Changes in Income inequality among the OECD Nations

[JamieDimonsBalls]

My principle concern about the increasing concentration of wealth is not economic but political. Vast concentrations of wealth result in concentrations of political power. Your story about economic flux...I am rich today and then poor tomorrow is exactly what the rich want to prevent. The only way to prevent it is to create political protection to ensure that upstarts can't take their stuff. The only way to do it is to make sure that the masses can't redistribute vast concentrations of wealth for their own purposes. The way to prevent such transitions is by eliminating democracy and instituting oligarchy and autocracy. Autocracy has terrible long run economic implications. All this we used to know in this country.

How do we account for the dramatic structural shift that has taken place? Technology has enabled far more rapid growth and acceleration of value in business than it previously witnessed. But, more importantly, the growing imbalance of supply and demand for financial assets, specifically U.S. equity (public and private), is also contributing to this. For the sake of complication, let's focus on U.S. public equity securities for now:

• Individual consumers are able to access data much more quickly and acquire or trade securities much more quickly and cheaply than they previously could (more access for more people) - increased demand
• We have witnessed an insatiable appetite from foreign investors (particularly BRICs) seeking long-term, double-digit returns - increased demand
• Increase in stock-based compensation - book equity increases
  
• Increased regulations (e.g. SOX, SEC requirements, etc.) have made it more costly and less beneficial to be a publicly traded company - reduction in supply
• Corporate image and media/public scrutiny makes it more attractive for companies to remain or go private - reduction in supply
• Globalization has led to an increased number of foreign entities that have acquired U.S. listed companies and the parent may or may not list on U.S. exchanges (direct or via ADR) - reduction in supply
• Increased appetite and money deployed for alternative asset classes that resulted in a more sophisticated and developed private market system - reduction in supply

So, if you are a CEO of a public company, you find yourself with massive tailwinds for the value of your shares and net worth, which is aligned (albeit poorly) to company stock performance. In the event of another downturn, income disparity will likely grow, but wealth disparity should narrow b/c of the leverage the top 1% has tied to public equity value is tremendous.

 

[iu_a_att]

How do we account for the dramatic structural shift that has taken place? Technology has enabled far more rapid growth and acceleration of value in business than it previously witnessed. But, more importantly, the growing imbalance of supply and demand for financial assets, specifically U.S. equity (public and private), is also contributing to this. For the sake of complication, let's focus on U.S. public equity securities for now:

• Individual consumers are able to access data much more quickly and acquire or trade securities much more quickly and cheaply than they previously could (more access for more people) - increased demand
• We have witnessed an insatiable appetite from foreign investors (particularly BRICs) seeking long-term, double-digit returns - increased demand
• Increase in stock-based compensation - book equity increases
  
• Increased regulations (e.g. SOX, SEC requirements, etc.) have made it more costly and less beneficial to be a publicly traded company - reduction in supply
• Corporate image and media/public scrutiny makes it more attractive for companies to remain or go private - reduction in supply
• Globalization has led to an increased number of foreign entities that have acquired U.S. listed companies and the parent may or may not list on U.S. exchanges (direct or via ADR) - reduction in supply
• Increased appetite and money deployed for alternative asset classes that resulted in a more sophisticated and developed private market system - reduction in supply

So, if you are a CEO of a public company, you find yourself with massive tailwinds for the value of your shares and net worth, which is aligned (albeit poorly) to company stock performance. In the event of another downturn, income disparity will likely grow, but wealth disparity should narrow b/c of the leverage the top 1% has tied to public equity value is tremendous.

All cool and interesting stuff...but what was your question again? Is your question something like: structural economic and technical changes are creating a great deal more variance in wealth than existed previously. Should that impact my concern about the growing concentration of political power among the super wealthy?

Just want to make sure I understand your question before attempting to answer.

 

[JamieDimonsBalls]

All cool and interesting stuff...but what was your question again? Is your question something like: structural economic and technical changes are creating a great deal more variance in wealth than existed previously. Should that impact my concern about the growing concentration of political power among the super wealthy?

Just want to make sure I understand your question before attempting to answer.

My question is, how do you combat structural problems that are underlying the wealth (not income) disparity that is being talked about?

I'd also point out (not a question) that I find it interesting that you are concerned about the concentration of political power because it tends to be increasingly liberal compared to historical times, which is interesting to witness.

 

[iu_a_att]

My question is, how do you combat structural problems that are underlying the wealth (not income) disparity that is being talked about?

I'd also point out (not a question) that I find it interesting that you are concerned about the concentration of political power because it tends to be increasingly liberal compared to historical times, which is interesting to witness.

Okay, thanks for the clarification. I think it is relatively easy to combat vast wealth and income disparities through taxation. I would think that fairly draconian taxes could be applied to the top .01% and above. Remember, my goal is not to balance the budget or something like that. My goal is just make it so that politicians cannot rely and a very small number of donors in order to get into office. Draconian taxes are exactly what the Nordic countries do AND they enjoy much higher levels of income mobility as well.

I don't know why you say that the vastly wealthy are more politically liberal. At any event my concern here is not about the particular political outcomes that are achieved...liberal or conservative. My concern is about protecting democracy itself.

 

[JamieDimonsBalls]

Okay, thanks for the clarification. I think it is relatively easy to combat vast wealth and income disparities through taxation. I would think that fairly draconian taxes could be applied to the top .01% and above. Remember, my goal is not to balance the budget or something like that. My goal is just make it so that politicians cannot rely and a very small number of donors in order to get into office. Draconian taxes are exactly what the Nordic countries do AND they enjoy much higher levels of income mobility as well.

I don't know why you say that the vastly wealthy are more politically liberal. At any event my concern here is not about the particular political outcomes that are achieved...liberal or conservative. My concern is about protecting democracy itself.

They possess dramatically smaller disparities (1% vs. 99%) because of wealth redistribution. That doesn't mean they are optimal economic models.

They tend to have higher prolonged rates of unemployment...

Under-produce in economic output...

It doesn't necessarily matter as these tiny countries are barely relevant on the global stage and will become increasingly less so.

The real question is, can we take certain positive/favorable attributes for Sweden and Norway and implement them into our current economic system without sacrificing some of the advantages that we possess? I'm not sure what the answer is, but redistribution does not get me excited as a long-term invested member of this economy.

 

[iu_a_att]

They possess dramatically smaller disparities (1% vs. 99%) because of wealth redistribution. That doesn't mean they are optimal economic models.

They tend to have higher prolonged rates of unemployment...

Under-produce in economic output...

It doesn't necessarily matter as these tiny countries are barely relevant on the global stage and will become increasingly less so.

The real question is, can we take certain positive/favorable attributes for Sweden and Norway and implement them into our current economic system without sacrificing some of the advantages that we possess? I'm not sure what the answer is, but redistribution does not get me excited as a long-term invested member of this economy.

I gave the Nordic model to illustrate that policies are available that can dramatically decrease income inequality without dire bad economic effects.
Essentially my proposal amounts to this: tax potential oligarchs out of existence (George Soros as well as Koch brothers) by reducing their wealth assets to a level that makes it no longer feasible for them to be significant political players as they are now. In turn, I would provide enough redistribution to make sure that all citizens maintain their ability to be viable political participants.

Questions about what should be done with the money raised or what other kinds of policies would make most sense I would leave as the outcome of political competition informed by policy analysis.

Surely, any intervention in the economy will likely produce some economic inefficiencies. I would prefer to minimize the economic inefficiencies subject to achieving the political objective of securing democracy from the threat of potential oligarchy.

 

[JamieDimonsBalls]

Essentially my proposal amounts to this: tax potential oligarchs out of existence (George Soros as well as Koch brothers) by reducing their wealth assets to a level that makes it no longer feasible for them to be significant political players as they are now.

How do you go about taxing wealth? Isn't that a violation of the constitution?

https://gspp.berkeley.edu/news/news-center/the-constitutionality-of-a-net-worth-tax

 

[iu_a_att]

How do you go about taxing wealth? Isn't that a violation of the constitution?

https://gspp.berkeley.edu/news/news-center/the-constitutionality-of-a-net-worth-tax

Interesting that the constitutional elements mentioned in your article were put there by the slaveholding states to protect slaveholder "wealth".
Don't know whether the legal analysis you provide is sound. Don't know all the ways such ends as I propose could be achieved and that might legitimately be interpreted as constitutional. Perhaps a constitutional amendment would be required. As we see, though, constitutions don't provide much protection against oligarchs and autocrats once they have taken power.

 

[JamieDimonsBalls]

Interesting that the constitutional elements mentioned in your article were put there by the slaveholding states to protect slaveholder "wealth".
Don't know whether the legal analysis you provide is sound. Don't know all the ways such ends as I propose could be achieved and that might legitimately be interpreted as constitutional. Perhaps a constitutional amendment would be required. As we see, though, constitutions don't provide much protection against oligarchs and autocrats once they have taken power.

Well, it's from UCB, so if anyone has a liberal viewpoint of legal interpretation, it would be that school.

 

[hoot1]

How do you go about taxing wealth? Isn't that a violation of the constitution?

https://gspp.berkeley.edu/news/news-center/the-constitutionality-of-a-net-worth-tax

Are local property taxes a violation of the Constitution?

 

[JamieDimonsBalls]

Are local property taxes a violation of the Constitution?

I wish! CO was talking about this in some other thread. I'm not a lawyer, so I'll let them squabble over the differences (or lack of).

The entire premise of taxing wealth is stupid because wealth goes up and down rather dramatically based upon asset values. I've had property tax issues and I'm sure others have as well.

 

[sglowrider]

They possess dramatically smaller disparities (1% vs. 99%) because of wealth redistribution. That doesn't mean they are optimal economic models.

They tend to have higher prolonged rates of unemployment...

Under-produce in economic output...

It doesn't necessarily matter as these tiny countries are barely relevant on the global stage and will become increasingly less so.

The real question is, can we take certain positive/favorable attributes for Sweden and Norway and implement them into our current economic system without sacrificing some of the advantages that we possess? I'm not sure what the answer is, but redistribution does not get me excited as a long-term invested member of this economy.

 

[JamieDimonsBalls]

View embedded media

I'd have no rebuttal too if the data was this clear.

 

[mohoosier]

I don't understand why people obsess over these things.

The US is highest in these areas because it's the best place in the world to do business...yet most our richest people just became rich in the last few decades. And it's the still the easiest place on earth for a nobody to become rich.

You'd think we were battling some European aristocracy the way the left talks about wealth in America.

Was that a Capitalist I hear?

 

[mohoosier]

probably because the accumulation of wealth by one, is often done so at the expense of the wealth of the many who work for them. or used to work for them. or worked for all the competitors the "one" destroyed in the process.

winner take all, only is fair when the winner produces all.

not just because the winner has the key to the company treasury, and thus has the ability to seize all the revenue, or at lest a ridiculously disproportionate share of, that was acquired by the many for whom said wealth could not have been acquired without.

inequity is a function of the breakdown of the ability of the working class to negotiate their share of the pie.

and a function of the skimmers, skimming off all they can because they can, while contributing zero to the endeavor.

Then go somewhere else where the rules fit your world view. And, when you find that ‘better place’ come back and give us all the good news.