I'd agree that risk capacity (or element of ruin, as it's known in gambling circles) is a big factor in rising inequality. But there are many other advantages that the wealthy enjoy that may also explain the divergence. The wealthy can borrow money at much more favorable rates, they can meet minimum investment thresholds in ventures or funds that provide higher rates of return, they benefit from economies of scale in large businesses, the list goes on and on.
And just as there is no one major cause, there is no one major solution, like a wealth tax. Rather, we need to overhaul much of our financial and business regulation to favor decentralization. Limits on corporate and real estate ownership, corporate board participation, and business advertising would all go a long way toward reinvigorating small business and creating a healthier, less homogenized economy.
I see the solution in another direction. For every monopoly I see I also find a government enforcing that monopoly. Limit government power, not private ownership if you wish to improve the lot of the average person.
A lot of the monopolistic/oligopolostic cartel-like behavior in my industry seems to be the result of free markets. Of course certain instances of government intervention have also encouraged cartel-like behavior.
I think you have to take it on a case-by-case basis and you can't make a general claim. On balance, free markets have probably caused more cartel-like behavior in my industry but abandoning free markets would be strictly worse than the mix that we have now.
Government enforcing and supporting monopoly is government not doing its job. Look to the individuals responsible, particularly those who've constructed the incentives for other parts of government to support such monopolies.
Left to themselves, corporations acquire monopolies. The market gravitates towards nasty local maxima when there is information asymmetry, or when people simply don't have enough spare resource to compare options properly (attention asymmetry?). The primary organised force against corporate opportunism is government.
Government does of course have its own failure modes, democracy regardless (for similar reasons) against which corporations and the free market operate.
Claiming that either half of the system is remotely capable of self-regulating is moronic.
You confuse cause for effect. Emerging monopolies gain the power to warp regulations in their favor by virtue of the concentration of wealth and power. That concentration is an inevitable consequence of the wealth-income feedback loop. Without limits on wealth, capitalism collapses in on itself like a black hole.
> Emerging monopolies gain the power to warp regulations in their favor by virtue of the concentration of wealth and power.
Exactly. And no civilization on earth has yet solved the "Power tends to corrupt; absolute power corrupts absolutely." problem at scale. In what society does power not exist in some form? In even the most primitive of human societies the first and best portion of the meal would be given to those who had the most political favor. We have control of a single vector in this equation, the size of the government. I see no other way.
You're not looking very hard. As I suggested above, we can pursue government policies (largely independent of government size) that favor decentralization. We don't have to throw up our hands in defeatism. We have perfectly good processes to implement these policies and improve our society. The only real obstacle, frankly, is the kind of fatalistic passivity you're proposing.
When our government was much smaller, it committed genocide of American Indians and recognized slavery. Similar things can be said of some other countries with small governments. I'm not convinced that government corruption is much of a function of its size.
This is really what sold UBI for me. Making it possible for more people to give entrepreneurship a try and explore their business ideas seems like it could be very valuable to our society. I'm not saying it would be a slam-dunk great investment, but it would do a lot to address this inequality of risk-taking ability.
It's not just overt financial risk. For example, tying health insurance to a job makes it hard for many people to leave their job (to start or join a new business).
Just as the roads provide an effective baseline for physical communication, universal health insurance of some sort provides a baseline or substrate for innovation.
There are other examples (e.g. clean air) but the health insurance case is most significant in the USA.
The cause of inequality is a combination of inherited wealth, workers not having control of means of production, and a lack of real direct democracy in how we make decisions as a society. This inequality is enforced with violence by those hoarding all of the wealth and power. Both capital and the state are to blame here.
Interesting mental exercises aside, this article is hard to take seriously.
To start with just one of your assertions, I don't think "real" direct democracy is likely to reduce inequality. As one example, California Prop 13 was passed by direct ballot and many would point to it as a major _cause_ of inequality.
People vote mostly of out self interest, but mediating their expression of self interest through elected representatives enables pragmatic compromises that make the most good for the most people. Ultimately, I view representative democracy as a recognition that the political process will always depend on a small number of powerful people, so it's better if those people have some accountability to the people. Direct democracy circumvents that political process, forcing representatives' hands and blocking compromise. The result is stuff like Brexit.
I do think there is a place for direct democracy, but it is very limited. Historically it has been useful in affecting constitutional change e.g. the 1967 Australian referendum to grant citizenship to Aboriginals.
There are also ideological factors at play here. When GP is arguing for direct democracy they're not arguing for it in isolation, they're arguing for it as opposed to the political-economic system of today which they see as under the thumb of capital, which in part is due to the representative model. But simply removing the representative model won't rid us of capital's totality, nor its mechanisms (inequality through equality etc.)
Let's not forget that government regulation specifically prohibits people below a wealth threshold to take part in earlier stage investments.
"Accredited investor" is a complete joke of a term. It implies some kind of education in the topic, but the only qualifications are making enough money each year or having enough money in the bank.
As if no one making less than $200k has the money or the mental capacity to invest in something risky.
To say that risk capacity is the "real" source of inequality is simply incorrect.
There are plenty of people at or below poverty level who have little/no aversion to risk - it's just that the high-stakes gambles accessible to them are of a different nature than those accessible to a person of middle/upper class.
Risks with high rewards associated with impoverished people:
Risks with high rewards associated with the middle/upper class:
- Investing (stocks, crypto)
- Quitting your job to start a business
For the impoverished, the consequences and chances of things going awry are stronger than a person of middle/upper class, yet they do pursue those risks, likely at a higher rate than the upper/middle class pursues the risks listed for them.
I'd agree that risk capacity (or element of ruin, as it's known in gambling circles) is a big factor in rising inequality. But there are many other advantages that the wealthy enjoy that may also explain the divergence. The wealthy can borrow money at much more favorable rates, they can meet minimum investment thresholds in ventures or funds that provide higher rates of return, they benefit from economies of scale in large businesses, the list goes on and on.
And just as there is no one major cause, there is no one major solution, like a wealth tax. Rather, we need to overhaul much of our financial and business regulation to favor decentralization. Limits on corporate and real estate ownership, corporate board participation, and business advertising would all go a long way toward reinvigorating small business and creating a healthier, less homogenized economy.
> they can meet minimum investment thresholds in ventures or funds that provide higher rates of return
On the other hand, anyone can invest in FAANG stocks and get a higher rate of return.
For example, if you'd bought some MSFT when Nadella became CEO, you'd have a 5x rate of return.
I see the solution in another direction. For every monopoly I see I also find a government enforcing that monopoly. Limit government power, not private ownership if you wish to improve the lot of the average person.
A lot of the monopolistic/oligopolostic cartel-like behavior in my industry seems to be the result of free markets. Of course certain instances of government intervention have also encouraged cartel-like behavior.
I think you have to take it on a case-by-case basis and you can't make a general claim. On balance, free markets have probably caused more cartel-like behavior in my industry but abandoning free markets would be strictly worse than the mix that we have now.
Government enforcing and supporting monopoly is government not doing its job. Look to the individuals responsible, particularly those who've constructed the incentives for other parts of government to support such monopolies.
Left to themselves, corporations acquire monopolies. The market gravitates towards nasty local maxima when there is information asymmetry, or when people simply don't have enough spare resource to compare options properly (attention asymmetry?). The primary organised force against corporate opportunism is government.
Government does of course have its own failure modes, democracy regardless (for similar reasons) against which corporations and the free market operate.
Claiming that either half of the system is remotely capable of self-regulating is moronic.
What evidence is there that limiting government power would improve the average person's situation?
Moving from feudalism to democracy clearly improved life for the average person, I'm not sure it's clear after that fact.
You confuse cause for effect. Emerging monopolies gain the power to warp regulations in their favor by virtue of the concentration of wealth and power. That concentration is an inevitable consequence of the wealth-income feedback loop. Without limits on wealth, capitalism collapses in on itself like a black hole.
> Emerging monopolies gain the power to warp regulations in their favor by virtue of the concentration of wealth and power.
Exactly. And no civilization on earth has yet solved the "Power tends to corrupt; absolute power corrupts absolutely." problem at scale. In what society does power not exist in some form? In even the most primitive of human societies the first and best portion of the meal would be given to those who had the most political favor. We have control of a single vector in this equation, the size of the government. I see no other way.
I see no other way.
You're not looking very hard. As I suggested above, we can pursue government policies (largely independent of government size) that favor decentralization. We don't have to throw up our hands in defeatism. We have perfectly good processes to implement these policies and improve our society. The only real obstacle, frankly, is the kind of fatalistic passivity you're proposing.
When our government was much smaller, it committed genocide of American Indians and recognized slavery. Similar things can be said of some other countries with small governments. I'm not convinced that government corruption is much of a function of its size.
This is really what sold UBI for me. Making it possible for more people to give entrepreneurship a try and explore their business ideas seems like it could be very valuable to our society. I'm not saying it would be a slam-dunk great investment, but it would do a lot to address this inequality of risk-taking ability.
It's not just overt financial risk. For example, tying health insurance to a job makes it hard for many people to leave their job (to start or join a new business).
Just as the roads provide an effective baseline for physical communication, universal health insurance of some sort provides a baseline or substrate for innovation.
There are other examples (e.g. clean air) but the health insurance case is most significant in the USA.
The cause of inequality is a combination of inherited wealth, workers not having control of means of production, and a lack of real direct democracy in how we make decisions as a society. This inequality is enforced with violence by those hoarding all of the wealth and power. Both capital and the state are to blame here.
Interesting mental exercises aside, this article is hard to take seriously.
To start with just one of your assertions, I don't think "real" direct democracy is likely to reduce inequality. As one example, California Prop 13 was passed by direct ballot and many would point to it as a major _cause_ of inequality.
People vote mostly of out self interest, but mediating their expression of self interest through elected representatives enables pragmatic compromises that make the most good for the most people. Ultimately, I view representative democracy as a recognition that the political process will always depend on a small number of powerful people, so it's better if those people have some accountability to the people. Direct democracy circumvents that political process, forcing representatives' hands and blocking compromise. The result is stuff like Brexit.
I do think there is a place for direct democracy, but it is very limited. Historically it has been useful in affecting constitutional change e.g. the 1967 Australian referendum to grant citizenship to Aboriginals.
There are also ideological factors at play here. When GP is arguing for direct democracy they're not arguing for it in isolation, they're arguing for it as opposed to the political-economic system of today which they see as under the thumb of capital, which in part is due to the representative model. But simply removing the representative model won't rid us of capital's totality, nor its mechanisms (inequality through equality etc.)
Let's not forget that government regulation specifically prohibits people below a wealth threshold to take part in earlier stage investments.
"Accredited investor" is a complete joke of a term. It implies some kind of education in the topic, but the only qualifications are making enough money each year or having enough money in the bank.
As if no one making less than $200k has the money or the mental capacity to invest in something risky.
To say that risk capacity is the "real" source of inequality is simply incorrect.
There are plenty of people at or below poverty level who have little/no aversion to risk - it's just that the high-stakes gambles accessible to them are of a different nature than those accessible to a person of middle/upper class.
Risks with high rewards associated with impoverished people:
Risks with high rewards associated with the middle/upper class: For the impoverished, the consequences and chances of things going awry are stronger than a person of middle/upper class, yet they do pursue those risks, likely at a higher rate than the upper/middle class pursues the risks listed for them.Let's not forget ZIRP and QE Infinity:
https://fortune.com/2019/05/02/fed-interest-rates-income-ine...