Thursday, June 21, 2007

Try to Level the Playing Field...

A capitalist economy necessarily generates financial winners and losers. But in an economy where the discrepancy between a winner and the "average wage earner" continues to grow out of control -- well, it's time for policy to step in.

No economic system is perfect... and to believe capitalism will address all of our social ills is as stupid as waiting for Jesus to come back: neither has strong evidence of occurring.

Take for instance the case of investment bankers, hedge fund managers and the like. Sure, these are professional people who provide a service to the business community. But does that service really warrant billions of dollars of accumulated wealth while the owners pay only a fraction of the taxes that a middle-income wage earner pays?

Most sane people would say no...

An article in the WSJ points out even conservative economists are making this point:
A new argument is emerging among the pro-globalization crowd in the U.S., the folks who see continued globalization and trade as vital to the country's prosperity: Tax the rich more heavily to thwart an economically crippling political backlash against trade prompted by workers who see themselves -- with some justification -- as losers from globalization.

The sharpest articulation of this view comes from ... Matthew Slaughter, who recently left President Bush's Council of Economic Advisers to return to Dartmouth's Tuck School of Business.

The recent widening of the gap between economic winners and losers is "entirely without precedent in the postwar period," Lawrence Summers, the former U.S. Treasury secretary and Harvard president, said at a Washington forum this week."Individuals are asking themselves, 'Is globalization good for me?' and in a growing number of cases, arriving at the conclusion that it is not," ...
How can a society justify an average educator's salary of around $48,000 a year, while someone who runs a investment banking firm pays 15% taxes while accumulating 7 BILLION in assets?

To argue that "the market bears the expense" is not an argument at all. The question isn't what the market will pay for a service, but what value does that service bring to society. While I don't argue for a command economy, there must be some sane system of incentives (e.g. - taxes and tax breaks) that help to steer the economic ship in a reasonable direction.

If not, we'll simply continue down the path of the haves vs the have-nots... Where people who provide critical services (water, sewer, garbage collection) are paid subsistence wages while those who skim off the financial markets (adding nothing of value to the process) live like the aristocrats of old.

When it gets ugly enough: when the society is completely stratified with an upper class of billionaire parents leaving riches to children who perpetuate a plutocracy -- people may finally wake up and realize no abstract economic theory in and of itself provides for economic social justice.

Society and the economy require pragmatic management... Not "control", but management. Capitalism in and of itself will lead to a tyranny as sure as despotism. Governments may not always take the right actions in regard to economic policy -- in fact, some actions may make things worse -- but a laissez faire is sure to destroy our country.

5 comments:

skip sievert said...
This comment has been removed by the author.
Reign of Reason said...

Some good points.

However, many creative people ARE motivated by the idea of "getting ahead"... Without that impetus, society wouldn't progress (as fast) technologically or otherwise.

skip sievert said...

Wrong.
Society is not progressing really.
We are destroying society to make a worthless goal. More money.
We no longer need to use money.
Money is a tool to maintain the class/caste system now and that is all it is.
Mechanical energy overtook human energy in 1913, as far as work is concerned.
Technology will destroy our Price System.
The alternative is a slave society run as ours is presently, that disintegrates to a real nightmare.

Reign of Reason said...

Money and politics are being used to perpetuate a class system: but it doesn't have to be that way.

Humans are inherently competitive: and that competition has driven some of the progress we have made in the last 200 years. Not entirely, but some of it.

Most humans are also inherently lazy: they will do the minimum to achieve an end.

There's a balance: it seems some of what your group proposes is as extreme as unregulated capitalism.

Reign of Reason said...

I had 15 min before a meeting and your computation (skip) bothered me... didn't seem right:
"``What's a trillion? Say a budget is something over a trillion dollars. For 100 million taxpayers that's $10,000 per taxpayer on which we'll pay $1,000 per year in interest. $1,000,000,000,000! If you started counting $100 bills at 100 per minute, 12 hours a day, you'd count only $26,000,280 in a year, so you'd have to keep it up for 4,000 years to reach a trillion."

I compute 380 years to reach $1e12 assuming you count for 12 hrs each day.

I have no idea where you get 4000 years.