one has to match their lobbying efforts just to keep the playing field even.
Beyond that, the effectiveness of lobbying enables the rich to exert more influence over the election process. It may be because our election system is not insulated against this influence that the income distribution seems so unfair. This would imply that we should reduce that influence or reduce the inequity of wealth. Which one is more fair, if they can even be done separately, is not clear to me.
The systemic damge, ISTM, comes in part from a combination of widespread awareness of increasing inequality with some natural human tendencies:
(1) we tend to judge our well-being not on an absolute basis, but by comparing ourselves with others (another word for that might be "envy"; sorry, I couldn't find a cite quickly); and
(2) we want what we want, and to varying degrees we think we're entitled to get it.
The effects of this combination seem to get damped down, at least to some extent, when most people can get an adequate living and sufficient psychic income from employment.
And when properly channeled, this combination can sometimes lead to productive disruption.
On the other hand, this combination can be bad news if too many people -- especially energetic young males -- have too much time on their hands. See, e.g., street gangs, drug cartels, radical political- and religious movements, etc.
By no means am I condoning envy or a sense of entitlement; I'm just pointing out what seem to be brute facts that we have to deal with if we want to keep society viable.
[EDIT to respond to TomOfTTB's comment:] TomOfTTB, you're right that I'm just trying to clarify the problem. Some ideologues insist that there's a simple solution (while often disagreeing vehemently about what that solution is). Me, I'm not so sure.
It is "fairness of opportunity" vs "fairness of result". Or maybe more to the point "if we can't yet guarantee fairness of opportunity are we then justified in equaling out the result"
In other words, the systemic damage comes from corruption among those writing tax policy, which makes that policy a vector for spreading the resulting distortions and imbalances throughout the economy. The piece also notes that guys like L&S+Z are in a decreasing minority when it comes to a who's-who of the plutocracy. That is to say, they are the exception that proves the rule.
SV has always prided itself (quite rightly) on its distance from DC. But that distance can also mean being unaware of exactly how bad things have really become. Rich does a great job in pointing out that the problem of intense wealth concentration shouldn't be attributed to generalized bogeymen like "technology" or "globalization" or "big corporations". Rather, he charges that very specific and very abusive manipulations of tax law have allowed some of our least innovative, least competitive, and least valuable organizations to become maliciously self-serving at the expense of everyone else.
If you tell a poor person "We spent your social security on the war and now we're going to lower the amount you receive" that's asking to be voted out of office. If you tell them "The greedy rich person got a tax cut and that's why your social security is gone. Let us fight them" that gets a lot of people upset and helps politicians win elections.
It's funny how, in both scenarios, it would seem the poor person would likely vote democratic, yet Republicans still win 6 out of 10 times. Perhaps, it's because the republican in scenario #1 just issues IOUs to the SS trust while still waging the wars, but spins it by saying "war is manly and we're awesome so debts (and deficits) don't apply to us", then when the house of cards fall, and the democrats scratch out a victory in the next election cycle due to voter frustration, the republicans whip up the frustration and then pivot it by saying "see? we told you the liberals would destroy us. debts are TERRIBLE! give us another chance!"
It's the virtuous circle of modern politics, which is why I don't even bother with it anymore.
It's better for TV to have an us vs. them debate when it comes to politics. It's always about a Republican proposal or a Democratic proposal. Rarely do you see the talking heads discussing what is the best course of action.
Could the Democrats then put to a vote an extension for the bottom 99%? Then 99.5%, 99.9% and so on? Eventually they would have to reach some threshold where the Republicans would have to compromise right?
Is it a practical matter of time, a matter of the lost tax revenue or just the risk of alienating rich donors that prevents this?