Futher reading/thoughts on gross inequality needed
January 18, 2017 6:56 PM Subscribe
The recent Oxfam report on the 8 richest men holding as much wealth as the poorest 50% of the world has led to me hearing arguments about how these people deserve their money and they give to charity so it's all OK, which I find kind of awful. Does anyone have thoughts/ websites/discussions/books to recommend that examine this in a more sophisticated way?
I know we're operating in a broken system that even allows this to happen, but I still feel grossed out by the individuals who have hoarded this much in a world where people are literally starving to death and dying of preventable disease because their countries don't have the infrastructure to provide them with necessary care. Can someone who knows more than me about these people, and the global economy, expand on this issue a bit more/recommend sites, discussions, books, films or tv programs etc to help me get more of a grip on this situation?
I know we're operating in a broken system that even allows this to happen, but I still feel grossed out by the individuals who have hoarded this much in a world where people are literally starving to death and dying of preventable disease because their countries don't have the infrastructure to provide them with necessary care. Can someone who knows more than me about these people, and the global economy, expand on this issue a bit more/recommend sites, discussions, books, films or tv programs etc to help me get more of a grip on this situation?
Response by poster: He's on my to-read list, next book for 2017!
posted by everydayanewday at 7:15 PM on January 18, 2017
posted by everydayanewday at 7:15 PM on January 18, 2017
Well, one thing to consider is what it means to be that rich, and what the alternatives are for these people.
Let's take Michael Bloomberg as an example - his worth is an estimate, and it's almost entirely comprised of the value of his company. So it's not like he has that cash sitting around - he happens to be the substantial majority owner of a very profitable private company. The company makes some number of billions of dollars in profit every year, of which nearly all gets donated to charity via Bloomberg Philanthropies. So instead of thinking of it as a hoard of cash, think about it like a magic money making machine that generates 4 billion dollars in profit per year. 95% or more of that money goes to charity. Almost all that money is generated from financial institutions like big banks, the primary customers of Bloomberg.
If he wanted to immediately redistribute all of his money, he'd have to do something like take the company public. He'd get the 40 billion dollars from the public (by selling shares) and immediately donate it to charity. Let's say the company becomes like Capital One, which happens to be worth about that. But at that point the money making machine would stop generating philanthropic money and start generating money that goes in the pockets of the new owners - the public, investment funds, etc.
So it's either 40 billion dollars right now, or 4 billion dollars a year for as long as the company keeps going...more if it grows, less if it doesn't. By holding on to the company and being that rich, he's keeping control of the future direction of the company and ensuring that it keeps generating money for his foundation. So it's not quite straightforward to me on what the best desirable outcome in this situation, but I'm going to watch this thread with interest and hopefully people will chip in with some interesting resources.
posted by true at 7:29 PM on January 18, 2017 [13 favorites]
Let's take Michael Bloomberg as an example - his worth is an estimate, and it's almost entirely comprised of the value of his company. So it's not like he has that cash sitting around - he happens to be the substantial majority owner of a very profitable private company. The company makes some number of billions of dollars in profit every year, of which nearly all gets donated to charity via Bloomberg Philanthropies. So instead of thinking of it as a hoard of cash, think about it like a magic money making machine that generates 4 billion dollars in profit per year. 95% or more of that money goes to charity. Almost all that money is generated from financial institutions like big banks, the primary customers of Bloomberg.
If he wanted to immediately redistribute all of his money, he'd have to do something like take the company public. He'd get the 40 billion dollars from the public (by selling shares) and immediately donate it to charity. Let's say the company becomes like Capital One, which happens to be worth about that. But at that point the money making machine would stop generating philanthropic money and start generating money that goes in the pockets of the new owners - the public, investment funds, etc.
So it's either 40 billion dollars right now, or 4 billion dollars a year for as long as the company keeps going...more if it grows, less if it doesn't. By holding on to the company and being that rich, he's keeping control of the future direction of the company and ensuring that it keeps generating money for his foundation. So it's not quite straightforward to me on what the best desirable outcome in this situation, but I'm going to watch this thread with interest and hopefully people will chip in with some interesting resources.
posted by true at 7:29 PM on January 18, 2017 [13 favorites]
Money is human time. The immensely wealthy have masses of human lifetimes tied up in their offshore accounts. That's slavery. I don't know whether any philosopher or economist looks at it this way, but I do, and it alternates between making me angry and making me sad.
posted by zadcat at 7:30 PM on January 18, 2017 [9 favorites]
posted by zadcat at 7:30 PM on January 18, 2017 [9 favorites]
I share your sense of disgust, but ... I don't think that Oxfam's statistic is very helpful. Felix Salmon explains, here:
http://blogs.reuters.com/felix-salmon/2014/04/04/stop-adding-up-the-wealth-of-the-poor/
posted by HoraceH at 8:06 PM on January 18, 2017 [7 favorites]
http://blogs.reuters.com/felix-salmon/2014/04/04/stop-adding-up-the-wealth-of-the-poor/
posted by HoraceH at 8:06 PM on January 18, 2017 [7 favorites]
I would recommend against Piketty for a reason I'll get to in a second.
Positive recommendations include Conscience of Liberal, by Krugman; Winner Take All Politics, by Hacker; Twilight of the Elites, by Hayes; Out of Sight, by Loomis. I have Rewriting the Rules of the American Economy by Stiglitz in front of me on my coffee table as a I type but I haven't read it yet; other things by Stiglitz have been good. To be fair only the first and probably last are really about wealth inequality but the middle ones are addressing its causes or effects. Online Mike Konczal, who is Stiglitz's co-author, is one of many good ones available.
Why I anti-recommend Piketty to liberals: It's a long book and parts are a chore and it's *not* about why inequality is bad. And if you believe inequality exists 70% has limited value. Buying it became trendy on the left but people didn't read it. I did, and the people who skipped it had the better of it (in most cases.) The basic structure is a short argument as to why theoretically inequality can increase in capitalism and then lots of data to argue it is increasing. Like lots of data estimating rates of return on investment for various countries. Did I mention lots of data? It's fargin' interminable. It really is of mild interest for the standard leftist non-academic who's not getting into arguments about why Fisher (IIRC) classic 1950's analysis was misguided and needing arcane facts to argue with.
OTOH if you already have it, read the first few chapters then skip to the last third, where the wealth tax policy proposal is discussed; I think it's probably worth the time in that abridged version. He sold me on the wealth tax, and I'm actually pretty wealthy, so I didn't expect to like it. But definitely don't feel obligated to read the middle.
posted by mark k at 8:45 PM on January 18, 2017 [8 favorites]
Positive recommendations include Conscience of Liberal, by Krugman; Winner Take All Politics, by Hacker; Twilight of the Elites, by Hayes; Out of Sight, by Loomis. I have Rewriting the Rules of the American Economy by Stiglitz in front of me on my coffee table as a I type but I haven't read it yet; other things by Stiglitz have been good. To be fair only the first and probably last are really about wealth inequality but the middle ones are addressing its causes or effects. Online Mike Konczal, who is Stiglitz's co-author, is one of many good ones available.
Why I anti-recommend Piketty to liberals: It's a long book and parts are a chore and it's *not* about why inequality is bad. And if you believe inequality exists 70% has limited value. Buying it became trendy on the left but people didn't read it. I did, and the people who skipped it had the better of it (in most cases.) The basic structure is a short argument as to why theoretically inequality can increase in capitalism and then lots of data to argue it is increasing. Like lots of data estimating rates of return on investment for various countries. Did I mention lots of data? It's fargin' interminable. It really is of mild interest for the standard leftist non-academic who's not getting into arguments about why Fisher (IIRC) classic 1950's analysis was misguided and needing arcane facts to argue with.
OTOH if you already have it, read the first few chapters then skip to the last third, where the wealth tax policy proposal is discussed; I think it's probably worth the time in that abridged version. He sold me on the wealth tax, and I'm actually pretty wealthy, so I didn't expect to like it. But definitely don't feel obligated to read the middle.
posted by mark k at 8:45 PM on January 18, 2017 [8 favorites]
Here's Piketty in 20 minutes, by Piketty: TED talk
posted by at at 9:24 PM on January 18, 2017 [2 favorites]
posted by at at 9:24 PM on January 18, 2017 [2 favorites]
Best answer: I know you asked for sophistication, but I think it's sort of simple: most of these people, in some way or another, have built their wealth off the labour of people in low-income countries who make things and are paid less than a living wage for it. Large corporations know the exact cost of manufacturing every single component of their product. They could easily factor in the cost of a living wage and decent working conditions if they were prepared to pay for them. Instead they monitor the margins of their subcontractors, and put pressure on them to squeeze overtime from their workers and fight tiny wage increases tooth and nail. Over the past decade, Chinese workers have managed to win wage rises so that the average wage is now very close to a living wage. So companies are literally packing up factories and moving to Vietnam and Burma where wages are lower.
In general, the wages of the workers who make the product are only a tiny percentage of its consumer price. Reducing profit by a dollar per item could probably make the difference between someone spending their life in working destitution to being able to feed and house their family and pay for opportunities and education for their kids. Instead, that difference is used to create wealth for individuals, or fund multimillion dollar sponsorship deals.
Where to read more about this stuff - local newspapers in low-income countries covering minimum wage cases, trade union initiatives like the Asian Floor Wage Alliance, or the financial press in high-income countries.
posted by trotzdem_kunst at 9:48 PM on January 18, 2017 [13 favorites]
In general, the wages of the workers who make the product are only a tiny percentage of its consumer price. Reducing profit by a dollar per item could probably make the difference between someone spending their life in working destitution to being able to feed and house their family and pay for opportunities and education for their kids. Instead, that difference is used to create wealth for individuals, or fund multimillion dollar sponsorship deals.
Where to read more about this stuff - local newspapers in low-income countries covering minimum wage cases, trade union initiatives like the Asian Floor Wage Alliance, or the financial press in high-income countries.
posted by trotzdem_kunst at 9:48 PM on January 18, 2017 [13 favorites]
I'd recommend 'The Spirit Level' by Kate Pickett and Richard Wilkinson. It examines the damage wrought by inequality, for both rich and poor.
posted by matthew.alexander at 3:40 AM on January 19, 2017 [1 favorite]
posted by matthew.alexander at 3:40 AM on January 19, 2017 [1 favorite]
In 2013, economist Greg Mankiw (a well-known academic who wrote one of the best-selling econ textbooks and served as George Bush's chief economic adviser) wrote "Defending the One Percent" in a volume of the Journal of Economic Perspectives devoted to the subject (alternative link). He argued that the income of the one percent reflects their contributions to society, and that our current system of taxes and spending is already sufficiently progressive.
Responses were forthcoming, shall we say. If you want to go down the rabbithole, just search for [mankiw "defending the one percent"]. In addition to the other articles in the JEP issue, here's a representative example:
The 1 percent needs better defenders: "Mr Mankiw's analogy stacks the deck by making it appear as though great creative entrepreneurs create the consumer demand which leads to inequality. This is not how things work. ... If the government were to, for example, return top marginal tax rates to the levels that prevailed in the 1990s or the 1970s in order to compensate for the superstar effect, there is no reason to believe that the top one percent would produce any less value for society than they do now."
posted by Mr.Know-it-some at 6:16 AM on January 19, 2017
Responses were forthcoming, shall we say. If you want to go down the rabbithole, just search for [mankiw "defending the one percent"]. In addition to the other articles in the JEP issue, here's a representative example:
The 1 percent needs better defenders: "Mr Mankiw's analogy stacks the deck by making it appear as though great creative entrepreneurs create the consumer demand which leads to inequality. This is not how things work. ... If the government were to, for example, return top marginal tax rates to the levels that prevailed in the 1990s or the 1970s in order to compensate for the superstar effect, there is no reason to believe that the top one percent would produce any less value for society than they do now."
posted by Mr.Know-it-some at 6:16 AM on January 19, 2017
"most of these people, in some way or another, have built their wealth off the labour of people in low-income countries"
This is true for about half the list of eight (Zara, Amazon you could argue) but not for Gates, Buffet or Zuckerberg. Not to say these people are saints or anything, but framing it as a 3rd world wages issue is a tad willfully ignorant and misses the real means to fix the issues.
As true mentioned above, those 3 at least, have most of their wealth as shares of their companies. The only way for them to become less rich is to sell the companies they built and lose control. All 3 of them have pledged to do that upon or before their deaths.
It's not as black and white as "the evil capitalist robber barons are taking everyone's money". It's about taxation and social safety nets that help level the playing field.
posted by dripdripdrop at 7:51 AM on January 19, 2017 [1 favorite]
This is true for about half the list of eight (Zara, Amazon you could argue) but not for Gates, Buffet or Zuckerberg. Not to say these people are saints or anything, but framing it as a 3rd world wages issue is a tad willfully ignorant and misses the real means to fix the issues.
As true mentioned above, those 3 at least, have most of their wealth as shares of their companies. The only way for them to become less rich is to sell the companies they built and lose control. All 3 of them have pledged to do that upon or before their deaths.
It's not as black and white as "the evil capitalist robber barons are taking everyone's money". It's about taxation and social safety nets that help level the playing field.
posted by dripdripdrop at 7:51 AM on January 19, 2017 [1 favorite]
All 3 of them have pledged to do that upon or before their deaths.
Yeah, yeah, and manumission in the will was a thing, too.
I'm not sure why one would object to Piketty for having too much data. He's writing a scholarly book, not pop economics. It's still quite comprehensible to a college graduate.
posted by praemunire at 8:13 AM on January 19, 2017
Yeah, yeah, and manumission in the will was a thing, too.
I'm not sure why one would object to Piketty for having too much data. He's writing a scholarly book, not pop economics. It's still quite comprehensible to a college graduate.
posted by praemunire at 8:13 AM on January 19, 2017
I'm not sure why one would object to Piketty for having too much data. He's writing a scholarly book, not pop economics.
That's easy, I'm not objecting to Piketty. I just don't think he makes sense as a strong recommendation for most progressives, let alone the default one, precisely because it is a scholarly book, and one at that which is covering a narrow aspect of the broad topic "inequality" rather than a broad survey. I don't think most progressives start out believing that capitalism reduces inequality, so a lot of pages definitively proving otherwise are unnecessary.
I also find most people's interests are going to be policies that have changed to get us here, the pernicious effect of inequality on society, the political economy aspects of it that let the wealthy write laws that favor them, the recent ballooning gaps in income. That's not what Piketty covers; the data section of Piketty especially is spends most of its time on wealth/income ratio time series estimated across countries going back to the 18th century. Which is fine if that's what someone wants but they should be at least be aware that's the focus.
To me it's analogous to getting a recommendation for a great book on evolution and finding 200 pages on definitive measurements of the mandible sizes of beetles stuck in the middle. Vital data to advance science, but I'm willing to just read the summary and then the conclusions drawn from the data.
posted by mark k at 9:48 PM on January 19, 2017
That's easy, I'm not objecting to Piketty. I just don't think he makes sense as a strong recommendation for most progressives, let alone the default one, precisely because it is a scholarly book, and one at that which is covering a narrow aspect of the broad topic "inequality" rather than a broad survey. I don't think most progressives start out believing that capitalism reduces inequality, so a lot of pages definitively proving otherwise are unnecessary.
I also find most people's interests are going to be policies that have changed to get us here, the pernicious effect of inequality on society, the political economy aspects of it that let the wealthy write laws that favor them, the recent ballooning gaps in income. That's not what Piketty covers; the data section of Piketty especially is spends most of its time on wealth/income ratio time series estimated across countries going back to the 18th century. Which is fine if that's what someone wants but they should be at least be aware that's the focus.
To me it's analogous to getting a recommendation for a great book on evolution and finding 200 pages on definitive measurements of the mandible sizes of beetles stuck in the middle. Vital data to advance science, but I'm willing to just read the summary and then the conclusions drawn from the data.
posted by mark k at 9:48 PM on January 19, 2017
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posted by praemunire at 7:14 PM on January 18, 2017 [4 favorites]