Natalia,
At 20:54 21/04/2012, you wrote:
(N) One could say that every single penny
(except in Canada, where, with the penny being
phased out, it's been said that Harper has left
the country without a single cent) counts
towards jobs, even if it's paid out to rent,
utilities, or beer. or short selling that only gives the broker their fee.
(K) When I wrote that a portion of a rich
person's income goes into investment (and thus
creates jobs) it doesn't mean to say that the
investment is successful, either on its own
account or for the sake of the wider job market.
If a particular investment is a failure, the net
effect is wasteful, as are many activities, such
as those you mention above (as also is warfare,
for example). However, although total economic
value has gone down, the money that's been
involved in failures and wasteful activities
still exists, so the overall effect is
inflationary. This is only neutralised if enough
new successful businesses are contemporaneously
started in which the efficiency gains (that is,
the profits) need the use of the otherwise
potentially-inflationary banknotes. Ideally, the
net result should be zero in due course.
(N) The point was that the corporations are
claiming that they, above the rest, deserve tax
exemption because they create jobs and economic
stimulus--which is seriously questionable. Let's
just take one obvious example--the financial
sector. They are listed amongst the most
lucrative, with profits now into the trillions
annually. They have all let staff go, been
involved in other job-loss activities for which
the public have bailed them out to the tune of
trillions, and reap the biggest profits through
transactions that do nothing for the economy at
large, and if anything, simply add to the
overall defeat of public wealth. Their pennies
are used quite differently from those of working
folk, whose bulk of funds goes directly into the
economy, and unlike wage earnings, have special
status attached to them which the public is
forced to protect from devaluation, supposedly
for their own benefit. The public pennies lost
to high rents or inflated goods are lost forever.
(K) Yes, you're absolutely right -- as I've tried
to explain above. Special tax exemptions to
businesses, tariff protection and monopolistic
favours (e.g. the sugar industry) are the enemy
of an efficient economy, as Adam Smith said
repeatedly in his Wealth of Nations. (He may be
laughed at by some these days for his
weird-sounding "hidden hand" metaphor but he was
dead right concerning the actual practises of his
day [and ours, too].) But just to be pernickety
concerning your last sentence ("The public
pennies lost to high rents or inflated goods are
lost forever.") They're not lost in a physical
sense. They still continue and consequently
inflate the money supply. This is the main
penalty of the privileges that are given to many
businesses that are able to lobby at a high
level. The immediate grants to business (to its
directors, shareholders and workers) enables
products to be made more inefficiently than they
could be, thus causing price rises to a much
wider band of customers. The price rise of one
particular product might only be small but there
are many privileges going on at any one time and
the total effect is inflationary in the shopping
basket. It's impossible for countrywide customers
to organise a counter-lobby in the case of every product.
(N) From a letter posted at:
<http://buildingmarkets.org/blogs/afghanistan/2012/01/31/wealth-creation-no-longer-creates-jobs-unemployment-sucks/>http://buildingmarkets.org/blogs/afghanistan/2012/01/31/wealth-creation-no-longer-creates-jobs-unemployment-sucks/
Phil Colgan says:
<http://buildingmarkets.org/blogs/afghanistan/2012/01/31/wealth-creation-no-longer-creates-jobs-unemployment-sucks/comment-page-1/#comment-8017>February
9, 2012 at 2:15 pm
(snip)
Last night Lord Levene, the former chairman of
Lloyds insurance market (who did a good deal to
restore its reputation and its finances) in a
speech to the Worshipful Company of International Bankers, said:
If we examine the business model of many of the
largest financial institutions operating today,
you will find that a large part of their
operations, are concerned with trading with each
other in financial products that operate
virtually in a closed loop and are not relevant in the wider economy.
Where activity in banks is completely
disconnected from the real world, then
ultimately it will create no value except for
those people involved in it. It potentially
destroys value elsewhere, and the whole thing
crashes. The wrong people make off with the
money. We have, sadly, seen plenty of evidence of this over the past few years.
So, part of our responsibility, as an industry,
is to ensure that all our activities connect to
the real economy. Banks should be there to
provide services, not to be self-serving.
Too many financial transactions are essentially
just bets (and hugely complex wagers at that) by
banks for their own gain (or taxpayers bailouts
when the bets go wrong as weve seen), rather
than genuine attempts to serve businesses and
households who make up the economy as a whole.
(snip)
(K) Yes.
(N) Regarding philanthropy, you can only say few
billionaires are giving at a rate much higher
than the average person. Take away Buffett's
gifts, and the average rate of billionaire
charitable donations is 0.5-1% of net worth.
Carnegie was exceptional, giving away about 78%
of his $10.3b. The reason most others are not so
giving is because they love money above all
else, and the power that comes with it.
(K) Yes, it's the power (status). Money is the
preponderant means towards it. There are some
individuals who are so expert in their own sphere
that they gain status automatically (even from
the wider world in some cases) without needing
much by way of money. But, given an elite
education, social contacts who have capital and
the right opportunities, individuals of quite
ordinary abilities can become very rich indeed
via business. They are bound to "love" money, if
you like, because it's their only access to high social status.
(N) Most are just as insecure as the rest of us.
(K) Now that happiness is becoming a sort of
science and increasingly investigated by
economists and neuroscientists, we are now
learning that happiness is more like one's
position on a "thermostat" moving up and down
around a mean position. It's a relational state
of mind. Except for individuals at the extremes
of wealth or poverty most people adjust to a mean
position (as measure on opinion polls) most of
the time. It can't be proved to be the same for
all in the same way that the "blue" I see in my
visual brain is the same blue that you see in
yours, but we can say that the potential for
happiness is equal for most in a practical sense
given an adequacy of secure income and their own social circle.
(N) Gates, who gives primarily to his own
tax-sheltered foundation of, in the estimate of
many, dubious motives, could easily part with
billions more to relieve world hunger and
suffering, but he can't stand to lose his wealth
status. Buffett, on the other hand, is
exceptionally secure about his self-worth, and
secure enough to live modestly. His
defenselessness, sharing of business knowledge
and generosity make him a less resented billionaire.
(K) But Buffet has thrown his fortune into Gate's
Foundation! He's done so because he approves of
the fact that Gates himself doesn't decide how
his money is spent specifically but leaves that
to an independent board. I don't know how happy
or secure either of them are, but they are both
individuals who happened upon a simple strategy
early in their lives and were wonderfully
maintained by it ever since. (Actually, if Gates
hadn't taken his father's advice he would have
simply sold his OS to IBM without retaining
copyright. Otherwise it's unlikely that we'd ever
hear of Bill Gates these days -- perhaps he'd be
just an ordinary software engineer working for Apple!)
(N) I agree that the average citizen is better
off in most ways than a century ago, but what we
have building here is the fact that the
wealthiest are tipping the scales because of
depleting resources, thereby leaving barren
soil, filthy waters, depleted ozone and war-torn wastelands.
(K) My point was not just that ordinary folk are
better off than previously but also, as we go
back in civilized history (to the time about
11,000 years ago when intentional selective
breeding of animal and plant genes was first
invented), the wealth differential between the
top social layers and the bottom was increasingly
greater. The wealthy today are only "tipping the
scales" into depletion and waste in the sense
that it is they who take the decisions (without
knowing all the facts, which sometimes may take
decades to emerge). We (customers), however are
not backward in coming forwards to want the
products that the wealthy make available by their
investments. (Most people deeply miss the grocery
shop just around the corner where they used to
have a chat as well as buy, but most people also
vote with their wallet and go to the supermarket.)
(N) We have them able to get the public to pay
for their gambling and their wars, whose costs
are far greater per capita, inflation taken into
account, than ever before. There exist few laws
to make them accountable, yet laws are rigidly
in place to punish the less wealthy criminals in
society. Laws for the rich have always been
different, but in the past there was at least a
modicum of accountability legislated.
(K) Yes, there was (in America for example
between about 1880 and 1920) but the further we
go back in history the less accountable the
wealthy were to the poor. In 19th century
Ireland, the peasants who were weakened or
starving with repeated bouts of potato blight
(the only diet possible in their gardens) were
forced by their landlords, sometimes at the point
of a soldier's bayonet, to harvest millions of
tons of wheat which was exported to dear old
Queen Victoria's England. Regiments would
accompany the wheat on its way to the docks. Two
million Irish people migrated to America, and
more than two million who couldn't afford the
price of a ticket (about $100 in present-day
terms) starved to death. In 18th century England,
landowners set mantraps against poor people who
tried to augment their potato or rye diet with a
rabbit or pheasant. If you weren't killed you
were maimed for life after setting off one of
these. The Romans would crucify peasants who
visited the rabbit warrens they'd set up. (I've
mentioned before that boy of my own school in the
14th (or 15th) century was hanged for stealing a
sheep because his board food was so mean.)
(N) Reagan, then Clinton, then Bush removed
these. Now the average citizen has little hope
of becoming middle class, and world youth,
unlike in the days of the robber barons, have a great future at Burger King.
Wealth flaunting is nothing new. It was once a
thing of awe, a la Diamond Jim Brady., whose
flaunting stirred admiration more than envy.
Your point about historic/genetic fairness is
well taken, but the levels of wealth of today's
elite are disproportionate to the level of
societal benefits their wealth generates.
Rockefeller employed many people nationally, but
today's billionaires make profit by firing
people and using slave labour overseas. And most
significantly, their wealth isn't real.
(K) Their wealth (paper money mainly, but also in
all its forms -- CDSs, etc) is certainly real.
It's as real as the public (and bankers) assume
it is, and thus use it. It's real enough, but as
it's constantly losing real value (against the
price of commodities) by being printed it's
becoming increasingly dangerous. (I'm only
carping a little bit here. I know what you meant.)
(N)No gold backing it at all, unlike the wealth
of the former elite, therefore it's hurting society and the economy at large.
(K) If we had gold (or some other valuable
material, independently stable in quantity) as
the true backing of paper money then we'd have
little or no inflation. If we had gold then less
than 1% is mined and added to the present world
total every year. Even so, the inflation of less
than 1% would depend on how much of it was taken
out of circulation (in the form of jewellery) and
how much was available for cash purposes. (The
world economy is much greater than it ever was in
history so that using gold for everyday purposes
is no longer possible. It need only be used
periodically in bullion form when clearing big
financial balances between countries or major
banks or TNCs. But the point about a gold-backed
currency is that, in principle and in practice, a
banknote [or, in the future, a digital unit] can
be exchanged for a gold coin if absolutely
necessary. Even in the heyday of the gold
standard in Victorian England if you went into a
bank with a crisp £5 note [beautifully printed on
silk paper] asking for five gold sovereigns, the
bank teller would play awkward and try to refuse
you -- or at least make you wait days. The reason
was that the bank would already have parked its
gold with the Bank of England in exchange for
freshly printed banknotes and, if you insisted,
would have to get some coins back again.)
(N) I can indeed blame the rich for lack of
jobs. It is they who defeat job creation at every turn.
(K) No they don't -- intentionally. They invest
their money, just like any workers' pension fund,
in the safest places with the best hoped-for
returns. As it happens, all industry and commerce
are becoming automated. But this can't be stopped
any more than King Canute could stop the tide.
(N) If this were not the case, we would now be
firmly on the path toward sustainable energy and
industry, but the influence of the elite in
government has ensured the continuance of oil
extraction at huge costs to both economy and
environment. War for oil and
security/defensiveness as the largest growing
industries.No strong environmental policies lest
it hurt a flawed economy. It is they who suck up
publicly owned finite natural resources, and
leave little for future generations by which to
sustain life. Sure, automation is a consequence
of advanced technology, but the wealthy have
prevented replacement industries from getting
off the ground. Expense of fledgling beneficial
industries has always been borne by the public,
like hydro and public water works were.
(K) Not so. Public ownership of these utilities
has only happened in the last 200 years or so.
Before then all drinking water had to be paid for
privately -- water butts had to be made, wells
had to be dug. Landowners with rivers would
charge people to use their water (fishermen,
water mills, irrigation for farmers). Roads,
rail, electricity, etc -- all of these were
privately owned and exploited before public ownership.
(N)The public once owned these, yet the wealthy
convinced government that they could convince us
we never did. Now, we still pay, but the profits
are no longer ours to share in. Privatization is
out of control, and has benefited only those who
have partial funds by which to operate these
giants for a very limited time. The citizens get
hit up for the balance in higher rate fees, and
additional ones for so-called capital improvements.
Investing in maximally profitable ventures is
standard mostly because of laws that were
implemented for the wealthy by government, but
you can't say the wealthy didn't put pressure on
government to get those laws passed.
(K) Yes, of course they put pressure on -- and
do. But you can't tar them all with the same
brush. The senior politicians with real power to
initiate legislation (no more than about a dozen
in any country) only have a few hours of "access"
time in a day. Only a miniscule minority of
businesses have a chance to have the ear of
politicians at the highest level (and to bribe
them, of course). Only the larger industries can
afford to lobby medium-ranking MPs whose
influence on legislation can only work more
slowly. (Microsoft had no lobbyists at all 15
years ago. Google had no lobbyists until less
than a year ago.) Most businesses have no
lobbyists at all and are at the mercy of the big businesses and happenstance.
(N) So, when the wealthy put all their money in
off-shore banks, because they can, I will still
say they are to blame for our inability to tax
their wealth. It's a choice they make to evade
responsibility to the country they predominantly
exploited in order to create that wealth.
Taxing status objects is fine and widely in
place, as long as you can keep tabs on them,
which you really can't. But this does nothing
for removing the opportunity to ferret those
billions by which they are able to afford the
status objects in the first place--the actual
source of the purse. The stuff that ends up
off-shore. Further, most wealthy people are
money hoarders, and spend little proportionate
to their assets and holdings. Profits from a
corporation should be taxed in the same way as
an individual's income, and even there, remember
that Buffett's secretary, for example, is taxed
at a higher rate than is he, so laws still need
tweaking on the individual level as well.
Once again, Keeeth, I hope you don't mind me
answering for my brilliant invisible sister, Natalie.
(K) I won't reply to the above because I'd be largely repeating myself.
Keeeth (suitably admonished)
Natalia
On 21/04/2012 1:53 AM, Keith Hudson wrote:
Natalie,
But the sort of emotive talk by Les Leopold and
others about wealth is of absolutely no
constructive use. The rich may be greedy, but
then so is everybody else given an opportunity.
One never hears of an inheritance or a lottery
win ever being turned down. Every single penny
of the wealth of a rich person goes into jobs.
It is either spent into the products or
services of existing jobs, or it is invested,
which produces new jobs, or it goes into
philanthropy, which also produces jobs. Even
wealth which goes into "dead" ends, such as
personal ornamentation or luxury yachts involves jobs.
Once again, as I'm continually saying on FW
(but which hasn't been remarked upon, never
mind disputed), the wealth of today's
billionaires (well over 1,000 of them and
growing fast) is not as disproportionate as the
wealth of the 'robber barons' (Rockefeller,
Carnegie, etc) of a century ago, nor that of
the even wealthier landed aristocracy of
previous agricultural times, nor that of the
royalty of ancient empires. Overall, we are, in
fact, steadily becoming more egalitarian. It's
hard to believe perhaps but it is so.
What makes us unhappy is that the wealth of
some of the rich is constantly flaunted in the
media. Emotionally we can't cope with this. The
effect is that what biologists call a "super
stimulus". We have no defences against this
because although our genes know what "fair
play" is (proven as an instinct in all primates
as well as some monkeys) we've evolved for
millions of years in environments in which
great disparities in wealth were never
possible. Emotionally we can't cope with
examples of great disparity in wealth when it's
thrust in front of us, whether of a next-door
neighbour who flaunts it or the antics of distant billionaires.
The rich can't be blamed for the growing
structural unemployment in the advanced
countries either. Without any overt conspiracy
between them, each one of them will tend to
park their investments with businesses that are
maximally profitable at that time. And that
means growing automation. Unless we extinguish
our intellectual curiosity in our minds and the
growth of the scientific method then automation has a long way to go yet.
I'm greatly in favour of taxing the wealthy --
and heavily, too. But the only sure way of
doing this so that it can't be evaded is to tax
the status objects that are visible to us --
their personal ornamentations, houses, luxury
yachts, etc. Some rich people might even
welcome this form of taxation because being
able to quote their tax band would only add
even more status to themselves. But this tax
will never happen because it doesn't give any
opportunity for politicians to grant favours to
the rich and thus be able to divert some of
their wealth to themselves. All other, more
sophisticated, forms of taxation give the
opportunity for rich people to employ clever
professionals and evade taxation. And you can't
blame the rich for wanting to evade taxation.
All of us would do so given the opportunity.
Keith
At 23:38 20/04/2012, Natalie wrote:
What If the Greedy Rich Paid Their Share? 8
Things to Know About Wealth and Poverty in the US
By <http://www.alternet.org/authors/8894/>Les Leopold
We're far from poor -- we just have a wildly
lopsided distribution of wealth that makes us seem poor.
(snip)
It wasnt an act of God, or the blind forces
of technological change, or the mysterious
movements of markets. Nor did the super-rich
become enormously smarter than before.
Instead, flesh-and-blood policy makers decided
that deregulation and tax cuts should become
the order of the day starting in the
mid-1970s. The idea was that if we cut taxes
on the super-rich and deregulated the economy
(and especially Wall Street), investment would
dramatically increase and all boats would
rise. But as we can see from the chart below,
the average worker's wage in real terms
stalled and even declined after the mid-'70s.
The fruits of productivity no longer were
shared equitably. The enormous gap between the
two lines (trillions of dollars per year) went
almost entirely to the super-rich. The wealth
of the wealthy skyrocketed, not by accident,
but by policy design. "Greed is good" replaced the middle-class American dream.
(snip)
What Is Wealth and Who Has It?
Wealth or net worth is the total value of what
you own (your assets) minus the total value of
your debts (your liabilities.) Our collective
net worth is really huge. Were talking big,
big numbers. As of the end of 2011, U.S.
households had $30 trillion in private assets
and $13.6 trillion in liabilities for a total
net worth of $16.4 trillion
(<http://www.federalreserve.gov/releases/z1/current/z1r-5.pdf>
PDF). How much is that? It comes to an average
of $141,000 per household free and clear of any debts.
(snip)
full story with graph at:
<http://www.alternet.org/economy/155025/what_if_the_greedy_rich_paid_their_share_8_things_to_know_about_wealth_and_poverty_in_the_us>http://www.alternet.org/economy/155025/what_if_the_greedy_rich_paid_their_share_8_things_to_know_about_wealth_and_poverty_in_the_us
(my comment)
Apart from reversing market deregulation and
tax exemptions for the wealthy, he may have
mentioned that many industrialists are wealthy
because government allows them, by virtue of
promises like job creation and economic
stimulus, to exploit the commons without much
compensation. Such agreements result in
unjustified tax exemption, despite immense
profits. Corporations today fail miserably to
employ or stimulate regional economies, as do
ever floundering free-market entrepreneurs.
<http://capitalism-creates-poverty.blogspot.ca/2012/03/free-market-myths-no3-entrpreneurs.html>http://capitalism-creates-poverty.blogspot.ca/2012/03/free-market-myths-no3-entrpreneurs.html
Government should, on behalf of the people
whose commons are being exploited, have
recourse to tax the income (profits) of the
corporation by the same measure as for
individuals. If the corporation downsizes and
ships most production overseas, citizens
should have recourse, through government, not
only to tax that income as well, but to revoke
the agreement within the first year of
outsourcing. With proper taxation of industry,
there wouldn't be so much concentration of wealth.
Further, if the commons were legally
recognized as incorporate of predominately
finite resources, we would be looking at
sustainable, rather than exploitative,
approaches toward extractions, and industry
would be paying high taxes for the privilege
of using public lands' raw materials.
Natalia
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Keith Hudson, Saltford, England http://allisstatus.wordpress.com
Keith Hudson, Saltford, England http://allisstatus.wordpress.com
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