The sentient should cheer because it signals enterprise being rewarded, freedom to keep the fruits of one’s labor, and then for all of us not rich it signals that our lives are getting better and better; the lifestyle disparity between us and them (the rich) shrinking precisely because economic achievement is taking place.
March 4, 2013
"So while expansions in the wealth gap have become sport for the partisan and economically illiterate on both sides of the political divide..."
"... the real truth is that the sentient among us should cheer every time they read of rising inequality."
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I know I cheer everytime a wealthy Obama donor gets another slice of my tax dollars.
Well I tended to think so too until I started reading about the bonuses that were routine for hedge fund guys. I could fully fund my retirement with just one of those spiffs. Thing is, they weren't "achieving," they were fucking up bigtime.
But that's neither here nor there.
Does this guy have to give Mickey Kaus royalties.
I think a lot of the blather about income inequality is generated by the envy of the 10% for the 1%. People with $1000 suits jealous of people with $500 ties.
Thomas Sowell has much to say on the subject, e.g.
"To say that ‘wealth is so unfairly distributed in America,’ as Ronald Dworkin does, is grossly misleading when most wealth in the United States is not distributed at all. People create it, earn it, save it, and spend it."
and
"The shrill rhetoric about differences in income proceeds as if they are talking about income inequalities between different classes of people. It would be hard to get the public all worked up over the fact that young people just starting out in their careers are not making nearly as much money as their parents or grandparents make.
Differences in wealth between the young and the old are even greater than differences in income. Households headed by someone 65 years old and older have more than 15 times as much wealth as households headed by someone under 35 years of age."
Carol said...
Well I tended to think so too until I started reading about the bonuses that were routine for hedge fund guys. I could fully fund my retirement with just one of those spiffs. Thing is, they weren't "achieving," they were fucking up bigtime.
But that's neither here nor there.
What they do with their money is their business. Not mine.
There are problems with capitalism. There are problems with income inequality. I prefer those problems to the ones the liberal social engineers have created.
Can the same be said for feudal times too and if not,why not?
Even big government/redistribution/fairness types believe in the blessings of income inequality. There are so many many things that only *government* is big enough to do; Medical research, exploration, going to Mars. building a road.
The difference is simply in the question... is government likely to be wiser and less oppressive in deciding what to put that money toward? Frankly, it may be even less likely to do so in a democracy where the first concern isn't making wise decisions for a future past your next election.
Huh... probably was unclear about the sarcasm in my first statement. None of those things are so big that only government can do them.
There was enough money in the budget to buy 2700 tanks for Homeland Security.
I would worry about income inequality only if it kept any of the poor from rising above their circumstances. That seems to be the operative assumption - that it somehow prevents people from creating wealth due to locking it up in the "upper classes" - but I've not seen that thesis actually supported with evidence. As far as I can tell, it's so far only been asserted.
Given that a good deal of the top earners in today's society - business founders like Steve Jobs or Bill gates, high paid professionals like athletes (Peyton Manning, Kobe Bryant), lawyers (Leslie Abramson... hey I didn't say they had to be likeable), entertainment figures, etc. - is comprised of people who own or are part of businesses or professions providing either a good or a service others buy, I'm hard pressed to see that as anything but having earned their place. In contrast, take a wealth-inheritance example from Europe of all places (the bastion of socialistic sentiment): Two of the children of Formula One President/CEO/Part Owner Bernie Ecclestone, Tamara and Petra. There's a prime example of wealth being locked up right there.
Yeah, sure, we get Ecclestonian examples here in America (the name "Kardashian" is a perfect example), but my broader point is that the above assertion regarding income inequality's claimed effects seem to presume that all the rich's wealth is immobile and thus destructive to the lower classes. Given that a large number of them have earned their money, I'm hard pressed to buy into that.
The only problem with the income equality situation is that we don't have a free economy and crony capitalism isn't really capitalism, it's fascism.
Many years ago, Ford Motor Company was taken over by what were called "The money people." These were guys (almost all guys in those days) who manipulated money instead of designing and building cars. The quality of the cars Ford built declined but no one noticed for a while. The company was still "making" money.
Health care has seen a similar phenomenon in recent years. The hospital where I used to practice now has an administrator who used to work for Pepsi. He has no background in health care. He recently appointed his brother-in-law to run the operating room, usually the biggest income generator of a hospital. The brother-in-law is a chiropractor. They both were overjoyed when Obamacare was signed. They think it will give them the power to whip the place into shape. The administrator's salary is orders of magnitude greater than any doctor, of course.
In the NHS 40% of doctors don't want their family members treated at their workplace. I started a trauma center at that hospital 30 years ago. When the national trauma survey came, we were rated higher than the university hospital. Right now, I wouldn't go there, myself.
The hedge fund guys are not creating wealth like Andrew Carnegie did. They are creating something that looks like money but it is not wealth. We saw that in 2008 and will see it again. The Obama cronies are rich but they don't create wealth.
Do not conflate hedge funds with investment and commercial bankers (and insurance companies). Hedge funds received zero bailout from the federal government, while the latter received (and are still receiving in the form of interest paid on deposits with the Fed - this is new, never done before Obama) billions (Obama's version of redistribution - bottom up).
Hedge funds that went bust, lost their own and their client's money - not yours, not mine (unless you were an owner or client - I wasn't). As far as their income and bonuses are concerned, when you turn millions into billions by making the correct bet, your clients will not begrudge you paying yourself well.
Now, whether they are properly taxed on their income/bonuses is a totally different question - I have no clue.
Wealth to us all
I wonder why Kausfiles decided to display an ad for Bentley to me just now? Isn't that like waving a red flag in our faces?
Oh the injustice. I wonder how many poor people have to go without cars so that Thurston Howell III can drive one of those?
John Tamny asserts who naysayers will point to, what an idiot. As if its just great to get rich selling cigarettes, or highly leveraged mortgages with no personal risk.
Nobody said capitalism was perfect. Fascism and Communism haven't worked out so great either, and at a far larger social cost.
I'm not worried about big bonuses paid to hedge fund managers and CEOs who fail.
First, that's the going rate. If the company could pay less to hire the same level of ability, they would.
Second, those people made the right decisions to get to the position where they could demand such a salary/perks.
Third, the high bonuses paid to CEOs when they leave after failure is often compensation with strings attached: to ensure they don't sell secrets to competitors. Those high severance packages are buying silence.
However, I am not so happy when semi-govt institutions like Fannie Mae and Freddie Mac give high salaries to those who fail. There are no secrets to protect. Taxpayers are paying the bonuses. The govt protects them...indeed, the CEOs of the quasi-govt institutions are usually top Democrat officials/advisers. The whole thing stinks of cronyism.
'Mike adamson' said, "Can the same be said for feudal times too and if not,why not?",
Whether or not increasing income inequality is good for practically everyone depends on whether the overall economy is static or dynamically expanding.
In practically all feudal economies, the size of the overall economy was static. Land was wealth, and with no new wealth being created the rich could have more only if everyone else had less.
In a dynamic economy, it doesn't have to work like that.if the income of a typical poor person increases by 40% and the income of the typical rich person also increases by 80% then the gap between them will increase (the rich person's income will become a higher multiple of the poor person's income).
But the poor person is still better off.
Sounds like one of those Social Darwinist puff pieces written during the gilded Age when the press would fellate some robber baron.
Michael K said...
Health care has seen a similar phenomenon in recent years. The hospital where I used to practice now has an administrator who used to work for Pepsi. He has no background in health care. He recently appointed his brother-in-law to run the operating room, usually the biggest income generator of a hospital. The brother-in-law is a chiropractor. They both were overjoyed when Obamacare was signed. They think it will give them the power to whip the place into shape. The administrator's salary is orders of magnitude greater than any doctor, of course.
The Blonde will tell you she used to love nursing, but the "money people" killed it.
Wyo Sis says:
There are problems with capitalism. There are problems with income inequality. I prefer those problems to the ones the liberal social engineers have created.
I read Althouse quite a bit, but don't usually have too much to say. But I do get to know the personalities of the regulars, and could probably recognize who wrote a good many of the posts without seeing the names. I've learned to watch for your posts, WyoSis -- you have a way of getting to the heart of things succinctly. (I could also be biased by how much I love Wyoming!)
Hedge funds do not pay large bonuses to CEOs (actually they're Managers) who fail. Their compensation is based on the growth of the fund, not the contraction. Also, Managers have their own funds invested in the fund, so if it fails, they not only lose the funds of their clients, but also their own. Not a happy occurrence.
Politicians and the media love to demagogue the bonuses, but you rarely hear about the failures, and it's not because they are few or minor.
Cheers to your wealth
The issue is cost of living, not including luxuries. The efforts made to obfuscate reality are most oppressive to the middle class, who are neither excessively wealthy nor sufficiently poor. This is the majority who bear the burden of economic distortions.
Wyo Sis / Mark,
The author does not help his cause as he asserts capitalism is problem free. And this is exactly what the media loves to publish.
Carol said...
"...the bonuses that were routine for hedge fund guys. ... Thing is, they weren't "achieving," they were fucking up bigtime."
Actually someone else they hedged against fucked up bigtime.
How about raising taxes on everyone, then reward your campaign bundlers bigtime? $535 millions? $2 billions? The connected multibillionaire's company closed, the employees were told to apply for unemployment, the management shared millions of taxpayer funded "bonuses". Or billions to rescue Freddie and Fannie, rewarded multimillions bonuses of taxpayers' money to the management who caused the collapse in the first place? Oh, how about rewarded a tax cheat with a cabinet post of SecTreasury? Rewrote laws to reward Goldman Sachs?
Hedge fund guys bet the money of the rich guys who trusted them, not my tax money. I'm ok with them getting rich, and enjoy quite a bit Schadenfreude on those who bet and lost. Again, it ain't my tax dollars they are winning/losing.
The thing that has to be preserved is disagreement about value.
Money comes in, but only as a counting device, not as wealth.
What's essential is that if I have something you prefer to something you have, and I prefer the something you have to the something I have, we trade and we both come out ahead.
The wealth of the nation rises by the amount of our disagreement about value.
This is miraculous because there's only been a rearrangement of stuff.
It's only possible when we disagree about value.
The rule for maximizing disagreement is specialize and trade.
The specialist values his stuff at much less than his customers do.
Every trade the specialist makes leaves both sides of the trade better off, and raises the wealth of the nation.
The rich guy is the successful specialist.
He's left a huge number of people better off.
Cut off inequality, and you cut off both sides of all those transactions, and blow away all the wealth of the nation.
Self-sufficiency is the route to extreme poverty and subsistence living. Make your own thread, clothes, food, shoes, and so forth and see how it works out for you.
You need specialize and trade to generate wealth, your own and the other guy's.
rhhardin said..
@12:38
To the left you might as well be speaking Swahili. The mechanisms that allow such wealth, to them, might just as well be magic.
rrhardin,
Nice. Although I was already familiar with the concept of value inequality, I hadn't seen explained quite the way you did.
It makes perfect sense.
Thanks.
Thanks, Mark
Wyoming is a mostly no bullshit state. I love it too.
It's pretty amazing how the basic mechanism of economics, as rhhardin so succinctly explained it, is so poorly understood by our people. It's not like quantum physics where the average person's life is not effected if they don't understand the underlying principles. Not knowing what makes economics work can be the difference between your own happiness or misery, and which one you inflict on others around you. It's not even hard to understand. It's just the opposite of what most people think they know. How often do you think a public school teacher explains that simple and extremely important concept? How many of them even understand it themselves? How many who do, would avoid telling their students anyway, because you can understand it, and still hate what it means to your beliefs and propaganda.
Liberals believe that income inequality is the worst evil ever. Conservatives believe death camps are the worst evil ever.
go figure.
bagoh - I'm struck by how ignorant most people are of the basic of paying off your credit card balances every month and not getting on the hook for the interest payments.
The sentient should cheer because it signals enterprise being rewarded, freedom to keep the fruits of one’s labor,
Those of us who are sentient and not full of shit understand how common it is for people to want to take the lion's share of the credit of every group effort to which they've attached themselves.
...and then for all of us not rich it signals that our lives are getting better and better; the lifestyle disparity between us and them (the rich) shrinking precisely because economic achievement is taking place.
Maybe on Mars.
What balderdash.
The hedge fund guys are not creating wealth like Andrew Carnegie did. They are creating something that looks like money but it is not wealth. We saw that in 2008 and will see it again.
No shit. The majority/lion's share of wealth and prosperity comes from technological innovation, not financial "innovation".
The gains of the former are quickly spread throughout society. And the inequities it initially causes quickly decreases as patent rights are lost.
But there is no end to the financial "manager's" greed and the inequities he creates. He knows his "invention" is too ephemeral and subjective to create the same sense of lasting value. And he will therefore find every way to falsely inflate his own worth and that of his business until he takes the economy down with him.
Michael K. has that part exactly right.
When Joe Namath was at the University of Alabama—so was I—he said he had sex with over 500 girls. That is simply not fair. I only had two or three, I’m not sure, I drank a lot in those days. He should be taxed at least 200 times more than me.
It is a simple, unarguable fact that free market capitalism has produced the highest standard of living, for the most number of people of any economic system in human history.
It's probably reasonably good news for the globally destitute, but the middle and lower class in the US will likely continue to be cut out of the loop for the next 50 years or so.
Is that really true, though? We imported more than eleven million illegal Central and South American peasants over the last fifteen years or so. Wouldn't you expect the bulk of those people to be poor?
The hedge fund guys are not creating wealth like Andrew Carnegie did.
Not in the sense that they are building"things", but they are adding value. They are engaging in the activity that allows "things" to be built.
Where is the outrage at the futures market, or the options exchange?
Why is it moral for a government to dilute the money supply. Essentially hedging with your saved dollars, but it is somehow immoral for private money to go in search of stability?
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