Capitalism Has Gone Off the Rails | Hacker News Reader

Capitalism Has Gone Off the Rails

spiegel.de

316 pointsphesse14303 comments

This is an important article, but I doubt there will be a useful discussion of it here.

The developed world has incredible productive capacity. With 1% of the workforce in agriculture and 8% in manufacturing, the US produces as much stuff as China. There are no significant shortages of any manufactured good anywhere in the developed world. Quality is pretty good across the board, too. This is unique in history.

That's great. But there's less productive work to go around. We're out of buying power. Labor is worth less because there's a labor glut. Our economic system can't cope with that. On top of this, more of what most people can do is being automated, and for less money. Automation used to be expensive. Now, if a computer can do it, it will be far cheaper than a human.

The financial system has become primarily self-serving, running on self-generated zero-sum tasks. It's part of the problem, not part of the solution. If we had a capital shortage, that might be a problem. Instead, we have a capital glut, and no place to put it that produces good returns on investment. This is "secular stagnation", as the article puts it.

Japan hit this around 1989, when their real estate bubble collapsed. Japan never came back from that. There was hope that the Japanese would figure out something. 25 years later, they haven't. They've built up their safety net and put money into infrastructure projects, so that fewer people are suffering. That's the best they could come up with.

We have no successful model for dealing with this. What capitalism gives us by default is a small number of rich people and a large number of poor people competing for a shrinking pool of low-paying jobs. Nobody really knows what to do about this, including the people who say they do.

Great comment. The standard argument given by capitalists is that the "pie" will keep on growing, so while the existing owners of capital will get richer, it will also lift others out of poverty. Why is this not happening any more? Is it because earlier automation used to create "new" jobs which require labour, while now automation is removing the need for labour at all?

It's because the US is no longer a Capitalist nation; as such it no longer derives the maximum benefits of Capitalism. It was a mixed economy 30 or 40 years ago. Today it's a welfare state that depends on its central bank to remain solvent, with hyper regulation, high levels of debt, and high levels of taxation. The number of economic regulations and general laws passed each year in the US is truly astounding, and literally impossible to either keep up with or manage (this includes the laughable tax code).

A century ago there were hardly any regulations or taxes. Today every segment of the economy is highly regulated outside of tech and nearly everything you can taste, touch, smell, eat or look at is taxed (often multiple times).

Capitalism still works fine, because it's not a designed system, it's not a central plan.

In fact, countries like the USA should give it a try again. It worked quite well for them last time.

> Capitalism still works fine, because it's not a designed system, it's not a central plan.

What logic is this? "Anything which is not a designed system works fine"?

F.A. Hayek wrote in The Fatal Conceit, “the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

We need to be careful that this differs materially from "the curious task of auronautics engineers" circa 1900. One place it surely does differ is that we've quite a few more people on this plane of the economy than on any test flight. We should, indeed, be correspondingly more careful.

That said, "be careful" and "do nothing" are two very different propositions. Being careful may motivate doing nothing, or it may motivate doing quite a lot. While I don't think it was present in Hayek's reasoning, this frequently spills over into something that looks like "We're dealing with people's lives/rights here! How can you be so crass as to talk about numbers and make decisions?" When things are difficult and important, that's precisely the time you need to be most careful in your reasoning.

Abstaining is still an action. Proposals for reduced or constrained intervention are still proposals, and only deserve reduced scrutiny to the degree that they are supported by "we've done that before and it worked out well".

A century ago we had the Great Depression, followed by a major application of regulation, followed by the biggest and longest boom in middle-class history in the US.

In the 80s we started massive deregulation including killing Glass-Steagall, opening up banks to so destroy the global economy that we're having this discussion today.

Your history of regulation and relative wealth is backwards.

Edit: I'll acquiesce that the tax code is laughable, but mostly in how upper-class income tax levels are half what the middle class pays.

> Why is this not happening any more?

It is happening. The average manufacturing wage in China is up 700% in fourteen years.

It isn't happening in the US and Europe, but that's because the average worker here still makes absurdly more money than the average worker in the developing world. The gap is closing quickly. As it does, we'll be able to see more evenly spread growth again.

But purely from a humanitarian standpoint, it's hard to argue that it's a bad thing for workers who make $7000 a year to be getting bigger raises than workers who make $37000.

From a purely humanitarian standpoint, it's hard to argue that it's a good thing for CEOs who make $9.6 million a year to be getting bigger raises than workers who make $37000.

http://www.csmonitor.com/Business/2014/0527/CEO-pay-hits-10-...

http://www.huffingtonpost.com/2012/05/02/ceo-pay-worker-pay_...

http://www.csmonitor.com/Business/2013/1212/CEO-vs.-worker-p...

http://www.epi.org/publication/ceo-pay-231-times-greater-ave...

Agreed, but that's actually a separate problem. There are so few CEOs relative to average workers that their aggregate pay isn't enough to explain why workers in the west aren't experiencing wage growth.

Actually, in some of the most egregious examples (Walmart), management and/or owners are paid enough to make a real difference in what workers are paid. The six Walton heirs hold as much money as the entire bottom 42% of Americans combined. A pay raise of $2/hour for every non-management Walmart worker (raising hundreds of thousands of people out of poverty), and/or giving them reasonable benefits, would not change that statistic in dramatic fashion.

http://www.motherjones.com/mojo/2012/09/sam-waltons-fortune-...

It's not enough to explain it, but it is a relevant piece of the puzzle.

According to the wikipedia 2013 stats, WMT has 2.2 million employees and and Walmart family owns "over 50%" of Walmart (let's assume 50%). 2014 net was 16 billion but 6 billion was paid in dividends to shareholders. Assuming a 2000 hour work-year, if ALL of the non-dividend was spent on wage increases, that's a $2.27 extra per hour all 2.2 million employees could get.

Well, boards often approve costly "incentive plans" for employees, but would a board approve 10 billion dollars to be distributed to employees every year? What would that mean for the future stock price?

Keep also in mid the other 50% ownership - probably pension plans funds.

You also mention already accrued wealth in form of stock, not income originally. How would distributing that work exactly? Would you add some kind of extraordinary tax on every WMT stakeholder? Their dividend alone (6 billion) is not enough to cover the wage increase.

You don't have to single out Wal-Mart specifically. Just put in sensible inheritance taxes, raise the marginal tax rates on high-income brackets across the board, and raise the capital gains rate.

It would also mean that all of the employees have a lot more money to spend, a part of which they'd spend at Walmart. Wasn't it Ford who back in the early 1900 gave his employees a lot higher wages than other companies so they could spend more and thus raise his own profits?

No, Ford raised wages to curb employee turnover.

That's a nice example! I always thought that it didn't make economic sense to pay people more money just so they could buy stuff from you. But just now I realized that it's actually possible.

Let's say you're selling cars for 100 dollars, and make 10 dollars in profit from each car sold. There's a lot of folks who have only 99 dollars and can't afford a car. If you give such a person one dollar, they will buy your car and you'll be 9 dollars richer.

Now, of course that's just a market segmentation scheme in disguise. If you could identify the folks who have 99 dollars and give them a 1 dollar discount instead, you'd profit even more, because they wouldn't be able to spend it on anything except buying a car from you. That's how companies do it today, they use employee discounts to get all the benefit of raised wages without actually raising wages.

"Assuming a 2000 hour work-year"

That's an incorrect assumption, possibly wildly so. Likely, more than half of Walmart employees are part-time and temporary employees, partly to avoid giving them legally required employee benefits.

http://www.forbes.com/sites/lauraheller/2013/06/14/obamacare...

Also, I appreciate that you've done the math in more detail than I did. I did a quick calculation in my head based on the 2 million employees to come up with $2, but you've been more precise and provided numbers, and I appreciate it. Even though we disagree on what the starting numbers for the calculation should be. Basing the discussion in reality is nice, and what I like about HN.

Ok. But thinking aloud here, when and how does exchange rate come into play? The only reason I have been lifted out of poverty living in India is because of "Western" consumers - I do work for which my employer gets paid in dollars, and they give me a fraction which is enough for me to lead an upper middle class lifestyle in India. No Indian company will pay, or has the ability to pay, as much money as I am getting now doing the same work for Indian consumers. So if a large percentage of "Western" consumers don't consume as much as they used to, it directly affects my livelihood. Is it a paradoxical situation that I am probably taking away the job of someone in US thereby temporarily improving my livelihood in the short term, whereas I actually don't have a livelihood in the medium / long term?

The hope is that the temporary wealth transfer until you reach equilibrium can fuel your own countries growth to the point where it can self perpetuate the cycle with its own infrastructure.

IE, you built factories and call centers and all manner of things to service western tastes, and even when the western money dries up by then you should have enough in your own little money cycle plus the infrastructure to produce enough to compete globally to maintain equilibrium.

It is an efficiency game. You start out with a farmer who has no tools, but because they live in an impoverished nation he sells his crops for next to nothing and that next to nothing money is considered a lot where he comes from. That money gets him funds to buy tractors and plows and other productivity boosters or maybe self driving combines to just outright replace some of his labor.

Now while a lot of that might come from the same western market, he will still spend some of it locally, and macroeconomically that effect will spread wealth in the local area assuming locals can buy something from each other. As long as the equation has money flowing out of another country into yours you are boosting your economy through your citizens productivity.

By the time the equation equalizes, the farmer should have all the modern tools of the farming trade such that there is price equalization between himself and all other farmers - their countries economic deficit gave him an opportunity to invest in his farming, yielding a more efficient farm that can produce significantly more food and by the time it is done sell it at western market value because their economy has equalized with the first world.

Of course, the farmer could also blow all his temporary profits on drugs and women, and end up screwed when he cannot produce enough crop to sustain himself as the cost of living rises with a modernizing economy.

> that effect will spread wealth in the local area assuming locals can buy

That's the problem you can't be sure once there is no more "western jobs" that they will remain enough money in the country. You are just assuming without proof. The exact thing neocon have been doing for years.

I don't know if the pie is growing or not. In my country they are going to include sex trading in the GPD and 23% of the econmy is supposed to be black money (money that don't pay any taxes). Statistics about numbers of jobs are crook because change every day what's mean to be employed so there is no a real historical record to compare or see trends. Also if you pay 50$/moth and you are below 30, you get into the health system and later will receive money for jobless and other resources, so is not clear if there is really creation of jobs or people are paying for themselves to receive more tomorrow from the government.

We do have a model that has successfully demonstrating certain principles which may be capable of addressing this problem: Burning Man. Bear with me for a second.

I'd say (and then pointing out my lack of formal or amateurish study of economics) that the issue you're pointing at is that capitalism doesn't function well in a post-scarcity environment, which we're entering. This is because our means of determining value is primarily based on supply/demand dynamics - aka, scarcity. As scarcity goes away, our ability to determine value goes away, and with it, our ability to distribute energy throughout our civilization.

Burning Man (which is definitely NOT a viable economic model and I am NOT aruging that) demonstrates the viability of a new principle: YOUR value is based on what you give away.

Which gets really interesting when you look at economics as a sort of directed thermodynamic problem: What defines where energy (aka money) goes? Right now, it's defined by supply/demand dynamics and wants and needs - what if it were primarily defined by altruism?

You can come at this from a different angle, going back to that grade school career question: If you had a million dollars, what would you do? Or to rephrase, if all your needs were taken care of, what would you do?

Blah, blah, blah, I'm throwing out a bunch of ideas to see how they react. What're your thoughts, given what I've described?

> what if it were primarily defined by altruism?

It's a fun question, but I think the answer is less entertaining: we would all be less happy. The fact is that most people are better at guessing what they themselves really want than other people are. It's a question of information. I know more about my desires than my friends do, for the most part.

Altruism is nice, but inefficient.

Spending quality time with friends & family, on the other hand, truly is priceless. I don't want them to be nice to me - I just want to be with them. So finding an economic (and cultural) system - be it a few tweaks on the current one or a radical rethink - that gives me more opportunities for a healthy social/family life ought to be the goal, in my opinion.

A bigger problem, IMHO, is how do you define Altruism? Is bill gates more altruist because he gave up a million dollar? Or someone else who speds large amount of time outside job with NGOs working for poor people?

> the issue you're pointing at is that capitalism doesn't function well in a post-scarcity environment, which we're entering.

A literally post-scarcity environment is not a problem because it makes the price of everything zero. Food is free, shelter is free, medical care is free, you don't need a job. Do whatever you want all day, it's not a problem.

The problem is that what we're entering is not a post-scarcity environment, it's an environment where things many people don't already have, like energy or land, become more scarce and thus more valuable than the things they do have, like the ability to perform unskilled labor.

In theory capitalism works fine in that situation. If people can't afford rent or home ownership then the price of housing should come down, because the supply of housing and the number of people who need it haven't really changed, so if people have less money then landlords and home sellers can no longer charge as much.

The problem is that we interfere with that process -- the housing crash was a market correction. Instead of letting that correction happen all at once, we bailed out the banks. So now the banks that didn't file for bankruptcy and liquidate their assets are sitting on thousands and thousands of foreclosed homes and intentionally keeping them off the market in order to backstop housing prices and prevent even more foreclosures. But the result is a significant artificial inflation of housing costs that comes directly out of the pockets of people in poverty.

Then the solution is pretty simple, doesn't it? make it illegal to foreclosure a house for more than 6 months, an "use it or lose it" policy.

Or even simpler, don't bail out businesses that make stupid decisions.

That's actually going to be ridiculously complicated. I doubt we will see such a reversal of the status quo happen in our lifetime.

I've heard the idea that banks are keeping foreclosed houses off the market a few times. Do you know of a reference that describes the scale of that?

> I've heard the idea that banks are keeping foreclosed houses off the market a few times. Do you know of a reference that describes the scale of that?

This estimates the number at 85-90% of foreclosures:

http://realestate.aol.com/blog/2012/07/13/shadow-reo-as-much...

You can literally see it with your own eyes. Walk down a street in a working class neighborhood. You'll see plenty of homes with a piece of paper on the front door saying the house has been foreclosed and "winterized" but no realtor's sign or other indication that the house is on the market.

Not selling foreclosures is completely rational behavior for the banks. The houses are usually on their books at the price the original owner paid for it, so selling it at the current market value causes them to take an accounting loss and makes the bank's CEO look bad. Meanwhile the homes are still assets they can collateralize and trade as securities without actually allowing anyone to live in them, which is all the bank was ever interested in anyway, and not allowing anyone to live in it keeps overall housing prices higher, which is more important to mortgage banks than anyone else in the world. Meanwhile the value of the home isn't actually going down, which is what would happen if they sold them at scale.

Gift economies prevailed for longer than capitalism has, and my gut says they will again. Not because of scarcity / abundance but because now we have social software. I'm working on a speculative project to scale the gift economy.

http://www.wired.com/2014/07/document-coin/

This is not an important article, it is a rant against people with "tacky mansions", a turn of phrase that is more indicative of the author's point of view than the other conventional points about not understanding creative destruction. I think it is this overly nationalist view of economics that needs to die, not "capitalism".

There is not less productive work to go around, it's just not being done in the US. We are in a difficult situation because we have free trade with lower cost labor markets. Until labor market costs in free trade enclaves reach equilibrium, capitalism will continue to raise more people out of poverty, and prevent wages from rising in places where they are above the demand level in the global market.

The extraordinary amount of government debt being created is an interesting phenomenon, as it is failing to cause inflation in most large currencies as they are increasing the money quantities in a correlated fashion. The financial entities are spending a lot of energy pricing these various instruments, and can make low risk money on the spreads.

Japan did have a real estate bubble. The thing about bubbles is not "coming back", it's that the wealth wasn't real in the first place. We weren't as rich as we thought we were. Their problem is demographics, an aging population, low birth rate, and a society that is not practiced at encouraging positive immigration.

"What capitalism gives us by default is a small number of rich people and a large number of poor people competing for a shrinking pool of low-paying jobs." This is just wrong in every way...the number of rich people in the world is growing, the number of jobs in the world is growing. Just because every country is not moving linearly up and to the right does not mean things are falling apart.

A third of the population in the richest nation on earth lives in poverty. According to you, that's not a problem because even poorer people in Bangladesh are slightly less poor than they would be if American companies had never employed them. What kind of callous person could look around at all the suffering and think this system's working great? Or do you not look around at all, holed up in a tacky mansion of your own?

I don't think that's what they're saying. They're saying that the problem of American Poverty is temporary; even poorer people in Bangladesh are earning gradually more and more, and will one day earn as much as unskilled American laborers. And only then will unskilled Americans be able to find work again.

FWIW, I'm less enthusiastic about the current system/situation than mattmcknight appears to be.

> look around at all the suffering and think this system's working great?

i dont think anyone is saying the system is working great. Capitalism the worst system, except for every other system tried. What do you suggest?

There have been multiple, very different systems labeled "capitalism" for political purposes. The strong-labor, domestic-demand-driven social-democratic model of capitalism worked far better than today's rentier and financial capitalism.

There is parecon http://www.wikiwand.com/en/Participatory_economics

>Participatory decision-making involves the participation of all persons in decision-making on issues in proportion to the impact such decisions have on their lives.

I live in a country in the EU. 90% of the population does not understand supply and demand. Even more people do not understand the notion if "rhetorics".

You want those people to participated in making decisions? Do you really believe that?

I am so fed up with this vain anarcho bullshit. WAKE UP. People are dumb. Dumb as a brick. If you want to help them, you have to drag their body over to the finish line.

Perhaps we should fix democracy before we try to fix capitalism.

We should fix education before even attempting to fix democracy. Both scholarly and within the family.

Any attempts to temper with the social framework by largely un/poorly/mis-informed masses of people leads to catastrophes.

Russia 1917 Italy 1929 Germany 1934 Spain 1939

Some enlightened people will always try to exploit people's resentment to gain control and use it as they see fit. Soon the system is far worse than before.

95% of the biggest nation in the world (or maybe second biggest, no one really knows the exact pop of India and China) lives in far deeper poverty than poor americans. Many of them experience actual suffering - not enough food, no flush toilet, no power.

What, precisely, do you believe poor Americans are suffering from? The only concrete answer I usually hear is envy (I.e. "oh noes the inequality").

http://economix.blogs.nytimes.com/2011/01/31/the-haves-and-t...

> What, precisely, do you believe poor Americans are suffering from?

Well, just for starters, they're suffering from entirely treatable diseases and injuries because they don't have health insurance, or don't have non-shitty health insurance. Quite a few of of them are suffering from childhood malnutrition, leading to lifelong cognitive and developmental defects. On the lowest rung, they are suffering from homelessness and all the deprivation and desperation that comes with it.

You're trying to tell us that someone to trying to raise kids in a rotting, roach-infested apartment in a drug-haunted slum, with no chance at a decent education and no real hope of advancement, is really perfectly all right because at least they're not actually living in a Delhi sewer. Or are you not even aware that this happens in America? You sound like the closest you've ever come to actually knowing a poor person is tossing a quarter to a homeless man in the subway.

Well, just for starters, they're suffering from entirely treatable diseases and injuries...

If that were the case, the increasing access to health care should make them healthier. It didn't.

http://www.nber.org/oregon/

Do you have evidence for childhood malnutrition?

Once you come up with a definition of "rotting, roach-infested", feel free to check what fraction of poor Americans actually fit that definition. See table 2-4: http://www.census.gov/prod/2008pubs/h150-07.pdf

Suffice it to say, probably the majority of my friends are poor by American standards. But then again, I live in India. And even when I was a poor American I still lived better than they do. Though I'm usually told that grad school doesn't count as poverty, even though the economics of it are the same.

It is sad that completely factual, sourced and on-topic comments get downvoted on HN just because they go against the political beliefs of downvoters who don't even bother responding.

No, I don't get what yummyfajitas is getting from his own sources. The Oregon experiment article he linked to stated, verbatim, that 25% more people reported themselves healthier thanks to increased health coverage, and 10% better mental health. Yet he is using this link to claim better health insurance does nothing for poor people.

Also, using a pre-2008 crisis census report to argue that everything is fine today is extremely intellectually disingenuous. It's almost like he's openly trolling.

Measured health outcomes did not go up, only self reported health did. Further, the increase in self reported health was present even before people had a chance to go to the doctor.

Better health insurance makes people feel better. That's not the same thing as making them healthier.

If you think the data changed between 2008 and the next AHS survey, feel free to prove it. Or just call me a troll, far less work.

> Measured health outcomes did not go up, only self reported health did. Further, the increase in self reported health was present even before people had a chance to go to the doctor.

That's BS, that report only presents no change in points on some physical health metrics which are dependent on lifestyle and not medical attention anyways.

> If you think the data changed between 2008 and the next AHS survey, feel free to prove it.

Sure, have a go at it: http://en.wikipedia.org/wiki/United_States_housing_bubble

It's clearly disingenuous to claim that the housing situation today is represented by a report concluded before the crisis where everyone lost their homes and/or jobs.

I don't understand. From my brief reading it looks like measured outcomes did improve significantly (see diabetes, depression, cholesterol). Am I misreading this?

The outcomes did not change statistically significantly. Note the CI's indicated on the graphs.

Diabetes was diagnosed more.

So, what is the answer? Wait for poor-people parity? We can only move forward in the US if all of the other poor people in the world are at the same level?

And, if that is the case, which direction do we go? Do we push the poor people in the US down or raise up the poor people elsewhere or a combination of both?

I'd rather raise others up while helping our own. Free markets are fine as long as they don't become a race to the bottom and create perverse incentives to keep the poor poor.

As the world economic power, along with our wealthy allied nations, we need to tie positive social movement, like raising the minimum wage, access to nutritious food, clean water, medical care, social mobility etc. to access to our markets.

If the people's lot doesn't improve, their elites don't get rich. Simple as that.

You've forgotten the original question. The question was whether we should harm very poor people in other countries in order to benefit not very poor at all people in the US.

I argued that it would be horrendously immoral to do so.

How do we pull up the poor when the elites filter the entire economy through their pockets?

If the goal is to pull everyone out of poverty, is there a way to accelerate the process? I'd say, yes. Predicate the elites selling their people's labor to wealthier powers on improving labor's situation in that country. They are not doing it on their own, at least not fast as they could.

I think we can help both the poor people in the US and everywhere else. We just need to squeeze the top a bit harder.

> If that were the case, the increasing access to health care should make them healthier. It didn't. http://www.nber.org/oregon/*
What evidence for your position do you see in that article? It seems to say the opposite of what you think it does. I'm looking at "Medicaid increased the probability that people report themselves in good to excellent health (compared with fair or poor health) by 25 percent" and "Medicaid reduced observed rates of depression by 30%."

> Do you have evidence for childhood malnutrition?*

The WHO doesn't seem to have much data on actual malnutrition rates for many nations, including the US, after a few minutes of searching, but "Some 13 million American children live in homes with limited access to food, and an average one in three children receive food assistance via the food stamp program..." (http://www.livestrong.com/article/487412-malnutrition-in-ame...)

It is absolutely true that poverty in India is deeper and more widespread than in America. That doesn't remotely mean that American poverty isn't real or that people aren't suffering. By your logic, a man with a broken finger isn't allowed to complain if a man with a broken leg exists, and that man isn't allowed to complain if a paraplegic exists, and so on down the oneupsmanship scale of wretchedness. Where, exactly, is the cutoff point beyond which we're no longer allowed to care about human misery?

If you want to argue that poverty in India and worldwide is a huge problem, and that the Western world could and should do more to address it, I'll agree heartily. But what you said was that poverty in America is not a problem and that poor Americans aren't suffering, and that's bullshit.

There is tremendous long run psychological and physical harm associated with living paycheck to paycheck in perpetual debt having to eat subpar foodstuffs because fruits and vegetables cost way more than dollar menu cheeseburgers per calorie. And if you don't have a working kitchen you can't cook farmers market produce.

And that is at best. A lot of us are unemployed, and families are collapsing in on themselves as you have fewer and fewer breadwinners.

There is tremendous long run psychological and physical harm associated with living paycheck to paycheck

This is entirely in the control of most poor Americans. India's GDP/capita is $5500 after adjusting for cost of living, yet India has a 20% savings rate. Poor Americans could reduce consumption and save if they wished.

in perpetual debt having to eat subpar foodstuffs because fruits and vegetables cost way more than dollar menu cheeseburgers per calorie.

Poor Americans tend to be fat. That means they can reduce calories and increase the quality of food while spending the same amount of money.

And if you don't have a working kitchen you can't cook farmers market produce.

3% of poor Americans lack a complete kitchen (see table 2-4).

http://www.census.gov/prod/2008pubs/h150-07.pdf

tl;dr; Poor Americans have some self inflicted problems. That's not much of an argument for protectionism against poor Bangladeshi's suffering from externally inflicted problems.

I've been traveling in SE Asia for the past 4 months, including China (not yet India). I've been in urban slums and poor rural villages. I also went to university in West Philadelphia, so I've spent a bit of time in an American "inner city".

I'd take the rural village or even the urban slum over the American inner city any day.

It might look from the outside that life "is entirely in the control of most poor Americans". But nothing could be further from the truth. The amount of forces conspiring against you as a student or young would-be worker in the ghetto is simply unfathomable to anyone with a middle-class or wealthier background (like myself). I'd argue you have a much better chance at moving up in the world as a poor person in Vietnam than America. There, you start a small business (eg; selling goods on the street) and work hard to grow it. Here, you can't just do that: people don't buy anything off the street. And don't tell me "they can just learn to code": I tried to teach them. They don't have computers. Not in the schools. Not at home.

Also, consider that unhealthy foods are often genuinely addicting and addictions are really, really hard to break. Especially when you're stretched then.

I don't want this to turn into a rant, so I'll just say that before you start blaming the American poor for their problems, spend some time living there, talking to them, and understanding their problems.

I'd argue you have a much better chance at moving up in the world as a poor person in Vietnam than America.

Your argument would be wrong, at least as of the last time we ran this experiment. Back in the 80's we took a bunch of Vietnamese and turned them into poor Americans. Now they are not poor. In contrast, the Vietnamese who stayed behind are still very poor. That includes the ones who started small businesses like selling goods on the street.

http://en.wikipedia.org/wiki/Vietnamese_American#Socioeconom...

There are plenty of Vietnamese/Hmong/chinese viet poverty in the states. And why San Jose gangs are mostly asian.

That was in the 80's. 30 - 40 years ago. A lot has changed, and not much of it for the better.

I can't tell if you are trolling or are serious. Anyways, I'll leave is here:

http://www.washingtonpost.com/wp-dyn/content/article/2009/05...

Excellent article. Thanks!

There have been studies that showed that the psychological problems that stem from being poor have little to do with your absolute wealth. It's more of a peer-thing. If you're the poorest man in a very rich peer-group you'll still feel miserable and less.

The problem then with being poor in America is not that you're rich compared to a farmer in vietnam, the problem is that you're poor compared to the people you see on your crappy TV.

To quote the report: "Mental health is also a key pathway through which inequality impacts on health. There is overwhelming evidence that inequality is a key cause of stress in itself and also exacerbates the stress of coping with material deprivation"[0]

[0] http://www.euro.who.int/__data/assets/pdf_file/0012/100821/E...

Yes - as I said in my first post: What, precisely, do you believe poor Americans are suffering from? The only concrete answer I usually hear is envy

The best solution I see to the problem of envy is directing social opprobrium towards people who exacerbate the problem (e.g., politicians appealing to envy, celebrity news publicizing lifestyles of the rich and famous).

I've had the privilege of having time to sit down and talk with plenty of folks struggling in the southeast US. None of them, that is zero, show any discernable 'envy.' What you are talking about is either a straw man or a deeply hidden psychological issue I just couldn't detect a hint of. Or perhaps you are mistaking the new paycheck-to-paycheck middle class for the actual poor. In my experience these are either fiercy proud or cynically hopeless people with so many immediate issues they lack even awareness about what us rich people are doing.

The real problems they face are debilitating sickness, taking care of a family member with debilitating sickness, struggling to continue sleeping where they are presently, struggling with maintaining a human identity in a society that treats them subhumanly, trying to get hired as a felon, trying to secure the trust of any financial institution, trying to break drug habits and cope with psychosis and other mental illnesses without access to a pharmacy or non-ER doctor.

Your continual use of the word 'envy' belittles the psychological affects of poverty. Your use of that word seems to imply that poor people can somehow eradicate their psychological suffering through positive thinking or something similar. It's the "pull yourself up by your bootstraps" approach to reducing poverty, as US conservatives so frequently say. It is these clever uses of words that aim to reduce very complex issues to simplistic ones, ignoring systematic affects and pointing blame at individual irresponsibility.

And yet, I can't shake the feeling that if you took away all my money and property, I would be employed and back in an apartment in a month. What's a guy to think, when folks complain about how its too hard to move, to get an education, to save money, when I know I can do it?

Its hard to empathize with people with an outlook so different, that they can't imagine working their way out of poverty. Because I can.

Well, we could always do an experiment to see if you're right.

Let's assume that you aren't able to use any existing education or connections, you start off with significant debt, and you are located in an area with high unemployment. If you are able to be back in your apartment in a month, I'll eat this computer.

Edit: If we threw the idea up on kickstarter, I'm sure that there would be more than enough support to pay for your opportunity costs (assuming you're not independently wealthy). It'd be an interesting experiment.

Move. Get a job, any job. Don't spend any (much) money. Work to get a better job.

And what's with the debt-but-no-education? How was that supposed to work? One or the other.

I'd be interested to see how quickly you could get a minimum wage job.

I'm not sure there's an ethical way to set up the experiment where you apply for a bunch of minimum wage jobs to see which ones you can get; and I doubt there's a way you can spend the time to do it.

But I'd be really interested to know if you could get a minimum wage job within a fortnight.

Yeah everybody is all about 'job creation' etc. I've never had a job that existed before I had it. You find a problem to be solved, you can start solving it for money.

I live in a small community. Most of the families are self-employed. Who created their job? They did. Didn't wait for some company to decide they were worth paying.

So I have a problem with folks that wait for somebody to make a place for them. That's no way to run your life.

"And what's with the debt-but-no-education? How was that supposed to work? One or the other."

It's not very often in life that the phrase "check your privilege" is appropriate or reasonable, but right here, right now, that's picture perfect.

I mean, you can't think of a single possible way that one could get into debt besides ivy-league loans, and you're saying that you understand what poor people have to deal with?

Someone did this experiment and wrote a book about it:

Scratch Beginnings: Me, $25, and the Search for the American Dream

http://www.amazon.com/Scratch-Beginnings-Search-American-Dre...

Well, let's take away all your money and property, give you three kids under 6, diabetes, dental problems, and a disabled spouse with a felony so you can't get housing assistance without leaving the spouse. That would be a more accurate representation of the difficulties people face.

I would definitely watch that experiment and I think people would support it on Kickstarter. (People don't want to support the actual folks doing this that much -- it's depressing -- but it would be interesting to see someone with all the advantages of education, marketable skills, previous steady employment, and ease with middle- or upper-class mores and culture try to make it come together.)

Definitely it would work better to be young, single and healthy. But aren't there an enormous demographic of just such people in poverty, jobless? That's what I was failing to empathize with.

> And yet, I can't shake the feeling that if you took away all my money and property, I would be employed and back in an apartment in a month.

Perhaps. Certainly, the advantages of a relatively privileged condition aren't limited to money and property, but include lots of deeper advantages that (among other things) are useful for the gain of money and property. That's among the reasons why generational poverty is is generational, and requires active effort to break the cycle rather than simply the absence of active effort to maintain it.

> What's a guy to think, when folks complain about how its too hard to move, to get an education, to save money, when I know I can do it?

You could maybe use that ability to get an education you are so proud of to learn enough to have some broader basis for understanding the world than simply your experience of what you are able to do given your own particular circumstances.

note that for the purpose of argumentation, i'm assuming a lot of things about you which are generally true of our privileged class, though might not be specifically:

Yes, you likely would be back in an apartment with a job. because when you grew up your mistakes didn't result in a felony charge, and because you have not had to burn through so much credit you can nolonger even open an account.. because you had enough resources to graduate high school rather than sling drugs. Because until now most of your health issues until now have been solved rather than pushed off and allowed to worsen.

And most importantly, because you've developed social ties to the institutionally established rich class.

This is not about envy, and you sound very condescending to me by calling the issues these people have 'envy'. This is about serious mental illness caused by a perception of enormous inequality. Envy is just an emotion, not a way of life.

The cause of their problems is not just from celebrity news or politics. It's the very society we live in. You can't just ban advertisements for cars, or decide that cars can't look new on the street. In other words: it's not just the things they see on tv that can spark these problems. Everything around them lets them know they're at the lowest rung of a very large ladder to the socio-economic top.

You're suggesting that we try to make the ladder appear shorter, or somehow hide the top from view. Apart from the fact that, as outlined above, this cannot effectively be done in my opinion. I also find it morally offensive that you'd rather defend a system that is likely not perfectly compatible with human nature. You'd rather try to remove the perception of inequality than the inequality itself.

If we cannot change how humans react to inequality: we get jealous, get sick, turn criminal or exhibit other negative traits. Then we should instead change our society to address the real issue: the inequality itself, and not just it's perception. Now doing that would be a whole other barrel of fish obviously.

I don't know what you mean by "serious mental illness" or "way of life". You seem to be describing negative feelings, specifically a longing aroused by qualities someone else has. That's envy, according to the standard definition.

If you'd rather use the a different term to avoid inspiring negative feelings about me, feel free to suggest one. For the remainder of this post I'll use the term "Mind State X" to describe an unpleasant mental state resulting from the observation that other people possess qualities that you wish you had.

I'm confused. Is inequality intrinsically bad? If so, then Mind State X is irrelevant, and you should be able to make that argument without it. If Mind State X is the thing that is bad, then inequality is irrelevant if it does not cause Mind State X.

Lets also generalize this discussion of Mind State X. Many non-money related things cause Mind State X - I'm tall and good looking, some people are short and ugly. I have sex with many women, some people are involuntarily celibate. I'm somewhat skinny, other people are far more muscular than me. These things can also cause Mind State X.

For example, a woman I used to sleep with is now sleeping with someone who is much stronger and more muscular than me. I feel Mind State X as a result. I believe the solution is that she shouldn't inform me of this. You believe the solution would be for her to be prevented from doing this, I take it?

On to practical matters: Everything around them lets them know they're at the lowest rung of a very large ladder to the socio-economic top.

Residential segregation and targeted advertising would seem to be a great way to address this. Luckily the world is moving in that direction anyway.

I'm of the opinion that, as with all things, the degree to which something happens is relevant. I'm saying that the way these people live, 'as if in perpetual envy', is no longer a form of envy. It's something different.

And yes, this means that inequality is bad in and of itself.

What the difference is is clearly outlined in the report I previously posted:

"It is abundantly clear that the chronic stress of struggling with material disadvantage is intensified to a very considerable degree by doing so in more unequal societies. An extensive body of research confirms the relationship between inequality and poorer outcomes, a relationship which is evident at every position on the social hierarchy and is not confined to developed nations. "

"Mental health, resilience and inequalities Box 9: Poverty and powerlessness It is evident that the consequences of an individualized view of poverty can often be devastating.... The sheer lack of respect and understanding given to the disadvantaged in Britain is highly corrosive of wellbeing, and all the more so because it is constant and overwhelming. We have had welfare recipients tell us how every interaction they have with the official welfare world is negative: no one has a good word to say to them; they spend hours shuttling between agencies in grimy offices that reinforce their powerlessness. Their time is of no account because they are considered to be of no account. Jones et al 2006 p. 439"

And finally:

"Economic analysis based on WHO data on the global burden of disease (see Box 4) suggests that of the total health burden, just under half is attributable to premature mortality and just over half to non- fatal outcomes (morbidity and disability). Mental illness, including suicide, accounts for less than 5% of all premature mortality but for over 30% of all morbidity and disability. No other health condition (apart from cardiovascular disease) accounts for more than 10% of the total burden of disease within the population (WHO 2005; 2006)"

These are the mental, and apparently also physical, problems I'm talking about. And they are the result of inequality, be it perceived or real.

As for your example, you seem to want me to agree with you that you should 'prevent her from sleeping with someone else'. Which would be a morally apprehensible thing to do.

I'll stop you right there, in no way is your sexual life in any way comparable to the way poverty impacts the mental wellbeing of people. I'd call what you sketch in your example envy. But that is not what these people are suffering from.

As for your idea of residential segregation, this seems to be another try to 'hide' the inequality. You're still attacking the perception instead of the real problem. I restate that you can't hide the inequality in our society. Say you do separate (forcibly?) all poor people from the rest. How do you stop them from seeing the people on TV? Radio? On the street, where they work?

Even if you somehow work it so that there's absolutely no contact between the former poor people and the rest of society, you've only succeeded in sawing of 1 rung from the ladder. Will you do the same with the new 'bottom rung'? As outlined in the rapport and by me, the issue is not wealth in absolute, it's the perceived gap in wealth between you and your peers, the people you see on tv that are no different from you except they got wealth and you don't.

And yes, this means that inequality is bad in and of itself.

If inequality were bad in and of itself, then you wouldn't need to refer to Mind State X to explain why it is bad.

I.e., suppose inequality doesn't cause Mind State X. Do you still care? If so, why?

I'll stop you right there, in no way is your sexual life in any way comparable to the way poverty impacts the mental wellbeing of people.

Suppose, hypothetically, I dig into the psychology literature and discover that the distribution of sexual partners causes Mind State Y which is just as bad as Mind State X. Would that make restricting the actions of others moral?

More concretely: what specific psychological properties determine that Mind State X justifies restricting the actions of others, but not Mind State Y? And if I could dig into the psychology literature and show that Mind State Y satisfied those properties, would you change your opinion?

I also postulate that you aren't really recognizing how devastating Mind State Y can be. Your Box 9 quote describes quite accurately my impression of the lives of less attractive men. Feel free to browse various "manosphere" subreddits (e.g. "red pill", seduction) to read many examples of this.

Societies don't work like that. Individuals don't live in a vacuum, free to make their own rational choices. Each one of us is born into the world with obligations and relationships created for us by our families. Children are usually not free to choose what education they get, the level of financial (or labor) support they're required to contribute to their family, the role models they're exposed to, or the access to people who can open doors for them. These obligations, as well as opportunities -- even among those of the same income level-- differ greatly from one culture to another. For example, nominal poverty in a close-knit rural society is very different from that in urban areas.

Comparing income (even adjusted income) in one society to that of a very different culture makes little sense. This applies both to poor people as well as the rich (who buy different things in different cultures), although the differences are much bigger among the poor because they are less exposed to foreign fashions.

Even if the economy was completely fair (and it isn't -- access to education and to key contacts plays a major role in your chances for success), there are so many social pressures surrounding us (and while all of us are subject to some social pressures, those the poor experience are usually much more choice-limiting) that describing economic behavior as a free choice is completely disconnected from reality, and from everything we've learned in about a century of sociology.

EDIT: And as to your original question, what do the American poor suffer from, they suffer from poor healthcare, bad education, constant financial dread, constant encounters with the law, life in high-crime neighborhoods and probably dozens of more very serious problems that I'm lucky enough not to have experienced. Your patronizing attitude, suggestion that people not in imminent danger of starvation are not suffering (or that there suffering is their own choice) is completely ignorant. If I recall correctly, we've had a similar argument over feminism, and there, too, you've shown complete disregard and disdain to any actual research on the subject by people devoting their lives to it. You can either learn about property -- or not -- but you should know that if you don't, you're arguments stand on ignorance, which, unlike poverty, is actually your own choice.

Respectfully, it believe you've misread that census report. 3% of _all_ American households lack a complete kitchen, not 3% of poor Americans.

That is a much more striking statistic, and there's reason to believe it may be higher, since marginalized Americans are both the most likely to be suffering lack of basic resources and the most likely to be unrepresented by the US census. Further, this study only measured households, and ignores the homeless and incarcerated, which represent another 2% of the population.

Considering that 10-15% of adults in the US live in poverty, your reference suggests that anywhere between 30% and 50% live without a complete kitchen.

See Table 2-4, Page 52, the rightmost column ("Below poverty level"). 503/14157.0 = 3.5%.

http://www.census.gov/prod/2008pubs/h150-07.pdf

> subpar foodstuffs because fruits and vegetables cost way more than dollar menu cheeseburgers per calorie.

what? not even remotely true.

i frequently buy 6 lb bags of frozen broccoli/cauliflower/carrot for 8 bucks. There is cheap, healthy food out there, some people just aren't buying it.

> 6 lb bags of frozen broccoli/cauliflower/carrot for 8 bucks

That implies access to a working freezer, electricity, and transportation to drive out to Costco or wherever; things that are nowhere near granted for everyone.

The freezer and electricity are available to at least 97% of poor Americans. One or more cars is available to 73%.

http://www.census.gov/prod/2008pubs/h150-07.pdf

For comparison, India and Bangladesh are likely to have electricity percentages around 50% (no good data is available) and car ownership rates in the single digits.

*Freezer and electricity are available to 97% of _all_ American (households). One or more cars is available to 73% of _all_ American (households).

No, _poor_ American households. See table 2-4 on page 52, look in the "Below poverty level" column on the right side of the page.

Time to prepare food as well.

6 lbs of broccoli at 23 kcal / 100 grams is about 621 kcal for $8, or 77kcal / dollar. A $1 cheeseburger is 350 kcal, so $8 would buy you 2800 kcal - and I'm sure there's products with even higher calories per dollar. (note this is off a random website, may be inaccurate)

You have to remember that for a nontrivial percentage of people - like the homeless - this is a survival situation, where 'healthy' has a much lower priority than 'calories per dollar'.

Thanks to couponing, I can get most frozen veggies and rice for free or very close to free. A month ago, I secured a year's worth of toilet paper and shampoo and only had to pay the sales tax on it.

But these "free" products are going to me, my wife, and our family. We're both well-educated, have good jobs, and live a comfortable life. What ultimately gets me the free stuff is time, access to technology (computer, printer, etc.), relationships built to acquire extra coupons, ability to drive to a nice suburban store that runs deals and doubles coupons.

I guess what I'm getting at is that a lot of people don't have access to get these good deals or aren't prepared for them. In many urban environments, if you don't have a car, your only access to groceries are small convenience stores or very small local grocers, who tend to have bad prices, bad selection, old items, etc. Either that, or you take a bus to the bigger grocery store, wasting a lot of time and having to adhere to the bus' schedule.

And let's not forget the necessary infrastructure to get and store bulk frozen food, plus the time, infrastructure, and supplies needed to prepare it. How many 6-pound bags of broccoli can you manage while changing buses? How many fit in the freezer of the small, old fridge your apartment has? How long can you spend cooking when you're pulling hours at two different low-wage jobs with erratic schedules and still have to get the kids to school?

I cook and eat a lot of healthy stuff, and I do it at a pretty reasonable price. But it is definitely a luxury that I pay for in time, and it still only works because I have decent infrastructure.

For those who did not grow up poor, it's worth reading John Scalzi's "Being Poor" to get a feel for the experience: http://whatever.scalzi.com/2005/09/03/being-poor/

You're totally right, the product exists, but access is still a problem. Mobility is a tremendous issue to people in poverty, which is as intended in some cities with populations with large wealth gaps. If a family has one car, the person working may take it for the day for work, leaving everyone else at home with only their feet or public transportation to get around. Unless they can purchase cheap produce in their neighborhood, it may take hours to get to that place, buy what they need, and return before it can be prepared. Imagine taking a bus to Costco to do the weekly shopping (payday dependent, in this context). Certainly if their life is planned around this event it becomes more reasonable, but it will be less convenient than walking to a corner market or local fast food joint and spending a few dollars to feed everyone.

Have you ever had your car break down? Last winter, mine did less than a mile from my house on the interstate in the middle of the night, and I was completely stranded. Relatively, I travel hundreds of linear miles a month and have never felt that way, because "I'm only ever a few hours away from home." Your world gets a helluva lot smaller when you don't have mobility, and anyone who doesn't appreciate that really can't understand the problem with calling pulling up farmer's markets in a 20 mile radius on Google a solution.

> The only concrete answer I usually hear is envy

Then I don't think you've really been listening. Their lives are extremely unpleasant. Spend some time in a poor neighborhood in America, talking to people. I haven't read it but the book On the Run by Alice Goffman might paint some helpful vignettes.

95% for china and India?

China is already a middle income country, India is a high lower income country. if you want poor, look at Africa.

Why should we care about people in India or China? We're entitled to shape our society the way we want, and to address the local ills we see fit to address. Our predecessors worked very hard so that we would be richer than India and China and have the luxury of figuring out how to better the lives of urban "poor" who have cable TV.

The premise underlying my post is the belief that all humans have equal moral value. I gather you don't hold this view and therefore will disagree.

However, if you favor some sort of protectionism, I'm curious why you think I should care about poor Americans. Supposing I were to give up humanism and revert to tribalism, as you seem to have done, why would I allow poor Americans into my tribe? Why not simply define my tribe as wealthy white males?

(I personally have practical reasons not to do this. A minority of my friends are American and a smaller minority of the Americans are white males. But those are just practicalities, not moralities.)

I'm also curious whether you favor imperialism. After all, if our goal is simply to maximize American utility, why not just pillage and plunder everyone else?

As everyday Americans, we simply do not have the power to directly influence other countries. The world does not operate as a border-less, humanistic, and unified entity. It is not a matter of protectionism and/or tribalism, but practicality. I don't believe it is very easy to influence politics outside of my state, let alone the country. IMO, comparing the plights of people across these 'imaginary borders' is of little help in this context.

We don't have the power to influence our own country either - your vote simply doesn't matter.

In any case, I'm not advocating for political change overseas. I'm simply advocating against threatening people with violence for engaging in mutually agreeable trade. I.e., if I want to hire an Indian person to work as my secretary, it's not right to forbid this in order to force me to hire an American.

> Why should we care about people in India or China?

Replace "India or China" with "Black or Hispanic" to see how sad this comment is. It still surprises me to see that we live in a world where racism is condemned but discriminating people for the place they were born in is socially accepted.

Now, to answer your question, we should care about people in India or China because they're people. Human beings. The place they were born in, just like the color of their skin, should be an irrelevant factor. Something assigned to you randomly just before birth.

Nationalism sucks.

I don't think that's what Rayiner is saying. Rather, I think he's saying that making comparisons between america's poor and the poor of less developed countries is useless to this discussion. We should be able to evaluate the suckiness of being poor in America regardless of the how much it sucks to be poor in China.

Caring more for the plight of people around you than people in far away countries isn't discrimination, it's rational self-interest. I want to see healthy, thriving communities in Baltimore because I live there. Those people are part of my community. They walk alongside me and interact with my family.

The irony is that people in India and China understand this simple dynamic perfectly well. You don't need to explain to the average Indian or Chinese person why they should care more for the plight of their neighbors than that of, say, even poorer people in Africa.

While I think your point is valid (that the majority of suffering is not in the United States), I just want to point out that there are still some people who don't have enough food or basic utilities in the States, and I'm not even referring to the homeless problem that some cities have. Look to deeply depressed rural areas like small mountain-pass towns post-industrialism, and look to the poorest of the poor inner city neighborhoods. Hunger, illiteracy, disease, these haven't been eradicated yet.

> What, precisely, do you believe poor Americans are suffering from? The only concrete answer I usually hear is envy (I.e. "oh noes the inequality").

Even if that was the only thing and the only source of suffering for poor Americans was relative deprivation compared to others in their immediate context, so what? Relative deprivation is an important, extensively empirically demonstrated, source of disutility. If one is interested in alleviating actual human suffering that exists, rather than artificially creating self-justifying excuses to defend perpetuating suffering, one would recognize that it is an important problem (not necessarily something which we should blindly bear every cost to minimize, as doing so may at some point do more to exacerbate other sources of suffering than it does to alleviate the suffering directly attributable to relative deprivation, but likewise something that should be considered, weighed, and addressed to the extent practical without doing more harm than good.)

Envy is a source of disutility. So is pooping in a field because you lack a flush toilet.

If you feel that forcing more people to poop in the field in order to reduce feelings of envy among wealthy Americans is a good thing, make that argument.

> If you feel that forcing more people to poop in the field in order to reduce feelings of envy among wealthy Americans is a good thing,

wealthy Americans aren't the ones facing relative deprivation (which is why the reference upthread was to "poor Americans"), nor is it a problem only in America -- inequality (with a strong and persistent ethnic basis to the inequality) is something that neoliberal international trade regimes promote on both the more developed and less developed sides of trade arrangements.

See, e.g., World On Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability, Amy Chua (2003).

You should watch the 30 Days episode about living on minimum wage. It is not a life you would want to live.

No offense, but you are just ignorant :/

http://abcnews.go.com/Health/food-insecurity-affects-50-mill...

http://www.ers.usda.gov/publications/err-economic-research-r...

So, 14.3% of US Households don't have enough food. Food insecurity is another way of saying "Hey, we may not eat today but we eat enough calories on average to survive.".

You think these people are paying their power bills over food? Seriously?

http://www.huffingtonpost.com/2014/08/18/american-recession-...

"69 percent of households that rely on food charities to survive have been forced to choose between paying for utilities and paying for food."

"66 percent of households said they’ve had to choose between paying for food and paying for medicine or medical care. Thirty-one percent said they had to make that choice every month."

I'm guessing some people are letting the power bill go unpaid based on that, eh?

So when you say its "Envy" are you saying you are ignorant or that 14.3% of the people in this country are envious, ungrateful bastards for thinking they deserve 3 square meals a day?

Food insecurity is another way of saying "Hey, we may not eat today but we eat enough calories on average to survive.".

You seem to be confusing "food security" with "very low food security".

http://www.ers.usda.gov/topics/food-nutrition-assistance/foo...

None of these things are hunger, however.

So when you say its "Envy" are you saying you are ignorant or that 14.3% of the people in this country are envious, ungrateful bastards for thinking they deserve 3 square meals a day?

The natural consequence of not getting enough food is weight loss. Where are the skinny poor people? Note that here in India, even in a well developed city, they aren't hard to find. In the poor parts of the US where I've lived, you mostly just see fat people.

> You seem to be confusing "food security" with "very low food security".

From the link: "Food insecurity—the condition assessed in the food security survey and represented in USDA food security reports—is a household-level economic and social condition of limited or uncertain access to adequate food."

"reports of reduced quality"

What do you think quality means in a nutritional context? How it tastes? No, that is desirability.

> The natural consequence of not getting enough food is weight loss. Where are the skinny poor people? Note that here in India, even in a well developed city, they aren't hard to find. In the poor parts of the US where I've lived, you mostly just see fat people.

You do realize you can just eat a bunch of starchy foods and suffer malnutrition but not lose weight right? http://www.huffingtonpost.com/dr-mark-hyman/malnutrition-obe...

I think the issue here is you are trying to be pedantic without understanding the context of the words being used. That and complete ignorance of "sufficient calories to gain weight" != "3 square meals a day".

http://www.oxforddictionaries.com/us/definition/american_eng... "(Especially of food) having different elements in the correct proportions: a healthy, balanced diet"

http://www.oxforddictionaries.com/us/definition/american_eng... "A substantial, satisfying, and balanced meal:"

So your argument is basically: "Well 14.3% are alive and not starving to death"

http://www.sciencedaily.com/releases/2010/05/100512141912.ht...

2-3,000 people a year die from malnutrtion in the US.

This isn't evidence either btw. Its anecdotal. You are refusing 5% of the population doesn't get enough to eat and people dying every year in the US as "well, I don't see it".

But hey, 2-3,000 people dying a year isn't a problem for you eh? Because its just envy. Nope. No material impact whatsoever.

Don't discount the economic impact of a human emotion. The entire global economy operates on what billions of humans want, and a good portion of them don't even need most of the things that they want.

We have an entire industry--advertising--devoted to making people want more things.

So something like envy, which is to say wanting something that someone else has, is a significant driving factor behind economic activity. Mental suffering and physical suffering amount to the same thing: unhappiness with the current state of affairs. It does not matter if one person wants to not die of cholera while another wants a new smartphone with a faster processor. It only matters what that person is willing to do or to forego to get that thing.

The first person may be willing to spend a week with a shovel in a pit filled with sewage to get adequate sanitation for the rest of the year. The second person already has a flush toilet, complete with sewer and treatment plant, so maybe they're just giving up new tires for their second car.

All of economics is just individual humans making choices about what they want.

Poor Americans have been told throughout their lives that they can have a certain lifestyle--pretty good in comparison to a lot of other countries--if they are willing to follow certain rules and spend some time working rather than playing. Many of them are finding that to be a lie. So perhaps they are suffering instead from a perceived betrayal of a social compact? Everyone willing to produce shall be able to consume in equal measure?

What I am seeing through my biased eyes is that significant limitations are being placed on ordinary people's ability to produce valuable goods and services, and so their ability to consume is falling below that required by their former customary standard of living.

Poverty is a relative thing. Very few actual poor people would recognize American "poverty" as such.

I disagree.

I saw a definition of being rich as "never having to worry about money". Now take being poor as "always having to worry about money".

Doesn't matter if you have got a widescreen TV. If you sell it off you may eat better for a few weeks, but after that you will still be in the same situation, in constant worry about money.

People really do need to give up on widescreen TVs as a marker for "not poor". I was in the Mekong Delta swampland, passing by rudimentary shacks that didn't close completely against the elements. I still saw big TV sets in them.

But American poor people "always have to worry about money" because of the way they spend it. By that definition no matter how much money Uncle Sugar gave them every month they'd still be poor.

Here's a pretty convincing TED talk which makes the point that global poverty has indeed significantly gone down in recent history, especially among developing countries: http://www.ted.com/talks/hans_rosling_shows_the_best_stats_y...

It was posted here about 6 years ago: https://news.ycombinator.com/item?id=373041

I don't think we should look at poverty as a solved problem, but I think it would be overly cynical to not acknowledge how much the "system" has done for the poor.

American slaves in 1850 were much better off than American slaves in 1650. Should we acknowledge what great things slavery did for black people in the U.S.? Do you see why your argument is worthless?

>A third of the population in the richest nation on earth lives in poverty.

It's not 1/3, and poverty is a relative term, but really the fraction doesn't matter.

"The Census Bureau today released data indicating that the overall poverty rate in 2013 was 14.5 percent – a decrease from 15.0 percent in 2012. This change was the first decrease since 2006." http://aspe.hhs.gov/hsp/14/PovertyAndIncomeEst/ib_poverty201...

The US poverty rate does not include the price of non-cash government benefits. The average cost per Medicaid enrollee, which all people at the poverty line qualify for by income, in all states, is $5,563. It doesn't include food assistance. It doesn't include housing subsidies. These vary, but are widely received.

>What kind of callous person could look around at all the suffering and think this system's working great?

What kind of callous person could think helping a person with more money in a country that provides them numerous benefits is better than helping a person with less money?

"Or do you not look around at all, holed up in a tacky mansion of your own?" I have traveled the world many times over the past 20 years. The positive change I have seen world-wide is perhaps invisible to you because you choose to focus on actions which cause others to consider you to be helpful, instead of actions which are actually helpful.

My house may be slightly tacky.

>This is not an important article, it is a rant against people with "tacky mansions"

Did you even read the article? It's a four-page, in-depth consideration of global economic issues; "tacky" does not even begin to play into it.

>Did you even read the article?

You must be new to HN ;)

[...] the number of rich people in the world is growing.

Thats because many more people become poor. I'm not saying they are directly exploited but indirectly they are, because it is a zero-sum game.

It isn't a zero sum game at all. China, India and Brazil have contributed to the global middle classes growing from 1.8 billion people in 2009 to an estimated 3.2 billion in 2020.

That the USA has failed to adopt sufficiently sensible policies to deal with these changes is not the fault of capitalism per se, and indeed in the case of things like a shockingly unequal education system is often driven by left wing people who dislike capitalism.

Sorry but until I see absolute numbers on a paper where the statistical analysis is detailed enough I'll keep my view.

Also, note that Europe (richest content) is undergoing a never-ending crisis which has broadened extremely the poor class, especially in South Europe and Ireland. But things in Britain and France are not looking good either.

The crisis in Europe is caused by the continued use of the Euro and all the policies being applied in an attempt to ensure it's existence.

Economics, and capitalism in particular are not a zero-sum game http://www.povertycure.org/issues/the-zero-sum-fallacy/

> and capitalism in particular are not a zero-sum game

Look at it this way. Money causes corporations to become powerful entities (through propaganda, lobbying, internal R&D, etc.), and this reinforces the loop. There is a selective component, in that competition leads to corporate casualties. In other words, capitalism causes agglutination of money. Hence, capitalism leads to some people becoming rich, and most people becoming poor (because they are now out of business).

The effect will be directly noticeable to people here on HN when Google invents strong AI, and puts every programmer in the nation out of business :)

There's certainly ideas and actions to respect from povertycure.org

However, povertycure.org seems to be embraced by quite a few neo-libertarians, neo-cons and the specific page you linked to is high on platitudes and fairly low on facts, in my opinion.

Between the strange mix of a libertarian worship of a unicorn "free market" combined with religious overtones, they strike me as a somewhat confused group with quite a few ulterior motives running in the background.

For example, this charmer from povertycure.org's board:

http://www.theguardian.com/business/2009/oct/21/executive-pa...

That's not to say I think povertycure.org is all bad and I disagree with everything they all say and do, but I take them collectively with a grain of salt. For example, I think Michael Fairbanks has some very smart ideas here and there, but I'm still wary of anyone that embraces a "free market" blanket solution to so many issues as well.

As far as the crisis in Europe goes, I think the damage that austerity measures have caused aren't given enough credence by a lot of the corporate media for obvious reasons.

More on this:

http://www.social-europe.eu/2014/09/europes-austerity-disast...

It's ignored too much, in my opinion.

edit: spelling

It most certainly is not a zero sum game. Any reading or thinking that led you to that conclusion is wrong.

Like the politicians, another believer in the theory that shuffling money about "creates wealth".

People working, manufacturing and creating things are what creates wealth. Not a magic money tree.

Coordination isn't free, shuffling money around is a distributed and parallel way to reach consensus.

More efficient options may exist but to the best of my knowledge none currently do

Totally agree.

An over-valued financial asset is thin air and creates nothing only the illusion of money. Add to that the ability of our current banking system to give Y-times more debit then their deposit (where Y -> OO+ ) one the one hand, on the other hand there are people producing items of value that we can actually use.

The rate at which over-valued asset are sold and re-priced + banks giving away loans that they will never get back and didn't had the money to support them anyway is orders of MAGNUTUDE bigger than the primary sector and secondary sector can produce.

There's also the problem of automation of the mainly the primary sector which makes things even worst. Now we have to create virtual scarcity in order to maintain this totally insane system because, let's face ... With today's technology 1 country could produce enough wheat for 5 planets.

It's not inherently a zero-sum game. It's just that the rich are doing everything in their power to capture all the surplus, which makes it feel like a zero-sum game for the rest of us.

"turn of phrase that is more indicative of the author's point of view" - this point of view is what 'Der Spiegel" is known for.

In their defense: German school curriculums lack a fundamental economic education. IMHO this non-education is one reason that everyone who has read "Economics in One Lesson" knows more about economics than 99% of German journalists.

Journalists are not meant to know deeply every thing about every subject. Micheal Sauga seem to be a economic specialist which doesn't mean he knows Thruth either. In France at least there is something called economy course in the curriculum but it's far from allowing you to juggle with the different theories and build new ones. It only allows to find out what's happening by reading and gathering data and point of views. Which is what Micheal Sauga did, only 6000 words article focusing on what some people in the economic industry think about the today economy. What about the inclusivness of economy, that the point of it all and it's not only a word that made up by people who were interviewed.

"But I doubt there will be a useful discussion of it here.". I suggest your uncalled-for sneer implies you won't be reading what you want to read.

You're proving his point for him.

I didn't read it either because of that line. Sorry, it was counterproductive of them to say that.

> We have no successful model for dealing with this.

Canada seems to have had pretty good success with that basic income town. And no major western democracy has really attempted it yet.

I like it because it lets you have a completely deregulated economy, because both employer and employee would be participating in voluntary negotiation without a huge bias towards the employer - when one side is starving and need shelter and the other just wants a third yacht, the incentives are skewed. If both of them want money for luxuries and not necessities (worker wants a TV, boss wants a movie theater wing on his mansion) you don't need as stringent workers protection regulations and you don't need a minimum wage, because all employment is voluntary and a worker could just walk without fear of homelessness if a boss cannot offer him enough to keep him working.

It also means people can pursue what they think is valuable, rather than what the market can show is valuable, which like you say it is becoming worse and worse at over time. It means every artist could draw all day, any recluse could stay in their bedroom trolling reddit all day, and everyone who wanted to help starving children in Africa could help starving children in Africa whenever they wanted.

I like the idea of basic income, but I'm skeptical about how many problems it can actually solve. Your depiction almost makes it sound miraculous (with a bit of social romanticism), while ignoring the problems it could eventually create. Apart form that we are a long way from having a serious discussion about it, as it's just too alien a concept for most people, including those who would need it.

Considering everyone beyond the retirement age is already effectively getting a basic income, or that anyone on unemployment is getting a temporary basic income, or that if you ignore the beuracratic overhead and injustice of welfare then food stamps + section 9 + the free electric programs sum to a near basic income, albeit a much worse implementation in every way, that is hugely destructive for economies and persons involved.

People already love getting those income tax returns - when you pay in more than you needed to, and you get the difference back. Basic income is the exact same thing - most people would be paying in significantly less than they get out, while those above a threshold (preferably the peak happiness threshold of income, that varies by location but in general on an individual basis is around 75k a year, src: http://content.time.com/time/magazine/article/0,9171,2019628...).

> Considering everyone beyond the retirement age is already effectively getting a basic income

No, they aren't. Presumably, this is intended to refer to Social Security, which is not at all like a basic income (even aside from age):

1) Eligibility to receive benefits at all isn't unconditional (again, even discounting age), its based on qualifying contributions -- your own or someone else's -- and other factors.

2) The level of benefits if you are eligible isn't constant, but varies based on the same factors that go into eligibility.

> or that anyone on unemployment is getting a temporary basic income

Unemployment insurance is also not like basic income, as the benefit level as controlled by qualifying income in the preceding period.

> or that if you ignore the beuracratic overhead and injustice of welfare then food stamps + section 9 + the free electric programs sum to a near basic income

You probably mean section 8 housing vouchers, but, again, nothing like a basic income; all of those are conditional program with both means and behavioral tests (and in many cases aren't fungible benefits, so they also have use restrictions).

There is a reason we usually prefix BI with universal. No, there are few programs that are legitimately universal, but every instance of non-universality you describe just describes a bureaucratic overhead nightmare that severely cripples any potential efficiency of a public works project.

The jump is not from anarchy to UBI. It is from conditional basic income to unconditional.

Also, I might be mixing up my district nines and section eights. I wonder why...

In theory that sounds great, but what happens if everyone says "fuck it!" and just starts taking the basic income? I think it's fairly obvious that with nobody paying taxes there is not enough government revenue to pay and thus the system falls apart. Let's call this 0% workforce participation.

On the other hand, if everyone works really hard and is super productive and starts businesses and etc then at some point their market wages totally swamp the basic income and it's essentially un-needed and kind of a joke. And if that were to happen, prices would rise to the point where the basic income isn't anywhere near enough to live off of comfortably and it's existence is worthless. Let's call this 100% workforce participation.

There exists a whole spectrum of workforce participation between 0% and 100% and some of them might be stable-ish such that there isn't a positive-feedback loop that quickly runs society off the rails.

The problem that the champions of basic income haven't really addressed is that people fear the degenerate case of 0% workforce participation (or nearly so) and the mental calculation that people seem so able to do but which proponents of basic income seem to find impossible: where does this money come from? Why will I as a worker have to pay for things that non-workers get? Why do I not get to keep the fruits of my labor?

Ultimately money is useless by itself, and the economic system is one which allows us to divvy up the limited physical goods (the planet is finite, our ability to manufacture is finite, roboticized production lines don't operate at infinite speed, neither are they free, we still need SOME farmers, etc) to people. A system which says that everyone can have even if no-one works sounds an awful lot like a perpetual motion machine and thus people are skeptical.

> In theory that sounds great, but what happens if everyone says "fuck it!" and just starts taking the basic income?

That's actually an argument for basic income. It's the mirror image of money politics, only its actually democratic.

I want to write a really sarcastic comment, but that won't really achieve anything. I suspect that either I really don't get something, or that you really don't get something but I can't tell which.

You said "That's actually an argument for basic income" in response to my statement "if everyone stops working and starts taking basic income" which I don't understand. I thought I laid out a fairly clear argument that if everyone stopped working everything falls apart.

To me, the logical next events are that with not enough taxes the government either prints money or defaults on its debt. That leads to either to massive inflation (undermining the value of basic income and perhaps resulting in civil unrest like in the Arab Spring when food prices got too high) or in the case of default, quite possibly the government ceasing to exist.

So how does everyone taking the basic income solve a problem? Is the goal to get rid of the government? I can't take that seriously because if people are serious about a basic income, then it stands to reason that they want it to continue, and if the government fails, so does the basic income which it provides.

I'm not saying US-style capitalism is great and perfect; it's clearly flawed in huge, huge ways. But that doesn't somehow make the flaws of a basic income system non-existent does it?

> I thought I laid out a fairly clear argument that if everyone stopped working everything falls apart.

Or the price of labor goes up. In a system where money buys the legislature, your only real recourse is to say "Fuck it, I'm out." Basic income would enable labor to vote by withholding labor. That's a feature, not a bug.

Okay, that's an interesting take on the matter. I think in a world where money buys the legislature you'd end up with basic income repealed (or not passed in the first place) and as a result, it doesn't serve the intended function.

That's actually why I'm really in love with mayday.us; Lawrence Lessig's PAC to get money out of politics by supporting people who want to do actual reform rather than just saying that want to. If we can actually vote the bastards out and get better people who won't be bought in, we've got a chance to shake things up and maybe fix some of the underlying problems that basic income seems like a solution to.

I maintain that everyone could stop working and prices could rise enough such that basic income is a joke and everyone has to work again in order to eat, which kind of defeats the purpose of basic income.

But I do appreciate your response.

lets think about it. Basic income is implemented tomorrow. First, only the people making up to the amount of the basic income would be willing to quit their jobs - anyone making more than needed to survive would certainly continue wanting to maximize their earnings.

We would then have a vacuum of a large number of poorly payed jobs that are now in demand - would this not immediately raise the wages for these jobs? Would employers not have to raise wages to attract workers? They would either have to raise wages or automate in some way - this would be a big shakeup for companies, but with basic income even people losing jobs or companies going under would not be a huge deal since basic needs will be met for all those people

So what if everyone quit their jobs and withdrew from the workforce all at once? Well, i think that wont happen - Would warren buffet quit his job? Would professional athletes? actors? Corporate accountants? Would your average HNer close up his startup? Would the bureaucrats running basic income quit? Would the bank tellers stop processing the checks?

If they all did of course that would be chaos - food would immediately stop getting produced, water would stop flowing - sounds like a serious problem that hundreds of millions of people now have all the time and motivation to solve - but lets be honest, the likelihood of EVERYONE quitting their job is laughable, at worst the wages for most jobs will raise and some jobs will more rapidly be automated

> First, only the people making up to the amount of the basic income would be willing to quit their jobs- anyone making more than needed to survive would certainly continue wanting to maximize their earnings

You've made two assumptions here:

1. People are ENTIRELY rational (they're not)

2. No black market exists

If you could guarantee that those conditions could be met, I would be much more willing to engage in the rest of your comment further. But they can't be met, not even close.

In order to be useful the basic income has to be a substantial fraction of the median income, or else you can't really argue that it's basic. If receiving it means that you're still in poverty by a wide margin I don't think it's useful enough to talk seriously about.

But once it's a substantial fraction of the median income, working looks less and less attractive. What I mean is that say $2000 for 0 hours worked in a month is very nice, and $2020 for 1 hour worked is at least in percentages, infinitely less desirable. Perhaps once you get up to 30 hours per week worked and $4400 in income you're starting to see some benefits from working in some kind of a meaningful way.

The issue is that working has both a fixed amount of hassle and a marginal amount of hassle. Once you don't need to work to eat, now you're just doing gut-feeling comparisons of hassle/reward ratios. On days that I have to work I have to get out of bed, get dressed, commute, etc. That's a fair amount of hassle. There's also the marginal hassle of being at work and not getting to do exactly what I want.

It wouldn't be worth it to do all the fixed overhead hassle to only work a hour a day because that would make such a small different in the total monthly income. So that leaves people wanting/needing to work more, probably at least a 4-6 hour day to amortize the fixed overhead of hassle into a reasonable number of hours to make the total amount of hassle substantially less than the money received so that working makes sense.

So now that lots of people aren't willing to do low skill, low pay jobs the pay obviously would have to go up. But that means that prices are also going to go up. And that means that the basic income isn't basic anymore; it means that it's sub-basic since it can't provide for your basic needs. That then requires a bigger basic income, which leads to higher prices, which leads to higher basic income, until you've got at least the potential to have a zimbabwe-style hyperinflation.

"Crucial to both components is discipline over the creation of additional money. However, the Mugabe government was printing money to finance involvement in the Democratic Republic of the Congo and, in 2000, in the Second Congo War, including higher salaries for army and government officials." http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe

Once those people (government officials and army) got more money and started to spend it, everyone started to realize that the money was not worth as much as they thought it was. That led to prices going up, which led to more money printing to keep salaries ahead of the curve and this spiraled out of control very quickly.

Granted there's no guarantee that a similar kind of runaway would happen under the basic income. But it's definitely a very real risk.

EDIT: I forgot to touch on the black market. If a person wants to accumulate income it might be better to do so on the black market. That allows a person to avoid high taxes (basic income has to come from somewhere, that somewhere is always proposed to be higher taxes). That makes the black market (or working "under the table") attractive. The shadow economy of Europe is already by one estimate 17% of the total economy. Basic income would further encourage such things: http://www.huffingtonpost.ca/salman-sakir/black-market-econo...

Are US salaries anything near a big part of the economy? I thought the 99% controlled most of the money. Its unlikely that fiddling around with salaries (even minting money to pay a basic income) will affect the value of money, if we're only talking about 1% (or less) of the money.

Your question is really confused. The top 1% hold a lot of wealth but not all that much purchasing power. Everyone else has relatively speaking a lot of purchasing power even if the wealth is less.

In other words, there is one guy with $1mm in the bank and 99 people that make $50k per year. Which is more important to you if you make and sell stuff?

The guy with $1mm in the bank could theoretically buy $1mm worth of your stuff but after that he'd be out of money. The 99 people who make $50k a year collectively could buy just under $5mm of stuff EVERY YEAR. So while the guy with $1mm has more power from any one instant to another, everyone else has a lot more power over any longer time-scale.

Not about purchasing power. About the value of money. That's not gonna change by fooling with 1% of the availability.

The reason so many are unemployed, after all, is that it takes fewer people to sustain a given 'standard of living', right? So now, with our free market, those unemployed drop into poverty since their bank account of imaginary points goes to zero.

Put points back into those bank accounts, and what happens? Those small tallys are not going to affect what the big folks are doing with all those trillions.

> Not about purchasing power. About the value of money.

The value of money is directly derived from its purchasing power. If you can't buy anything with money, it's worthless.

The point is that the vast majority of the money in the US is in flow, not tied up in the rich 1% bank accounts.

So if 95% of people suddenly have 2x cashflow (on average, let's say) then prices should roughly double within a fairly short period of time. We won't suddenly have more gasoline or milk or beef or whatever if everyone has twice as much money every month. So more money chases the same amount of goods and prices rise. This is really simple economics.

Would doubling the price of everything erode the purchasing power of the rich too? Yeah, absolutely. At least for all the money that they have tied up in cash. But considering that the FDIC only insures you up to $250k I suspect that most wealthy people are going to have their money in assets like stocks, bonds, and real estate. Real estate prices will definitely rise and I suspect that the other asset classes will go up in price too.

There might be a period of a few weeks to a couple of years where people actually do get more stuff before the prices start to rise. But with how just-in-timed everyone's supply chains are these days it's not as though it would take 20 years for everyone to catch up to what's happened.

That's all classical economics, but it assumes people spending money is the whole economy. These days, it isn't. We're a pimple on the spreadsheet of America.

According to some quick Googling

"wealthiest 1 percent of Americans control 35.6 percent of the total wealth of the country"

"the top 1 percent of income earners took home 17.67 percent of the total income"

http://money.howstuffworks.com/one-percent-control-third-of-...

Okay, but what is the overlap between those two groups? Are the top 1% of income earners exactly the same people as the wealthiest top 1%?

I think it's safe to assume there's a high degree of overlap, but I don't see the relevance of that question.

>In order to be useful the basic income has to be a substantial fraction of the median income

Woah thats a pretty crazy assumption - basic income only needs to provide enough income for basic needs to be useful - are you trying to say that the median salary in the US is the bare minimum to meet necessities? Median income is the amount which divides the income distribution into two equal groups, half having income above that amount[1] currently the median household income is estimated to be $51,371 - if you think that this is the MINIMUM amount of basic income for the program to be useful then its clear you have a core misunderstanding of basic income at its core.

>What I mean is that say $2000 for 0 hours worked in a month is very nice, and $2020 for 1 hour worked is at least in percentages, infinitely less desirable.

You say that people are not entirely rational at the beginning of your comment, yet you are now assuming they are - many people enjoy work, do you think PG only does ycombinator purely for the money? warren buffet? does tom cruise still act only for the paychecks?

Also, you are missing another key point of my last comment, and that is that the price of labor will rise. I agree that working for 20 extra dollars isnt going to seem as worth it when you already have enough to serve your needs - that is the whole point. wages will rise, people will be choosier about what work they are willing to do, and the less desirable jobs will have to pay more - that is how simple supply and demand work

>EDIT: I forgot to touch on the black market. If a person wants to accumulate income it might be better to do so on the black market. That allows a person to avoid high taxes (basic income has to come from somewhere, that somewhere is always proposed to be higher taxes). That makes the black market (or working "under the table") attractive. The shadow economy of Europe is already by one estimate 17% of the total economy. Basic income would further encourage such things:

First, you are somehow overlooking that the incentive to work under the table is already there, yet the vast majority of workers do not get paid cash under the table - it is in both the employer and employees interest to subvert the tax system for wages already yet this isnt happening - what makes you believe that this would so dramatically change that MOST of the labor market chooses this option?

This is to ignore that fact that there are regulatory bodies that actually enforce this, and will go to job centers to make sure employees are being payed legally - this happens all the time and is a common method is trying to find illegal aliens (I have years of experience cooking in restaurants where i have seen this first hand many times)

I appreciate the discussion thanks

[1]http://web.archive.org/web/20060922200944/http://www.busines... [2]http://www.census.gov/prod/2013pubs/acsbr12-02.pdf

Thanks for being civil about this.

When I stated "substantial fraction" I guess what I mean is that it's at least 20% or 40% or something. A basic income of 5% of median personal or household income is going to be little more than a sick joke. Note I didn't say "exactly the same as" but rather "a substantial fraction"

To compare people who make millions of dollars a year to people who are eking out subsistence wages is a mistake I think. These people tend to be highly motivated and thus for them it's often not strictly about the money anyhow, but the money sure is nice as it affords them the ability to work on the thing they're passionate about. When you're making $9/hr at mcdonalds I suspect that passion has less to do with it and a need to eat and have shelter is a bigger factor.

The higher taxes go, the more incentive there is to work under the table. I don't know if the black market in the US is bigger than in Europe, but I can tell you that in the US taxes are lower and so there's less incentive. I agree that policing can do a fair amount, but what if you push people into entirely invisible jobs? It doesn't have to change MOST of the labor market, but if right now the black market is 10% of GDP and the taxes rise enough to push it to 15% or 20% then you're growing crime. I don't think that's a good outcome.

Now a great question to ask is which is worse? Would it be worse to raise crime and have a basic income? I don't know. Trying to think about the unintended consequences of policies is really hard, so few do it. I think that's part of the reason our laws tend to be so full of obvious loopholes.

"if everyone stops working and starts taking basic income"

There is a pretty neat solution, if enconomy goes down then basic income goes down in such a way that no many people would like to be on basic income. If this seems harsh, I think that some force must be applied to restore the system.

Anyway, to control any kind of system we have to take into account the lags in the feedback to make the system stable. If all people quit their jobs at once then there is no force (cops, military, and so) to restore the system to its orginal state and we lose control. We need to study how elastic is this desire to quit your job and act in accordance.

Using only the statistics skimmed from elsewhere in the thread, a 1% workforce participation rate feeds everyone in the US, and several other countries that import from the US. A 9% rate does that plus manufacturing all goods. I think it is not unreasonable to think that 10% of all people able to work might just do so because they want to do something meaningful with their lives.

If everyone takes the basic income, they will spend their 16 free hours a day doing things that they find value in, but not necessarily valuable enough to others to support their basic needs.

In the degenerate case, a self-sustaining automated economy produces a massive surplus for human consumption. Robotic slave labor, programmed not to want anything or complain, will serve all your basic needs.

A good portion of the robotic production army is already in place, but it still requires human maintenance and operators. All that is required is a sub-economy that produces more than it consumes, and requires zero inputs from anyone outside it.

Autotrophic organisms already do this. Everything else on the planet eats them. If you want to feed more people for free, you just design a better algae or plankton, and they build themselves. The rest of the ecosystem simply builds on top of them.

If people are able (in terms of practicality, affordability, possibly legality) to live entirely on imported goods and services, then as you say when everyone stops working, everything breaks hard.

If people only buy domestic (including the case of a global BI) then when "everyone stops working" then we see supply of most things shrink dramatically. This raises prices, which means that the BI people are receiving doesn't go as far. This motivates people to get back to work. Note that it does so before the purchasing power of the BI is negligible - it does so as soon as it falls below "what you can live on with the comfort we want", which itself will have variation. I would expect such a dynamic to be self-stabilizing, not self-destructive, though it certainly depends on the constants involved.

In reality, some things are purchased from abroad for cheap, some things at a premium over domestic goods, and some things can only be provided domestically. Your point is most strongly an argument against too high a BI in too small an area.

The flip side, 100% participation, doesn't seem like something liable to be caused by the basic income, and it if is it should be self limiting for exactly the reason you note - we quickly find ourselves in a situation where the basic income is approximately zero in real terms.

As an aside, out of fears over feedback loops I have said before that a BI should not be pegged to actual inflation, but to targeted inflation. I think that would help it generally track the real value that we are best capable of providing.

You mean " . . . deregulated labor market." Other parts of the economy would still need to be regulated.

The people you pass on the street can come up with many solutions which would help the world greatly, and do a better job than you + I can. There's no end to creative and effective solutions.

But these improvements aren't allowed to be implemented. (The moment enough people peaceably, legally assemble to plan a more serious democracy, armed government bureaucrats come along to break it up.)

There is more than one thing going on.

Balance sheet recession. Mistaken policy response-austerity, German unhelpfulness in Eurozone. Globalization-i.e. cheap labour Automation Financial industry acting against interests of wider economy.

There are a lot of going on but the point is to single out symptoms from root causes. Otherwise we will wallow trying to deal with symptoms forever.

Dunno if anyone has yet mentioned one of the basic contradictions inherent in capitalism which could very well be at the root of what we experience. Means of production are private (factories, etc) and the owners as almost all players in capitalism take care to maximize _their_ profit and not society's well being. That maximization involves dumping down workers wages (another commodity in capitalism). Interestingly enough, workers are also consumers so dumping their wages erodes their purchasing power. And that's just one of the contradictions that stem from having a social mode of production driven by private interest.

The name of the most prominent economist that pointed out this and other contradictions some decades ago is Marx (which interestingly enough is never mentioned when capitalism crisis are on the table).

I'm not tremendously impressed with Marx's analysis.

Here is my initial premise. Across the entire economy, current consumption is paid for by current production, with any difference buffered by available filled stockpiles and empty stockpile capacity.

If you eat an ear of corn, someone has to grow an ear of corn, and transport it to you. If that person grows more corn than other people want to eat, it has to be stored somewhere until those people get hungry again. And the transportation and storage themselves consume resources.

This is the economic gradient. Goods and services are brought to market by producers, and taken away by consumers. In order to make this worthwhile--remember that bringing something to market is not a zero-resource operation--the consumers must give the producers something of greater value to them than whatever it is they produced.

Because this is sometimes tricky, we all agree for convenience that everyone always wants "money"--whatever it may be--more than whatever it is that they produce.

This works just fine when all producers are also consumers.

Now introduce industrial capital. Now a producer can, via the multiplying effect of capital, potentially single-handedly satisfy the entire worldwide demand for a good or service, at lower cost than any other producer who lacks the required capital. Again, this still works fine, so long as that person can manage to somehow consume all those resources.

But then we run into a problem. What if that person cannot manage to spend that much? The excess has to be stockpiled, according to the premise. Without the convenient fiction of money, that super-producer would have to start filling warehouses with goods and services. (We will pretend for the moment that services can somehow be stockpiled.) But even then, until the imbalance is rectified, that guy will simply keep filling warehouses that can never be emptied. Those resources are lost to everyone else. The super-producer simply has everything he could possibly need or want, and there's nothing anyone could possibly give him in trade without first tricking him into thinking it is better than anything he already has. With money, the problem of warehouse space is solved by reducing all that surplus to a number, which is stored in a computer.

But then we run into another problem. The value of the money is determined via continual market recalculations by the amount currently in circulation. Warehoused money might as well not exist. The super-producer has to keep moving it around, or prices will adjust to accommodate the fact that it is not being spent. He therefore gets less in exchange for his production. Then, whenever he goes to buy something, prices rise again temporarily. So the super-producer "invests" his money stockpile, which is a fancy way of saying that he moves it around from being owned by him in his own name to owned by him in a fictional business name. Or it approximates virtual warehouse space for his owned physical goods and for his owned services. The point is that investment is not consumption.

Whenever someone produces at a level that far exceeds their level of consumption, someone else's production is essentially being thrown into an economic black hole.

That's the problem with Capitalism. It can concentrate wealth so much that the owner cannot possibly consume it all, over his entire lifetime, or even in the lifetimes of his heirs. And until someone in the line of inheritance can become creative enough to embark upon some consumption megaproject, the concentration of capital sucks the life out of the productive economy.

Marxism solves this problem by diluting the concentration right at the source, by distributing the capital production in the hands of more spenders. But then there are no megaprojects without re-concentrating that wealth via government.

The capitalist solution to this problem is to give rich people more expensive things to consume. If, for some reason, they don't want to consume, the system fails. And nowadays, rich people are mostly investing rather than spending. If they do not change their ways, and quickly, the traditional release valve is to take back ownership of resources by force.

Interesting point of view. Just some notes on the rich spending: (I don't have time to find refs but that should be pretty easy) numbers show that rich spend a tiny proportion of their money compared to other classes. So they are effectively hoarding. Also they invest mostly at the only place that can give them returns over 3%(?) nowadays which is stock markets, etc (1). Real investments in industry/services that would translate to jobs are sparse in Western world. That's also part of the problem for Westerners debt problem which could be seen as a way to mitigate the effect of industry and services (real production that is) going to Asia (mainly).

So, I'm afraid that if you expect things to change via rich themselves changing their ways (e.g. see the light and start redistributing their own wealth) you're gonna wait for long. After all just imagine being one of them. Why invest in the declining west with worker wages say 50% more expensive than in China? Never mind that competition will inevitably do the same thing to undercut you and this will end only when both of you are out of customers. In some ways, as a rich man, you can see the customers/labor as a dwindling common source where the tragedy of the commons apply under the rules of the capitalism.

(1) That's not to put a distinction between good industrialists that create jobs and bad bankers that create hot air. For one thing they largely are the same people and even if they were not they still have to play the game to stay ahead of competition.

PS: I bear no affiliation to this page but it seems to explain the point I'm trying to make much better than my limited English can: http://www.massline.org/PolitEcon/crises/Crises01.htm

Oh, I don't think they will change. There's nothing really in it for them. As I said, they not only have everything they want, but they have exhausted their imaginative ability to want things that do not yet exist.

You can sell a rich man a luxury yacht. You can't sell him a one-room habitat on the Moon, for other people to visit and live in, because it hasn't yet occurred to him that doing so might one day lead to more luxurious yachts. They are instead saving up their money to afford the next thing they want, the thing that doesn't exist yet, because no one seems willing to consume resources on research that other people might just copy and use for free.

If the rich don't start buying (not just investing in) costly megaprojects to employ them, the poor folk will simply build the default megaproject--war. And that will be used to redistribute some of the wealth and start over.

And as I said earlier, hoarding money is different from stockpiling actual goods and services. Hoarded money is ignored until someone actually tries to spend it, and then it triggers inflationary distortions. A stable economy requires that most of its money circulate continuously, rather than stagnating in pools.

>Means of production are private (factories, etc) and the owners as almost all players in capitalism take care to maximize _their_ profit and not society's well being.<

No one forces you to purchase what's "produced". If you purchased a Windows computer - and so helped Mr. Gate's well being - that was your choice! The list of examples is long. As to "Windows" - whether society is better off ...

Though for a time, because of crapware subsidies, often computers with Windows installed would be cheaper than the identical computer without it. I think this is no longer the case but TBH I haven't actually checked in a while. In that case, "forcing" is probably too strong a word, but I'm being asked to pay if I want to avoid helping Mr. Gate's net worth (I think his well-being was plenty taken care of before I started making any purchasing decisions). I'm not sure to the degree this changes any of the reasoning above, but it was at least a little strange.

> There was hope that the Japanese would figure out something. 25 years later, they haven't. They've built up their safety net and put money into infrastructure projects, so that fewer people are suffering. That's the best they could come up with.

Improved safety net and infrastructure projects so fewer people are suffering? Sounds terrible. Please don't sign me up. /sarc

Seriously, what is wrong with improving the safety net and infrastructure projects? It's far better than the solutions being tried in the west, i.e. high unemployment and the gutting of social safety nets in the name of austerity. Once we can at least match Japan, then we can consider better still models of dealing with a lack of demand for labour, e.g. Basic Incomes or Job Guarantees (or whatever else).

I don't think he's saying that there's anything "wrong" with it. Just that it's not enough to really kickstart the faltering economic engine back into its top gear.

Japan's population isn't growing--why do they need more than tepid economic growth?

The population of Japan may not need it, but some capitalists may need to be convinced of their preferred system's inherent immortality.

but I doubt there will be a useful discussion of it here.

wrong on that front

Sorry, but the financial system exists at the behest of the political class. The political class is the one percent who runs it all. They may talk that we have a capitalist society but with the heavy amount of regulation that exists that is pretty much a stretch. You have a one percent group (politicians and their appointees) who determine who succeeds and who goes to jail. You thwart them and its pretty damn sure within a few short years what you do is illegal or your paying off through someone's campaign.

Shovel ready jobs, the ACA, none of this was done to benefit the everyday worker, their employment or fulfillment were not part of the equation.

It might be worth mentioning that although the Nikkei has been pretty flat, after visiting Japan yearly for the past few years, I've noticed that the rate of development and re-development there continues unabated. Employment is high, health care universal and prompt, bullet trains ever evolving, gleaming skyscrapers appearing in place of 30-year old structures deemed out-dated, shopping and commerce and business all zooming along, uniformed safety workers waving red glowing batons over temporary pot-holes which will be patched by morning. It all runs like a well oiled machine. House prices were surprisingly affordable - values haven't risen meteorically like before the 'bubble'. In short, the idea that Japan has flatlined for 20 years gets thrown around a lot in the west, but it only takes a visit there to see that in those 20 years, they've managed to do some amazing things while remaining under the radar in a supposedly enduring recession. Japan is still way ahead of the west in many areas, and it seems more like they've reached a kind of steady-state balance. It's a situation that I suspect many westerners would actually be impressed by, if not a bit envious of, if they witnessed it first hand.

"Capitalism is producing a large number of poor people competing for a shrinking pool of low-paying jobs"

Some questions:

Is this situation new in history? Is this a transitory state? Is this related to corruption? How can find a new job those that wered cancellet out because automatization?

Do we really control our future?

Are our goverments trying really to find solution to those problems, that is allocating the necessary resources to dealt with those problems?

Some people could think that making it difficult for people to live in a country increase productivity in the sense that people are disponed to work more for less pay, macroeconomically this can make sense but what about those that can stand up?

Do we really vote with our heart or are we at the end of the day voting to continue living in a such competitive system that no one knowns were it is heading?

Here in Spain, I sometimes consider that people don't value really how well we are with low tuition rates and free health care. Without being able to value what's really important is very difficult to design any kind of sensible approach to solve the really important problems we face.

Perhaps any of those questions can be answered?, I don't know.

If I were a rich software engineer feeling angry at people who criticised the capitalist system we had, perhaps whilst failing to acknowledge that people in America die because they can't pay health insurance, or are homeless because they can't afford housing, or end up eating what they find in someone's trash because they can't afford to buy food, I think that I'd do one thing:

I'd consider whether perhaps I might be wrong. Maybe my worldview is a bit skewed by the situation I find myself in. Maybe my country isn't very fair at all, and it's not right that I have the privileges I do whilst my fellow citizens suffer. And maybe it's not the Government's fault, either. Perhaps those Europeans with their welfare states aren't all socialist nutcases, but maybe they have something right that America has got wrong.

Often I hear Americans say "this isn't real capitalism! we need more capitalism! less government!". And I look at the state of homelessness in their country, or those without health insurance, and I think "really? Do you really need more of that? Maybe instead you need to spend a little less on your military and a little more on looking after the least fortunate in your society, the sick, the vulnerable. Maybe that would make a difference."

The "more capitalism" mantra always makes me think of communists who argue "well, this wasn't real communism! That's why it failed!" And it's so ironic, because those most vocally against communism are the same people who are cheerleading extreme capitalism, failing to notice that they are simply on the other side of the mirror.

With both, private and public spending, it is not the quantity that matters, but quality. Both sometimes waste money, and that's what needs to be addressed. More government does not solve anything as long as that additional spending finances bureaucracy. Since the most cost-effective governments are normally also the smallest, my personal view is that one should spend less on the federal level, but more on the local level. Decentralization is key.

That can make it difficult to implement consistent standards that are not subject to the whims of local politicians.

There are also economies of scale that are difficult to achieve on a local level. Drug purchasing, for example. A federal government is going to have far more negotiating power.

But I take your point. Perhaps the right answer is that laws and oversight are the domain of the federal government, and implementation is local.

or are homeless because they can't afford housing, or end up eating what they find in someone's trash because they can't afford to buy food

There's a bit of a straw man or, at least, mischaracterization hidden in here. It's true that the U.S. does a pretty poor job of dealing with the mentally ill and those at the very bottom who simply cannot take care of themselves. And I think if you push people, even those on the far right, they'll acknowledge that we probably need to do something to help those people.

But, outside of this group, nobody is digging through trash for food. We live in a society where clothes and food are as cheap as they've ever been. And there are government programs to fill the gaps. Arguments like yours only further distance you from the people you're trying to convince, because it's obvious to just about anyone, including (especially?) those who have actually been poor, that they're just not true. I've been poor. And it sucks. It sucks for lots of reasons, all related to access to resources, lack of successful friends and coworkers, its drain on your motivation, and so on and so on. But I never feared missing a meal. That's not the experience of most poor folks in the U.S.

> But I never feared missing a meal. That's not the experience of most poor folks in the U.S.

I'm not an expert on the U.S. However, I have seen people digging through trash for food in Atlanta. I have also seen the extreme state of homelessness in Philadelphia, and the problems in San Francisco.

It is certainly true that many people in the UK struggle to afford food [1], and given that the US has a much greater disparity of wealth, I assume that the US has this problem on a great scale.

So, no, I don't agree that it is an exaggeration.

[1] http://www.trusselltrust.org/foodbank-projects

Yes, I've seen them, too. And there's a risk here that it will sound like I'm moving the goal posts around so that I'm right by definition. But that's not what I'm trying to do. There are of course those at the bottom who are chronically homeless. Those are the folks I was referring to in my first paragraph. Yes, you will see them digging in dumpsters.

But this is not the typical experience. Most poor people never end up homeless. And those who do are typically homeless for a short period of time (and do get help).

ok, I see.

It might be surprising to hear, then, that those people using food banks in the UK by no means consist entirely of the chronically or mentally ill. I'd say that would be a small minority. Most of them simply use food banks because they can't afford to buy food - the number one reason being their welfare payments being ended or delayed. See, in the UK in the process of dismantling our welfare state and I look across the Atlantic to see our fate. :-s

> Most poor people never end up homeless

The times they are a-changin': http://www.rollingstone.com/culture/news/the-sharp-sudden-de...

A lot of that cheap food will cause major health problems if it is your main foodsource.

what about the middle class? not everyone is so poor that they need welfare. we're having a real problem now of people who make just enough money that they can survive on their own income but they can't prosper because of wage stagnation and rising cost of living.

Well, yes. As more of the money is used to make more money, instead of things, experiences, or people... It losses it's correlation with the things that we actually want out of an economy. Plus, those in power (rightfully) use the power to get more power of the sort they already have. According the history books I read as a kid, this is what caused capitalism in the first place (english barons with more money than power using that money to make more money) and the (serial) French revolutions (aristocrats with more power than money using that power to gain more power).

I note these bits in particular:

"After a financial and banking crisis, the first order of business is to clean up the banks, and to do it quickly and radically. Institutions that are not viable need to be shut down while the others should be provided with capital."

"Their central thesis was that the key to [Western] success was not climate or religion, but the development of social institutions that included as many citizens as possible..."

I'm also reminded of a good article on what Iceland did after the collapse - I'm having trouble finding the article, but part of it was that, instead of taking on the debt from their collapsed banks, they issued arrest warrants so Interpol could chase down the executives. (The initial government was going to acquiesce and take on the debt, and that's when the "revolution" happened.)

Finally, someone gave me a really good quote a couple months ago: "Death is the way for an older organism to gift it's energy to a younger one." I then note that part of the financial problem is that failing institutions are not actually allowed to die - thus keeping that energy stagnating in the aptly-named "zombie" corporations.

Note that what Iceland did and the idea of clearing out bad capital and malinvestment are actually capitalist ideas, versus, say bailouts and central bank manipulation, which are not.

Yeah. I'm, to a decent degree, a fan of calling what we have today "corporatism" rather than "capitalism".

Yes. Many of the problems today have nothing to with capitalism but with government policies that are largely aimed at making those with the gold happy.

Capitalism is mainly about having markets that have competition. NO organization is suppose to have market power. This isn't really possible, but that is the concept. And we are so hugely away from it we can't call what is going on now capitalism. We have allowed people to convert what is called capitalism into an extreme political view that believes government is bad and huge corporations are good. That isn't capitalism, it isn't even an economic belief, it is a political belief.

A capitalist country has to be focused on maintaining a fair marketplace where companies can compete for business and consumers (including companies buying from each other) have the freedom to buy in a competitive market (not a market dominated by trusts, monopolies and oligopolies that break the function of markets to advantage themselves).

http://investing.curiouscatblog.net/2008/06/10/monopolies-an...

I agree with your point that capitalism is about markets, technically markets for capital, but markets for goods and services are also very important for a high functioning economy. We have those. To demonstrate this, let's looks at some alternative models such as those in Russia and the Chinese domestic markets, and contrats those with the west.

The Chinese and Russian ssytems are very corporatist. In both cases huge corporations completely dominate the domestic economy. In Russia's case these are technically privately held, but the oligrachs are so closely tied to the political ruling elite that this realy is just a technicality. In China the major corporations are owned by the government and explicity run by government place-men. In both cases these corporations enjoy economic, financial and political patronage and privillege that makes it functionally impossible fror 'independent' corporations, companies or individuals to effectively compete with them.

You might argue we have a similar ssytem in the west, but we realy don't. es there are instances of political patronage. Yes there are cases of undue political influence by corporations through lobbying. However the scale of such cases is absolutely riny and marginal compared to the standard order of business in Russia and China. There just isn't any reasonable comparrison. The rule of law, vita to the funcitoning of viable markets, it'sn just weak in China and Russia, it's functionally nonexistent.

No matter what weaknesses and flaws you can pick at in the rule of law in the US or Europe, the difference compared to China and Russia is several orders of magnitude.

Could our system(s) be better? Yes, of course. Is the situation gettign worse? In some ways yes. Are we in the same boat as Russia and China? No, not by any reasonable measure.

I would say it is true in most places in human history, those with power consolidate their power and use that power to take advantage of those without power (or very little power). That is the current system in the USA. I would agree in the USA it is less than in many other countries today.

So I agree the USA is less bad. But it is bad. And it is getting worse the last 20 years. And it is getting less and less capitalistic with relatively free markets (not the political extreme, might-make-right-markets, but actual economic markets that are free of monopolistic pricing power).

The USA has many advantages and does some things well (like having a marketplace where businesses can indeed grow quickly and prosper - even if it is far from perfect). This has given us great economic advantages. The huge amount of wealth we had and built up after world war two is a huge part of why the USA is where it is today. The USA mainly did well enough not to squander too much of that wealth advantage - it certainly could have done much worse. It could also have done much better.

The USA's health system is by far the worst in the rich world (double the cost and no better results - and this is the most expensive area of economics so being twice as bad as everyone else - and much more than twice as bad as the good health care system - is very bad). This problem is very much tied to the non-capitalist pro cronyist policies that are in general bad for the USA. Health care is just far worse here than anywhere (maybe some tiny, nearly insignificant markets are as badly broken relatively in the USA - say sugar quotas or something but economically it is just giving billions to a few people and costing everyone very small amounts of money). Health care is hugely broken and massively costly to the economy.

In most other areas the USA is mediocre or comparatively good but there are numerous where there are problems (and many are getting worse in the last 15 years).

Other than health care I don't so much see that the USA needs to turn to other examples of countries doing a better job of using capitalism to improve results to society (though there are examples such as new Zealand for farm policy…).

But the USA is creating great loss to our people by not taking advantage of capitalism (letting markets work - which is not what political talking heads mean, letting big business distort markets with monopolistic power). I want the USA to stop throwing away the benefits capitalism would allow us to gain.

There are many individual facets of society we could benefit from improving (and have lots of examples of countries doing much better - education, policing, foreign policy…).

But I would agree with your point that most other countries are even worse at taking advantage of the gains possible with a capitalist economic system.

In fact the USA is often responsible for making those other countries worse. The huge damage done by the copyright cartel (and associated patent messes) is the worst in the USA and the USA uses its political and military might to demand that its vassal states in Europe, Japan, Australia, etc. (I know they don't think of themselves as basal state but they really just bow down to whatever the USA actually demands only given token resistance where the USA allows it) allow such pitiful policies to flourish. The constitution of the USA had an appropriate understanding of the government GRANTING rights to private citizens/companies that DON"T exist WITHOUT government granting them (copyrights and patents). The economic theory is to balance the benefit to society from encouraging innovation through government granted monopolies with the cost of the GOVERNMENT taking from society to give to the private entity. The current USA policy is purely about supporting big business and allowing markets to be broken with extremely bad policy and no evidence they even have the vaguest understanding of capitalist or any economic theory on how the government should be acting in taking from society and giving to individuals.

Ah well, I doubt anyone will actually read this far. Obviously I am emotional on this topic. Which I know is odd. I just have seen how many people across the globe suffer because we don't get nearly the benefits from capitalism we could if we didn't allow the idiotic ides that capitalism means those with the power make the rules to break markets and direct the benefits to their own pockets.

I read it, and +1 because even though I don't agree with everything you say, at least it makes sense and presents arguments I can engage with. That's valuable.

I think a problem we have in the west (I'm a Brit) is that our generation has inherited a capitalist free market system under the rule of law, but we're treating it like a rich kid that doesn't value or truly understand our inheritance and doesn't manage it responsibly.

I don't think the situation is as bad as you say. But then my wife is Chinese and I have a good udnerstanding of how bad things can be. When people talk about the erosion of the rule of law and corporatist policies in the west I have a counter-example I can use for comparison and I see a much more nuanced picture in the west. Yes we do need to recalibrate our social contract, particularly in the US, but we do have the institutions and mechanisms available to do that. At least we are capable of having the debate here without getting censored or thrown in jail.

> NO organization is suppose to have market power.

This is naive wishful thinking. It's popular to create simplistic models to explain basic economic principles, models that assume perfect markets. However, reality does not (have to) comply to such models.

Analytically, the principle of economies of scale (1) strongly favors, through market mechanisms, the development of large entities. A large corporation, dividing its marketing and R&D costs over a large market share, has significantly lower costs than upstart small competitors. This enables it to out compete smaller upstarts, and serves as a natural barrier of entry to a specific market. Upstarts are either relegated to a small niche, or, having stumbled upon an entirely new market with no dominant players yet, grow to be a large dominating player in their respective market.

Empirically, every single market is dominated by a handful of large actors. This pattern is observed in local markets, national markets and global markets. Quick example for the HN crowd, the cloud hosting market. Amazon, Microsoft, Google, Rackspace account for more than half the market share (2). In a young market, with little regulation, where a lot of people on this site have plenty of technological skills to engineer an IAAS service from scratch. But few have the business skill, capital and timing to actually enter the market successfully.

(1) http://en.wikipedia.org/wiki/Economies_of_scale

(2) http://www.businessinsider.com/amazon-web-services-market-sh...

Well, I'm glad that /someone/ has recognised and stated the correct word for what we have today.

Until I encountered your post, I was reading the comments here with dismay - "capitalism" this and "capitalism" that...

Folks, please, recognise what the system we have today is; It's Corporatism. I have yet to see in my 45 years on this planet anything resembling laissez faire capitalism.

The creature and symtpoms as described by that article, and what you're all discussing, is Corporatism and its inevitable outcomes. As a variation you could probably call it Crony Capitalism. Go look both terms up and see which seems the most fitting for what we have today, for it is most definitely /not/ laissez faire capitalism in any way.

Pedantic, but it's actually "Corporate Capitalism"[1]. "Corporatism"[2] is a bit different. (My Economic History professor tells me it was a system dominant sometime around the Middle Ages in Europe, in which guilds directly provided many of the services we now associate with governments. Which before that had not existed; there were only Feudal Lords and their subjects. But, it seems it all depends on who you ask, and my memory may be hazy on the specifics).

[1] http://en.wikipedia.org/wiki/Corporate_capitalism [2] http://en.wikipedia.org/wiki/Corporatism

I think it's really important to make it clear that they (well, specifically bailouts really) are also not ideas of the opposing bogeymen, though. No one who even thinks of considering themselves socialist or, say, anarchist would ever say "Yeah, let's give a bunch more money to rich people!"

The tendency for power to accumulate into the hands of a few, who then manipulate the economy to their own ends, is a problem endemic to all social power structures. No system yet invented has proven immune to it merely through built-in assumptions of the model.

"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants"

Hopefully we'll be able to do this in a less-than-literal fashion.

"The people can not be all, and always, well informed. The part which is wrong will be discontented in proportion to the importance of the facts they misconceive. If they remain quiet under such misconceptions it is a lethargy, the forerunner of death to the public liberty. [...] Let them take arms. The remedy is to set them right as to facts, pardon and pacify them."

Nor has any political force yet emerged built on that premise of social power structures. Perhaps classial liberalism, georgism, distributism, and good old fashioned anarchy. Every existing political force along the spectrum simply tries to subvert the pyramid to its own purpose.

Interestingly enough, the US Constitution's much-abused 2nd amendment was targetted at precisely this problem - the founders were at least aware of the problem.

It's still too early to know if this is a sufficient safeguard. But things must be getting close - those Occupy Wall Street protests only needed to have a few hotter heads leading things, and we may have seen impromptu armies numbering in the thousands taking over corporate America. I don't know how the government would react to such an uprising.

Yes and no. While it's true that a purpose of the second amendment was to preserve the right to armed revolt, another purpose, articulated in the Federalist Papers, was to share (distribute and balance) the state's natural monopoly on the use of force with the people.

However, I had more in mind an ideological revolution transcending the tired left-right paradigm. In this matter, the right sees a centralized concentration of power in the government as a problem but fails to see the role that concentrated capital plays in controlling that political power, while the left sees a centralized concentration of power in the economy as a problem but fails to see the role that concentrated government plays in concentrating wealth. Little do both sides realize that both concentrations of power are one in the same.

I was actually thinking of the Federalist Papers justification when I wrote my comment ;) We're not talking about the people overthrowing the government, but rather reclaiming a share of the wealth which they can't get any other way, because the wealthy always ended up capturing the permanent power structures. It's worth noting that even with wealth these days being virtual (there are no massive vaults filled with gold in company HQs), there is still a physical aspect to accessing that wealth - someone that physically takes over the corporate headquarters of Walmart has access to systems that can distribute the wealth. Of course if you're just a bunch of bandits that does this, the government will pursue you to reclaim the money. But if you do it as part of a political movement with wide community support, politicians are much more likely to let it lie.

I think the 2nd Amendment is a "meta" amendment. It's a recognition that power tends to concentrate, and that to stop this some chaos needs to be maintained in the system.

Bailouts and central bank manipulation are also capitalist ideas, or at least they were developed by capitalist economists within a capitalist framework on behalf of capitalists to try and keep capitalism afloat.

Bailing out banks and hoping they will spend it on industry just after they bankrupted themselves by gambling shows an unquestioning and total belief in the institutions of capital.

Socialists would have just lent cheap money directly to industry and full on communists would have thought it a great opportunity to dismantle the monetary system.

edit - Thinking about it, it may be a weird form of cargo-cult capitalism. As in, the political business of managing capitalist economies has been replaced by a belief in preserving the current institutions of capital, irrespective of how those institutions are behaving.

> Bailing out banks and hoping they will spend it on industry just after they bankrupted themselves by gambling shows an unquestioning and total belief in the institutions of capital.

On the contrary, it betrays deep distrust in the actual institutions of capitalism: market prices and bankruptcy.

"Institutions of capital" cannot just mean "the people who hold the capital", because by that definition every oligarch since prehistory was a capitalist. That contradicts even Marx, who saw capitalism as a distinct modern development.

I was using the phrase to specifically mean the organisations that structurally underpin modern capitalist economies and have now come to represent it. Sorry if I did not make that clear enough from context.

Now you can argue that what happened was bad economic theory, however the intent behind bailing out the banks was not to steer away from capitalism, but to prop it up, so even if you think it stinks from an economic theory perspective, it was at least intended as capitalist.

All Austrian-school ideology is capitalist, but not all of capitalism is the Austrian school. Both ideas were capitalist: private ownership of the means of production, with production being for profitable exchange.

> Iceland

Not clear to me the executivies were charged for anything applicable to the overall collapse

http://www.economist.com/news/finance-and-economics/21577064...

3 from Iceland, 2 for stock manipulation and 1 for fraud.

Not viable institutions - that would be retirement and mutual funds with hundreds of billions invested in real estate tranches?

> older organism to gift

Not sure where all those energetic millenials would be living now if mom & dad lost their house on that HELOC and their 401K to a crushed Goldman or Fidelity.

I'm for nihilism as long as people admit they're ok with more than old corporations dying.

> ...charged for anything applicable

I don't know if it's similar enough, but, a good extreme example is Al Capone. He wasn't charged with organized crime, but I don't think you could argue he wasn't jailed for it. Conversely (although that may be the wrong operation) and by design, you can do a Wrong Thing and not be jailed because it's a new Wrong Thing and thus there's no law against it - there's actually a technical term for this, and AFAIK it's one of the basic principles of our judicial system.

> Not viable...

I think you're reading in that I think we shouldn't have bailed out those institutions, since you're using examples with emotional impact.

And actually, there may be an interesting correlation here... What do you think of the "Right to Die"? To continue with the medical analogies, if you have someone in a vegetative state (for the purposes of the analogy, they are no longer a viable person), you don't pull them off life support immediately, because it IS about more than just them. But you do let them die, eventually.

So let's say you have this retirement and mutual fund that has - by virtue of a CONTINUED need for financial life support - demonstrated that it has entered a zombie state. Well, if you consider the invested funds as the organism's energy... redistribute that energy to new organisms (aka, break up the company). Energy still exists, energy is still invested - and yes, of course I'm simplifying this and it could be non-feasible due to the effort involved in that break-up, but the idea remains.

> Where all those...

...Protesting? :D Joking aside, well - again, that energy isn't lost. Where does it go? I'm very much not enough of an economist to say what circumstances money is actually destroyed, but... as Lewis CK put it: nothing's on fire and nobody's dead.

Now, want to say that energy doesn't go someplace appropriate? We could go the angry route and say it's going to the wall street bankers that caused the collapse, which in turn then looks like a whale eating krill. At some point the whale needs to die so there can be nourished krill, and the Cycle Continues, as they say.

I'm OK with more than old corporations dying but I don't think either of these positions have anything to nihilism. Then again, SMBC is my understanding of nihilism. (http://www.smbc-comics.com/?id=2394)

They couldn't lose their home to their HELOC (Home Equity Line Of Credit) because they could simply continue to pay the interest and do payments on the principal. They probably shouldn't have taken that loan to begin with but now that they have it they should simply be paying off on it.

The fact that bad debt was issued required two parties to be willing partners, one to issue the debt and another to take it on and that's something that didn't have to happen. Taking on debt without having the means to pay it back is supremely stupid.

As for the 401k, don't you get a say which funds that money gets invested in? Don't you get a say on whether or not you contribute to them anyway?

As far as I get it it is mostly a tax deferment scheme, pay out later (after (hopefully) compounding for a number of years) for when you're earning less than you do today.

A flat taxation regime would take care of that in a heartbeat (then deferment has no advantages).

Personally I wouldn't trust any institution with my pension, but that's me being paranoid. If you do choose to put your money in the hands of others for increased long term return you have to keep in mind that any kind of returns indicate an increase in risk and if you're unaware of where those risks stem from then you are probably assuming a good part of that risk yourself.

"Taking on debt without having the means to pay it back is supremely stupid."

Or desperate.

When central banks like Japan's or US print money it is called "Capitalism" or it is called "central planning"?

When in places like Spain they create a bubble in real state but then try to support the prices by any means, including the creation of "bad banks" so prices don't sink it is called Capitalism or central planning?

When States do not control what they spend and the increase the debt by 10x it is called Capitalism or central planning?

This is not capitalism, but capital-comunism: Capitalism when prices go up on the riches, private profit, communism or public sharing of the losses.

When I lived in Japan and prices went down, it was very good for the people living there, but in the international news it was a catastrophe, because the markets could not make money in the stocks.

People(family and friends) always told me: Are you ok? like I had gone to the war or something, because of what they heard on the news.

This is the most appropriate reply currently.

We bemoan capitalism, but what we are really seeing is corrupt administrations with ex-banker moles everywhere supporting the financial industry's black sheep at all costs, against all rules of capitalism and the free market.

Classic case of 'not looking at the bigger picture'. If you look at standard of living in the west, since the industrial revolution, it's increased exponentially, massively. More than anywhere else in the world, and it almost directly correlates to the more economically free parts of the world.

Yet every time there's a minor blip in that massive, massive rise in wealth and standards of living, people band together t blame Capitalism, forgetting the massive improvements to quality of life it's given us.

Actually what we have now, despite all that is somewhat broken and it's not even Capitalism in its truest sense. We're constantly battling against the feverish symptoms of Corporatism. Big business bail-outs, state monopolies, printing fiat currencies and the inflation it causes.

So whilst there are problems, don't blame 'Capitalism', blame those who try to 'improve' or 'skew' the heart of Capitalism. Which is free-trade, entrepuanlerialism and innovation. Not price fixing, inflation or quantitive easing.

I thought this article was a waste of time. It is a grab bag of obvious truths, buzzwords, opinions and contradictions. The author seems to be confused and his prescriptions for more regulation, higher interest rates and more incoherent political revolt are unlikely to improve things and will probably make things worse.

Clearly there are many problems in the financial sector and even more in our governments (there many good things too). Unfortunately nobody can - in my opinion - convincingly articulate how to fix them or even exactly what they are and what causes them. And this author is worse than most!

Capitalism works just fine. The problem is throughout Europe and the US we have this weird kind of corporate socialism where governments are more and more involved in their respective economies and then blame "capitalism" when things don't work out. You can't call it capitalism if companies aren't allowed to fail.

And banks are so heavily regulated they're de facto agents of the state. The banking crisis isn't an indictment of capitalism at all - quite the opposite.

The banking crisis was a result of de-regulation, caused by neo-liberal government agendas. After the great depression, the banking sector was stable and only became problematic again when the laws that were introduced after the great depression started to be dismantled.

Are you saying thats not what happened?

The US financial crisis happened in large part due to the monopoly of the "big three"[1] credit ratings agencies mislabeling bad debt as good. These agencies had a corner on the credit ratings market thanks to the US federal gov't (SEC) bestowing them with the coveted "Nationally Recognized Statistical Rating Organization" (NRSRO)[2] status, a status which only those three companies held between the mid-1990s until early 2003, firmly cementing them in the financial industry as the chosen ones for credit ratings. The US gov't also gave some extra protection to NRSRO-rated debt, e.g. by recognizing it as legal investments.[3]

So in this case, over-regulation and the monopoly it bred had quite a large hand in the financial crisis.

[1]: http://en.wikipedia.org/wiki/Big_Three_(credit_rating_agenci...

[2]: http://en.wikipedia.org/wiki/Nationally_recognized_statistic...

[3]: http://en.wikipedia.org/wiki/Nationally_recognized_statistic...

Yes, I'm saying that's not what happened. The banks were forced by the government to make bad loans, to such an extent the government had to buy up 90% of the paper.

How can you write an article about Japan Syndrome and stagnating economies without mentioning Bernanke, Krugman, or Keynes?

Capitalism isn't itself the problem. It's the way out of our current doldrums. But there's this idea that government institutions have no way to intervene to kick-start capitalism's more virtuous cycles.

As Keynes first recognized, and as Bernanke and Krugman both clarified in respect to 1990s Japan: when you hit an economic slump driven by lack of demand and your control over interest rates has hit its natural limit (you can't set an interest rate lower than zero... you wouldn't want to risk deflation in any case), the only way out (besides waiting) is to increase demand.

So how do you do that? Well, we have tons of options. Governments can take the opportunity to borrow at essentially zero interest and use the money to build stuff we need and fix stuff that's broken. Build out gigabit Internet to every house in the country; commit to curing diabetes in 20 years; build 200mph+ high speed rail networks between clusters of large cities, and improve airport capacity for longer-distance travel; replace aging water and sewer systems; invest in offshore wind and tidal power sources; build out a national power grid to maximize efficiency; provide research grants to increase battery efficiency x100 by 2025.

All of this will create millions of jobs, in addition to providing the cash to soak up all the industrial overcapacity that's out there. But there are more direct routes as well. Raising the minimum wage would stimulate a huge amount of new consumer spending and debt reduction, while increasing payroll and income tax revenues for the federal government and putting upward pressure on wages across the board, which would lead to additional spending, tax revenues, and growth.

Or if you want to go full Bernanke, just have the central banks print money and drop it out of helicopters. That, or just mail everyone a check. That money'll get spent, and add jobs, and then we can let capitalism take back over from there.

So do you think it worked for Bernanke after he went full Bernanke and the article misses this point? Or do you think it didn't work - if so, why didn't it?

There seems to be an almost religious belief that capitalism has to work in all circumstances. But you can't just keep pumping credit into an economy with the hope that it will continue to expand. People only have so many needs. After a while there is no real point in building either new factories or houses.

Why isn't that fact that interest rates are zero not interpreted to mean that we are simply at capacity? Capitalism isn't broken, it's just full...

Because a simple walk down an average street nearly anywhere in the country strongly indicates otherwise. In science, we like to imagine that we'll begrudgingly discard our theories in the face of a single contradictory fact. Economists don't even seem to pretend that's a thing they'd ever do.

There are some 50-60 million people living in poverty in the US. Schools don't have books or desks. People are quite literally fighting insurance companies for their lives on a daily basis. That's quite a lot of demand out there for pretty basic things. There are staggering numbers of unemployed and underemployed people out there as well, so we're not hurting for supply-side capacity either.

There's simply more profit to be made by "investing" capital in playing financial games than there is in meeting actual demand. We can quibble about whether this is a failure of capitalist theory or a failure caused by too much regulation, or probably a dozen other claims. But whatever the case, it's a pretty cut and dried case of the bleeding obvious that we're not at capacity in our economic system.

I think you misunderstood my point. I am claiming that credit driven capitalism is incapable of providing any particular benefit under current conditions. In other words; capitalism is entirely ineffective...

From my perspective "playing financial games" is caused by the simple desperation of people who have large amounts of money and are having trouble coming to terms with the current reality. They face the horror of actually having to spend their capital...

The current climate is interesting. I think it's no coincidence that we are about one generation since soviet communism failed as a political movement and it became obvious that other leftist economies would either reform or be overthrown.

In any case, the current debate will perhaps be fruitful. Wealth disparity. Acceleration of Automation. Jobs evolving so fast that the paradigm of eduction-qualification-work is getting very clumsy. A resurgence of the old leftist idea that wealth distribution is inevitably political, mores than nationalism, religion or anything else.

It's all interesting.

Personally, I think the major force at play in our time is technology. Fraking for all its controversial implications has already lowered energy prices. Perhaps all the research and motivation to develop other energy sources will give us the awaited revolutionary 10X increase in energy availability. Computing continues to generate wealth and promises of more wealth.

The communication mediums open between most people on earth are developing at a blistering pace. The effects of cultural globalization may dwarf those of economic globalization.

It's not surprising that we have an appetite fro radical thought.

There's a lot of conflation in this article between distribution and economic growth, which I think arises from the Spiegel's European perspective.

Going back to the start of the DAX tracking (mid-2011), we see okay performance in German DAX index, stagnation for the French CAC and British FTSE, and strong performance in the US S&P 500 and Japanese Nikkei. [1] Eurozone unemployment has soared into double digits of late, while in the US and Japan it is converging with the natural rate, <6%.

The economic situation in Europe is truly awful, in contrast to the US and Japan where growth has been respectable. But you would never have guessed this from the tone of the article.

The article raises a second narrative about inequality. Fair enough! But this is an orthogonal issue to Europe's economic malaise. The US is infamous at not distributing the benefits of growth. In the US, we have one thing that's working (growth) and one thing that's not (inequality). This is due to many institutional problems and governance decisions and it will be a lot of work to improve the situation.

The thing I found alarming about this was the way they denigrated stimulus. This is an area of major divergence between Japan/US and Europe. Nominal GDP growth, the measure of the 'easiness' of money (it's the sum of all money trading hands), has stagnated under the European Central Bank (ECB) while the US Fed (FOMC) has used stimulus to keep it growing in the United States [2]. If anyone believes the central banks have "run out of ammunition" as the article suggests, look what happened just last Friday in Japan: The BoJ announced unexpectedly high stimulus and the Nikkei instantly soared 4%, despite the fact that interest rates were already 0. [3]

The ECB needs to be more like the FOMC and BoJ. The Spiegel seems to think the opposite. It seems like the ECB's policy reflects this hawkish European perspective. And that's scary for Europe.

PS It's true that Japan has been stagnating for decades. That is likely related to the ultratight monetary policy they've pursued since the early 90's (as well as structural issues of course); NGDP actually shrunk there over 2 decades [4]. But they've been moving in a different direction lately, and the shift seems to be paying dividends.

[1] Drag the slider here back to mid-2011 to get a long-ish view: https://www.google.com/finance?chdnp=1&chfdeh=0&chdet=141499...

[2] http://static.cdn-seekingalpha.com/uploads/2014/9/11/sauploa...

[3] http://www.huffingtonpost.com/2014/10/31/nikkei-japan-stimul...

[4] http://uneasymoney.com/2012/02/13/japans-2-decade-experiment...

> The economic situation in Europe is truly awful, in contrast to the US and Japan where growth has been respectable.

That depends very much on where you're looking. Spain or Germany are worlds apart in this respect.

They certainly are. But even Germany has had mediocre performance compared to the rest of the rich world.

Your meta comment is probably the most informed one I've read in this discussion.

One aspect worth considering is _why_ the article is representing such a different perspective to the perspective USA readers would consider "sensible".

A reasonable answer on the growth side is that Germany's perspective is not solely focused on GDP, other factors such as employment and wage growth are important. On the stimulus side the German central banking system has always been hawkish (possibly due to their history) and this has continued to a large degree with the ECB.

Germany has stagnated in employment, wage growth, and expected GDP growth (as measured by equities) compared to Japan and the US.

While adding 20+ million people from a collapsed economy and rebuilding much of that.

Exactly, the effects of reunification are still being felt. Not to mention battling a low birth rate for quite some time, although this is partially offset by immigration from other parts of the EU.

That happened 25 years ago. I was only meaning to reference growth since 2008. it's not clear why recent growth should be impacted by an ancient supply shock.

The same country's economy grew at double digit rates while recovering from their entire country being leveled to the ground. [1] It's not clear that supply shocks [necessarily] suppress growth at all.

[1] http://en.wikipedia.org/wiki/Wirtschaftswunder

25 years is a very short time to rebuild a collapsed economy. We still pay for the East. Unemployment in the East is still high. We pay for pensions. There is payment between the German states, called 'Länderfinanzausgleich'. Not one eastern state in Germany ever has paid any money into it. There is some improvement in their financial situation, but it is far from self-sufficient.

A German here, I probably read Spiegel for >10 years (from ~2000 to beginning of 2014):

They are kind of "left" which reflects in their articles "raises a second narrative about inequality". They'd support basic income any time.

The Spiegel has turned into yellow press lately, I am surprised to see a (english) article on HN.

Thank you HN for unveiling that there are some spots in Europe that are doing fine and that there are structural problems (I can see them, the borders are open and ppl come to Germany from other European countries).

One of the problems with the open borders is that the younger people are moving, leaving countries with an already stagnant economy with an even greater aging population issue.

The same problem exists within Germany.

"The Spiegel has turned into yellow press lately" that's your very own personal opinion but the way you serve it (as absolute truth) is yellow. Not to add in various other mishaps in your argument (eg "kind of "left"", thanks for unveiling ...). In short that's nice propaganda (albeit not very effective here).

1. No, there are a lot of sources, that report the same. SPON (Spiegel Online) turned from being a good source for news into click-bait (~beginning 2014). The editorial staff changed: Didn't the editor in chief come from Germany's most famous yellow press gazette (die Bild) [1]?

2. You have a basically American audience on HN. I underpinned "kind of left" with the "basic income discussion", which -with no doubt- the Spiegel has a (very) positive stance for it (just search Google, the German terminology is "(bedingungsloses) Grundeinkommen").

3. No, it's not my opinion v.s. your's (that would be deficient)

[1] It's the co-editor ... and his appointment "was received with great controversy within der Spiegel": http://de.wikipedia.org/wiki/Nikolaus_Blome

He is also the one responsible for "the online-resort", so the articles on their web site.

I admit that I didn't know about the Bild connection (and yes it does speak volumes). Btw, Bild editors can be accused of anything but leftism and you said that there was significant controversy with Spiegel. Maybe there is still hope for the medium.

Still this particular piece is well written and (seems) quite well researched.

Japan has stagnated because its working age population is in decline. Apart from the demographics, Japan's doing great.

Japan is in dire condition in fact.

They've stagnated because instead of generating real growth, they were faking continued prosperity by accumulating massive sums of debt. It was all meant to cover the fallout from the late '80s / early '90s asset bubble exploding.

Debt servicing costs are roughly 23 trillion yen, compared to tax revenue of 45 to 47 trillion yen for 2014. So half their budget is now just going to paying interest on debt. That's a fiscal death spiral. Things are about to get a lot worse in Japan.

It's already so bad they've taken to destroying the Yen to buy a very short amount of time, which is accelerating the overall erosion and rapidly dropping the standard of living. All of their projections for recovery have fallen flat (the failed Abenomics), as anybody with a basic understanding of non-Keynesian economics would have known ahead of time.

Want to know what comes next? A more dramatic debasement of the Yen, as a means to stave off default a bit longer. It won't work, their debt situation will get worse, and the cost to service that debt will climb, sapping even more of their tax revenues; confidence in the Yen will fall, and their ability to prop up the debt situation by debasing the Yen will begin to weaken; sooner than later, they will no longer be able to maintain the facade.

> Things are so bad they've taken to destroying the Yen to buy a very short amount of time, which is accelerating the overall erosion and rapidly dropping the standard of living in Japan

This is an interesting perspective. If the falling yen is so bad for consumption, why is the yen anti-correlated with equity performance? Equity performance should be a measure of real expected national income. If a falling yen meant less income, equities should drop as well, just as inflationary shocks in the 1970s were met with sagging equity prices.

Also the Nikkei is up roughly 50% from the time Abenomics was announced in late 2012.

If you are correct that Abenomics will fail, you should be able to make a killing in the markets.

I'd say that it's well on its rails. It's us, the 99%, that we are in it's way.

Capitalism has not gone off the rail. It is just the concept that has worked better than almost every other thing known to humanity.

This inequality business is a new modern day scam just like communism of last century. Some anointed people want power for themselves and want to still money from people like us who are working hard in the name of poor people nothing else.

When government creates incentives where it steals money from hardworking people like us and gives it to irresponsible people like teenage mothers in the name of "compassion", we are creating incentives for many people to remain poor. This is a perpetual poverty into which we have let the government condemn them. That is the problem.

Capitalism is a hope.

The need to see an untermenschen to rail against always puzzles me; these tirades about "stealing from us" are just a good way to give one's eye-rolling some exercise. It's like you think, with your labor, you're not poor, too--while some folks (hi) recognize that a couple years of illness are enough to destroy a laborer's career. Even a tech worker.

If you don't own capital to sustain your lifestyle, you're almost certainly part of the poor you want to spit on. Nobody has serious designs on your slightly bigger slice of the scraps that the middle and lower classes have, and I have this sneaking feeling that you know that. But Steinbeck predicted you most of a hundred years ago.

Yes. Something might destroy all I have earned but that is fine. I am individually responsible for that and I dont think someone else owes me anything.

The idea that one is individually responsible for getting cancer at the age of twenty-five is at best hilarious and at worst monstrous.

A damning indictment from Stockman's The Great Deformation (referenced in the article):

  The paper trail uncovered by congressional investigators shows that the
  $400 billion (notational value) of busted CDS insurance issued by the AIG
  holding company was held by a very small number of the world’s largest fi-
  nancial institutions, and virtually none of it was held by the banks of Main
  Street America which were allegedly being shielded from AIG’s imminent
  collapse. Moreover, the worst-case loss faced by the dozen or so giant in-
  stitutions actually exposed to an AIG bankruptcy would have amounted to
  no more than a few months’ bonus accrual.

More at http://news.slashdot.org/story/14/10/16/149247/bill-gates-pi...

I don't think the healthiness of any specific industries (like banking and finance) has anything to do with capitalism. Just like, say, manufacturing CPUs has nothing to do with capitalism. If you have a bug in your manufacturing process then your company might go broke. Likewise, if there is a bug in your financial rules, financial institutions might break down. That has no bearing on the validity or invalidity of capitalism as a whole.

This is a good insight, with the remark that CPU manufacturers are rarely bailed out by the taxpayers, after designing a faulty processor and getting close to bankruptcy.

The main purpose of money is to provide a transaction medium. So that we can negotiate contracts and trade things without barter. This function requires money to act as an artificial store of value. However money doesn't have intrinsic value in itself so if people start to put too much faith into this paper, it can replace more tangible market based stores of value such as stocks, bonds commodities etc., those that are backed by real economic activity. When real economic activity is replaced by a government "paper" store of value, you get unemployment and sub potential production.

Right now in many places, Europe in particular, interest rates are artificially high, yes they are near zero but zero is high when the alternative private investments would be in the negative in risk adjusted, inflation adjusted term. That is why corporation and banks tend to hoard cash. Cash is kept artificially more valuable than market investments.

It is critical in these situations to have slightly higher than normal inflation to allow central bank real rates to be more negative and closer to market rates for stores of value. When central banks don't cause enough inflation, they are subsidizing holders of money and money like instruments to the detriment of those who invest in things that are tied to economic activity. They are subsidizing economic idleness, they are keeping an artificial store of value worth more than free market investments and this creates gridlock in the economy.

What is interesting about the article is that it clearly points out how destructive the Central Banks are in trying to manipulate the economy, but ends with blaming the private bankers. It is abundantly clear from economic history that Keynesian policies of money printing and interest rate manipulation don't work and in fact have never worked - they are the problem.

What's really interesting about the labor glut is that the conventional wisdom about demographics hasn't been adjusted.

The CW is that the US has a great future because US population is going to climb to about 400M by about 2050. If economic growth is decoupled from labor, is that an advantage?

Capitalism requires growth, finite resources/demand can't always live up to it. I have always believed that the virtual economy / digital goods is really where most of the growth needs to be.

We are seeing lots of this but maybe not enough. The only limited resource in virtual worlds is imagination, storage, network and power (energy), but it takes fractions of what physical goods take. If we can pull something off like in Ready Player One OASIS or even just more participating in buying digital goods I think this is part of the solution.

Another area I think can help is loans/investments but of digital currencies. The world of funding could be revolutionized by bitcoin like systems where they are primarily for hoarding, but they are also perfect for supplying capital. Capital could be made available to the 99% out there in new interesting ways, shaking up baked in wealth of the 1% that is immovable at times of need. If there ever is a basic income, I believe it will be some sort of digital currency, a new currency might even start out that way.

Unlike Capitalism, Globalization is Zero-Sum.

Another absurd anti-capitalism diatribe from left oriented journalists.

Capitalism is not the problem. We have too little capitalism, not too much. Central banking and the banking industry in general are the problem, since it exerts monopoly control over interest rates and currencies. Free markets are resilent distributed networks and therefore self-regulate and self-repair. Concentration of wealth is a valid concern, but only because many normal mechanisms of exchange have been co-opted by central entities. Because of this, people have to go through intermediaries to facilitate exchange. These intermediaries often do not have the interests of those parties at heart.

So will it scale now?

Very very very simple.

The natural end state of unregulated markets is cartel/monopoly.

Which is what practically every sector is right now.

Break them up with existing antitrust laws.

It's not capitalism that's gone off the rails ... it's socialism. All of the countries with slow growth and growing inequality have heavy-handed socialist policies in place.

So you're saying the US isn't experiencing slow growth and growing inequality?

Growing inequality by what measure? Gini co-efficient? If so Sweden has a much higher inequality than most of the EU.

I'm saying the US has some of those very same policies in place.

So who doesn't?

I'm not aware of any major countries unfortunately.

So the richest and most technologically advanced societies in the world, consisting of the most educated and most productive free people in the world, people who through democratic institutions can shape their societies as they see fit, are converging to the same basic model, and you want me to believe that this isn't a ringing endorsement of that model?

> ...the most educated and most productive free people in the world, people who through democratic institutions can shape their societies as they see fit...

I don't accept this premise. Voting is only a small input into the colossal self-propelling machinery of bureaucracy (and the government-to-corporations-and-back chain of what could be called pay-offs or bribes... ie campaign donations, to profit-increasing changes in government policy, and back again).

I'm with you on paper voting being a small input, but (arguably) a more important part of the "freedom" part of our "free societies" is the ability to vote with my time, dollar, and feet - decide where I spend my time, my money, and where I live.

So howsabout this rephrasing:

> people who through [their free actions] can shape their societies as they see fit...

True in the small stuff, but it's pretty ridiculous to say that the modern welfare state is the product of bureaucracy rather than democratic will. Look at polls of what voters say they actually care about.

In a word, yes. Although:

1) I don't necessarily agree with your claim "through democratic institutions can shape their societies as they see it" - democracies are quite a bit messier than that.

2) I wouldn't use the word "converging" - I would probably say becoming stuck in similar states of sub-optimal social organisation.

And to touch on your other suggestions, I would say that, while these are certainly the richest and most educated people in the world, I don't believe that they are as a whole either: a) particularly self-aware of their own desires and values b) particularly conscious of how they might achieve said desires and values or c) particularly cognisant of how contemporary norm of policies and political strategies actually affect and shape society.

My argument would be that if people satisfied a, b, and c, we would see very different policy arrangements in Western societies. Speaking crudely, people would accept that even if it were possible to coerce market outcomes, it would not be desirable. Politics would become extremely boring, because it would no longer hold pretensions about its capacity to "manage" or "shape" the market.

I would assert that these are the policies that an enlightened society would recognise as most contributing and enabling the greatest good to the greatest number, and would therefore pursue.

Fundamentally, I don't think modern societies are as enlightened as you would like to portray them. That's really not meant to be a critique, I don't think it would be fair to expect much more at this stage of history.

The rules of economics do not dictate outcomes. Government intervention can move economies to different equilibriums. It's just how the rules of physics don't necessitate that people give up on the idea of flying. They dictate what one has to do to fly--not what one's end-goal should be.

I find it odd that you seem to find my outlook pessimistic. Quite the opposite: I would argue fervently that I absolutely believe in a world of flight. It is a world underpinned, a world that must be underpinned, at heart, by one utterly simple principle:

Let us defend the right of one another to the freedom to act as we each see fit, as long as we do not cause each other harm.

Note that this is still a world in which many people can and most certainly will make poor decisions and fall behind in life. But there is nothing stopping a true libertarian from feeling that some of their time and resources can be best spent helping those people improve their economic decision-making.

Yet a true libertarian would also honour the decision of another not to care (though they might not respect it.)

So, you don't actually have any data to back up your claim that your proposed fix would fix anything. Here, let me edit your first statement to include your data:

> All of the countries [have] growing inequality [and] heavy-handed socialist policies in place.

Sorry, but I'm not the person who made the original claim, just someone who is in agreement with them.

Hong Kong and Singapore are the two freest economies. They have very minimal welfare states, with relatively light regulation and taxation. Their wealth creation and economic growth have been astounding over the last ten years.

Meanwhile, most of Europe has seen zero GDP growth in real terms since 2004/05. France has seen an average of sub 1% nominal GDP growth for a decade; negative in real terms. Japan, which is a massive welfare state, has seen zero GDP growth for 20 years; their State spending dug such a deep hole, a quarter of their revenues go to just paying interest on debt, and they've taken to debasing their currency as the last step available to them to hold off further collapse. Spain, Italy, Portugal, Greece, et al. are welfare state disasters, rapidly imploding. The US has seen zero standard of living improvement for 40 years, and that's before accounting for the massive increase in debt that has yet to exact its full toll.

You can count the number of welfare states in the world that are doing well on one hand, with one of them being a temporary oil empire named Norway.

"Freest Economies"? You mean the biggest leach in modern history. They send all of their children to be educated abroad. The rely on the security provided by our military. And they provide safe harbor for all the rich tax evaders who made their money off the innovation created by countries that actually invest in research. Then there's also all the poor as dirt neighboring countries who does all the work for them and live in the pollution byproducts.

We shouldn't measure how well the kingdom is doing by the gloss of the marbles at the king's court.

Hong Kong and Singapore had an astounding growth of 2.9% and 3.9%, while socialist China had a miserable 7.7%? I don't get the impression you looked at the numbers at all, or did you?

In what way is China socialist? It's a kleptocracy and an aggressively capitalist one at that.

Whether or not China is socialist or capitalist doesn't really matter: GP said "freer" economies have higher growth. Is China freer than Hong Kong or Singapore?

(BTW: China sure has a market economy, but OTOH it lacks multiple specifics of contemporary Western capitalist economies, e.g. it's not primarily driven by the financial markets, a significant portion of the workforce still works at state owned enterprises, much deeper planned macro economical development than in the West, ...)

> Hong Kong and Singapore are the two freest economies. They have very minimal welfare states, with relatively light regulation and taxation. Their wealth creation and economic growth have been astounding over the last ten years.

I don't know about Singapore, but the last echo I had about Honk Kong was "we have too many poor people, you can't seriously consider letting them vote".

Singapore is a not a "minimal welfare state". As an example, some 40% of the population lives in government subsidized or public housing. Singapore has universal public healthcare. Generous unemployment and government pension benefits. There is free primary and secondary education as well as multiple state-run universities with free/highly subsidized tuition. In short, there are lots of social safety nets there.

The USA has an annualised growth rate of 3.5% at the moment, the UK is around there as well, the Eurozone - which didn't have many zombie banks but did have plenty of insane socialist governments mortgaging their people's futures is on the brink of recession, again.

Did... did you read the article? You may be correct about the correlation, but a) I'm pretty sure you're not and b) the article goes into moderate detail discussing the mechanisms involved, most of which would also be expected to create an appearance that matches what you describe: More socialist countries, by virtue of NOT sustaining zombie banks, have less growth than less socialist countries which ARE sustaining zombie banks, and thus continuing to create the appearance of growth - but it's no more growth today than it was in the years leading up to the collapse.

Nothing a little more government intervention couldn't solve, comrade.

That is a really poor argument and can be debunked with some simple thought modeling. Imagine a system where returns on capital are higher than labor, and there are a relatively small number of people with large amounts of capital and no 'socialist' policies in place to attempt to interrupt the capital flow. After a period of time, assuming everyone is working and investing if they have capital to spare, would the income be more or less evenly distributed? This result would occur outside of socialist policies so it's very doubtful they are the cause.

Like most socialist theorists, you left out entrepreneurs.

Hong Kong and Singapore have very high inequality.

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