Declining worker power vs. rising monopoly power: explaining recent macro trends
voxeu.org
voxeu.org
Some consolidation is natural, but a huge part is caused by mergers and acquisitions (M&A) fulled by Private Equity. The M&A benefits the shareholders of participating companies at the expense of consumers, employees, and other companies.
From Bloomberg: ==About 3,600 firms were listed on U.S. stock exchanges at the end of 2017, down more than half from 1997.==
https://www.bloomberg.com/opinion/articles/2018-04-09/where-...
https://www.nytimes.com/2018/08/04/business/shrinking-stock-...
If it was an artificially low interest rate we'd see wage inflation, as opposed to just asset inflation.
And by artificially low I meant below the natural interest rate or NAIRU.
(The mathematical model - and the proof - for this is taught in most introductory macroeconomics courses. So is monetarism, which is the "declining rates = stimulus" that you mention.)
It's been a persistent question why the super-low nominal interest rates that central banks have set for the last decade haven't resulted in consumer inflation, and there's no consensus among experts for it. My personal theory is that it comes from the entry of China and other large developing nations into the world economy, which a.) has dramatically lowered the price of labor-intensive consumer manufacturing, offsetting much of the inflation caused by the large money supply and b.) changed the mix of savers in the world economy; Chinese people are much more in the habit of saving large fractions of their income than Americans are, which leads to a glut of savings, which lowers the real interest rate.
[1] By capitalism I mean private ownership specifically, not the usual HN definition of something something markets something something competition.
You could make a case that some of the current anger in the united states is because COVID's destruction of the economy has removed that freedom to switch jobs (as the jobs have gone) demonstrating how important it is.
Let’s say I work at Kroger. I don’t like the way I’m treated, so I quit.
Now the remaining grocery stores I can work for owned by Albertsons or Amazon. What kind of choice is that?
Pick any other industry and you’re likely to find similar problems.
It would be really interesting to see what mandatory democratic corporate governance might look like.
Or, perhaps, fixing union regulations so that unions don’t have a bunch of downsides for the employee or other regulatory issues that seem to have directly led to their decline.
The fundamental problem is that there’s less demand for unskilled US labor than there are unskilled US laborers looking for work. Fix that, and most of the issues people are worried about go away.
That likely has to be solved at the federal or international government level.
I don't think many minimum-wage retail or service workers can just "vote with their feet" and easily get another job, especially if you don't consider major changes in location and hours to be a non-starter.
For folks with kids, or who depend on public transit to get to work, "up and moving" isn't really an option. If you're one missed paycheck away from eviction, bankruptcy, or arrest due to missed fines or court fees then you can't play "hardball" with your employer.
Saying the arc of history improves overall cruelly glosses over the reality today for millions of Americans.
No it doesn't. Medical understanding and technology has gotten way better over the centuries, and people still die of things that could have been handled. Acknowledging progress doesn't imply perfection, but progress.
https://www.legalnature.com/guides/are-non-compete-agreement...
Yes there are other states that have similar limits, and many other states that don't.
>and in all of them if they are determined to be unreasonable in court
That's a tautology. A court can refuse to enforce any contract for many reasons. The problem is that what may be considered unreasonable in California might not be in Georgia.
It's also not super helpful for someone who can't afford a lawyer to fight it. Or for someone who can't find another job because companies don't want to deal with the hassle.
I personally know of many, many cases of this.
Even if this is true in theory, it's so completely untrue from a practical perspective that it's pointless to debate.
Poor people successfully sue businesses ALL THE TIME.
Besides, just last week a friend of mine told me that the former boss of one of his employees threatened a lawsuit over a non-compete agreement. He simply told the former boss "see ya in court and you'll be paying my legal bill". That was the end of that.
Not only are most of these just bluster, it's not profitable to sue poor people, since poor people don't have money.
I'll leave you with some advice that helped me find my way out of libertarian ideology when I was younger.
Stop and think for a second. Why the "proper functions of government" just happen to line up exactly with the functions that directly benefit you.
Why, the existence of anti-SLAPP laws comes directly out of courts not caring how they're weaponized by well-monied people bullying not-monied people. That's literally the point of anti-SLAPP laws.
GP's claim makes no sense with even the dimmest awareness of the court system.
Democracy is about voice, not exit.
Fair conditions grow out of equal power. But a fundamental problem with managerialist capitalism is an imbalance of power that will never be solved with vote-with-your-feet slogans. You have one job. A CEO has tens, hundreds, thousands of employees. It's always easier for a boss to fuck you over than it is for you to push back. Individual action is not enough to fix that.
[1] Foner's "The Firey Trial" is a good look at Lincoln's ideas, including what he has to say about labor. https://www.amazon.com/gp/product/B0044XV6G6/
What you are implying though, is that the government forces all workplaces to conform to your desired control scheme. So fuller democracy equals government limiting choice, as long as it is your desired choice.
Can you tell me the exact things the government is preventing people from doing in this case?
Perhaps the same statement would apply to workplace control. Most people have a general apathy to their workplace governance and only care about their pay and benefits.
I really don't know how you make people care about things, but compelling a change that people are free to make today by government force is last on my list of things to try.
There's also situations where dominant players make it difficult for smaller competitors to survive. In a loose analogy, Microsoft's monopolistic strategies in the '90s can be compared to the past decades' weakening of laws protecting unions.
Strengthening unions, or rather reversing the weakening of unions in this country, doesn't really require oppressive government force. That's in line with the misconception that considers America's sickly unions- who are an absolute paper tiger at this point in history- to have any considerable strength.
https://psmag.com/economics/what-caused-the-decline-of-union...
OSX and Windows work because the make it easy for end users to use them; and run the applications/games they want to play.
There are a good number of hackers who would consider Linux superior to the dominant OS's, which is why I made that arbitrary comparison.
To follow your tangent, I actually did a little bit of not terribly formal research on this at one point (maybe about 15 years ago now), calling up a variety of people in different volunteer organizations and asking them about their background and motivation for their volunteer work.
Generally, the anecdotes I gathered all roughly corresponded with their volunteer work tying in in some way with other facets of their lives.
For example, a man who had received books in prison from a volunteer organization joined that organization after he got out because he believed in the value of what they were doing. A mom volunteered on an organization that arranged activities for kids, which hers participated in. That sort of thing.
My takeaway was not terribly revolutionary: you can't -make- someone care about things, but their circumstances will increase the chance that they will care about related things.
Why cooperatives do poorly? Maybe people usually are not very good at governance, that's understandable, you can have trade-offs - slightly worse pay for better working conditions, or better dignity. Does it work like this?
I don't think you have evidence to back this up. The reality is that cooperatives are very rare, so 99% of people don't even have to option to work for one. It's probably not even clear to the vast majority of workers that such a thing is even possible. This says nothing of the extreme aversion to anything even remotely resembling collectivism in the US.
I have seen economist claim that cooperatives tend to be pretty inflexible. Slack was a communication tool for what is now a failed gaming company. If the company was owned by game developers, artists, and story writers, how many of them would have voted to sack themselves and pursue a chat application?
The majority of workers have probably never even heard of worker coops and those that have probably imagine it to be related to socialism and therefore un-American.
>So fuller democracy equals government limiting choice, as long as it is your desired choice
So more democracy actually == more authoritarian. Astounding logic.
That is the lazy way. If people are uniformed, we need to do more to inform them. People have power to choose where they work and where they spend their time and money. No one needs to come in and force Amazon into becoming a co-op. If top talent wants to work for co-ops and consumer prefer to get their good from co-ops, Amazon will adapt or die.
Though the concept of Amazon becoming a co-op is interesting. One wonders if a majority of Amazon employees organized and wanted that, if there would be even any legal avenue for them to do that. They probably wouldn't have enough shares to make that change from within.
Also, people overwhelmingly would rather exchange their stake in the company for the equivalent value in cash. It's only when the company's valuation skyrockets when they retroactively declare this to be unfair.
Well it literally is. If they are talking about Wall St. bankers they have no way to replicate the results of those people. Wall Street can make poorly thought out multi-trillion dollar bets on housing bonds and when they go bust they get bailed out and still get their Christmas Bonuses. There is no similar mechanism to protect a non-institutional investor from similar levels of risk.
If you want to sit on the sidelines because it's too risky for you, that's fine. But don't then complain that others make money on stocks.
You, and anyone else, can buy FAANG stocks, index funds, or whatever.
Many of us might be fortunate to have well paid jobs, and the ability and capital to invest, but it's understandable how someone could view the ability of those with capital to generate further capital without any labour to be unfair.
I've known many people who didn't have any cash on hand, yet lived high on the hog with expensive clothes, new cars, and nice houses. They didn't have any cash on hand because they spent it as fast as possible.
And maybe that is how it should be? Maybe life shouldn't be about the most efficient way to run a business.
Also, what's best for the workers isn't necessarily what is best for society. Globalization is anti-worker, but it helps the consumer with cheaper prices, the company with extra profits, and developing countries afford what developed countries take for granted like antibiotics.
This line of discussion is also making the assumption that what's best of workers and what's best for companies are necessarily in conflict, which is rather silly given that if a company goes under, the workers themselves are in trouble. There is at least one example I can point to where a workers union forced management to recognize the need to be more economically competitive. [1] Also, it makes the assumption that management and/or shareholders necessarily know best for a company's future, and there is no shortage of evidence to the contrary, some even recent. [2]
[0] https://en.wikipedia.org/wiki/Mondragon_Corporation
[1] https://news.ycombinator.com/item?id=13986889
I don't find much value in hypotheicals. Even the far right Ben Shapiro admitted he would support UBI if automation makes most jobs obsolete.
There are smart workers and dumb shareholders, but at the end of the day, people respond to incentives. Audi workers would never agree to convert their factory to EV had Tesla not already proven that EVs are something consumers actually want. This isn't a bad thing, but it comes with a cost. Tesla was able to ramp up production as fast as it did because they didn't need to run every decision past a union.
Your opinion doesn't change the fact that your response was invalid. You are responding to a normative, idealistic statement about universal values with your own slightly more concrete hypothetical. A misapplied exercise in practicality.
> Audi workers would never agree to convert their factory to EV had Tesla not already proven that EVs are something consumers actually want.
That seems like a hypothetical without basis. One doubts that General Motors assembly line workers were the ones who killed the EV1.
> Tesla was able to ramp up production as fast as it did because they didn't need to run every decision past a union.
There are some smart CEOs and there are dumb ones. Who's to say that the incentives given to traditional management schemes are truly correct? Businesses fail all the time. Startups, in particular, fail all of the time, and there are no shortage of egregious examples of boneheaded management decisions, or of shortsighted shareholders. Pointing to a Tesla and Musk, or to an Apple and Jobs, is simply survivorship bias.
What's your point? I obviously don't think the purpose of life is to maximize shareholder value. I'm merely illustrating where I find such idealism falls apart. I could be more specific, but I'm not trying to write a book.
You don't need to be a Nobel economist to know how people respond to incentives. An average family person doesn't want to risk their time, money, and health on helping to pivot Audi to a company that makes bleeding edge EVs. A company that is truly revolutionary has to focus as much energy as possible on delivering or some other company is going to do it first. That's why most successful startups are very cult-like. This comes at a cost to the worker and leads to scam companies like Theranos, but the alternative is that you're left behind.
That article is from 2017. EVs were already more or less an accepted mainstream technology, even though certainly not the majority of the automotive market yet. You're making it sound like it's as difficult as it was for Tesla back in 2003- the union was simply demanding Audi management to respond to the needs of the market and expand its product line, for the betterment of the company and to protect their livelihoods by staying competitive. Audi building EVs does not require, as far as I know, a pivot.
Theranos is also a good example to mention. Perhaps if it was a worker-owned co-op or a union there, some sort of countervailing force against both managerial and investor incompetence, that fiasco could have been averted. Perhaps with a system in place to provide support against those powerful forces, and someone sympathetic to listen to whistleblowers, Ian Gibbons would still be alive.
It's all well and good to lionize Randian revolutionary lone geniuses, but the creative destruction they tend to wreak in their wake tends to fall upon a lot of the little people. And worse off, these geniuses at world-changing companies are few and far between, and far outnumbered by copycats and wannabes who cause more damage through imitation. We have checks and balances in our societal governance; why not likewise in our corporate governance?
Have any data to back that up? Comparing a democratically run corporation to the US government is a non sequitur. Outside VC there is no business model that will allow you to run at a loss for decades. So it's a scenario that's not even possible hypothetically.
Somewhat anecdotal but there is a Worker Co-op in Spain, Mondragon, that's been a very competitive corporation for over 50 years. It can clearly work long term and it leads to better outcomes for employees and the communities they work in.
Anecdotally, I hear that Ford's biggest problem right now is the union's resistance in adopting the Toyota production system. If I were a factory worker, I wouldn't want to change the way I do things just so the shareholders get richer. That's a perfectly reasonable attitude to have, but it does place Ford at a disadvantage to car makers without unions like Tesla and Toyota.
The employees all know they could run the business but they cant picture themselves doing it. Their arguments are "It's to complicated" but struggle and fail to explain how. It might still not be a good idea but that they draw a blank is the ultimate hurdle for now.
Pretty much everyone is becoming subject to these authoritarian regimes (corporate structures) as they invade and carve away at our democracy through financial influence, regulatory capture, etc.
(fed / state / local / HOA)
Something where the more money you've spent at a place, the more say you have in how it is run.
Not really sure of what way that could be done, but the premise feels right so far.
haha literally like tangentially above yours...
If you want to see what small government/strong corporate control is like, look back a century in American history. Corporations controlled much more of American life than they do even now, and the 20th century regulatory state is all very much a direct response to all that.
Lot less time to go surfing back then, too.
Unions.
Say a group of people unionized and formed a collective coop org.
Workers would get paid fairly who were employed by the co-op and would be members of the union.
The union would create it's own credit union and financial instruments and be a mesh of a CU and old style savings/loan.
The CU/Bank aspect would also invest in real estate (section 8 housing mostly and other but try to keep rents down wherever it has rentals and keep rent competition in check).
$$ brought in would be pooled, and as we grew to a certain size we'd launch our own health insurance company. All $$ from investments/real estate/etc would go towards the health care, premiums would basically be collective medical costs - income from investments / members of union, and members could choose to pay more for members w/ more financial burden.
Eventually we could start other businesses and encourage our union to ONLY use those businesses that we own as a co-op. ISPs, Amazon-clone, Google alternative, etc...
Eventually we gain $$ and power to start building or buying hospitals of our own. We also invest in our own generics drug company and maybe even a research company to design new drugs. Everything we do we deliver at cost or close medical wise. When we have surplus at the end of the year members vote whether we should diversify it into more investments, pay out dividends to all union members, or apply it to the medical fund, etc....
Eventually we could expand beyond our co-op and offer to be the 'benefit plan' for states' medicaid/medicare, as well as employer plans. The goal being have better quality and lower costs for employers, states, and members.
Eventually we get state $$ on top of union dues to cover the $$ needed for our m4a plan. If we're constantly in the green, we could start looking at a UBI plan.
The concept is a marriage of capitalism, unions, socialism, libertarianism. It's based on the concept of dual power. Eventually you get enough power that you weaken the healthcare lobbies (by taking their business) so that the $$ and political will to thwart you isn't there because they can no longer enrich politicians because they're cash on hand keeps dwindling, eventually we'd have more $ to lobby with than they would.
In fact, in the "small government" vein, I'd suggest repealing Taft-Hartley immediately. The biggest immediate benefit to repealing that would be that unions could once again freely conduct wildcat strikes.
But that's not what libertarians generally think about when they think "small government," they think of ending social programs -- at least, in every conversation I've ever had with them. I've never had a one-on-one conversation with a libertarian (and I've had quite a few, thanks extended family) who thinks unions are a good thing or a way to balance corporate power.
The libertarian argument is that the proper role of government is to protect people from force or fraud being used against them.
However what almost everyone overlooks is the demographic transition. The US, along with every other developed economy, is significantly older today than it was 40 years ago. And the fact of the matter is that an older work force almost certainly leads to an economy with larger, older firms.
Most entrepreneurial activity is disproportionately carried out by younger people. Young workers are much more likely to work for small, young, growing firms. That makes sense because they have longer horizons and can take more risks. Older workers, who have higher fixed expenses and are closer to retirement, prefer the stability of a stable, large company with low employee turnover.
Macroeconomists who have attempted to quantify this impact, generally find that the average firm age in an economy linearly increases with the average worker's age.[1] Since older firms, tend to be larger, slower growing, and less competitive, it's not wonder we've seen an increase in monopolization.
This is self-contradictory.
This is why the solution of making the government ever more powerful isn't going to work.
https://techcrunch.com/2019/10/04/snap-ceo-isnt-expecting-mu...
Licensing, permits, etc, are all ways to limit and prevent competition.
"The AMA strictly controls the number of seats, and the government has a medical licensing process, therefore the AMA's actions are the government's fault."
Nope.
https://www.amazon.com/Competition-Monopoly-Medical-Care-Fre...
Plenty of evidence and cites.
I think it's reasonable that people should have local control over their city environs, even if it means a multinational like Google can't come in and build new infrastructure. It's not a "will of the people, unless Google wants to build fiber huts everywhere" kind of society. Maybe they should just go surfing instead.
This is an idealistic line of thinking, but as a practical matter, is completely untrue. Essentially 0% of America understand their county commissioners' stance on ISP competition, myself included. No one campaigns on those things.
It's a lot like saying that electorates are responsible for police violence because sheriffs are elected officials after all.
And once a company does build a network, absent government regulation requiring them to let other companies use it, the existing infrastructure is an enormous barrier to entry.
Before the government stepped in to anoint winners and losers in the phone business, companies sprang up everywhere and strung their own wires.
There is no history of a successful, large scale infrastructure project built without government assistance. Either directly or due to the fact that much of it was built on government land.
(unless maybe you consider some case where private infrastructure was built in one large area controlled by a small group of owners, but that's basically just a government by another name and doesn't apply to modern America.)
Even so, a railroad is private property and they can choose to allow or not someone stringing wires along it.
It's hard to argue that the railroad builders were not given "assistance" (the granting of land).
Oh? Network effects don't exist? Economies of scale don't exist? Dumping doesn't exist? Branding doesn't exist? The only kind of moat in existence is regulatory capture?
Regulatory capture is real, but it's one of many tools that suppress competition. I can think of one single solitary competitive analysis I've been party to where we decided it was the largest factor.
If only fixing anticompetitive markets were as easy as "drowning the government in a bathtub" we'd have solved this problem ages ago.
I didn't say "only".
For example, if I said "Star Wars" was "the movie" to see in 1977, I obviously did not mean it was the only movie.
If I meant it was the only tool, I would have written "the only tool".
If you need to insert the words "only", "always", "never", "100%" into my words in order to argue, you should reconsider the strength of your argument.
Even so, I'm happy to engage with your new argument: that regulatory capture is the first tool companies reach for to unfairly suppress competition. That's still wrong. Regulatory capture is slow, unwieldy, and opportunistic. The first tool a company reaches for is typically either M&A or dumping.
When WhatsApp was getting popular, did Facebook respond by crafting legislation with a plausibly deniable dual purpose, cultivating connections with campaign contributions and a held-open revolving door, wait for a wave of public sentiment that could carry their law up the priority list, through congress, and onto the books, and then sit back and pray that the resulting wind blowing at their backs and in WhatsApp's face would tip the balance enough to keep them on the throne? No, of course not! Facebook bought WhatsApp. Where there were two competitors, a free market exchange happened, and then there was one competitor. See also: banks. Yeah, they need FTC approval, but the free-er the M&A market, the easier it is for competitors to just merge together, and the more anti-competitive the result.
As for dumping, you'll often hear people blame legislation for the big ISP monopolies we have. Certainly there are no shortage of legislative failures in this space, yet it's not illegal to start an ISP. If you set out to create an ISP of your own, you'll probably be able to find a municipality willing to deal with you. The actual trouble will appear when you start selling your service. Your first few customers will gladly switch in order to take advantage of the better deal you're offering, but once the regional ISP monopoly notices the churn, suddenly you'll find that all of your prospective customers recently received a promotional discount from the monopoly and are no longer interested in your service. Then you go out of business, and customer rates go back up. It wasn't a law that kept you out of the market, it was the fact that your competitor had a larger war chest.
In both cases, more market freedom = less competition. Certainly, regulatory capture also exists and is also a problem, and in that case more market freedom = more competition. In some cases, it's even more complicated: economies of scale create genuine value by amortizing costs across volume, but they also create an anticompetitve moat. They have good aspects and bad aspects that are inextricably linked and inseparable from each other.
Still, focusing exclusively on regulatory capture will lead you to misdiagnose most markets. The cure will appear obvious, but where your diagnosis is incorrect, it won't work.
The distinction is that there are plenty of other tools companies can use to suppress competition, and Government also can be used as a tool to encourage competition.
A strict black and white view point that more government = less competition is absurd.
Yes, and fortunately I didn't say otherwise.
Take away the government's power to suppress competition, and they'd still have and use many other tools.
Attacking the government is a distraction that's quick, easy, and wrong, like blaming surfers for the tsunami washing over the city.
Firms that are monopolistic are less competitive, larger, and slower growing. Reducing monopolistic tendencies increases capital growth, competition, and reduces average firm size. This is well understood economics.
Monopolies arent' some hypercompetitive ultra capitalist battlespace, they're fat and happy, and the most impactful teams they employ are lobbyists and policy folks in DC. Look at like, comcast and what they did with the FCC.
Looking only at average age doesn't give a full picture, how does this square with the Millenials recently becoming the largest generational cohort? By your logic shouldn't there be a massive wave of young growing companies.
Personally for a left view I would add cash/capital accumulation. It's kind of the same thing happening for individuals with wealth and real estate. Regulation is failing to bring the balance between the revenues of capital (which are exponential unregulated) vs the revenues of work. At one point you can't even compete anymore if you start from scratch. Competitors with billions in cash can pretty much "kill" any new business they want.
I've made a career out of small startups, and I wouldn't trade it for a thing. On the other hand, if I'd gone to work for Amazon straight out of college, I'd probably have a boat by now.
I also find the idea of "basic economics" laughable given how impossible economics is in the first place. I mean, yes, if you assume spherical cows...
It kinda is, isn't it? The fun, fulfilling job is one that everybody is happy to do. The boring, soul-devouring job is where you need to encourage people to do it by offering more money.
It's called 'psychic income', and it is something that people will accept, to some extent, as a substitute for cash comp.
This is widely cited as the reason that teachers earn less than other professions, and why garbage collectors earn more. There are a lot of people who enjoy teaching, and not a lot who enjoy garbage collecting.
https://www.wipo.int/edocs/pubdocs/en/wipo_pub_econstat_wp_5...
Looks like the median pay for garbage collectors is $37,840[0] and for teachers it is $59,420[1]
[0]https://www.bls.gov/oes/current/oes537081.htm
[1]https://www.bls.gov/ooh/education-training-and-library/mobil...
For example, college professors receive psychic income, but they make much more than garbage collectors. They make less than stock brokers, which is another career option available to people who can get PhDs, in general.
That's not the impression you gave. You gave the impression that garbage collectors make more than teachers.
>This is widely cited as the reason that teachers earn less than other professions, and why garbage collectors earn more
Teachers < other professions < garbage collectors
I get now that you meant to say was
Teachers < similar professions to teachers
Garbage collectors > similar professions to garbage collectors
I've heard many arguments that teacher make less than X profession, so the former wasn't an unreasonable interpretation given the phrasing.
Knowing what you meant to say. I don't think garbage collector pay is good supporting evidence for psychic income. Garbage collector pays well because it is a physically unpleasant job. What's an example of a substitute job that is similarly physically unpleasant that pays less because people find it fulfilling?
Basic supply and demand. Fun jobs mean more people apply to the job. The employer can pick the cheapest employees. Employees can get an edge over their peers by lowering their salary expectations because they value the job more than the money.
I honestly don't even think that this is a bad trade off. There are lots of jobs where you get access to equipment that you could never afford even if you had a higher salary. Think of working at a company like SpaceX or doing research at a university.
I think we've reached a point in the industry where innovation has slowed enough to allow the biggest companies to catch up. Combined with the natural advantages that big companies have (monopoly, regulatory capture, etc.), it's just really hard to go toe-to-toe with them these days.
The delayed liquidity of the extremely long startup adolescence in recent years ("startups" that are 10+ years old and where almost all of the big value growth is in the rear-view mirror) is, IMHO, a big part of this.
i.e. you can join a startup that is already successful (the winner has been picked, Amazon, Google, Uber, ...) and safely with less variance expect to gain more expected value than you'll on average get from trying to pick the next winner. If you say "but startups are win win" then I'll say "but he's saying monopolists are win win win"
Microsoft was already an OS monopoly by 1990, but after that is when it really started to make real money, and for a lot more people than had worked there in the 80's. Because monopolizing a niche industry is nothing compared to growing the monopoly to mainstream acceptance.
you don't have to agree with his assessment; I'm just trying to clarify that he is saying something, not just selecting a point on a gaussian.
I'm not saying you can't get rich off of gas station scratch tickets, but it's not the best option.
Sure, what has changed over the last 10 or so years is that winning the startup lottery pays close to nothing incremental over working at a large company since most of the equity is now held by founders and late stage investors and most of the stock growth happens before a company goes public.
Earlier this year (before COVID), I interviewed with Microsoft, as they were looking for people with security clearances to work on Azure services. I apparently passed at least one of the four interviews, as they made me an offer. However... the offer contained minimal details on what I would be working on or doing, just a vague description that it was an Azure infrastructure service team. The recruiter himself didn't have any information to answer my questions. If I were just coming out of college, I'd be fine with that level of unknown, but as someone with about ten years of experience and who knows what he likes to work on, I wasn't going to take the risk of ending up on a miserably boring project (again).
Who wouldn't be with those salary levels? You basically have the golden ticket in your hand.
If your goal in life is to be rich, it's not bad, I guess. If you really love doing good tech, it's stultifying.
Anyone who'd bought AMZN probably has a boat by now.
That's the "pro" of going with an established company - having reliably high compensation.
The "pro" of going with a startup is the low chance of exceptional pay and the fulfilling work.
Why would anyone ever work for the big company if startups were both more potentially lucrative and more reliable?
Therefore we should want a Growth market so that more wealth is produced and risk averse people will still be rich but more people will become as rich as them.
To resolve Inequality we can't just have the mindset of punish the rich for creating wealth. We need to grease up our economy so that everyone else can be rich as well.
Different mindset but this problem is super hard to solve and I don't think anyone has a decent solution for it.
I really feel like people need to look into land taxes a la Henry George: https://en.wikipedia.org/wiki/Henry_George
Taxing things like capital gains differently or implementing a generic wealth tax can actually hurt those we want to help to build wealth as well as incentivize things like expatriation of wealth. Can’t expatriate land.
I understand that the financial/business world has been trying to convince people otherwise since the mid 1970s, but they are still as wrong today as they were then.
Tax “fairness” is therefore simple. He who earns the most should pay the most.
You cannot expatriate dollars. The currency is issued by the state and the state can seize it. Chinese factory? Great, tariff on iPhones at the dock. Baseline tax = difference in currency value between country of origin and country of destination on that day. HQ in Ireland? Super, you owe the US the difference between the tax you paid there and the equivalent rate here. Don’t like it? No security sales in US markets. Sell bonds and stock somewhere else.
These aren’t hard problems.
You can't hide land, and if you want the state to enforce your property rights, you can't alter your behavior in a way that lets you avoid paying the tax. That makes the land tax what economist call a "zero-deadweight" tax: it doesn't decrease economic activity or consumer wellbeing at all. There's also an economic theorem [1] that an LVT results in the optimal size of government: investment in public goods increases the value of land (and hence rent that can be charged for it), but also the tax on that land, so citizens have an incentive to vote in only those public works projects that increase rents more than their cost in taxes.
Whereas if you put a tariff on iPhones at the dock, Apple will pass that tariff along to consumers, prices will go up, and fewer people that want an iPhone will be able to afford one. The "HQ in Ireland" trick revolves around avoiding dollars at all: profits from a company's EUs operations are retained as Euros and then used to pay European employees or exchanged directly for RMBs to pay for Chinese goods.
Who is saying taxes shouldn’t exist here? I’m advocating for a specific form of wealth tax. I clearly believe taxes are necessary. As for them not being a punishment, this is clearly a silly semantic argument focused on trying to frame this emotionally. People respond to incentives and change their behavior when faced with incentives. Taxes change incentives. If a tax disincentives a behavior, this behavior will be done less. Get your moral policing out of here.
> Tax “fairness” is therefore simple. He who earns the most should pay the most.
Why earnings? Why should we tax people’s labor? Your definition of fairness is yours, not everyone else’s.
> You cannot expatriate dollars.
Jesus Christ, yes you can. It’s like you’ve never heard of offshore banks. Where does an idea like this even come up? Go see China’s issues with people expatriating capital and their middling success at preventing it with capital controls.
How someone can speak like this and not see the value of a wealth tax in the form of a land tax blows my mind. By the way, concerned with massive disparities in wealth? That’s all from housing which is of course built on what? Land. https://www.brookings.edu/wp-content/uploads/2016/07/2015a_r...
Tax the shit out of land. The marginal value to a piece of land from the actions of its owner is minimal at best. People gaining wealth from land is the definition of rent seeking.
> Jesus Christ, yes you can. It’s like you’ve never heard of offshore banks
I don’t think you appreciate how governments already monitor wire transfers, and how they are reversible within a certain timeframe if a legal authority chooses to intercept one.
Again, this is not a complex problem since the tools and authority already exist, it’s a political will problem, in that there are nearly zero elected officials willing to cross a billionaire.
> How someone can speak like this and not see the value of a wealth tax in the form of a land tax blows my mind.
Because I live in a state in the US without income taxes and with a high reliance on land taxes. It makes no difference, corporations bribe their way into temporary (as in decades) exclusions from land taxes, and individuals are left to pay what the chemical plant literally polluting their back yards is exempt from.
There is no logarithm or formula that fixes all of this. What fixes it is 10 years without parole at hard labor for any owner or officer of a business entity who gives anything of value to any employee of the state, whether that employee be elected, appointed, or hired. The same penalty will automatically be applied to the state official who has been paid.
A hefty estate tax is something I can get behind. It's definitely distortionary and has a huge amount of difficulty in implementation but I see almost no societal value to generational wealth.
That said, I see no reason as to why we shouldn't at least experiment with other alternate tax regimen as well, and that may include tax savings at least for the highest earners. To echo others' statements, why shouldn't those at the absolute highest levels of savings endure a little redistribution? It wouldn't matter much to Bezos.
That being said, how do we prevent people from just selling small amounts of capital every year, so as to stay below bracket thresholds?
If the concern is that someone is paying less in tax off $250,000 in capital gains when they realize their wealth than someone who is paid a wage of $250,000, the policy prescription (with which I agree), is to tax $250,000 capital gains like income, I.e. at the top marginal tax rate.
What happens if I liquidate $50,000 at a time over the course of 5 years, and continue to pay a net effective tax of around ~20%, which is what the long term capital gains tax is, today?
This could mean that they have $1 million of unrealized gains that year. You're not really able to tax unrealized gains most of the time because they could disappear or go negative. That would go untaxed until they sell, but it would eventually be taxed.
At the same time, they're not going to be able to enjoy their wealth only taking out a small amount every year, so I'm not entirely convinced that this behavior of living frugally to pay less tax is something we need to 'prevent'.
Very fair point.
> I'm not entirely convinced that this behavior of living frugally to pay less tax is something we need to 'prevent'.
I think I buy this argument. Another commenter had the suggestioin of dividing the actual realized gain by the number of years the asset was held and assess taxes as if the person made that quotient in income for each of those years. I can't think of anything wrong with this approach.
Federal income tax caps out 37% and california income tax caps out out 13%.
If you do that, you would want to increase the rate on OI as well, otherwise people would play games because of the rate differential (take money out of a business as salary instead of CG, for example).
And lurking in the background you have the timing/inflation issue, which is that OI is taxed every year and CG is taxed in nominal terms upon sale. So you end up potentially paying lots of tax on nominal increases in value that are actually just inflation. The fact that CG is not inflation-adjusted is one of the rationale for having a lower CG rate.
I hadn’t considered the inflation issue, which is interesting but seems solvable.
I would argue that millions (if not billions) are injected into corr^Wlobbying to make sure that we never fully have this mindset, indeed.
Meanwhile, the rich are way less taxed (proportionally) than the middle class, and in my opinion, that's a problem that stifle Western economies.
Is this actually true? According to the IRS, in 2018 the top 10% of income earners paid 69.47% of total income tax collected.
Source: https://taxfoundation.org/summary-latest-federal-income-tax-...
That number feels wrong, given it's exactly the same as the tax one, but I couldn't find another source. https://www.statista.com/chart/amp/19635/wealth-distribution...
There's no other reason you could think of to feed a hungry person?
> That is why an economy must rely on the basis of voluntarily offering something of value. Because the alternative is literal enslavement.
You don't see the irony in saying that a person must volunteer their value or be enslaved?
Free individuals might give something out of benevolence. But a state institution is not a free individual. It can only represent the collective, and you cannot ensure that all individuals in such a collective would agree to such an exchange, or feel benevolent about it. As such, there is no such thing as a benevolent state. Instead, you can employ game theory on such entities, to the extent of making them look completely self-serving and even psychopatic, as proven by Nash.
This is why it is so important to curtail the development of big and monolithic bureaucratic organisations, and instead use such principles as those given by Montesquieu, to make natural powers compete for authority.
> You don't see the irony in saying that a person must volunteer their value or be enslaved?
Do you think the person giving you bread should be forced to give you that bread? Nay, it would be far better if there was some kind of mutual exchange. There is none to be had, when the exchange is merely giving out a resource for "free." Except we know that it's not for free, but in return for your good behaviour. Then the exchange isn't free, but depending on an exchange anyway, except you have little to no say in it. Then the one in power of that resource in turn also have absolute power over you. So there should be a way for you to gain that power for yourself, or in the least make sure the one giving you bread does not have monopoly in doing so, because it will inevitably devolve into abuse of power.
A state is only benevolent if every single citizen is benevolent? That seems like a pointless assertion.
In a democracy, in theory, the majority is what matters.
If the state was a dictatorship, then the point might apply. However, democratic states (to lesser or greater degrees) contain some measure of feedback; and that weakens both of the prongs.
Plainly speaking, a democratic state provides its people bread for free because that's what the people want. The state can't take it all away since it is responsible to the people, and the exchange isn't a one-sided forced deal because the people in the state's jurisdiction have collective power on the state itself.
If that power is the power of the ballot, then the mutual exchange could be seen through an adversarial lens to be "good behavior in return for free bread". But the consequence doesn't hold, as the state doesn't have absolute power over its people. The exchange is mutual because if either party reneges, so does the other party.
But the stronger that feedback is, the less the adversarial model works. Consider a community small enough to support a direct democracy along consensus lines. If the tech existed, such a community could create an automated bakery and then hand all of that bread to its members. Here the members govern themselves; there is no external power that arises out of the state and then unilaterally controls the people.
A larger state may be different, but that difference is a matter of degree. "The one in power of that resource" only has "absolute power over you" if you are not part of it.
However, while the price of membership in such a unit decreases with every new participant, the ownership is also diminished with each new owner, until effective control over the unit or process becomes very difficult. This will inevitably lead to frustration and feelings of powerlessness as needed change is slowed more and more.
As the saying goes, more votes, does not necessarily mean more democracy. It simply means that it becomes harder to get anything done. Meanwhile, bureacracies grow and rule uninterrupted under such conditions, since a vote every fourth year, and the meddling of one or two representatives, can only ever make small and incremental changes, instead of giving the organization the far-reaching and overarching reorganization that it actually needs in order to become fair and effective again; a thing that is usually contested and opposed by those making up the bureacracy of that organization in the first place.
Given those points, it is not impossible to imagine a future state deciding to use some of its resources to constructing an automated production system. Its legitimacy is backed up in two ways: once, by the consent of the governed through the democratic process, and the other, by the positive externalities it grants to the people in common.
If the people of such a future state decides to create a common automation infrastructure, then they may also reach the conclusion that not everybody needs to work. The conclusion you reached in your initial post,
>Because if you cannot offer anything of value, someone else will offer that value on your behalf, making you an extraneous cost which anyone in their right mind would want to remove.
no longer holds, because even in the most selfish system, any bureaucrat who takes the time to "remove" you will have to face the consequences. And therefore, there can exist a state that does not demand everybody work.
To some extent, that already exists today. Welfare states protect (or are intended to protect) people who can't work. The people in a welfare state do not want to leave those who can't work to starvation, and so the state doesn't, either.
I do, of course, agree that states as they exist today are imperfect, sometimes grossly so. But I disagree that there is a necessary implication that everybody has to work. As long as the people have a say, and as long as the people do not only value labor, the state cannot simply rid itself of its unproductive constituents. If anyone "in their right mind" would remove people that are "extraneous costs", then the people are collectively insane - and they are coherently and strongly insane enough to check those who are not.
Not really. The more people who get to vote, the less individual control you get yourself over the outcome, and so the more powerless you become. More votes do not equate more democracy, only less individual power to influence your own future or leadership through the ballot, especially if your choices are limited. Unless you take a more direct action, and go into politics yourself, that is. But who has the time for that?
This is why people are rioting in the streets now, instead of patiently waiting until the voting booths open. It's because deciding between two candidates wouldn't resolve the matter in any meaningful way. Especially since there are no real candidates to vote for, that would make anything but token change for you. Nevermind an independent candidate, who just wouldn't gain any traction at all, or at least not under the American system.
Call me cynical, but representative democracy only works because it gives people the illusion that they have an individual say in politics, but they really don't. However the illusion keeps them blissfull enough to not want to rise up. If it actually mattered, I'm sure there wouldn't be a discussion on whether the Brexit vote should be respected (many wanted to disregard it entirely), or even that my own country of Norway perhaps shouldn't pursue relations with the EU, since a majority voted against membership. Yet here we are, with a de-facto membership of the EU through the EEA. Voting against it really worked. Yay... /sarcasm. So I can full well understand why some people think rioting is a better choice. I don't condone it, and I think there are better ways to protest, but I still understand it.
> even in the most selfish system, any bureaucrat who takes the time to "remove" you will have to face the consequences. And therefore, there can exist a state that does not demand everybody work.
Depends on the system in place. And it would be at the eternal scorn of those who have to work, but still pays the full cost of all those who don't. Because UBI isn't "free." And let's face it, such a machine wouldn't be "free" either, although it stands to reason that if it was made really big, then it would certainly be cost saving enough as to preclude all competition from all those who don't have the means to build such a machine themselves. As such, it would be clearly monopolistic.
In essence, it would be unfair to all those who would otherwise compete by baking bread of their own, because it would make bread-baking entirely unprofitable for everyone, just like slavery made low-end work unprofitable both in Rome and in pre-civil war USA. People somehow forget to mention that the war wasn't just about emancipation, but also because slavery gave slave owners such an unfair advantage that it put a lot of people out of honest work. Thus there would be something in it for every baker to throw a wrench into such a monopolistic machine.
If the only way to build such a machine, is to build it big, then it stands to reason that only big players can build it. So what makes you think they'd do it out of pure benevolence, without anything to gain from it? Surely, giving elites peace from the "rabble" might be a good enough reason? In fact, large swathes of the people would become complacent and dependent on the machine. So anyone who could gain control over it, would also stand to gain untold power for themselves and their group.
I think a fair few people would aspire to such power, and some might even be willing to murder for it. If you were somehow able to defend that coup, either diplomatically or by force, you would in effect gain dictatorial power over anyone it served. And nevermind democracy. You now have the power to decide what people vote, or no bread for you! And so, even if it was made with good intentions and for benevolent reasons, the machine may well come under the control of evil. Worst of all, if evil ever got control over it, many would come to their aid, simply to make sure they would continue to come first in the bread-line.
Now consider a crisis sweeping the world, say, destroying crops around the world; the guys who are getting stuff for free, would be the first to be cut out of the service of that machine. Only those who worked and saved would afford bread in such a time, as everyone would be made to pay. Except those who relied solely on the machine would starve, because they wouldn't have anything saved up to pay for bread. And so you'd have new upheavals.
The only way to alleviate such an extreme amount of power, would be to make sure there is competition for it, so that several machines were made to compete with each other to offer the best bread. And for that to be possible, you need people who also add value by working in various ways.
But without any incentives to do so, one might revert to letting the state do it. And then it would be in the interest of the state to keep that power to themselves, and prohibit anyone else from having it. Good luck saving it from the psychos and sociopaths that usually want to climb to those heights.
> If the people of such a future state decides to create a common automation infrastructure, then they may also reach the conclusion that not everybody needs to work.
If they provide no value, then they are also worthless and expendable. If their worth is only potential, then don't be surprised if they're treated like cattle by those owning or controlling that infrastructure.
> To some extent, that already exists today. Welfare states protect (or are intended to protect) people who can't work. The people in a welfare state do not want to leave those who can't work to starvation, and so the state doesn't, either.
Except it's an inherently unsustainable system unless most people in that country also contributes to it. We're now in a situation where more and more countries cannot afford the welfare states they once created. And now while the coffers are empty, and the jobs are drying up, people want UBI? Who's gonna pay for it? The only reason rich people would pay for it, is to insure safety for themselves. So in essence, they would pay for security against the masses. It's the same reason the patricians of Rome did it. Well, Ok, whatever you say, it did work for a time... For that reason. So that's at least something, I guess. But whatever that was, it wasn't freedom.
There is already solutions that lets people stop working, however: Income based on interest, dividends and rising asset values. This is when the value you add back to society has become intrinsic to the property that you own. But most people have neither the means nor the knowhow for how to get there. Perhaps this is what schools should focus on in the near future, then?
This doesn't have to be the case, only the most nihilistic and privileged view of the world can produce such statements. People are not valuable because of their ability to produce capital, reducing things to these terms is a deficiency in both mental models and morality.
It's not what you can think of that matters, it's what the people who control the state apparatus can think of.
The vast majority of human beings are capable of empathy. Such people are usually found towards the bottom to middle of most hierarchies, because their empathy makes it painful to fuck over all the other claimants and collateral damage that they need to crawl over to get to the top.
You could look at capitalism is a sociopath-containment vehicle. If there were no sociopaths, there would be no need for capitalism: people would produce what was needed and freely share it with the people who need it most. However, there are sociopaths, and throughout history they've usually just taken all the excess production, enjoyed it, and left the people who produced it destitute. It was a big innovation to be able to channel that selfishness and will to dominate other people into productive uses that make the rest of society more efficient.
Wanting to remove people for being "extraneous costs" is not right-minded. It is extreme sociopathy.
On the other hand, if you were a baker, and someone told you that you must give your bread away for free to a third party, how would you feel about that? The only thing you would get in return, is not being punished by the one forcing you to work, and not killed by the masses for whom you provide your free bread. I don't know about you, but personally I'd hate to live under such a fascist regime.
I mean, I personally think it's all sociopathic, but it's the normal state of 'the state'.
People should not be required to work to survive. People should be required to work to make the world a better place. Most people work bullshit jobs that do not advance anything but the wealth of the 1%.
What does "be required" mean?
We'll never automate medicine because everyone wants to live even longer.
I would love to not work and just play with my kids.
It's not even a fringe idea that government policy is dictated by the wealthy class. What incentive do they have to do this?
The only way that it will happen is by regular people making it policy, and our current system doesn't give us a voice on what happens.
I suspect the bigger problem isn’t the Bezos’s of the world consolidating money and power generationally, it’s the big corporations getting bigger, with corporate taxation disproportionately hurting the smaller players rather than the bigger players. We would have a much healthier economy if the incentive structures hurt companies more the bigger they get to discourage things like vertical integration. A company doesn’t have to pay taxes on the intermediary steps of production but might have to (sales or B&O tax) if they were to purchase the same goods from a third party. This tends to distort markets away from lots of smaller players to a few big players.
Your understanding is a talking point created by the Republican party and has no real basis in reality.
https://www.factcheck.org/2017/09/death-tax-talking-point-wo... https://www.cbpp.org/blog/the-myth-that-the-estate-tax-threa... https://money.cnn.com/2017/10/10/news/economy/farmers-estate... https://www.chicagotribune.com/opinion/commentary/ct-perspec... https://www.tampabay.com/archive/2001/04/09/debunking-the-my...
I will also point out that estates benefit from step-up basis which avoids Capital Gains taxes on unrealized gains, which is hugely beneficial to most estates. This way of taxing is meant as a compromise to allow fairly large estates to pass tax exempt --currently up to $11MM if held by a single person, $22MM for a married couple-- while applying taxes to estates that all but guarantee that you could retire instantly collecting an income that puts you in the top 1% of household earnings in the US with highly favorable capital gains tax treatment. Also, the IRS will work with anyone that has a large illiquid estate and allow taxes to be paid over a decade after an initial grace period, with an appropriate interest rate.
Also, make no mistake, I'm not trying to apologize for people who are already extremely wealthy, who have to deal with this problem. I would love to have the problem of what to do with a company big enough to need to sell it upon my death. I'm merely trying to point out, that estate taxes do have a consolidating effect that feeds mega corporations. What I don't know is if this effect is as big as I suspect it is, or if it's simply dwarfed by other factors, like the general desire to sell out for a big payday.
I'm sorry, but this is just the same talking point reframed.
If you have a business that is large enough to be subject to estate taxes, you should have enough time and resources to talk to an estate attorney and learn how to move the assets into an appropriate corporate governance structure such that it is no longer a real issue.
Similarly, you are wishing that the workers must also provide capital, but again it requires workers to have savings. Now obviously I know you don't think of these things like that, you just have a wishful desire that somehow the profits are distributed to the workers and not to some random individual. But the truth is this is the precise reason why the prophets go to the individual who supplied the production process with their savings (just supplying them with savings isn't enough that would only allow you to earn the original money plus interest, but in order to benefit from the profits you must undertake the risk associated with the productive process).
By separating the people who work in a company and the people who undertake the risk associated with the productive venture, you benefit everyone.
I would put some limits on estate tax rates at certain thresholds. Like, anything above $50 million, tax at 90%. And hey, the kids will still be rich, just not crazy billionaires. For private companies this gets tricky and for many companies they would be forced sellers, that's one of the big trade offs. Exempt farms if necessary?
but according to law, corporations are "people" arent they?
Well, I can say that about anything. Oh... the rate of return on capital is higher than the rate of return on labor? Well that's only true of the past, no study has studied the concrete data of what is going to happen in the future (Hint: it's because there is none).
I'm not sure if ycombinators like the alternative way.
BTW I agree to your idea in general, just want to say that I'd substitute WORK with anything that benefits human being.
But as long as that's true, you're going to get increasing disparities of both wealth and power - because you have a nice tight political and economic engine that cycles by turning one into the other, and back again.
Redefining value as "social value" - of some kind - won't change this on its own, because that process is just the on-ramp to the main cycle.
And unfortunately it's not the only on-ramp - it's just the most obvious one.
Democracy has always been like this, or worse, when it is not judged by money, but by your ancestors. Capitalism smashes Feudalism by bringing power to a lot of people than the Feudal lords agreed with, and then it's pretty much "money buys everything" mode.
If we look at history, most of the stuffs that improve human civilization were indeed funded by "VC" of the time, but the core motive is not to earn profit, but to solve problems and satisfy personal interest. Now if you can remove VC from the picture, you pretty much get a society in which everyone is automatically doing things that are beneficial to the collective. Anyone who wants to just be super lazy will get bored easily and will start doing things sooner or later, especially when all of his friends are creating value.
Sounds familiar somehow.
If firms have workers with negative productivity, aren't executives incentivized to fire them?
And if so, why are there negative-productivity workers?
There are also plenty of examples of work that is profitable to a company but that doesn't create value to consumers:
* Campaign Donations / Lobbying for favourable regulations.
* Softbank style monopoly creation (it's just moving investor money to consumers).
* Patent Trolls and lots of semi-patent trolling games. (Think Amazon buying Kiva)
* Misleading / Emotive advertising. (Which I'd argue is the majority of it.)
If you're hell bent on thinking markets are inherently fair you can contort yourself to show these things _can_ be productive but to think they're always productive?
Who is incentivized to hold executives responsible for the bottom line, board members and shareholders?
> If you're hell bent on thinking markets are inherently fair you can contort yourself to show these things _can_ be productive but to think they're always productive?
I agree, insomuch that many 'profitable ventures' don't increase the aggregate material wealth of the country.
1. The firm has enough growth to cover it up (downturns can finally bring about layoffs here)
2. Measurement is difficult or not practiced at certain firms vs others
3. Subsidies or contracts from the government specifically cancel out negative productivity and so make it worth it
etc
Many administrative, HR and IT workers are overhead, but still needed.
Presumably, actively working (like with a job) to generate wealth to invest in other enterprises is 'active participation in the value creation'. I mean, sure, if you want to introduce steep capital gains on invested capital that was inherited, or won, or whatever, that's fine.
This is my exact point. Working (like with a job) creates value. Investing money in a secondary market for stocks generates no value whatsoever. Perhaps it keeps some stock brokers emplayed
Great, then let's open the primary market (which does generate value) up to individual investors. Unfortunately, this value generating mechanism has been legislated away.
That said, I do think this is somewhat beside the point of how capital gains should be taxed. I think that stock appreciation profit should be taxed at least as high as personal income.
I don't understand why... if I invest money I worked to earn, the profit from putting that money to use should be taxed three times: once while paying the employee the company hires to carry out business, twice after profit is calculated and corporate income tax taken, and then thrice when they tax me for the dividend. Surely twice is enough?
> That said, it is worth pointing out that public investors do have access to primary market IPOs.
Not quite, the have access to the resellers of the primary market IPO. The original buyers of the equity are the underwriters plus whoever registered during the road show -- and they must be accredited I believe.
My point is that if you are investing in a secondary market, you are not putting that money to use. It goes into the pocket of whoever sold you the stock and the company doesn't see a dime from the transaction.
If we must have taxes, I would rather have them not come from earned income (like a job), which takes labor and creates value. Income from the secondary market require no labor, and create no value.
If you believe rewarding and incentivizing value creation is more moral and socially desirable. Rewarding individuals for simply possessing assets is at best neutral.
Not sure where you're based, but do the recent economic events in the US change your tune here at all? Given 'too big to fail' how do you prevent organizations from retaining zero earnings and then asking for loans when liquidity dries up? Double taxation is an incentive against this behavior
This may not make a lot of sense right now when interest rates are close to zero, but there was also a time when interest rates were 20%.
> Technology undoubtedly contributes to productivity, which should, of course, make more available to all. But buried (not too deeply) in the very innovations that increase productive capacity of the workforce are factors that serve to deny the workforce the bargaining power to gain their share of the output.
It argues that the people who drive innovation and technological advancement in the workplace tend to do so for the benefit of a small minority (i.e. the owners/buyers rather than the worker/users) which itself contributes to an increasing inequality of power.
Are you suggesting the US has any control over the tech giants? It's clearly not the case, most politicians talk the talk, but they take massive donations in private events and then craft legislation to favor big tech. What we need is more companies, more competition, government needs to bust up the big players and disallow M&A.
source: I work at a small company, and have dealt with such bureaucrats
Summers has been talking elsewhere about how America needs a new approach to China that is more aligned with America's economic interests. Of course, he doesn't mention that he helped shape America's approach to China originally.
People at the bottom have it bad, very bad. Being ignorant of that problem is just going to make it worse. Lashing out at fancy retailers in fancy neighbourhoods makes a lot of sense as a way of sending a message to rich people, whether you like it or not.
It's an interview with Cornel West. You may not agree with his political philosophy, but he "gets it" with regard to the current social unrest. If you want to understand what's happening, you should try to empathize with what he's talking about.
Of course, the elites will pretend that they meant to throw that bone all along and will vehemently deny it has anything to do with a smashed up Gucci store in Beverly Hills and a lot of Americans (perhaps most) will believe this denial.
Riots tend to widen the disparities, not reduce them.
1. https://www.baltimoresun.com/maryland/baltimore-city/bs-md-c...
2. https://www.washingtonpost.com/graphics/2018/business/is-rac...
That's why they'll pull out all of the stops including heavy handed propaganda, agent provocateurs, sending in the army (if it gets much worse) and even (finally, with gritted teeth), appeasement.
Historically riots have often presaged regime change as it can uncover how dangerously exposed the elites are and how little support the elites have. Unlikely in this case, but it's still the same process that scares the bejesus out of most regimes.
The amount that this is actually happening is vastly overstated. I've watched this narrative blow up within 48 hours, but the reality is that a lot of the "looting" is from frustrated, angry, low-income people.
In no way is that a racist claim - poverty and extreme inequality breeds desperation and anger and you can't pretend that away.
The French and Russian revolutions are a testament to what happens when the ruler tries to effect the appearance of compromise without actually doing it (e.g. Constitution of 1906). It ended very badly for the rulers in both of those cases.
They fucked up a lot more than just that, but that was a key contributing factor to their deaths.
Jeff Bezos and Warren Buffett can move with their families to some private island in the Caribbean and wait while things cool down while running their gigs remotely.
The French elite had no such luxury.
Part of the problem was that he left it too long to attempt fleeing.
Coups still exist today.
Civilians outnumber police 500-1. The people who were lead to the guillotines also wanted more police power but you have to throw a bone to the civilians to make them think 'you care'.
Here's $2 extra to come to work and risk coronavirus and we totally won't cancel your insurance when you get sick.
Destroying retail will just destroy retail. When it's gone it's gone.
If you think shopkeepers control the Police, you are hopelessly confused.
That is, unless you start to cause trouble in the wrong neighborhood, then the police will absolutely take care of it: https://www.nbcnewyork.com/news/local/crime-and-courts/nypd-...
I'm not sure why people are eating up the media lie idea that the government is some fascist entity supporting corporations, because the government's actions show that the rioters, politicians, corporations, and government (state and federal) are all on the same side.
Revolutionaries that signal on the same lines as Sony, Target, Walmart, Google, the state governments, and the federal government... It's honestly laughable how well this is orchestrated and how incredibly naive or stupid the people are that are eating it up for social brownie points.
The only people not being represented by anyone are the small business owners who don't wan't their homes and businesses eviscerated, and normal citizens who keep their heads down.
Do you think that they are not going to see the smashing of their favorite shop as an implicit threat against them personally?
Gucci is a powerful symbol of unchecked gaudy wealth as much as it is a retail establishment. The handbags themselves aren't really the point, which they'd be the first to admit to.
I'm not sure anyone controls the police. They look a lot like self ruling autonomous entities to me. The mayor of New York, supposedly their boss, is in a conflict with NYPD, and is mostly losing, from what I hear.
The current "looting" is in no way confided to Gucci type stores. All retail with anything of value is being plundered.
But even in a world where the gaudy rich control the police, and only their favorite stores were destroyed, I can't imagine that leads to police reform.
If people attack something you hold dear and makes demands on you, few people just give in. The normal reaction is to fight back as hard as you can, ignoring costs, until your enemy is defeated. I offer the US reaction to 9/11 as an example.
In your model, the Gucci customers are extremely powerful, so they can mount very strong counter attacks.
https://plsonline.eku.edu/sites/plsonline.eku.edu/files/the-...
> More than crime, modern police forces in the United States emerged as a response to “disorder.” What constitutes social and public order depends largely on who is defining those terms, and in the cities of 19th century America they were defined by the mercantile interests, who through taxes and political influence supported the development of bureaucratic policing institutions. More than crime, modern police forces in the United States emerged as a response to “disorder.”
> These economic interests had a greater interest in social control than crime control. Private and for profit policing was too disorganized and too crime specific in form to fulfill these needs. The emerging commercial elites needed a mechanism to insure a stable and orderly work force, a stable and orderly environment for the conduct of business, and the maintenance of what they referred to as the “collective good” (Spitzer and Scull 1977). These mercantile interests also wanted to divest themselves of the cost of protecting their own enterprises, transferring those costs from the private sector to the state.
> Maintaining a stable and disciplined work force for the developing system of factory production and ensuring a safe and tranquil community for the conduct of commerce required an organized system of social control. The developing profit-based system of production antagonized social tensions in the community. Inequality was increasing rapidly; the exploitation of workers through long hours, dangerous working conditions, and low pay was endemic; and the dominance of local governments by economic elites was creating political unrest. The only effective political strategy available to exploited workers was what economic elites referred to as “rioting,” which was actually a primitive form of what would become union strikes against employers (Silver 1967). The modern police force not only provided an organized, centralized body of men (and they were all male) legally authorized to use force to maintain order, it also provided the illusion that this order was being maintained under the rule of law, not at the whim of those with economic power.
It's worth trying to help others understand why people are angry. People need real help, police need to be held accountable, and we can't just keep shoveling cash into the pockets of the rich.
I am aware of the devil's arrangement this is with the current administration. This administration, like all administrations, is temporary.
https://en.wikipedia.org/wiki/National_security ("National security or national defence is the security and defence of a nation state, including its citizens, economy, and institutions, which is regarded as a duty of government.")
Emphasis mine. Conversely, "efficient" businesses like Hertz (who ran at max capital leverage) are realizing the cost of doing so (including Carl Icahn, who lost $1.6 billion in the process). I think it's a bit silly to assume all private businesses are more efficiently operated than government (and does a grave disservice to hard working civil servants), but I'm happy to reply with bankruptcy after bankruptcy to prove my point [2].
[1] https://www.google.com/search?q=us+supply+chain+failure+covi... (Google search: US Supply Chain Failure Covid)
[2] https://www.forbes.com/sites/hanktucker/2020/05/03/coronavir... (Coronavirus Bankruptcy Tracker: These Major Companies Are Failing Amid The Shutdown)
It's not the people who are 'ignoring' the inequalities. With 40+ million unemployed, unable to feed or pay rent, watching their tax dollars get gulped up by big corporations from the 'small business loan program', unable to get their unemployment checks, and getting beaten by police for no reason other than race and deep pocket money from politicians/rich elites. People at the bottom know exactly what's happening, because it affects their personal livelihoods very deeply, and the combination of those issues is why they are on the streets protesting day and night, while computer people like HNers who are generally well off are still behind a corporate desk with no unions, and only observing from afar.
That said, completely agree that narrative around ‘trouble makers coming out of town’ was overblown and likely put out to take attention away from real issues at hand.
You cannot say that corporations are doing that when Google, Sony, Target, Home Depot, EA, Square Enix, Ubisoft, Facebook, Apple, Intel, Levi's, Banana Republic,Amazon, Spotify, Snap, Netflix, Microsoft, Zillow and Disney are in favor of the protests/riots. And those are the ones I found on the first article I clicked.
Google DJIA to see a graph of how this has affected the wealthy...
I am not blaming the players (well some), but the game is rigged.
Small business, retail and service workers, and employees whose jobs can't be trivially moved online are in desperate straights right now. The Fed's action did almost nothing for them.
Why has worker power decreased? Yes, we can say that capital owners capitalised on the fact that workers were willing to give up more. But why were they? Unions can explain some of it, but why did Unions go away? Why is it, when two workers sit in two rooms with two managers, one of them is willing to take less than the other?
Consumer credit is why. Because of consumer credit, the person who is able to and willing to overextend their financial position "wins", which is an awful race to the bottom.
The essential purpose of work is to provide a lifestyle. If you cannot achieve the lifestyle you want with your job, you will demand more money. Why work at all if you're just scraping by, and not able to enjoy any of life?
But, wait, here's a credit card. Now you can have that lifestyle you want, and you don't really _need_ to demand more from your employer. Or maybe you do, but you know the next guy has one too, and you know that he'll take less because he can, and maybe he's less financially intelligent than you are. So you feel like you have less bargaining power at the table.
Would unions help with this? Maybe. But lifestyle is what drives us at our core. If greed is a core component of demand, then we need to make it so that we can't quench greed with false financial mechanisms.
In the past, a union strike at a plant would see a generous long-term contract and benefits for the workers. Now, it is likely for the plant to be moved or workers replaced with automation.
Globalism made the very poor in China/Mexico/etc. richer, created their middle class and it made the very rich in US/EU even richer at the cost of US/EU middle class.
Saying how that is irrelevant now because of automation just smells like new propaganda to replace the old one so that the rich can get richer and the rest of us arguing propaganda.
The end-game is, of course, little need for labor at all. Like America China will have to face this and find some way to keep millions from starvation. And soon.
This may sound controversial but it's likely the only way forward for the US to compete with China long term. Trying to ostracize our neighbors and go it alone against a country 4x our size is not a geopolitically sound move.
Yeah the rust belt job loss is only temporary. They will come back any day now.
> We want manufacturing in mexico because we're connected by literal rail lines and can ship products back and forth far more readily and in an environmentally friendly way.
Yeah I'm sure those Mexico factories have all the environmental regulations that US/Canada does.
> This may sound controversial but it's likely the only way forward for the US to compete with China long term.
The US has given China it's growth. It has exported jobs and exported it's middle class along with it. It has also exported much of it's high tech advantage into China. All for the short term benefit of the investor class and it's billionaires. Competing with China could start by not giving away every advantage.
> Trying to ostracize our neighbors and go it alone against a country 4x our size is not a geopolitically sound move.
The only ostracizing I do is towards the billionaires who shape economic policy to their benefit and everyone else's expense.
To put it differently, if we have to go with outsourcing, China was a mistake and we should redirect as much of what was offshored as possible to Mexico.
Obviously the billionaire class needs to pay for what has been done. I'm absolutely not against that.
This point bears repeating until they finally take it into account when discussing inequality. It's honestly tiring to have to repeat this every time
Minor nitpick: I'd call it globalization, not globalism, as the latter has historically meant something else and currently means something terrible
What the US establishment refers to as keeping a country 'business-friendly'.
Data to back this argument up is available on FRED if you're interested.
I agree, but I think you mean income distribution and latent demand. The idea is that a lot of people would be consuming more goods and services if they weren't so cash strapped. Some of this is also affected by wealth distribution also, though.
There's a bunch of work no one wants to do that gets dumped on people who need the money by everyone who can afford it. Elder Care is an obvious examples in the US, along with Child Care to a lesser extent. Lots of people consume free or budget versions of these services with which they're dissatisfied, and the root of their dissatisfaction is often that they can't pay enough to get the people providing the service to accept micromanagement, either because there aren't enough of them to implement it, or because they don't need the money enough to put up with it.
I guess the flat-wealth-distribution case is most people grudgingly using some economy-of-scale option leveraging the people with more patience for this kind of work, and a few control freaks either doing it themselves or economizing elsewhere to pay for a boutique option.
That can be said of practically every industry. They are all segmented by cost/quality, whether that quality is real or perceived.
That said, the goal behind reducing wealth and income disparities isn't to flatten them completely, it's to put a floor under the standard of living of those at the bottom of the wealth/income distribution. That doesn't mean everyone will be consuming boutique products and services, but it means that latent demand, currently repressed by lack of income/wealth, will become active demand, and money velocity in the economy will increase.
Based on what I've read about the history of blue collar strikes in America, this scenario is far more often the exception than the rule.
Here is Larry Summers from his 1998 speech "The Challenges of Success".
" The world looks very different than it did at the beginning of this decade, a time when America was said to be in decline. It is now clear that America will grow faster in this decade than Japan and Europe. Their four-decade-long story of convergence has ended and America is pulling further ahead. Why this success? A large share of the credit must go to the two forces that this conference brings together: technology and finance.
The twin forces of intonation technology and modern competitive finance are moving us toward a post-industrial age. And if you think about what this new economy means - whether it is AIG in insurance, McDonald's in fast-food, Walmart in retailing, Microsoft in software, Harvard University in education, CNN in television news - the leading enterprises are American. "
Edit:
I tried deleting this, because it is an ad-hominem, which feels good but adds nothing.
It is just endlessly frustrating that one of the principle architects of the current status-quo demands so much attention.
Summers helped structure post-Soviet Russia, viciously attacked Brooksley Born when she sought to regulate the swaps market, among many many other serious lapses in judgement.
And yet, when he and his students come up with another insane policy proposal we have to take it seriously and challenge it on the merits.
It feels a lot like the allied strategy during WW2 of saturating enemy air defenses.
[1] https://mattstoller.substack.com/p/how-bill-clinton-and-amer...
He holds out AIG as a world-leader to be emulated.
In the same year he gave that talk, he attacked CFTC chair Brooksley Born when she proposed margin rules for OTC swaps. She made this proposal in the aftermath of the LTCM collapse. Summers/Greenspan/Rubin said that banks were so "sophisticated" that they didn't need margin rules, and that these rules would somehow cause a financial crisis.
Ten years later, AIG almost collapsed because it had a division making massive directional bets on credit markets using un-margined swaps. Were it not for a $200bn loan from the public, AIG would have collapsed.
https://www.simonandschuster.com/books/Goliath/Matt-Stoller/...
Unions have been on a serious decline the past several decades, but striking isn’t their only power. It’s just the only one you see on the 5 o’clock news, or in Hollywood movies, because it’s the most dramatic.
Most of the people reading this are likely to be tech workers, so imagine what it would be like to try to join a company that was on strike[1]. How do you log in to your computer? Where's the bug tracker? What are the current goals? Where is the code stored? What part of this code base is actually relevant to what you're doing? What five year old architectural decision means that you can't just do this the obvious way? How do you deploy code? How do you roll back deployments? How do you find the metrics for what went wrong? Imagine trying to figure out the answers to any of these questions without senior engineers around, and in fact nobody around except other strikebreakers with the same questions. When I was at Google it was generally accepted that a new hire would take 3-6 months before the were productive, and that was with considerable help from the rest of the engineers.
Tech is a particularly severe instance of this, but all labor is more complex than it appears on the surface. As any roboticist will tell you, the real world is overwhelmingly detailed.
[1] Don't do this by the way, it's called being a scab, and it's against your own long-term interests. If a strike in your industry succeeds, it raises the average conditions of people in your industry.
Which would make them more valuable to employers and more in demand. You're proving that wages are a product of supply and demand
Entire erroneous economic theories were concocted to wage their war.
I'm still deeply ambivalent about redistribution, cashectomies, etc. But it'd a lot easier to remain neutral if there was (a lot) more profit sharing.
Also, I have a hunch that gross inequity is related to the "missing productivity". I'm hoping someone is researching this.
Being a life long patient, my observation is that healthcare workers have become A LOT more skillful, knowledgeable, educated. The natural trend towards ever greater specialization and all that.
I know nothing about lawyers, so can't comment.
This is another way to explain bullshit jobs, obviously someone working to con their customers for their bosses will feel their job is bullshit.
To me this explains most of what is going on. Markets are evolutionary environments for profit making companies. Companies must innovate in production efficiency and product quality. But they must also stay competitive in corrupting regulators, fooling customers and short changing workers.
This is not to disavow any of the conclusions in the document, but only to provide a framing and context for the kinds of problems he is capable of identifying and the kinds of solutions he is comfortable proposing.
1) the cost to participate in the US court system.
2) the abuse of copyright, patent, trademark, and contract[1] law to divorce workers from their experience and treat employee knowledge as company property.
The time and money involved in both pursuing and defending court cases favors larger entities with armies of lawyers and large war chests. Intellectual "property" cases take especially vast amounts of resources because of the fuzziness involved. Meanwhile, treating workers as fungible producers of ideas that can be bought and sold both reduces the bargaining power of individual workers while empowering companies that can amass large portfolios of patents, etc. to use in litigation.
Not sure about reforms for the court system, but patent and copyright reform, combined with restrictions on unfair employment contracts, would go a long way to improving the situation.
[1] NDAs, NCAs, etc.
Fear controls populations, and protects power.
We need to start taking decentralization far more seriously than we have been.
In the United States, estimates of NAIRU typically range between 5 and 6%.
Monetary policy conducted under the assumption of a NAIRU typically involves allowing just enough unemployment in the economy to prevent inflation rising above a given target figure. Prices are allowed to increase gradually and some unemployment is tolerated.
While there is a bias against raising minimium wage there is also a fundamental constraint - if a job can't pay for itself in value generation it isn't sustainable.
I think that a major factor is the increasing number of roles occupied by workers. Workers were easier to organize when large numbers performed similar job functions in large manufacturing industries. Now manufacturing that requires a large number of one type of worker has been offshored. The residual manufacturing is either highly automated, or it is producing a large array of higher-tech products requiring a wider variety of skill sets.
The new service economy also requires a vast number of different roles fitting into partially automated business processes. As the degree of automation shifts, roles change rapidly. This makes it difficult to engage in union bargaining to arrive at contracts that define wages and benefits for specific jobs.
From the linked article
The real problem is that certain industries (e.g. airlines) supposedly compete on prices and service, but large chunks of their stocks are owned by the same investors. It doesn't take a smart brain to imagine what happens behind the scenes...
If I made an error that big, it would take some huge new insight for my research to be taken seriously again.
[1] https://www.nytimes.com/2008/10/09/business/economy/09greens...
However, have you ever tried to open or run a small business? The regulations are INSANE especially if you want a physical location. Go try and build housing in the city that needs it most. Good luck. Free the fucking markets a bit. It works.
George's essential political idea was that society is not a struggle between labor (workers) and capital (entrepreneurs, investors, landowners, etc), but between rentiers - paradigmatically landlowners, but in neo-Georgist thought all "owners" - and the "productive" classes (labor and entrepreneurial capital). For George, the general interest can always be identified with capital accumulation. Rentiers stand in the way of capital accumulation, and thus in the way of the general interest.
Many software developers feel the line between entrepreneurial capital and highly remunerated wage work is quite blurry because, for at least two decades, they have seen a significant amount of upward and downward mobility. Who doesn't know someone who started a "lifestyle business", retired early, or cashed out some stock options and played the VC game a bit? Combine this with the obvious dysfunctionality of the Bay Area housing market, VC excess, etc. and Georgism seems entirely natural.
The difficult questions for the neo-Georgists include: Can capital accumulation really be identified with welfare? Given how stagnant labor productivity enhancing technological development has been for two decades, can we really assume institutional changes will boost it? If they can't, doesn't this make the normative questions all the more difficult?
The New School of Economics (2018)
They claim that the US has seen a falling labor share due to the following --- "the decline in worker power – as private sector unionization and union power fell, the real value of the minimum wage declined, shareholder activism increased, and ‘ruthless’ management tactics became widespread"
The authors are either locked up in their academic high tower and out of touch or they are writing to serve a political agenda.
Unions served a valuable purpose when management was truly "ruthless", however nothing in current work culture remotely approaches "ruthless" anymore.
Unions are effective at increasing pay in return for less production. it's sad but true. There are few unions left that actually have anything resembling an ethic of hard work when compared to non-union norms. These remnants of hard working union types are only found in the blue collar "gloves and sweat" industries.
That point aside, America has lost it's blue collar labor force because we have developed a technocratic, first world, entitlement culture that considers physical labor as an untenable acquaintance.
Meanwhile, the rest of the world has to fight and struggle to survive and hard work is a fact of life and a measure of worth. Consequently, Americas blue collar workforce is simply out worked by the rest of the world and if not for the immigrant work force, that bring the drive and desire to work hard with them, American labor would be in an even worse predicament.
Pricing power for the workforce does exist in America and examples abound. However, it is these unionized parts of the economy that have contributed to the downward trend in labor share by offering less production in return for extorted compensation increases.
American born workforce has lost the cultural sponsorship of physical labor and each generation laments the laziness of the next. This is the underlying reason that America's share of world labor has declined.
Academics are laughingly stupid sometimes.
"Since the 1950s, food retailing in the UK has undergone a massive shift from high streets, covered markets and district centres full of small independent specialist food shops; grocers, greengrocers, bakers and butchers, to the domination of food retailing by the "big four" supermarket chains; Tesco, Asda, Sainsbury's and Morrisons. In 1960 small independent retailers had a 60% share of the food retail market, supermarkets about 20%. Now the small independents share is reduced to 6%, while the multiples' share has increased to 88%.7"
The splitting-up of the total social capital into many individual capitals or the repulsion of its fractions from one another, is counteracted by their attraction. This last does not mean that simple concentration of the means of production and of the command over labour, which is identical with accumulation. It is concentration of capitals already formed, destruction of their individual independence, expropriation of capitalist by capitalist, transformation of many small into few large capitals. This process differs from the former in this, that it only presupposes a change in the distribution of capital already on hand, and functioning; its field of action is therefore not limited by the absolute growth of social wealth, by the absolute limits of accumulation. Capital grows in one place to a huge mass in a single hand, because it has in another place been lost by many. This is the centralization proper, as distinct from accumulation and concentration.
The laws of this centralization of capitals, or of the attraction of capital by capital, cannot be developed here. A brief hint at a few facts must suffice. The battle of competition is fought by cheapening of commodities. The cheapness of commodities depends, coeteris pribus, on the productiveness of labour, and this again on the scale of production. Therefore, the larger capitals beat the smaller. It will further be remembered that, with the development of the capitalist mode of production, there is an increase in the minimum amount of individual capital necessary to carry on a business under its normal conditions. The smaller capitals, therefore, crowd into spheres of production which Modern Industry has only sporadically or incompletely got hold of. Here competition rages in direct proportion to the number, and the inverse proportion to the magnitudes, of the antagonistic capitals. It always ends in the ruin of many small capitalists, whose capitals partly pass into the hand of their conquerors, partly vanish. Apart from this, with capitalist production an altogether new force comes into play - the credit system.
In its beginnings, the credit system sneaks in as a modest helper of accumulation and draws by invisible threads the money resources scattered all over the surface of society into the hands of individual or associated capitalists. But soon it becomes a new and formidable weapon in the competitive struggle, and finally it transforms itself into an immense social mechanism for centralization of capitals.
It is possible for monopoly and industry power to crush worker power, while the rate of profit increases. In fact, this is exactly what he predicted.
The mechanism for this to happen is simply accumulation of capital.
Another reality is that the profits of many industries such as the financial industries are not predicted to fall according to Marx, only that of commodity-producing industries. An absolutely huge part of modern profits is not profits according to the definition used at the time, and not realizable or even intangible. If you look at the rate of profit in commodity-producing industries, you will find that it is exceedingly thin in a great many cases, and that often profit is only realized via financial instruments (for example, the sale of new cars).
From a libertarian acquaintance the root cause is clear. Going off the Gold standard[1] in the US. I am not completely convinced.