You don't need to beat the market, you just need to beat inflation + your rate of spending, and you're winning the economic gain. That's very difficult when you're poor, but when rich it shouldn't be harder than a set of diversified index funds and not hemorrhaging money just because you're "rich".
Is there something I'm missing?
You're also right people are thinking beating the market, but that's also a bit silly, you can just buy the market and match it, who needs to beat anything if they've reached this point...
The mistake in this line of thinking is that a small pool of billionaires getting richer doesn’t leave everyone else behind. Their money is effectively irrelevant in how rich the rest of us are. A 100% wealth tax on all billionaires isn’t enough to fund UBI for one year.
The only upside to “solving wealth inequality” is just to reduce rich people’s ability to big influence in politics. There is no economic or financial reason to do so.
This is obviously a highly complex and lengthy topic that spurs tons of thought experiments but I generally agree with your latter point.
This doesn't sound right to me, though of course it depends a lot on what level you set the UBI at. In a US context we typically give numbers around 1/3 of median per-capita income (~$10k, out of $32k), and globally that would be ~$1k (out of $3k median per-capita income).
To give $1k to everyone in the world you'd need $7.7T, and billionaires have ~$9T, so it looks like this would work out.
(I don't think a 100% wealth tax on billionaires is a good idea, just surprised by your claim and looking into it)
Billionaires in the US hold about 3T. https://www.stockingblue.com/article/311/net-worth-of-billio...
There are 250 million adults in the US. https://en.wikipedia.org/wiki/Demography_of_the_United_State...
That’s $12,000 per adult for a single year. That’s not enough to reach even a minimum wage full time income, let alone a livable wage. UBI is supposed to be something you can live off of. The $10k number you are citing is a joke compromise defeating most of the point of UBI.
$10k is about what I've seen for most UBI proposals. For example, Yang is proposing $1000/month: https://www.yang2020.com/what-is-freedom-dividend-faq/
When you think of a reasonable UBI amount, what are you thinking? Do you have examples of proposals that use figures in that range?
Middle-class people buy stuff. Poor people don't, because they don't have any money. Rich people don't, because once you've got five houses it's more appealing to stick your extra money in a bank or in investments than it is to buy a sixth one.
So when you've got an economy geared around selling consumer products and services, you need a middle class to make that economy go. If you make 5% of that middle class rich and the rest poor, suddenly there's nobody around to buy those products and services anymore. Which in turn means the jobs of the poor people disappear and the investments of the rich people take a nosedive.
> If you make 5% of that middle class rich
If you’re talking about the top 5%, you’re not just attacking billionaires, you’re hitting all successful small business owners, doctors, lawyers, engineers, etc. That’s an entirely different argument.
The middle class has not been emptying at all. It just hasn’t progressed in wealth like the upper. https://www.pewresearch.org/fact-tank/2018/09/06/the-america...
Yes, some of us are in the top 10%, even in the top 5%. No, we are not going to be up against the wall just for having a modicum of success.
1. Each billionaire wasn't created by a small EFT from every adult, so there's no reason to expect that reversing the transaction would somehow fix the issue.
If we focus on where the money came from (we don't try to solve for individual billionaire-creating events like inheritance), I would imagine most of it can be described as accrued by extracting small slices from a great many individual transactions (including labor arrangements, government contracts, B2B, retail purchases; directly and transitively through investments, incentives, etc). Little slices of the value that transaction may go to a very large number of individuals, institutions, and corporations.
A great many things seem plausible. Billionaires (or anyone that, as GP said, reaches material escape velocity) could be getting richer by obtaining ever-shrinking slices while facilitating an always-growing number of transactions. Or Billionaires might be growing richer by "winning" (concentrating) slices that used to go to a larger number of people near the top of the wealth scale (via competition or consolidation). Or they could be obtaining slices that used to go to everyone else.
2. While I think I agree that the big benefit of solving wealth inequality is clamping the range of influence, I'm not sure what magical firewall limits the influence of the rich to politics (unless you have a very expansive view of the political).
It's a problem for people in the financial sector whose income/wealth stems from convincing people that you can beat the market (convincing is really the key, but it's way easier to convince people of it if you've already had success--even if that was luck).
If you have a few million dollars to invest, you can beat the market by just finding a few arbitrage opportunities. But if you have $100 billion to invest, you need a lot of ideas--figuring out that a $1 billion company is incorrectly priced only lets you get returns from a fraction of the money you manage.
Note: I'm an outsider..maybe someone in finance could give a better description.
I think you are missing the feeling of getting "financial cancer" or in a "financial car crash", like this very unexpected thing that sometimes happen to people where there's a huge global financial crisis, or they get scammed millions. The fear of that happening makes you do higher risk bets to maybe "just jump a little bit higher just in case and of course it may be the chance of my lifetime...". In the realm of those bets is sometimes where the actual crisis happen so it's kind of a vicious circle and very hard to break.
Of course if all high risk high reward bets where guaranteed not to ever send the rest of the world crashing a burning it would be a virtuous circle, but history proves it's not the case so the fear of this financially crippling event still lingers.
1. They aren't just trying to beat inflation. *
2. Viable ways to make money change depending on the scale of the money you're trying to tie up. A lot of things don't scale (or, maybe better said, scaling them requires additional competencies and may ruin the margins that made it worth doing).
3. You aren't the only one out there competing for opportunities. There's a lot of money out there seeking return.
* I'm shooting from the hip, based on my (potentially flawed) understanding of some reading I've done over the past few years on the body of Capital as Power (CasP) theory being built out by Jonathan Nitzan and Shimshon Bichler among others.
When they frame Capital as Power, one of the important implications is that it isn't an absolute quanta--it's a relative measure (i.e., power describes a relationship--one can have power in some relations, and not in others).
By framing it as a relative measure, they also suggest that attempts to increase one's capital are less about trying to beat inflation than they are about trying to gain power relative to others. I'm not sure I can unpack this in a very concrete way, but some implications are like:
- You could just beat inflation in a high-growth sector for a decade or two and still lose large amounts of power relative to the big players in the sector, and effectively end up transitioning from having enough power to check the other participants to having too little to keep them from pushing you around.
- You could lose money (absolutely) in a crisis, but still significantly increase your power relative to others.