Richest 1% will own more than all the rest by 2016
oxfam.orgThis sure seems to be HN's flavor of the month (and possibly for good reason). One thing I haven't seen mentioned is the fact that markets are created, not discovered. LLC's and Delaware C-Corps didn't materialise out of the aether, nor did the property rights regarding their shares. I dislike the concept of "deserving" at the best of times, but under this light, those that are the most successful reap their rewards largely in relation to how this system is established. Taxing large profits is no more "unnatural" than protecting the right to these profits in the first place.
That said, with regards to the article, appealing to businesses as moral actors is only so effective. A business acting unethically but legally is most rectifiably a problem with the law, rather than the business.
>One thing I haven't seen mentioned is the fact that markets are created, not discovered.
Probably because most capitalists don't believe this?
>nor did the property rights regarding their shares.
Debatable. Most capitalists would say that property rights naturally exist and that "shares" are simply an agreed upon way of dividing property rights over a complexity of assets and agreements (i.e. a business).
>Taxing large profits is no more "unnatural" than protecting the right to these profits in the first place.
True. Obviously a laissez-faire capitalists would say they're both unnatural- as they would say most, if not all, concepts created via legislative action are also "unnatural." Of course, people don't typically expend effort fighting "unnatural" injustice that benefits them- especially when money is on the line, and even more so state protected stock holder money.
>A business acting unethically but legally is most rectifiably a problem with the law,
Since when is it the legislature's job to enforce morality?
> Since when is it the legislature's job to enforce morality
Our laws are a constantly shifting mirror of our ethics (through the prism of "everyone" and "political reality")
Look at divorce, abortion, women's property rights, environmental obligations etc etc
The GP is well placed to say if a company is acting legally but unethically changing the law is often fastest and simpler fix -most eapecially for whole industries (hello banking)
"Most capitalists would say that property rights naturally exist ..."
I would like those capitalists to show me the "property rights" molecule.
The concept of "property rights without responsibility" is a Roman invention. There are alternatives. US law takes property rights more seriously than most other countries, because the US never had to get rid of feudalism. Also, one of the few lawbooks available in the early days of the US was Blackstone, who was a property rights absolutist.
In feudalism, land ownership implies the obligation to protect the inhabitants and gives them certain rights. One remnant of this is that, in Britain, you have the right to walk on the undeveloped private property of others. Also, most European countries afford renters much stronger rights than the US does.
Many nomadic societies, from the Mongols to native Americans, don't recognize the right to own real estate you're not currently using. Sharia law has the concept that land can be unowned by anyone, and can revert to that state if unused, although many Islamic countries do not do that in practice.
So no, property rights do not stem from "natural law".
The comment you are replying to isn't disagreeing with you.
The people who believe property rights are "natural" aren't saying they aren't a human creation at all. Just that they are a human right, like other rights that are also human creations.
The justification for this is something like you own your labor and slavery is wrong, and if you use your labor to produce something, it's unfair for anyone to take it from you. Likewise it's your right to trade it for something someone else made, or do whatever. And from that you get capitalism and property rights as we know them.
However this argument doesn't cover property rights over natural resources or land. There are some arguments for that like the homesteading principle. But in general there is an argument to be made that natural resources should be publicly owned, or at least rented with the profits going to the public.
Also this argument is deontological. A consequentialist would say if violating someone's rights helps more people than it hurts, you should do it anyway. And an economist would point out that pure property rights don't work in the first place, because of market failures like public goods, common goods, information asymmetry, natural monopolies, etc. So everyone is better off if we violate them at least a little.
The people who believe property rights are "natural" aren't saying they aren't a human creation at all. Just that they are a human right, like other rights that are also human creations.
I don't think this is true; why would it need the "natural" moniker in such case? Natural rights proponents claim that such rights are not invented, but an universal truth, either endowed by a god (like in the US Declaration of Independence) or derived from some natural property, such as human reason.
This is contrast with people who claim that all rights are subjective creations, not an innate property of nature nor a consequence of such, and therefore are not universal.
> But in general there is an argument to be made that natural resources should be publicly owned, or at least rented with the profits going to the public.
First made famous by Henry George, if anyone is interested.
An interesting use-case for cryptocurrencies/blockchain-like technology.
It's not a "natural law", but pretty close to it. It's a social convention (behavioral equilibrium) that guarantees peace and cooperation. The greatest philosopher of property rights was David Hume and the best continuator of Hume is Anthony de Jasay: http://oll.libertyfund.org/titles/2455/231884
I would like you to show me the "sarcasm" molecule
Ignoring the obvious that it's a 'when did you stop beating your wife?' statement, one might ask to see the 'your wealth is mine while I can bully you into handing over a sizable portion of it' molecule.
> Probably because most capitalists don't believe this?
That's what they may say. But the primary job of salesmen and the advertising industry is to create markets where none existed before. I.e. convince people to buy stuff they otherwise wouldn't even think about.
That’s what legislatures do all day. (And economists are generally theologians masquerading as scientists.) For instance, capitalism requires enormous legislation and bureaucracy. Starting with a property regime (so I can "own" natural resources), police to beat those who disobey, throw people off their land so nearly everyone has to obey capitalists/managers all day, and so on. All backed by a bizarre morality.
(And the more you get closer to so-called pure free markets, the more bureaucracy there is. Take Graeber's "Iron law of liberalism": "Any market reform, government initiative intended to reduce red tape and promote market forces will have the ultimate effect of increasing the total number of regulations, the total amount of paperwork, and the total number of bureaucrats the government employs.")
This is a cartoonish view of things. On top of that, most of history speaks of the contrary.
Markets are basically people buying and selling stuff. If some people sell their houses there hence exists a property market and so on. If I sell houses and sell you a share in my business then shares exist. If you and similar people offer your shares for sale then a stock market exists. So these things come about fairly organically if people buy and sell stuff. The LLCs and similar are embellishments to make things more efficient.
That said governments can change the rules and regulations.
This is an idealisation. Useful for demonstration and abstraction but rarely a total picture.
To take an extreme example, the idea that the house belongs to someone until they sell it is constructed.
For a more real world example, what does "own" fully mean? Can you start a business there? Build a skyscraper? Oil refinery? Do you own minerals? Flight paths? Can you demolish it or is it listed? When selling a house, you are transferring rights that are pretty variable and ethereal. These rules are elastic in practice and affect wealth.
Most large markets depart from the idealisation, many much more than real estate. Financial markets, minerals telecommunications... What does Disney gain from tweaking copyright laws? How does tax law play in?
I am pro markets, but I think we need to acknowledge that they are dynamic and emergent within constructs, not natural or inherent.
That house has value because it is connected to a road, power plant, sewer system, running water, etc. in a municipality that provides schools, EMS, firefighting, police, etc. Its future value is protected by zoning which ensures loud/ugly/polluting/busy buildings will not be located nearby. It is reasonable for the mortgage lender to make the loan because such contracts are enforceable in court, and it can count on the state to seize the house from a delinquent borrower even if the bank itself owns fewer guns than the occupant. The house is guaranteed to meet certain minimum workmanship quality and safety standards set by the state, verified by inspection, to minimize buyers' exposure to lemons.
Very little about the real estate market is emergent. This is an excellent example of a market created by society.
"Very little about the real estate market is emergent. This is an excellent example of a market created by society."
What is the difference between the market being "emergent" and being created by society?
Isn't "created by society" just code for a process that's happened without any one person planning it, over a long time, adding more and more rules to make the world like it is? That's sounds pretty "emergent" to me.
In this context I'd argue emergent is the opposite of "designed as public policy" - more like "naturally happens." Though I suppose you could say public policy is itself emergent.
That's true, the state prevents an unplanned market from arising by taking monopolist control of a bunch of infrastructure and natural resources.
Yet poverty as a whole is decreasing according to numerous measures.
Plus their report contradicts the world bank observations: http://ourworldindata.org/VisualHistoryOf/Poverty.html#/Glob...
Which is not surprising since Oxfam has a clear political agenda.
EDIT: world bank poverty report, clearly showing the decreasing poverty rates globally: http://www.worldbank.org/content/dam/Worldbank/gmr/gmr2014/G...
Not quite sure the point of your comment. This article says nothing about whether poverty as a whole is decreasing? The report you link to agrees with what they say is a problem (e.g. "In high-income countries, the rising concern about shared prosperity is a reaction to income inequality that has reached levels unprecedented in the post-war period.") There is no contradiction between the top 1% getting richer and more global equality within the remaining 99%.
Oxfam no doubt have a political agenda, we could probably debate how clear it is and what exactly it is, but their political agenda doesn't particularly influence whether this article is correct, nor do your links seem to contradict it.
> This article says nothing about whether poverty as a whole is decreasing?
They are saying the inequalities are growing, whereas the world bank report says the inequalities in income are shrinking progressively. That's a very different view.
I've skimmed the report you linked to, and I really don't see the contradiction. E.g. look at the quote below, taken from several on inequality:
"The second WBG goal of boosting shared prosperity is new and opportune. It shifts the focus in evaluating economic development from average income growth to income growth of the bottom 40 percent. Indicators proxying the socioeconomic status of the bottom 40 percent of the population, have shown little improvement, even though the growth of incomes of the bottom 40 percent of the population has not been slower than that of the general population in many countries. This growing inequality in basic living standards is worrisome".
I don't see anything that contradicts the Oxfam report, while there are some comments that seem broadly in line with it. Overall, the broad thrust of both seem in roughly the same direction, although they do take different views.
Again the inequalities in income shrinking progressively shown in the interactive presentation is between countries. It looks at incomes below 100k USD, which is not particularly relevant to a debate on the top global 1%.
I'm sure there's a debate to be had on how much inequality restricts growth. Perhaps it's not correct when Oxfam says that reducing inequality could improve the overall size of the pie. But I see little in your links to contradict that at first glance. Maybe you could point out more specific grounds for your views?
Inequalities are shrinking not because everyone is getting richer but because the middle class is being hollowed out. People who used to be middle income earners are now low income earners making them more in line with the working class who were always low income earners. #progress
At least in the US more people have moved up out of the middle class and into the upper tiers, than have moved down and out of it. That is true over 15, 30, 45 year spans.
Progress indeed. The middle class is getting richer more than they're getting poorer.
The World Bank also has a political agenda. Are you not worried about the accuracy of their reports, too?
>Yet poverty as a whole is decreasing according to numerous measures.
Yep. You lift people out of poverty through growth, something capitalists are very good at.
Indeed witness the successes of Brazil! A country under the direction of US capitalism since 1964" with massive natural resources, no nearby enemies ... It's got very dire poverty and extreme wealth inequality.
Vs the countries in Eastern Europe with none of those advantages. Most Brazilians would kill to live like an average person from there.
I don't understand your point, poverty in Eastern Europe has fallen tremendously after the switch to capitalism, but you're saying it has nothing to do with it?
Inequalities might have risen a bit though, I don't know.
yeah, he really cut his own branch very efficiently... we had central planning (with heavy guidance from those fckers from Moscow that invaded us in '68) that just didn't work in long term. People were considering bananas and oranges exotic hard-to-get stock in shops with empty shelves. I recall my parents standing 2 hour queues in crazy weekend hours in -15 Celsius just to get their son some fruit with vitamin C (or fresh bread).
Capitalism ain't perfect, far from it, but what we had here was a major clusterfck, no thank you. And what changed is move to open economy, call it capitalism if you want. With its own warts and issues, but much better overall.
Previous regime got the worst out of people, this at least tries to do the opposite.
Compared to Brazil where people starve to death, life expectancy is way lower, educational standards, medical standards, virtually every social measurement is way lower.
Capitalists like Lula? Uh huh.
The world is about to enter a deflationary period. Perhaps capitalists are not the geniuses you make them out to be and just got lucky. Correlation != causation etc etc
Contrary to popular belief, there can be economic growth during periods of deflation, as demonstrated by the economist Gary Shilling. Paul Buchheit gave a presentation in London which understood capitalism as a technology. I think that is the right way to regard it. Unfortunately, over the last 30 years Western society has turned capitalism into an ideology, something to be worshipped and bowed down to.
How do you know the world is about to enter a deflationary period? With that kind of inside knowledge you can get quite rich.
The central banks are turning off the money taps, growth is pretty stagnant across all major economies (bar the US and UK). Wealth inequality is rising while automation is arriving with a bang putting people out of their jobs and at an increasing rate and also putting downward pressure on prices as manufacturing costs fall, meaning the masses won't be spending much. China was a major driver of global economic growth but is undergoing a huge correction, Brazil has been in a recession since last year, Russia is suffering under sanctions, the Eurozone is becoming Japan mark 2, the price of oil is dropping like never before affecting the Middle East's ability to grow (notwithstanding the war currently ravaging the area). This all points to a period deflation.
Only people with money can make money with economic foresights.
Not true. If you're really sure of yourself you can leverage up without much money.
Much is still some.
Edit: I got down-voted because I've got no money?
I didn't down vote (I can't; I don't have the points) but I imagine it is because what you said sounded like a knee jerk reaction or perhaps because you missed the word without in your quote.
Or because people are assholes. It doesn't matter. Smile (:
Thanks for your kind reply. I don't really mind, I just find it curious how privileged people can be. Living hand to mouth is very humbling and I'm still easily within the top 50% in terms of global wealth, purely due to having been born in the right place.
I never set out to make money anyways (though I would like a little bit more than I have now), but I wouldn't feel comfortable participating in a system I would rather didn't exist (i.e. shorting markets, making money by moving money etc). If I was really interested in that I would have attempted it long ago, (in fact I was presented with ample opportunity to do so, by a dodgy potential investor, in a previous business venture) but I prefer to immerse myself in making things.
Reading posts such as PG's pro-inequality posts I have realised that I have something no rich person could ever have, and that is an insight into how the majority of people in the world think and act, and why this happens. For example I only need one reasonable pay day and my whole consciousness changes, everything I think about, do and occupy myself with, flips. Creativity suddenly explodes and productivity goes through the roof. I'm not sure people who have never experienced hand to mouth living realise how destructive inequality and poverty really are. It is holding back the true potential of the human race in uncountable ways.
> Reading posts such as PG's pro-inequality posts I have realised that I have something no rich person could ever have, and that is an insight into how the majority of people in the world think and act, and why this happens.
Do you think you'd lose this insight if you somehow get granted a living fund that pays us say $10k every month for the rest of your life? I mean it is not much money for PG but it'd change a lot in my life. I could probably put away at least $6k out of the $10k every month and still live fairly well. It'd change my daily life. I think I'd still work but I'd probably be able to be much more honest to my bosses. What do you think?
Yes, absolutely. It would take far less than that to lose it.
"Absolute" poverty, yes.
When it comes to food on the table, or material wealth in general, that's the only kind that matters.
What about actors? The top 1% of actors make more than the rest of the actors combined. Is this fair? Should we tell Tom Cruise that he needs to take 80% of his paycheck for the next Mission Impossible movie and redistribute it to the actors that are not well-known and aren't making as much?
How about something more relevant, like startups: Should it be fair that only 1% of startups make more than any of the other startups combined? Unicorns like Uber and Airbnb should take their profits and spread them around to startups that failed!
Yes, there is inequality, but I don't necessarily a bad thing. It's the natural form of most free marketplaces and systems.
Inequality happens automatically if there is no control. I.e. someone will have way more than others, and not because they created value and are just capturing portions of it. Exceptional value generating individuals are not the norm, they are the exception.
Most money is acquired through luck, inheritance, network effects, rents, and interests on investments.
>Most money is acquired through luck, inheritance, network effects, rents, and interests on investments.
That is an absurdly huge claim to make without a source.
This was my interpretation of this graph:
http://money.visualcapitalist.com/all-of-the-worlds-money-an...
This was recently in HN if I recall so I did not source it in my comment.
We can debate what is the value of owning derivatives but I think we can agree it's not anything like the direct value created by actors?
Incredibly interesting chart which I hadn't seen, thanks. I don't know if I wholeheartedly agree, but I very clearly see your point.
> Most money is acquired through luck, inheritance, network effects, rents, and interests on investments.
Inheritance -> heavily taxed about everywhere.
rents -> you need capital in the first place to secure rents, so it means that somebody has produced some work in the first place to get it.
Interests on investment exist to allow your money to be useful to other people trying new things and building their businesses. So it's a positive enabler.
Not sure what you were trying to demonstrate.
Rebuking the notion that all wealth is earned through directly creating value.
For instance, the biggest reason top actors in hollywood succeed in capturing so much value is because starting in the late 1970's CAA ([1]) moved leverage in negotiations towards actors, not because they are so much better actors. If talent had less leverage, they would create as much value if they were paid less, but studios and their owners would capture the value.
Economy is a wealth creation platform but it does not come with an automatic "fair scoring" system.
Well I mean, maybe we should do that. Do you really think Tom Cruise deserves that much money for what he does? Or that the world is better off with that money going to him instead of someplace else?
Startups already distribute wealth a lot. Investors invest in many startups in order to get to that 1%. So even though they make a lot of money on Uber, they've also lost a lot of money on 99 other startups you haven't heard of.
Some investors do only invest in one startup, but no one is making them do that. So if they lose it is their own fault, and if they win it's only fair. They agreed to enter the lottery, that's a lot different than someone being born poor and stuck there. No one agreed to the lottery of birth.
>Do you really think Tom Cruise deserves that much money for what he does?
People want to, and agree to, give him that money. What other measure of 'deserve' could there possibly be?
>Or that the world is better off with that money going to him instead of someplace else?
It doesn't matter. The world will be fine either way. People though? Tom Cruise is a person. The people paying him are people. They evidently think the arrangement is pretty good.
Depends on how you define fair but the usual solution is to tax Tom Cruise and let the money subsidise the government expenses (education, health etc) of the struggling actors. That's pretty much how it's worked in the developed world for the last century. You can vary the actual tax and spending according to your political preferences.
I feel the serious point Oxfam are looking to make is let down by a definition of wealth that is very distorted.
Their headline is based on a report by Credit Suisse [1] which defines net worth as: "the marketable value of financial assets plus non-financial assets (principally housing and land) less debts."
Consider two people who will earn exactly the same amount of money at every stage of their lives. But one is 18 and has just started working, the other is 65 and has just retired. Is the 65 year old really 1000x richer than the 18 year old, because the 18 year old has saved $100 so far and the 65 year old has had time to save $100,000? Is this really 1000x inequality? For the purposes of determining inequality, these people should be considered equal, because it's simply the case that one person is older and has had more time to save.
A fair assessment of a person's wealth, at least when determining fairness and inequality, should include more than this. It should include an estimate of their future earnings potential plus the social security/welfare state entitlements and state pensions that they are entitled to.
Otherwise you have hundreds of millions of people in the West with negative "wealth" who in reality will enjoy a far wealthier life than someone in the developing world with small positive financial assets and no debt.
Someone with $100 in assets and no debt does not get to claim that they are single handedly "richer" than the combined net worth of tens of millions of university graduates that each have a total career earnings potential of millions of dollars, but who each still have outstanding student debt and thus negative net worth.
Also see this article on the "the wealthy living paycheck to paycheck" [2] which points out that people that will enjoy very wealthy lifestyles are spending rather than saving their income, and therefore really are rich yet will be written off as being far "poorer" than others in terms of financial assets.
[1] http://publications.credit-suisse.com/tasks/render/file/inde... [2] http://www.theguardian.com/business/2015/dec/25/wealthy-amer...
Any simple definition is distorted, inevitably.
Income, consumption or utility have a case. That said, wealth by this definition is most relevant in certain contexts. If you're worried about political consequences, for example. When the majority of property-wealth belongs to a small minority the majority have less reason to preserve property rights, for example.
The availability of credit will allow those that are asset poor but with reasonable earnings potential to compete for resources fairly.
There are of course very serious implications when, for example, asset bubbles and unfunded state liabilities will create unfairness between generations. That's an example of real inequality. There are many other forms of real inequality. Fake inequality is when two people with comparable earnings and abilities to purchase assets are treated as not equal simply because one is older and has had longer to save.
I agree that income and (current) wealth are often fungible. The main reason I think wealth is usually reported because real income figures are hard to come by. If we want to look at the extreme end, current property and not income is the only option.
But, I think wealth (above definition) may be important as a stand alone. Many of the political implications of wealth disparity have more to do with current wealth than income, for example.
I do think you have a point though, as I said. Some wealth disparity is a matter of age, for example. But the disparities we have and those we project are very large. They may overstate disparities in income and consumption taken alone, but I don't think it's more clear headed to dismiss them outright. They do indicate a real and growing disparity.
On the other hand consider those depicted as the "poor" stereotype: Many young people in Asian cities will have low incomes and little to no savings, however many/most will have security and ability to self-sustain: a rural family/clan home, subsistence farming options, livestock.
Compare that to urban low-income families in middle-to-highly developed countries. No roof or food unless you pay for it, paycheck-to-paycheck. Few opportunities to accumulate wealth. No clan/community to help out.
While the first will do an order of magnitude worse on income studies, I'm not sure the latter are overall in a better position, economically.
Any definition of wealth is "distorted", but you can still use them to measure trends. What is really worrying is how fast inequality is growing.
If governments made loans for university education available to a billion more people, that would dramatically increase their future earnings potential and quality of life. Yet this would be flagged as a "worrying increase in inequality" if you count their debt against them but don't count their newly increased earnings potential in their favor.
Similarly, increasing access to healthcare would extend people's working lives. This is a fantastic outcome. But this would increase the number of years that people would be able to save over, and so this again would be flagged as rising inequality because some people will have been able to save for longer. Instead of people retiring at 50 with far greater savings than 18 year olds, you'd have people retiring at 60 with even greater still savings than 18 year olds. Yet those 18 year olds will when they are 60 achieve the same "wealth", so those 18 year olds are not being "wronged" by this inequality.
The primary adjustment that needs to be made is simply to start counting earnings potential as an asset, instead of ignoring it and claiming as a result that people are worse off than they really are.
"The existence of a billionaire is a clear indicator of one or more market failures"
I have been banging this around my head for a while since PG's infamous essay. There are plenty of reasons to see wildly successful people as talented, special etc. But nowhere near enough to believe them to be superhuman. Nor as rare as might be expected.
Becoming a billionaire (or member of top 1% or what have you) is not something that can only be achieved by a certain fraction of the population, like being over 6'6'
There must be market distortions that fail to share out the vast wealth of the Russian oilfields? Similarly for not sharing the license fees of MSWord or the markup on Amazon books.
Maybe PG is right and we need thousands more entrepreneurs out for themselves, and we shall see the inequalities of the world sort themselves out through "market" action.
Which would mean still we need politicos action (why not more female entrepreneurs? What about highly regulated industries?)
I would take a close look at feedback loops from wealth. The very poor is to poor to change anything, while the very rich can change laws and dictate world wide sentiments.
In the end the inequalities of power destroys any linear correlation between skill and income that might otherwise manifest.
Traditionally we've been looking at the lower end of the power distribution to mitigate this (unions, minimum wage, micro loans and so forth) it might be prudent to look at the other end (property laws, corporations, finance and so forth) with similar intentions.
I dont disagree - market distortions can be found anywhere. And ending them will both end billionaires and likely increase equality (less billionaires means more money to spread between everyone else)
>There must be market distortions that fail to share out the vast wealth of the Russian oilfields? Similarly for not sharing the license fees of MSWord or the markup on Amazon books.
Network effects. Microsoft being a textbook example of a company built on them.
> Members of this global elite had an average wealth of $2.7 million per adult in 2014.
I know plenty of people in their 60s who simply busted their asses at middle-class jobs while saving their pennies who are members of this "global elite."
I don't think you do.
The median income in the USA is $52,000. Assuming that a middle-class job pays 3* that amount, and that someone can reasonably save 30% of their salary for the last 20 years they work, that amounts to about $1m saved. Probably a lot less because a person's salary isn't at it's peak for much of their career. Even factoring for a household with 2 incomes at that level you don't get to $2.7m.
I imagine the people you know are members of the elite as you say, but they got there by by having elite jobs and by investing their elite incomes. If you think they're in the "middle-class" you have a somewhat distorted view of the world.
I think you're not understanding that the American middle class covers quite a wide range of wealth and income.
You'd probably also be surprised at just how many millionaires who used to work in factories there are. 40 years of union wages, plus pension, plus investing in a mutual fund. I obviously can't prove it here, but I'm from a blue-collar factory city and trust me, some of those people have multi-million dollar retirement funds.
Granted, you can't replicate that kind of success today, but there are people who didn't work "elite" jobs in possession of millions.
Probably also because the prosperity of those blue collar workers came about by pumping the economy by borrowing from the future. Interest rates were 16%+ in the early 80s, you could have bought a middle class house and refi'd 2 times (at 8%,4%) and basically get two free houses. With interest rates zero or near zero, current middle class individuals will not be able to repeat this feat.
Net worth, that includes your home. And don't forget returns on investment.
Saving $30K/yr and getting a 5% return on your investment gets you very close to $2.5M after a 30 year career. Sure that's in the upper range of middle class, but it's by no means wealthy.
it's by no means wealthy
Are you honestly trying to suggest that someone with $2.5m to their name isn't wealthy? Wow.
I like how you didn't quote my words "upper middle class".
I guess the question is, what is wealthy then? I haven't ever seen a definitive cutoff. $1M? That doesn't seem like much if it's a household with two retired people.
They're certainly not poor, but if they've saved that stash just to blow it all on end-of-life care, they're not really wealthy in the perceived 1% sense.
Someone with $2.5m to spend on end of life care is a heck of a lot wealthier than someone with $250k to spend on end of life care. No matter what, if everything else is equal, someone with $2.5m is very wealthy.
Arguments like "Ah, but they're not really wealthy because..." will always fail because there'll always be the case of someone in the same situation who doesn't have $2.5m, at which point the person with $2.5m is definitely wealthy.
You bring up a good point. When we're talking about wealth, we all seem to ignore age in the process. Age has a huge impact on how wealthy you are.
If you're 25 and you have $2.5M? Yes, you're wealthy since you have 40 years of earning potential on top of your money.
If you're 65 and you have $2.5M? Very well off, but nowhere close to the 25 year old.
Same goes with inequality. If you ignore age, then things really unfair. How can someone have $3M and another nothing? But that ignore the fact that you'll have inequality regardless just due to age. It's not unreasonable for someone who is 65 to have a lot more money than someone who is 25. That's just the benefit of time.
I generally agree with you.
The problem, in my opinion, is that there are too few gradations when talking about wealth. Yes, someone with a million dollars in assets - heck, even $10k in assets - is very wealthy, globally. I completely agree.
But to lump them in with the actual ruling class and call them "elites" is naive.
Yeah, even $200k is very good, that's like 4 houses in India. Most people don't even own one.
I think GP does know some people like this, because the boomer generation experienced tremendous asset appreciation across all sectors (public equities and real estate in particular) during their earning years.
Sure, but being in the right time and place to benefit from a massive housing boom/bubble isn't "busting their asses".
> isn't "busting their asses"
It is if that invested money came from say, pouring metal in a foundry 60 hours a week for 40 years.
If two people do the same amount of hard work, but one ends up a millionaire because they bought a house in the right area 40 years previously, then being a millionaire has nothing to do with their hard work. They are not rich because they "busted their ass" for 60 hours a week. They're rich because they were lucky to live in the right geographical area.
Hard work is replicable. Whether that's hard work pouring metal in a foundry, or writing code, or analysing the stock market and investing well, those can all be hard work. Hard work is not buying a lottery ticket, or a house in an area that gets gentrified decades later. Nor is it giving your wealth to someone else to invest on your behalf.
The "standard" middle class way to wealth is to work hard, save as much as you can, and put your savings into investments that will grow your money.
While a lot of people go the "buy a house" route, and make most of their investment gains from the house appreciating, others will put their money into e.g. the stock market and make their returns there.
Which part of this do you think "doesn't count" or has "nothing to do with hard work"?
If we were talking about only people who worked hard, put X% of each salary into the stock market, and ended up wealthy because their investments paid off, would that count as "getting rich from hard work"? Is your objecting specifically with the fact that their chosen investment was in a house?
Don't forget, buying a house is the same as putting money into a diversified stock portfolio in terms of work - they had to save X% of their salary to pay off a mortgage instead of putting it into the stock market, but effectually they worked the same amount and saved the same amount to end up at the same place. I don't think it's worth making a big point of difference over which exact vehicle they chose to put their investments in, as it obscures the point.
Note: I recommend the stock market instead of buying a house because, like parent says, investing in a house is more of a lottery.
A 7% return on savings will exceed $2m after 20 years.
Absurd that he would try and argue about live savings and claim someone does not invest.
If they stashed in their mattress sure. But don't fucking argue about savings and claim they don't invest it at all.
And all of the poor of the USA is relatively wealthy to the population of the rest of the world too.
Still as far as 60 year olds go, that is actually pretty good. There are many 60 year olds who did not pinch pennies or did and had some medical disaster wipe their savings.
> And all of the poor of the USA is relatively wealthy to the population of the rest of the world too.
Yes, something I like pointing out to my friends who never worked in a factory complaining that there are no more good factory jobs.
Global poverty is declining in part because that work left America.
Strange to see a Rothschild speak out against inequality.
(FTA) Lady Lynn Forester de Rothschild [...] said: “Oxfam’s report is just the latest evidence that inequality has reached shocking extremes, and continues to grow. It is time for the global leaders of modern capitalism, in addition to our politicians, to work to change the system to make it more inclusive, more equitable and more sustainable."
You may have heard of Amartya Sen, welfare economist specialising especially in inequality and poverty.
His wife, I learned recently, is Emma Georgina Rothschild.
So: not all that improbable.
The smart ones can sense the pitchforks coming. The only way they can retain their position of wealth and power is to ensure the rest of us are well fed, housed, clothed and generally satisfied in life.
A few more questions regarding your point:
- Lynn Forester de Rothschild, Chief Executive Officer of E.L. Rothschild has what interest in fighting inequallity? A look at the list of investments of E.L. Rothschild http://www.elrothschild.com/investments paints a picture of an investment fund. So, the very 1% that is getting richer by moving money around while working population earns the dividends. Funny thing, one of the companies listed is The Economist Group. It would be interesting to know, how favourable/critical of Oxfam is The Economist.
- Oxfam had a budget of €947.1 million for the period 1st April 2013 - 31th March 2014. Almost a billion euros! And who has given them that much money? https://www.oxfam.org/en/annual-and-financial-reports has that data. Or, at least, that is what I have hoped for. The list of donors om page 68 of the annual report for 2013 - 2014 is just a birds-eye view.
- In its report, Oxfam says very little about growing inequallity in developed countries. Does that mean, that only developing world has inequallity problems?
Not really. The rich are far more invested than anyone else in "the system" (that made and keeps them rich) being "inclusive, equitable and sustainable". Especially the sustainable part. That effectively means "keeping themselves rich".
The poor are not very invested in the system (they should be, of course, since without an economy their fate would be far worse, but human nature means you're not going to be happy having less than everyone else, even if destroying the system would make sure you have much less). This is the basis of Marxism, and of course it's true. In a way jealousy gets in the way of rational thought.
This is one of the really good parts of capitalism. It concentrates power with people who want and need the system to succeed and who have very little power to use force to secure specific outcomes.
You may agree to this to varying extents, but just compare China's attempts to stabilize it's currency with the US ones. China : 208 people in the financial industry (and counting) "disappeared", a lot of them with reports of the police asking for them right before their disappearance. US: so far 1 person arrested, and a lot of people agree that it's for a good reason, not just the government. You might say "but the US gave boatloads of money to the banks/rich !". Well, yes. But there's no difference there, so did Europe, so did China ... [1]
[1] http://www.ft.com/intl/cms/s/0/4568598e-8731-11e2-9dd7-00144...
2.7 million puts one in the richest 1%? Unexpected, but I guess it makes sense. There are still a lot of very poor in the world.
I started to think "injustice" when I saw the article, but 2.7 million will barely buy a nice house in some parts of the US. I suppose in some ways wealth is still relative.
I guess I'm more curious about what percentage of world assets the .001% control.
Where did you find that 2.7m number? The most recent data is the Credit Suisse 2015 set, which you can see here:
https://www.credit-suisse.com/uk/en/about-us/research/resear...
They put the 1% line at $760k, and that's net worth: include the value of your home, subtract your debts.
I'm pretty unhappy about this oxfam article. It talks about "the richest 1%" and "the billionaires" alongside each other as if these groups were even remotely similar. This is furthering the myth of some kind of group of "shady rich people" who are behind the global financial conspiracy. Reality check: if you're reading this, you're almost certainly in the top 10% ($68,845 in total assets). According to the same data set, the median wealth in the US is $50k, so about half the population is in the top ten percent. You are the rich people this article is talking about.
Comparing the "richest 80 billionaires" to the bottom 50% is similarly misleading, because the bottom 50% has about 0.5% of the global wealth (which I think roughly answers your question about the top 0.001%). If you lined up the top 80 billionaires, shot them all, and redistributed all their wealth to the bottom 50%, then those people would still be in extreme poverty.
There are serious global wealth inequality problems, and this oxfam article doesn't really talk about them at all, and instead tries to perpetuate a popular meme. I strongly suggest that people skip it and read the Credit Suisse report instead - the data tells a much more interesting story.
Here are the numbers which the oxfam article doesn't mention, and should:
85.65% of the global wealth is held by the top 10% of the population, which is 477m people, of which 113m are in the US, with second place going to Japan at 58m.
32.3% of global wealth is held by the middle class (defined as $50k to $500k wealth); 92.4% is held by the middle class or above. 37% is in the US. Africa, India, and Latin America together represent about 4%.
2.7 million is from the article. But looking back you are right, it's an average not a cutoff.
Among the 1% I bet the top 1% are weighting a lot too and so on. IMO the issue is pointless, it's just a statistical mirage, discussing about that won't make you richer or poorer, just time wasting. AND among the 1%, the majority of them would think about the same injustice back in the days they worked hard to earn, until they got the "chance" of being rich themselves.
1% is just tugging at heart strings, marketing.
If you further divide that 1% you'll find it like you suggest is much worse than that. 0.001% seems more likely.
It's very clearly an exponential curve, 0.001% probably has a disproportional share of 1% and so on.
A good response to this[1] was posted here on Hacker News, but so far it languishes unread, with too few upvotes to promote it from the new submissions page. Take a look for a specific response to the article kindly submitted to open this active thread.
[1] "What Oxfam won’t tell you about capitalism and poverty"
http://blogs.spectator.co.uk/2016/01/what-oxfam-wont-tell-yo...
On the other hand every single person of the richest 90% owns at least as much as the whole poorest one-third does.
Heck, even i do. So i own as much as 2 400 000 000 people do in total. https://www.oxfam.org/sites/www.oxfam.org/files/file_attachm...
At least a court helped the poorest person on earth last year: "In March 2014, a French high court upheld Kerviel's prison sentence but ruled he would not have to repay €4.9bn" https://en.wikipedia.org/wiki/J%C3%A9r%C3%B4me_Kerviel So there is still hope left.
If you simply conflate "richest" with "most powerful", this is already the case, and has been for most of human history. It's unclear why we should care about monetary wealth specifically more than other dimensions of power.
Probably because it's very easy to measure, and correlates with other dimensions through well known adjustments like Purchasing Power.
Money and assets are more easily measured, taken, and transferred.
It's easily measurable and since everything pretty much correlates with everything else when it comes to complicated systems like the world economy putting in some corrective feedback is a worthwhile effort. As it is I think things are stuck in a positive feedback loop (rich getting richer) and that's not healthy from either social or systems perspective.
The global economy is in a transitional period, computerization has made inequality rise, but also Women working has led to higher inequality among families, Robotics and further automation of current industries will make things much worse for the people currently alive. There isnt a clear solution, what will ultimately happen is people working less and a higher percentage working in higher skilled jobs.
So I assume everyone downloaded the PDF AND the excel? Good, so lets get to the numbers:
My problems:
1. Percentages: the article talks in percentages, as if something tangible was lost from 50-45%. Here is the table of wealth by year in total vs the bottom 50%:
year Total($bil) 50% ($bn)
2000 $117,052.00 $702.31
2001 $113,390.00 $793.73
2002 $122,757.00 $859.30
2003 $147,566.00 $1,032.96
2004 $166,018.00 $1,162.13
2005 $171,182.00 $1,198.27
2006 $195,941.00 $1,763.47
2007 $220,043.00 $2,200.43
2008 $189,877.00 $1,708.89
2009 $205,656.00 $1,850.90
2010 $216,084.00 $2,593.01
2011 $224,382.00 $2,243.82
2012 $238,089.00 $2,142.80
2013 $255,620.00 $1,789.34
2014 $263,242.00 $1,842.69
+224.89% +262.38%
Besides which, isn't that F^$%^&$ing amazing! That the bottom 50% areover 2 and a half times richer. That is world changing for the people it affects, surely? Yet the story is the rich have more. Really, "Rich have more" is the story? I can't wait for "water is wet" as installment 2.
More importantly, why is the story not the drop from 2010 to 2014? What was that?
So I sought out the source: https://publications.credit-suisse.com/tasks/render/file/?fi... and it appears that the wealth in the bottom 50% is made up mostly of mostly of two things (see figure 8, page 12): 1. Poor nations - e.g. Africa and, largest of all, India which accounts "... for over a quarter of people in the bottom half of the distribution". 2. Ruch Americans in debt - the tail seems skewed that way, to me at least.
If we take just India, they had a massive currency exchange problem vs the USD since 2010. In 2010, it was 46.21 rupee to the dollar, in December 2014 it was 62.8 (http://www.x-rates.com/average/?from=USD&to=INR&amount=1&yea...). That is a drop of about a third in value. That is likely at least part of the reason for the wealth drop.
2. The percentage projection carries on from what looks like an historical anomaly between 2010 and 2014. If the currency exchange reverses course, and India claws back even 10% of the gap, the percentage to the 1% will likely reverse to some degree.
3. The data set for the rich changes dramatically. The minimum to be top 80 in 2014, would be top 15 in 2004. Zuckerberg appears out of nowhere in 2011, adding a few billion (his wealth versus the 81st position) to the total from nowhere. If Wallmart's founder had survived, we'd have a top 80 with 4 more billionaires in it, making it an even larger a total. That's not really indicative of anything (other than rich people can die too).
Look, I get Oxfam's political agenda, but I think a +262.38% increase in wealth for the bottom 50% - even after what looks like a currency disaster since 2010 - is amazing in and of itself, and any comparison to an arbitrary set of extremely wealthy is just political machinations.
So, I know this is a complicated issue that has been discussion with a lot of emotion and even anger. I find it very difficult to make any sense of it all, because it strikes me that in every discussion some crucial things are mixed up so much that the entire discussion strikes me as unproductive most of the time. In single back and forth's, we mix up:
- the meaning of words - the specificity of the argument (say, actor income versus a country versus the global economy) - the ethical assumptions underlying our argument - the actual facts
Personally I've been raised, developed my thoughts and occupy an environment that can be considered strongly on 'the left' of the spectrum (yes, also vague). That said, I really try to properly understand the 'other' side(s).
But it's difficult, considering that my entire world view is built on assumptions, arguments, lines of reasoning that are built on 'facts' and 'knowledge' that is 'leftist'. My left-wing viewpoint is like a realist painting while my right-wing viewpoint is more like a crude child's drawing. So obviously I'm more likely to reject the latter, and judge its proponents harshly, because it seems so stupid and primitive.
So I guess my question is... How would I best go about developing a more nuanced picture of the 'other' side(s) so that I can try to find 'truth' that is not conveniently aligned with my upbringing and current viewpoints, however difficult (or impossible) that might be?
I've been trying to subscribe to blogs that don't align with my views. I've also been trying to look into philosophical views that seem to further this, but I find it difficult because I don't really know what axioms underly these views so alien to me. So I don't always know where to look. I've been trying to respectfully read economic or social arguments (including pg's recent essay) that I have some fundamental issues with, but it all falls apart through sheer complexity and ambiguity (see: the discussions here where half the time people seem to discuss what pg actually said). And whenever some discussion does go into 'facts', I'd really have to read the sources where half the time I would need to study that particular field to even understand the abstract, not to mention that I can't really check the accuracy of these facts in the first place (and we all know that the further we get from the 'natural' sciences, the more ambiguous and slanted these facts become).
Here's the thing. I was raised an Evangelical Christian, and now I'm (basically) an atheist. The difference between these two paradigms is huge. I've believed both these sides with full conviction, so I know in quite a bit of detail how to defend many beliefs from either side. I feel that as a result, I can often pinpoint at which point in an argument things diverge, and I also feel I can reasonably choose in which direction to go. It also feels a bit schizophrenic and uncomfortable.
But the only reason I can do this is that I've basically studied theology and I've been immersed in this now-alien point of view for about 25 years, not counting the period of overlap where I was very confused about matters.
Obviously I cannot do that with an issue such as this. So what can I do, aside from try to assume that the viewpoint alien to my own is probably not as stupid or superficial as it seems? How can I assess a commenter's viewpoint when I don't have any knowledge of their background, honestly, or expertise as a person (which I do feel is important. we need to take shortcuts at some point).
It's incredibly frustrating, but I don't want to get stuck in convictions that I just happen to have chanced into, basically.
It might be good to explore some of the books that are considered classics with regards to free market capitalism. Adam Smith's writings, along with Milton Friedman and Friedrich Hayek, will give you a much more nuanced understanding of the philosophies behind the ideas of the 'right'. The Road to Serfdom is one I would suggest starting with. I think you will find some much more powerful arguments for right wing economics from these authors than you will find in most of today's writing on the subject as well. I think it will help you think about the issues more clearly and independently as well (by better understanding both sides), to come up with your own arguments. IMHO, I've tried reading what are considered 'classics' of left wing economics, and fail to find the same nuance, or arguments that are materially different from what is written today. Of course this could be just my own opinion, so I would love to hear your views after reading.
You know what, I'll actually do that. Would 'The Road to Serfdom' be accessible enough to someone who has a relatively broad general knowledge, but is mostly versed in psychology?
This might sound strange, but is there any chance you would be willing to check up on my resolve in about a month? Just a quick email would be enough. It's just that with everything else going on in my life currently, I'm likely to forget even if I set a reminder or task...
(and I understand if you don't feel like doing this of course)
I set a reminder on my phone for a month from now. I'll do my best to follow up. TRTS is grounded in political/economic philosophy, as it was written before economics had the analytical rigor it has today. Don't let that fool you into thinking it is out of date and incorrect. Many things in the field of economics and politics can't really be accurately measured (how do you really measure how much a 1% tax increase affects future innovation and entrepreneurship, if those innovations don't exist yet?) That being said, if you can handle dense psychology books, you might need to re-read a few paragraphs and sentences multiple times to get it, but you'll probably be fine.
What a great question! I hope I can help.
The biggest differences in economic debates are not between people who have different viewpoints. The biggest differences are between people who have actually studied economics and know what they're talking about, and most people, who are saying things that don't make sense, and basing most of their arguments on misunderstandings and wishful thinking.
I find that just reading a lot of "real" economics from real economists will usually make everything you read much, much clearer, whether you come at it from the "left" or the "right". I also tend to find that most economists are significantly to the "right" of the standard populace, which would make it even better for your needs. (This could just be my biased reading habits, but I think not - I have other thoughts on the subject but they're not for now).
Now, how can you go about reading real economists? The best way is to actually study economics, which you can do either via online videos (plenty of them available) or reading a textbook. I recommend Mankiw's "Principles of Economics" textbook, it's very readable.
If you don't have the time/inclination for reading a whole textbook, the next best thing is to read more "introduction to economics" books. A few that I highly recommend:
1. Basic Economics - Thomas Sowell. Brilliant book, was my first introduction to real economics. Most people will say it's heavily biased to the "right", so could be good for your usecase, but keep it in mind.
2. Naked Economics - Charled Wheelan. A bit shorter and lighter than Sowell, but a great book. I think it's a lot more balanced.
3. Great Courses courses on economics (audiobooks). A good one to start with is "Economics" by Timothy Taylor.
After this you can dive deeper into specific questions/areas you care about, e.g. there are brilliant courses by the Great Courses on how the stock market works, etc. Very useful to know what's actually going on in the world.
Massive income inequality hurts economic growth. Why? The rich don't spend (much of) their money, they hoard it.
What do they do with it then? The only way they could hold money and it not have a positive impact is if it's sitting in cash.
If they invest it or hell, even put it in a savings account, the money is having a positive impact on the economy. If they buy a ridiculous $50M yacht? That money flows to the company that built it.
That's true, but it'd be true if all that money were divided between 1000 people's bank accounts or if 50 people bought $1m yachts too. And that way there'd be more people enjoying the wealth rather than just one. Some people think that's better.
That's not necessarily so. If you invest in real estate (and many do), wealth and income can grow even without any physical improvements, just due to supply and demand. National income will grow (since it includes rent) but it doesn't create any new jobs.
Here's an analysis showing that capital is earning more than labor mostly due to housing prices:
http://www.brookings.edu/about/projects/bpea/papers/2015/lan...
All of which may have something to do with rock solid fact that global capitalism is lifting people out of poverty at the fastest rate in human history.
You would have to define "hoard" here. But there is a more interesting question which is that when Bill Gates is worth 54 billion a lot of that is stock in Microsoft, not fungible cash.
When you have a millionaire who is "rich" because they own their house (no mortgage) and the house is worth more than a million dollars, they might still be living paycheck to paycheck. The difference being they could leverage their house if they needed money on short notice.
That said, it would be interesting to see what shooting down rent-seeking taxes would do here. If for example you allowed copyrights to expire in a reasonable time, then you could have people put on a play and keep the profits. Something they can't do today.
Life was better for everyone when we had a demand side economy. The working class and middle , had some money to put back into the economy, even after they paid there bill's. I was only a kid in the 60's but I had eye's, and society was more equal and better for everyone.
I guess it depends on what you mean by "money" the wealthy have most of their wealth tied up in ill liquid assets like property, would you call owning property hoarding? Cash is almost always invested, either directly or indirectly through deposits.
Actually, straight up hoarding would be helpful to the economy, IMO. If the money isn't being used to build some ridiculous yacht or 40 bedroom house that no one is going to ever make full use of, then the people that actually would have done that work now are freed up to do stuff the benefits the rest of the community.
Why all the downvotes? HN'ers like yachts and empty mansions, huh?
Let me rephrase the title using absolute values:
"Richest 73 Million People Will Own More Than All The Rest by 2016"
That's less than the population of Germany having more wealth than the other 7 billion.
I've mentioned this before, but if you want to know why this is, read Debt: the First 5000 Years.
It's life changing
Yeah. It's somewhere between France and Turkey.
But in my opinion the whole 99-vs-1 narrative is bonkers.
EDIT: Let me clarify to the downvoting PC frat boys: 99% vs 1% is a shit metric that doesn't address the issue of inequality. The only thing it enables is moronic populism.
Imagine if we take all the wealth of the 1% and distribute it uniformly among the rest of the 99%. Do you really think this will lead to an equal distribution of income?
Well the richest 1% have definitely lost more than the rest (proportionally) over the last 2 weeks as well...
https://www.youtube.com/watch?v=pdR7WW3XR9c&feature=youtu.be...
Rising inequality on its own is not a problem.
It is a problem if only because of the huge power differential it creates and the segregation it leads to. It doesn't result in healthy societies.
The kind of argument the OP is trying to make makes no sense to me, the only reason I see for us to "trust the market/system" is because it promises the most efficient allocation of resources, fairest compensation for value provided and opportunity and development for all. If it fails, it fails. I don't see how obcene inequality and all the problems of human misery that comes with it(which goes from insecurity to violence to even wars) isn't an instance of economics failling its own proposition(I will admit it does like 1% of it, tho).
The most efficient society would be one where money and resources goes where it's needed and that it would create virtuous cycles(e.g.: take people out of misery -> they become economic agents -> everyone's work serves needs of someone else -> development -> world GDP increases -> humankind is able to do more things -> society gets star-wars-like capabilities -> more people more happy)
The inequality is also bad for the rich since they end up getting eaten.
They'll be touched by your concern.