Insanely Concentrated Wealth Is Strangling Our Prosperity

Today’s mountains of wealth throttle the very engine of wealth creation itself.

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By Steve Roth

Remember Smaug the dragon, in The Hobbit? He hoarded up a vast pile of wealth, and then he just hung out in his cave, sitting on it (with occasional forays to further pillage and immolate the local populace).

That’s what you should think of when you consider the mind-boggling hoards of wealth that the very rich have amassed in America over the last forty years. The picture at right only shows the very tippy-top of the scale. In 1976 the richest people had $35 million each (in 2014 dollars). In 2014 they had $420 million each — a twelvefold increase. You can be sure it’s gotten even more extreme since then.

Bottom (visible) pink line is the top 10%.

These people could spend $20 million every year and they’d still just keep getting richer, forever, even if they did absolutely nothing except choose some index funds, watch their balances grow, and shop for a new yacht for their eight-year-old.

If you’re thinking that they “deserve” all that wealth, and all that income just for owning stuff, because they’re “makers,” think again: between 50% and 70% of U.S. household wealth is “earned” the old-fashioned way (cue John Houseman voice): it’s inherited.

The bottom 90% of Americans aren’t even visible on this chart — and it’s a very tall chart. The scale of wealth inequality in America today makes our crazy levels of income inequality (which have also expanded vastly) look like a Marxist utopia.

American households’ total wealth is about $95 trillion. That’s more than three-quarters of a million dollars for every American household. But roughly 50% of households have zero or negative wealth.

Now of course you don’t expect 20-year-olds to have much or any wealth; there will always be households with none. But still, the environment for young households trying to build a comfortable and secure nest egg — the American dream? — has gotten wildly competitive and hostile over recent decades. (If we had a sovereign wealth fund, everyone would have a wealth share from birth.)

But here’s what’s even more egregious: that concentrated wealth is strangling our economy, our economic growth, our national prosperity. Wealth concentration drives a vicious, downward cycle, throttling the very engine of wealth creation itself.

Because: people with lots of money don’t spend it. They just sit on it, like Smaug in his cave. The more money you have, the less of it you spend every year. If you have $10,000, you might spend it this year. If you have $10 million, you’re not gonna. If you have $1,000, you’re at least somewhat likely to spend it this month.

Here’s one picture of what that looks like (data sources):

These broad quintile averages obviously don’t put across the realities of the very poor and the very rich; each quintile spans 25 million households. But the picture is clear. The bottom quintiles turn over 40% or 50% of their wealth every year. The richest quintile turns over 5%. For a given amount of wealth, wider wealth dispersion means more spending. It’s arithmetic.

Now go back to those top-.01% households. They have about $5 trillion between them. Imagine that they had half that much instead (the suffering), and the rest was spread out among all American households — about $20,000 each.

Assume that all those lower-quintile households spend about 40% of their wealth every year. They each get to spend an extra $8,000, and enjoy the results. Sounds nice. And it’s spending that simply won’t happen with concentrated wealth. The money will just sit there.

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Now obviously just transferring $2.5 trillion dollars, one time, is not going to achieve this imagined nirvana. Nor is it bloody well likely to happen. That example is just to illustrate the arithmetic. Absent some serious changes in our wildly skewed income distribution (plus capital gains, the overwhelmingly dominant mechanism of wealth accumulation, which don’t count as “income”), that wealth would just get sucked back up to the very rich, like it has, increasingly, for the past forty years — and really, the past several thousand years.

If wealth is consistently more widely dispersed — like it was after WW II — the extra spending that results causes more production. (Why, exactly, do you think producers produce things?) And production produces a surplus — value in, more value out. It’s the ultimate engine of wealth creation. In this little example, we’re talking a trillion dollars a year in additional spending and production. GDP would be 5.5% higher.

If you want to claim that the extra spending would just raise prices, consider the last 20 years. Or the last three decades, in Japan. And if you think concentrated wealth causes better investment and greater wealth accumulation, ask yourself: what economic theory says that $95 trillion in concentrated wealth will result in more or better investment than $95 trillion in broadly dispersed wealth? Our financial system is supposed to intermediate all that, right?

Or ask yourself: would Apple be as successful as it is if its business model was based on selling eight-million-dollar diamond-encrusted iPhones? Broad prosperity is what made Apple, Apple. Concentrated wealth distorts producers’ incentives, so they produce, for instance, a million-dollar Maserati instead of forty (40) $25,000 Toyotas — because that’s what the people with the money are buying. Which delivers more prosperity and well-being?

This little envelope calc is describing a far more prosperous, comfortable, and secure society — far richer and and one hopes far more peaceful than the one we’re facing under wildly concentrated wealth. With the possible exception of a few very rich multi-generational dynasties, everyone’s grandchildren will be far better off 50 years from now if wealth is more widely dispersed. And over that half century, hundreds of millions, even billions of people will live far richer, better lives.

Why wouldn’t we want that? Why wouldn’t we do that? (We know the answer: rich people hate the idea — even those who aren’t all that rich but foolishly buy into the whole trickle-down fantasy. And the rich people…have the power.)

By contrast to that possibility, here’s what things look like over the last seven decades:

Here are the results — growth in inflation-adjusted GDP per capita:

The last time economic growth broke 5% was in 1984. And the decline continues.

So how do we get there, given that we’ve mostly failed to do so for millennia? Start with a tax system that actually is progressive, like we had, briefly, during the postwar heyday of rampant and widespread American growth and prosperity. And greatly expand the social platform and springboard that gives tens of millions more Americans a place to stand, where they can move the world.

All of this dweebish arithmetic, of course, doesn’t put across the real crux of the thing: power. Money is power. So it is, so it has been, and so it shall be in our lifetimes and our children’s lifetimes (world without end, amen). This is especially true for minorities, who have been so thoroughly screwed by our recent Great Whatever. Money is the power to walk away from a shitty job. To hire fancy lawyers and lobbyists, maybe even buy yourself a politician or two. If we want minorities to have power, they need to have money.

Add to that dignity, and respect, which is deserved by every child born: sadly but truly, they are delivered to those who have money. You can bemoan that reality, but in the meantime, let’s concentrate on the money.

If you want to create a workers’ utopia, a better world for all, seize the wealth and income.

2017 September 18


Data Sources

The data for the tall chart is from Gabriel Zucman, PSZ2016AppendixTablesII(Distrib).xlsx Table TE3. Google sheet with data and chart here.

Average wealth by quintile is from the Federal Reserve’s Survey of Consumer Finance (SCF), scf2013_tables_internal_nominal.xls, Table 4. (Top 20% wealth in the table above is an average of the means for 80-90% and 90-100%.) The most recent triannual SCF release, covering 1989-2013, determined the year chosen for the table. The next release, through 2016, should be out imminently.

Spending by quintile is from the BLS Consumer Expenditure Survey (CEX; earlier years here), Table 1101 (adjusted; see below): All annual expenditure-by-quintile tables 1984-2016 in one spreadsheet here.

Note: Measuring expenditures is very difficult, especially the spending of the very rich. They’re not keen to answer lengthy surveys like the CEX, given that they don’t even want their housekeepers to know that they paid $6 for a loaf of bread. As a result, CEX — which breaks out spending by quintile — misses about 40% (xlsx) of the spending tallied in the BEA’s Personal Consumption Expenditures (PCE) — which doesn’t. As a rough corrective for that discrepancy, the spending-by-quintile figures in the table above are CEX measures multiplied by 1.66. This “PCE correction” results in far more plausible spending figures, especially for the top 20%: Average $165,000 in 2103 annual spending versus CEX’s $100,000.


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  • M A J Jeyaseelan

    There is no point in just lamenting over growing inequalities. There is also no point in relying on re-distributive taxes to promote more equality. There is no way to stop this economic madness without plugging the basic loopholes in extant economics that not only cause and abet inequalities but also sanctify and glorify the mechanisms that help the richest to suck out all the cream. It is a sort of legitimised density based material separation process in which wealth gets attached to wealth. Science teaches only a limited number of methods. However, economics is full of methods and mechanisms that help the richest to steal from the poor legitimately and legally.

    The real irony is that economists who shed crocodile tears over concentration of wealth hardly ever own up their own responsibility in the wealth skimming process. The richest class uses several types of suction pumps to draw in wealth. While the list is too long, I am giving below a few of the largest income and wealth suction pumps.

    1) The banking system including the central banks are the biggest of all the suction pumps used by the rich. Banks create credit over and above the savings deposited with them . Central banks add bonds and print currencies without creating a penny of economic value. Both pass on these extra claims in the form of loans to the rich at insanely low rates of interest but the rich use these loans in multiple ways to generate far higher rates of return. These returns are earned by the rich with the help of money, bonds, and credits illegitimately created by the banking system.

    2) The speculative markets are the next most significant channels used by the rich to siphon away wealth without creating it. With the money borrowed from the banks at atrociously low rates of interest, the rich keep manipulating stock prices with the help orchestrated bulk purchases or sales. All speculative market transactions involve only transfer of values. All profits made in the stock market are a kind of legitimised looting. There are also other stock market instruments such as the buy back arrangements that result in double whammies. Usually buybacks are thrust upon companies at unreasonably high prices . In order to make up for the lost profits, such companies often raise the prices of their products and services unfairly

    3) Public debt and taxation: This is one of the most innocuous suction pumps that is hidden from the view of the public. Who owns this debt? It is the rich and the richest. The most hurtful feature of debt is that interest must be paid irrespective of the way one makes use of such debt. Usually, governments earn negative returns on expenditure incurred with help of public debt. Yet, governments pay interest to the lenders, even when the economy is down in the dumps. Governments are least bothered about both the quantum of public debt and growing interest burden. They simply increase tax rates or impose new taxes. What most citizens do not take into reckoning is the fact that a larger part of the taxes paid them goes towards interest payments. In some countries, interest payments constitute over two thirds of government budgets. In my view, it would be very fair to say that most governments simply tax the poor to pay the rich.

    4) Market mechanism: This is the most rampant source of inequalities. Markets as these are designed in extant economics give enormous powers to the rich to manipulate markets in their favour. Companies and traders with deep pockets always manipulate supplies and create artificial shortages that result in unfair prices – transferring in this process, more economic values to the sellers than what their products or services are worth by themselves. The same happens with the help of marketing and advertising that play on the mindset of the consumers and con them into paying higher prices than warranted. Some companies also adopt premium pricing policies by enticing customers with their one-up-ness strategies.

    In nutshell, there can be no inequality without the help of unfair exchanges. All unfair exchanges are actually blessed by extant economics. There is no way to end inequalities without correcting the unfair exchange processes. There is no way to end unfair economic exchanges without rewriting economics.

    If you would like to know more about the need for rewriting economics, please do read my article hyper linked below

  • BryanKavanagh

    So we need to tax economic rent/unearned income, and un-tax productivity – right? (Are you with me?) The Right understands this isn’t ‘capitalism’, but a leeching, extractive, ‘rentier’ economy. Therefore, those on the Right have a vested interest in keeping the rentier economy a secret, because it has served them well, particularly those on Wall Street and in ‘The City’.

    But where’s the Left on this critical point? Well, they haven’t quite discovered the rent-seeking mechanism yet, so although they certainly get top marks for pointing out all the socio-economic ills that flow from a failed financial system, they haven’t any real answers. ….. And that’s very sad!

    • Bill Green

      And isn’t that the flaw in Piketty’s argument (not a full understanding of the rentier economy)?

      • BryanKavanagh

        Yes, Piketty came close …. but he missed the bus.

        • Ben Jamin’

          Yep, because he is wedding to the socialist ideology that society has property rights, thus taxation of income and capital is justified. LVT blows a hole in that below the waterline.

  • davidlee2472

    HUH!? “concentrated wealth is strangling because we have lots of and more concentrated wealth”?
    this is the whole gist of the article!
    come author, you don’t realize how idiotic that sounds???

    • Nishant Tiwari

      Lol !!!

  • John Fowler

    “Remember Smaug the dragon, in The Hobbit? He hoarded up a vast pile of wealth, and then he just hung out in his cave, sitting on it…”

    I’m going to have to stop you with your first sentence. Rich people don’t sit on their money. No one stays wealthy sitting on money.

    • Right, they nobly stride forward to reallocate their portfolios annually. The brave work of efficiently allocating resources.

  • timworstall

    Err, yes, Smaug. The example I use is Scrooge McDuck. There simply aren’t any rich who hoard their wealth in that manner. Those financial assets (which is where the $95 trillion comes from) are, well, they’re financial assets. Shares in Apple say, money in VC funds, cash in the bank – cash which the bank lends out to other people.

    Wealth doesn’t actually do nothing. For to a very close approximation wealth that does nothing isn’t wealth…..

    • Ben Jamin’

      That’s not the relavent point being made,

      “Or ask yourself: would Apple be as successful as it is if its business model was based on selling eight-million-dollar diamond-encrusted iPhones? Broad prosperity is what made Apple, Apple. Concentrated wealth distorts producers’ incentives, so they produce, for instance, a million-dollar Maserati instead of forty (40) $25,000 Toyotas — because that’s what the people with the money are buying. Which delivers more prosperity and well-being?”

    • 1. Money in your bank account. You don’t spend it. “Save” it.

      2. You spend it. It’s in a different account.

      Are there more funds in #1 vs #2 or vice versa?

      Incredible error of composition. Personal saving — spending less than your income —
      increases your wealth/assets/net worth. It doesn’t increase our wealth/assets/net worth.

      When you eat less corn — consume less — we have more corn. When you spend less money, we have the same amount of money.

      Ditto when a firm “saves” — retains earnings, doesn’t distribute profits as dividends to shareholders — that doesn’t increase private sector wealth/assets/net worth, or anything that people like to refer to by the vague and incoherent term “loanable funds.”

  • ddrew2u

    Raising (back from the dead) American labor union density is the singular remedy. Seems the big blockade against progressive states starting the ball rolling – by for instance making union busting a felony – is the universal presumption that federal preemption bars almost any labor law action by states; even actions simply supporting federal law (which works with minimum wage for example). Which is the extreme way the courts have portrayed what the NLRA(a) intends for generations now.

    Cut the Gordian knot of fed preemption – per simple, unquestioned right to organize – by remembering that a First Amendment protected right is involved in same:
    If a state or local legislature passes a law that makes exercising freedom of association (e.g., organize a labor union) possible where it would not be possible otherwise, then, Congressional preemption of labor law falls to the First Amendment.

    As presentable a new path back as it is simply true. Republicans will have no place to hide.

  • karen222

    to timworstall and John Fowler, you are quoting conventional wisdom rather than truly thinking about this. Conventional wisdom is that wealth is always used to invest productively, that is to say it is used to fund projects and initiatives that increase productive capacity and thus expand the whole pie over the long run.

    You need to question that assumption.

    For decades now, capital (wealth) has far exceeded the available opportunities for useful investment. It has therefore been used to inflate a series of asset-price bubbles instead.

    The overall world economy is consumption-constrained, NOT capital-constrained. Companies are sitting on cash, and using it to buy back shares, precisely because their leaders find themselves unable to identify investments in productive capacity that they believe will actually increase future earnings. Their actions show that they believe making more of whatever they make will just result in more unsold inventory.

    See the recent blog posts of Professor Michael Pettis for more on this, from someone with credentials (unlike me).

    • timworstall

      “Companies are sitting on cash, and using it to buy back shares, precisely because their leaders find themselves unable to identify investments in productive capacity that they believe will actually increase future earnings.”

      Excellent, so that cash leaves those large companies and ends up in the hands of individuals. Who can only do one of two things with it.They can spend it, creating immediate demand. Or they can invest it. None of them do put it in the vault a la Scrooge McDuck. They put it into property, stocks, VC funds, bank accounts and so on, and thus the money circulates. Each person it circulates to can only either spend or invest it.

      This process never, ever, stops. That money can only do one of two things, be spent or be invested. No, we cannot say that when they buy stock it just pushes the price higher. Because someone receives the money for that stock and the process just goes on.

      There never is a sump, a pit, where the money collects, it always, but always, continues to circulate.

      • karen222

        Think about it, when someone puts their money into the bank there is no guarantee that the money will be lent PRODUCTIVELY. Remember the mortgage crisis?

        When money is used to bid up the prices of existing assets like real estate, or company stocks that are already in existence and are merely being traded from one investor to another (generating no actual revenue for the company itself), that is actually worse for the economy than if the investors DID literally sit on it.

        Money does not create anything worthwhile by merely circulating. It has to be used to fund something that creates real value, such as the expansion of production capacity or a successful R&D program or the easing of transportation-system bottlenecks.

        The concentration of wealth has caused an imbalance in the world economy where consumption cannot keep pace with investment. The signs are many, and fairly obvious if you look around. I’ll come back on to expand on that later, if you like (I have to go now).

        • timworstall

          “Think about it, when someone puts their money into the bank there is no guarantee that the money will be lent PRODUCTIVELY.”

          So what? The original claim in the OpEd here is that money which is wealth just sits there, does nothing. We’ve shown that this is not true – therefore that the central thesis here is incorrect, that is, it is wrong.

          Good, now we’ve done that we don’t want to chase off down other little rabbit holes. Or perhaps we do. So, let us consider whether money is being used productively. Who decides what is productive? There are plenty of people who insist that bottled water is a bad idea. Should I not be allowed to buy bottled water because that is not a “productive use” or my money? Or buying a stock. I want to save for my pension, I go buy a few bits and pieces of S&P 500 stock. Surely better over the decades than Treasuries, after all. Is that money now being used “productively”?

          Well, depends on whose point of view you’re using, doesn’t it? I agree, no new money is going into that company to be invested in factories. The guy who sold me the stock might spend it on hookers, might invest in a fur bearing trout farm, might start the next Apple. Shrug – but that money’s working productively for me, saving for my pension.

          Your insistence that money must be used in what you regard as a productive manner is actually an insistence that everyone else must do as you say. But if my buying stocks is productive for me and my pension then why should you have a veto over my doing so?

          • karen222

            I believe the thesis of the original article is that wealth concentration is preventing the economy from growing as much as it otherwise would.

            When I googled “definition of economic growth,” there was a surprising amount of variation but basically economic growth is the increase in the amount of goods and services produced over a period of time.

            Anything that does not increase the amount of goods or services being produced by the economy does not add to economic growth.

            The trading of existing assets, be they stocks, bonds, shopping malls, mortgage-backed securities, or works of fine art, contributes nothing to GDP. It creates no goods or services. If that were all everyone did with their time, we would all be starving before long. It may work out well for you as an individual to buy the S&P 500, but your doing so has no effect on GDP. Money changing hands does not, by itself, add to economic growth.

            If a publicly-traded carmaker issues new stock to raise money to expand production of a new model, buying THAT stock directly from the company will help to expand the economy – but only if the investment causes the carmaker’s total sales to go up compared to last year. If the new model turns out to be unpopular and sales go down, the investment would end up shrinking the economy instead.

          • timworstall

            This isn’t true I’m afraid.

            “Anything that does not increase the amount of goods or services being produced by the economy does not add to economic growth.

            The trading of existing assets, be they stocks, bonds, shopping malls, mortgage-backed securities, or works of fine art, contributes nothing to GDP. It creates no goods or services.”

            Approach this from the other side. What happens if we artificially reduce the amount of secondary trading in those markets? GDP falls from where it would have been.

            The EU did a big analysis of the effects of a financial transactions tax. Less secondary market trading – the entire point of the tax – reduces the price level of those stocks, bonds, etc. That makes new capital for companies, primary trading, more expensive. That’s the same as stating that capital is more expensive. More expensive capital means less is raised by companies, less is invested, this makes the economy smaller.

            Their result was that a 0.01% FTT would shrink the economy by 1.8%.

            There is nothing odd nor unusual about their logic or structure of the argument here, it’s absolutely standard economics. But it does provide us with a refutation of your assertion, that secondary market trading does not grow the economy.

          • MigT

            “What happens if we artificially reduce the amount of secondary trading
            in those markets? GDP falls from where it would have been.”

            Not if it diverts purchasing power to the real economy of production, consumption and employment. Quite the contrary.

          • timworstall

            I always love this type of argument.

            Over here we’ve standard economics, a self consistent body of knowledge many tens of thousands of very bright people have constructed over the centuries.

            And over here we’ve got what I just thought of myself.

            When there’s a conflict between the two it’s just amazing how many people insist “I win!”

            You’ve missed the mechanism that was described. If prices for secondary investments are lower as a result of less activity then there will be less investment and the economy will be smaller. That’s already including your comment, that there will be less trading in those secondary investments and *still* the economy will be smaller.

          • MigT

            I don’t see that you have described a mechanism “already including” my comment (which certainly isn’t anything I’ve “just thought of”). Apart from the hand-waving appeal to authority, you appear still to be on about “artificially reducing” secondary investment rather than diverting it to the real economy

            ..almost as if you thought the latter were some kind of “sump” or “pit”

      • Chavdar Naidenov

        Money can be invested in nonproductive assets. That’s hoarding.

        • timworstall

          Like what? A house? Sure, that’s a non-productive asset. So, we’re to ban people buying houses because that’s hoarding?

          Or perhaps you could pick up the point I made, which is that i I buy an asset, however productive or not it is, then someone else has my ex-money and they’re going to do something with it, aren’t they? And so too of the person who receives it for whatever they buy. The cash continues to circulate, it never stops.

          • Ben Jamin’

            There’s an important point you are missing though. By its very nature, concentrated wealth thins the market for mass production, Its economies of scale that increases output,

            Thus if inequality is excessive due to an unfair distribution of the factors of production, there will be deadweight resulting from it.

      • “They put it into property, stocks, VC funds, bank accounts and so on, and thus the money circulates.” <— that isn't, strictly speaking, circulation of currency.
        The simple metric for knowing whether money has entered circulation in the real /economy – is the money changing ownership in the goods or the labor markets?
        If not, then that money cannot be considered to have circulated in the economy.

        As for investment – has the investment led to a growth in the economy's productive capacity (caused the PPP to expand outward)?
        If not, then the money has not entered the real economy.

        It is when money has increased consumer or producer surplus on being exchanged that it can be said to have "circulated in the economy".

      • John Browne

        How about the cellar of the Federal Reserve banks? ^..^

    • Paul Bigioni

      Consumption wouldn’t have been so constrained if wealth was more broadly shared. That’s one of the author’s key points. There would have been more investment opportunities.

  • Ben Jamin’

    Excessive inequality shrinks output because it leads to thinner markets.

  • Alan

    Money isn’t a thing, it’s a metric. Even if Rich people just stuffed money into bank accounts, it has a velocity – the bank lends it. But they don’t. And their managers, paid for performance don’t either. And the delivery of large sums of money to people with a propensity to spend is simply inflationary – you can’t make more doctors in six months.

    If not the rich, who would finance the next greatest thing? And plenty of rich people lose plenty of money on bad investing. And wealth numbers can plummet quickly. Do another 2008 and wealth inequality will be the last thing on your mind.

    Which is all not to say I don’t think a good case can be made for confiscation of large amounts of capital and its redistribution – worldwide. Why are Norte Americanos special anyway? I agree with Barack, spread the wealth around, including his. Just don’t give it to the government. Maybe pay off a tenth of the national debt. Of course that’s just a paper transaction from one rich person to another.

    There’s a lot that can be done, and establishing a real capitalism, not this phony Washington-New York Eastern crony trust system would be a good start.

    • John Browne

      YOU CAN RENT a lot of Doctors right NOW- from CUBA. No need to wait! ^..^

      • Paul Nelson

        Cuban doctors are not whores. They call people who left Cuba during the Mariel boat lift “gusanos.”

  • What is Steve Roth trying to promote here? Communism? Taking money from people who have it in order to give it to people who don’t is theft.

    The real problem is not concentration of wealth. The real problem is stability:

    “Stability is destabilizing,” says economist Hyman Minsky.

    Long periods of relative stability will promote all kinds of problems throughout all of society – including the over concentration of wealth. We need the government to stop promoting stability every time there is a blip in the economy. If a crash comes then do exactly nothing. I can guarantee you that the concentration of wealth in the super-wealthy will change real quick in the next big crash.

    “If wealth is consistently more widely dispersed — like it was after WW II — the extra spending that results causes more production.”

    It seems like a lot of things took off after World War II ended. That was because there were two giant crashes that were mostly allowed to play out: The Great Depression and World War II. The big crashes fixed a lot of problems. Crashes are never the problem. They are the solution.

    We know that wealth follows a power law distribution: 80% of the wealth should go to 20% of the people. That is the ideal balance.

  • Peter van den Engel

    The model presented makes sense, since that’s how the systems mechanics work.
    It is also a correct conclusion it does not lead to a most efficient end outcome, to say the least.
    The problem though is, without understanding the system wishing it to be something else does not work.
    It is not impossible to change the system in a much more poductive and efficient one. But this does not work like imagining the figures to be distributed otherwise, without a concept.

    I guess spending is not even the key/ but that you’ld like to see more productive and creative ideas coming out, to be enjoyed. You share in stead of spend. It’s a different concept.

  • Rob Lewis

    As I argue here: poor and middle-class people actually subsidize the lifestyles of the rich. For example, the Toyotas we buy allow the manufacturer to achieve economies of scale that are used to reduce the cost of the Lexuses for the rich. If the low-end market goes away because people can’t afford cars, the high-end customers will have to pay a lot more for their luxury goods.

  • 1: American (North-Latin-South) ($): 2: BSR (British Ireland/Scandinavia/Russia) (£): 3: EUAF (EUROPE AFRICA) (€): 4: AIOP (Arab India Oceania Pacific) (¢) (Arabia ¢/€)::::::

    1: American Latin: Apple Company: 30% + 30% + 10% = 100%::::::: 10% + 30% – (30%) = 30% Apple!

  • Patrick Cardiff

    This is interesting, and I’m in solidarity with the comparative statics, but it’s way too simplistic for how the macro economy runs – in fact is all too typical of the way people look at macro estimates.
    Steve, you’re missing two very important things: time, and outliers. I can tell because variables are put in convenient square boxes, assuming constant returns, or cet. par., not taking stock of non-probabilistic events, changes in political matters, in innovation, invention, discovery. It’s easy to look out at sea and see a smooth surface, but if you have really strong glasses, you will look out to see and see dips and figures, waves, different weather, etc. We (humans) do not have the eyes, or the capability to see the macro economy to the tune of prediction because it is too complex. Think how dreadfully human it is to multiply everything by 1.66 – to better understand the next factor.
    Similarly we need to find places – they’re not hard to recognize – small and local, that are definitely and deliberately harmed by the action of wealth built up elsewhere. Not just neglect or the absence of wealth. We need to identify those places, rank-compare them, and show how, indeed, wealth is a no-grower, or worse, in the sense of gentrified neighborhoods, a concentrator. That means concentrating on the losers rather than the winners.

  • Zaphod Braden

    I’ve been saying ……. America is dying from lack of economic activity, yet there are TAX-DODGING so-called trusts, foundation, endowments, sitting on hundreds of billions of dollars. They provide huge, steady, salaries to ‘trustees” who have NO interest in ending the Party. Government need to put “Mandatory Term Limits” on them. Make these Money Machines spend ALL that money in a certain amount of time. Things like the Ford Foundation should have been liquidated long ago, not live forever like some VAMPIRE. These Universties need to spend THEIR endowments, NOW, quit sucking the life out of the Students you are supposed to be educating.
    Every one of these Artificial Creations should be told “You have 5 years to empty your coffers, or the government takes it all”.

    They ARE VAMPIRES sucking life from the Workers who have to make up the taxes these UNDEAD MONSTERS do not pay.
    They are “social manipulators” illegally and immorally screwing around with society and harming living individuals. They should be sued out of existance.
    The fact that these charities are tax deductible means, in essence, billionaires are able to use tax subsidies for their own purposes, rather than democratically-identified priorities. Assuming a 28% marginal tax rate, it means that taxpayers contribute more than 1/4 of the funding.

    Take Zuckerberg’s much-vaunted $100 million gift to Newark schools. Even if we grant that the money went to a good cause (a dubious assertion at best, considering it was mostly intended to spur privatization and mostly went to consultants and charter schools), taxpayers kicked in $28 million of that gift. We had no say in how our money was used, and there are no doubt better ways to use $28 million of taxpayer funds for a failing school system.

    Similarly, in an era where funding for public infrastructure is being slashed and neglected, a billionaire may donate $200 million for an opera hall, used mostly by the wealthy. Bill to taxpayers: $56 million.

    Or, while tax-starved public universities are passing on huge tuition bills to poor and middle-class students, the Ivies are rolling in donation cash. Again, taxpayers are subsidizing 28% of these donations to already wealthy institutions, while many public universities receive less than 10% of their operating budget from tax subsidies. As with so many other areas, those who need it least receive the most benefit.

    These artificial entities are a large part of what is messing up our society, KILL THEM.

  • Zaphod Braden

    They have so much money they should be paying for the wars that protect their wealth — 90% off the top to pay off the National debt. Then we talk……………