Should we bemoan the fact that employment and earnings aren’t the key trickle-down mechanism?
Hat tip Economist’s View for Lane Kenworthy’s post on growing the GDP and distribution of the benefits. It is also related to concpts determining trade policies:
None of these countries significantly increased the share of GDP going to government transfers. What happened is that some nations did more than others to pass the fruits of economic growth on to the poor.
Trickle down via transfers occurs in various ways. In some countries pensions, unemployment compensation, and related benefits are indexed to average wages, so they tend to rise automatically as the economy grows. Increases in other transfers, such as social assistance, require periodic policy updates. The same is true of tax reductions for low-income households.
Should we bemoan the fact that employment and earnings aren’t the key trickle-down mechanism?
Why have trickle down in the first place?
Seriously, there is an assumption here that the rich must bestow their blessings upon the poor, like manna. If that is a social necessity, then the question is not which method of “trickle down” is best, but ending exploitation in the first place. In the U. S. it is no accident that poverty is correlated with race and ethnicity.
To be fair, Ken has a different comparative point to make. However, we do face the dilemma of a possible shrinking of the pie from current lofty heights and have little in mind of how to even frame it.
I get your point, Rdan, but I think I am being fair. Words matter. Linguistic frames matter. It is not just a question of rhetoric, it affects our cognition. I do not agree with those who claim that economists say whatever the rich want them to. However, much of the terminology of economic discourse reflects the world-view of creditors and the rich.
As for the shrinking of the pie, I have not seen the pie shrink in the past 30 years. I have seen great advances in trade, economic growth, and productivity. We really should not talk about the Third World anymore. And the world economy has not been a zero-sum game, there have been gains all around. In fact, the U. S. economy has flourished, despite dire warnings that we will have to tighten our belts and accept a lower standard of living. But that prosperity has not been shared amongst our people, as our earlier post-WWII prosperity was. Our enlarging pie has been hogged by the hoggies at the top, while they talk about how the pie is shrinking.
Being a dotcom engineer and seeing housing costs just ramp up in sync with wages 1995-2000, I thought something was rotten but couldn’t put my finger on it.
After all, houses were capital and capitalism is good, right?
Then in late 2002 I discovered:
http://en.wikipedia.org/wiki/Progress_and_Poverty
and everything became a lot clearer. Modern economics has been adjusted to eliminate the difference between land and other forms of capital.
The supply of land is fixed, and the supply of housing is limited. This means the more productive we are, or the less taxes we pay, or the lower the cost of money, the higher we push up the cost of land.
I think the secret of the eurosocialist economies is entirely the high taxes that EVERYONE pays, because in the end “all taxes come out of rents”.
40 million people get foodstamps. $20B goes into housing assistance. None of these people pay income tax on their wages. All these subsidies, in the end, end up in landlord’s pockets.
The Rent is in fact too damn high.
The pie is bigger. But, the pieces of the pie the top 2% get are huge compared to the rest of us. You know, this is serious money. Not just a percent here or there. I had a different view of the US than other people while I was working. So, I knew what the down side of society looked like. But, I have noticed for a long time that there is a general presumption of wealth that applies it to everyone. Of course, nothing could be farther from the truth.
The majority of people are ok but not prosperous, and a growing number aren’t even ok. Not even close and have no prospect of ever being even within sight of ok. This isn’t right. And while there’s still a chance that we can change the way business works in this country, we should at least tell people what they are proposing to do isn’t alright with us. NancyO
min,
on a decade by decade measure, both world and u;s. gdp has been slowing since 1970. See,e.g., my comment [or work done for the OECD by Angus Maddison…..or numerous others. There has been a Long Slowing taking place beneath/partially because of financialization.
http://econospeak.blogspot.com/2007/11/very-flattering-review-of-confiscation.html?showComment=1194641820000#c7312282126431469140
For Christ’s sake, there is no better example than the US of America that a comprehensive distribution of wealth and income is the way for prosperity for all. The US achieved greatness by administering a policy of low tax rates, family level wages, and retirement and healthcare for the majority of citizens, meanwhile taxing the super rich and corporations to limit their wealth and power. The founding Fathers and Mothers came here to escape the gdamn Aristocracy.
Suddenly, we have the John Birch Society, under the guise of the draft dodger Ronald Reagan, and Sam Walton telling us that the people have too much. Has the US world improved. There are many, many examples of the ultimate outcome of trickle down societies. Latin America comes to mind.
Your headline is incendiary, and I haven’t read the article. If Kentworthy is suggesting that family level wages and benefits are not the way to strength, then he is sadly mistaken, or worse, a lapdog for the wealthy. Our civil service, news media, and Universities are full of them.
Well, Sulligan, put if you put it that way, where we gonna go now? Seems like we don’t have much choice but to stay and duke it out. However, Rdan’s original question only has one answer, “Yes.” NancyO
Sulligan, enthusiasm is welcome. But while your sense of history is also enthusiastic, it needs explanation and does not on the face of it appear to be accurate.
Should we bemoan the fact that employment and earnings aren’t the key trickle-down mechanism?
Only if you’re willing to bemoan that a helium balloon rises in air.
Capitalism is a mechanism for the concentration of wealth, and those who have wealth accumulate more of it at the expense of everyone else. That’s what efficiency and productivity are all about. It is really just exactly that simple.
http://jazzbumpa.blogspot.com/2010/11/we-are-become-argentina.html
http://jazzbumpa.blogspot.com/2010/10/us-economy-is-dying.html
We’re basically screwed.
JzB
The best way to distribute wealth is still a healthy job market. Sadly, we are a long way from a healthy job market.
By the way, I have never worked for a poor person. I have never worked for a rich person who didn’t work longer hours than the help.
There is a huge difference between the owner of a construction company in Toledo who makes some money and a partner at Goldman Sachs. Enough of the “capitalism is evil” crap.
The Birchers are to blame? Wow.
In all human history in all cultures save tribal ones wealth has been extremely concentrated at the top. So it will always be.
America’s tabla rosa beginning and lack or royalty and traditional elites negated that for a time but by the beginning of the 20th century asset distribution relentlessly accrued to the top as the mechanisms of organized elite power organized. Then came the horror of New Deal liberalism, which has now been defeated. I’ll hazard a guess if the asset distribution of all histories nation states could be calculated that the top 10% would have 90% of assets. So it shall be again.
The project of monern conservatism, to parapharse very obtusely JK Galbraith, is to negate the silly idea that wealth and power should should be any different than it has ever been.
Min,
I have fully appreciated how my life has gone in this country. The lingistic frame matters, yes. Just turning this one on its head. Re-distribution is rarely used in reference to wages and benefits.
It depends on how long you want to be rich and where you want to be rich. The rich don’t produce anything. They just control the spigots, so that most of the goodies flow to them. (Granted, a good solid 1% of the rich actually got that way by inventing a new spigot, but usually the inventor of the new spigot dies in poverty.)
If there isn’t a solid drainage mechanism that pumps money from the top where it accumulates and back into the economy, the economy shrinks, living standards decline, and you get long periods of stagnation like the Dark Ages. Being rich in the Dark Ages wasn’t the end of the world, but it’s much better being rich, or even somewhere in the middle, now.
They’re just ahead of the rest of us in knowing that capitalism has failed. As an economic system it has reached its limits, and it can no longer support our living standards or keep us safe. “Free market” capitalism will collapse, just as communism did.
To be honest, I consider capitalism to be the greatest productive force ever, but I also consider combustion (and possibly nuclear reaction) to be the greatest energy sources better. It’s just that you don’t set fire to your house, because you want to read a magazine.