Hacker News Reader

Comment by Aloha | Hacker News Reader

I'm an American and I can talk about the same things, nearly word for word (Jobseekers allowance notwithstanding) and feel exactly the same way.

Something is wrong with the economy, not just in the UK, but in America and probably a bunch of other countries. Where is the prosperity, if its there, why is it not more widely shared? is it a single cause, or is the cause manifold?

I have some ideas as to the answers to these questions (and its not capitalism is bad), but I too am just an engineer, not an economist. The unrest that propels populism is real. It's clear the status quo isnt working for the majority.

View on HN

Because we live again in a new Gilded Age, with its monopolies, robber barons, regulatory capture, and corruptions.

If you want to understand these days, you have to understand the Gilded Age, the rise of Unions, the New Deal, the G.I bill, the rise of the middle classe post WW2 until the end of the 70s, when reagan started to reverse the course engaged by FDR in the 30s, gutted every regulation intended to protect workers, envirronement, gutted union coercitive power, deregulated financial system with its new credit offering allowing to compensate diminished real purchase power of middle class salaries, slashed taxes on highest tiers of population and corporation, slashed public service.

The subprime crisis is a direct consequence of this...

For a short introduction in the matter, I suggest you to watch the last episode of season 33 of The Simpsons.

The decay started earlier than Reagan it's not just the vacuousness of supply-side economics, if you asked me to pick a date, it'd be 1971.

Maybe more like 1973 : the first energy crisis.

I've pondered that, but why did the energy shock kill everything?

Prices came down, even with stagflation, things got better.

Reagan was warming up for the presidency in his second term as CA governor in '71.[0]

[0]https://en.wikipedia.org/wiki/Governorship_of_Ronald_Reagan

That doesnt explains why its hard to find buildings built newer than 1971 in rural oregon, Oklahoma, or other places.

Which is the year Bretton Woods ended, and productivity gains began to be captured by speculators instead of being shared with workers.

In STEM we've seen huge stagnations in frontier research, breakthrough physics, and academic originality. And the arts are hardly in a healthier state.

Financially we're in a 30s-style depression but the media are being careful not to call it out as such.

Clearly this is Not Working.

An economy that privileges a few hundred billionaires at the expense of everyone else is not prosperous, stable, secure, or capable of real invention.

That episode of The Simpsons was very on point.

Feels like there's a very obvious answer that covers the majority of the answer and everything else is quibbling over the small remaining sliver.

The UK and other western countries were a global power because colonialism. Then WW2 happened and the US was mostly unscathed while also prioritizing long term growth through a stable democracy which led to high quality of life until the rest of the world caught up.

We can talk about immigration, austerity, trade policy, etc. But these will only move the needle slightly. The overwhelming advantages that these countries experienced won't happen again until there's another major disruption.

How far back in history do you stop counting advantages? What about the Ottomans, the Romans, the Egyptians? Did they not also use wars and slavery for their own gain?

I have suspected for a while that the single biggest cause is our lack of a national Land Value Tax (LVT). After all, Henry George predicted a century ago that continued technological progress and wealth creation would also lead to poverty unless there is a sufficient LVT. Until then, whether you or your family holds land is going to be a primary factor in whether you benefit from our societal progress.

I think both Georgism and Modern Monetary Theory are both interesting ideas, I'm not sure how applicable either is to reality however. (Even if I want MMT to be true and correct)

Wages for low income Americans have increased substantially in the last year.

https://www.pnas.org/doi/10.1073/pnas.2204305119

So has inflation.

The growth in wages at the low end has outpaced inflation.

Which is outpacing wage growth like a cheetah versus a sloth.

Have you been paying attention to the trend of the last 60?

That's why this is so exceptional.

A substantial increase one year cannot undo sixty years of wage stagnation. We have to keep going.

Exactly. Today's economy (in the US) is in a really good place. Moderate inflation, very low unemployment, decreasing inequality.

Yet the narrative is that the economy is in the crapper. The powers that be want to go back to the glory days of low inflation, high unemployment and increasing inequality. That's what we'll get if the fed continues to raise rates.

I would have agreed with you on everything, but inflation's really hurting people right now.

Our inflation is anything but moderate

High unemployment and rising inequality are far more harmful than 8% inflation. You can't have your cake and eat it too, you have to choose.

Perhaps I'm just a moron - why can't we have low unemployment and low inflation at the same time?

Wouldn't that situation be the best for wage increases?

We have had times with low unemployment and low inflation, but that's outside the Fed's control. The Fed has 2 levers it can pull -- interest rates and QE. Increasing rates / decreasing QE makes inflation better and unemployment worse. Decreasing rates or increasing QE makes inflation worse and unemployment better. This is about as well studied as anything in economics can be.

And while low unemployment is not unique to 2022, the decreasing inequality and the imbalance between the number of job openings vs job seekers are both at levels not seen in modern times. It seems reasonable to say that the inequality reduction and the high number of job openings are correlated. Raising interest rates will impact the latter so it's quite probable that it will reverse the decreasing inequality trend.

Thank you for explaining that. Doesn't Quantitative Easing just destroy the savings of the middle class over time? I don't understand how this helps equality in the long run, because it seems that inflation and Quantitative Easing are tools used to destroy generational wealth.

Do you have a resource you can recommend for self study?

Neither the poor nor the middle class have significant generational wealth to destroy. Wealth inequality is much worse in the US than income inequality. Inflation decreases wealth and increases income which is why it is a powerful tool to combat inequality.

The system is rigged against middle class on down because the government is bought and paid for by the 0.1% so that it's trickle up economics.

Forced sharing of prosperity (in form of transfer payments / taxes) is at a much higher non-wartime rate (% gdp) vs say 100 years ago (in the US).

If you want to use our parents (and before) proportion of transfer of prosperity, we should lower it significantly.

Forced sharing is a silly way of referring to taxes which are fees assessed for collective services. Nobody builds anything alone and is a benefactor of all sorts of common goods, services and infrastructure. To say otherwise is to prefer the bootstraps narrative to reality.

Top marginal tax rate in the mid 1900s was 70-90% and the estate tax was actually assessed without exempting the first $14M or whatever it is.

It’s all a social construct and we collectively set the rules.

The effective tax rates when the marginal rates were 70-90% were not much different than they are now. Cherrypicking marginal tax rates while ignoring deductions against those rates is misleading and deceptive.

Havea source on that? I hadn't heard that before and am interested in what that looked like.

https://fred.stlouisfed.org/series/FYFRGDA188S

Why are you comparing to 100 years ago - thats a non-sensical one, even my great-grandparents were minors 100 years ago.

Fine, go back 20, 30, 60 years. Practically take your pick. If you look at say federal transfer payments as percent GDP they were way lower.

https://fred.stlouisfed.org/graph/?g=jU5N

And we all know anyone talking about the standard of the bottom is looking exactly at transfer payments. That's how those at the bottom survive. We shouldn't try to trick the reader by saying "I'm not talking transfer payments."

Right, but again, I'm not talking transfer payments, or forced sharing, if I'd meant to speak to transfer payments, I would have said transfer payments, not 'shared prosperity'.

How would you define "shared prosperity" then? How would we compare it to some other time or place?

Profit sharing is probably the term we’re looking for here.

So corporations doing share buybacks and dividends? Something else? Is there a real number you're looking at in order to do a comparison, or just labeling some vague idea?

Share buybacks and dividends are profit sharing for shareholders, not workers...

A shareholder of a public company has done nothing for the company to generate value, even more when buying the paper from a previous shareholder and so not contributing to capitalise the enterprise.

Apart from helping to set pricing in the market, what exactly does a shareholder in the open market brings of value-generation to a company? Nothing. And they get dividends while most workers depend on the benesse of a company sharing bonuses and so on.

How do share buybacks equal profit sharing with employees? The employees are the ones doing the work, pay them before lecherous shareholders.

They don't, I'm trying to get a comparable number. "profit sharing" is too vague a term to compare two groups (across time or geography) with any credibility.

If we are going to compare on an axis, we need to first have a defined axis, otherwise it's just an opinion.

For instance, GGP and you both clarified things with two different definitions for "shared prosperity".

You’re splitting hairs here under the guise of data centrism. By virtually every metric shareholders are continuously improving their lives while workers have not. Obviously the 0.01-10% of the population that comprises shareholders with voting rights or majority holdings is a smaller cohort but when they improve their lot at the expense of everyone else we’re in a tyranny of the minority and doing nothing but argue is a wholly unacceptable state of affairs.

The premise of this thread is:

> Something is wrong with the economy, not just in the UK, but in America and probably a bunch of other countries. Where is the prosperity, if its there, why is it not more widely shared? is it a single cause, or is the cause manifold?

I'm trying to find basis for the part that references America, other than a gut feeling. If not transfer payments, GDP growth, real wage growth, then what? If everything we can measure says things are generally improving, then why the feeling that prosperity isn't happening?

Your response here tells me prosperity is pretty widespread as there are lot f shareholders in the US.

More good jobs for everyone.

Largely, in my adult life, I've seen management and shareholders pots grow, and labor stay the same.

When the pie grows everyone ought to get a little bigger piece of it.

Meanwhile, rent, price of a used or new car, college education, homeownership and medical costs have grown unabated - and generally faster than inflation.

Yeah, things are about to get worse. The newer generation wants equality of outcome and wealth (aka communism). They're enamored by income equality and climate which is just a complete subjectivism take over. You can do no little and you can always do more. We're here to shame you.

Asian countries have adopted what worked in the west: Capitalism and lifting people out of poverty at an unprecendented rate.

Those that complain about inequality are totally ok with not comparing themselves to someone in Bangladesh. To them, you look like a multi-millionaire. The hypocrisy is so blindingly bright, it is unbelievable.

None of the current zeitgeist has any reason, rationality and logic. It is subjectivism and post-modernism in its worst form. Biting off the hand that feeds them.

>Biting off the hand that feeds them.

You forgot to mention that the hand doing the feeding is attached to a body with another arm that’s picking the hungry masses pockets.

Can you give an example of that? How are big corporations ruining your life? What has TSMC or IBM has done to you?

Where is the coercion and use of force?

I know someone who works for IBM, his healthcare costs more in real dollars than it did when he hired on, he gets at best infrequent raises and there's no more pension plan.

How is that ruining his life though? Why didn't you account for the fact that IBM provided for his family for years? They are welcome to leave, we are not practicing slavery and the best part of at-will hiring is that you can fire your employer and find another job.

Don’t know much about Tsmc. IBM is a rather terrible company though, between their incessant illegal discrimination, mass layoffs, near criminal monopolist behavior, etc. look at any large publicly traded company and the piles of skeletons behind them are shocking. you’ve shifted the goal posts from companies picking pockets (taking unwarranted profit, or worse) to making ruining lives. This isn’ta gotcha though, the state of capitalism is abysmal when we actually consider the crimes against humanity these corporations get away with every second of every day for the past hundred odd years.

The "newer generation" is reacting this way because there is no political alternative being offered. Speaking in terms of the US, where is the party that advocates fiscal responsibility? Not fake "fiscal responsibility" where the Fed gives away trillions of dollars in "loans" to the financial industry while politicians run interference by making a show about legislative spending, but actual fiscal responsibility that respects the inherently-distributed economy. It's been outside the Overton window since the everything-bubble was kicked off by the ending of the gold standard.

There are folks running for office that advocate for significantly less spending by the government as well as balanced fiscal discipline. People don't tend to vote for them.

Why bother talking about them? They stand zero chances to be elected, not having one of the two parties behind them. I repeat, zero chances. Zero.

Sure, candidates do exist sometimes. The deeper problem is the whole topic is swamped by the mainstream party that has claimed "fiscal responsibility" as part of their platform, while doing the exact opposite.

Reply on news.ycombinator.com