Inequality
from Peter Radford
I am preparing a talk on inequality here in America, and so have been re-reading the Piketty and Saez work. Amongst the more eye-opening facts I have come across is the assertion, by Saez, that the surge in the top 1% incomes is so large that the growth of the bottom 99% amounts to only half the average [mean].
Think about that for a moment.
It would be like walking into a room full of people two feet tall with one thirty footer in the corner. The mean average is meaningless in such circumstances. We are all taught that in statistics class, but to come across such an egregious example in a dataset as large as all US tax returns is astonishing.
Not only is this an alarming fact, but to portray it adequately on a chart is difficult to do. The line representing that 1% doesn’t fit well with the 99% because any scale you use cannot easily accommodate such extremes.
When I chat with people about the topic I realize that most have no clue as to how skewed and screwed up the economy now is. Even when they start to comprehend they retreat into a kind of ‘it doesn’t affect me’ denial. The fact seems to be that most people want to cling onto the mythological image of America they carry with them, perhaps because confronting the reality we have made for ourselves means accepting unpleasant and disturbing facts.
Yet they’ve all been hurt by what happened.
They key, I think, is to be as apolitical as possible when you portray the facts. People can absorb those facts given time and lack of controversy. The bigger challenge is getting them to understand that they have suffered and need to do something to help re-assert a more acceptable balance.
There are still plenty who argue that inequality does no harm and that those who accumulate great wealth and/or incomes somehow deserve it. Ironically mainstream economics can help win the argument. Once you get people to commit to allegiance to free markets you can more easily get them angry over massive inequality when they realize it represents a perversion of market magic.
But then you get trapped into arcane discussions about how mainstream economics has nothing to do either with capitalism or reality or much of anything at all. People’s eyes glaze over, and economics is once again shown to be a waste of time.
Why do we bother?
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—– look inside —– $5.94 / $20.00
—– look inside —– $4.90 / $8.00
—– look inside —– $15.99
—– look inside —– $5.99 / 12.99
—– look inside —– $5.93 / $12.99
—– look inside —– $4.97 / $9.90
—— Ugarteche, Puyana and Madi ——
Gerson Lima / Maria Alejandra Madi
Edward Fullbrook and Jamie Morgan
————— Michael Hudson ————–
Maria Alejandra Madi / Jack Reardon
————- Edward Fullbrook ————-
—————— Steve Keen —————–
————— Richard Smith —————
————– Gustavo Marques————
– Victor Beker and Beniamino Moro –
————– Lars Pålsson Syll ————-
—————– Stuart Birks —————-
Edward Fullbrook and Jamie Morgan
———— Armando Ochangco ———-
Shimshon Bichler / Jonathan Nitzan
————— Mauro Gallegati ————–
————— Herman Daly —————-
————— Asad Zaman —————
—————– C. T. Kurien —————
————— Robert Locke —————-
Real-World Economics Review Blog 
May I also recommend :Capital in the Twenty-First Century” by Thomas Piketty,
The inequality conversation as commonly portrayed reminds me of the time a reporter stopped people on the street and asked them what they think we should do about the potentially toxic effects dihydro oxygen on humans. The nature of the question led people to automatically react by saying that it should be “banned”.
The widening distribution of capitol might be a potential problem, but I don’t know that to be true. Tyler Cowen suggests in “Average is Over’, it might be a symptom resulting from lots of forces influenced by technology, productivity and workforce changes. I am confident that any proposal to “fix the problem” scares me, largely because we’re simply not that smart.
Dihydro Oxygen (water) is toxic in humans in large quantities, however banning it isn’t a solution. We need to be careful about simple solutions to complicated problems.
“We need to be careful about simple solutions to complicated problems.”
as well as complex solutions to simple problems.
What really needs to be done, ” ***** “Believe nothing merely because you have been told it…But whatsoever, after due examination and analysis,you find to be kind, conducive to the good, the benefit,the welfare of all beings – that doctrine believe and cling to,and take it as your guide.”- Buddha.
Inequality is like water, a part of life, but may, because of the size of its gaps, become toxic.
Following the theme in the preamble to tcoss’ monumental paragraph 2, like inequality, the death of god may be a potential problem, but I honestly don’t know that to be true. One could ask the oracle, consult wikipedia, or, god knows, if god is willing, s/he could tell us the answer to the problem, if s/he hasn’t lost the faith and will (2) power to discover (or create, depending on your theology), or remember (god being possibly fairly old and hence is in a state of dementia, if it wasn’t genetic and there at brith) the truth.
One can consider all the counterfactual cases or problems—eg the fact that the allies won rather than lost ww2 may be a potential problem, but i honestly don’t really know that to be false. Indeed it may be ‘undecidable’ (Godel) unless you employ someone with an advanced Turing degree to serve as an oracle (eg S Kleene in math logic, 40’s (not S Keen);, Paul Cockshott woiuld argue such oracles cannot be automated if they exist at all, so its just speculation (a form of finance) and philosophy )
Its interesting that Tyler Cowan suggests lots of forces are involved in the inequality process (as termed by J Angle in J Math Sociology in the 80’s—e.g. http://www.asanet.org/footnotes/feb07/fn9.html ), and while i have no particular disregard for Cowan’s brilliance, this idea has been discussed before (so Tyler Cown should stick with his forte, writing restaruant guides and collecting money from the Koch brothers and Mercatus center—-both of these also possibly among the ‘potential forces’ involved in the inequality process) which i imagine he ignores in his ‘book’; or magnum opus while collecting his taxpayer funded salary at GMU to help fund his anti-tax the rich, anti-spend on the worthless poor because the money would be better spent on Tyler Cowan and other folks in law and econ at GMU . They will then show ‘average is over ‘ because averages won’t describe skewed income distributions well, and by printing this up in, say, Mises or Cato journal, they
can become above average in a self-reinforcing process.
Unlike the ‘peer reviewed journals’ which determine who and what gets published, and hence in part determine the distribution of income, obviously there should be no ‘referree’ or set of rules to deternmine what may fix a problem. If in a boxing fight, one person goes down, iy seems it would be better, rather than stipulate some arbitrary fix or rule to say, stop the fight’ after some point, just let the game freely play out. Plus, you dont need to pay for the refereee, rulemaker, or other Coasian transaction cost which most free market weconomists know are entirely trivial. As the inequality process deepends, one will realize noone needs rules once you,have rulers, oligarchs, etc. The question posed by the great martin luther ‘rodney’ king— why Kant we all get along? —the problem of inequality, is solved , since we are free at last , no money down. (A slave society is cashless, so it is identical to the ones promoted by communists and anarchists, the so-called gift economy, just as adam smith was a socialist—-freedom is lavery).
someone at Yale recently pointed out, using agent based simulations and polling, that ‘great art’ is often simply due to chance rather than merit (a point documented in hundreds of papers already, though Yale of course will get the credit for plagiarising, essentially, this insight) so ‘average is over’ and ‘mediocrity is the new normal’ since anyone with good PR can write books and get a noble prize. . .
In general, its hard to know what actually are potential problems, though perhaps the 10 commandments and shariah law or the golden rule, fleece,, goose. or bug (Edgar allen poe) may have some suggestions. Also, how many forces are there—4 according to the standard model of physics, or one al la TOE? Technology, skills, electricity, gravity? Doob, Snell, Kac and others have shown many problems are potential problems (eg browninan motion), so conceivably the social landscape can be desribed by a potential function, with tipping points whch jolt the system from one potential well (or metastable state, local equilibrium) to another.
I actually think the problem is the solution. And, that there are many potential problems, and hence solutions, , considering the infinite and transfinite counterfactual multiiverses. So, maybe we should (in the words of Mark Tegmark http://www.arxiv.org/abs/0709.4024 ). just ‘shut up and calculate’. Rather than trying to figure out how to get wage slaves to stay busy buying, selling, and producing, so the ‘owning class’ can get a slice off each transaction to add to their estate, people should try to figure out what is worth buying selling, and producing. Check out the landscape or potential, and see which is most attractive. (I’m in hawaii now and it has an attractive landscape though the fact that falling off the mountains is a continual issue one realizes to experience beauty you should aquire and use some intelligence because its wise not to be stupid), Maybe a fix would be to have a ‘universal right to be lazy’ (coined in prison by paul lafargue, marx’s son-in-law —who was why marx said ‘i am no marxist’) or simply take an agnostic nonjudgemental view and suggest that inequality is an inverse function, and laziness and work, merit and , valueless, problems and solutions, are the same tautological things.
You are running into the issue that has been well documented by Ariely and Norton. See http://harvardmagazine.com/2011/11/what-we-know-about-wealth and http://danariely.com/tag/wealth-inequality/
“Compassionate and good heart”:
http://www.slate.com/articles/life/culturebox/2014/02/dalai_lama_at_a_santa_fe_ski_resort_tells_waitress_the_meaning_of_life.single.html
Excessive debt (asset values) to GDP and wages is a perpetual debilitating claim to future after-tax real labor product and subsistence purchasing power of the bottom 90-99% imposed by the parasitic rentier top 0.01-0.1 to 1%.
No system can be sustained with a growing overwhelming majority share of low-to-high-entropy flows of resources, production, purchasing power, well-being, and political power flowing to the top 0.01-0.1% atop the hierarchy of power relations.
The bottom 99% cannot afford to sustain the wealth, privilege, and power of the top 0.1-1% AND subsist indefinitely.
The rentier-parasitic, winner-take-all, high-entropy system of natural and human capital exploitation and plunder cannot persist. The rentier Power Elite top 0.01-0.1% have no reason to care about the rest of the human ape population.
Peter:
Here is a post I just sent out to my readers on exactly what your are talking about: how an attempt to pass a minimum wage bill in Maryland runs afoul of the thinking of neoliberalism and its ideological hold on both parties, so that the price seems to be, if it will pass at all, bringing Maryland’s estate tax into line with the one the Republican Right pushed through in Congress a few years ago. If readers will further indulge me, I have an analysis at the PS mark which zooms in on another aspect of inequality: raising revenues in an upper middle class dominated legislature; I include the shocking fact of how few “services” are taxed in Maryland, and the ones that aren’t are the professional related ones, we are losing 1.6-2.2 billion per year by avoiding a confrontation with lawyers, accountants, financial consultants and so on….its directly relevant to the increase in the exemption in the estate tax because the state’s top legislative analyst has proclaimed substantial revenue losses by being “fair” to the wealthy (workers get 10.10 per hour when the wealthy triple or quadruple their threshold for starting the tax.) Here’s my commentary, right from the trenches”
MAKING MILLARD TYDINGS PROUD: ECONOMIC “JUSTICE” in ANNAPOLIS
February 27, 2014
Dear Citizens and Elected Officials:
As centrist Democrats fret about the possibility of a genuine left populism rising to challenge them, inside or outside the party, and members of the very top rungs of the financial elite express their feelings of persecution in national media outlets in very unsavory terms, I’ve been trying to follow the minimum wage debate here in Maryland, my home state for the past nine years. I will quickly confess my self interest in this matter, having written about the political economy extensively over the past seven years, and also from the more recent fact that I labor at that convenient borderline of 30 hours per week at $8.75 per hour for a Fortune 100 company. And that princely sum comes after 18 months on the job, winning an 11 cent per hour raise after my first year. Yes, I’m on my way back into the “Middle Class,” climbing the ladder of mobility rung by rung, cent by cent.
When I first began writing about the minimum wage two years ago, I noticed that the entire discussion, even among progressives, which is where it started, was only about making up for losses to inflation since that golden baseline year for labor, 1968, But wait a minute, I objected: whatever happened to the discussion of productivity, which was absolutely and obsessively insisted upon by all the right people in the economics profession and corporate management ever since the mid-1970’s. There could be only a downward escalator, or at best wage stagnation, unless productivity increased. Well, I said, here we are in 2014 after the microchip- computer, Internet and IT “revolution,” the marvels of American invention, the unravelling of the human genome…biotech!…and the “evolution” of the lean and networked international corporation and supply chain…as Thomas Frank wrote in 2000, we would all be in “One Market Under God”…and oh yes, after all those debt fueled corporate mergers which had, as we all know by wrote, only one motivation: to make business more …productive… by the wholesale slaughter – layoffs – of those bloated and despised – unproductive! – middle managers. So there are costs to “creative destruction,” high human costs and many other costs that Americans cannot squarely look in the eye.
Productivity there was, no doubt; now where was labor’s missing share, I asked Dean Baker and at the time I asked him he was just about ready to supply some numbers, the most prominent economist to courageously venture into this logical line of reasoning but explosive ideological minefield…really just picking up where our social betters had led us during the past three decades.
So economist Baker used two sets of conservative assumptions and came out with two numbers. Labor’s missing share of productivity would put a new and fair national minimum wage at between $16 and $21 dollars per hour – phased in gradually of course; no responsible advocate for these numbers could insist upon rapid implementation…certainly it could not be done the way millions were riffed from middle management in the 1990’s…here today, gone tomorrow. Separation stipend and clear out by 4:30. What color is your parachute? Since that time, other progressive economists have piled in, and readers can do much worse than read the New York Times lead editorial from February 8th, here at http://www.nytimes.com/2014/02/09/opinion/sunday/the-case-for-a-higher-minimum-wage.html?_r=0 which manages to reveal more than most of the liberal lobbying material reamed out by progressives.
The Times points out that “even a boost to $10.10 an hour by 2016 (also adjusted to 2013 dollars) would lift the minimum to just above its real value in 1968. So while it is better than no increase, it is hardly a raise.” The Times makes a case for $11.00 per hour while comparing today’s minimum to the “average” wage for non-supervisory production workers in the private sector. Then comes the shocker: “The problem is that the average wage, recently $20.39 an hour, has also stagnated over the past several decades, despite higher overall education levels for typical workers and despite big increases in labor productivity…If the average wage had kept pace with those productivity gains, it would be about $36 an hour today, and the minimum wage, at half the average, would be about $18.00.”
Well thank you, New York Times. I didn’t expect you to be filling me in on what Centrist and even Progressive Democrats have decided on their own to leave out, skipping the productivity considerations and focusing only on links to lost inflation factors and, of course, silently factoring in the unspoken political “realism.’ These tactics and decision making processes leave me suspicious that this is not going to be a “first step,” followed by many others to bring wages and the missing productivity gains into alignment with historical reality – and economic justice. No, I suspect the Democrats are going to try to do this $10.10 and then it won’t come up again for a decade and productivity can, well, be tossed into the dustbin of history. Unless management finds it again a convenient discussion to have.
This is not an argument to abandon the current minimum wage bills in Maryland(HB 295, SB 331) ,or nationally, please don’t misunderstand me. Millions of workers at the very bottom, at the bare minimum wage, can use any help they can get. But please, please, don’t delude yourself, Democrats, or us, that this figure is going to lift anyone out of poverty, where here in Montgomery County Maryland the County Council itself said a living wage for us was $17.00 per hour but only got a bill passed to get to $11.50 per hour by 2017, and having to give up the linkage to inflation to get that. And I didn’t detect much enthusiasm among the other council members for Councilman Marc Elrich’s bold and skillful tactics in getting it passed. And remember, even many more millions of the working poor are not at the bare minimum, they are earning somewhere between $8.00-$10.00 per hour – that is how EPI reached its astonishing figure of 28 million Americans working for $9.89 per hour or less.
President Obama, I don’t think the nation or your proposed policies include anything close to 28 million, or 14 million even, “ladders of opportunity.” So maybe we ought to put aside illusions of mass mobility and just make the pay and working conditions there “in place,” more humane.
But I am not finished. I have to be true to my own efforts in writing over the past seven years and the ignored and spurned work of many progressive economists like James Galbraith, L. Randall Wray, Thomas Palley and yes even Paul Krugman, who started out arguing for an array of greater stimulus programs, higher wages, direct governmental job creation programs built on infrastructure rehabilitation and expansion, combatting global warming, environmental restoration…and so on…a full array of programs that year by year were stripped off, pared down, whittled away by both the arrogance and intransigence of the Republican Right and the Democratic Centrist collaboration in neoliberal ideology…when the human needs were staring us all right in the face, screaming silently as people were tortured through the foreclosure process, thrown out of work or written off as too old or without the proper skills. So don’t try to convince me or anyone else that $10.10 is sufficient, adequate or some great humanitarian effort…it’s almost a bare skeleton…no not even that, just one bone from a fully human policy response to the great financial crisis.
So now let us pick up the scent on the trail of Maryland’s pursuit of $10.10 per hour, backed by all those national opinion polls as well, and the Maryland Governor, Martin O’Malley, a contender for the Democratic presidential nomination in 2016. In testimony given before a Maryland Senate Committee on February 17th, the Governor said this figure is actually “pretty modest.” Yes Governor, it certainly is; that’s the result of leaving out all labor’s share of the missing productivity gains. And ignoring most of what the New Deal did in the 1930’s to create full employment, however incomplete its success, and despite the opposition of Maryland’s famous, or infamous, Senator Millard Tydings, who opposed FDR’s New Deal.
But then, after the 17th, the Maryland trail goes cold. Even some Montgomery County Councilmembers are arguing that maybe it should just be left to Maryland counties; doubtless other legislators none too favorably disposed but reluctant to say it in public, will now argue that Maryland should wait to see if the federal government passes a $10.10 or $9.00 per hour bill. For one has to admit American federalism – that is, what layer of government will or should act – that it is not only the famous laboratory of democracy, but also a great stalling ground for insincere politicians. I kept Googling and looking at my incoming Emails after this initial hearing, and the trail of the bill was dying out; not even its advocacy groups were reporting anything. And then, growing even more curious, I found this alarming piece from the Executive Director of Progressive Maryland (Kate Planco Waybright) at David Moon’s Maryland Juice website:
http://www.marylandjuice.com/2014/02/guest-post-progressive-maryland-sounds.html
I was incredulous at first; then it began to make sense: the minimum wage bill was stalling, and in its place, accelerating – was a bill to change Maryland’s estate tax to mirror the one passed by the Republican Right a few years ago, changing Maryland’s threshold from one million to match the higher federal one – in year-by- year increments of tax break generosity.
And then we have the sponsors of these estate tax breaks bills, SB-602 and HB-739: Senate President Mike Miller, true salt of the earth, friend of the working man, friend of nature too, no doubt and no surprise…but his often times opponent, House Speaker Michael Busch…et tu Busch? , who always was spoken of as many steps to the left of Miller…or was it just several steps…or a baby step…and then the other names supporting it: Senators Jennie Forehand, Karen Montgomery, Brian Feldman…and on the House of Delegates side: Luiz Simmons, Jim Gilchrist, Anne Kaiser…Ana Sol Gutierrez… no, no this can’t be true, can it? But apparently it is. And I noticed an interesting pattern. Most of these surprising co-sponsors of additional tax breaks for the wealthy – and the loss of revenue for Maryland, because that’s what the state’s top legislative analyst projects – are also supporters of the minimum wage bill. If you can ignore 30 years of national economic history, I guess you could call that “fair and balanced” legislating.
Is this a coincidence, or are the Democrats signaling that this minor and in fact harmless gesture to their long forgotten New Deal base, the working class, is so threatening during this period of rising storm clouds on the left – are these Centrists and yes even progressives- listening to Ralph Nader, Gar Alperovitz and Chris Hedges on the Baltimore based RealNews Network, as I am? Are they so afraid of this minor humanitarian gesture to the working poor (and the unemployed can go and eat dandelions in a couple of months, can’t they?) that they have to counter-balance it with tax relief to the wealthiest among us?
Well citizens, I hope I am very, very wrong, but I have already gone out on a limb and predicted no minimum wage bill for Maryland, and passage of estate tax relief for the destitute in Potomac, with Maryland proudly living up to its new ranking as having the highest per capita ratio of millionaires in the nation. Please tell me I am wrong, because if it is true, then I fear for our country because this minimum gesture is just one small step in making up for thirty years of outrageous policy and unfairness towards the majority of our citizens in matters of economic justice – and decency
Once again, here is the link to Progressive Maryland’s posting; please use their tools to send in your outrage and protest now: http://www.marylandjuice.com/2014/02/guest-post-progressive-maryland-sounds.html
And, if you can make it tonight, February 27, at 7:00 pm, Meaningful Movies Olney is hosting a viewing of Robert Reich’s “Inequality For All,” in the Buffington Building Community Room, Olney Maryland. Here’s the link: http://hankandgina.com/drupal/
Best,
Bill Neil
Rockville, MD
PS
Because cutting estate taxes implies a loss of revenue, as certified by the official analysis of the fiscal impact of this bill, I thought I would include a little exercise in fiscal fact finding which I did back in 2008. It shows how much could be gained annually – $1.6-2.2 billion dollars – yes billions, by including currently untaxed services, especially professional services.
MAKING MD’S SALES TAX MORE PROGRESSIVE
Bill Neil
July 2008
In the complex budget maneuvering of 2007-2008, the Maryland Legislature chose to raise the sales tax from 5% to 6% with the expected revenue increase to be $687 million in FY 2009. Based on 2007 numbers, the MD sales tax raised 3.62 billion dollars, 27% of the state’s general revenue, second compared to the 7.04 billion and 52.4% raised by the personal income tax (and just $598 million and 4.5% raised by corporate income taxes) Although Governor O’Malley extended the services taxed to four new categories, it was not a very bold effort and ended up targeting a “weak lobbying link” – computer services – which then rallied to repeal its inclusion. The significant thing here was the potential revenue raised by just this one category of service: $207 million. It is suggestive of Maryland’s deeper failure, to extend the sales tax base from its 1947 starting point of taxing only tangible goods, to capture the vast changes since then in an economy which has become more and more service oriented.
National tax studies indicate about 168 categories of services which might be included in a sales tax – and Maryland taxes only 39 of them. In the fall of 2007, the Center on Budget and Policy Priorities proposed taxing services such as cable and satellite TV, auto repairs, interior decorating, pet grooming, and country club memberships, which they say would have raised an additional $163 million. The list again hints at the unwillingness to take on the tough lobbies and therefore the big numbers: accounting, engineering, legal services, advertising. As a matter of fact, I have been unable to find even studies which would tell us what each of these services would generate if included in the sales tax. The closest we have, using broader categories which don’t highlight these services, comes from the Puddester Commission from November of 2002: Its list of revenue to be raised by “Taxation of Services” reads as follows:
“Business Services” – 600-700 million
“Information Services” – 325-385 million
“Professional Services” – 200-260
“Transportation” – 200-250
“Financial Services” – 150-230
“Personal” – 75-115
“Repair Services” – 50-80
_______________
Total Revenue from taxing “these” services: $1.6-2.2 Billion
House Bill 448 from 2007 started to head down this path. It proposed 30 new services to be included under MD’s existing 5% sales tax, and the revenue generated would have been an additional $657 million – without raising the rate to 6%. A sampling of the new services in the bill: auto repair and services, parking, barber and beauty salons, docking and boat services, engineering, storage, (shoe repair!), tax preparation and locker and storage facilities…..personnel and temp. Agencies….the numbers raised on certain services are impressive: engineering: $82.8 million; personnel and temp. $65.7 million.
This leads me to the conclusion that Progressives should keep the impressive categories from House Bill 448, drop the silly ones like shoe repair, and add advertising, accounting, legal, management and p.r.
The obstacle is political: to get a legislature full of lawyers and accountants and sensitive to the lobbying power of the other big services named above (real estate-advertising), to even consider producing a study showing what the excluded services would raise in revenue. (Personal note: I’ve heard a high ranking state leader say these categories would never even be brought up, never put on the table, in answer to me directly raising the question in January of 2008).
Who has pushed in the Past: Progressive Maryland listed the same list as I have above from the Puddester Commission in their “Fiscal Crisis Briefing Book” from 2008, but it was near the end of a long document and did not seem to be a high priority.
Another Approach: There has been some discussion in Annapolis of enacting a Gross Receipts Tax, which 7 states have some variation of: Del., Kent., Mich., New Mexico, Ohio, Texas and Wash. – which functions almost like a sales tax on the purchasers of services as well as goods. Economists don’t like the pyramiding effect: many of our “hollowed out” business entities purchase accounting, advertising, etc. services from outside firms and each time they bought them, they would be hit by this tax…so this is a big obstacle…and progressives don’t seem too high on this approach, nor many economists. In a phone conversation I had with Neil Bergsman of the Maryland Budget and Tax Policy Institute (July 10) he favors, if we want to head down this route of taxing services, that the legislature bring all services under its sales tax – a kind of grand House Bill 448, and then enumerate which categories and exemptions it feels would be necessary to make it function well. I might add that part of the political trade-off in Annapolis might well be to reduce other corporate taxes if either this grand inclusion of services or the Gross Receipts Tax is enacted. Illinois considered the GRT approach – 1-2% would raise 6-8 billion…but it was not enacted.
Bill Neil
Rockville, MD
PS Although it’s very late in the current (March, 2011) budget negotiations in Maryland, another pathway which leads directly from the answer to the question “Where did the money go?” is that the maldistributions of the past 30 years can’t be reached by just taxing income, you have to look at the different forms and places where wealth is stored (and hidden). That leads to the consideration of a surcharge on wealth, broadly defined, not income. An obscure “redistributionist” named Donald Trump suggested that a few years ago, at the national level. His is not the greatest recommendation we can think of, but The Donald just might have some idea of where “it is stored.”
What you are bumping up against is this question … What is an economy? Are super predators amassing more currency digits than there is stuff to buy part of the economy?
Peter:
I hope I have not tried the patience of this blog by my own long posting – which I hope, ask, be viewed as a “dispatch” from the frontlines of struggle to correct inequality in the United States. But as I hope I have showed, the editorializing on the minimum wage which occurred on the left – the strange removal of centrality of “productivity” – shows it is very hard to just present the facts in a neutral way as the best method of winning over the undecided. I’m not going to let them bury all the preaching thrown at the workforce and everyone else over the “lean” decades about productivity just at the time it should be most relevant to raising wages dramatically to combat the inequality.
Now lets get to what is the heart your post, Peter the comment that “Once you get people to commit to allegiance to free markets you can more easily get them angry over massive inequality when they realize it represents a perversion of market magic..” Well, I wish this was true, but the blunt reality I see before my eyes at least -and I’ve had this debate with Dean Baker – is that the biggest champions of the market as a force for good are the biggest defenders of its supposedly fair outcomes – the current great inequality staring at all of us.
This reminds me a bit of the favorite phrase over on the American Right, I think Bill Buckley used it often and I’ve heard it recently, in regards to markets and a “free market economy” and it goes like “Christianity, properly understood,” or markets, “rightly understood.” Oh that’s a warning sign that these institutions, ideas, forces, do not speak for themselves, they and the outcomes have to have interpreters, who in turn have to be “rightly understood.”
So that you and Dean have to convince us that the greatest example of markets understood over historical time is how they played out in the history of American agriculture, which I would argue was, if we start in the 1820’s-1840’s, was the golden time of millions of small farm “firms” competing…we eventually got to the great revolt of the 1890’s and by the mid-twentieth century, the demise of farming as an broadly based factor in the economy (as opposed to a very productive one with huge offsetting externalities dumped upon the soil, water and air and energy “budgets.” ). Or we might consider another great advocate for the restoration of markets at a time when they were staring at the great concentration trend of the late Gilded Age, Woodrow Wilson, or, as Richard Hofstadter called him in his great biographical essay, “The Conservative as Liberal,” which nicely captures the inversion of the meaning of conservative and liberal as we moved from the 19th to the 20 century economies. So why, if markets were so wonderful – or easily maintained, does Hofstadter begin this biography with an epigraph – “The truth is, we are all caught in a great economic system which is heartless.” That sentence, which I can’t imagine any contemporary American leader uttering, came from Wilson’s book “The New Freedom,” which in turn was a collection of his speeches from the great campaign of 1912. In the book, which is still worth re-reading, Wilson said – and this helps explain the title and more than a little bit about the nature of the world that Wilson wanted to restore – that many small businessmen would come up to him with their complaints of the horrific practices used against them in the predatory world of business competition. They didn’t want to speak in public, and Wilson didn’t either about the specifics – so he described their great fear and the “horrors” of competition as practiced – in broader and more polite terms…and the epigraph hints at what the reality was.
My point is this, if it is not already clear. The nature of competition in markets is not pretty, and has an inherent tendency towards oligopoly and monopoly, and, more arguably, towards the elimination of labor (a tendency, not an absolute); we hope for great products, innovation and productivity from them, but there is a lot more that goes along with it. not the least of all the fact which Karl Polanyi clearly stated in his 1944 work, The Great Transformation, that if left to their own devices markets would tear society and nature to shreds. And, Peter, and Dean, if you want them as the central force in society, be prepared for a lot of interventions to keep the firm size “reasonable,” the labor practices fair, and the wealth not distributed the way it was in the Gilded Age, the 1920’s and today. Hmmm….anyone see a pattern here? Not the least of which it would take a substantial sized and interventionist government to keep a market based economy from evolving into what I see as its natural tendencies, so well captured in WW’s quote. (The NY times just ran an article about Silicon Valley successes in IT trying to collude to rig the markets for stealing top engineers…even the winningest firms – the fittest in free market competition, can’t live with the pure unadulterated market nature – they have to collude…a trend which the career and recommendations of Herbert Hoover in the 1920’s and early 1930’s ought to remind us of…as well as his failures..).
If markets rightly understood were what the US really wanted, its anti-trust history does not align the ideal with the actual practices.
May I add my own sense and comment to the work of Polanyi, to bring it up to date with the worship of small businesses in the US…which, if anyone, ought to, Peter, to share your view about markets “rightly understood,” are not the champions of a progressive Dean Baker view of the employment of markets to attain our economic goals, they tend to be the most anti-labor and anti-generous benefits and aligned ideologically with the most reactionary forces in society, as Jared Bernstein has noted. And if the day ever came when a part of the American Right got their wish, that everyone in society would be an entrepreneur, instead of the 15-20% which exist today (with much dispute as to the definition and actual numbers) – and if they all exhibited the psychological traits that they do today, the great intensity in their pursuit of the American Dream and the social and political sparks and heat that they throw off – then surely, in Polanyi’s terms – they would tear society to pieces, it would be unlivable….