Austerity Is an Antidemocratic Strategy to Boost Capital
catalyst-journal.com
catalyst-journal.com
Austerity occurs when the cost of government borrowing becomes so high governments are would be functionally unable to operate in the medium term without brining it down.
After the finance crash the UK was increasing it's debt load at something like 200bn GBP/yr, iirc. A rate that credit-nervous markets wouldnt sustain cheaply.
Austerity is the way the ideologues talk about the consequences of economic collapse without having to learn anything.
What you never hear from them is alternative policies that address the specific economic problems periods of austerity are solving. You hear instead about ever more elaborate abstractions that ever less map on to any observed reality.
https://www.ons.gov.uk/chartimage?uri=/economy/governmentpub... (source: Figure 1 here: https://www.ons.gov.uk/economy/governmentpublicsectorandtaxe...)
You can see that it was indeed increasing through 2008/2009, although that was largely a one-off thing because of the financial crisis.
The problem is austerity didn't work, and the reason is that it also reduces economic growth (slowing growth of the demoninator - GDP). Without austerity, if we'd spent money on infrastructure, we'd likely have had higher growth, reducing debt to GDP that way.
Plus the fact is the markets were lending the UK money at 1% for very long terms all through the 2010s, so funding a large debt to spend on infrastructure would not have been difficult.
Austerity isnt about reducing debt, it's about reducing borrowing costs.
UK debt went from 50% GDP to 75% in two years by your own graph -- you'll notice that rate basically flatlined when austerity was introduced.
Increasing your debt load by 12.5% *GDP* YoY is an insane situation to be in; austerity was part of the policy response which enabled the UK to continue to borrow.
Ideologues on the left havent address this, as far as i'm aware. Preferring to blame austerity for one of the worst economic crises in modern history.
In the UK, however, austerity has been a persistent policy for over 13 years. Low taxation, low spending, persistent erosion of workers rights. No spending even when times were better, leaving it all the more fragile the next time.
Compare to the US, Canada and elsewhere, which performed strong austerity measures immediately following the 2009 crash, then dialled them back - as per economists recommendations - and recovered much faster than the UK.
What's going on is that the UK population is greying and far older than it once was, and huge portions of the UK budget are going towards paying pensioners, the NHS etc. Worse, the triple lock ensures that this part of the UK budget is essentially inflexible. The perceived "austerity" is jsut a reflection of demographic trends.
Or the country can experience a reduction in the quality of goods and services being delivered, for example instead of being able to see a doctor, some portion of the population is now expected to consult with someone less qualified.
It's high in historical perspective because the austerity years of the 2010s and Brexit choked growth. But we could still choose to spend more on services without being unusual in European terms
Since 1965 companies pay a much lower corporation tax.
Tax to GDP has been a little bit up and down but only recently did it breach the 1970s peaks.
I don’t think this matches with “ Taxation in the UK is currently at the highest levels in recorded history.”
Since it's not straightforward to get figures for before 1965:
https://en.wikipedia.org/wiki/United_Kingdom_corporation_tax...
> Until 1965, companies were subject to income tax on their profits[11] at the same rates as was levied on individual taxpayers
> In addition to income tax, companies were also subject to a profits tax, which was deducted from company profits when determining the income tax liability
> At the time of Hugh Gaitskell's 1951 budget, the profits tax was 50% for distributed profits and 10% for undistributed profits.
> The tax rates fell to 22.5% on distributed profits and 2.5% on undistributed profits by 1957
This means that in 1951, if a company had a profit of 100, the taxes were *at least* (I'm using undistributed profits, not taking into account higher rates, etc.etc.) 52.75
(10% of 100, plus 47.5% of the remaining 90% of 100)
The 47.5% is the standard rate of "nine shillings and sixpence in the pound", per https://api.parliament.uk/historic-hansard/commons/1951/apr/...
In 1959, a company with a profit of 100, would've instead paid in taxes *at least* 40.28
(2.5% of 100, plus 38.75% of the remaining 97.5% of 100)
The 38.75 is the standard rate per https://hansard.parliament.uk/commons/1989-03-03/debates/3cc...
see also: "seven shillings and ninepence in the pound" per https://api.parliament.uk/historic-hansard/commons/1959/apr/...
The current corporation tax main rate is 25% (the small profits rate is even less: 19%)
In any case, the low rate of taxation is only one element of the persistent austerity policies that have been in place since the 2009 economic crash.
In terms of government spending, we have easily-obtainable data on the NHS[2] and those available by thinktanks like IFS[3]. The NHS spending is low (and again consistently lower than our peers in Europe). I find the charts from the IFS interesting because it doesn't show a lot of change in spending year-on-year (relative to GDP) since the '90s, except for the catastrophes.
But the table at the bottom is very interesting. Health £ spending up, but equivalent to 2-3% increase YoY, which barely keeps up with inflation. Education, public order & housing spending are all DOWN in absolute terms, forget about inflation. Defense, social security, transport all increased at a rate less than inflation. (Obviously a huge increase in debt spending recently due to Covid measures.)
That there is long-term austerity exemplified. No myth.
[1] https://www.oecd.org/tax/revenue-statistics-united-kingdom.p...
[2] https://www.kingsfund.org.uk/projects/nhs-in-a-nutshell/nhs-...
[3] https://ifs.org.uk/taxlab/taxlab-key-questions/what-does-gov...
Er, no. The UK currently has the highest tax burden for 70 years.
https://www.spectator.co.uk/article/yes-five-million-are-on-...
Which by definition is austerity.
The austerity policy you're suggesting has been overwhelmingly found to have failed almost everywhere it's been tried. Cutting spending in a downturn creates slower growth, which makes it even harder to recover. The book in OP argues that austerity is not about recovery, it's about disciplining workers.
https://www.theguardian.com/commentisfree/2017/jul/07/imf-au...
Totally agree that austerity as practiced in this country is dogmatic and about keeping people in place.
The most popular theory (and one with some quite good empirical support) is that government should increase spending exactly following a crash or time of economic hardship. That has been the mainstream economical thinking for near a century.
What people mostly disagree with each other is what to do on times of strong growth.
We were borrowing at 1% (basically free money because inflation was higher) and we might have spent that on growth policies, but George Osbourne thought this was a good way to reduce the size of the state, a political decision.
You’re not familiar with Keynes I guess. There are many many well thought out alternatives to austerity that have been shown to work. The problem with them is it’s harder to cushion particular classes from having to bear some of the cost.
Not sure why you’re being so thick about this.
There’s plenty of criticism of Keynes and how his practices are implemented (or whether they should even) but that’s quite a different thing to saying that nobody has any alternatives.
This is in effect an infinite-money glitch, until you overplay your hand and a market upset bankrupts the state (or the state triggers hyper-inflation in an attempt to prevent bankruptcy). Austerity is just a roundabout way of saying "let's get more breathing room by abusing this infinite-money glitch less".
In an ideal world any country would go through periods of austerity to get rid of wasteful spending, before increasing spending again. But of course this is not how politics works: it's hard to sell to voters, and the things that get cut in "austerity" are often not the most wasteful things.
He openly admitted that the Conservative party manifesto of 2010 was a lie. That it was totally impossible to do what they promised about the deficit. Now, I'm not sure I remembered the manifesto pledge correctly, but even with that caveat, he still insisted that lying was absolutely acceptable. He refused to accept that normalising lies in this fashion is a problem (I wish I'd asked him about the Boy Who Cried Wolf, but I didn't) and then promptly changed the topic.
If we can fix housing we can fix a lot of what's wrong the UK I think.
Atm in the US, it's 16% of the budget goes on repayments, or ~3.5% of GDP.
Likewise in the UK, it's ~12% at ~3.5% GDP
I suspect it's fairly easy for a society to this level
The debts of governments of this type is about the lowest risk investments its possible to make, and they're treated that way.
But that also means severe economic crises in those countries has an outsized impact. If the US debt were to increase 12.5% of GDP YoY for years, the entire global financial system would melt down -- as US debt is basically the baseline of the entire system
The above goods and services can simply be “stability” relative to the rest of the world, such that wealth seeking a safe haven continues to choose assets denominated in they nation’s currency.
Can you name an instance in which a developed country, borrowing in its own currency, has defaulted? I can't, at least not since the end of the gold standard.
That is really a statement without a real point. Countries can of course print currency to keep covering their debt obligations but that just impoverishes their citizens and means they lose access to debt markets (effectively).
I know people make this statement a lot, but I never really understand what point they're trying to make.
It sounds like they're trying to claim "free lunch" but I don't really know.
If for some internal or external reason people are suddenly only willing to lend to you at 4x the previous cost, your cost-of-repayment will quadruple over the next ~20 years. Having a lower debt-to-gdp ratio gives you more flexibility on how to react to this because lowering your debt by a significant margin becomes one of the viable strategies.
Ironically one major contributor to government debt today and 200 years ago were war expenses.
[1] https://en.wikipedia.org/wiki/History_of_the_British_nationa... [2] https://data.imf.org/?sk=806ed027-520d-497f-9052-63ec199f5e6...
English kings had a tendency to spend all the money on foreign wars. Take Henry VIII for example:
> Henry inherited a vast fortune and a prosperous economy from his father, who had been frugal. This fortune is estimated at £1,250,000 (the equivalent of £375 million today). By comparison, Henry VIII's reign was a near disaster financially. He augmented the royal treasury by seizing church lands, but his heavy spending and long periods of mismanagement damaged the economy.
> Henry VII had not involved Parliament in his affairs very much, but Henry VIII had to turn to Parliament during his reign for money, in particular for grants of subsidies to fund his wars.
https://en.wikipedia.org/wiki/Henry_VIII#Finances
Hmmm, having said that, the section mentions he spent a lot of money on tapestries, so maybe it was not all war.
Like, it is true that oversupplying government bonds creates some really nasty economic effects, but so does undersupply. The government budget is not a household budget, and it's simply not true that their debts can or should be paid back.
No. US Treasuries are one of the most liquid and easy to borrow against assets in the world. When institutions buy Treasuries, they use them as collateral to borrow against with new money created by the banking system. This money is then spent in the real economy. That’s very different from taxes.
That's how bureaucrats play the game. When an organisation gets their budget cut, they don't immediately look through the services they provide to see which ones can be cut or delivered at a lower cost. The first move is to float stories about cutting their most popular services to generate adverse press for the budget cuts. c.f. local councils in the UK threatening libraries whenever they get a budget reduction (or not as much of an increase as they would like).
In Berlin, we have a district called Neukölln, a poor district accumulated a lot of social and economic problems, such as high levels of violent crimes, drug abuse, a lot of homeless, gang wars etc.
The solutions for Neukölln problems devised by left-leaning municipal and city govs were absolutely fabulous, such as public swimming pools. At some point when it became clear that the district (or rather Berlin in general) is an eternal money pit, it was decided to cut its funding.
What was the response of local gov? Cut unnecessary and redundant services (sarcasm) like school security, drug addiction helping centers among others. Basically what they do is an open blackmailing, "you cut the funds, we are fucking things up", but that's how political blanket-pulling game works. Nobody likes funding cuts, so it's not uncommon that executives, local governments and various institutions sabotaging such initiatives.
Which is technically true, but impossible over the long run for the levels of deficits the US is running now.
And sometimes austerity means stupid spending reductions that would not even qualify as cost savings under any meaningful accounting scheme. You save money on infrastructure maintenance, education, preventative healthcare, mental health services, and youth work, and you don't see any changes in the short term. But in the long term, you get failing infrastructure, a less productive workforce, higher healthcare costs, mental health issues, and more crime.
Instead of cutting fixed spending, it would often be less harmful to cut discretionary spending – the programs the current government uses to achieve its policy goals. But of course no government wants to do that. People get into politics to change something, not to manage the existing system.
Austerity is therefore a self-defeating strategy. It does not remove wasteful spending, rather it creates more of it. What states should focus on is what are the best resources to purchase and how that spending should be apportioned, not whether there is money to spend with.
https://en.wikipedia.org/wiki/United_Kingdom_government_aust...
> Most macroeconomists now agree that the austerity programme pursued by the Coalition Government in its first two years was both too severe and unnecessary and set back the economic recovery which was underway in the first half of 2010. The Office of Budget Responsibility confirmed that the austerity programme reduced GDP, while the Oxford economist Simon Wren-Lewis has calculated that the Coalition Government's austerity programme cost the average household £4000 over the lifetime of the Parliament and severely damaged those public services which were not ring-fenced.
This was really obvious at the time. The economy was recovering slowly, and then the Tories got elected and induced a recession. It kinda amazes me that this wasn't obvious in advance of their actions, but whatevs.
It’s common in hindsight to say “if only labour were elected”
Also worth remembering that in 2015 the country said “we want more Tory”. The coalition wasn’t Tory enough.
https://www.theguardian.com/politics/2010/mar/25/alistair-da...
I have never seen something so revisionary on wikipedia. This is just left-wing propaganda.
There is zero analysis of the macroeconomic context, zero analysis of austery as an economic policy. Just an endless series of newspapers attacking the government in power for the economic consequences of a economic crisis.
One of the most egregious misrepresentations of an issue i've ever seen. Its just writing up what newspapers said; i can't believe it.
Reading that article can you answer: (1) what the economic policies called 'austerity' were? (2) what the economic aims of these polices were? (3) whether these aims were successful? (4) why were these the aims? (5) what were alternative policies?
You could not submit to an academic journal with most of your controversial claims referenced to newspapers. An enclopedia operates at a higher standard of research than academic journal articles -- it should summarise books/etc. about those articles.
This article is essentially poor-quality primary research which quotes MPs and newspapers to argue a case about austerity. That's fine for a BA sociology degree -- it's bad for a MSc, it's disqualifying at PhD level, and has zero plac e in an encylcopedia
https://www.ft.com/content/1670a3d2-880f-11e2-8e3c-00144feab...
Hindsight is wonderful, in 2010 the choice was austerity, austerity or austerity, there was no alternate voice, but that doesn’t mean it was the right move
With the exception of Germany post-WW2, has there ever been an instance where austerity was judged to be somewhat successful?
There are hundreds of examples of austerity, which could be added to the wiki page as a success?
That it didnt meet the goals given to it by opposition parties and newspapers is irrelevant.
Reduce the deficit sufficiently to promote confidence in the market for UK debt in order to deliver growth in the economy.
You claim this was overwhelmingly successful?
How? Where would we see evidence of success? Would it show up in a change in bond yield trajectories post GFC? (It doesn’t). Would we see a change in the growth rate of the economy post GFC? (We didn’t).
So how is it possible it was not just successful but overwhelmingly so when we can’t detect the proposed benefits in the observed data?
It was to reduce the increasing deficit from +12.5% GDP YoY to flat, in the middle of essentially a "deficit crisis" caused by the need to bail out the financial industry to prevent a whole-economy crisis.
Arguments can be made about how far and how fast the deficit needed to decrease; but the policy was overwhelmingly successful.
The government was able to maintain non-trivial deficits for a decade after the policy -- precisely because of it. Only people with zero understanding of the issue maintain that there was any non-austerity alternative.
Labour's policy was "less" not different. There was no non-austerity option for the UK, with such dramatic deficit increases -- ie., 25% of GDP in <2yr.
Few other countries experienced this. The US did not.
The financial crisis should've caused a depression in the UK, and a total wipeout of our economy in a whole economy crisis. The bailouts prevented this, then austerity prevented the ensuing deficit crisis.
Both policies were not about "growth" they were about preventing total economic metldown in the UK. We were the worst country in the world affected, these conditions were unique and severe.
George Osborne originally said:
>> Mr Deputy Speaker, let me now turn to the measures in the Budget designed to deliver this accelerated reduction in the structural deficit. The coalition Government believes that the bulk of the reduction must come from lower spending rather than higher taxes. The country has overspent; it has not been under-taxed. Our approach is supported by the international evidence, compiled by the Organisation for Economic Cooperation and Development, the International Monetary Fund and others, which found that consolidations delivered through lower spending are more effective at correcting deficits and boosting growth than consolidations delivered through tax increases.
>> “and boosting growth”
I’m having a hard time seeing this as anything other than intellectual dishonesty on your part.
Given this is HN, I’ll be curious instead of judgemental. Help me interpret what you said about austerity had nothing to do with growth?
> Mr Deputy Speaker, let me now turn to the measures in the Budget designed to deliver this accelerated reduction in the structural deficit.
> "Democratic control over economics" looks like people voting for more services and lower taxes.
The services part seems clear but "lower taxes" makes me ask what kind of taxes are we talking, income tax, sales tax, corporate tax, capital gains tax, corporate tax credits, import duties, national insurance (UK government health service levy), wealth tax, etc, etc, etc
There are so many taxes and 100 more exceptions and loopholes and so many vested influences pushing for changes that benefit themselves. The current political processes aren't capable of a systematic review and revamp of all of the taxes.
contra - Denmark, Germany, Sweden...
there are countries that vote for the taxes that allow for supporting the services they want.
And I say this as someone who feels totally screwed over by the Danish tax system, but really your intro blanket statement was just not true.
(Who vote themselves largesse from the public treasury.)
> Indeed, because an oligarchy cannot exist as a permanent form of government. It can only exist until the billionaires realize that they can bribe themselves largesse from the public treasury
There is always an equilibrium point. The oligarchs won’t suck the state’s teat to the point where the state collapses.
Given that the 'cost of government borrowing' is a policy setting, there can therefore never be a case for 'austerity'.
See Japan for details.
There is no traditional market in government bonds. The only aggregate alternative to the fixed rate is the expected path of the floating rate and the floating rate is set by the central bank. Which we can easily set permanently to zero once we reject the failed 'twin star' economic hypothesis and accept the 'price anchor' hypothesis.
Or Argentina.
Yes. And then they see the consequences.
Coddling the people is not going to make our governance better. Do you prefer that an elite nanny the people?
That is not why austerity happens, at least in recent history:
* https://en.wikipedia.org/wiki/Austerity:_The_History_of_a_Da...
During the 2010s, when rates were at an all-time low, Very Serious People were going on and on about "expansionary austerity" to boost the economy:
* https://en.wikipedia.org/wiki/Expansionary_fiscal_contractio...
During the COVID crisis deficits grew rapidly and the cost of borrowing did not change. This only happened after the crisis was over, and as a policy choice, not necessity. Japan never increased interest rates and its deficit has continued to widen.
The credit markets do not sustain the UK. It is the other way around. Without the UK state there would be no credit markets, at least not in GBP.
I think the core problem is that it is your thinking that does not map to any observed reality.
However in my opinion, there is a great lack of "class consciousness" from the people who vote for these parties, in a sort of Stockholm syndrome, or because people easily fall prey to the sensationalist idea that you can apply household economics to macro-economics.
The fact that there are still schools of though that call for abolition of all tariffs and subsidies as inherently bad for economy is telling. That's the economy variant of belief in perpetuum mobile.
Whatever you do, it won't affect the world very much.
For behemoths, very much not like a househould budget, because whatever you do influences the world a lot.
The size isn’t that relevant. The degree of the autonomy over one’s monetary and fiscal policy is much more important. It certainly applies to big economies like the US. But it also applies for other economies that issue their own currency. At least it does for goods that are produced domestically
For example, if the US and Eurozone decide to increase their interest rates this causes capital to fly from smaller countries with an independent currency, which causes their currency to devalue, which (generally) causes inflation, which forces them to increase their interest rate.
Yeah it should not have an effect on locally produced goods, but unless you're both an industrial and an energy power house you are going to import a lot of stuff so you still get inflation.
A psychologist doesn't learn anything useful from studying amoebas. A macroeconomist can't apply lessons from individual household economics either.
Let's say that a place like, say France, maps to a family of six (Mother and Father, 2 children, 2 elders) living in an apartment on the second floor of a 5-floors/ten apartments building.
- Can France "extract" the tiles from the bathroom and sell it to Switzerland on floor 4th?
- Can France tax movement across the section of hallway directly outside their door? Who takes care of enforcing this, and protect "our sacred hallway section" from expansionistic Germany on the other side of the stairs?
- How do the two working adults in the household make sure that a portion of their income will be invested in order to sustain them when they are too old to work?
- The daughter is 16 - will she be forced to emigrate to the 3rd floor when she reaches working age?
- How is she supposed to send some money back home? maybe Switzerland can help, but of course they will get a share of it for the service...
Some of your examples indeed do not work with the analogy. Others might. For instance, that daughter who is 16 might babysit somebody‘s children for a payment and buy some shein clothes with it, instead of getting money from her parents. Or France can definitely sell their used washing machine to Swiss students on floor 4th, who might pay a bit to not rent a van. In some countries living blocks split cleaning common areas between neighbours, and replacing lightbulbs or painting the common areas provokes heated arguments at neighbours meetings, not unlike some EU decisions.
These are just examples. I agree with your point. I just do not agree it is generally wrong unless we talk about a specific example. You provide a few where indeed it is wrong.
How much soap do you need to replicate the effect with a real boat?
The different scales (not only in terms of space/number of inhabitants, but also in terms of time) at which a household operates, compared with even the tiniest nation (Vatican City: 19 km2, 510 inhabitants, >1000 years of "life") invalidates any attempt to try to derive anything useful from the household model, precisely like the soap experiment I described above.
Following your example (kind of, with planes). Dont people use wind tunnels to test aerodynamics of planes? Miniature planes/boats might be useful to detect design flaws early on. In that sense you can derive useful things from that model. The same model of a small boat will be useless to decide the route, the weather, or the electronics on board.
The example I used (based on this: https://www.scientificamerican.com/article/surface-tension-s...) is precisely to show that if you play with scale too much, you might introduce (or remove) phenomena that make the whole model totally inapplicable.
- a 1-inch cruise ship (model) can definitely be moved by 1 drop of dish soap.
- 12000 drops of liquid dish will have no effect whatsoever on a full-sized cruise ship.
Let's go back to our "State economy is just like a household economy". If you google for "major expenses of local government" you will get something like:
"public school system, law enforcement, fire protection, public facilities , and public health."
do you really believe that the household budget for "fire protection" or "law enforcement" is comparable (as a percentage of total expenses) to what a state spends?
(According to the California State Controller's Office, in the 2021-22 fiscal year cities spent $14.82 billion on police expenditures, making up the highest category of spending at 14.8% of total expenditures in the state)
Does the average household spend 15% of its annual budget on enforcing corrective measures to be applied to the family itself?!
Same applies to income, actually. States have taxes, and may have some sort of natural resource that they can sell or "lease" to private companies for a fee. Something that is really difficult to shoehorn in something remotely similar at the household level.
The only "insight" we can obtain from something like a "household economy model" is that if you spend more than what your assets are you will end in debt.
Not exactly unexpected.
But any kind of measure you might find useful at the household level (e.g.: everyone will fast by skipping 1 meal / week, reducing groceries bills by 7% - nothing to sneeze at, at the household level: https://www.statista.com/statistics/237211/average-food-expe...) will not really work at the city level, let alone at the state level.
And it is not that difficult to understand why, either: enforcing the new law "absolutely nobody will have lunch on wednesday" will be complicated and expensive to enforce at the state level, and require more resources to be devoted to this new task, possibly resulting in a negative gain.
Where we disagree fundamentally is that you are finding that the analogy is wrong. But wrong for that? For the scale example it is wrong. For the aerodynamics testing on a little model it is not. From that, I conclude that it _can_ be useful, which is a different claim that it _always_ is.
This is just a fig leaf.
The "10% less democracy" concept (https://www.sup.org/books/title/?id=28088) is interesting here, and frames the question as "when and how much" as opposed to "democracy or no-democracy"
Historically it's amazingly good for rhetorically justifying war crimes and genocide by way of claiming moral highground.
HN users: hold my beer
After those voted come to power, nothing prevents them from flipping on their agenda. I've seen it happen countless times, and probably so did you.
If only there were mechanics (a la Liquid Democracy) to recast votes in collective actions without the initiative of the government, but by way of constitutional rights. Politicians would be more interested to keep themselves aligned to their electorate, or lose their comfy job before their term would normally end.
Politician as a career, and unconditional 4 year terms seem like a problem imo.
Because my experience is that the big parties in most countries cover so many topics in their political agendas that people are voting for them for all manner of different reasons. Sometimes it's the social/moral aspect that they care about more than the economic one, and sometimes vice versa.
It's unlikely any conservative will vote for the more left leaning party based on a dislike for austerity, and vice versa.
The argument the article makes is not that austerity measures are unpopular, it's that they're anti-democratic.
As for austerity: reasonable people do not spend beyond what they have and if they do they do it in reasonable ways: things with an expected return on investment and with limited, calculated risk.
Yet what I see is increasing intervention and out of control debt.
Starting from these two premises...
I do not think austerity is antidemocratic in itself. What I see is that a high degree of intervention ends up doing a cost transfer to normal people.
But that would be a problem of hyperregulation, not from austerity itself IMHO. After all, I would say the correct philosophy is to spend what you have and measure the risk every time you go beyond that. Sometimes you have less, sometimes you have more, but I would not advice any person, business or state to go out of control about this. However, a state incentive is different from the former two, since they continuosly transfer costs by the force of law to unrelated people. Namely, I do and you pay, be it by friends regulation or by direct expenses and taxes increases.
Moreover, government spending pays for itself - from each transaction a proportion comes back in tax. It can be considered as a geometric series that tends to zero.
At that time services stop working. I also refuse the idea that everyone can permanently get more than what they produce. If you give someone some push it should be for them to be able to become autonomous, not for living from other people permanently.
The breaking point is if you expand your debt repayments beyond your ability to service them. And, because growing economies and inflation are both real things, an ever growing debt is not only possible but desirable. As long as you can invest in things that grow the economy like libraries and benefits for those in need, you’ll be fine.
Btw, read a UBI study sometime. You’ll find the actual research into just plain giving people’s money does not match the naive econ101 theory.
That’s true, but debt held by a country isn’t really the same thing as household debt.
But at the end, you have to measure gow much you are risking.
I would say it is the same, just the scale is different and allows states push for policies probably not at the reach of normal people.
But even those should be managed with care, because what someone should be looking for long-term is sustainable services. Meaning that debt cannot be infinite.
At the time your creditors do not believe you... you have a problem. Just look at Argentina in the last 20 or 30 years for an example.
What is particularly evil is the fact that people who take our money have basically no responsibility on the results and can take it from us through laws but they benefit from those in other ways.
To give an example "at the limit" - sometimes easier to see the issues. Assume all people in the world die except 2 people, if they inherit all the wealth, each will be multi-billionaires (or something - no clue how much money is in the whole world). That would not mean they could do a lot with that "money".
Back to austerity. I agree with you that the key is "spending in reasonable ways". But to understand what is reasonable you must make a projection. And that is the hard part. A projection will probably affect the result. Of course you are correct you can't just say we will spend 10x more because we will have 10x more, so there are limits...
Around the time they switched to that frame, wages decoupled from productivity and what I might call working-class power started to get crushed. It is, and I say this at my most sarcastic, a miracle of modern economics that once we stop trying to measure how much we have in consistent units suddenly resources stop being a problem and big borrowers can just take what they need.
Although what I actually think is someone is getting ripped off really badly; I'm just not sure who. Hopefully retirees since I'm not one of them yet.
That's a great argument I had never heard before, thanks!
The way I see it is that any given economy has an amount of real resources (labor, raw materials, know-how...) that are often under-utilized. In such cases targeted government spending can mobilize those resources in a way that increases output without creating the bottlenecks that cause inflation.
It seems to me that this is becoming harder and harder, and consumer debt is pushed harder and harder, people are forced to take on more debt as costs of living increase. No matter how reasonable you are, you need a place to live and food to eat.
I lived in Vietnam for almost 12 years. Luckily as an expat.
Most people in the world live like people in Vietnam, not like people in USA or Spain.
I do not mean we should live in worse conditions. I mean: look at it with perspective because we are a privileged minority.
You are mixing regulation, intervention and austerity, which is so broad, it cannot provide a distinct explanation for the declining public services, which enforcing regulations is a part of, btw.
Budget cuts set a hard upper bound on the reach of public institutions. Nothing else you mentioned achieves this.
In my experience, talking about Spain, I am not sure where that upper bound of expenses you talk about is. In EU according to the rules debt should not be over 60% of GDP. Spain is over 110% and after covid they did not cut back to the normal expenses...Every spanish owes over 30.000 euros in debt... I mean each of them, all ages.
Any reasonable person could tell you that here health system and public education are degrading at the same time the taxes go up steadily.
Now, you are mixing in un-/fair taxation. This is the income side, austerity is primarily about spending.
> It is democratic looting or chosen by a few only?
If those few were the only ones elected, then by definition, yes it is democratic. Now you are mixing in democratic participation and political corruption.
> 110% spains debt, not sure where the fiscal upper bound is.
According to your name, you are a german guy: Haushaltsdebatte, Schuldenbremse. Large tasks cost money and without such you cant do anything. Germany is essentially using legal tricks to circumvent their austerity nonsense, like propably spain and many others did, decades before. Do i really have to be more specific about that hard upper bound?
> public services degrade while taxes go up.
You are supporting my point here. With the right spending this degradation wouldnt happen. And to let me mix in something: Taxes go up for who exactly? Workers or owners?
> All these topics are closely related if you think of it a bit beyond the surface.
But they are non the less different problems. I think you are not just wrong, you are confused.
Austerity imo is ultimately about sabotaging the ability of public institutions, thus shifting power from the public to the private sector and this is the part, that makes it undemocratic. "Let large private corporations fix climate change by building megalomanic nuclear power plants (which i suppose you are a fan of too) and then let the public handle the staggering cost of the nuclear waster by taxing more off the ones who resist less, the poor and somehow (???) uneducated."
The article mentions how war time economy is evidence how the society can do whatever it wants, and implies this should be done during peace time too. And then later in the article mentions how war time leaves the economy heavily indebted. So you can do the same during peace time - take on as much debt as needed to do everything. The issue with this approach is that this increases the money supply, effectively debasing the currency. Due to the Cantillon effect, the first people to use the new money will be able to spend it at 'old value', while people further down the line will get less and less value out of it.
If you're wealthy enough, you can short the currency by taking out debt, and buying assets. If the assets are yield bearing (dividend, rent), your income automatically adjusts for increased money supply. If you depend on your wage, tough luck, wages are last to adjust, so you just keep silently getting poorer.
So there's no free lunch. Either explicitly or implicitly, the poorest pay the most.
I don't think that's a predicament though. It's just that the answer likely doesn't lie in the extremes. A prudent enough government should be able to navigate this by not devaluating the currency too much, yet also taking on reasonable amounts of debt to fund the functions with the highest ROI.
This was one of the most prolific decisions to be done in the 2020's and yet we could just barely enforce the will of the people over the interests of extragovernmental groups. Now imagine the thousands of small decisions being done which the average voter has no transparency into.
A good start to real democracy would be completely outlawing lobbying, NGO's, think tanks and other garbage organizations who's only raison d'etre is subverting the peoples right to their own governance.
>> lets examine a recent large crisis we had in Finland - the border crisis, in which Russia systematically weaponized migrant waves - where the democratically elected government was initially unable to act with any measures on, because it would've been in violation of a UN convention which was agreed on in the 60's.
just like that, yes. Finland is in the EU and NATO now. Russia didn't invade and society didn't colapse because of refugees (for some reason Ukrainian refugees are different from those other refugees, but I digress). So it seems, so far, democracy won.
Using them that way is unethical though, to an ethical country that tries to do the right thing for its citizens they are a net drain. No country can handle the burden of doing that for the entire world, so it isn't unethical to tell countries to take care of their own instead of dumping them at your country.
On the surface 1) sounds like a principled stance, but it is anything but. First, it is shameful, the argument is selfishness disguised as ethics. We, the people of ethical country, enjoy prosperity. We could not provide this prosperity to all comers without diminishing our own prosperity. Obviously we don't want that. But we neither want to deny a part of the prosperity for some time to migrants because that would not be what ethical people do. So, the ethical answer is to send the migrant back into squalor? Off you go, back to whereever you do not want to be. I think it is obvious this argument is about US, not THEM, and it has a taste of we don't like them no strangers. Sorry, mister, you can't come in from the thunderstorm, there is no cake left for you. Have fun on the trip home over the Mediterranean. Second, it seems to say that any solution must be perfect -- but that's not what I am looking for. Improving the lot of people is a process, not a state. The lot of a migrant is improved if she may live in a country with working institutions and the rule of law, even if they are denied some things naturalized citizens enjoy (like voting. Oh wait, ethical country doesn't seem to mind that though). Now the migrant has a chance to build something for themselves without worrying about drought, war, corruption, oppression, lack of institutions, raider warlords, or religious nutcases, and start on the road of gaining citizenship. I think here at HN we are big on entrepreneurship and personal responsibility, ask the migrant what she would prefer.
Argument 2) is more of an extension of 1). It is ethical to tell others what to do if it improves my lot. You change, so I don't have to. Here we chide other countries that obviously have massive problems already -- otherwise people would not leave in droves -- to get their act together so that we do not have to bother. I mean, telling other countries what to do is par for the course, everybody does this all the time, just think of China. But it doesn't seem to work, I wonder why?
If a country would be organized enough to enact 3) they probably also could create an environment where their people could provide for themselves (granted, maybe they wouldn't, see Russia). The main reason for migration is because individuals cannot provide for themselves in many parts of this planet for various reasons (see above). The migrant takes the largest decision of her life: leaving behind everything she knows, embarking on a long, expensive, and dangerous journey for the fighting chance to make a living somewhere else. It's not the nations that are sending their citizens (and tax base) away, quite to the contrary. It's the citizens that say, I can't provide for myself here. I must seek my fortune elsewhere. Ferrying people back into countries they fled from is not helping the migrant or the originating country.
What's the problem with solid majority of citizens deciding they don't want any more refugees then? Poland actually ran referendums like that and got 95% of "no thanks".
But since you are on the journey of learning about all of this, continue. Use Wikipedia for startes, and not some other sources a quick search turns up so.
> The declaration of Republika Srpska in January 1992 triggered a civil war and a campaign of ethnic cleansing of Muslims and Croats, in which 100,000 people died.
Factually correct, but missing a ton context, up to the point that small bit of information is basically useless in understanding the issue.
Вот плачут дед и баба, но напрасно -
Всё предначертано, яйцо должно разбиться.
Зло порождает зло в наш век ужасный.
Ты хочешь знать, чем эта сказка завершится?
Старуху ту Раскольников зарубит,
И не со зла, причём, так по сюжету надо.
Старик же, пьянством горе усугубив,
Эрцгерцога застрелит Фердинанда.>> Grandfather and grandmother are crying, but in vain Everything is preordained, the egg must break. Evil begets evil in our terrible age. Do you want to know how this fairy tale will end? Raskolnikov will cut down that old woman, And not out of malice, and that's the way it should be according to the plot. And the old man, having aggravated his grief by drunkenness, The Archduke will shoot Ferdinand.
Because the Archduke Franz Ferdinand didn't shoot anyone, he was the one being shot...
Nice poem so!
But I guess now you're going to act shocked and offended that anybody could think these migrants could be a problem for Finland. No doubt they're truly a blessing, Finland should be happy to have them, and Russia is actually inadvertently doing Finland a favor, right?
Didn't know about that happening in Africa but doesn't surprise me, do you know of anything else like that happening in Southeast Asia? Might find myself in that area and would like to know what to look out for besides vodka and people yelling "cyka blyat"
To oppose this is antidemocratic, and frankly, in the service of Russia's belligerent interests.
The other guys in this conversation are calling you an idiot or a concern troll. I don't know if that's what's going on here but your unwillingness to concede that Finland has a right to defend itself from Russian border bullshit really does make me wonder. Finland wasn't in NATO throughout the cold war, only recently did they join. Why do you think that is? The Russian threat is real and needs to be taken seriously. Russia is sending those migrants specifically to disrupt Finnish society. For you to pretend otherwise is absurd.
And I explicitly calles out the EUs failure to come up with a workable plan how to handle refugees across all 27, and formerly 28, member states since 2014 (!). Because that plays a big role by allowing other nations to weaponize refugees, either as some war tactic or to gain political and financial favors.
At the core of that failures of EU policies lies something deeply human so: Xenophobia and fear of the unknown and different. In ky opinion so, we owe it to ourselves to not allow those fears define our actions and policies, especially if we give our adversaries angles of attack by doing so.
Besides Russia, we had Turkey and Tunesia using refugees to extract concessions and money from the EU using the same mechanism. One would assume people have learned back then to allow others to extort them using their own fears, but I know that this is propably impossible.
Since nobody who knows me ever called me stupid (I have been called a lot of other things so), I am inclined taking it as a compliment considering whom this insult is coming from.
I'll give you a bit of help, you can't use colonialism or similar usual guilt tripping against us because we have never engaged in that activity. (in fact, I believe Finland has had the most people forced into slavery per capita, by the hand of Russia of course - but that doesn't concern this discussion)
If you want to close your borders with an agressive neighbor, by all means do so. Just don't call refugees a threat to national security if the only reason refugees can been seen as a threat a totally home made and self-inflicted (again, by each and every single EU member state and the EU itself).
The reason for doing so is quite straight forward so: soft power. Western democracies relied a long time on the perception of championing human rights, on being the good guys. Just look at how bad the US looked during and after Vietnam. We in the West, especially the EU, lost a lot ofbthat clout and soft power since we are ok with thousands of people drowning unnecessarily in the Mediterranean. Now we do the same on our Eastern borders. Giving up moral high(er) ground, when said morals make up a huge part of your power, is stupid. Especially when you already have others using that weakness for almost a decade.
Just regarding enslaved Fins: bavk during Zarist tines, serfdome was a Russian thing. And Finland still part of Russia. No actions, or lack thereof, in the past justifies actions in the present. At the most, they explain them.
It should give you pause to think so: the risk of the journey is clear to everyone, the risknof loosing your life and your loved ones either somewhere in the desert or at sea. And regardless, people embark on that journey. Just image how desperate one has to be to do so, how utterly fucked up life at your home has to be. At the very least, we all couod afford and extend some compassion to people having much harder lives than we do. And by the way, compassion is not weakness or softness, quite the opposite actually, it is people eho refuse to show it that are too weak to accept and face their oen fears and insecurities. You know, the difference between the real tough ones and the wannabes.
6 billions of euros EU thought of paying accounts only for a small amount of what it has costed to Turkish taxpayers which are a lot poorer than their, for example, German counterparts.
https://en.wikipedia.org/wiki/List_of_countries_by_refugee_p...
And still Erdogan used refugees to gain concessions and favors from the EU.
Except the PM said we need "more actions on the border" which pretty much means continuing keeping it closed.
Same from other leaks in the government according to Iltalehti.
https://yle.fi/a/74-20068749 https://www.iltalehti.fi/politiikka/a/12941635-5b60-4383-968...
It's a study of WW1 and the early 1920s from an economic and social POV.
To be for free stuff and at the same time be for degrowth, decel, limit resource use, etc.... seems naive to say the least.
To play devil's advocate, however, I would argue that there is sound rationale for not allowing economic policy to be decided in an a purely democratic way. If everyone had equal vote in what the government should do monetarily, the result could quickly evolve to a disaster, which we have also seen in places where dictators try to appease to the population as a whole by subsidizing costs and wages.
Recommended by economists as different as Tyler Cowen and Thomas Pikkety, the book won Best Book of the Year by the Financial Times.
Ignore the OP's review of the book. Instead, read the book itself:
https://press.uchicago.edu/ucp/books/book/chicago/C/bo181707...
https://www.amazon.com/Capital-Order-Economists-Invented-Aus...
We should probably describe economic systems as massively complex distributed interactions rather than thinking of them as organisms with monolithic intentions and goals
It's undemocratic to continue growing in perpetuity and not be held accountable to those who pay for it.
If the Panic of 1879, the Panic of 1897, and the Great Depression don't count as "financial collapse", sure. I don't think that I agree with your definitions, though.
> Gold standard wasn't great but in hindsight it actually worked better what we have now.
You didn't specify what it worked better at, just asserted that overall it worked better.
I replied that it was specifically worse at preventing crashes (implying that it therefore was reasonable to question whether it was overall better).
You reply that the crashes were not specifically caused by the gold standard. Perhaps not, but they were part of the way things worked under the gold standard. You can't argue that things as a whole worked better, and then argue that all the parts that didn't work better weren't part of what you were talking about.
Is there any particular reason to blame the crashes on the gold standard? Well, the gold standard prevented someone like the Fed from doing what the Fed does these days to keep them from being so severe. So, maybe the gold standard wasn't the cause, but it was part of the problem.
> The gold standard wasn't great but at least it kept the monetary policy anchored to the reality.
I will agree with you that the Fed policy is less constrained by reality than it would be under the gold standard. I think the new actually works better, but I admit that the lack of constraint is a serious concern.
Was the inflation observed with the gold standard ever as bad as what's seen with government/central bank-issued money i.e. fiat?
So the gold standard failed because it was bound to fail. It was bound on the false illusion that every penny in circulation was backed up by a gold brick, which it wasn't.
It could still have happened, the mechanism is basically the same as in a bank run. If there isn't enough gold and too much demand for gold payouts, the central bank will run out and the system will explode.
The "other" "abolishment of the gold standard" is actually something different: The transition from commodity money to fiat money. Commodity money is when your money is something of intrinsic value such as gold. Stamping coins in commodity money only serves to assure the holder of weight and purity, but the value of a coin is 1:1 the metal value. In commodity money, it is pointless to mint any coins out of metals other than the precious ones, so that transition is marked by the abolition of actual gold coins. There you transit from intrinsic value to putative ("fiat" means "believe" in latin) value, usually through instilling some kind of trust into that coin by payout guarantees (you may still get some gold if you really want), force of law and guarantees of purchase power (a loaf of bread will always cost some fixed amout, or else...) or just plain trust that it will continue to work as it always has (which is the current state of things). So the actual abolishment of the gold standard was quite some time after the commodity to fiat money transition and just exchanged the "fiat base" of a promised gold payout by plain trust.
However, that "plain trust" can only work if the amount of money in circulation doesn't increase too rapidly compared to the amount of goods and services available and provided. Which is why you really really need strict control of the amount of money in circulation, thus central bank interest rates, austerity and other limitations on "printing" of money.
So, inflation under the gold standard was even worse than under fiat at times.
Many philosophies throughout history emphasize finding meaning in your work:
- Ikigai: discover your reason for being, which is at the intersection of passion, mission, vocation, and profession. It is not just about yourself, but contributing to the world and bringing joy to others
- Stoicism: while not solely focused on work, Stoicism emphasizes finding purpose and virtue in whatever situation you find yourself in, including approaching work with a sense of duty and striving to contribute to a greater good, even if the task itself is mundane
- Confucianism: stresses the importance of hard work, diligence, and skill in all aspects of life, incl. work. Emphasizes fulfilling your roles and responsibilities in society with excellence, finding meaning and respect through well-performed work
- Protestant work ethic: sees work as a moral obligation and way to glorify the Christian god. Encourages hard work, diligience, and productivity, finding meaning through creation & contribution to society through labor
- Existentialism: encourages individuals to create own meaning in life, incl. through their work. Involves taking responsibility for your choices, pursuing authentic goals, and engaging authentically with your work.
They obviously also haven't read Marx, who literally argued the exact opposite. He believed Capitalism caused "alienation" in the worker, preventing him from finding meaning in his work. Prior to capitalism people were highly skilled artisans, or subsistence farmers, who almost universally found meaning in their work.
So capitalism did not "give rise to a value system that teaches us to find meaning in our work", the value system was already there. Capitalism just prevented the values from being fulfilled in the workers' lives.
Putting it differently, scapegoating capitalism for preventing people from finding meaning in work seems like a shallow analysis to me. It is not like factory workers or blakcksmiths from the past who were more interested in other things (making music, say), would agree that they were fulfilled.
Europe has a very long history of banking, but at the moment when the Euro was created, most of the obliterated national currencies were weak, reflecting distrust towards their overlords. Switzerland, the country with the strongest national currency in Europe, never felt compelled to join the bloc.
Historically, authoritarian countries tend to go bankrupt over war expenses, democratic countries over handouts. The British pound was strongest at the time when the country was somewhat semi-democratic, neither-nor. But that is a very unstable configuration.
Pick your poison.
If you don't see the difference between a truely authoritarian regime and the EU, you never paid attention in history class or current world events.
EU is run in authoritarian ways, but so far it's in, let's say, benevolent dictator mode. But same mechanism can be easily abused. And it's already abused. Just in ways that don't affect day-to-day life too much. But overall it's very bad for the society which does not feel attached to decisions of it's servants. Which is the bad thing. Democracies can easily cause a lot of harm (e.g. wars, repressions etc) too. But authocracies ruin societies for a loooong time. Wether they spilled blood or not.
What the EU does so, is managing to get 27 nations to work on compromises. And it does so quite well, sometimes better and sometimes not. That, obviously, involves a ton of politics (humanity hasn't figured out a different approach yet, heck, even the most authoritarian and absolutists governments had tons of politics). The core fact remains so: all participants in EU governance are either elected directly at EU or national level or nominated by those elected parties.
The core fact is that EU governance is far removed from the people. It’s too huge and too diverse. But it’s perfect ground for deep state (deep union?) to find ways to work around democratic instruments.
There is a lot of propaganda around what EU is paying for or allowing. But the truth is that each country would be able to do the exact same thing if they wanted to, just with better money efficiency because it wouldn't have to be cut so much for feeding the bureaucracy monster of the EU...
And yes, it's terribly inefficient too. The only thing it's efficient at is building a class of people who rely on EU institutions for their wellbeing. Collaborator class if I may?
This is EXACTLY what it feels like; and in most cases it was pretty clear to me that those people cost more money to society than any kind of "value" they were bringing.
But the whole thing is politics anyway, so outcomes are kinda irrelevant in the grand scheme of things. To me it looks like a prototype of some sort of new communist system, where the "leaders" choices are completely disconnected from the rest of the population...
Back in the day, when there was still a communist bloc, this kind of system, a "soviet republic" consisting of a hierarchy of workers councils was the usual example for how you can have elections but not have democracy. Because the hierarchy of councils will dilute any kind of will and sovereignty of the people into the will of the political upper class.
Most people looking for “more democracy” are actually advocating for a more politicised commission, which is a very bad idea.
IMO more politics at EU level overall is a bad idea. The strength of europe is diversity and competition within the region. Not a bureaucracy superstate on shaky legs with a rather long runway to die.
In as much as it is what people actually want through revealed preference, it’s as democratic as they come.
The original article uses "Antidemocratic" as a subtly negative value judgment. One of my points was that "Democratic" management of finances has often turned sour, too.
At all points in history most of people were trying to do "things at the expense of someone else" (colonialism, feudalism, etc.). Borrowing and not repaying is one of the most reasonable ways to do that - I think it's a clear improvement from killing/enslaving people, so I think it's an improvement.
Andreas Papandreu, the king of Greek debt, is long dead, but debt that he ran up is still saddling the young Greek generation. The artificial living standard growth which resulted from his reckless borrowing helped him getting reelected several times, but the guy died in 1996 and now people who even weren't alive back then are carrying the burden of his electoral success that was bought by unsustainable spending. One of the insidious properties of national debt is that it comes at cost of people who aren't born yet. They are in no way represented in the democratic process, but they shouldn't be ignored either. We understood so much at least with regard to environment (albeit the implementation is far from perfect), we should do the same with regard to finances.
Compared to death and outright enslavement, bankruptcy is better, but it is a choice between Black Death and some treatable cancer. We should strive for better.
The Greeks also had no control over monetary policy as a result of being part of the EU currency union so they were essentially at the mercy of the banks and the EU leadership.
Most people who are into this space are doing relatively well, but then remember that more than 60% of Americans can't spare 400 dollars for an emergency and this simple fact shows how absolutely bonkers the whole system is.
You may be free to say hateful things if that's your definition of freedom, if we define freedom as having the means to develop your true potential or just do things you like sometimes without a constant feel of existential threath, that's what I call freedom.
> Expertise is, in a certain sense, a bourgeois concept, a by-product of the ideological imperative to organize our lives and activities in a rational way.
God help anyone who takes this shit seriously.
I don't know when, if ever, austerity is called for (even Paul Krugman has called for deficit reduction in certain circumstances: https://www.nytimes.com/2023/10/10/opinion/us-budget-deficit...). But this review is dripping with ideology to the point that it's genuinely disconcerting.
I think that is the mental framework with ideology-saturated economic opinion pieces like this one. I don't think they care about being right. Instead, the goal is to make cool, edgy, story-book-good-vs-evil narratives independent of empirical validity ("any subjective interpretation is valid if it's thought-provoking")
But postmodernism says more. It says that truth claims aren't actually about truth, but are assertions of power. Those who believe such things are likely to have that intent when they write. Keep that in mind when you evaluate what they say.
However, do you think ideological language is a predictor of a valid, fact-based take on an issue, or the opposite? I'd be hard pressed to say "more ideology -> more empirical validity", but maybe they're orthogonal
Would you agree? Or do you think being steeped in ideology leads to more rational decision making? (independent of whether ideology is needed for social mobilization)
It is the same realization as when I stopped consider the GNU guys paranoid crackpots.
I'd apply it to both sides, but I only see one side on HN:
Dear leftists! Can you please take your propaganda and fuck off to reddit, twitter/X, or wherever?
This has been studied for over a century, why this being repeated uncritically in media?
Yet another butthurt marxist misinterpretting (among other things) the fact that free markets evolve into oligopolies to mean twar the whole system apart. The correct interpretation is that we screwed up going full rehnquist and nerd our antitrust enforcement to move back nearer to what it was doing pre rehnquist supreme court.
This look like a good book and I am likely to buy it. From a systems standpoint it is quite obvious that capitalism tends to concentrate wealth in the hands of those who already own capital.
Piketty showed the historical data agree with that: as long as growth is less than capital rewards, wealth concentrates.
We need a systemic solution to that, and that can't happen with représentative democracy. We need direct control of the means of production by those who make them work. This means stronger unions, but also platform régulations, as users are unpaid knowledge workers giving away their data in exchange for a service, an exchange so one-sided and highly beneficial to the platforms that states are losing their sovereignty to the platforms.
See bratton's The Stack to know more.
The only processes known to make substantial impacts on this process involve mass death.
Write a simulation yourself, it's relatively trivial. You'll find PA a force of nature which little can overcome.
2x0 is still 0, 2xbillion = 2billion
And thus from equal starting points and equal chances inequality becomes ever more extreme.
Rutheless redistribution on the scale of a small tribe might, within that tribe, work for a time. But wars between tribes fix this 'temporary reprieve' -- since tribal power follows PA.
There is no known policy, at least none i'm aware of, which can preserve the tiny populations needed for equalising redistribution which at the same time prevents them from preferetnailly attaching to each other.,
Instead, I would like to encourage those interested to consider and discuss the similarities and differences between capital income taxes and wealth taxes, between taxation and non-voting ownership of an asset, and between voting and non-voting ownership. What is the average rate of return on capital and what is the volatility? What is the difference between the CPI basket and that of the implicit GDP deflator and why? Those are all interesting questions to ask and answer.
All policies which affect the wealth distribution do so by moderating the gini coef, ie., the specific shape of the power-law -- they do not make it normal, uniform, etc. or however the ideologue would wish it to be.
The "natural mechanism" of "fair procedures" in the case of systems wherein parts attach to other parts based on their current size (, success, etc.) is spiriling inequality in the extreme.
All sane policy conversation is about how extreme. That bigger things get bigger isn't "capitalism's fault", as far as anything could be said here, all modern systems of economics and government seek to make the concequences of this process less extreme, rather than more.
Eg., in the case of capitalism, it is essentially a mechanism for managing the extreme impact of risk (via limited liability companies), and a mechanism for addressing intergenerational rent-seeking (the historical way pref. attachment was "fought").
Again, you are assuming your conclusion, and you do not even do us the favour of stating premises, which is hardly conducive to a productive discussion (or, any, really). On the other hand, it is quite fundamental to welfare economics that under a few assumptions, some unrealistic and some less so (namely: perfect information, fully internalised externalities, absence of market power, local nonsatiation and convexity of preferences and production) it is possible to reach any point on the Pareto frontier. The policies required to reach a desired point in such a toy model is left as an exercise for the reader. Now, the actual juicy questions here are how things like market power, externalities and imperfect information affect this? Is the model still a good approximation? To what extent are we able to correct things, and do we even want to? If we do, how best to do it?
> The "natural mechanism" of "fair procedures" in the case of systems wherein parts attach to other parts based on their current size
Again, you assert that it's "natural" and "fair" as if the result is a foregone conclusion. If it is inevitable that dx be a f(x) ~ x then yes, that's an exponential. Why would it be unnatural or unfair for dx to be instead a function of y, some other factor that has no proportionality to x? You are stating as a conclusion and premise that financial wealth experiences preferential attachment unconditionally, that is in essence, circular reasoning. What is the actual mechanism, the force, and how irresistible is it really? Would resisting it simply divert its effects to something else, for example, concentration of political rather than economic power?
Quite frankly, the dismissal of everything outside of a frankly ridiculously narrow space, where your model with an unspecified mechanism (which does achieve the results that you say it does) clearly must be an accurate reflection of the real world in all circumstances... Well, it gets old quite fast. If you really must use that model, describe and justify the accuracy of your proposed mechanism at least, if you please.
As an empirical matter, the burden of proof lies with those who say "there is some other process" to show it. Since the PA process is demonstrated without exception.
Formally, why should we expect wealth to be a PA process?
Well, formal arguments will always be toy and disappointing, but get someway to explaining what's observed empirically. But:
Economic transactions are, roughly, exchanges of time. We have a fixed quantity of time each, and Alice offers some time to Bob, who offers some time to Eve... and so on.
Wealth is your net ability to draw down on the time of others, as a function of time. By spending X amount, I can obtain Y time from P people.
Assume, at t=0, everyone has an equal ability to draw down on the time of others, and an equal preference for exchanging their time (1hr for whatever it takes me to do, for 1 hr of whatever it takes you to do...).
Now, since we have different rates of production and produce different things it becomes wasteful for me to spend 1hr for your 1hr when you dont make what i want; or someone else makes more of it faster.
Our desire not to expend our own time needlessly, to waste our finite quantity of it, means we allocate it to where the ratio from ours/others is most efficient.
That is to those who can draw down on the time of others most, we give some of our own; and to those who can the least, we give none. (To, roughly, quote Matthew).
Simply in the pursuit of not having our 100 years wasted egregiously. And there are many compounding effects, not least this. For as soon as any inequality enters those who then have more can do more, and so become ever more effective at what they do.
We will not work a month to buy a t-shirt when a t-shirt can be made in a factory for a minute of our time. It makes no difference that the factory is owned big Capital (omg!">?!?). And if we were to that, there could be no "factories" of this kind -- since allocating resouces according to what minises wasting our time gives us more time, without which we cannot develop anything new.
All this is somewhat irrelevant however. As above, the burden is on those who say something else is conceivable to show (1) what their conception is; and (2) it is physically possible.
If all alternatives amount to global coordinaton across the species such that we are each programmed Marxists acting like drones -- or, likewise, non-agression libertarians -- you're then talking about a different species.
Wealth amongst the bees might be a little more normally distributed, for sure.
But the issue is that small tribes arent stable. The primary objective of tribes is foremost survival, and in the pursuit of every more gauretees of survival, they will pref attach to other stronger tribes (often by concequest, occasionally by consent, see eg., the formation of the UK vs. the formation of the british empire).
So there are different 'social logics' taking place at each level: the individual wants to minimize the amount of their life wasted; the group wants to maximise its chances of survival etc.
It's not that I do not see 'local violations' of pref-A-type expectations; they're quite common indeed.
It's more that I see the 'effect size' from pref-A processes to be, empirically, overwhelming. A force of nature at every scale.
People who are "anti-capitalist", ie., the person i was addressing, arent offering an analysis of the entire history of the human species in terms of these processes --- and how alternatives can be provided; rather they are profoundly ignorant of all this, have no interest in learning it, and are rather engaged in a religious crusade against their notion of sin.
The first step to help this ideologue out of their crusade, is if even possible, to show that it isnt Sin which makes the world Fallen -- it Falls even under extremely simple, extremely fair procedures. This is intolerable to the fantatic whose crusade is against a human psychic reality they thing they can attack -- tilting at windmills, of course.
If we're talking "two good-faith people who arent fantatics trying to model possible realitites" then the dialetic is different.
I'd say: i have sets of entirely plausible propositions each of which entail 'inevitable extreme inequality', each of which plausibly model reality, each of which have high credences from a range of experts (etc.).
I do not see the same on the other side; this may be my ignorance, but I have never encountered a systematic presentation of any explanatorily-plausible alternative.
How on earth do you propose to hault 2*2*2*2*2... vs. 0.001*1.001*1.0001* ... ? By what means are most individuals on the planet coordinated so that the labours of one do not multiply benefit themselves, but "divisionally benefit" everyone? What process to the general benefit of society could be imagined where net wealth grows without inequality?
THe only "divisional processes" i can imagine not only reduce net wealth, they are horsemen of the apocalypse.
I'm going to interpret that as acknowledging that the bulk of the distribution is not Pareto with Pareto fitting well only at the end of the right tail. This fits with a mostly multiplicative dNW/dt but in a random walk rather than monotonic increase, or a sublinear PA, but with increasing linearity at the very high end. Not that we actually need to model this blindly, dNW/dt is to a significant extent just Y, income, and we can and do measure income, at least. A lot more accurately than wealth, even. More importantly, there is enough data with both for the same individuals that we can examine the relationship between the two. Certainly, there is a positive correlation, but overall it seems R ~ 0.33 across many countries, which is fairly low, really, and if you want to eyeball the graph you can probably see the data points clustered tighter near the top.
Now, I can't tell you what distribution @linschn might target as desired or if there are things beyond mere distribution that they would wish to address. My reading of their comment would be that they wish to focus on ensuring non-NW effects >> NW effects, i.e. high mobility, not necessarily high equality (does raise an interesting question here, would a combination of mobility and inequality also tend to increase zero-sum vs positive-sum competition?) Still, given that the correlation, although low, does exist, any actions increase to mobility does seem likely to reduce final inequality as a side effect. This does not necessarily shift the shape of the distribution (rather than spread) significantly, but there is no reason why it should need to.
> How on earth do you propose to hault 22222... vs. 0.0011.0011.0001* ... ? By what means are most individuals on the planet coordinated so that the labours of one do not multiply benefit themselves, but "divisionally benefit" everyone? What process to the general benefit of society could be imagined where net wealth grows without inequality?
I don't see why anyone should care for growth of total NW over Y. Wealth isn't real, there is not literally a warehouse full of stuff and services that wealthy people can draw upon, so it can only be a claim on future Y plus or minus inflation. I entirely agree with @linschn in this respect, seeing growth in wealth being higher than growth in income as a good thing is complete and utter madness, and yet those are the scenarios where the PA or PA-like effects relatively dominate. If during relative stagnation it's a choice between infinite paper growth (plus increasing concentration) and the apocalypse, let's have the apocalypse. At least the apocalypse is honest about what it is. In a way, it's the Greek sense of the word.
1. https://www.brookings.edu/articles/deciphering-the-fall-and-... (Piketty underestimates the extent to which inequality is due to real estate)
2. https://davidsplinter.com/AutenSplinter-Tax_Data_and_Inequal... (uses different -- more accurate -- methods to estimate inequality in the US since 1960 and finds that Piketty and co. overestimate the growth of inequality)
Representative democracy is a powerful check against a lot of bad things.
I don't care if you feel you aren't being paid for your data if it means I'm allowed to vote on whether I'm allowed to start a business or not.