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Warren Stupidity

(48,181 posts)
Fri Dec 11, 2015, 11:29 AM Dec 2015

How to fix inequality


By Joseph E. Stiglitz


AMERICAN SOCIETY has been so unequal for so long that it is easy to assume that this level of inequality is natural and inevitable. In truth, however, inequality is a choice that we make as a nation with the rules we create to structure our economy. Thirty-five years ago, we began to write these rules. Lowering taxes at the top and stripping away regulations would, it was argued, incentivize and free up the economy. Sure, there might be more inequality; but everyone would be better off as a consequence of the resulting faster growth. Unfortunately, the “reforms” led to slower growth and so much more inequality that the bottom 90 percent of the population has virtually seen incomes stagnate. Instead of more growth, we got more volatility. Today, people struggle to earn enough to sustain the middle-class life that once was taken for granted. It’s time to rewrite the rules once again to promote growth that benefits all Americans.

In the current political context, discussions about economic inequality and the government’s role in leveling the playing field often revolve around taxation and redistribution. But focusing on top marginal tax rates and social safety-net programs can obscure a deeper problem: America’s market income — income before taxes and government payments — is among the most unequal in the world, especially for people younger than 60. Viewed from this perspective, increasing redistribution is like stanching the blood from an open wound: It addresses the immediate symptoms, but not the underlying problem.


We can trace the effects of the new rules: Corporations increasingly focused on short-term quarterly returns, and this meant less long-term investment in people, technology, and plant and equipment. Traditionally, productivity and workers compensation moved in tandem. Under the new rules, productivity continued to increase, albeit at a slightly slower pace, but compensation stagnated. Incomes of CEOs and those in the financial sector soared — incentive pay was supposed to lead to faster economic growth, but the only incentives in evidence were to encourage creative accounting and increase compensation at the top at the expense of everyone else. Relaxing financial regulations led to the runaway growth of the financial sector — whose share in GDP increased from 2.8 percent in the 1950s to 7.3 percent in 2014 — with nothing to show for it other than more predatory lending, more instability, more money at the top, and more poverty at the bottom. Weak antitrust enforcement, which was not up to the increasing forces of market concentration, and stronger intellectual property protections led to firms in many sectors to charge excessive prices — well above marginal costs — lowering further the real income of workers. Antiworker laws, lax enforcement of existing worker protections, and failure to update our laws to reflect the changing nature of work has resulted in declining worker power and widespread wage stagnation. Structural discrimination against women and people of color, which has plagued the United States since its founding, has exacerbated the impact of these trends in already disadvantaged communities.


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How to fix inequality (Original Post) Warren Stupidity Dec 2015 OP
Everyone can have everything The2ndWheel Dec 2015 #1
If we fix our dependence on non-renewable energy sources we can Warren Stupidity Dec 2015 #2
The planet is only finite when it comes to oil and coal? The2ndWheel Dec 2015 #3
No I clearly stated that we need to address other non renewables as well. Warren Stupidity Dec 2015 #5
People mistake an economic tool (capitalism) for an entire economy. haele Dec 2015 #4

The2ndWheel

(7,947 posts)
1. Everyone can have everything
Fri Dec 11, 2015, 11:55 AM
Dec 2015
Moreover, we can do this secure in the knowledge that we can have both more economic equality and more growth.


Yet apparently we live on a finite planet. At least when we're talking about climate change.

One major issue is that any individual probably isn't needed. Americans in general aren't as needed in the global economy. White men in America aren't as needed as they were in the 50's. Unions aren't as needed because they have strength when place matters, and we live in an increasingly placeless world. There are over 300 million people in America, so even among ourselves any single person isn't needed. Unless you're really good at what you do, have a very specialized skill, or found your way to the top of the company. That's not even getting to the technological advances that will just make everything even more complicated.

Fairness and equality are abstract concepts that human beings imagined. It's not like it exists somewhere outside of the human imagination, and we just haven't found enough of it yet. That's why it's so damn fickle. There's nothing to fix.
 

Warren Stupidity

(48,181 posts)
2. If we fix our dependence on non-renewable energy sources we can
Fri Dec 11, 2015, 11:58 AM
Dec 2015

have economic growth and rising equality for the entire planet. We also have to fix our other dependencies on non-renewable resources, and we cannot continue to grow the population of humans. But those are actually solvable problems.

The2ndWheel

(7,947 posts)
3. The planet is only finite when it comes to oil and coal?
Fri Dec 11, 2015, 12:19 PM
Dec 2015

We changed environments when we hunted with sharp sticks and started choosing where to plant seeds. We're not getting out of jail for free just because we harness some sun and wind to run and maintain a global civilization of 7+ billion people(and more before the number actually goes down) that all want everything.

Like anything else in physical reality, renewable energy will have a downside to it. We probably don't even know what it is yet, but that's how complex existence works though.

Plus we don't have much experience with a human society that doesn't grow the population. Any that did, either don't exist anymore, or are some small jungle tribe. Every institution we've built is based on more people. We don't do limits very well, which is why we hope renewables will be limitless.

 

Warren Stupidity

(48,181 posts)
5. No I clearly stated that we need to address other non renewables as well.
Fri Dec 11, 2015, 02:58 PM
Dec 2015

Our dependence on those, while critical, doesn't also threaten to destroy the habitat as fossil fuels and an unbounded human population do. The point is that these problems are not insurmountable and we can in fact have a global economy that is fair for everyone, not just for a vanishingly small set of astoundingly wealthy assholes.

haele

(12,667 posts)
4. People mistake an economic tool (capitalism) for an entire economy.
Fri Dec 11, 2015, 01:00 PM
Dec 2015

Capitalism is a financial tool that depends on reducing the amount of costs (valued either as a financial or effort/opportunity cost) that are used for the optimal production result.
It is specifically a financial optimization "machine" for organizational constructs that place a value on property and representations used to acquire property. There is no real governance inherent to capitalism; it can be used in combination with whatever economic governance tool (i.e. socio-political system) in which it is operated.

Capitalism itself does not handle the presence of excess or unrequired resources - especially labor and intellectual resources - very well, because there is a cost to maintaining resources, and capitalism requires the reduction of costs as part of the financial optimization to be effective.
This is where the governance factor of economics must come into play; the choice to conserve or maintaining resources for future use, and how far out one needs to be concerned about conserving resources.
If you are a corporation, you are only concerned about keeping your board of directors and investors comfortable. Depending on how much value there is in a corporation's production or service model to maintaining a customer base in a specific location or market will direct how much economic concern that corporation has with the world it operates in. Holistically, it does not matter how well or what you are doing in a market or location, other than for your personal corporate well-being. You are only concerned about the resources you need to maintain yourself.

If you are a government, you need to be concerned with all the local economic resources, not just the few needed for the production of a few items. You need to be concerned with excess resources and their requirements - especially population, which, unlike for a corporation, is not a market that uses a product, but a raw economic resource that produces a wide range of products and opportunities, which may or may not be applicable to a financial result or particular desired result. Populations, like every other raw resource, need to be maintained and nurtured to reach an optimal economic potential.

This plays out in a balancing act between the short-term needs of the few and the long-term needs of the many. It's a maturity issue.
If a shiny economic tool is deemed to be more important than actual resource governance, then everyone is headed to a big trash heap of ever-dwindling resources being wasted because a few people want to play with their tools rather than actually produce a viable economy.

Haele

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