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The rich get richer...

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Pinketty is back in the news in South Africa, so I figure this is a good idea to chat about his big idea:

 

https://www.youtube.com/watch?v=JKsHhXwqDqM

 

So what do people think? Are we headed (again) to a world where the middle class is this thin sliver between the idle rich and the restless poor?

 

Or are we already there?

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Pinketty is back in the news in South Africa, so I figure this is a good idea to chat about his big idea:

 

https://www.youtube.com/watch?v=JKsHhXwqDqM

 

So what do people think? Are we headed (again) to a world where the middle class is this thin sliver between the idle rich and the restless poor?

 

Or are we already there?

Already there.

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Also, this brings up a really good point, that the Left in the US always screams for more taxes on the wealthy, but really, all that does is penalize honest businessmen. Really, instead they should be clamoring for better financial transparency so that the government can hunt down those guys with offshore accounts and prosecute them for tax evasion.

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The biggest problem is outsourcing, which de-industrializes a nation and leaves a lot without work.Trickle down economics does work; China is a state controlled example and lower taxes on the wealthy have corresponded with a higher employment rate. Outsourcing throws all that in the trash, making the wealthiest even more wealthy while destroying local economies.

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The biggest problem is outsourcing, which de-industrializes a nation and leaves a lot without work.Trickle down economics does work; China is a state controlled example and lower taxes on the wealthy have corresponded with a higher employment rate. Outsourcing throws all that in the trash, making the wealthiest even more wealthy while destroying local economies.

 

China isnt extactly a prime example of Reaganomics tom 

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Also, this brings up a really good point, that the Left in the US always screams for more taxes on the wealthy, but really, all that does is penalize honest businessmen. Really, instead they should be clamoring for better financial transparency so that the government can hunt down those guys with offshore accounts and prosecute them for tax evasion.

 

A climate where the onus of the taxes weren't actually placed on the middle and lower upper class would be pretty cool no matter how it got done, and a lot of the Left is saying that cutting taxes on the rich isn't the panacea the Right makes it out to be, and it really doesn't end up trickling down, because frankly why would it? Wealth at the top does very little to drive the sort of mass demand that you need to ramp up supply to meet.

 

I do agree that outsourcing is a great evil, but enough about the morale of software engineers nationwide.

 

The biggest problem is outsourcing, which de-industrializes a nation and leaves a lot without work.Trickle down economics does work; China is a state controlled example and lower taxes on the wealthy have corresponded with a higher employment rate. Outsourcing throws all that in the trash, making the wealthiest even more wealthy while destroying local economies.

 

There's a lot of variables there to deal with, and I'm not really sure perching the economy on a bubble is a thing we want to do here.

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China is has a state controlled economy based on the trickle down effect. Not exactly Reaganomics, but it is partially based on the trickle down effect.

 

No where in close, all they have in common is filating powerhouses, and even Regaen ended up fucking the US over in  the long term with that 

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Trickle down always seemed like a bad idea to me because it is based on the assumption that spending patterns don't change as you go further up the ladder. 

 

In reality, the rich aren't spending more money on mass-produced goods (you can only eat so much bread, after all). Instead, they're ploughing the extra money they get into financial investments, parking it in tax havens and spending the leftovers on luxury goods. None of which involves any real sort of 'trickle down' into the broader economy.

 

Where progressive taxation falls flat, however, is in thinking that rich individuals are the great drivers of inequality (they're a symptom, not a cause). Rather, we should be looking at how corporations themselves function to pull money out of the real economy and fix that. But reforming corporate governance and oversight law is boring and doesn't make for good slogans, so we're stuck with half-measures.

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Hilariously enough, you know who immediately plow their money right the hell back into the economy?

 

People who can't afford everything they need, let alone want.

 

 

As far as progressive taxation goes, just because it doesn't cure the entire problem doesn't mean that it isn't a useful palliative or in fact that a sound system wouldn't include it or something functionally equivalent. The more money someone has, the easier it is for them to get it, and I don't see many other ways to redress that imbalance without getting into the realm of fundamental changes.

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In reality, the rich aren't spending more money on mass-produced goods (you can only eat so much bread, after all). Instead, they're ploughing the extra money they get into financial investments, parking it in tax havens and spending the leftovers on luxury goods. None of which involves any real sort of 'trickle down' into the broader economy.

 

I think most conservative economists would turn their head sideways at your description of "trickle down" effect. My understanding was that they're putting more capital into the economy because they have the funds to start new endeavors, enterprises, hire people, etc.

All very good things that an economy needs to really thrive, so the big scare of taxation of the wealthy is exactly how much you're negatively impacting that.

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Pinketty is back in the news in South Africa, so I figure this is a good idea to chat about his big idea:

 

https://www.youtube.com/watch?v=JKsHhXwqDqM

 

So what do people think? Are we headed (again) to a world where the middle class is this thin sliver between the idle rich and the restless poor?

 

Or are we already there?

 

Already there. Pretty soon it won't even be a sliver. 

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I think most conservative economists would turn their head sideways at your description of "trickle down" effect. My understanding was that they're putting more capital into the economy because they have the funds to start new endeavors, enterprises, hire people, etc.

All very good things that an economy needs to really thrive, so the big scare of taxation of the wealthy is exactly how much you're negatively impacting that.

Good point, but then it's pretty obvious that rich people aren't spending the majority of their money on investments into new businesses either. Rather, they're spending a small fraction on high-risk stuff (while doing their best to mitigate said risk) and the vast majority on low-risk stuff as described above.

Nearly all of the investment I've seen going to new businesses are from government programs, with other businesses and investors jumping in only once they are convinced it's a sure thing.

So I see no issue with taxing a lot off the rich (although as I mentioned I think its not the biggest issue) and ploughing the money received into startup programs.

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Hilariously enough, you know who immediately plow their money right the hell back into the economy?

People who can't afford everything they need, let alone want.

As far as progressive taxation goes, just because it doesn't cure the entire problem doesn't mean that it isn't a useful palliative or in fact that a sound system wouldn't include it or something functionally equivalent. The more money someone has, the easier it is for them to get it, and I don't see many other ways to redress that imbalance without getting into the realm of fundamental changes.

True, but again it doesn't do much for the root causes of a lot of this mess. We don't even need fundamental changes to rights or whatever, just some serious changes to the laws governing how businesses may be run and how they may be structured.

I'm thinking specifically about the shareholder value maximisation paradigm, executive compensation linked to share price, offshore finance and sale of companies to their offshore subsidiaries, separation of banking and investment, changes to the type of financial instruments which can be created and limitations on certain share-pumping strategies.

An actual economist could probably come up with a dozen more minor tweaks which would have the cumulative effect of making it less attractive to park your money in bubble-inducing financial instruments, and less easy for fund managers to collude and bilk investors using the same.

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Good point, but then it's pretty obvious that rich people aren't spending the majority of their money on investments into new businesses either. Rather, they're spending a small fraction on high-risk stuff (while doing their best to mitigate said risk) and the vast majority on low-risk stuff as described above.

Nearly all of the investment I've seen going to new businesses are from government programs, with other businesses and investors jumping in only once they are convinced it's a sure thing.

So I see no issue with taxing a lot off the rich (although as I mentioned I think its not the biggest issue) and ploughing the money received into startup programs.

 

Right, and all my solutions to that problem involve things that scare people even more...

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So, another thought:

 

One of the things we can all agree upon about how capitalism* works is that it includes a strong positive feedback component. My wealth allows me access to more opportunities, training and resources; so I will tend to accumulate even more. Add in the component of inheritance, and you end up with a system which very quickly produces a few winners and a lot of losers (read: my kids get a massive advantage because daddy left money in trust and sent them to the best schools).

 

Where people disagree is how much of this process is dependent upon ability vs. luck, and how stable the system is once the winners and losers have been picked.

 

If there is a strong tendency for people with talent to make it to the top, then capitalism can very convincingly be argued to be a good thing for society regardless of the inequality it causes.

Equally; if it is relatively easy for someone at the bottom to make their way to the top, then capitalism can very convincingly be argued not to have an inequality problem at all.

Finally; if you believe that the talent which allows people to make it to the top is in some way innate, then you can readily reconcile yourself with the idea of people at the top handing their descendants an advantage as they go.

 

This is pretty basic, foundational stuff. But it should be borne in mind whenever you see people discussing if capitalism 'works'.

 

 

* Note that many other systems have this dynamic too. We're just discussing capitalism for now.

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