I question exactly how long-lived this new wealth is or will be.
Look at the Rothschilds - they have figured out a way to take the initial 1700s wealth and keep it (we can assume mostly) together in a relatively cohesive lump for some 300 years.
A less "notorious" example would be the duPonts, easily trillionaires if you were to add up the wealth accumulated amongst this wealthy family.
Against that, someone worth $100 million who gives 90% of it away when he/she passes doesn't seem all that significant.
Not sniping, just expressing a contrary POV to consider...
> keep it .. we can assume mostly.. in a relatively
> cohesive lump for some 300 years.
I think I disagree but it might just be over choice of words. It's an interesting topic that I want to develop and I'll charge on.
On the topic of intergenerational wealth, it's not enough to say that you can keep a lump of wealth. During the 300 years you talk about, governments rose and fell, and currencies and sovereign debt with them. In order to stay above water, you have to float your position across multiple regimes and positions. Or keep it in a lump of gold. That didn't do that - they worked money hard.
Rothschilds took on huge positions in the Napoleonic wars that could easily have gone wrong. They then would have lost it all due to poor timing over the end of the waterloo campaign but leveraged up by taking an audacious position on sovereign bonds that paid off and made them even richer. My point is, they gambled the house at several points.
Part of what's striking about the Rothschilds specifically is that they kept a healthy mindset across several generations. This is a wildly interesting topic that has crossover with another article hacker news today link today to the atlantic, http://news.ycombinator.com/item?id=2072200
In that article you see lots of people who came from aspirational backgrounds. But how do you keep that? How do you raise a wealthy family in a way that passes on those values?
I upvoted you because you have hit on the core question: how do you stay hungry after that first x million, and how do you pass it on to the next generation?
Some family members have achieved relative wealth and I see this with their children who attend private schools ... I see nephews and nieces likely to pursue professions, but do not see the same competitive drive being passed along.
This is a fine exposition on the state of the world today -- and the hope that these hard-working global citizens will help create a more equitable world -- but it's worth remembering that there's nothing new under the sun.
After all, the British royal family is of German descent.
I understand your sentiment, and don't really disagree, but keep in mind that it's basically impossible to innovate or build wealth under unfavorable institutions. So... some value probably "should" accrue to nations.
This might be a good time to take a look at history. Lots of examples of institutions destroying innovation. By contrast, not as many examples of them creating it.
Or, to put another way, we did just fine innovating and inventing and such on our own -- in caves, on the Savannah, on trade routes, as part of tribes or guilds. Innovation and entrepreneurship is as natural a part of life as breathing. If this weren't true, we'd still be hanging around in trees waiting for the big cats to leave their prey.
Of course, you can argue that institutions accelerate this natural ability, but there's a lot of room for doubt over exactly what magic sauce makes people super productive. At the very least we can agree that different folks have different answers to that question. (If there were some "proven" answer, we'd just all copy that and the world would be full of Thomas Edisons) I understand there are a lot of works of fiction and nonfiction that claim to explain why so much innovation happened in such and such a place, but it's easy to say or write something like that. In reality, lots of really smart folks have went at this problem and haven't gotten very far in terms of reproducible results.
I find this line repeated over and over again -- that somehow if there is a lot of innovation in situation X that it naturally follows that we know all about X and why all this innovation happened. I think that's stretching logic a bit too much for my tastes.
You're missing the definition of a good institution.
A "good institution" is one that does not interfere, but also stops others from taking over and interfering.
Innovation is as natural as breathing, but so is conquest. After innovation, the winners often use their power to conquer and close the door behind them. This is history too. It is the innovators who tend to shut down the environment that was open enough to enable them to innovate.
Winners close the door behind them because they underestimate how much luck went into their success. As everyone knows, the first $20 million is the hardest.
I mean that: I can't. It is logically impossible for me to disagree. My thesis is that there is no repeatable definition of a good institution. Your definition is just as good as any. Personally I like it.
I would simply point out that a lot of folks have written a lot of books and essays about what makes a good institution. We've yet to see something reproducible. We've seen a lot of things that sound and feel good, and I completely believe that your points are valid, but that and 5 bucks will get you a cup of coffee at Starbucks.
I can line up a dozen other folks that will tell you that a good institution fosters creativity, or puts the individual above the group, or is one with a spiritual center, or is one in which open communication is everywhere, or any one of a thousand other things that also sound pretty good.
If the answer to this question involved pleasing the most people with your reasoning, there's no doubt in my mind that you would do very well. But it doesn't.
While it is hard to somehow "prove" what is the best strategy for an institution, I would say there is indeed hard science that has been done that gives us a fuzzy picture.
It's not a perfect science, but then again even quantum physics is incomplete and suffers from anomalies.
The entire purpose of social science is to move these questions away from just personal judgement and get SOME level, no matter how small, of objective fact.
Organizational psychologists have studied this issue and I think there are some good guidelines. My definition is, admittedly, biased by my own personal judgement.
But still, there is real genuine scientific evidence that indicates institutions which empower individuals and allow for a lot of freedom are objectively better than ones that are more authoritarian and brutal.
You can operationally define "better" as "the group of choice of a 4/5th majority of randomly selected humans" if you want.
I'm not saying nothing is provable. I'm not even saying that nothing is useful.
What I'm saying is that if I had a zillion dollars, a magic wand, a dumptruck of pixie dust, and a flying unicorn? I still wouldn't be able to create an institution that I would feel comfortable with as being a steady generator of innovation. In addition, I can observe that, as you point out, these things are sociological in nature, not mathematical. I can further observe that lots of people make lots of money selling books and giving speeches and such claiming to be able to make the perfect institution. Since these people continue to generate new ideas and continue to write books and charge for speeches and seminars and such, I believe it is reasonable to assume they have no fully satisfactory answers. I can further observe that many institutions have spent tremendous amounts of money and effort into creating environments that spawn invention and innovation -- to very mixed results.
All of these observations lead me to a great deal of skepticism in regards to your statement. That doesn't mean that what you say has no value. I'm sure we could all agree on general attributes that most of the time provide more return than others. But that's a long way from the certainty I was hearing. People talk about fostering innovation and entrepreneurship like it was turning on a light, and that kind of certainty is ludicrous. It's nothing at all like that. All I was trying to do was provide context.
I'm done here. No desire to get into an infinite argument stream. Good thoughts. Thank you for sharing them.
I think it is an insight just in your statement that there is no such thing as an institution for innovation. That means I should foster innovation where I find it, no matter how unlikely, instead of looking to build utopia.
I try to avoid sarcasm in comments. It seems like one is packing more meaning into a short comment, but without knowing a person or body language the comment is often unclear.
Here I think you meant your comment as a final unavoidable contradiction to the GPs post, but I recall reading some lore on a father of the internet steering the RFC process while a government branch was working on another standard meant to be primary. (I'd look it up but I'm on my mobile.) So I doubt we can say it was more the government institution rather than the will of the builders which led to the internet which is more in line with the GP and doesn't take away from the idea that their positions made their work possible.
I agree with you that in the end, it comes back to individuals and their decisions. However, many of those individuals were working in an environment afforded them by a government institution, either directly (working for DARPA) or indirectly (working for educational institutions supported by the government).
But, really, I was responding to the parent's 'By contrast, not as many examples of [institutions] creating it.' The environment provided by institutions (whether it's a small company or a large facility) have created a great many things throughout history.
We all want to think individuals are what it's all about, but individuals don't exist outside their surroundings and influences.
That's like saying the government is responsible for all business because they printed the money.
The "internet" that the government created would be nothing without the private organizations that actually built it. When did the government start Cisco? Google? USR? Even the early iterations of the internet were built by private companies. It's more that the government was the first buyer of this type of technology.
Edit: The idea that the government can take responsibility for the internet is gigantic hubris. In fact it's governments that are continuing to destroy what the internet has become.
BBN is the most well known. Additionally a lot of the early gear was produced by DEC and IBM.
ARPANET didn't resemble anything close to the internet in it's current incarnation. Thank the government that you have a macbook to use, because they built ENIAC!
umm, so subcontractors to the government/academia?
sure there were a lot of those. Still, for more than 20 years during 1970-90s private sector largely discarded ARPANet mutating into Internet as an academic toy. All while TCP/IP was invented by Vint Cerf and Robert Kahn at Stanford and HTML by Tim Berners Lee at CERN. Yup, two largely government-funded organisations again.
Yes, for sure. Some of the benefits should return to the nation that provided the favorable conditions (and do, in the form of that person's taxes and also in the form of opportunity-seekers from around the globe flocking to the places where growth is possible). But I don't like the notion that people owe their successes to their country any more than I believe they are indebted to oxygen or gravity.
You may not like the idea but that doesn't necessarily have any bearing on its truth. None of us does anything on our own - water, power, roads, schools, the list goes on and on (not all directly attributable to the country itself, but certainly national governments are high on the list of contributors to these projects in almost all cases, and I haven't even mentioned things like tax policy yet). I think the days of the nation-state are numbered but we can't ignore what those entities did for human progress. Maybe not in the form of a literal debt, but it's short-sighted and antisocial to pretend that the elites didn't have a hundred million helping hands on their way up.
Perhaps, but the elites have already paid for all of those helping hands many times over. The top 5% paid about 60% of the nation's taxes, for instance, and they almost certainly have not used 60% of the public services.
In spite of this, most of the services they paid for are not the public goods (e.g., roads, power, water, police) you describe. Of the top 5 biggest expenditures in the US, only the 4'th is a public good.
And this completely ignores all the consumer surplus they have created (i.e., the happiness you get from using a macbook rather than having $1000). The elites have paid their debt. Let them leave if they want to.
I think the point is that the elite benefit from the public services even if we do not use them directly. E.g. if we work in an office building we benefit from the services that allowed the worker vacuuming to be there, though we didn't necessarily take the bus there ourselves.
[edit] but this is not to say that anyone should be restricted unduly.
First of all, if the worker is a taxpayer, the employer is already paying for those services in the form of pre-tax wages. I pay for my own police protection, and I raise my wage commensurately [1]. This is all included in the cost of labor.
Secondly, most government spending does not provide those necessary services. Roads, police and water are just not very expensive. Most government spending is just transfers from the wealthy to the less wealthy - see my second link in my previous post.
[1] Actually, my landlord pays for police protection, and has raised my rent commensurately.
Most of the cleaning service people are not really taxpayers[1], which is why including them distorts the equation. They are benefiting w/out contributing, and we do in fact, need them.
Also reinforcing my point, How can you claim that Defense is the only public good in the top 5? What percentage of the population must benefit to qualify?
[1]From other IRS data, we can see that in 2008, around 52 million tax returns were filed with either positive or negative AGI that used exemptions, deductions and tax credits to completely wipe out their federal income tax liability. Not only did they get back every dollar that the federal government withheld from their paychecks during 2008, but some even received more back from the IRS.
and they almost certainly have not used 60% of the public services.
They've probably used more than 60%. Almost all of the money is a means to keep poor people "content" in this country. It's a small price that rich people pay. To put it another way, rich people could certainly cut off pretty much all education, pension, health care expenditures if they wanted to. But there's a reason they don't, and its not because they're nice people. But its in their best interest. It's their public good.
This debt metaphor is really unproductive. Fact is it's easier to make money when you already have money. So the assumption here is a nation would be better off if it subsidized the money making process, same as it subsidizes education.
We ARE indebted to oxygen and gravity. While it's hard for us to destroy gravity we are rapidly destroying oxygen generation capacity on this planet and it's not going to go very well for us if we continue.
Why not? Oxygen and gravity occur naturally. Nations with conditions favorable to technological innovation do not. They have to be built and maintained.
Loyalty or gratitude to an institution makes little sense to me (I'm probably in the minority on this in the general population), simply because an institution is incapable of loyalty or gratitude towards me.
I'm loyal or grateful to people, but rarely to abstract concepts.
So setting aside questions of what occurs "naturally", who should I be loyal/grateful to? The few enlightened bureaucrats who make a system better than average? The taxpayers who fund it, willingly or not? The bureaucrats who, at best, are ineffective at ruining everything? The rebels who make things happen by bending or ignoring the rules?
I wonder if the parent is objecting to the word "loyalty" - Loyalty implies a certain degree of unconditional support; while I think that when talking about countries, we're better off with conditional support.
That said, if by loyalty you mean conditional support, I agree completely. Governments don't exist in a vacuum, and there is constant pressure from the those who directly benefit from a less-efficient government.
I am - and to be fair I don't think anyone else used the word "loyalty", so I could be swinging at strawmen, but that's what some of the discussion sounded like to me.
There is a very telling story in the great book "Bad samaritans" ( http://www.amazon.com/Bad-Samaritans-Secret-History-Capitali... ). Among other things -- the author explains how in the 1850s, American travellers in Japan were surprised by the Japanese laziness and inefficiency, so much to make it almost proverbial. Doesn't it sound funny? In the 1850s, Japan was terribly underdeveloped, and in an underdeveloped environment you simply cannot do much to innovate, undertake new projects. So people everywhere in underdeveloped countries just seems lazy to people from the industrialized world, that was true of Japan in the 1850s, Korea in the 1950s, and many African countries nowadays.
The impetus later came from the central government, and in 1905 Japan was not a negligible country anymore. The moral of the story is that free-market bullshit and Ayn Rand books are just make-believe stories without any solid backing.
I think most people would be happier if they saw it in more absolute terms. I have witnessed wealthy people made to feel like paupers when a yet more wealthy person puts on a display that they can't afford. The phenomena is actually quite comical.
Still it's fairly clear that wealth will always be a measuring stick that people will use to display their relative worth. It's like plumage. A lot of resources go into growing those fancy tail feathers. In itself I don't see anything wrong with that. It's quite natural.
However it's important for societal cohesion that the absolute wealth of the average does not fall and that they can maintain some semblance of dignity.
Good read on the world trending towards meritocracy, esp during these times as a lot of older institutions are getting turned upside-down. It reminds me of this old PG post, "After Credentials" - http://www.paulgraham.com/credentials.html
"The course of people's lives in the US now seems to be determined less by credentials and more by performance than it was 25 years ago."
Why? Why is that disturbing? This is a genuine question.
It doesn't disturb me one bit. As long as each generation is relatively wealthier than the prior one, I don't care about the spread within that generation.
My grandfather died of pneumonia at age 56 due to a lack of oxygen and antibiotics at the hospital. They didn't have enough money to paint their house and instead used old tractor sump oil. My parents, when married, didn't have hot water or a toilet inside the house. They had never travelled more than 200 miles from their place of birth.
My kids have access to better health, leisure, education, food and housing than even I did, which is not that long ago.
This continual improvement in wealth amongst my own family is proof enough that the very rich aren't impinging on what really matters, which is improving living standards for the majority of people.
Paraphrasin PG in one of his essays - it doesn't disturb me that Mozart was 1 million times more musically talented than I am, or that Tiger Woods is 10 million times better at golf. Their ability and success doesn't impede on my life at all - if anything - it improves it. It's not unfair (in any real sense) that Federer can play tennis very well and I can't hit the ball to save myself. So why is it unfair that someone has talent at making money and can make a million times more money than I can? In a free society, (apart from a very tiny minority who steal or lie their way to it) the only way they can get (and stay) rich is by providing excess value to everyone else. That's true whether you are kicking a ball, trading stocks or building software.
Nobody has ever successfully convinced me why wealth disparity in a free society is a problem. If anything, I see it as a sign of a healthy society.
"...apart from a very tiny minority who steal or lie their way to it..."
Do you mean they are a "tiny minority" because
- they are already members of a tiny minority (those who are extremely rich), or
- those "who steal or lie their way" are a small part of those who are extremely rich?
If the latter, then I believe you are wrong. That is, I believe that a very large percentage of those who are extremely rich partook or do partake of significant "stealing and lying" to get there or stay there.
The dictum "follow the money" is a good one for prosecutors. Doing so almost inevitably uncovers corruption and firms working at the ethical edge of society. We merely don't have (or are unwilling to hire) enough financlal police to track them all down. We settle for the occasional big expose', hoping it will instill fear in others. It does not.
So each decade we uncover or are surprised by new financial scams that wipe the economic slate clean and clean out our savings accounts. Then we start all over, like Sisyphus.
A tiny minority of wealthy people are rich because they lied, cheated or stole their way there. When you get to the uber-rich from free societies it gets even slimmer still.
Take a drive through a wealthy suburb. Look at all the families in expensive houses. Do you really think they lied, cheated and stole their way to those houses? And I don't mean some Marxist 'all property is theft' view, I mean actually took something without permission or told a lie in order to get someone to hand over money. And that's just one small area within one country. When you add up all the wealthy people in free societies you'll find a lot of hardworking/lucky/smart people and very few .
How about some of the successful YC exits that have made the founders wealthy. Were they lying, cheating or stealing?
I don't pretend there aren't people who haven't cheated their way to riches, just that they are a tiny, tiny minority of the people who have a lot of wealth. Sure, if you're going to look at the courts system, that's what you'll find. But that's like inspecting a garbage dump and announcing the world is covered in litter.
But if you look around and all you see liars, cheats and theives, then you've got a very skewed view of reality.
If this is your worldview :
'I believe that a very large percentage of those who are extremely rich partook or do partake of significant "stealing and lying" to get there or stay there.'
Then there is nothing more you and I can discuss because we look at the world in very different ways. And I loudly wonder what you're doing on this site.
On the other hand, your own view might be skewed if you are only looking at USA.
USA offers the most opportunity(including numerous lottery type multipliers for outliers) to get rich without breaking common ethic norms .
I am currently in a European country with an average Gini coefficient. Still, almost everyone (read over 90%) of rich have indulged in suspicious behavior while creating their fortunes. Since this is only using public information, one can only hazard to guess what lurks around in shadows.
Sadly, when I look at a rich suburb here, most of it belongs to people who have benefited from corruption, embezzlement, stealing, lying, cheating, contraband(least of evils here) et al.
In a nutshell: the top 20% of the populace controls 85% of the US's wealth.
1. Increasing wealth concentration = increasing concentration of political power => democracy undermined. US is excellent example - the populace can vote, but only for candidates preselected by funders in the top 20%; populace can advocate, but top 20% has much better access, influence (due to both campaign funding and 'revolving door' jobs when leaving office), and in some cases actually writes the legislation (bank bailout being a major example).
When that happens, you get capture of the government and regulators, financial excess & crisis, and symptoms of banana republic:
2. 'As long as each generation is relatively wealthier than the prior one, I don't care about the spread within that generation.'
That's held true for decades, but is not guaranteed to continue forever. Problem of induction: no amount of confirming observations can prove a theory true, while one single refuting observation can disprove it. Eg, even if all strata of every generation has always been relatively wealthier than the previous generation, that is no guarantee the same thing will continue indefinitely in the future.
Highly concentrated wealth also skews some economic statistics, masking the plight of the lower and middle class. The latter can even be in decline while the top 20% are making out like bandits by outsourcing chunks of our wealth-creating 'making things' industries to higher-profit-margin manufacturing centers, and that wouldn't show up on some stats based on averages.
The workers get laid off while the CEOs, boards, 'pay consultants', and shareholders pocket the increased profits. And when the top 20% controls 85% of the wealth, guess who those shareholders are. Bottom 80% is increasingly locked out of the wealth that can be generated from ownership, and forced to subsist as wage slaves.
There are arguments that is what is beginning to happen now.
3. 'This continual improvement in wealth amongst my own family is proof enough that the very rich aren't impinging on what really matters, which is improving living standards for the majority of people.'
Your standard for 'proof' is pretty low. That's a single data point anecdote. C'mon now.
4. Extremely high wealth concentration has historically been associated with revolutions and other unrest. The French Revolution comes to mind. I'll let the amateur historians here argue over causality, but it's really not a road we want to go down.
For anyone who believes in the adaptive, corrective power of free markets and democratic government, increasingly extreme wealth concentration should be a concern, since it can and does undermine exactly that.
PS - I'm not implying wealth redistribution is the solution, since that's just a poor kluge that addresses the symptoms rather than the underlying problem/s. But I do think the reasons for this accelerated wealth concentration need to be clearly understood, and in some cases neutralized - unpunished financial fraud that led to the crisis, CEO pay based on board & pay consultant connections, free trade with countries that allow effective slave labor, among others.
I'm in agreement with some of your points, but not others.
The most important thing to stop the concentration of wealth taking over the government is to limit the government powers. If the government is a smaller part of peoples lives, and the economy, then capture of the government by a relatively small minority must then have a limited affect on the greater population. Power always concentrates in the hands of a few - that's always been the way. In a free society the checks and balances are there so that even if a group manages to capture power for a short time, it should balance out over the longer term. As long as there is free association, free speech and free and open voting, then these things can be corrected.
I agree that capture of the economic benefits of a company by the executive at the expense of the workers (ie, company is bankrupted) isn't a good outcome, but the fact still remains that most companies are still operating and employing people. Not every company is an Enron, the majority of the population is still employed.
Yes, using one family is a bad data point, point taken. But then just about everyone I know is better off than their parents, if you take total measures of wellbeing into account (not just monetary measures).
As for other discussions such as outsourcing - it's beside the point. You give me the French revolution, I give you England with no revolution, and just as much disparity. The 'revolutions' were a giant waste of time and lives at any rate, and were as much to do with lack of control over destiny as much as relative wealth. In any democracy a revolution isn't going to happen while the polling booths are still taken seriously. Someone might lose their political head but not their actual head.
The problem with arguing against wealth disparity is that you can only end up arguing for wealth distribution, which generally ends up making things worse for everyone overall. And most people make the mistake of introducing the 'fixed pie' idea of wealth into their thinking at some stage.
Again it comes down to 'it's the worst system around, except for all the others that have been tried'.
'The most important thing to stop the concentration of wealth taking over the government is to limit the government powers.'
Completely agree. Power corrupts, and absolute power corrupts absolutely. The best way to defend against that is to distribute and decentralize power as much as possible. The original intent of the Constitution. A nice fringe benefit is that that also creates more agile, adaptive organizations, as the military and most modern businesses can attest.
Unfortunately, the reality is that the US government is massive and top-heavy and growing, and it doesn't seem anyone is able to change that. I personally don't think the politicians are even in control of the government anymore, rather the massive defense, security, and other beauracracies, combined with corporate pigs suckling at their teats and funding the entire political process are.
'In any democracy a revolution isn't going to happen while the polling booths are still taken seriously. Someone might lose their political head but not their actual head.'
I didn't mean to imply a revolution would happen in America, I don't think that will be the case either, at least not a full scale violent one. But lots of people are nevertheless pissed off and feel like they're getting screwed. I don't know where that will lead.
'The problem with arguing against wealth disparity is that you can only end up arguing for wealth distribution,'
Not necessarily. Things looked better in this regard 30 years ago. Something changed. Or either it's the nature of the system. Either way it's worth understanding and devising more sophisticated solutions than wealth redistribution.
'And most people make the mistake of introducing the 'fixed pie' idea of wealth into their thinking at some stage.'
True, it's rather unfortunate that even in this day and age so many don't understand how wealth is created and steady economic growth achieved.
> "Extremely high wealth concentration has historically been associated with revolutions and other unrest."
The truest statement of all. American history books would glorify the American Revolution as a battle against tyranny for freedom, but above anything it was a battle against extreme economic exploitation.
Just like the French Revolution... just like the Russian Revolution... just like the Chinese Civil War...
The rich are digging their own graves. No amount of economic power will hold back a sea of desperate, furious peasants who have nothing left to lose and every desire to see your head on a stick. I'm not looking forward to that mess.
above anything it was a battle against extreme economic exploitation.
The Crown's North American subjects were the richest, most lightly taxed group of polities on Earth, the Crown's British subjects the second richest, most heavily taxed.
The American Revolution could more accurately be called the War of American secession; substantially the same people were on top in NA at the beginning and the end. The American Revolution was a different creature to the French and British.
Oh please, get a fucking grip on reality for fuck sake. Those populations starved for years under insanely despotic regimes.
Today even poor people have too much to eat (look at obesity rates) and leave tvs behind when they loose their house cause it isn't worth taking with them. Your computer would have been worth fighting a war over 200 years ago.
To suggest that we are anything close to a "sea of desperate, furious peasants who have nothing left to lose and desire to see your head on a stick" while the peasents have access to better food, medical care, running water, communications, transportation and entertainment that the Sun King ever dreamed of shows how crazy that argument is.
They have access to Big Macs, they are one of the cheapest foods ever. Do you think anybody would have cared about that cake remark (which she never said) if they really had eaten cake instead?
> But I do think the reasons for this accelerated wealth concentration need to be clearly understood, and in some cases neutralized - unpunished financial fraud that led to the crisis,
I'd agree, but the good folks in MA just re-elected Barney Frank.
Govt caused the housing crisis and the credit crunch, so if you're arguing that govt will fix it, you get to explain why things will be different this time.
'Govt caused the housing crisis and the credit crunch'
An assertion without proof. If you want to have this conversation, you have to prove or at least support that assertion first. It's a GOP talking point, not an axiom.
Securitization was encourage by govt action. The monopoly on bond rating was also govt action. The bond insurance that was used to turn risky assets into safe ones that banks could hold to meet their capital requirements was yet another govt creation. (Govt wanted regulated institutions to hold such securities to increase the demand and thus stimulate the supply.)
Govt also "encourage" banks to make housing loans that they wouldn't have made otherwise by making such loans a condition of doing other things.
And then there's "encouraging" banks to hold fannie and freddie stock by giving it special treatment for the purposes of capital reserve. That pretty much guaranteed that any problems at fannie and freddie would poison the banking sector.
And let's not forget that fannie and freddie were lying about the loans in their portfolio and in the market in general. Everyone was doing their risk analysis based on fannie and freddie's numbers, which were wrong.
Then there's the small matter that fannie and freddie set a govt guaranteed price level.
The housing market is subject to govt action at so many points that it's absurd to argue that govt action is not responsible.
As far as parties go, I didn't mention Dems or the GOP.
If I had, I'd have pointed out that dems were more active in this, but that repubs were happy to help "encourage" home ownership.
"Peter Lindert is an economist at the University of California at Davis and one of the leaders of the “deep history” school of economics, a movement devoted to thinking about the world economy over the long term—that is to say, in the context of the entire sweep of human civilization."
My intention was not to imply that Ayn Rand's philosophy is the universal truth, though I find it very logical. My intention was to say that the author, who refers to Rand in the opening paragraphs in a manner suggesting philosophical opposition, goes on to make a weak argument. If the author was really familiar with Rand's work (which the reference implies), she (the author) would hardly lump all the rich under the same common denominator, without consideration for the source of their wealth (ability vs. privilege), and conclude that they are all awaiting the same grim fate - turning either into victims or dictators.
"Federal Reserve Chairman Alan Greenspan: iconic libertarian, preeminent defender of the free market, and (at least until recently) the nation’s foremost devotee of Ayn Rand. When the high priest of capitalism himself is declaring the growth in economic inequality a national crisis, something has gone very, very wrong."
The above paragraph suggests that the author is aware of Ayn Rand and disagrees with both her (who was not libertarian) and the libertarians. Then the author goes on to imply that the free market is responsible for the rising income inequality and to put all the rich under the same common denominator, with no regard for the source of their wealth (note how many names are cited and the widely varying reputations of the businessmen in question). Ayn Rand is very explicit on the distinction of gaining wealth through thoughtful and productive effort on the one hand and through special privileges on the other. It is this observation that the author has ignored.
Second, the author concludes that "the lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth", so they must choose one of these options. This message ends an article that would constitute a weak response to Ayn Rand (if the article was meant to be one). It sanctions a systems that says: the rich, no matter how they got to be rich in the first place, should either abuse the rest of the population, as they often did in feudal times, or will have to see their property seized by force, as it is done in socialist and communist countries. Otherwise, they cannot survive. Well, that's a very dangerous proposition for individual rights.
Rich people already have power. Trying to minimize their political power, in favor of a more "democratic" system, is just denying the reality that the rich are powerful. If the government antagonizes rich people, the rich will fight back economically until they get what they want anyway (with lots of collateral damage). On the other hand, if you give the rich political power to begin with, you are merely acknowledging that they have power. Then they can wield it more effectively, and (Ayn Rand hopes) society will be better off.
Edit: Also, income inequality is no big deal if the rich aren't stepping all over the poor. As the article points out, the super-elite in Shanghai haven't stopped the middle class in China from exploding, and average income is growing strongly despite the financial crisis. The super-elite aren't hurting anything.
You know I've wanted to read Atlas Shrugged for a long time but I can't find a copy that isn't in microscopic brain-hurting print and crappy paper. Any ideas?
The super-elite aren't hurting anything - in China. In that article the author draws a connection between the faster-than-expected recovery in wealth of the American-super-elite vs. the still struggling middle and lower classes. This connection suggests (but certainly doesn't prove - not by a longshot) that the super-elite are affecting the economic recovery of the non-super-elite.
