Democrats & Liberals Archives

Capitalism Can Be Its Own Victim

The question raised by this case here is one of where some capitalists are more equal than others. The folks who invested in Nabors Industries most decidedly wanted to raise their shareholder value, but when a CEO gets paid more as the company’s fortunes tumble, then over a hundred million to leave the company, something is not right.

It's a bit of a vicious cycle, and it's sort of hardwired into us. You put an electrode into the pleasure centers of a person's brain, and just give them the ability to press it until they don't want to anymore, and you'll have an addict on your hands.

And soon, a dead addict. Fortunately, nature tends to route our pleasures and rewards through doing things like eating, surviving, having kids, and other helpful things. Ah, but human beings can abstract things away from the hoops nature would otherwise have us jump through, and so folks get into trouble.

And the trouble here? Well, the folks on the board of directors for many corporations are CEOs and executives themselves, so they're not opposed, really, to granting pay raises to fellow CEOs and executives, often in the name of being competitive. Which just means that they use the fact that they've given some guy over here more pay as an excuse to give somebody over there even more pay!

Ah, but that pay has to come from somewhere, doesn't it?

The conventional wisdom is that the captains of industry are all super-smart people who know better than the rest of us how to run things, and thus deserve every dollar that people are willing to give them to buy their services. Nice theory. Trouble is, the reality is that many corporations have gone down in flames, while the executives bail out with golden parachutes. And why not? If a person can make tons of money whether they succeed or not, whether the business prospers or not, whether they are honest with their clients or not, they'll do whatever is easiest for them.

And why shouldn't they? Like many of God's creatures, if you reward their behavior, they'll continue to do what makes them wealthy.

The funny thing about this approach to things is that many people sell this expedience as being the grittily realistic way of doing things, yet their other selling point, simultaneous to that, is that we should expect these folks, having been given more money, keeping more of that money, not having to be so accountable or so constrained, etc. to turn around and give people jobs, that is take on a cost, with no certainty of reward.

This after years of headlines dominated by outsourcing, offshoring, layoffs, and consultants brought in just so they can figure out who to fire. Why? Because if you cut labor costs, you can meet price/earnings ratio estimates, and your stock will go up.

Sense something a little funky there? Now while some rich folks are going to do something with their newly accumulated cash, you have to realize something: cash was already accumulating for them to begin with. By definition, being rich means you take in more than you have to spend to satisfy your needs. So why raise labor costs, especially in a bad economy, where nobody can expect a profit?

I'm not trying to talk businesses out of hiring here, this is what they're already saying to talk themselves out of hiring more people, despite the fact that they have more cash on hand than ever! Why is all that cash not being spent on creating jobs? Because at basis, businessmen are ill-advised to create jobs if they don't get a return on investment. That is, if they care about doing things in the first place, rather than just soaking up more wealth and pressing the lever attached to the pleasure centers of their brains.

Supply side theory on bringing this nation out of it current economic state is built on a huge misunderstanding of what motivates productive economic behavior. It says that if you provide people with a never-ending escalation of reward, regardless of what they do, you'll get the best leaders. Well, hate to break it to you, you've only gotten the best-paid. It says that if you relieve them of obligations, then they'll naturally gravitate towards doing the right thing, even if the things that aren't right often can be done at a greater profit. It says that if you let them keep more of what they've already accumulated, and then let the market alone decide what gets done, that in gratitude, these people will create jobs. Never mind that the market discourages growth in employment when there aren't enough people making enough money to generate the activity that would keep those people busy, their employers rolling in the profits. Never mind that the response of many of these supposedly altruistic souls, over the past few decades, has been to reward themselves by cutting labor and other costs in the business to the bone, even in the best of times.

In a normal business cycle, whatever imbalance that reduced profit and business would ease up, and folks would get back to business, positively correcting the negative correction that caused the whole recession to begin with. Only this time, the economic crisis caused a major problem in finance, such that the negative correction, in all its excess, remained stuck, not springing back with full elasticity. Long term, it's a problem for us.

I would prefer to let the system correct itself. I would also prefer that the system gets corrected, back to working at full potential, regardless of whether it does so by the means of my first preference. My sentiments about letting things happen "naturally" is that all too many times, it means letting a highly artificial, price-distorted situation endure, on the theory that letting this happen again and again is the way to find moderation. Never mind that this depends on the idea that markets seek or find one ideal, natural equilibrium.

What if markets don't? What if the market can get stuck for a long time in a state where it's not performing up to snuff, and rather than this being our only real choice, it's just some screwed up alternative we chose out of foolishness? How many times in the last few years have we had the opportunity to do better, and had it thrown away just so some could keep government the way it is, and enforce their idea of what's "natural?"

If we reward folks the way we do on Wall Street, and in corporate America, for what they're doing at the moment, we can easily get stuck in these positions where bad market conditions persist for years, both the ones that cause problems now, and those that cause problems in the future after fueling false growth. It's my belief that the policies that were enacted to encourage speculative froth in the housing markets and excessive easy credit in the Bush years were encouraged precisely to mask the weaknesses of an economy where manufacturing had been largely outsourced, and consumers were expected to spend more on stagnant wages. That's how Wall Street finance came to take up so much of the economy, and that's how their collapse became so much more devastating.

We encouraged an economy reliant on the vain promises of future gain, in its own way an insidious addiction for the average American. Because failures in credit mean that people pay more for products, the problem isn't just outstanding debt taking up income, but also future finance charges sucking it up on the other end. Finance, instead of acting in a symbiotic way with commerce to promote businesses that employ and act productively, has parasitically sucked the economy dry from both the supply side and the demand side. Wall Street has shaped an economy that seems intent on fitting the square peg of current cost into the round hole of reduced demand.

The average person now graduates to less hope of a job than their parents had. They have less hope of making themselves upwardly mobile. The luck and pluck fairy tales become a cruel joke for many, who thanks to market forces out of their control, see themselves slide deeper into poverty, rather than rise higher into prosperity. Our infrastructure ages, a legacy of generations that while not greater, certainly were more responsible, and longer term in their thinking. But even their creations can't last forever.

Hope exists, but not in the passive acceptance of what is. Hope is what OWS is looking for, really. I know folks make fun of it, but when we're talking hope here, we're talking a defiance of what some consider an inevitable defeat for the interests of the average person. We're talking people wanting to follow the example of their forebears and put finance and commerce back in the place of being part of what governs life in America, not the sum total.

I remember a time when it was taken for granted that we must think not merely in terms of financial benefit, but in terms of the consequences of our actions, where moral and health concerns had some precedence over dollars and cents bean-counting. We need to return to those kinds of values, where there were other dimensions, other facts taken into account than just the ones that would lead us to do something in the interests of some financier or CEO.

We need a system that's more wholly human, because only when we take needs and social obligations that have long been the root of law and order in our civilization and satisfy them as well in the mix can we get a system that isn't corroding our humanity and civility in the name of the benefit of the lucky few.

Posted by Stephen Daugherty at November 1, 2011 8:12 AM
Comments
Comment #331372

Re having less chance of a job than your parents - my father got his first job in 1939. We look back at that as a turnaround, but it must have been pretty inauspicious. With the forces of nazism/communism on the assent and the economy seeming to be going sideways.

I started my MBA in 1983, we had great hope because the Reagan reforms were starting to work, but we still had unemployment as high as today and the economy had been bad for about ten years.

Every time looks bad before it gets better and usually looks good before it goes bad.

You say that you don’t want to wait for the the economy to right itself. That implies that you know what to do to make it better. We know what didn’t work - Obama’s massive stimulus. Your plan is to do more of that.

It would be nice if we could improve the economy by wishing it so. It would be interesting if protests could create wealth.

RE OWS - please tell me specifically how they think they can create more jobs and make the economy work. I know what they say they want. It is what we all want. The question is how to arrive in that bright and happy state of affairs.

Maybe a first step would be to prevent big bonuses at institutions that have taken taxpayer money - oh sorry - this is not the Obama policy.

Posted by: C&J at November 2, 2011 6:11 AM
Comment #331373

C&J-
That first turnaround depended on a war which we piled up massive debt and created massive new employment opportunities to win. The second turnaround depended on the end of the austerity that both Carter and Reagan had imposed on the economy.

So what’s your party’s approach here to fixing the economy? Well, you’re going about the business of using austerity to head off inflation that doesn’t exist, and you won’t let Obama use debt financing now to create massive new employment opportunities.

I believe things can get better, but I’m not going out there and merely wishing for it, like you suggest I am. I’m in favor of actual, active measures.

As for that last part? I had the sense you might slip that in somewhere. Here’s the math: that amount that was paid to the GSE’s executives was about 12 million, in total. That’s divided between ten executive, who all met goals to gain those bonuses.

It’s about a hundred million less than one man got paid for failing to run a business well, and a fiftieth of the full fortune that man got paid over the course of his reputedly overpaid career.

More to the point, why did those guys get million dollar bonuses? Who set the tone of that compensation?

I think the straight answer would be that Fannie and Freddie got paid in line with what folks in the private market would get paid. If you think that’s excessive for taxpayers to foot the bill for, what about private investors who tend to have a lot less money to waste?

Should I count on your support for changing the general state of things, or were you just attacking Fannie and Freddie because of their status as a government sponsored operation? Is it better to be a taxpayer than a stockholder in this day and age?

Posted by: Stephen Daugherty at November 2, 2011 8:31 AM
Comment #331377

Stephen

I don’t think politics CAN fix the economy in the short term nor can it create sustainable prosperity directly.

This is the fundamental difference between us. You ask me to come up with a plan for something that I know cannot be done. Furthermore, most of the plans thought up to help the economy in the short term actually end up hindering long term success.

Government can and has the duty to create conditions for the people to create long-term prosperity. This means mostly fostering predictable change, protecting the rule of law, ensuring domestic tranquility, protecting us from foreign enemies and building & maintaining infrastructure too big for individuals in voluntary association to accomplish.

Government often fails to do these basics because it loses tracks of priorities. Politicians promise too much, some even believe their own promises. Their failed attempts to deliver perfect results as well as their political incentives prevent them from doing the good and needful things.

It is very exciting and politically profitable for a leader to promise to end poverty or bring equality, things he cannot accomplish. It is much less useful for a politician to rebuilt an obsolete water system. Which will an ambitious leader choose.

I love government. I say w/o irony that the American Federal government is one of the greatest and best inventions of mankind. But government must do its basic tasks and do them well. As with any individual, any firm or any organization at all, when they try to do too much, they end up doing nothing well. Worse, the emphasis of political leaders will almost always be short term.

My modest goal is to restore virtue to our Republic and the sense of restraint. We should do less than we think we can do and recognize that many wonderful goals just are not our business and/or the tools at our disposal are not appropriate to the job.

I made the choices based on those principals with the resources I control and advocate it with others. I find that as a leader and a manager that often when I do less, WE accomplish, more as others are empowered to use talents I don’t understand or about which I may be even unaware. I find this applies in my family, in firms and I am reasonably sure in government.

As individuals, we should seek excellence and we should help and try to get others to do the same, but we should not apply the coercive power of the state to accomplish our worthy goals. The tool is wrong.

Re payment - I dislike high pay for executives. But if a private firm does it, it is none of my business and if the firm is complying with applicable laws, it is none of the government’s business. I apply the principle of restraint. It is the responsibility of the owners. When it is taxpayer money, it becomes our business and those of the political leaders.

IMO - Obama - as president - has no business criticizing the legal activities of private firms or individuals. Obama - as president - has the duty to keep track of government run operations.

In typical craven political fashion, he has chosen to be “active” where he has no responsibility and little practical discretion to act and chosen to ignore the instances where he HAS a duty to act and where his actions could have fairly immediate practical effects.

So you cannot count on my support to change the general private compensation plans. I deplore what I consider a waste of money and will say that when asked. But it is not my business to try to coerce changes. If I am in the position of responsibility and power in particular situations, I will act. Otherwise, I apply the principle of restraint.

Posted by: C&J at November 2, 2011 9:10 AM
Comment #331383

I asked a teabagger: “If the customers stop coming through the door and currency doesn’t go into the cash register, does your house disappear into thin air?” His reply: “I don’t know what you’re talking about.” Would anybody understand me if I said capitalism is legalized thievery?
Prove me wrong on this. Question: What do you call capitalism that plays fair? Answer: Socialism. Now, all you good liberals can get all in a tizzy about the calcified mind set beginning to crack.

Posted by: Stephen Hines at November 2, 2011 11:27 AM
Comment #331384

Stephen

The joke about socialism is just silly. If you want to define socialism as fairness, you have the wrong definition but nobody will be against it.

Socialism requires government control or ownership of the means of production. Means of production, i.e. the things that directly create wealth. If you trust bureaucrats and politicians to make better choices than you or me, by all means go for socialism. Your confidence in politicians in touching and I have to wonder about your frame of reference.

But there is no historical reason to believe socialism is fairer. And people who advocated socialism, such as the National Socialist Workers Party in Germany or the various sorts of communism, or Hugo’s “Bolivarian” state tend to come to grief.

BTW - the cleverer joke about socialism and capitalism is what the revolutionary said to the guy in the crowd:

“Under capitalism, man exploits his fellow man, but after we establish socialism it will be the other way around.”

Posted by: C&J at November 2, 2011 12:04 PM
Comment #331389


A political party of today, who’s membership looks compellingly similar to the National Socialist Workers Party is the Republican Party.

Lower middle class workers (43% of the party membership), small businessmen, farmers, upper middle class, and wealth. That was the National Socialist Workers Party constituents.

Capitalism is exploitation, but it is a form of exploitation that is acceptable to a majority of the people a majority of the time.

When capital let’s it’s power go to it’s head, uses it’s power to exploit the system to the detriment of many, it will eventually be put back in it’s place within the society as a whole.

All, including those who disagree, should be thankful that we use the tax system, regulation, and social programs to temper capitalism rather than replacing it with socialism.

Posted by: jlw at November 2, 2011 2:11 PM
Comment #331391

jlw

So because the Republican Party represents, according to your figures, workers, small business people, farmers, upper middle class and wealthy people (sounds a lot like America, doesn’t it?) you compare it to Nazis.

Which of these groups do Democrats not represent? Which of these groups should not be represented by any mainstream party? What you have is a meaningless distinction.

Re socialism - having lived in former socialist countries recently freed from that tyranny and visited others still in the thrall of that bankrupt ideology, I can say w/o doubt that ANYTHING that can prevent its widespread adoption is the U.S. is a good thing.

I also point out - again and again - that if we brought together ten academic experts on socialism and capitalism in real life, we would get ten different definitions.The only consistent in socialism is that it requires that government own or control the means of production. The only consistent in free market is that most economic decisions must be made by individuals and firms. In real life, there has never been a system that has not had some of both. Only academics and pedants, overlapping groups really care about the purity of the definitions.

The better measure is the extent of free market. Heritage publishes a Index of Economic Freedom. I understand that many here hate Heritage, but you don’t have to love or believe them to read the list of places that leading conservatives consider more or less economically free. I got with those definitions.

Posted by: C&J at November 2, 2011 2:38 PM
Comment #331393

http://reason.com/archives/2011/11/02/you-want-more-equality-support

Not to mention, tales of runaway income disparity destroying the American middle class have been repeatedly debunked. James Pethokoukis at the American Enterprise Institute recently pointed out that new Congressional Budget Office “data show real median after-tax household income (half of all households have income below the median, and half have income above it) grew by 35 percent over the past three decades.” Over the past half-century, in fact, the wages of the middle class have captured a remarkably consistent share of gross domestic product. And the most important fact that eludes protesters and progressives is that the poorest 5 percent of Americans are still richer than nearly 70 percent of the world—with a lot more opportunity to change that situation.

What we should be worrying about is economic mobility. And we do well there, too. A 2007 Treasury Department study showed that 58 percent of households that were in the bottom quintile in 1996 moved to a higher level by 2005, and of households in the top 1 percent during the same time, more than 57 percent dropped to a lower income group. And Reason Foundation Senior Analyst Shikha Dalmia recently pointed to a study by the University of Chicago’s Steven Kaplan that “shows that, despite government bailouts, in 2008 and 2009 the adjusted gross income of the top 1 percent—a disproportionate number of whom work in the financial industry—fell to 1997 levels.”

You will notice that the Occupy Wall Street crowds—and the progressives who support them—focus on bringing the wealthy down to earth rather than lifting the 99 percent. They have a nearly religious belief that too much wealth is fundamentally immoral and unhealthy for society. The economic systems they cheer on would coerce downward mobility for the sake of equality but ignore prosperity for the people they claim to represent.

Posted by: Rhinehold at November 2, 2011 4:11 PM
Comment #331394

Rhinehold

Our leftist friends always do such things.

Envy is a very powerful emotion. But people don’t like to admit it, so they call it justice.

Their worldwide is also just obsolete. In their minds, there are oppressed peasants and lord living off their work. In our modern world it is more likely the poor doing nothing living off the work of the richer people. In short the poor are not poor because the rich take too much (as was the case in the past) but the poor are less poor than they would be because the rich have created more wealth.

I personally don’t like vast wealth, but it is not our business to tell others what to do.

What I am afraid of is the fact that a large and growing number of Americans pay no taxes but enjoy the fruits of our great country. In the past, the poor used to do other useful things like serve in the military, but they do that not so much anymore. It is the old Roman mob, seeking bread and circuses.

I know this formulation insults our liberal brothers and sisters. But consider the OWS crowd. I could not get enough time off work to hang around there for weeks. Those who have such time on their hands either don’t work and are living off the public or have enough money that they don’t have to work. Either way, they don’t work.

What we have now is the revolt of the non-working (but feeling entitled) class.

Posted by: C&J at November 2, 2011 5:49 PM
Comment #331395

C&J-
National Socialism is to actual socialism what the People’s Republic of China is to real Republics. People come up with neat little names to market their movements, but that doesn’t necessarily tell you the actual chacter of the government. After all, both East Germany and West Germany called themselves Republics, and only one of them actually fit the bill. Hell, East Germany even called itself a Democratic Republic! That didn’t make it a thing like our country, which could properly be described as a Democratic Republic.

Don’t get distracted by labels.

Here’s what I’d say about socialism: there’s merit in anti-poverty, healthcare in normal times and direct job creation programs in times of economic crisis, but there are many parts of our economy that I feel are too complex and dependent on fine-grained behavior to be fully governed by a set of laws and regulations.

Which is not to say that no laws or regulations should be applied. What I would say is that laws should be set to optimize the functions of the markets in those cases, prevent manipulations that exploit the weaknesses of consumers, investors, debt-holders and others involved in the economy. Just as a cowboy doesn’t have to deal with every individual cow all the time, regulators don’t have to anticipate every economic agent’s individual behavior, if they properly shape behavior on a macroeconomic behavior, and don’t let certain behaviors slip by.

You want to force the rest of us to live with less regulation and less accountability from the top than we feel is safe. Well, you might win for some time, but if things continue to be bad, and we’re hit with on economic problem after another, what you’re going to see eventually is a breaking point beyond which people decide that they’re going to do something about the misbehavior of the markets.

If you anticipate that with a reform, you can head off the stronger brew of socialism. If you don’t, folks are going to go for it because they’re so sick of the consequences of cutting Wall Street slack that they’ve got no mercy left for it, even if it’s not ideal for growth. Capitalism only survives if patience remains for capitalists, if those people can fail and not take the rest of us with them.

As for your last comment? Please, it looks like you’re going to exhaust yourself trying to charm liberals on this subject!

You know, there’s this thing called vacation time, and some folks have obviously chosen to use it to protest. Now, you can belittle them all you want, but it won’t get you any closer to answering people’s frustrations from your political vantage point. It’ll just make you look more the elitist bad guy they want you to play.

Rhinehold-
His argument is bunk. Many people in the OWS movement also support unions and living wages. They support programs that get more people employed, and improve their compensation. It’s just a cute phrase he whips out in order to generate sympathy for the one percent he’s trying to defend.

The top one percent’s income may have fell, but it not only quickly rebounded, but it’s grown where the income of the other 99% have not in the aftermath of that crash.

Wages, even before then, remained stagnant, requiring more and more people to depend on credit to get by. My family didn’t use much credit over the last couple decades, and let me tell you, it’s not easy to do things cash and carry in today’s society.

But worse, now, credit isn’t what it used to be. It’s a correction, but the malignant kind of correction that creates slack in an economy, and unemployment that punishes good, hard working people with idleness.

And you know what? If the top 99% hadn’t gotten so greedy, hadn’t succeeded in shedding so many constraints that would have kept the consequences of their risky behavior contained, we wouldn’t have been in this position.

Posted by: Stephen Daugherty at November 2, 2011 6:16 PM
Comment #331396

“The top one percent’s income may have fell, but it not only quickly rebounded, but it’s grown where the income of the other 99% have not in the aftermath of that crash.”

Stephen,

Excellent point. The effect of the Great Recession has been to increase the wealth inequality gap not reduce it. The rebound in the stock market post crash benefited who? The policies of the Fed benefited who? http://business.gather.com/viewArticle.action?articleId=281474978336962

Posted by: Rich at November 2, 2011 6:30 PM
Comment #331397

Stephen

The National Socialist Workers’ Party believed that government should own or control the major means of production. They heavily regulated the market and chose winners and losers in a really big way.

IT was a nasty thing, but it was definitely a species of socialism, is communism and those “people’s republics” you talk about.

I like most of what you say in the couple of paragraphs after, however. Definitions are not always useful in real world politics.

RE vacation time - I don’t get that much or actually I am too busy to take all the vacation that I am entitled to take. How long has the OWS been going on? I just couldn’t take off that much time. The same goes double for active students, BTW. If you are taking a reasonably rigorous course load, you certainly cannot afford to take off even a week in mid-semester.

So my conclusion is that anybody who has been hanging around for more than a week is not very busy and probably not gainfully employed. I suppose you could argue that the chronically unemployed are justifiably the core of the protestors, but even in that case, I think they should be looking for jobs.

My son just got a job waiting tables at Silver Dinner. He previously had a good job as an intern and he is going to school, so he was unenthusiastic about taking a job in the food service industry, where he make less money and has to take more crap, but I am proud that he is working.

I can afford to support him totally, BTW, but I don’t. It is better if he works. But I figure that if he can find a job, so can others. I worked at McDonald’s when I was young. And with my newly minted MA in history I had a job for a while stuffing newspapers where my immediate supervisor was an illegal alien. Times can be tough but we improvise, adapt and overcome and end up better than before, or at least a little more humble and wiser.

Posted by: C&J at November 2, 2011 7:47 PM
Comment #331398

SD continues to write about his fantasy…that is, if we don’t have more socialism we will have nothing but socialism by virtue of some sort of revolution. For him, it has to be one or the other.

It’s quite evident to me, from his past comments, that he isn’t really in favor of true socialism, but rather…just enough to make him, and his like minded friends, more comfortable with someone else’s money.

They refer to public works, police, fire departments, schools, roads, and…Social Security, Medicare, Medicaid and such as socialism lite. However, that is not enough for them.

They reason, I am quite confident, that since they see these as such a great boon to our citizens, we must have more such programs.

To get more socialistic programs requires more money, not only to sustain those that are already deep in the red, but new ones as well. It is only logical that the money must come from those who have it…for now, that being anyone earning over $200K per year or, who have assets exceeding what they believe is proper.

Those who can’t compete in a fair manner by obtaining an education that produces skills someone will actually pay to employ, or are too lazy, doped up, or convinced that they are owed something, look to socialism for their salvation.

It is silly beyond imagination that some believe that anyone owes them anything. Yet, they all clamor for a mouth at the government teat regardless of the inability of the cow to feed more than her own calves. When the cow runs dry of milk, these vultures will devour the cow.

Posted by: Royal Flush at November 2, 2011 7:52 PM
Comment #331399

Following up on Rhinehold’s comment about inequality, there is a great chart about the Ginni index. For those unfamiliar with this, the Ginni index is a measure of inequality used worldwide for many years.

As you can see on the chart, the Index has hardly changed in the last fifteen years. In fact, the index for individuals has gone DOWN (i.e. become more equal) a little since 1994.

http://politicalcalculations.blogspot.com/2011/10/real-story-behind-rising-us-income.html

The individual index is the one that shows economic results, i.e. income for jobs, investments etc.

The index for families is a bit lower than for individuals, because high income for one earner is often diluted by lower earnings for others or kids w/o outside income. This has gone up a little. But this measures also societal changes and behaviors.

This is a potential problem but very hard to address. It is caused by people associating and marrying people more like themselves and by more opportunities for women in the workplace. How does this work?

A single wage earner in a family of four who makes $100k a year will not be that far in real money from a single wage earner in a family of four who earns $50k.

But if both the husband and wife make good money as opposed to both the husband and wife making smaller money, it starts to matter.

Two wage earners in the same family making $100k each means a family income of $200k. Two earners making $50K is $100k. It is still the same ratio but having 100K more gives you a lot more discretionary income than $50k.

Rich households also tend to have more wage earners than poor ones and kids tend to resemble their parents in both talents and habits. So this inequality is going to get more pronounced due to social reasons, mostly unrelated to economy. The only possible solution would be to make rich/smart people marry/associate with poor/dumb ones to even out results. I don’t think we would like that.

Posted by: C&J at November 2, 2011 8:18 PM
Comment #331400

Royal Flush,

The reason that we “socialize” certain services is because it is the most efficient way of funding and maintaining essential services. It is as simple as that. It is the best business decision.

It doesn’t mean that more money must be “taxed” to provide the services. In many instances, it is the best method for getting a bigger bang for the same buck. Money currently spent is reallocated through a more efficient mechanism of expenditure.

Health care is a prime example. As a nation, we spend almost twice as much per capita as any other industrialized nation for health care. Yet, we have huge gaps in coverage, our health care outcomes are middling and the method of financing, i.e., employer group coverage, reduces our business competitiveness.

So, why wouldn’t we do what all of our competitors have done and implement a scheme of universal coverage using the financing methods found effective for the rest of the industrialized world? It wouldn’t cost any more. Indeed, it would reduce our costs along with the peace of mind of assured coverage. Our businesses would become more competitive. Are we just stupid or so blindly arrogant that we can’t bring ourselves to admit that somebody else may have invented a better mouse trap?


Posted by: Rich at November 2, 2011 8:58 PM
Comment #331401

C&J
What’s in a name? What’s in a label? All you have to do is look at the people screaming things like, too liberal, Obama is a socialist, creeping commies, etc., etc. Look at ‘em. See anything familiar? The moneyed elite are looking at this exchange and laughing their asses off.

Posted by: Stephen Hines at November 2, 2011 9:03 PM
Comment #331402

Rich

I lived in Scandinavia. I was in the hospital there. One of my sons was born there. I like the Scandinavian health system but I don’t think we could easily bring it to the U.S. because Americans demand too much and many are crybabies. In Norway, if you have a bad knee, they give you a cane. They don’t have those electric chairs, nor can you expect fast service on elective procedures. People live longer because they have better habits than most of us do. There are few really fat people in Norway. And lifestyle related sickness is the biggest growth for us.

So if you can convince Americans to accept the type of care they get under socialized medicine, I would support its introduction.

We have managed to create the worst of all possible systems. We have individual rights and usually somebody else paying, so demand will always exceed supply. In addition, we have added lawyers. It is a horrible system, but Obama reforms don’t address the core problems. They just add another layer of payers.

Oh yeah, you have to respect those Viking descendents. When I went in for a root canal, the dentist seriously asked if I wanted novacane. He said it wouldn’t take very long and many of his patients didn’t bother. He mildly ridiculed me when I took the baby way out and insisted on the pain killer. Would that Americans were that tough.

Posted by: C&J at November 2, 2011 9:11 PM
Comment #331404

C&J-
Their presentation of the Gini index is misleading.

For one thing, the top one percent have gone from having 8% of the wealth in this country, to having 17%. But it gets worse:

But the Gini index actually shows that the United States is doing very poorly on the income inequality scale. According to the CIA, the United States ranks 39 out of 135 nations plus the European Union, with a Gini score of 45.0. To put that in perspective, according to Gini indexing only 38 nations suffer more economic inequality then the U.S, putting America in the same ballpark with the likes of Cameroon and Bulgaria. And like the CBO report, Gini details growing economic inequality within the U.S., as the Gini coefficient was 40.8 in 1997.

Or, put another way, there’s 97 other countries that distribute their income more fairly than us. It’s not a myth.

Concerning the Nazis? I think the confusion might come from the fact that many people identify Socialism merely in Marxist-Leninist terms, when actually, the term has also been associated with other groups who identify with creating greater fairness in the economy, or with carrying out a certain kind of social agenda.

You can have Christian Socialists, as well as Marxist socialists. It might do you some good to recall that the other kinds of socialists and the communists themselves were in fact one of the favorite targets of the Nazis. If you doubt me, you’re free to recall who they blamed the Reichstag fire on.

Royal Flush-
I’m merely saying that if you don’t take care of the problem, and if you’re successful in preventing us from taking care of the problem, people will be a lot less reasonable when they reach their breaking point.

In fact, reasonably speaking, they’ve already reached a breaking point. That Obama could more or less get away with what he’s already done is part of what’s scaring you. You know that there is now a demand for the government to go in and level the playing field, not to to mention demand for holding those who got us into this mess accountable.

You tried to ride the wave with the Tea Party, but your tea party folks proved to be too strong a brew, in a direction people didn’t elect you to go.

Our situation here isn’t a product of people being lazy or stupid, it’s a product of a system that was both designed to rely on the disposable and not so disposable income of the Middle Class, and at the same time squeeze said income to prevent labor costs from rising. There’s only one way to create growth from that kind of system, and that’s debt. But debt eventually catches up to us. What makes that reckoning worse now is that Wall Street took the precious free market freedoms you gave them, and created a God-awful mess out of it.

Now they want everything they insured didn’t develop naturally, to unwind itself naturally, so they can get the maximum payout they were foolish enough to expect out of people saddled with greater and greater economic problems.

That’s not sustainable. Circulation in the body economic needs to improve. There’s no use in keeping blood going to the core and the the brains, if the limbs are rotting away, poisoning the blood. Greater economic equality isn’t just about some vague sense of fairness, it’s about enabling people to be the consumers we want them to be and need them to be.

Posted by: Stephen Daugherty at November 2, 2011 9:42 PM
Comment #331411

Stephen

I feel your pain. Remember all those people yelling that Bush was a fascist or all those people who called the Tea Party racist?

Stephen

Re Gini - you assume that greater equality is a necessarily a good thing. It depends on what is happening. If two people are doing very different things and making different contributions, equality would be an indication of indifference or injustice. But this is a different discussion.

The thing we are talking about here is trends. The standard argument made today is that inequality has INCREASED. This is not true. The Gini index in the U.S. has been stable since 1947, when they started to figure it.

Re socialism - the big problem is people don’t know what they heck they are talking about. If you ask demonstrators at OWS what they want, they might want to change “capitalism” but they have not thought much about the modalities of doing that or what would be the next steps.

We had the joke above that capitalism with fairness is socialism. Lots of people just think in those simplistic terms.

In my experience, many people just think socialism is more equality, with they - against simplistically - think is “fair”.

The problem is that we live in a very complex system, in which information and incentives are difficult to control. We have seen with experience in Eastern Europe, inhabited by very intelligent and organized people, BTW, that “socialist” systems collapse principally on the basis of their inability to aggregate information and make decisions. The oppressive parts of socialism are what we see. The real weakness is mostly technical.

This is what makes it so hard. Most of the youngish people demonstrating just don’t have the background or experience to understand this and - besides - it is pretty prosaic and boring. IMO, that is why we have the old saying that if you are not a communist/socialist when you are 20, you have no heart, but if you are still a communist/socialist when you are 40 you have no brain.

Re Nazis, communists and other socialists - They are all heresies of the same religion. Like heretics, they hate each other more than they hate others, but their basic ideas and practices are similar. They all believe in the primacy of the state in making decisions. They all believe the market should be managed and that the means of production should be owned or controlled by the state, and most of them end up oppressing and killing people, since most people will not get with the socialist program.

Posted by: C&J at November 3, 2011 5:31 AM
Comment #331414

C&J-
The increase in income and wealth inequality is real, judging by real world statistics. You’re presenting me with this abstraction that claims otherwise. I trust the first order evidence over the second. You can really screw up with a Gini Coefficient if you don’t put the brackets together right.

More to the point, the coefficient is telling us our economy is especially inequitable in its income distribution, and the effects of that, lack of upward mobility, more people in poverty, higher debts in the lower class, growth in income that favors the rich, etc, are visible expressions of that inequality.

A system like ours is complex, but many complex things are made of simple, understandable parts. Together, things are not necessarily predictable in the absolute sense, but they have their regularities. If some folks read past the first few chapters of books on chaos theory, they might find that out.

Don’t keep up this charade of equating the Nazis and the Commies together. They really are different political ideologies, wrong for different reasons. They may share a few qualities in common, but they had very different ideas about how to run a country. I know it works to your advantage if you don’t have to make a separate slanderous accusation in order to further define the left as being politically undesirable, but ****canning historical accuracy for the sake of such defamation would be a joke if the consequences of forgetting histories lessons and confusing them weren’t so grave.

I believe in a composite system, where we recognize that if a pure free market system was viable, we wouldn’t have discarded it long ago. Government isn’t an inherent evil, it’s what people have to do to avoid stepping on each other’s toes, and to deal with the arguments that transpire when folks inevitably do

The Market is unable to completely govern itself. Like any human system, it will develop its share of corrupt members, whose competitive advantage might draw others to follow suit in gaming the system. Only through the external application of law, as well as the working of market forces, can the market see order.

There’s a strained desperation to free market policy today that you’d be better off without. The truth is, yours would not be the first theory to fail to fully explain and guide proper conduct in the economy. Theories in such confounded real world situations are less laws of nature, and more schools of thought on things, and though the real world outcomes can give some clue to the quality of such ideas, there’s no way to figure out absolute laws like you can in physics.

The Libertarian Theory of Free Markets cannot be the only ideas we have about how the markets work. It has already proven flawed in its predictions. We need to be less concerned with absolute consistency, and more concerned with getting things pragmatically right.

Posted by: Stephen Daugherty at November 3, 2011 8:37 AM
Comment #331416

“The standard argument made today is that inequality has INCREASED. This is not true. The Gini index in the U.S. has been stable since 1947, when they started to figure it.”

C&J,

Not according to most researchers. The Gini ratio actually declined from 1947 to the late 60’s when it began to climb. From the Federal Reserve Board of San Francisco “In terms of the Gini index, the distribution of income among American families tended to become more equal in the two decades after World War II. Between 1947 and 1968, the Gini index declined about 7 percent. However, inequality has been rising since 1968, and the Gini index surpassed its 1947 level in the early 1980s.”

“Since the Census Bureau started measuring the Gini coefficient in 1967, it has risen by 20% for full-time workers and 18% for households. Among households, the index has risen from 39.7 to 46.9,[45] from 31.4 to 42.4 among men and from 29.8 to 35.7 among women.” http://www.republicansagenda.com/income_inequality_in_the_united_states/encyclopedia.htm

Posted by: Rich at November 3, 2011 10:11 AM
Comment #331420

C&J
When I yammered about Socialism I had just been recently hypnotized into believing I was a Zen Marxist. Today my imaginary therapist rocked a watch on a chain and said, “You are a Social Democrat.” So, today I’m a Social Democrat. I’ll try and find out what it takes to become a Democratic Socialist. He’ll probably tell me I’m not ready for that yet. Noam Chomsky’s been accused of being a Libertarian/Communist, but if he says he’s still an Anarchist I’ll believe him.
Here’s one thing we do know: The Malevolent Overlords want us to think about Debt, Deficit and Austerity. My only answer is this: Who do you think you’re trying to fool with that insane perception? Here’s one. Vacant housing, homeless families-who’s going to look at that and say, “Completely insane.” You? Me? Who? 99% of the Occupy Movement? Can we try and define morality? No. Too dangerous, but to who?

Posted by: Stephen Hines at November 3, 2011 11:24 AM
Comment #331451

Stephen

“More to the point, the coefficient is telling us our economy is especially inequitable in its income distribution, and the effects of that, lack of upward mobility, more people in poverty, higher debts in the lower class, growth in income that favors the rich, etc, are visible expressions of that inequality.”

The numbers tell us that income distribution is uneven. It says nothing about upward mobility. You could substitute all the rich people for all the poor people every year and it would not change. It also says nothing about higher debt, or income changes. It DOES say that the income growth has not created greater inequality.

Re Nazis and communists – I will NOT stop putting them in the same category because they belong in the same category. THEY tell us they are different and opposite. They are lying. In fact, If both communists and Nazis agree, it is nearly a prima facie case that it is not true.

The run their countries in very similar fashion. The difference being the justification they give for putting into concentration camps or killing them

Both use the state as their instrument to bring about revolutionary social change. Both identify groups who are enemies of the new order and must be dealt with by force. Both make group membership immutable. Both get lots of people killed and neither has much respect for an independent rule of law nor allows the growth of free markets or any significant group that is outside the state control. They sound like the same guys, don’t they? Because they are.

Re free market – As i keep on explaining – a free market requires government; it requires the rule of law. Serious people do not advocate the elimination of government. There is no pure “capitalism” and nobody wants such a thing. Capitalism is usually defined by its opponents, who set up a straw man they can knock down.

“The truth is, yours would not be the first theory to fail to fully explain and guide proper conduct in the economy.” – I don’t have a theory to fully explain the economy. I KNOW that such a theory is impossible, so we have to go with practice and experiments. That IS the free market theory. It is a process NOT a plan. Marxists have comprehensive plans. Nazis have comprehensive plans. We are tôo smart for that.

Rich

Your statistics are very interesting. If the Gini coefficient is really as low as you report, we have a very equal society.

Posted by: C&J at November 3, 2011 7:07 PM
Comment #331453

“Your statistics are very interesting. If the Gini coefficient is really as low as you report, we have a very equal society.”

C&J,

Statistics will vary. But regardless of the method, it is clear that the US has one of the highest Gini ratios of any industrialized nation and that it has been rising in recent decades after falling in the post war years. The most significant rise in the Gini ratio occurred in the 70s and 80s and essentially leveled off thereafter. This phenomena is different that most other industrialized nations which have not experienced this rise in inequality despite increased national income and wealth.

Posted by: Rich at November 3, 2011 7:41 PM
Comment #331461

Rich

Why do we assume that inequality is a bad thing? Or something that should be changed?

You mention the 1970s. In the 1970s, I was in the lowest quintile of income. Today I am in the top 5%. IN a few years, I bet I will drop back down to someplace around the middle. I really don’t think it would have been fair or good to pay the young me as much as they pay the me today and it won’t be good or fair to pay the old me as much as they pay the current me.

In Europe, I would probably have made a little more in my first job and I would probably not had the student loan debt. On the other hand, I would probably make less now.

Equality, per se, is not a good thing.

Posted by: C&J at November 3, 2011 9:41 PM
Comment #331629

ABC News: 1 Million People Move Their Money; Banks Hiking Fees Again

Posted by: Adrienne at November 7, 2011 12:54 PM
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