Home > Economics - General, World Events > How (not) to defend entrenched inequality

How (not) to defend entrenched inequality

January 25th, 2012

The endless EU vs US debate rolls on, but now with an odd twist. Although the objective facts about economic inequality, immobility and so on are far worse in the US than the EU, the political situation seems more promising. (I’m not talking primarily about electoral politics but about the nature of public debate.)

In the EU, the right has succeeded in taking a crisis caused primarily by banks (including the central bank, and bank regulators) and blaming it on government profligacy, which is then being used to push through yet more of the neoliberal policies that caused the crisis. And, as we’ve just seen, formerly social democratic parties like New Labour in the UK, are pushing the same line.

By contrast the success of Occupy Wall Street have changed the US debate, in ways that I think will be hard to reverse. Once the Overton window shifted enough to allow inequality and social immobility to be mentioned, the weight of evidence has been overwhelming.

This post by Tyler Cowen is an indication of how far things have moved. Cowen feels the need, not merely to dispute some aspects of the data on inequality and social mobility in the US, but to make the case that a unequal society with a static social structure isn’t so bad after all.
Update Cowen offers a non-response response here. Apparently, disliking arguments for inherited inequality, such as his point 3 (because of habit formation, social mobility reduces welfare) is a “Turing test” for reflexive leftism.

Cowen makes seven arguments, ranging from weak to risible. He is an able economist, and no fool, so the weakness of the case he makes reflects the difficulty of making bricks without straw. I’ll reorder his arguments from weakest to strongest and respond to them in turn.

3. For a given level of income, if some are moving up others are moving down.  Do you take theories of wage rigidity seriously?  If so, you might favor less relative mobility, other things remaining equal.  More upward — and thus downward — relative mobility probably means less aggregate happiness, due to habit formation and frame of reference effects.

This is an ancient argument against income redistribution (Bentham had a version of it, IIRC) but it’s surprising to see it extended to the case of intergenerational mobility.  Apparently, expensive tastes, once acquired in childhood, can’t be dispensed with without great suffering.

5. How much of immobility is due to “inherited talent plus diminishing role for random circumstance”?  Is not this cause of immobility very different — both practically and morally — from such factors as discrimination, bad schools, occupational licensing, etc.?  What are you supposed to get when you combine genetics with meritocracy?  I do not know how much of current American (or other) immobility is due to this factor, but I find it discomforting that complaints about mobility are so infrequently accompanied by an analysis of this topic.

A lot of handwaving here. The supposed genetic role is assumed, not supported by any evidence to produce a suggestion that declining mobility arises because the US has now become more meritocratic, and therefore more efficient at promoting people of high ability. There’s plenty of evidence going the other way, notably including the fact that class matters much more than it used to in getting admission to high-status colleges..

4. Why do many European nations have higher mobility?  Putting ethnic and demographic issues aside, here is one mechanism.  Lots of smart Europeans decide to be not so ambitious, to enjoy their public goods, to work for the government, to avoid high marginal tax rates, to travel a lot, and so on.  That approach makes more sense in a lot of Europe than here.  Some of the children of those families have comparable smarts but higher ambition and so they rise quite a bit in income relative to their peers.  (The opposite may occur as well, with the children choosing more leisure.)  That is a less likely scenario for the United States, where smart people realize this is a country geared toward higher earners and so fewer smart parents play the “tend the garden” strategy.  Maybe the U.S. doesn’t have a “first best” set-up in this regard, but the comparison between U.S. and Europe is less sinister than it seems at first.  “High intergenerational mobility” is sometimes a synonym for “lots of parental underachievers.”

Another version of the same argument.  The only notable point is the observation that “smart people realize this is a country geared toward higher earners”.

6. I am more than willing to hear arguments than a less mobile society is a less stable society, or otherwise a society which makes worse political decisions.  But I haven’t seen serious arguments here.  By “serious arguments” I mean those which take endogeneity into account and go beyond noting that Denmark is a better polity than Brazil, and so on.

Granted, there doesn’t appear to be a lot of hard statistical evidence here (commenters, please prove me wrong on this). But there is a ton of US political rhetoric from the past (right up to the last six months or so) that would suggest great social and political benefits from living in a ‘land of opportunity’.

2. Measured mobility in the United States does not seem to be falling, or at least not falling much, as shown by Scott Winship.

This is a general class of argument I find unimpressive. Although statistical evidence is hard to find after a point, it seems pretty clear that at some point in the past income mobility was greater in the US than in Europe. And the evidence is clear that the reverse is true now. So, arguments of this kind amount to picking particular subperiods where you get negative results. There’s a further problem in that Winship’s summary of the data is unreliable. For example, this study  shows that “transmission of high-income status significantly increased” but Winship only reports the finding that “he transmission of low-income status remained stable”.

1. If the general standard of living is rising (and I am more than willing to admit problems in this area for the United States), mobility takes care of itself over time.  I find it more useful to focus on slow growth, if indeed that is the case.  Just look at income growth for non-wealthy families and that is more useful than all the mobility measures put together.

Maybe so, but as Cowen admits, the evidence is in, and median household income has been falling for a decade. Lower down the scale, the poverty rate is rising. Over the last 40 years, income growth for non-wealthy families has been much weaker than for wealthy families, and much slower than in the postwar decades. As Cowen must surely remember, when this fact was pointed out, defenders of the US system used to claim that it didn’t matter because the US system allowed lots of economic mobility. Some, like Paul Ryan are still pushing this claim.,

7. I would like all measurements in this area to take into account the pre-migration incomes of incoming entrants.  Denmark, which doesn’t let many people in, is a much less upwardly mobile society once you take this into account.  Sweden deserves more praise, and in general this factor will make the Anglo countries look much, much more supportive of mobility.

This is about the only argument worth taking seriously. But, in previous debates of this kind, it’s turned out that taking migrants into account doesn’t change much. The US would be a particularly complicated case because of the large number of undocumented migrants, many (most?) of whom return home at some point.

To sum up, Cowen’s post is an exercise in defending the indefensible, and its weaknesses reflect that. As Mitt Romney’s tax returns show, wealthy Americans have the rules rigged in their favor from day one. And that’s assuming they obey the rules. Unlike the poor, they can mostly cheat with impunity. In these circumstances, it’s unsurprising that US inequality is so deeply entrenched. The only surprise is the suddenness with which the facts have become common knowledge.

It remains to be seen how this will play out electorally, but there are at least some promising signs. Eight months ago, the situation in the US, seemed if anything even worse than in Europe. Obama seemed determined to capitulate to the Repubs, with the support of the entire centrist establishment, still committed to the idea of bipartisanship. Political discussion was dominated by the claims of the Tea Party, essentially identical to those of the European Austerians. The debt-ceiling debacle, the success of Occupy Wall Street and the recent Romney revelations have changed that. First, the fact that the Repubs are extreme reactionaries, uninterested in any kind of bipartisan compromise, has finally sunk in to all but the most obtuse centrists.[1] Second, the point that the rich play by different rules from the rest of us has been made glaringly obvious.[2]

Given the weakness of the economy, and the absence of any real action from the Administration between the initial stimulus and last year’s Jobs Plan, Obama’s re-election can’t be taken for granted. But it’s looking increasingly likely, and his SOTU speech will hopefully make commitments that will be hard to retract after November.

fn1. I don’t buy the 11-dimensional chess version of this story, but the slapdown of Obama’s painfully sincere attempts to reach across the aisle was exactly what was needed

fn2. It would be great if we could see a similar transformation regarding civil liberties, the permanent War on Terror and so on, but I’m not holding my breath. SOPA and the TSA can provoke outrage, but NDAA not so much, at least for the moment.

Posted via email from John’s posterous

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  1. Nicholas Gruen
    January 25th, 2012 at 13:31 | #1

    Wow, I expected to find a lot of hand wringing from Cowen when I linked through to the article. But Nope – just out with it – Short Tyler Cowen “Equality is overrated”.

  2. January 25th, 2012 at 13:44 | #2

    Thanks for posting this. Your readers may not know is that Tyler Cowen is a director of the Mercatus Center, a lobby shop funded by the billionaire Koch Brothers. It’s product is neoliberal propaganda.

  3. Fran Barlow
    January 25th, 2012 at 15:39 | #3

    @Invisible Backhand

    [Its] product …

  4. Ikonoclast
    January 25th, 2012 at 15:43 | #4

    JQ – “The weakness of the case he makes reflects the difficulty of making bricks without straw.”

    Or perhaps it illustrates the the difficulty (for Cowen) of making brickbats without straw man arguments. ;)

  5. rog
    January 25th, 2012 at 16:51 | #5

    Is he saying that smart Europeans are smarter than smart Americans?

  6. billie
    January 25th, 2012 at 16:54 | #6

    Perhaps an arguement for the point “less mobile society is a less stable society,”

    There is an expatriate Australian who has compared the health of Americans at age 65 against the health of Britons at age 65. At age 65 you can see the results of a lifetime in the health system. The research found that the health of Britons in the bottom quintile was better than the health of Americans in the top quintile.

    Source ABC, Radio National, The Health Report sometime 2005-2009

  7. PeakVT
    January 25th, 2012 at 19:52 | #7

    What are you supposed to get when you combine genetics with meritocracy?

    Something that sounds remarkably like a dog whistle, perhaps?

  8. critical tinkerer
    January 25th, 2012 at 20:17 | #8

    What Cowen is arguing is about individual mobility between existing permanent jobs, which has no effect on economy. What matters, and what JQ argues is about jobs becoming more profitable, en masse, not people filling those jobs, which has reall effect on total economy trough risen consuming power. Positive feedback of having higher incomes. mobility of a particular job position to provide better standard over time. Like a mobility of a CEO/menagemant job to skyrocket payout into stratosfere over last 30 years, while all other jobs mobility stagnated.
    and GDP grows slower since 1%, which contains more and more of mobility(income) can not spend effectively as 99% can consume and with it affect GDP more positively. Not to talk about diminishing health and education levels with poorer majority which is moral case and long term effects, but to stay on pure economic case, which right supposedly understands, while decisevely reject any moral logic.

  9. January 25th, 2012 at 21:04 | #9

    Today the world’s richest person, Bill Gates, was a computer programmer. Anyone think that his particular set of genes would have resulted in him becoming immensely wealthy if he’d been born even ten years earlier? I don’t think so. Our environment is in a constant state of change and as a result, so are the gene combinations that might help people strike it rich.

  10. Ernestine Gross
    January 25th, 2012 at 22:26 | #10

    It seems to me Tyler Cowen’s post invites a reflection of Schelling’s focal point (http://en.wikipedia.org/wiki/Focal_point_(game_theory)), a game theory concept well known to Cowen.

    Consider Cowen’s point 4 (fully reproduced in JQ’s post). Cowen suggests differences in the behaviour of ‘smarts’ in the US and in the EU as an explanation for differences in ‘mobility measures’. On the face of it, his suggestions sound plausible against casual observations – except for the word “ambition”. Cowen equates ambition with personal monetary income.

    In many game theory models, payoffs of strategies played by humans are defined in terms of monetary values but not in Schelling’s original work. Schelling’s ‘focal point’ idea rests on common knowledge that coordinates the actions of individuals without communication. One way to interpret ‘common knowledge’ is to say people in a geo-politically defined region share cultural values. Following this line of thought, the differences in the behaviour of ‘smarts’ in the EU and the US is not due to differences in ambitiousness but due to different arguments in their utility functions. Cowen may have contemplated this idea and the possibility that the cultural values (arguments in the utility functions) in the US are a factor in the different mobility measures (“Maybe the U.S. doesn’t have a “first best” set-up in this regard…”). But he avoids this conclusion by adding “but the comparison between U.S. and Europe is less sinister than it seems at first. ‘High intergenerational mobility’ is sometimes a synonym for “lots of parental underachievers.” This is a pity because the implication of contemplating 2 ‘focal points’ (in terms of cultural values) leads to vastly different implications as to possible reasons for the measured mobility differences between the EU and the US.

  11. Dan
    January 25th, 2012 at 22:32 | #11

    Can I distil that into: Tyler Cowen thinks that Americans have a narrower and less interesting notion of what constitutes success than Europeans (but maybe isn’t wise to the fact that he thinks that).

  12. paul of albury
    January 26th, 2012 at 00:59 | #12

    or even that so called ‘smart’ Americans aspire more to what their country can do for them than what they can do for their country? Fortunately for their society this isn’t universal.

  13. Brian Hanley
    January 26th, 2012 at 04:17 | #13

    @Ronald Brak
    Please note that Bill Gates father was a wealthy attorney.

  14. Brian Hanley
    January 26th, 2012 at 05:04 | #14

    I voted for Obama in the last election. I found his speech seriously disingenuous in critical areas. There were a few nice messages in there and quite a few internal contradictions.

    Since Obama has been a milquetoast dealing with a sociopathic opposition. I don’t think he should run again.

    I’ll start with the small and move to the large problems:

    1. He uses Steve Jobs as an example of what makes American industry great after saying outsourcing weakens America. Steve Jobs outsourced everything. And when Obama asked him about it, Jobs said flatly, “Those jobs aren’t coming back. Period.”

    2. He refers to regulations that prevent startup entrepreneurs from getting financing. Flatly – as a multiple startup entrepreneur – that’s garbage. Difficulty in financing of startups has nothing to do with regulations on it. It does have to do with the con-games that make more money on paper than doing anything real. It also has to do with the virtual monopolies on investment that venture capital has by sector. VC groups won’t invest in things that will hurt their current investments until after they have divested.

    3. He refers to the “living will” for banks. He talks about a “special financial crimes unit”.

    But Obama is the president who has done nothing but protect these biggest campaign donors of his so far. The Obama DOJ has 1 guy for the biggest financial crimes of all time. The Obama SEC has said it plans to appeal a judge’s ruling that throws out the Citigroup settlement. In that case, Citibank pushed creating bad loans for the purpose of insuring them with Credit Default Swaps. Citibank sold those loans off then collected on the defaults. The whole thing appears to have been deliberately engineered. That is criminalization of banking as an industry. And Obama is protecting them.

    The Obama administration is still pushing an egregious settlement with State Attorney’s General to absolve bank executives. http://www.nakedcapitalism.com/2012/01/thanks-nc-readers-tom-miller-says-no-mortgage-deal-imminent.html

    Meanwhile, William Black, prosecutor for the S&L crisis, says tens of thousands should be going to prison. I think he’s right. Can I believe Obama will actually follow through if elected? Not likely. He will only follow through if he has no other choice.

    4. Obama takes credit for the Arab Spring. And yet, it was Wikileaks that set it off with released diplomatic cables describing the corruption of Tunisia’s leadership.

    No mention is made of the machinery of tyranny that the Obama administration has unleashed on Julian Assange. The USA has been executing a plan of secret payoffs and pressure on Sweden as a way to get our hands on Julian. There is no basis for this in law. It is worthy of the KGB under Stalin. And yet, there is silence.

    No mention is made of the machinery of tyranny that the Obama administration has grabbed for itself. (http://www.salon.com/writer/glenn_greenwald/ )

    Glenn Greenwald notes that while Obama did not sign NDAA, that is not a cause for celbration. “Contrary to how it was portrayed, the Obama administration’s threatened veto of the NDAA rested largely on the assertion that they did not need a law vesting them with indefinite detention powers because they already have full power to detain people without a trial”

  15. Brian Hanley
    January 26th, 2012 at 05:10 | #15

    I wrote about Obama and his speech because of the reference at the end to Obama getting re-elected. It seemed to me that was an implicit endorsement of Obama as candidate.

    It may be true that Obama is better than the alternatives on the Republican side. But that isn’t saying much. A plaster lawn ornament would be better than any of the republican candidates.

  16. rog
    January 26th, 2012 at 05:54 | #16

    If you were to accept Cowens argument you would also have to accept that the US is deficient in public goods and alternative pursuits and only geared to earning more which sort of knocks on the head the notion that it is a land of opportunity. Using his criteria Europeans have more opportunity which the smart ones utilize, Americans are stuck with cash.

  17. John Quiggin
    January 26th, 2012 at 06:07 | #17

    @Brian Hanley I agree entirely with this and your previous comment

  18. January 26th, 2012 at 06:30 | #18

    Brian, I’ll make myself a little clearer (now where did I put that invisibility potion?) Genetics does appear to have an effect on income. For example, there is a very strong genetic component to appearance and good looking people tend to earn more. However, although there have been some pretty strong contants there has still been variation in what is considered beautiful over the decades and so the combination of alleles required to best match has varied. Having Marilyn Monroe’s genes in the 1950s was probably more helpful than it would be today as standards of beauty are slightly different. So as the culture (environment) has changed, so have the best genes to have. The same thing has happened to other traits. For example raw physical strength was something employers often looked for 100 years ago, but has declined in importance, while the ability to sit one on one’s behind and use a computer for 8+ hours a day has increased. In fact, 100 years ago employers didn’t value this ability at all.

    Your mentioning that Bill Gate’s father was a wealthy attorney raises an important point. One that many young people today who want to be rich overlook. I keep telling them, if you want to be rich, make sure you have wealthy parents. But they just look at me as if I am some kind of idiot.

  19. alfred venison
    January 26th, 2012 at 06:42 | #19

    dear Brian Hanley
    thanks for your measured tirade about obama’s record – nicely put. people think i’m nuts when i says he’s a great disappointment. i’m sick of it; i’ll refer them to you.
    yours sincerely
    alfred venison

  20. Dan
    January 26th, 2012 at 07:44 | #20

    @Brian Hanley

    Outstanding.

    As a regular reader of CounterPunch I am familiar with critiques of Obama from the left but this is one of the fiercest and most cogent I have read. The kindest thing you could say is that he is taking advice from the wrong people.

  21. Chris Warren
    January 26th, 2012 at 08:24 | #21

    I find it odd that so many people attempt to assuage their worries over reality by criticising leaders.

    As someone said, “Its the economy stupid”.

  22. Dan
    January 26th, 2012 at 09:00 | #22

    And how exactly would you propose the reshape the economy without enlightened and courageous leadership?

  23. Fran Barlow
    January 26th, 2012 at 09:11 | #23

    @Brian Hanley

    It’s hard to take issue with your account above of the results of the first Obama term, and doubtless, you could have added many further criticisms had you been so inclined.

    This shows us clearly that what drives US policy is much larger than the Presidency or even Congress but the interests of dominant fractions of the boss class, and that what is needed is not a new iteration of the old false dilemma — the Democrats or something even worse — but a new paradigm of governance — inclusive governance in which the interests of working people are at the foundation of policy.

    Whatever else he is, Obama is no fool. He must know who he is helping and harming, and yet he smiles and does it anyway. At best, one can see him as a piece of intriguing political flotsam on an ugly cultural sea, made uglier by his own flailing about. Like our own regime here, he has alienated most who wanted to console themselves with the thought that the worst of boss class public policy would be barred by his tenure. That he has made such poor use of the political goodwill he had in 2008 is perhaps the most perplexing of all things for his supporters. I suppose that what we are now witnessing is what happens when the bill for political or cultural cognitive dissonance becomes due.

  24. rog
    January 26th, 2012 at 09:51 | #24

    Greenwald argues that tyranny by Washington has bipartisan support.

    http://www.salon.com/2010/12/14/wikileaks_20/singleton/

  25. Troy Prideaux
    January 26th, 2012 at 10:02 | #25

    @Dan
    “And how exactly would you propose the reshape the economy without enlightened and courageous leadership?”
    Does our current western systems allow for such leadership? Especially the massively corrupt US political process?

  26. Ikonoclast
    January 26th, 2012 at 10:27 | #26

    Dan :
    And how exactly would you propose the reshape the economy without enlightened and courageous leadership?

    The real issue is to reshape ownership of the productive apparatus of the economy. We need to move (by steps) from corporate capitalist and oligarchical ownership to a capitalist-cooperative system. By this I mean we remain basically capitalist but companies must be cooperatively owned and managed by the workers. Cooperatives would still compete with each other in a capitalistic fashion. Non-working shareholders would be phased out. Retirees would get a pension equal to the basic wage. The separate managerial class would be phased out. The public sector would be expanded to provide a job guarantee (in the public service) and a full and better range of public and human services including health, mass transit a dirigist energy and national infrastructure policy and so on.

    The largest peronal income in the country would not be permitted to more than 10 times the basic wage which would be legislated with the job guarantee. Personal and family wealth would face punitive taxes once it reached 10 times the average wealth. Money sent off-shore to avoid these measures would be confiscated. Rich individuals who persisted in attempting to circumvent these laws could face prison. Those emigrated in protest at this more equal society would be exactly those greedy exploiters you don’t want. Let them go but not their wealth.

  27. Dan
    January 26th, 2012 at 10:51 | #27

    Inspiring stuff, but who drives the change? Or, to put the question more broadly, how to get from here to there?

  28. Troy Prideaux
    January 26th, 2012 at 11:01 | #28

    Dan :
    Inspiring stuff, but who drives the change? Or, to put the question more broadly, how to get from here to there?

    Like McCain, I tend to believe it’ll take 2 election cycles for the brown stuff to finally hit the wind farm, but I’m also worried about much larger issues in the US between now and then, like the collapsing of their currency.

  29. Fran Barlow
    January 26th, 2012 at 11:31 | #29

    @Ikonoclast

    I don’t need to agree with your precise specifications, or even agree that in practice they are all feasible to like the overall thrust of your outline.

    I think one could scale in radically progressive taxation between 10 and 25 times average wealth and income. I have no problem with people sending some or all of their after tax income overseas. I don’t agree with imprisoning recalcitrants trying to evade taxation. Asset confiscation would serve adequately. We want to spend as little on prisons as possible.

    I’m not sure how you could phase out “the managerial class” or even if this would be desirable. Effective and efficient managers contribute to good work environments and good outcomes. Assuming accountability and a viable model for the work unit and the other egalitarian measures, I’ve no problem with management.

  30. alfred venison
    January 26th, 2012 at 11:42 | #30

    dear Ikonoclast
    sounds a bit like an updated proudonian/syndicalist model of federations of workers’ co-ops – not that i’d disapprove in the least if it were to transpire. hell, throw in a bit of social credit & i’d even vote for it, if it came to that. but as for maximum wealth being measured at ten per cent of the ovarall average, wouldn’t that mean a static overall average wage over time & no increase in wealth for anyone? and, ultimately, wouldn’t that be a matter for the worker/owners co-ops to set for themselves & their members, as part of the (presumably) healthy competition, in a hybrid, capitalist-co-operative economy, between different worker/owner co-ops for business, resources & the recruitment of appropriately skilled or cashed up fellow worker/owners?
    yours sincerely
    alfred venison

  31. Fran Barlow
    January 26th, 2012 at 12:33 | #31

    @alfred venison

    but as for maximum wealth being measured at ten per cent {times [orig]} of the overall average

    Now …

    wouldn’t that mean a static overall average wage over time & no increase in wealth for anyone?

    No, not necessarily. It would place some constraints on inegalitarian distribution of wealth and income, but if the value of production rose by 10%, it would not constrain movement within the tolerance band — e.g. people on half average wealth and income taking a much greater than average share of new wealth, or even those who were 8 times as wealthy as the average becoming 10 times as wealthy.

    It would tend to militate against extreme maldistribution of wealth and income however, where “extreme” was defined as starting at one order of magnitude of positive difference.

    How enterprises arranged their business would be a matter for them, whereas the taxation system would deal with the results.

    One potential problem might be the issue of non-taxable benefits. In taxation regimes seen as confiscatory, an enterprise might simply “pay” people in short hours — giving them the maximum money prior to the confiscation threshhold, and then cutting their working hours. A person who only works 5hours per week and still gets 10 times the average income is not much less privileged than someone working 30 hours per week and getting 60 times the average income. You’d also have to define job perquisites quite broadly as well to avoid evasion or artificial schemes.

    In a way, this is why consumption-based taxation ought to have a place in the system, if only because it complicates evading the reach of taxation. It also captures more revenue from extra national tourism. A system that allowed more flexibility and a smoother tax curve as people’s incomes entered the confiscatory threshholds but clawed back through purchase of services and goods, revenues that could be used to supply non- or semi-liquid benefits to those on or near the bottom of the distribution might end up being a more egalitarian in its outcomes than a regime that simply sought to confiscate everything above a specific relative threshhold.

  32. Ikonoclast
    January 26th, 2012 at 14:44 | #32

    I’m sure “my” suggestion needs plenty of work on it. Of course, these ideas are not original.

    What ought to be clear to people is that something has to change. Corporate oligarchic capitalism is about to fail spectacularly and a lot of people, in the billions probably, are going to get hurt very badly. The oligarchs may manage to insulate themselves for another decade or two except where revolutions occur.

    Corporate oligarchic capitalism fails or soon will fail all the following tests. I mean the tests of

    (1) Democracy;
    (2) Equity;
    (3) Peace;
    (4) Sustainability;
    (5) Fulfillment; and
    (6) Aesthetics.

  33. alfred venison
    January 26th, 2012 at 15:22 | #33

    dear Fran Barlow
    i’m not so worried about differences in personal wealth if those differences have been earned fair & square (conditions apply). i don’t have a great problem with some people having more money wealth than others. some people seem to need a lot of expensive material goods to be happy, others appear at least equally happy with less stuff. if its their gig to accumulate a lot of money to buy a lot of stuff in order to be happy as they see it then i have no great problem. my problem is if its their gig to accumulate a lot of money to buy political influence. that’s a problem i’d work on by some kind of political campaign finance limits.

    if a worker were to be very good at some skill, or average good at some skill in high demand, then worker/owner co-operatives should be able to offer above average to get that person’s skill for their co-op rather than a competing co-op. conversely, a worker with skill in high demand should benefit from any worker/owner co-op willing to pay higher than average to get that skill for their enterprise.

    but, most importantly, who gets to decide the “threshold of excess”? at what point is a worker with a skill in demand earning “too much” for it? and when does a worker/owner co-op with a burning need for a particular skill pay “too much” for it?
    ideally, it should be the prerogative of each worker/owner co-op to pay what it thinks is an acceptable wage for scarce skills it needs. it should be allowed workers with skills in demand to earn more for those scarce skills while they are rare & in demand.

    if there were to be limits on wages/labor costs then such decisions would need to be decided by some kind of federation of participating worker/owner co-ops. and conversely, of course, if limits on wage/labor cost was something a federation of worker/owner co-ops wanted, argued for & voted for then i’d have no problem with that. but i think the greater problem is with unlimited political campaign financing.

    anyway, this is just “pipe-dreaming”.
    yours sincerely
    alfred venison

  34. rog
    January 26th, 2012 at 15:33 | #34

    Test

  35. Fran Barlow
    January 26th, 2012 at 15:56 | #35

    @alfred venison

    I’m not in favour of wage control. It’s much more efficient to allow enterprises to pay as they see fit and allow the portfolio of tax measures to do fairness and adequacy for all.

    I also don’t accept your boolean on inequality. Within certain bounds, inequality is probably unavoidable in practice, and the net social benefit of attempts to force equality would be sharply negative. On the other hand, allowing gross inequality leads to what we have now — a situation in which a tiny minority of the world sets policy in ways that buttress both their privilege and political monopoly. That makes the inequality not a mattter of quantity, but of quality. Even in Australia, the difference between the culutral significance of the CEO of NAB or BHP and a 16-year-old apprentice pastry chef is not captured merely by the proportion of the former’s income that the latter earns. When one asks how the “gods” of Wall St or Warren Buffett compare with a child labourer in Sierra Leone, it’s hard to prefer biological to cultural taxonomy and say these two beings are even of the same species. Yet in theory, according to the official culture, they are equals.

  36. Chris Warren
    January 26th, 2012 at 16:49 | #36

    Ikonoclast’s “capitalist cooperatives” will not destroy the threat of economic crisis.

    Co-operative capitalism is just as contradictory as hierarchical, oligopoly, capitalism, and just as threatening to society.

    Technically you abolish capitalism with the economics of socialism (democratic or undemocratic). However at the level of humanity, you create a better and more stable society with “democratic socialism” mixing plans and free markets as best suits circumstances.

  37. Ikonoclast
    January 26th, 2012 at 18:46 | #37

    According to Wikipedia, as at July 1 2010 the Australian minimum wage was equivalent to $20,000 international dollars (in round numbers) and this was 50% of 2009 per capita GDP (again in round numbers).

    This seems reasonable on the face of it but I am am not sure how it pans out in detail for people living on that sort of money.

    At the top end of the scale, there seems to be no real justifiction (IMO) for anyone to earn or have income of more than 10 times that i.e. $400,000 international dollars. Certainly no manager or even CEO is worth more than that. The current mythology that top CEOs create value an order or more above that order (e.g. $4,000,000) is just that; mythology.

  38. alfred venison
    January 26th, 2012 at 19:41 | #38

    dear Fran Barlow
    sorry for misconstruing your position & thanks for the correction. not sure, though, how i did a “boolean”, but it behoves me to be sure i’ve not been misconstrued due to “category error”.

    its only against the backdrop of Ikonoclast’s hypothetical society, back at #25 as i took it then (particularly the part about companies cooperatively owned & managed by the workers in competition with other worker owned & managed companies) that i’d be sanguine about worker/owners who were able to accrue more money wealth than others by working the parameters of that system.

    i’m not at all in that way sanguine about differences in money wealth in the present system where a lot of it has been gained by coercion, fraud & expropriation. in a society where worker/owners controlled the means of production & the usufruct from the surplus this would be less a problem, imo. the nub is getting from here to there, of course.

    but, crucially, my sanguine attitude, in addition to Ikonolast’s hypothetical society of competing worker/owner co-ops, is crucially also contingent on, at least effective, political campaign contribution/expenditure controls. i’m ok for comrade worker/owners to work & be paid more or work & be paid less, in order to accrue more money wealth or to accrue more time wealth, but not in order to accrue money wealth to buy unhealthy amounts of political influence.

    in the present situation, some kind of political campaign finance reform would do a lot to bring issues & a better quality of policy debate back to politics, imo.
    yours sincerely
    alfred venison

  39. Dan
    January 27th, 2012 at 08:16 | #39

    Campaign finance reform would be a great start and is also happily within the existing Overton window.

  40. Troy Prideaux
    January 27th, 2012 at 09:01 | #40

    Dan :
    Campaign finance reform would be a great start and is also happily within the existing Overton window.

    Absolutely (!), without that, it’s almost pointless implementing other much needed reforms.

  41. Dan
    January 27th, 2012 at 09:07 | #41

    This is a good resource:

    http://democracy4sale.org/

  42. James Haughton
    January 27th, 2012 at 09:53 | #42

    Arguments that the distribution of wealth reflect meritocracy are easily combatted by observing that the distribution of wealth looks nothing like a bell curve.

  43. Dan
    January 27th, 2012 at 10:07 | #43

    Why would merit (whatever that is) be normally distributed?

  44. Charles
    January 27th, 2012 at 21:24 | #44

    Brian it’s a bit sad when one has to say Newt Gingrich, is probable the best republican on offer, at least he is a straight down the line rogue and his motives will probable be limited to robbing the treasury.

  45. Charles
    January 27th, 2012 at 21:26 | #45

    “Why would merit (whatever that is) be normally distributed?”.

    Because life is a normal distribution, once you understand the maths you will understand why.

  46. Dan
    January 28th, 2012 at 00:03 | #46

    I’m a statistician by trade…

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