Some consolidation is natural, but a huge part is caused by mergers and acquisitions (M&A) fulled by Private Equity. The M&A benefits the shareholders of participating companies at the expense of consumers, employees, and other companies.
Monopolization almost certainly is occurring. The left usually cites weak antitrust enforcement. The right usually cites regulatory barriers that make it expensive to compete without economies of scale. I actually think both sides are at least partially correct.
However what almost everyone overlooks is the demographic transition. The US, along with every other developed economy, is significantly older today than it was 40 years ago. And the fact of the matter is that an older work force almost certainly leads to an economy with larger, older firms.
Most entrepreneurial activity is disproportionately carried out by younger people. Young workers are much more likely to work for small, young, growing firms. That makes sense because they have longer horizons and can take more risks. Older workers, who have higher fixed expenses and are closer to retirement, prefer the stability of a stable, large company with low employee turnover.
Macroeconomists who have attempted to quantify this impact, generally find that the average firm age in an economy linearly increases with the average worker's age.[1] Since older firms, tend to be larger, slower growing, and less competitive, it's not wonder we've seen an increase in monopolization.
> The left usually cites weak antitrust enforcement.
Personally for a left view I would add cash/capital accumulation. It's kind of the same thing happening for individuals with wealth and real estate. Regulation is failing to bring the balance between the revenues of capital (which are exponential unregulated) vs the revenues of work. At one point you can't even compete anymore if you start from scratch. Competitors with billions in cash can pretty much "kill" any new business they want.
Firms that are monopolistic are less competitive, larger, and slower growing. Reducing monopolistic tendencies increases capital growth, competition, and reduces average firm size. This is well understood economics.
Monopolies arent' some hypercompetitive ultra capitalist battlespace, they're fat and happy, and the most impactful teams they employ are lobbyists and policy folks in DC. Look at like, comcast and what they did with the FCC.
Those attributes stem from them being a monopoly, they don't create it in the first place. He's questioning the implication that being less competitive and slower growing would allow you to obtain more of a monopoly.
The large, lumbering not-yet-a-monopoly has no method to increasing market share other than buying smaller competitors; thus leading to monopolization.
Yes, regulatory capture is a problem, but it's somewhat ludicrous to make a blanket statement like "government is the tool used to suppress competition". It's one tool in the toolbox, perhaps a significant one, but hardly the only one.
Health care is another example. The government empowers the AMA to strictly control the number of seats in medical school, thereby restricting the supply of doctors and competition.
Licensing, permits, etc, are all ways to limit and prevent competition.
I could ask any surfer on the beach right now and even they'd be able to identify that you've now entered a kind of argumentation where, if government is at all involved, government is the problem, no matter how it's involved.
"The AMA strictly controls the number of seats, and the government has a medical licensing process, therefore the AMA's actions are the government's fault."
Again, I do not deny that governments have been used as a tool for monopolies to form, but it is dubious that they are the only tool used by bad actors, nor is regulatory capture the only method for anticompetitive behavior.
You didn't, but your phrasing certainly implied it. "The government is the tool used to suppress competition" is a very stark statement. Next time, say "a" or "one of the" tools.
A simple alternative ingredient could be that firing (read "punishing") employees on a small scale has a large chilling effect. Relaxing labor laws/job security may have a much larger long term effect. If I ask for a raise, will I get fired first either way?
You need government to build an ISP in the first place. No private company would be able to negotiate with that many land owners to build out fiber on a large scale.
And once a company does build a network, absent government regulation requiring them to let other companies use it, the existing infrastructure is an enormous barrier to entry.
Telephone lines were almost always built following existing public roads or private railroads (that were built with government assistance and government land grants) even in the early days.
There is no history of a successful, large scale infrastructure project built without government assistance. Either directly or due to the fact that much of it was built on government land.
(unless maybe you consider some case where private infrastructure was built in one large area controlled by a small group of owners, but that's basically just a government by another name and doesn't apply to modern America.)
railroads were given the go-ahead by the federal government back when they were built, because the federal government granted the land to both sides of the rails to the rail builders (if they built it).
It's hard to argue that the railroad builders were not given "assistance" (the granting of land).
Those were all local municipalities, responsive to their electorate - if the surfers in a community wanted Google fiber huts, they could elect councils who would allow them.
I think it's reasonable that people should have local control over their city environs, even if it means a multinational like Google can't come in and build new infrastructure. It's not a "will of the people, unless Google wants to build fiber huts everywhere" kind of society. Maybe they should just go surfing instead.
>Those were all local municipalities, responsive to their electorate - if the surfers in a community wanted Google fiber huts, they could elect councils who would allow them
This is an idealistic line of thinking, but as a practical matter, is completely untrue. Essentially 0% of America understand their county commissioners' stance on ISP competition, myself included. No one campaigns on those things.
It's a lot like saying that electorates are responsible for police violence because sheriffs are elected officials after all.
> The government is the tool used to suppress competition.
Oh? Network effects don't exist? Economies of scale don't exist? Dumping doesn't exist? Branding doesn't exist? The only kind of moat in existence is regulatory capture?
Regulatory capture is real, but it's one of many tools that suppress competition. I can think of one single solitary competitive analysis I've been party to where we decided it was the largest factor.
If only fixing anticompetitive markets were as easy as "drowning the government in a bathtub" we'd have solved this problem ages ago.
"the tool" meaning it was the first tool they reached for, not the only tool.
For example, if I said "Star Wars" was "the movie" to see in 1977, I obviously did not mean it was the only movie.
If I meant it was the only tool, I would have written "the only tool".
If you need to insert the words "only", "always", "never", "100%" into my words in order to argue, you should reconsider the strength of your argument.
Nah, I heard what you said and you said what you meant.
Even so, I'm happy to engage with your new argument: that regulatory capture is the first tool companies reach for to unfairly suppress competition. That's still wrong. Regulatory capture is slow, unwieldy, and opportunistic. The first tool a company reaches for is typically either M&A or dumping.
When WhatsApp was getting popular, did Facebook respond by crafting legislation with a plausibly deniable dual purpose, cultivating connections with campaign contributions and a held-open revolving door, wait for a wave of public sentiment that could carry their law up the priority list, through congress, and onto the books, and then sit back and pray that the resulting wind blowing at their backs and in WhatsApp's face would tip the balance enough to keep them on the throne? No, of course not! Facebook bought WhatsApp. Where there were two competitors, a free market exchange happened, and then there was one competitor. See also: banks. Yeah, they need FTC approval, but the free-er the M&A market, the easier it is for competitors to just merge together, and the more anti-competitive the result.
As for dumping, you'll often hear people blame legislation for the big ISP monopolies we have. Certainly there are no shortage of legislative failures in this space, yet it's not illegal to start an ISP. If you set out to create an ISP of your own, you'll probably be able to find a municipality willing to deal with you. The actual trouble will appear when you start selling your service. Your first few customers will gladly switch in order to take advantage of the better deal you're offering, but once the regional ISP monopoly notices the churn, suddenly you'll find that all of your prospective customers recently received a promotional discount from the monopoly and are no longer interested in your service. Then you go out of business, and customer rates go back up. It wasn't a law that kept you out of the market, it was the fact that your competitor had a larger war chest.
In both cases, more market freedom = less competition. Certainly, regulatory capture also exists and is also a problem, and in that case more market freedom = more competition. In some cases, it's even more complicated: economies of scale create genuine value by amortizing costs across volume, but they also create an anticompetitve moat. They have good aspects and bad aspects that are inextricably linked and inseparable from each other.
Still, focusing exclusively on regulatory capture will lead you to misdiagnose most markets. The cure will appear obvious, but where your diagnosis is incorrect, it won't work.
Government has funds, land, resources and tons of attention. A competent business man should be able to forge large numbers of jobs out of this. If done on sufficient scale elaborate services and infrastructure can be build that gives corporations a huge advantage. These jobs can remove people from the labor pool and create a kind of cabin in the woods "exit" strategy that will eventually drive up wages and the value of training/education.
The situation is far more nuanced. If you said instead "The government can be a tool used to suppress competition," I think most would agree with you.
The distinction is that there are plenty of other tools companies can use to suppress competition, and Government also can be used as a tool to encourage competition.
A strict black and white view point that more government = less competition is absurd.
> The US, along with every other developed economy, is significantly older today than it was 40 years ago.
Looking only at average age doesn't give a full picture, how does this square with the Millenials recently becoming the largest generational cohort? By your logic shouldn't there be a massive wave of young growing companies.
> The US, along with every other developed economy, is significantly older today than it was 40 years ago.
As employees are squeezed out of profit, life gets more expensive and it gets harder to have kids.
Watching Super Size Me 2 you realize that the same thing happened to the chicken industry. It’s frightening. It’s like we have a democracy (so far) and under that a lot of smaller authoritarian organizations that are hard to notice or dismantle. Some of the farmers were basically slaves, in huge debts to these companies way of running things. Unbelievable.
And its growing ever more unavoidable in daily life for anyone trying to live.
Pretty much everyone is becoming subject to these authoritarian regimes (corporate structures) as they invade and carve away at our democracy through financial influence, regulatory capture, etc.
This should be actively fought every step of the way. We don't have to allow any corporation to do anything, they belong to the people who believe and give them power. Everything can be taken away, and everything can be burned.
Is there a way a startup could set up this business model, or would it necessarily require all the tax and legal implications of a publicly traded company?
The libertarian argument generally goes that competition will keep them all in check, but history has shown again and again how it doesn't work in the general case.
If you want to see what small government/strong corporate control is like, look back a century in American history. Corporations controlled much more of American life than they do even now, and the 20th century regulatory state is all very much a direct response to all that.
Say a group of people unionized and formed a collective coop org.
Workers would get paid fairly who were employed by the co-op and would be members of the union.
The union would create it's own credit union and financial instruments and be a mesh of a CU and old style savings/loan.
The CU/Bank aspect would also invest in real estate (section 8 housing mostly and other but try to keep rents down wherever it has rentals and keep rent competition in check).
$$ brought in would be pooled, and as we grew to a certain size we'd launch our own health insurance company. All $$ from investments/real estate/etc would go towards the health care, premiums would basically be collective medical costs - income from investments / members of union, and members could choose to pay more for members w/ more financial burden.
Eventually we could start other businesses and encourage our union to ONLY use those businesses that we own as a co-op. ISPs, Amazon-clone, Google alternative, etc...
Eventually we gain $$ and power to start building or buying hospitals of our own. We also invest in our own generics drug company and maybe even a research company to design new drugs. Everything we do we deliver at cost or close medical wise. When we have surplus at the end of the year members vote whether we should diversify it into more investments, pay out dividends to all union members, or apply it to the medical fund, etc....
Eventually we could expand beyond our co-op and offer to be the 'benefit plan' for states' medicaid/medicare, as well as employer plans. The goal being have better quality and lower costs for employers, states, and members.
Eventually we get state $$ on top of union dues to cover the $$ needed for our m4a plan. If we're constantly in the green, we could start looking at a UBI plan.
The concept is a marriage of capitalism, unions, socialism, libertarianism. It's based on the concept of dual power. Eventually you get enough power that you weaken the healthcare lobbies (by taking their business) so that the $$ and political will to thwart you isn't there because they can no longer enrich politicians because they're cash on hand keeps dwindling, eventually we'd have more $ to lobby with than they would.
Oh, I am all in favor of unions, and you're absolutely right. It's a tragedy, yet an unsurprising one, that business co-opted government to restrain union power the way it did.
In fact, in the "small government" vein, I'd suggest repealing Taft-Hartley immediately. The biggest immediate benefit to repealing that would be that unions could once again freely conduct wildcat strikes.
But that's not what libertarians generally think about when they think "small government," they think of ending social programs -- at least, in every conversation I've ever had with them. I've never had a one-on-one conversation with a libertarian (and I've had quite a few, thanks extended family) who thinks unions are a good thing or a way to balance corporate power.
Big difference though between 'libertarian party' and libertarian socialism. I'd support M4A, I've just given up hope through gov't sanctioned socialism, so let's find a new path through unions and combining forces of the many, creating some huge collective. W/ the internet it doesn't need to be local anymore.... it'd kind of be like those religious health share programs, but no religion needed.
This is an argument a lot of non-authoritarian socialists make: democracy only governs the few hours when people are not sleeping or at work, so a deeper, fuller democracy would include running workplaces democratically as well. Whether by employee-elected boards, cooperatives, democratically run unions (a necessary distinction), or some other form of collective control, that the consent of the governed is a question for all situations in which people find decisions about their lives being made.
Democracy is not an efficient way of running a business. Look at the multi-trillion dollar deficit as an example. Workers are incentivized to choose themselves over the health of the company or the customer.
Also, people overwhelmingly would rather exchange their stake in the company for the equivalent value in cash. It's only when the company's valuation skyrockets when they retroactively declare this to be unfair.
>Democracy is not an efficient way of running a business
Have any data to back that up? Comparing a democratically run corporation to the US government is a non sequitur. Outside VC there is no business model that will allow you to run at a loss for decades. So it's a scenario that's not even possible hypothetically.
Somewhat anecdotal but there is a Worker Co-op in Spain, Mondragon, that's been a very competitive corporation for over 50 years. It can clearly work long term and it leads to better outcomes for employees and the communities they work in.
Part of this is that VCs as you describe. It doesn't matter if a democratic social media company is more sustainable than Facebook when Facebook receives a half a billion dollars in VC funding to patch up its problems.
Anecdotally, I hear that Ford's biggest problem right now is the union's resistance in adopting the Toyota production system. If I were a factory worker, I wouldn't want to change the way I do things just so the shareholders get richer. That's a perfectly reasonable attitude to have, but it does place Ford at a disadvantage to car makers without unions like Tesla and Toyota.
For that business it might not be a good formula but public education seems to be the biggest thing missing. I've talked with employees who could very very easily run the show themselves if they simply got organized and made a [much smaller] bid on the contract their employer was bidding on. They also know their managers share in the huge profits, drink coffee all day and never show their face(!) If the people doing the work ask for anything there will be a huge deliberate delay or it won't be done as a reminder not to ask for things. Do it again and you will get punished. They are on a first name basis with employees working far away because of the sheer amount of improvisation. If you need widgets you will have to get them from someone.
The employees all know they could run the business but they cant picture themselves doing it. Their arguments are "It's to complicated" but struggle and fail to explain how. It might still not be a good idea but that they draw a blank is the ultimate hurdle for now.
what if all workers were shareholders and the 'union' was a subsection of the company like an autonomous entity w/in the company that still had some voice but that ultimately was ALSO about their bottom line so that their shares go up as do the shares of all other employees?
I often hear people complain about others making money in the stock market, so I suggest they invest in stocks, too. They respond saying it's too risky.
Well it literally is. If they are talking about Wall St. bankers they have no way to replicate the results of those people. Wall Street can make poorly thought out multi-trillion dollar bets on housing bonds and when they go bust they get bailed out and still get their Christmas Bonuses. There is no similar mechanism to protect a non-institutional investor from similar levels of risk.
The problem is you need capital to begin with, and the median American barely has enough on hand to cover an emergency, nevermind build significant investments.
Many of us might be fortunate to have well paid jobs, and the ability and capital to invest, but it's understandable how someone could view the ability of those with capital to generate further capital without any labour to be unfair.
The median American buys new cars, so they could by a used car and invest the difference.
I've known many people who didn't have any cash on hand, yet lived high on the hog with expensive clothes, new cars, and nice houses. They didn't have any cash on hand because they spent it as fast as possible.
If Earth was government by one big country, you'd have solid point, but most Americans would prefer that the next trillion dollar companies not all be based in India and China.
Also, what's best for the workers isn't necessarily what is best for society. Globalization is anti-worker, but it helps the consumer with cheaper prices, the company with extra profits, and developing countries afford what developed countries take for granted like antibiotics.
The parent comment is making a universal statement, and so it would hypothetically apply to companies everywhere, including in India and China. Perhaps then there would be a world without trillion dollar companies, or maybe the workers can figure out a way. The Mondragon Corporation is a tens-of-billions-dollar workers cooperative [0], for instance.
This line of discussion is also making the assumption that what's best of workers and what's best for companies are necessarily in conflict, which is rather silly given that if a company goes under, the workers themselves are in trouble. There is at least one example I can point to where a workers union forced management to recognize the need to be more economically competitive. [1] Also, it makes the assumption that management and/or shareholders necessarily know best for a company's future, and there is no shortage of evidence to the contrary, some even recent. [2]
> The parent comment is making a universal statement, and so it would hypothetically apply to companies everywhere
I don't find much value in hypotheicals. Even the far right Ben Shapiro admitted he would support UBI if automation makes most jobs obsolete.
There are smart workers and dumb shareholders, but at the end of the day, people respond to incentives. Audi workers would never agree to convert their factory to EV had Tesla not already proven that EVs are something consumers actually want. This isn't a bad thing, but it comes with a cost. Tesla was able to ramp up production as fast as it did because they didn't need to run every decision past a union.
Your opinion doesn't change the fact that your response was invalid. You are responding to a normative, idealistic statement about universal values with your own slightly more concrete hypothetical. A misapplied exercise in practicality.
> Audi workers would never agree to convert their factory to EV had Tesla not already proven that EVs are something consumers actually want.
That seems like a hypothetical without basis. One doubts that General Motors assembly line workers were the ones who killed the EV1.
> Tesla was able to ramp up production as fast as it did because they didn't need to run every decision past a union.
There are some smart CEOs and there are dumb ones. Who's to say that the incentives given to traditional management schemes are truly correct? Businesses fail all the time. Startups, in particular, fail all of the time, and there are no shortage of egregious examples of boneheaded management decisions, or of shortsighted shareholders. Pointing to a Tesla and Musk, or to an Apple and Jobs, is simply survivorship bias.
> You are responding to a normative, idealistic statement about universal values with your own slightly more concrete hypothetical.
What's your point? I obviously don't think the purpose of life is to maximize shareholder value. I'm merely illustrating where I find such idealism falls apart. I could be more specific, but I'm not trying to write a book.
You don't need to be a Nobel economist to know how people respond to incentives. An average family person doesn't want to risk their time, money, and health on helping to pivot Audi to a company that makes bleeding edge EVs. A company that is truly revolutionary has to focus as much energy as possible on delivering or some other company is going to do it first. That's why most successful startups are very cult-like. This comes at a cost to the worker and leads to scam companies like Theranos, but the alternative is that you're left behind.
> An average family person doesn't want to risk their time, money, and health on helping to pivot Audi to a company that makes bleeding edge EVs.
That article is from 2017. EVs were already more or less an accepted mainstream technology, even though certainly not the majority of the automotive market yet. You're making it sound like it's as difficult as it was for Tesla back in 2003- the union was simply demanding Audi management to respond to the needs of the market and expand its product line, for the betterment of the company and to protect their livelihoods by staying competitive. Audi building EVs does not require, as far as I know, a pivot.
Theranos is also a good example to mention. Perhaps if it was a worker-owned co-op or a union there, some sort of countervailing force against both managerial and investor incompetence, that fiasco could have been averted. Perhaps with a system in place to provide support against those powerful forces, and someone sympathetic to listen to whistleblowers, Ian Gibbons would still be alive.
It's all well and good to lionize Randian revolutionary lone geniuses, but the creative destruction they tend to wreak in their wake tends to fall upon a lot of the little people. And worse off, these geniuses at world-changing companies are few and far between, and far outnumbered by copycats and wannabes who cause more damage through imitation. We have checks and balances in our societal governance; why not likewise in our corporate governance?
I keep [half] joking to my managers that they should spend a few days on the work floor doing those jobs they argue so easy about. Not doing so makes it impossible to prioritize their own tasks properly. There is some child like joy in picking tasks by what they feel like doing.
As we've seen in recent cases, corporate management has become incentivized to choose the interests of the investors over the health of the company or the customer or their workers, making short-term decisions that look good in quarterly reports.
It seems that all the forms of collective control you listed are perfectly legal. If the majority of workers prefer workplaces like that then those places will thrive.
What you are implying though, is that the government forces all workplaces to conform to your desired control scheme. So fuller democracy equals government limiting choice, as long as it is your desired choice.
That's a bit like saying "Here we are in 1650 under an absolute monarchy. The people are the majority, they could topple our illegitimate hereditary government and make it a democracy, but they haven't done it yet because they certainly prefer things this way".
Not at all. If the people tried to topple the monarchy, they would be actively in conflict with the military. I am pretty sure you can start a co-op without risking conflict with the military.
Can you tell me the exact things the government is preventing people from doing in this case?
Another metaphor: "Linux is open and free, it can be a major desktop OS if everyone just switched to it, but because they haven't they obviously don't care for it."
Not to go off on a tangent but what you said is true, most people don't care about Linux...or Windows, or MacOS. They have a general apathy to whatever desktop OS they use, with a slight bias to whatever they used last. People just want to use the applications they want and need.
Perhaps the same statement would apply to workplace control. Most people have a general apathy to their workplace governance and only care about their pay and benefits.
I really don't know how you make people care about things, but compelling a change that people are free to make today by government force is last on my list of things to try.
My overall point is that there are many examples of the dominant players in a market being inferior in certain ways compared to more obscure choices, and there are different reasons for it. Cooperatives and alternative corporate governance models are simply less well-known, not unlike the average consumer hasn't even heard of Linux. They don't know the benefits involved in these alternate models. You can extend to many other categories where there are superior, but obscurer, alternatives that come with trade-offs.
There's also situations where dominant players make it difficult for smaller competitors to survive. In a loose analogy, Microsoft's monopolistic strategies in the '90s can be compared to the past decades' weakening of laws protecting unions.
Strengthening unions, or rather reversing the weakening of unions in this country, doesn't really require oppressive government force. That's in line with the misconception that considers America's sickly unions- who are an absolute paper tiger at this point in history- to have any considerable strength.
In terms of not crashing, fewer security issues, no telemetry, or having to pay money for it, sure. Point is it's an alternative that could potentially serve the needs of some users better than Windows does, but will likely never be considered by them just because it's almost unknown to the general public. I'm sure better examples exist.
Sure, but the point is that it's possible for a market to be dominated by a brand- or, in our original discussion, by a way of thinking or governing- that might be inferior to a lesser known choice.
There are a good number of hackers who would consider Linux superior to the dominant OS's, which is why I made that arbitrary comparison.
>I really don't know how you make people care about things
To follow your tangent, I actually did a little bit of not terribly formal research on this at one point (maybe about 15 years ago now), calling up a variety of people in different volunteer organizations and asking them about their background and motivation for their volunteer work.
Generally, the anecdotes I gathered all roughly corresponded with their volunteer work tying in in some way with other facets of their lives.
For example, a man who had received books in prison from a volunteer organization joined that organization after he got out because he believed in the value of what they were doing. A mom volunteered on an organization that arranged activities for kids, which hers participated in. That sort of thing.
My takeaway was not terribly revolutionary: you can't -make- someone care about things, but their circumstances will increase the chance that they will care about related things.
I don't know - there are cooperatives - it is not like you need to risk your life to work at one. Somehow they are not that popular. There are also partnerships - which are kind of close to cooperatives, when they employ only the partners and for example outsource office cleaning and stuff. In some industries they do pretty well - for example in law.
Why cooperatives do poorly? Maybe people usually are not very good at governance, that's understandable, you can have trade-offs - slightly worse pay for better working conditions, or better dignity. Does it work like this?
I don't think you have evidence to back this up. The reality is that cooperatives are very rare, so 99% of people don't even have to option to work for one. It's probably not even clear to the vast majority of workers that such a thing is even possible. This says nothing of the extreme aversion to anything even remotely resembling collectivism in the US.
Maybe they're less popular because they're less well-known, their benefits and downsides are as well, and so they're less likely to be considered by people incorporating a new business? Or maybe they're less advantageous to the founders so that's why they're simply not pursued?
I have seen economist claim that cooperatives tend to be pretty inflexible. Slack was a communication tool for what is now a failed gaming company. If the company was owned by game developers, artists, and story writers, how many of them would have voted to sack themselves and pursue a chat application?
In my limitied view, this seems to be one of the biggest obstacles. I'm heartened to see new cooperative investment funds coming online, like Evergreen Cooperatives (http://www.evgoh.com) and accelerators, like Start.coop (very new)
>If the majority of workers prefer workplaces like that then those places will thrive
The majority of workers have probably never even heard of worker coops and those that have probably imagine it to be related to socialism and therefore un-American.
>So fuller democracy equals government limiting choice, as long as it is your desired choice
So more democracy actually == more authoritarian. Astounding logic.
So people are dumb, they just need to listen to me.
That is the lazy way. If people are uniformed, we need to do more to inform them. People have power to choose where they work and where they spend their time and money. No one needs to come in and force Amazon into becoming a co-op. If top talent wants to work for co-ops and consumer prefer to get their good from co-ops, Amazon will adapt or die.
There is literally no one advocating for existing corporations to be converted into co-ops. People are saying there should be more co-ops in general, but that can be promoted by creating an environment that's more friendly and attractive to founding co-ops. Or educating people to promote the concept, which is largely unknown to the public. Bringing up the possibility of government force in the discussion is cheap scaremongering. It's like screaming "communism!" in a practical discussion about tax policy.
Though the concept of Amazon becoming a co-op is interesting. One wonders if a majority of Amazon employees organized and wanted that, if there would be even any legal avenue for them to do that. They probably wouldn't have enough shares to make that change from within.
This comes up a lot, nobody is literally chained to their desks. Democracy in the workplace comes from voting with your feet and taking another job at another company. It's not perfect, particularly for lower income people, but it's also not slavery and generally the arc of worker rights is improving through time.
You could make a case that some of the current anger in the united states is because COVID's destruction of the economy has removed that freedom to switch jobs (as the jobs have gone) demonstrating how important it is.
> It's not perfect, particularly for lower income people...
I don't think many minimum-wage retail or service workers can just "vote with their feet" and easily get another job, especially if you don't consider major changes in location and hours to be a non-starter.
For folks with kids, or who depend on public transit to get to work, "up and moving" isn't really an option. If you're one missed paycheck away from eviction, bankruptcy, or arrest due to missed fines or court fees then you can't play "hardball" with your employer.
Saying the arc of history improves overall cruelly glosses over the reality today for millions of Americans.
> Saying the arc of history improves overall cruelly glosses over the reality today for millions of Americans.
No it doesn't. Medical understanding and technology has gotten way better over the centuries, and people still die of things that could have been handled. Acknowledging progress doesn't imply perfection, but progress.
Let’s say I work at Kroger. I don’t like the way I’m treated, so I quit.
Now the remaining grocery stores I can work for owned by Albertsons or Amazon. What kind of choice is that?
Pick any other industry and you’re likely to find similar problems.
It would be really interesting to see what mandatory democratic corporate governance might look like.
Or, perhaps, fixing union regulations so that unions don’t have a bunch of downsides for the employee or other regulatory issues that seem to have directly led to their decline.
The fundamental problem is that there’s less demand for unskilled US labor than there are unskilled US laborers looking for work. Fix that, and most of the issues people are worried about go away.
That likely has to be solved at the federal or international government level.
I don't think, "we've mostly gotten rid of actual leg irons" is the paen to worker's rights you think it is. To the extent slavery was outlawed, that happened 150 years ago. In many ways, things have gotten worse for the average worker since that era. (If you don't believe me, read Lincoln himself. [1])
Fair conditions grow out of equal power. But a fundamental problem with managerialist capitalism is an imbalance of power that will never be solved with vote-with-your-feet slogans. You have one job. A CEO has tens, hundreds, thousands of employees. It's always easier for a boss to fuck you over than it is for you to push back. Individual action is not enough to fix that.
Personally, I'd love it if everyone could easily vote with their feet. I think there's more overlap between certain libertarian and socialist visions of the economy than most people realize. In our current system, there's a lot of factors that prevent people from voting with their feet: healthcare, location, switching costs, and availability of jobs being chief among them, but also newer phenomena like non-compete contracts.
Yes there are other states that have similar limits, and many other states that don't.
>and in all of them if they are determined to be unreasonable in court
That's a tautology. A court can refuse to enforce any contract for many reasons. The problem is that what may be considered unreasonable in California might not be in Georgia.
It's also not super helpful for someone who can't afford a lawyer to fight it. Or for someone who can't find another job because companies don't want to deal with the hassle.
Courts tend to take a dim view of well-monied people bullying the not-monied in courts. Larger companies are well aware of this, so are their employees, and the companies get sued constantly by those employees, and the companies usually settle because it's cheaper.
Don't worry, it isn't true in theory either. Courts don't give a shit about that sort of high-minded honorableness.
Why, the existence of anti-SLAPP laws comes directly out of courts not caring how they're weaponized by well-monied people bullying not-monied people. That's literally the point of anti-SLAPP laws.
GP's claim makes no sense with even the dimmest awareness of the court system.
> it's so completely untrue from a practical perspective
Poor people successfully sue businesses ALL THE TIME.
Besides, just last week a friend of mine told me that the former boss of one of his employees threatened a lawsuit over a non-compete agreement. He simply told the former boss "see ya in court and you'll be paying my legal bill". That was the end of that.
Not only are most of these just bluster, it's not profitable to sue poor people, since poor people don't have money.
I think the cause and the effect is reversed. There is more money for investment now than ever before (due to an aging population, and increased inequality) which leads to both a low/zero interest rate, and lots of money for PE.
If it was an artificially low interest rate we'd see wage inflation, as opposed to just asset inflation.
Interest rates are artificial. IMHO they are currently way too low. I dont even think the absolute rate is what affects the economy, its rate of change in interest rates that causes change. Declining rates stimulate the economy while rising ones act as a brake. The absolute level of the rates determine where money flows and inversely affects the price of big things like housing and cars. Low rates lead to inequality and hardship. These are just thoughts and observations, I would love to build a good mathematical model.
Nominal interest rates are artificial. Real interest rates (nominal rates - inflation) are not. If central banks set nominal interest rates too low you get inflation which negates the purchasing power of the borrowed money. That's what the grandparent poster was alluding to.
(The mathematical model - and the proof - for this is taught in most introductory macroeconomics courses. So is monetarism, which is the "declining rates = stimulus" that you mention.)
It's been a persistent question why the super-low nominal interest rates that central banks have set for the last decade haven't resulted in consumer inflation, and there's no consensus among experts for it. My personal theory is that it comes from the entry of China and other large developing nations into the world economy, which a.) has dramatically lowered the price of labor-intensive consumer manufacturing, offsetting much of the inflation caused by the large money supply and b.) changed the mix of savers in the world economy; Chinese people are much more in the habit of saving large fractions of their income than Americans are, which leads to a glut of savings, which lowers the real interest rate.
I think you're right that low interest rates boost wealth inequality due to rising asset prices, but they also reduce income equality because of the tight labor market.
And by artificially low I meant below the natural interest rate or NAIRU.
It's just a natural product of capitalism[1]. When you can buy a chunk of a business and own that chunk of its profits, you can use those profits to buy a larger chunk of the business, repeat ad nauseum, until you have so much money that your needs for more profit aren't satisfied by any one business, but you have enough money to perform multi-business maneuvers. Higher interest rates might make some of these maneuvers less possible in the short term, but that would just delay the problem until the wealthiest capital-owners accumulate enough money that they can put forth more collateral to get better loans.
[1] By capitalism I mean private ownership specifically, not the usual HN definition of something something markets something something competition.
I find it very disappointing that the most reliably lucrative career arc for a programmer nowadays is to get hired by a tech giant and stay there as long as possible. And the second most is probably to go to work for a company that could get gobbled up by a tech giant.
I've made a career out of small startups, and I wouldn't trade it for a thing. On the other hand, if I'd gone to work for Amazon straight out of college, I'd probably have a boat by now.
And what kills me about this is it almost seems like the big tech companies are just grabbing up engineers to no purpose. When I hear stories about what people are actually doing at larger companies, it often seems somewhere between miniscule and just plain empty. And it's not like a lot of the people telling these stories don't understand that. But they're happy enough wasting a third of their day at that salary.
Earlier this year (before COVID), I interviewed with Microsoft, as they were looking for people with security clearances to work on Azure services. I apparently passed at least one of the four interviews, as they made me an offer. However... the offer contained minimal details on what I would be working on or doing, just a vague description that it was an Azure infrastructure service team. The recruiter himself didn't have any information to answer my questions. If I were just coming out of college, I'd be fine with that level of unknown, but as someone with about ten years of experience and who knows what he likes to work on, I wasn't going to take the risk of ending up on a miserably boring project (again).
I appreciate you putting "modern" in there. We tried so hard to make it people over process. Getting things done over internal BS. Alas, that's not how it ended up for most people.
There was this cartoon about a guy graduating top of his class in a CS program and the hoopla of him being hired at a "Big Tech" firm. Then he discover that his role was basically to keep someone on a web page for a half second longer...
I worked for a brilliant but ruthless businessman at one point in my career who very openly "stabled PhDs" (his words) in the field (RF engineering / DSP). He'd give them some research projects to play with for years on end just to keep them away from the competition.
I'd guess no one's really happy being bored all day. People get into a position where they feel like their life is settled, and unless they do something really horrible 'the good life' is all but guaranteed. Leaving something like that for uncertainty will calculate out to insanity for most people, because the value of 'the good life' is either very high or people under value their chances of success.
A big problem with filthy rich outfits is that they can simply afford to do this. My two highest-paying jobs were almost sinecures. The teams were massively overstaffed, and it could be quite difficult to find productive things to work on. I spent a lot of time simply waiting, which is to say killing time.
If your goal in life is to be rich, it's not bad, I guess. If you really love doing good tech, it's stultifying.
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>There is nothing inherent in "basic economics" that postulates that fulfilling or fun jobs pay less.
Basic supply and demand. Fun jobs mean more people apply to the job. The employer can pick the cheapest employees. Employees can get an edge over their peers by lowering their salary expectations because they value the job more than the money.
I honestly don't even think that this is a bad trade off. There are lots of jobs where you get access to equipment that you could never afford even if you had a higher salary. Think of working at a company like SpaceX or doing research at a university.
> There is nothing inherent in "basic economics" that postulates that fulfilling or fun jobs pay less
It's called 'psychic income', and it is something that people will accept, to some extent, as a substitute for cash comp.
This is widely cited as the reason that teachers earn less than other professions, and why garbage collectors earn more. There are a lot of people who enjoy teaching, and not a lot who enjoy garbage collecting.
That's true but the OP just destroyed the only supporting evidence you provided for your point. It might be that teacher's salaries would be below $37k if it didn't require credentialing, but that's not the case, so it's not evidence.
I never said that teachers should make less than garbage collectors because they enjoy psychic income. These two jobs are not generally substitutable in the eyes of potential employees, since they are so different. Sorry if I gave the impression that any job that enjoys psychic income would pay less than any other job — certainly this is not true.
For example, college professors receive psychic income, but they make much more than garbage collectors. They make less than stock brokers, which is another career option available to people who can get PhDs, in general.
>Sorry if I gave the impression that any job that enjoys psychic income would pay less than any other job — certainly this is not true.
That's not the impression you gave. You gave the impression that garbage collectors make more than teachers.
>This is widely cited as the reason that teachers earn less than other professions, and why garbage collectors earn more
Teachers < other professions < garbage collectors
I get now that you meant to say was
Teachers < similar professions to teachers
Garbage collectors > similar professions to garbage collectors
I've heard many arguments that teacher make less than X profession, so the former wasn't an unreasonable interpretation given the phrasing.
Knowing what you meant to say. I don't think garbage collector pay is good supporting evidence for psychic income. Garbage collector pays well because it is a physically unpleasant job. What's an example of a substitute job that is similarly physically unpleasant that pays less because people find it fulfilling?
> There is nothing inherent in "basic economics" that postulates that fulfilling or fun jobs pay less.
It kinda is, isn't it? The fun, fulfilling job is one that everybody is happy to do. The boring, soul-devouring job is where you need to encourage people to do it by offering more money.
this seems like basic common sense. if you have two job offers for the same salary, but one sounds really fun and the other sounds really boring, wouldn't you pick the fun one? but at the same time unless you're already pretty wealthy, there's probably a dollar amount that would make you pick the boring one instead. iterate this choice over enough people, and the "fun factor" depresses wages.
Cet. par., if doing a job involves less disutility for the worker, people will demand less pay to compensate, since pay demands will be at the breakeven net utility point. Basic economics.
Boss, I counted up my utils for the month, and it looks like I'm enjoying this new project. I have handily computed for you an appropriate rate at which to cut my pay. Basic economics demands it be so.
wow, check out this guy who figured it out. damn, never thought about that. i guess all the people who get paid alot to do fun things, and all the people who get paid shit to do horrible stuff were in my imaginiation.
Depending on when you graduated from college, that may or may not have fallen into the big company or startup bucket.
The delayed liquidity of the extremely long startup adolescence in recent years ("startups" that are 10+ years old and where almost all of the big value growth is in the rear-view mirror) is, IMHO, a big part of this.
But that's also expected, isn't it? Startups are like playing the lottery, those that win will suddenly have much, much, much more than your average person that puts their money into savings instead. But a big part of those playing the lottery will never win, and on average those who just invest their money will be better off than those who play the lottery.
Sure, what has changed over the last 10 or so years is that winning the startup lottery pays close to nothing incremental over working at a large company since most of the equity is now held by founders and late stage investors and most of the stock growth happens before a company goes public.
I think you're 100% right, but it feels to me like the odds have just shifted over time. Early on it was more like the stock market, then it was like a roulette table, and now it's like gas station scratch tickets.
I'm not saying you can't get rich off of gas station scratch tickets, but it's not the best option.
he's saying that the monopoly aspect earns more much's of money for more much's of people, and therefore it's much much more than the startup aspect is much more.
i.e. you can join a startup that is already successful (the winner has been picked, Amazon, Google, Uber, ...) and safely with less variance expect to gain more expected value than you'll on average get from trying to pick the next winner. If you say "but startups are win win" then I'll say "but he's saying monopolists are win win win"
Microsoft was already an OS monopoly by 1990, but after that is when it really started to make real money, and for a lot more people than had worked there in the 80's. Because monopolizing a niche industry is nothing compared to growing the monopoly to mainstream acceptance.
you don't have to agree with his assessment; I'm just trying to clarify that he is saying something, not just selecting a point on a gaussian.
When I hear tech giant, I think FAANG, but I'm not sure this is representative of the options most programmers have. It certainly isnt representative of the compensation at most large companies.
In addition, I think rank-and-file FAANG salaries, when discussed here, tend to get grossly exaggerated. I know lots of people working at these companies and none of them have a boat. Lots of them have roommates in cramped apartments in SF like other tech company employees. Are there some highly paid employees at top tech companies? Sure. Do most employees at these companies have vacation homes and private jets? Nope.
I'm not a historian or anything, but I've seen it ebb and flow over the years. There have definitely been periods where the best opportunities were at small, innovative businesses.
I think we've reached a point in the industry where innovation has slowed enough to allow the biggest companies to catch up. Combined with the natural advantages that big companies have (monopoly, regulatory capture, etc.), it's just really hard to go toe-to-toe with them these days.
Trying to break the conditioning here but government should always tax in a way that it incentive WORK. The way things are Wealth is no longer being produced, so those who have it will be on top because income will never be enough to prop you up.
Therefore we should want a Growth market so that more wealth is produced and risk averse people will still be rich but more people will become as rich as them.
To resolve Inequality we can't just have the mindset of punish the rich for creating wealth. We need to grease up our economy so that everyone else can be rich as well.
Different mindset but this problem is super hard to solve and I don't think anyone has a decent solution for it.
I've long argued for massive estate taxes on the very rich that forces a partial reset on wealth and avoid medieval times when land ownership was just passed down generation to generation. It's the only fair and practical wealth tax I can think of. I have no problem at all with Bezos being filthy rich, however, I have a giant problem with his kids and all descendants being billionaires. A huge estate tax would also massively incentivize charitable giving as wealthy people donated money to avoid the government taking it all. I'm sure consumption would rise some also, but the more money you have the harder it gets to spend on consumption, hence many of today's problems. The point is, knowing it will mostly go to the government upon death, the extremely wealthy would be motivated to do stuff with the capital. I'm still baffled why no one has seriously floated this idea though.
The bigger problem with estate taxes (and btw estate taxes often imply death taxes in US law) that you may not see is how they effect smaller players. One of the things fueling corporate consolidation is asset liquidation upon death. If I start and own a small company that’s worth $10million, when I die, there is likely a strong desire to liquidate that company in order to allow for some inheritance to multiple people. This likely means selling the business to another player. If there’s an estate tax, then you must sell. My understanding is this has been a very real problem for farmers for many generations, and they have been the largest opponents for estate taxes.
I suspect the bigger problem isn’t the Bezos’s of the world consolidating money and power generationally, it’s the big corporations getting bigger, with corporate taxation disproportionately hurting the smaller players rather than the bigger players. We would have a much healthier economy if the incentive structures hurt companies more the bigger they get to discourage things like vertical integration. A company doesn’t have to pay taxes on the intermediary steps of production but might have to (sales or B&O tax) if they were to purchase the same goods from a third party. This tends to distort markets away from lots of smaller players to a few big players.
I will also point out that estates benefit from step-up basis which avoids Capital Gains taxes on unrealized gains, which is hugely beneficial to most estates. This way of taxing is meant as a compromise to allow fairly large estates to pass tax exempt --currently up to $11MM if held by a single person, $22MM for a married couple-- while applying taxes to estates that all but guarantee that you could retire instantly collecting an income that puts you in the top 1% of household earnings in the US with highly favorable capital gains tax treatment. Also, the IRS will work with anyone that has a large illiquid estate and allow taxes to be paid over a decade after an initial grace period, with an appropriate interest rate.
Yeah, you may be right about the republican talking point with farmers. I have no direct anecdotes with farmers, and with the one friend I have in the agriculture world, the topic never came up. The main anecdotes I have are with people who have estates that were big enough to have to worry about what would happen to their businesses when they died, since they couldn't just pass on the business to their heir. This is a hard problem even without the threat of a government wanting their cut, since companies don't have a tendency to survive their founders leaving.
Also, make no mistake, I'm not trying to apologize for people who are already extremely wealthy, who have to deal with this problem. I would love to have the problem of what to do with a company big enough to need to sell it upon my death. I'm merely trying to point out, that estate taxes do have a consolidating effect that feeds mega corporations. What I don't know is if this effect is as big as I suspect it is, or if it's simply dwarfed by other factors, like the general desire to sell out for a big payday.
> The main anecdotes I have are with people who have estates that were big enough to have to worry about what would happen to their businesses when they died, since they couldn't just pass on the business to their heir.
I'm sorry, but this is just the same talking point reframed.
If you have a business that is large enough to be subject to estate taxes, you should have enough time and resources to talk to an estate attorney and learn how to move the assets into an appropriate corporate governance structure such that it is no longer a real issue.
Personally, I hate the idea of corporate income taxes - they're literally stupid. You can't tax corporations, you can only tax people. At the end of the day, it's always a person somewhere that is paying the tax, whether it's an employee, supplier, shareholder...and that person is already paying their own income taxes. Also, the tax code favors big companies at the expense of small ones, it's a system that can be gamed in a bunch of ways. I say get rid of it, it's dumb.
I would put some limits on estate tax rates at certain thresholds. Like, anything above $50 million, tax at 90%. And hey, the kids will still be rich, just not crazy billionaires. For private companies this gets tricky and for many companies they would be forced sellers, that's one of the big trade offs. Exempt farms if necessary?
Your argument is based on corporations existing within a closed system within the country. But you're ignoring the ability of money leaving the country without being taxed.
I think a large portion of people would not bother building an estate if it could not be passed on to teir children. Most people work hard and build businesses for the benifit of their family.
you do understand why private individuals own the company and not the workers themselves right? In order for any productive venture to start that are three components, raw materials, labor and capital. Workers only provide labor. Workers may be able to provide raw materials, but that's ridiculously prohibitive to become a worker.
Similarly, you are wishing that the workers must also provide capital, but again it requires workers to have savings. Now obviously I know you don't think of these things like that, you just have a wishful desire that somehow the profits are distributed to the workers and not to some random individual. But the truth is this is the precise reason why the prophets go to the individual who supplied the production process with their savings (just supplying them with savings isn't enough that would only allow you to earn the original money plus interest, but in order to benefit from the profits you must undertake the risk associated with the productive process).
By separating the people who work in a company and the people who undertake the risk associated with the productive venture, you benefit everyone.
Three things. First, this is only true of the past and doesn't saying anything about the future. Second, this "study" isn't weighted based on the size of the estate. Third, that 10% matters far more than you could imagine.
> First, this is only true of the past and doesn't saying anything about the future.
Well, I can say that about anything. Oh... the rate of return on capital is higher than the rate of return on labor? Well that's only true of the past, no study has studied the concrete data of what is going to happen in the future (Hint: it's because there is none).
There are tons of loop holes. In the end, if said legislation passes both floors the only ones got hit are the middle class people who don't have the knowledge and means to use those loopholes.
I'm with you but substitute WORK for Value Creation. It's way to easy to "create jobs" which are essentially busy-work with 0 to negative productivity. In the coming decades, economic productivity will become more and more important as gains from elsewhere start to taper out.
Agreed. Value Creation is a better word. Idea world is to have everyone getting rid off the necessary of repetitive work (of course he can still do it if he wants) and everyone is motivated to create value, in one way or another, and people generally don't say things like "Hey because I build rockets/control banks I should have a much more lucrative life than the rest of you guys".
If we look at history, most of the stuffs that improve human civilization were indeed funded by "VC" of the time, but the core motive is not to earn profit, but to solve problems and satisfy personal interest. Now if you can remove VC from the picture, you pretty much get a society in which everyone is automatically doing things that are beneficial to the collective. Anyone who wants to just be super lazy will get bored easily and will start doing things sooner or later, especially when all of his friends are creating value.
Isn't "Value Creation" just another one of those buzzwords used to bamboozle investors? It's not that it doesn't exist, but it's so abstract & academic as to be impossible to measure.
Lots of executives aren't judged on their final contribution to the bottom line but the size of their 'empire' or project 'successes' they can point to.
There are also plenty of examples of work that is profitable to a company but that doesn't create value to consumers:
* Campaign Donations / Lobbying for favourable regulations.
* Softbank style monopoly creation (it's just moving investor money to consumers).
* Patent Trolls and lots of semi-patent trolling games. (Think Amazon buying Kiva)
* Misleading / Emotive advertising. (Which I'd argue is the majority of it.)
If you're hell bent on thinking markets are inherently fair you can contort yourself to show these things _can_ be productive but to think they're always productive?
> Lots of executives aren't judged on their final contribution to the bottom line but the size of their 'empire' or project 'successes' they can point to.
Who is incentivized to hold executives responsible for the bottom line, board members and shareholders?
> If you're hell bent on thinking markets are inherently fair you can contort yourself to show these things _can_ be productive but to think they're always productive?
I agree, insomuch that many 'profitable ventures' don't increase the aggregate material wealth of the country.
Why should everyone have to work? We are 100% capable of creating a society where everyone's basic needs are met with the automation and technology we have today. The idea that a person is only worth something if they work needs to be deeply reexamined.
While I agree with the overall sentiment, the idea that we are capable of creating a society where all basic needs are met entirely through automation is a pretty damned bold assertion.
Because of attitudes like this. There is enough money out there to solve many problems but it is hoarded by a certain amount of people and then a bunch of people go around saying, "better things aren't possible."
Because if you cannot offer anything of value, someone else will offer that value on your behalf, making you an extraneous cost which anyone in their right mind would want to remove. And then you are but a slave to whomever you are useful to, meaning whoever controls you, and whoever has the power, and who grants you the means to get those basic needs. If someone is giving you bread for free, you can be sure it's because they don't want you to rebell. But then that is also your only value to them, which is a very dangerous proposal,
because it means you're expendable, and that the guy giving you that bread might not want to continue such a fruitless endavour. That is why an economy must rely on the basis of voluntarily offering something of value. Because the alternative is literal enslavement.
> There's no other reason you could think of to feed a hungry person?
Free individuals might give something out of benevolence. But a state institution is not a free individual. It can only represent the collective, and you cannot ensure that all individuals in such a collective would agree to such an exchange, or feel benevolent about it. As such, there is no such thing as a benevolent state. Instead, you can employ game theory on such entities, to the extent of making them look completely self-serving and even psychopatic, as proven by Nash.
This is why it is so important to curtail the development of big and monolithic bureaucratic organisations, and instead use such principles as those given by Montesquieu, to make natural powers compete for authority.
> You don't see the irony in saying that a person must volunteer their value or be enslaved?
Do you think the person giving you bread should be forced to give you that bread? Nay, it would be far better if there was some kind of mutual exchange. There is none to be had, when the exchange is merely giving out a resource for "free." Except we know that it's not for free, but in return for your good behaviour. Then the exchange isn't free, but depending on an exchange anyway, except you have little to no say in it. Then the one in power of that resource in turn also have absolute power over you. So there should be a way for you to gain that power for yourself, or in the least make sure the one giving you bread does not have monopoly in doing so, because it will inevitably devolve into abuse of power.
This seems to be a kind of mixing of two concepts. First, that "a state that is big enough to give you anything, is big enough to take it all away". And second, that being provided resources "for free" is a forced exchange because you don't have a say.
If the state was a dictatorship, then the point might apply. However, democratic states (to lesser or greater degrees) contain some measure of feedback; and that weakens both of the prongs.
Plainly speaking, a democratic state provides its people bread for free because that's what the people want. The state can't take it all away since it is responsible to the people, and the exchange isn't a one-sided forced deal because the people in the state's jurisdiction have collective power on the state itself.
If that power is the power of the ballot, then the mutual exchange could be seen through an adversarial lens to be "good behavior in return for free bread". But the consequence doesn't hold, as the state doesn't have absolute power over its people. The exchange is mutual because if either party reneges, so does the other party.
But the stronger that feedback is, the less the adversarial model works. Consider a community small enough to support a direct democracy along consensus lines. If the tech existed, such a community could create an automated bakery and then hand all of that bread to its members. Here the members govern themselves; there is no external power that arises out of the state and then unilaterally controls the people.
A larger state may be different, but that difference is a matter of degree. "The one in power of that resource" only has "absolute power over you" if you are not part of it.
This is not a concept, but an observation. What you're talking about already exists. It's the capitalist cooperative, where people voluntarily come together to pool capital in order to build some company that produces things or services that are of benefit to the collective owners and/or their customers.
However, while the price of membership in such a unit decreases with every new participant, the ownership is also diminished with each new owner, until effective control over the unit or process becomes very difficult. This will inevitably lead to frustration and feelings of powerlessness as needed change is slowed more and more.
As the saying goes, more votes, does not necessarily mean more democracy. It simply means that it becomes harder to get anything done. Meanwhile, bureacracies grow and rule uninterrupted under such conditions, since a vote every fourth year, and the meddling of one or two representatives, can only ever make small and incremental changes, instead of giving the organization the far-reaching and overarching reorganization that it actually needs in order to become fair and effective again; a thing that is usually contested and opposed by those making up the bureacracy of that organization in the first place.
Right, so the point that it is a matter of degree stands, and the point that you are not powerless in a state where you are part of the government also stands.
Given those points, it is not impossible to imagine a future state deciding to use some of its resources to constructing an automated production system. Its legitimacy is backed up in two ways: once, by the consent of the governed through the democratic process, and the other, by the positive externalities it grants to the people in common.
If the people of such a future state decides to create a common automation infrastructure, then they may also reach the conclusion that not everybody needs to work. The conclusion you reached in your initial post,
>Because if you cannot offer anything of value, someone else will offer that value on your behalf, making you an extraneous cost which anyone in their right mind would want to remove.
no longer holds, because even in the most selfish system, any bureaucrat who takes the time to "remove" you will have to face the consequences. And therefore, there can exist a state that does not demand everybody work.
To some extent, that already exists today. Welfare states protect (or are intended to protect) people who can't work. The people in a welfare state do not want to leave those who can't work to starvation, and so the state doesn't, either.
I do, of course, agree that states as they exist today are imperfect, sometimes grossly so. But I disagree that there is a necessary implication that everybody has to work. As long as the people have a say, and as long as the people do not only value labor, the state cannot simply rid itself of its unproductive constituents. If anyone "in their right mind" would remove people that are "extraneous costs", then the people are collectively insane - and they are coherently and strongly insane enough to check those who are not.
As automation advances it will be much more self reliant in terms of supply chains and production. It could be conceivable that a small town is completely self reliant, not needing to be an entity the size of a state to achieve it.
> Right, so the point that it is a matter of degree stands, and the point that you are not powerless in a state where you are part of the government also stands.
Not really. The more people who get to vote, the less individual control you get yourself over the outcome, and so the more powerless you become. More votes do not equate more democracy, only less individual power to influence your own future or leadership through the ballot, especially if your choices are limited. Unless you take a more direct action, and go into politics yourself, that is. But who has the time for that?
This is why people are rioting in the streets now, instead of patiently waiting until the voting booths open. It's because deciding between two candidates wouldn't resolve the matter in any meaningful way. Especially since there are no real candidates to vote for, that would make anything but token change for you. Nevermind an independent candidate, who just wouldn't gain any traction at all, or at least not under the American system.
Call me cynical, but representative democracy only works because it gives people the illusion that they have an individual say in politics, but they really don't. However the illusion keeps them blissfull enough to not want to rise up. If it actually mattered, I'm sure there wouldn't be a discussion on whether the Brexit vote should be respected (many wanted to disregard it entirely), or even that my own country of Norway perhaps shouldn't pursue relations with the EU, since a majority voted against membership. Yet here we are, with a de-facto membership of the EU through the EEA. Voting against it really worked. Yay... /sarcasm. So I can full well understand why some people think rioting is a better choice. I don't condone it, and I think there are better ways to protest, but I still understand it.
> even in the most selfish system, any bureaucrat who takes the time to "remove" you will have to face the consequences. And therefore, there can exist a state that does not demand everybody work.
Depends on the system in place. And it would be at the eternal scorn of those who have to work, but still pays the full cost of all those who don't. Because UBI isn't "free." And let's face it, such a machine wouldn't be "free" either, although it stands to reason that if it was made really big, then it would certainly be cost saving enough as to preclude all competition from all those who don't have the means to build such a machine themselves. As such, it would be clearly monopolistic.
In essence, it would be unfair to all those who would otherwise compete by baking bread of their own, because it would make bread-baking entirely unprofitable for everyone, just like slavery made low-end work unprofitable both in Rome and in pre-civil war USA. People somehow forget to mention that the war wasn't just about emancipation, but also because slavery gave slave owners such an unfair advantage that it put a lot of people out of honest work. Thus there would be something in it for every baker to throw a wrench into such a monopolistic machine.
If the only way to build such a machine, is to build it big, then it stands to reason that only big players can build it. So what makes you think they'd do it out of pure benevolence, without anything to gain from it? Surely, giving elites peace from the "rabble" might be a good enough reason? In fact, large swathes of the people would become complacent and dependent on the machine. So anyone who could gain control over it, would also stand to gain untold power for themselves and their group.
I think a fair few people would aspire to such power, and some might even be willing to murder for it. If you were somehow able to defend that coup, either diplomatically or by force, you would in effect gain dictatorial power over anyone it served. And nevermind democracy. You now have the power to decide what people vote, or no bread for you! And so, even if it was made with good intentions and for benevolent reasons, the machine may well come under the control of evil. Worst of all, if evil ever got control over it, many would come to their aid, simply to make sure they would continue to come first in the bread-line.
Now consider a crisis sweeping the world, say, destroying crops around the world; the guys who are getting stuff for free, would be the first to be cut out of the service of that machine. Only those who worked and saved would afford bread in such a time, as everyone would be made to pay. Except those who relied solely on the machine would starve, because they wouldn't have anything saved up to pay for bread. And so you'd have new upheavals.
The only way to alleviate such an extreme amount of power, would be to make sure there is competition for it, so that several machines were made to compete with each other to offer the best bread. And for that to be possible, you need people who also add value by working in various ways.
But without any incentives to do so, one might revert to letting the state do it. And then it would be in the interest of the state to keep that power to themselves, and prohibit anyone else from having it. Good luck saving it from the psychos and sociopaths that usually want to climb to those heights.
> If the people of such a future state decides to create a common automation infrastructure, then they may also reach the conclusion that not everybody needs to work.
If they provide no value, then they are also worthless and expendable. If their worth is only potential, then don't be surprised if they're treated like cattle by those owning or controlling that infrastructure.
> To some extent, that already exists today. Welfare states protect (or are intended to protect) people who can't work. The people in a welfare state do not want to leave those who can't work to starvation, and so the state doesn't, either.
Except it's an inherently unsustainable system unless most people in that country also contributes to it. We're now in a situation where more and more countries cannot afford the welfare states they once created. And now while the coffers are empty, and the jobs are drying up, people want UBI? Who's gonna pay for it? The only reason rich people would pay for it, is to insure safety for themselves. So in essence, they would pay for security against the masses. It's the same reason the patricians of Rome did it. Well, Ok, whatever you say, it did work for a time... For that reason. So that's at least something, I guess. But whatever that was, it wasn't freedom.
There is already solutions that lets people stop working, however: Income based on interest, dividends and rising asset values. This is when the value you add back to society has become intrinsic to the property that you own. But most people have neither the means nor the knowhow for how to get there. Perhaps this is what schools should focus on in the near future, then?
>If they provide no value, then they are also worthless and expendable.
This doesn't have to be the case, only the most nihilistic and privileged view of the world can produce such statements. People are not valuable because of their ability to produce capital, reducing things to these terms is a deficiency in both mental models and morality.
> It can only represent the collective, and you cannot ensure that all individuals in such a collective would agree to such an exchange, or feel benevolent about it. As such, there is no such thing as a benevolent state.
A state is only benevolent if every single citizen is benevolent? That seems like a pointless assertion.
In a democracy, in theory, the majority is what matters.
Thankfully, it's because a lof of politicians have read Socrates, and taken his lesson to heart; that majority rule is indeed dictatorial, and so we should strive to also let the minorities be heard. That doesn't mean it is always fair, though. Sometimes it also leads to minorities gaining dictatorial rights when they shouldn't.
> There's no other reason you could think of to feed a hungry person?
It's not what you can think of that matters, it's what the people who control the state apparatus can think of.
The vast majority of human beings are capable of empathy. Such people are usually found towards the bottom to middle of most hierarchies, because their empathy makes it painful to fuck over all the other claimants and collateral damage that they need to crawl over to get to the top.
You could look at capitalism is a sociopath-containment vehicle. If there were no sociopaths, there would be no need for capitalism: people would produce what was needed and freely share it with the people who need it most. However, there are sociopaths, and throughout history they've usually just taken all the excess production, enjoyed it, and left the people who produced it destitute. It was a big innovation to be able to channel that selfishness and will to dominate other people into productive uses that make the rest of society more efficient.
You are completely correct, Sir. This is why we must avoid organizing our states in ways that create such dependencies at all cost, and instead strive to create states that create voluntary sharing of resources and values that are mutually beneficial. That is the only way progress can be made, and freedom can be insured.
On the other hand, if you were a baker, and someone told you that you must give your bread away for free to a third party, how would you feel about that? The only thing you would get in return, is not being punished by the one forcing you to work, and not killed by the masses for whom you provide your free bread. I don't know about you, but personally I'd hate to live under such a fascist regime.
Unless you consider the majority of human societies to have every existed extreme sociopathy. While I don't particularly support it, many societies throughout history exposed children with disabilities and many many more would execute or exile elements they deemed 'criminal'. Today, we still remove people for potentially being extraneous costs in abortion. It's legal, but it is the same motivation.
I mean, I personally think it's all sociopathic, but it's the normal state of 'the state'.
I don't know about the should part, but I think everyone needs a reason to get out of bed in the morning, to know that they're contributing to their family and their society as a whole. Imagine how unpleasant it would ultimately be to be told that your needs would be well met, but you would no longer be allowed to carry out productive work.
Because the only way to increase the standard of living is to increase productivity. You cannot inflate your way to prosperity. It is a mathematical impossiblity.
no reexamination necessary, I'm drawn to emulate and recommend the humans that work hard toward long term goals. I like when Darwinism shows tangible progress against entropy rather than producing viruses that leech off of life.
What long term goal is slaving away at McDonalds or Wal-Mart accomplishing? All the people advancing society are being paid pittances compared to the true leeches (landlords and shareholders).
People should not be required to work to survive. People should be required to work to make the world a better place. Most people work bullshit jobs that do not advance anything but the wealth of the 1%.
I think your point mirrors Scott Galloway's and Warren Buffet's philosophies. Why is sweat, regular labor, taxed much more than capital gains? Why do CEOs who are fantastically rich need lower taxation rates than the 100s of laborers their lifestyle relies upon? We tax sweat, we let riches run free.
I was always told the reason was to encourage investing, to increase the velocity of money. Interest income from parking your money in the bank is taxed as ordinary income; lower taxes on investment income (capital gains) helps make investing more attractive vs parking the money.
This may not make a lot of sense right now when interest rates are close to zero, but there was also a time when interest rates were 20%.
Capital gains -- gains from dividends or retained earnings -- are taxed at the corporate tax level before being distributed. I don't think we should retax them at all. I think dividends should be untaxed, and so should the retained earnings portion when selling a stock, but all capital gains attributed purely to increase in speculative valuation can be taxed more, sure. Just a small nitpick.
I think the exact opposite. Taxing capital gains and eliminating corporate taxes would incentivise value creation.
Low tax dividends and capital gains benifit individuals without active participation in the value creation.
> Low tax dividends and capital gains benifit individuals without active participation in the value creation.
Presumably, actively working (like with a job) to generate wealth to invest in other enterprises is 'active participation in the value creation'. I mean, sure, if you want to introduce steep capital gains on invested capital that was inherited, or won, or whatever, that's fine.
>Presumably, actively working (like with a job) to generate wealth to invest in other enterprises is 'active participation in the value creation'.
This is my exact point. Working (like with a job) creates value. Investing money in a secondary market for stocks generates no value whatsoever. Perhaps it keeps some stock brokers emplayed
> Investing money in a secondary market for stocks generates no value whatsoever.
Great, then let's open the primary market (which does generate value) up to individual investors. Unfortunately, this value generating mechanism has been legislated away.
Im open to lessinging restrictings on accredited investors to allow more access. That said, it is worth pointing out that public investors do have access to primary market IPOs.
That said, I do think this is somewhat beside the point of how capital gains should be taxed. I think that stock appreciation profit should be taxed at least as high as personal income.
> I think that stock appreciation profit should be taxed at least as high as personal income.
I don't understand why... if I invest money I worked to earn, the profit from putting that money to use should be taxed three times: once while paying the employee the company hires to carry out business, twice after profit is calculated and corporate income tax taken, and then thrice when they tax me for the dividend. Surely twice is enough?
> That said, it is worth pointing out that public investors do have access to primary market IPOs.
Not quite, the have access to the resellers of the primary market IPO. The original buyers of the equity are the underwriters plus whoever registered during the road show -- and they must be accredited I believe.
>I don't understand why... if I invest money I worked to earn, the profit from putting that money to use should be taxed three times: once while paying the employee the company hires to carry out business, twice after profit is calculated and corporate income tax taken, and then thrice when they tax me for the dividend. Surely twice is enough?
My point is that if you are investing in a secondary market, you are not putting that money to use. It goes into the pocket of whoever sold you the stock and the company doesn't see a dime from the transaction.
If we must have taxes, I would rather have them not come from earned income (like a job), which takes labor and creates value. Income from the secondary market require no labor, and create no value.
If you believe rewarding and incentivizing value creation is more moral and socially desirable.
Rewarding individuals for simply possessing assets is at best neutral.
Is this regardless of legal structure? The choice to incorporate as a corporation comes with a side effect of double taxation but the sole proprietorship doesn't...
Not sure where you're based, but do the recent economic events in the US change your tune here at all? Given 'too big to fail' how do you prevent organizations from retaining zero earnings and then asking for loans when liquidity dries up? Double taxation is an incentive against this behavior
I think we should go to a system where companies must pay out all profits to investors, who can choose whether to reinvest or not. Stop the 'too big to fail' mentality -- if companies want money, ask the investors, not the government.
You can't solve the problem in conventional ways because rich people as well as large funds and corporations control legislation. You can vote 100 tines and be guaranteed that the outcome won't be different in that perspective.
I'm not sure if ycombinators like the alternative way.
BTW I agree to your idea in general, just want to say that I'd substitute WORK with anything that benefits human being.
The underlying problem is that money buys policy. That's not how democracy is supposed to work.
But as long as that's true, you're going to get increasing disparities of both wealth and power - because you have a nice tight political and economic engine that cycles by turning one into the other, and back again.
Redefining value as "social value" - of some kind - won't change this on its own, because that process is just the on-ramp to the main cycle.
And unfortunately it's not the only on-ramp - it's just the most obvious one.
As long as the state, or whoever manage and control the state machine, utilize "money" to purchase man power (to get whatever tasks they need to accomplish or whatever goods they need to build), it's impossible to bar money from the system. It is part of the system.
Democracy has always been like this, or worse, when it is not judged by money, but by your ancestors. Capitalism smashes Feudalism by bringing power to a lot of people than the Feudal lords agreed with, and then it's pretty much "money buys everything" mode.
Taxing things like capital gains differently or implementing a generic wealth tax can actually hurt those we want to help to build wealth as well as incentivize things like expatriation of wealth. Can’t expatriate land.
Taxes are not punishment. Taxes exist because a certain amount of wealth is required to maintain a state.
I understand that the financial/business world has been trying to convince people otherwise since the mid 1970s, but they are still as wrong today as they were then.
Tax “fairness” is therefore simple. He who earns the most should pay the most.
You cannot expatriate dollars. The currency is issued by the state and the state can seize it. Chinese factory? Great, tariff on iPhones at the dock. Baseline tax = difference in currency value between country of origin and country of destination on that day. HQ in Ireland? Super, you owe the US the difference between the tax you paid there and the equivalent rate here. Don’t like it? No security sales in US markets. Sell bonds and stock somewhere else.
> Taxes are not punishment. Taxes exist because a certain amount of wealth is required to maintain a state.
Who is saying taxes shouldn’t exist here? I’m advocating for a specific form of wealth tax. I clearly believe taxes are necessary. As for them not being a punishment, this is clearly a silly semantic argument focused on trying to frame this emotionally. People respond to incentives and change their behavior when faced with incentives. Taxes change incentives. If a tax disincentives a behavior, this behavior will be done less. Get your moral policing out of here.
> Tax “fairness” is therefore simple. He who earns the most should pay the most.
Why earnings? Why should we tax people’s labor? Your definition of fairness is yours, not everyone else’s.
> You cannot expatriate dollars.
Jesus Christ, yes you can. It’s like you’ve never heard of offshore banks. Where does an idea like this even come up? Go see China’s issues with people expatriating capital and their middling success at preventing it with capital controls.
How someone can speak like this and not see the value of a wealth tax in the form of a land tax blows my mind. By the way, concerned with massive disparities in wealth? That’s all from housing which is of course built on what? Land. https://www.brookings.edu/wp-content/uploads/2016/07/2015a_r...
Tax the shit out of land. The marginal value to a piece of land from the actions of its owner is minimal at best. People gaining wealth from land is the definition of rent seeking.
The point I’m getting at is taxes should be for raising revenue, period. The minute you step into trying to influence behavior via tax code, as the US has done, you are doing something wholly different from raising revenue.
> Jesus Christ, yes you can. It’s like you’ve never heard of offshore banks
I don’t think you appreciate how governments already monitor wire transfers, and how they are reversible within a certain timeframe if a legal authority chooses to intercept one.
Again, this is not a complex problem since the tools and authority already exist, it’s a political will problem, in that there are nearly zero elected officials willing to cross a billionaire.
> How someone can speak like this and not see the value of a wealth tax in the form of a land tax blows my mind.
Because I live in a state in the US without income taxes and with a high reliance on land taxes. It makes no difference, corporations bribe their way into temporary (as in decades) exclusions from land taxes, and individuals are left to pay what the chemical plant literally polluting their back yards is exempt from.
There is no logarithm or formula that fixes all of this. What fixes it is 10 years without parole at hard labor for any owner or officer of a business entity who gives anything of value to any employee of the state, whether that employee be elected, appointed, or hired. The same penalty will automatically be applied to the state official who has been paid.
Land taxes are actually better in those regards than income or capital gains taxes.
You can't hide land, and if you want the state to enforce your property rights, you can't alter your behavior in a way that lets you avoid paying the tax. That makes the land tax what economist call a "zero-deadweight" tax: it doesn't decrease economic activity or consumer wellbeing at all. There's also an economic theorem [1] that an LVT results in the optimal size of government: investment in public goods increases the value of land (and hence rent that can be charged for it), but also the tax on that land, so citizens have an incentive to vote in only those public works projects that increase rents more than their cost in taxes.
Whereas if you put a tariff on iPhones at the dock, Apple will pass that tariff along to consumers, prices will go up, and fewer people that want an iPhone will be able to afford one. The "HQ in Ireland" trick revolves around avoiding dollars at all: profits from a company's EUs operations are retained as Euros and then used to pay European employees or exchanged directly for RMBs to pay for Chinese goods.
"Tax “fairness” is therefore simple. He who earns the most should pay the most." - I don't like the idea of tax fairness as what is fair to you may not be fair to other person. I would only concur with your second statement on the absolute value (numbers) and not on percentage basis.
Why should we disincentivize saving? It's clear why we should tax land, the value of land is not driven in almost any way by ownership of land so the returns to land are unjustly gained AND it's economically efficient to tax land as it's fixed in supply. However, taxing savings (capital gains, wealth) is unclear in value. What would, for example, be the benefit of shifting investment to consumption? In other news, I could be highly in favor of a consumption tax instead but again, that's very difficult to implement well.
A hefty estate tax is something I can get behind. It's definitely distortionary and has a huge amount of difficulty in implementation but I see almost no societal value to generational wealth.
I'm not advocating any specific plan and I find Georgism to be worth a new look and calls for a LVT to be compelling, I'm just saying that I think those who focus solely on it, some of whom advocate abolishing all taxes and only using an LVT, to be impractically utopian.
That said, I see no reason as to why we shouldn't at least experiment with other alternate tax regimen as well, and that may include tax savings at least for the highest earners. To echo others' statements, why shouldn't those at the absolute highest levels of savings endure a little redistribution? It wouldn't matter much to Bezos.
Should social security and medicare taxes apply to capital gains? Should these taxes apply beyond the current caps, which are a bit over $100k? If not, there would be very little impact since most investment income is earned by people who also have six figures of wage income. And if so, then we'd have to levy these 'taxes' (they're not quite taxes, to the extent that these are paid in exchange for later services/payments that the taxpayer receive) on all wage income.
Because the amount you pay into social security and Medicare are quite large in terms of percent of income, if you make less than $100k. Of course, you later get paid SS or receive Medicare services, which makes it less clear that these items should be considered taxes.
Sorry, but I genuinely am missing the point you are making. I agree that SS and medicare are large taxes for those making less than 100K. Are you saying that this is a reason we should not increase capital gains and should instead increase SS and MC?
I was pointing out that you would have to increase CG rates by a lot if you wanted them to be higher than OI rates (and you count SS and Medicare in the OI tax rate).
If you do that, you would want to increase the rate on OI as well, otherwise people would play games because of the rate differential (take money out of a business as salary instead of CG, for example).
And lurking in the background you have the timing/inflation issue, which is that OI is taxed every year and CG is taxed in nominal terms upon sale. So you end up potentially paying lots of tax on nominal increases in value that are actually just inflation. The fact that CG is not inflation-adjusted is one of the rationale for having a lower CG rate.
Because it defeats the purpose of a progressive capital gains tax?
If the concern is that someone is paying less in tax off $250,000 in capital gains when they realize their wealth than someone who is paid a wage of $250,000, the policy prescription (with which I agree), is to tax $250,000 capital gains like income, I.e. at the top marginal tax rate.
What happens if I liquidate $50,000 at a time over the course of 5 years, and continue to pay a net effective tax of around ~20%, which is what the long term capital gains tax is, today?
I guess that's a question of what the purpose actually is. If you only take out $50k, then you're living on $50k that year and you pay the same amount of tax as if you had worked a regular job for the same amount. If you want to live a more extravagant lifestyle, you take more out and are taxed more.
This could mean that they have $1 million of unrealized gains that year. You're not really able to tax unrealized gains most of the time because they could disappear or go negative. That would go untaxed until they sell, but it would eventually be taxed.
At the same time, they're not going to be able to enjoy their wealth only taking out a small amount every year, so I'm not entirely convinced that this behavior of living frugally to pay less tax is something we need to 'prevent'.
> You're not really able to tax unrealized gains most of the time because they could disappear or go negative
Very fair point.
> I'm not entirely convinced that this behavior of living frugally to pay less tax is something we need to 'prevent'.
I think I buy this argument. Another commenter had the suggestioin of dividing the actual realized gain by the number of years the asset was held and assess taxes as if the person made that quotient in
income for each of those years. I can't think of anything wrong with this approach.
I don't think it makes sense to tax the appreciation of an asset over twenty years as if it were a single year of outsized income. if you want to treat it similarly to income, you should divide the realized gain by the number of years the asset was held and assess taxes as if the person made that quotient in income for each of those years (under the rules/brackets for each year, possibly with some adjustments for inflation). this would make it harder for average joe to estimate his tax liability when he sells, but it prevents the tax optimization you mentioned and is (imo) pretty fair.
It's impossible for everyone to be rich. This doesn't mean we should punish the rich for being rich, but you aren't going to reduce inequality by increasing the number of rich people - you need to increase the income of low and average earners compared to the rich.
I came across this very relevant article earlier today: "Computers Don't Kill Jobs, People Do: Technology and Power in the Workplace"[0]
It was written in 1996 but many of the observations affirm these trend:
> Technology undoubtedly contributes to productivity, which should, of course, make more available to all. But buried (not too deeply) in the very innovations that increase productive capacity of the workforce are factors that serve to deny the workforce the bargaining power to gain their share of the output.
It argues that the people who drive innovation and technological advancement in the workplace tend to do so for the benefit of a small minority (i.e. the owners/buyers rather than the worker/users) which itself contributes to an increasing inequality of power.
To me it's pretty easy to understand. It's far easier for state organs to control large corporations, than many small and independent businesses. Meanwhile, it's far easier for coroporations with means to lobby for legislation that makes it difficult for smaller, i.e. competing, businesses to thrive. They can do this, because they can afford the armies of lawyers and lobbyists needed to uphold and exploit all those rules. Just add revolving doors. It's particularly conspicuous that this is going on to such a degree in the USA. In effect, it means the USA is increasingly ending up with a new kind of aristocracy not dissimilar from the royal rule they once rebelled against.
I'd argue it's simpler for governments to foster a free and competitive market than try to work against massive vertically integrated companies with tons of lobbyists and power.
Are you suggesting the US has any control over the tech giants? It's clearly not the case, most politicians talk the talk, but they take massive donations in private events and then craft legislation to favor big tech. What we need is more companies, more competition, government needs to bust up the big players and disallow M&A.
Bureaucracies don't like working with a bunch of small companies; they want to work with a few large companies with specialized departments that make it easy to get what they want. The rules and regulations are all written for large corporations with inside counsel and compliance departments, not small independent companies.
source: I work at a small company, and have dealt with such bureaucrats
No sane person should ever listen to Larry Summers again. This weasel looted America; even looted Russia with his pals at Harvard -anything he has to say that isn't a groveling apology for his life of treachery and destruction isn't worth listening to.
It's a bit funny watching all of these economists backpedal and attempt to explain why the policies they promised would be so great for the average American have failed.
Summers has been talking elsewhere about how America needs a new approach to China that is more aligned with America's economic interests. Of course, he doesn't mention that he helped shape America's approach to China originally.
I'm unfamiliar with this scandal and am having trouble researching it on Google. Can you explain it in simple-ish terms (I'm weak on economics) and/or provide a source?
Andrei Shleifer was definitely his pal, definitely helped loot Russia, is STILL at Harvard, despite their settling a lawsuit over insider trading related to his activities, and Summers was not forced out from his position there for any malfeasance. He was forced out for saying things. Which shows you where Harvard is at; commit crimes, loot multiple countries? No problemo; just don't say things which trigger people.
I think this plays into the current social unrest as well. People have been trying to separate the looters and protestors, but they seem to completely ignore the extreme inequality that exists throughout the US, especially in this period of high unemployment.
People at the bottom have it bad, very bad. Being ignorant of that problem is just going to make it worse. Lashing out at fancy retailers in fancy neighbourhoods makes a lot of sense as a way of sending a message to rich people, whether you like it or not.
In all likelihood lashing out at fancy retailers will be effective. Additional police powers and crackdowns will be paired with throwing the rioters a few bones (e.g. greater checks on police powers and throwing the book at George Floyd's murderers).
Of course, the elites will pretend that they meant to throw that bone all along and will vehemently deny it has anything to do with a smashed up Gucci store in Beverly Hills and a lot of Americans (perhaps most) will believe this denial.
Wait, so if there were some elites in charge of everything, and if they felt personally threatened, you are suggesting that their response would be to decrease the power of their security forces? Wouldn't they want to make the police even more powerful?
> Wouldn't they want to make the police even more powerful
Civilians outnumber police 500-1. The people who were lead to the guillotines also wanted more police power but you have to throw a bone to the civilians to make them think 'you care'.
Here's $2 extra to come to work and risk coronavirus and we totally won't cancel your insurance when you get sick.
Yes of course they'd want that, but compromise is often a necessity to prevent things from spiraling totally out of control.
The French and Russian revolutions are a testament to what happens when the ruler tries to effect the appearance of compromise without actually doing it (e.g. Constitution of 1906). It ended very badly for the rulers in both of those cases.
They fucked up a lot more than just that, but that was a key contributing factor to their deaths.
The difference is in the times of the French revolution, the elite lived only mere miles away from the angry poor, within striking reach of their wrath whereas now the elites can move to super safe heavens, isolated from the mess they created and suffer no consequences from the angry masses.
Jeff Bezos and Warren Buffett can move with their families to some private island in the Caribbean and wait while things cool down while running their gigs remotely.
I could see Louis 16th's failed flight to varennes being repeated in a different form. It wasnt a lack of technology that stopped him, it was a man recognizing him and arresting him.
Part of the problem was that he left it too long to attempt fleeing.
Indeed, peaceful protests are good for the status quo because they're easy to ignore. They want you to sit down and be quiet so they can ignore you. Once you start to inconvenience rich people, or god forbid cause the stock market to go down, real change will begin to happen.
Gucci doesn't control the police, no. People who shop at Gucci do.
Do you think that they are not going to see the smashing of their favorite shop as an implicit threat against them personally?
Gucci is a powerful symbol of unchecked gaudy wealth as much as it is a retail establishment. The handbags themselves aren't really the point, which they'd be the first to admit to.
I'm not sure anyone controls the police. They look a lot like self ruling autonomous entities to me. The mayor of New York, supposedly their boss, is in a conflict with NYPD, and is mostly losing, from what I hear.
The current "looting" is in no way confided to Gucci type stores. All retail with anything of value is being plundered.
But even in a world where the gaudy rich control the police, and only their favorite stores were destroyed, I can't imagine that leads to police reform.
If people attack something you hold dear and makes demands on you, few people just give in. The normal reaction is to fight back as hard as you can, ignoring costs, until your enemy is defeated. I offer the US reaction to 9/11 as an example.
In your model, the Gucci customers are extremely powerful, so they can mount very strong counter attacks.
I was reading this this morning, on the subject of "who controls the police," seems legit (the answer is, the economic elites, absolutely represented by Gucci patrons):
> More than crime, modern police forces in the United States emerged as a response to “disorder.” What constitutes social and public order depends largely on who is defining those terms, and in the cities of 19th century America they were defined by the mercantile interests, who through taxes and political influence supported the development of bureaucratic policing institutions. More than crime, modern police forces in the United States emerged as a response to “disorder.”
> These economic interests had a greater interest in social control than crime control. Private and for profit policing was too disorganized and too crime specific in form to fulfill these needs. The emerging commercial elites needed a mechanism to insure a stable and orderly work force, a stable and orderly environment for the conduct of business, and the maintenance of what they referred to as the “collective good” (Spitzer and Scull 1977). These mercantile interests also wanted to divest themselves of the cost of protecting their own
enterprises, transferring those costs from the private sector to the state.
> Maintaining a stable and disciplined work force for the developing system of factory production and ensuring a safe and tranquil community for the conduct of commerce required an organized system of social control. The
developing profit-based system of production antagonized social tensions in the community. Inequality was increasing rapidly; the exploitation of workers through long hours, dangerous working conditions, and low pay was endemic; and the dominance of local governments by economic elites was creating political unrest. The only effective political strategy available to exploited workers was what economic elites referred to as “rioting,” which was actually a primitive form of what would become union strikes against employers (Silver 1967). The modern police force not only provided an organized, centralized body of men (and they were all male) legally authorized to use force to maintain order, it also provided the illusion that this order was being maintained under the rule of law, not at the whim of those with economic power.
The pandemic demonstrated that luxury retail is non-essential (you can still buy your Gucci bags online). When luxury retail was closed the world did not fall apart. Nobody is protesting because they can't shop at the Apple store.
For someone in desperation all I hear is further reason to riot and loot. Nobody cares about these people, and politicians keep going on TV saying how they're going to put everyone in jail or shoot them.
Statements and actions are two very different things, and as far as I can tell the rioters have the support of both corporations and the state, as absolutely nothing has been done to deal with the unrest.
I'm not sure why people are eating up the media lie idea that the government is some fascist entity supporting corporations, because the government's actions show that the rioters, politicians, corporations, and government (state and federal) are all on the same side.
Revolutionaries that signal on the same lines as Sony, Target, Walmart, Google, the state governments, and the federal government... It's honestly laughable how well this is orchestrated and how incredibly naive or stupid the people are that are eating it up for social brownie points.
The only people not being represented by anyone are the small business owners who don't wan't their homes and businesses eviscerated, and normal citizens who keep their heads down.
Do you really think so? These stores all have insurance. The deductibles will hurt a little but I don't think it's going to be game changing, especially for any national or international chains.
Yes. I don't think it's a problem for them financially, it's just it's a a powerful symbol of the control that they have lost.
That's why they'll pull out all of the stops including heavy handed propaganda, agent provocateurs, sending in the army (if it gets much worse) and even (finally, with gritted teeth), appeasement.
Historically riots have often presaged regime change as it can uncover how dangerously exposed the elites are and how little support the elites have. Unlikely in this case, but it's still the same process that scares the bejesus out of most regimes.
We're already seeing agent provocateurs in the current protests. White nationalists are purposely trying to incite violent riots throughout the U.S. as part of their "accelerationist" plans. The regrettably widespread opinion that the original, peaceful protest against police brutality is per se violent and thus to be opposed is very much a false and racist claim.
> We're already seeing agent provocateurs in the current protests. White nationalists are purposely trying to incite violent riots throughout the U.S. as part of their "accelerationist" plans.
The amount that this is actually happening is vastly overstated. I've watched this narrative blow up within 48 hours, but the reality is that a lot of the "looting" is from frustrated, angry, low-income people.
In no way is that a racist claim - poverty and extreme inequality breeds desperation and anger and you can't pretend that away.
Angry and frustrated people will always be vulnerable to provocation. We can't pretend that away, but we can't wish that away either. So both claims could be true in some sense, but agent provocateurs (acting under fictitious monikers such as "Antifa", "Anonymous/4chan" or the like) are clearly playing a key role.
The big chains won't run risky or unprofitable stores. It's the communities that will be hurt by this. Despite interest-free loans and over $100 million in federal funding, Baltimore still hasn't recovered from the 2015 Freddie Gray riots.[1] Moreover: government funding is a rather blunt tool, and directing it at a city tends to cause most of the money to flow to the nicer parts of town. That's what happened in Ferguson.[2]
Riots tend to widen the disparities, not reduce them.
The big chains were suffering outside of a handful of affluent neighborhoods in all cities even in good times, I don’t see why this wouldn’t be a problem. Margins are low, and consumers’ ability to spend is low, so raising prices might not be possible leaving closing down as the only option.
If you don't run a viable business, should your business continue to exist? Which one do you want, socialism or capitalism? In a capitalist system, failed businesses are allowed to fail and don't get free money from the government.
It's easy to see this in graph form. 100K+ COVID deaths, 15%+ unemployment, wide spread homelessness, unaffordable housing crisis, riots and curfew in every major American city.
Google DJIA to see a graph of how this has affected the wealthy...
I am not blaming the players (well some), but the game is rigged.
And this is all _before_ evictions and foreclosures are allowed to start again. With the number of people already behind on rent and the number of people paying rent on credit cards it could get really ugly without any policy to mitigate this.
This IMHO defends, not defuses the preceding argument. When there was risk of the market crashing, the federal government injected trillions _into the market_. This primarily benefits those with significant capital investments, not those whose ability to provide for themselves and their families is tied directly to regular employment.
Small business, retail and service workers, and employees whose jobs can't be trivially moved online are in desperate straights right now. The Fed's action did almost nothing for them.
It's an interview with Cornel West. You may not agree with his political philosophy, but he "gets it" with regard to the current social unrest. If you want to understand what's happening, you should try to empathize with what he's talking about.
Politicians, police, corporations, media... the institution is trying to pushing the idea that protestors == looters. And therefore the protests should be quelled. Several states even went so far as to declare, without any evidence, that the majority of the people in the protests were from out-of-state troublemakers... which makes no sense. Even more fitting, President Trump called the protestors thugs and terrorists. It's all part of a design to stop the momentum of these protests.
It's not the people who are 'ignoring' the inequalities. With 40+ million unemployed, unable to feed or pay rent, watching their tax dollars get gulped up by big corporations from the 'small business loan program', unable to get their unemployment checks, and getting beaten by police for no reason other than race and deep pocket money from politicians/rich elites. People at the bottom know exactly what's happening, because it affects their personal livelihoods very deeply, and the combination of those issues is why they are on the streets protesting day and night, while computer people like HNers who are generally well off are still behind a corporate desk with no unions, and only observing from afar.
It’s a protest! You want someones attention. What good would it do to shout slogans in some hick town in the middle of nowhere. Of course You want to go somewhere where someone actually notices. So people protesting out of state/town/county makes perfect sense to me.
That said, completely agree that narrative around ‘trouble makers coming out of town’ was overblown and likely put out to take attention away from real issues at hand.
>Politicians, police, corporations, media... the institution is trying to pushing the idea that protestors == looters.
You cannot say that corporations are doing that when Google, Sony, Target, Home Depot, EA, Square Enix, Ubisoft, Facebook, Apple, Intel, Levi's, Banana Republic,Amazon, Spotify, Snap, Netflix, Microsoft, Zillow and Disney are in favor of the protests/riots. And those are the ones I found on the first article I clicked.
Agreed, I (unfortunately) know many of these people. They simply don't understand the problem, and do not want to empathize with "the other side".
It's worth trying to help others understand why people are angry. People need real help, police need to be held accountable, and we can't just keep shoveling cash into the pockets of the rich.
That may be true, but as someone who has been actually poor before, and have also known many people who were born into money, I don't think rich people really understand what it means to be poor, hopeless, and also discriminated against.
I forget where I saw it, but I appreciate a comment that says: When faced with extreme inequality, you can redistribute wealth through taxation or you can redistribute poverty through revolution.
There are 600 billionaires in the US. There are 40 million unemployed Americans. There are about 700k law enforcement officers in the entire country. The math is straightforward.
Indeed, the math is simple: 600 + 700k + 40M = 40,700,600 people who stand to lose if supply chains stop working and the recovery from the downturn is not swift. If you look at the history of insurrections, the poor tend to eat it just as much if not more than the rich. Examples: French revolution, Russian revolution, Chinese revolution...
The rich aren't needed for supply chains to work, and taking their wealth and redistributing it would likely make the recovery quicker. That was basically the entire goal of the New Deal.
Is that really true? The rich mostly put their money in the growth instruments like debt and equities. Someone needs to invest in businesses. Diverting the money presently sitting in investments towards spending would break the current system.
The Federal Government can deficit spend to invest in any necessary infrastructure or supply chains (funded by central bank operations), if the wealthy fail to do so. There is too much capital chasing too few returns, which indicates capital has lost a lot of its value.
Are you suggesting that the federal government start a federal hedge fund, or are you suggesting that they directly operate industries? Neither one sounds very efficient, especially given the government we're talking about here. (How satisfied are you with the current administration? How much more power should they have?)
The Federal Government operates Fannie Mae and Freddie Mac, the largest mortgage GSEs. The Federal Government operates the largest military in the world. I am suggesting the Federal Government take whatever actions are necessary to ensure and protect a functioning economy, whether that's acting as a consumer or producer of last resort.
I am aware of the devil's arrangement this is with the current administration. This administration, like all administrations, is temporary.
Note how current "cost effective" supply chains have collapsed significantly [1]. Survival of certain supply chains, distribution networks, and institutions is preferable over a few percentages in cost savings.
https://en.wikipedia.org/wiki/National_security ("National security or national defence is the security and defence of a nation state, including its citizens, economy, and institutions, which is regarded as a duty of government.")
Emphasis mine. Conversely, "efficient" businesses like Hertz (who ran at max capital leverage) are realizing the cost of doing so (including Carl Icahn, who lost $1.6 billion in the process). I think it's a bit silly to assume all private businesses are more efficiently operated than government (and does a grave disservice to hard working civil servants), but I'm happy to reply with bankruptcy after bankruptcy to prove my point [2].
They're the mechanism by which it is ensured that only efficient organizations stick around. They're the economic equivalent of a civil servant getting pushed out of their position because an elected official is afraid of losing an election, except they are much more direct.
Most commentators here are the "rich people" in the scheme of American wealth inequality. Sure, not the tippy tippy top but members of the relatively affluent professional class.
Why has worker power decreased? Yes, we can say that capital owners capitalised on the fact that workers were willing to give up more. But why were they? Unions can explain some of it, but why did Unions go away? Why is it, when two workers sit in two rooms with two managers, one of them is willing to take less than the other?
Consumer credit is why. Because of consumer credit, the person who is able to and willing to overextend their financial position "wins", which is an awful race to the bottom.
The essential purpose of work is to provide a lifestyle. If you cannot achieve the lifestyle you want with your job, you will demand more money. Why work at all if you're just scraping by, and not able to enjoy any of life?
But, wait, here's a credit card. Now you can have that lifestyle you want, and you don't really _need_ to demand more from your employer. Or maybe you do, but you know the next guy has one too, and you know that he'll take less because he can, and maybe he's less financially intelligent than you are. So you feel like you have less bargaining power at the table.
Would unions help with this? Maybe. But lifestyle is what drives us at our core. If greed is a core component of demand, then we need to make it so that we can't quench greed with false financial mechanisms.
The big issue is supply and demand. With increasing automation and global supply chains, there is a huge amount of labor available relative to the need.
In the past, a union strike at a plant would see a generous long-term contract and benefits for the workers. Now, it is likely for the plant to be moved or workers replaced with automation.
Larry Summers is simply not credible. This is an "oh fuck things are about to get out of hand, let's try to insert ourselves into the debate so we don't get locked out" paper.
Here is Larry Summers from his 1998 speech "The Challenges of Success".
"
The world looks very different than it did at the beginning of this decade, a time when America was said to be in decline. It is now clear that America will grow faster in this decade than Japan and Europe. Their four-decade-long story of convergence has ended and America is pulling further ahead. Why this success? A large share of the credit must go to the two forces that this conference brings together: technology and finance.
The twin forces of intonation technology and modern competitive finance are moving us toward a post-industrial age. And if you think about what this new economy means - whether it is AIG in insurance, McDonald's in fast-food, Walmart in retailing, Microsoft in software, Harvard University in education, CNN in television news - the leading enterprises are American.
"
Edit:
I tried deleting this, because it is an ad-hominem, which feels good but adds nothing.
It is just endlessly frustrating that one of the principle architects of the current status-quo demands so much attention.
Summers helped structure post-Soviet Russia, viciously attacked Brooksley Born when she sought to regulate the swaps market, among many many other serious lapses in judgement.
And yet, when he and his students come up with another insane policy proposal we have to take it seriously and challenge it on the merits.
It feels a lot like the allied strategy during WW2 of saturating enemy air defenses.
I'm not hugely surprised that the OCR of the scan of the transcript of the speech says "intonation technology", but i'm mildly amused that both Stoller and you copy-and-pasted it without question.
There is a lot to unpack, but here is one example.
He holds out AIG as a world-leader to be emulated.
In the same year he gave that talk, he attacked CFTC chair Brooksley Born when she proposed margin rules for OTC swaps. She made this proposal in the aftermath of the LTCM collapse. Summers/Greenspan/Rubin said that banks were so "sophisticated" that they didn't need margin rules, and that these rules would somehow cause a financial crisis.
Ten years later, AIG almost collapsed because it had a division making massive directional bets on credit markets using un-margined swaps. Were it not for a $200bn loan from the public, AIG would have collapsed.
Another way to phrase jobs being exported is the rise in imports of partially completed goods for final assembly locally. This is how the USA "manufacturing output" continues to go up while employment goes down - we no longer smelt steel, cast parts, weave textiles, pick-n-place electronic components, etc in the amount that we used to. Those things are done overseas where environmental and worker regulations are laxer and then the parts are imported for final assembly, and then in many cases re-exported.
Data to back this argument up is available on FRED if you're interested.
I would like to see someone back up the data with regards to automation. Why is the burden of truth on the other side? Fact of the matter is Chinese factories that produce the world's gadgets employ millions. This is reality and not some mythical fully automated factories.
Globalism made the very poor in China/Mexico/etc. richer, created their middle class and it made the very rich in US/EU even richer at the cost of US/EU middle class.
Saying how that is irrelevant now because of automation just smells like new propaganda to replace the old one so that the rich can get richer and the rest of us arguing propaganda.
While tangential, it should be noted that creating jobs in Mexico and Canada will probably always be a net good for the US even if it means some net loss of jobs in the near term. Being closely connected with populous neighbors whom you can enrich such that they can buy your stuff will vastly strengthen the US's position as well as the NA bloc. We want manufacturing in mexico because we're connected by literal rail lines and can ship products back and forth far more readily and in an environmentally friendly way. Further we have mutual interests in terms of policy and defense.
This may sound controversial but it's likely the only way forward for the US to compete with China long term. Trying to ostracize our neighbors and go it alone against a country 4x our size is not a geopolitically sound move.
> While tangential, it should be noted that creating jobs in Mexico and Canada will probably always be a net good for the US even if it means some net loss of jobs in the near term.
Yeah the rust belt job loss is only temporary. They will come back any day now.
> We want manufacturing in mexico because we're connected by literal rail lines and can ship products back and forth far more readily and in an environmentally friendly way.
Yeah I'm sure those Mexico factories have all the environmental regulations that US/Canada does.
> This may sound controversial but it's likely the only way forward for the US to compete with China long term.
The US has given China it's growth. It has exported jobs and exported it's middle class along with it. It has also exported much of it's high tech advantage into China. All for the short term benefit of the investor class and it's billionaires. Competing with China could start by not giving away every advantage.
> Trying to ostracize our neighbors and go it alone against a country 4x our size is not a geopolitically sound move.
The only ostracizing I do is towards the billionaires who shape economic policy to their benefit and everyone else's expense.
I think this kinda bends the meaning of the argument a bit.
To put it differently, if we have to go with outsourcing, China was a mistake and we should redirect as much of what was offshored as possible to Mexico.
Obviously the billionaire class needs to pay for what has been done. I'm absolutely not against that.
> Globalism made the very poor in China/Mexico/etc. richer, created their middle class and it made the very rich in US/EU even richer at the cost of US/EU middle class.
This point bears repeating until they finally take it into account when discussing inequality. It's honestly tiring to have to repeat this every time
Minor nitpick: I'd call it globalization, not globalism, as the latter has historically meant something else and currently means something terrible
I don't think offshoring is irrelevant now. With that said, I think there was a bigger push towards offshoring in the past than there is today. Now automation is playing a larger role. As an example, the company I work for has been offshoring positions since the 90s, while simultaneously and incrementally automating other positions. There isn't much left to offshore, but we're still automating work.
China is America's largest consumer of automation equipment. 25%. They, like America, are automating at a furious rate and have been for 2 decades.
The end-game is, of course, little need for labor at all. Like America China will have to face this and find some way to keep millions from starvation. And soon.
I'd argue the underlying cause is poor wealth distribution. There's lots of demand for labour, just not from people/companies/industries that have the means to the pay for it.
> There's lots of demand for labour, just not from people/companies/industries that have the means to the pay for it.
I agree, but I think you mean income distribution and latent demand. The idea is that a lot of people would be consuming more goods and services if they weren't so cash strapped. Some of this is also affected by wealth distribution also, though.
Latent demand and wealth distribution interact strangely.
There's a bunch of work no one wants to do that gets dumped on people who need the money by everyone who can afford it. Elder Care is an obvious examples in the US, along with Child Care to a lesser extent. Lots of people consume free or budget versions of these services with which they're dissatisfied, and the root of their dissatisfaction is often that they can't pay enough to get the people providing the service to accept micromanagement, either because there aren't enough of them to implement it, or because they don't need the money enough to put up with it.
I guess the flat-wealth-distribution case is most people grudgingly using some economy-of-scale option leveraging the people with more patience for this kind of work, and a few control freaks either doing it themselves or economizing elsewhere to pay for a boutique option.
> I guess the flat-wealth-distribution case is most people grudgingly using some economy-of-scale option leveraging the people with more patience for this kind of work, and a few control freaks either doing it themselves or economizing elsewhere to pay for a boutique option.
That can be said of practically every industry. They are all segmented by cost/quality, whether that quality is real or perceived.
That said, the goal behind reducing wealth and income disparities isn't to flatten them completely, it's to put a floor under the standard of living of those at the bottom of the wealth/income distribution. That doesn't mean everyone will be consuming boutique products and services, but it means that latent demand, currently repressed by lack of income/wealth, will become active demand, and money velocity in the economy will increase.
Labor is not as simple as supply and demand; a huge portion of a worker's value is in their knowledge and ability to train other workers. When they strike, they are unavailable to train replacements.
Most of the people reading this are likely to be tech workers, so imagine what it would be like to try to join a company that was on strike[1]. How do you log in to your computer? Where's the bug tracker? What are the current goals? Where is the code stored? What part of this code base is actually relevant to what you're doing? What five year old architectural decision means that you can't just do this the obvious way? How do you deploy code? How do you roll back deployments? How do you find the metrics for what went wrong? Imagine trying to figure out the answers to any of these questions without senior engineers around, and in fact nobody around except other strikebreakers with the same questions. When I was at Google it was generally accepted that a new hire would take 3-6 months before the were productive, and that was with considerable help from the rest of the engineers.
Tech is a particularly severe instance of this, but all labor is more complex than it appears on the surface. As any roboticist will tell you, the real world is overwhelmingly detailed.
[1] Don't do this by the way, it's called being a scab, and it's against your own long-term interests. If a strike in your industry succeeds, it raises the average conditions of people in your industry.
"a huge portion of a worker's value is in their knowledge and ability to train other workers. When they strike, they are unavailable to train replacements."
Which would make them more valuable to employers and more in demand. You're proving that wages are a product of supply and demand
Unions are great, but strikes are actually pretty rare. In the short term, they’re bad for workers, too! Striking is always a last resort.
Unions have been on a serious decline the past several decades, but striking isn’t their only power. It’s just the only one you see on the 5 o’clock news, or in Hollywood movies, because it’s the most dramatic.
I agree with this very much. Despite the observations (and people's incorrect intuition about tight labor, before this virus at least), there is a surplus of willing labor to do work. To the extent that part-time gig work has become a necessity for people to stay afloat. You cannnot fundamentally change the situation or get wages/labor power to increase by restricting who can work, artificially raising wages, etc. The mass action of people numbers is hard to counteract, and as long as there are way more people than required for the demand for labor, we will be in this situation.
I'm suprised there isn't any mention of the relation between monopoly power and declining worker power. I'm not an economist, but it seems like if a company gets a monopoly on an industry, it most likely also has a monopsony on workers in that industry, thus reducing the negotiating power of those workers, since they can't go work for another company if their employer treats them badly. At least, not without having to be re-trained to work in a different industry.
It’s sad to see elite American economists fumbling around with productivity and employment issues that Swedish economists like Wigforss, Karleby, Sandler, and the Myrdahls had worked out in the 1930s and 1940s.
It's a feature not a bug. Things that were figured out in the 30's (such as Keynes) were actively fought against by people who didn't like the policy those economic conclusions led to. Mainly because those policies interfered with their plans to gobble everything up.
Entire erroneous economic theories were concocted to wage their war.
AIUI, profits do not really explain inequality. It's a wages dynamic, where the premium that's paid for highly-skilled work tends to grow over time. Separately, wages in highly-regulated sectors (such as law and healthcare) also show significant growth, even though skill requirements haven't changed all that much in these occupations.
Being a life long patient, my observation is that healthcare workers have become A LOT more skillful, knowledgeable, educated. The natural trend towards ever greater specialization and all that.
Have you read Phishing for Phools? The basic idea is that companies innovate in deception as well as efficiency.
This is another way to explain bullshit jobs, obviously someone working to con their customers for their bosses will feel their job is bullshit.
To me this explains most of what is going on. Markets are evolutionary environments for profit making companies. Companies must innovate in production efficiency and product quality. But they must also stay competitive in corrupting regulators, fooling customers and short changing workers.
It's a structural issue. Corporations are designed to extract as much value for shareholders as possible, paying employees as little as possible is a part of that. That includes all levels of compensation, such as awarding shares to employees.
This is co-authored by Larry Summers, whose main ideological bent is that economic activity is good only as long as it serves US interests and can be directed by the US. He is on record as saying that African countries are underpolluted.
This is not to disavow any of the conclusions in the document, but only to provide a framing and context for the kinds of problems he is capable of identifying and the kinds of solutions he is comfortable proposing.
Although the economy is a complex system and it's dangerous to try to over-simplify, my personal opinion is that there are two main and intertwined causes:
1) the cost to participate in the US court system.
2) the abuse of copyright, patent, trademark, and contract[1] law to divorce workers from their experience and treat employee knowledge as company property.
The time and money involved in both pursuing and defending court cases favors larger entities with armies of lawyers and large war chests. Intellectual "property" cases take especially vast amounts of resources because of the fuzziness involved. Meanwhile, treating workers as fungible producers of ideas that can be bought and sold both reduces the bargaining power of individual workers while empowering companies that can amass large portfolios of patents, etc. to use in litigation.
Not sure about reforms for the court system, but patent and copyright reform, combined with restrictions on unfair employment contracts, would go a long way to improving the situation.
TIL: NAIRU. Non-Accelerating Inflation Rate of Unemployment refers to a theoretical level of unemployment below which inflation would be expected to rise. It was first introduced as NIRU (non-inflationary rate of unemployment) by Franco Modigliani and Lucas Papademos in 1975, as an improvement over the "natural rate of unemployment" concept which was proposed earlier by Milton Friedman.
In the United States, estimates of NAIRU typically range between 5 and 6%.
Monetary policy conducted under the assumption of a NAIRU typically involves allowing just enough unemployment in the economy to prevent inflation rising above a given target figure. Prices are allowed to increase gradually and some unemployment is tolerated.
It’s a fascinating thing to realize that policymakers consider zero unemployment to be too low. The economy is built on the idea that some people at the bottom will be desperate enough to keep minimum wages low.
Zero unemployment would be bad because it would imply there’s no churn of people leaving one job for another. Back last year when unemployment was 3.5% most of that is people choosing to leave a job to find a new one.
But on average a few percent of people will be unemployed at the moment the survey week is conducted. And that is what the unemployment rate is measuring.
Let's look at this mathematically. If the average person changes jobs every four to five years, and spends two-three weeks unemployed doing so, as they already have a plan for their next job, you would expect a job-related unemployement rate of around 1% due to job changes.
In practice it makes up around 2%. The remainder in good times is people who were just fired, a few layoffs (since even in booms businesses can fail) and a few people entering the workforce.
Unemployment to some degree is functionally a form of a buffer or reserve of labor. Obviously there is also a measure of skill mismatch, lag time, and similiar as well but lacking a reserve leads to disruptions which interupt growth and advancement.
While there is a bias against raising minimium wage there is also a fundamental constraint - if a job can't pay for itself in value generation it isn't sustainable.
I think that a major factor is the increasing number of roles occupied by workers. Workers were easier to organize when large numbers performed similar job functions in large manufacturing industries. Now manufacturing that requires a large number of one type of worker has been offshored. The residual manufacturing is either highly automated, or it is producing a large array of higher-tech products requiring a wider variety of skill sets.
The new service economy also requires a vast number of different roles fitting into partially automated business processes. As the degree of automation shifts, roles change rapidly. This makes it difficult to engage in union bargaining to arrive at contracts that define wages and benefits for specific jobs.
> But the decline in the labour share has been much more pronounced in the US than in other industrialised economies which are arguably similarly exposed to globalisation and technological change
The US happens to have a huge population speaking the same language and dealing with roughly the same regulations, so the economies of scale are even better. But, as the article says, labor everywhere faces the same risks.
If compared to European countries the US has higher wages generally, is it possible this effect is due to wages in those economies being at or near the wage floor already?
The problem is not just consolidation, which is certainly happening.
The real problem is that certain industries (e.g. airlines) supposedly compete on prices and service, but large chunks of their stocks are owned by the same investors. It doesn't take a smart brain to imagine what happens behind the scenes...
Could it be that Larry Summers, proponent of deregulation and globalization, could have contributed to the destruction of the American worker? Ironically, no mention of those policies here.
There's also his 1998 attack on Brooksley Born and her proposal to regulate swaps. This proposal would have likely avoided or mitigated the 2008 crisis [1,2].
If I made an error that big, it would take some huge new insight for my research to be taken seriously again.
Depends so much on what deregulation you mean. If you mean deregulating from an antitrust perspective, sure that could be blamed. I don’t know specifically of him doing so, though, it’s completely possible.
However, have you ever tried to open or run a small business? The regulations are INSANE especially if you want a physical location. Go try and build housing in the city that needs it most. Good luck. Free the fucking markets a bit. It works.
"Radical Markets" by Weyl and Posner (2018) is a very accessible summary of what you might call "neo-Georgist" thinking.
George's essential political idea was that society is not a struggle between labor (workers) and capital (entrepreneurs, investors, landowners, etc), but between rentiers - paradigmatically landlowners, but in neo-Georgist thought all "owners" - and the "productive" classes (labor and entrepreneurial capital). For George, the general interest can always be identified with capital accumulation. Rentiers stand in the way of capital accumulation, and thus in the way of the general interest.
Many software developers feel the line between entrepreneurial capital and highly remunerated wage work is quite blurry because, for at least two decades, they have seen a significant amount of upward and downward mobility. Who doesn't know someone who started a "lifestyle business", retired early, or cashed out some stock options and played the VC game a bit? Combine this with the obvious dysfunctionality of the Bay Area housing market, VC excess, etc. and Georgism seems entirely natural.
The difficult questions for the neo-Georgists include: Can capital accumulation really be identified with welfare? Given how stagnant labor productivity enhancing technological development has been for two decades, can we really assume institutional changes will boost it? If they can't, doesn't this make the normative questions all the more difficult?
I fail to see this in High Tech Companies, let's take FANG for example, by various measure we can call these monopolies, now if you look at their worker's earning, they earn by far the highest in the industry for same type of job. So that seems to have failed the premise of this argument "Declining worker power vs. rising monopoly power:"
In a bubble, yes. But if you compare them to the top paying jobs of prior generations (say finance jobs of 20 years ago) they are actually pretty paltry wages in comparison. Plus, 250K in San Francisco where the average home is over a million dollars is not really that great.
this statement by the authors is silly on it's face...
They claim that the US has seen a falling labor share due to the following --- "the decline in worker power – as private sector unionization and union power fell, the real value of the minimum wage declined, shareholder activism increased, and ‘ruthless’ management tactics became widespread"
The authors are either locked up in their academic high tower and out of touch or they are writing to serve a political agenda.
Unions served a valuable purpose when management was truly "ruthless", however nothing in current work culture remotely approaches "ruthless" anymore.
Unions are effective at increasing pay in return for less production. it's sad but true. There are few unions left that actually have anything resembling an ethic of hard work when compared to non-union norms. These remnants of hard working union types are only found in the blue collar "gloves and sweat" industries.
That point aside, America has lost it's blue collar labor force because we have developed a technocratic, first world, entitlement culture that considers physical labor as an untenable acquaintance.
Meanwhile, the rest of the world has to fight and struggle to survive and hard work is a fact of life and a measure of worth. Consequently, Americas blue collar workforce is simply out worked by the rest of the world and if not for the immigrant work force, that bring the drive and desire to work hard with them, American labor would be in an even worse predicament.
Pricing power for the workforce does exist in America and examples abound. However, it is these unionized parts of the economy that have contributed to the downward trend in labor share by offering less production in return for extorted compensation increases.
American born workforce has lost the cultural sponsorship of physical labor and each generation laments the laziness of the next. This is the underlying reason that America's share of world labor has declined.
The law of increasing concentration of capital is probably the most successful prediction made by Karl Marx until now. Just another sample:
"Since the 1950s, food retailing in the UK has undergone a massive shift from high streets, covered markets and district centres full of small independent specialist food shops; grocers, greengrocers, bakers and butchers, to the domination of food retailing by the "big four" supermarket chains; Tesco, Asda, Sainsbury's and Morrisons. In 1960 small independent retailers had a 60% share of the food retail market, supermarkets about 20%. Now the small independents share is reduced to 6%, while the multiples' share has increased to 88%.7"
This related video pops to mind
TL;DR buybacks and CEOs bonuses based on share value, create an incentive not to invest in the worker force
https://youtu.be/ylLTMYt24lA
Marx literally wrote about this in Das Kapital over a 100 years ago laying out the mechanisms of capitalist consolidation:
The splitting-up of the total social capital into many individual capitals or the repulsion of its fractions from one another, is counteracted by their attraction. This last does not mean that simple concentration of the means of production and of the command over labour, which is identical with accumulation. It is concentration of capitals already formed, destruction of their individual independence, expropriation of capitalist by capitalist, transformation of many small into few large capitals. This process differs from the former in this, that it only presupposes a change in the distribution of capital already on hand, and functioning; its field of action is therefore not limited by the absolute growth of social wealth, by the absolute limits of accumulation. Capital grows in one place to a huge mass in a single hand, because it has in another place been lost by many. This is the centralization proper, as distinct from accumulation and concentration.
The laws of this centralization of capitals, or of the attraction of capital by capital, cannot be developed here. A brief hint at a few facts must suffice. The battle of competition is fought by cheapening of commodities. The cheapness of commodities depends, coeteris pribus, on the productiveness of labour, and this again on the scale of production. Therefore, the larger capitals beat the smaller. It will further be remembered that, with the development of the capitalist mode of production, there is an increase in the minimum amount of individual capital necessary to carry on a business under its normal conditions. The smaller capitals, therefore, crowd into spheres of production which Modern Industry has only sporadically or incompletely got hold of. Here competition rages in direct proportion to the number, and the inverse proportion to the magnitudes, of the antagonistic capitals. It always ends in the ruin of many small capitalists, whose capitals partly pass into the hand of their conquerors, partly vanish. Apart from this, with capitalist production an altogether new force comes into play - the credit system.
In its beginnings, the credit system sneaks in as a modest helper of accumulation and draws by invisible threads the money resources scattered all over the surface of society into the hands of individual or associated capitalists. But soon it becomes a new and formidable weapon in the competitive struggle, and finally it transforms itself into an immense social mechanism for centralization of capitals.
Except that the rate of profit has fallen and is falling, with small fluctuations year over year.
It is possible for monopoly and industry power to crush worker power, while the rate of profit increases. In fact, this is exactly what he predicted.
The mechanism for this to happen is simply accumulation of capital.
Another reality is that the profits of many industries such as the financial industries are not predicted to fall according to Marx, only that of commodity-producing industries. An absolutely huge part of modern profits is not profits according to the definition used at the time, and not realizable or even intangible. If you look at the rate of profit in commodity-producing industries, you will find that it is exceedingly thin in a great many cases, and that often profit is only realized via financial instruments (for example, the sale of new cars).
Politics is the study of how power is distributed in a society. By definition, almost everything you could discuss involves politics.
Complaining that something is "political" usually means "I have everything I need with regards to power distribution in society, why are you wasting my time talking about what you want?"
Renters don't do "nothing." Part of the job of these rentiers - through the profit motive - is to allocate property to the highest (most efficient) economic use: someone who wants that land has to show that costs (which represent the value other people place on alternative uses) are less than the income, or the value people place on the proposed use. So they have to show that their uses is the use that satisfied the most values. Basic price theory.
Then, they get money from rent if they successfully allocate this land. If they unsuccessfully allocate it they have an incentive to undo that mistake (evict) and try again next time - and those who are really good at allocating well get more resources.
Now, whether the ones that "got there first" should get land is a good question, but it really doesn't apply in a market, since those who actually have the best record allocating land resources will end up with more land, no matter the original distribution. I would like to ask though, how else should we initially allocate propert?
I'm skeptical of its implementation. So much land is bought up by a small number of entities with a lot of money then rented out at a profit indefinitely with little to no value added. My parents have been paying rent for 15 years and the only involvement from the landlord has been fixing the heater once or twice after having to be harassed to do so. In this situation he's essentially a parasitic middleman for property taxes.
There are legitimate reasons people may want to rent instead of own, but it seems to me that it needs to be curtailed to some extent. Maybe controls on how much property can be rented or owned without occupying so that people who want to live in a house without sending half their paycheck into a black hole all their lives have a better chance.
I don't think artificial limits are the answer. A far better way to do it is to regulate the rental market in ways that increase the quality of rental accommodation across the board (minimum sizes, improved safety standards, increased tenant rights etc). This puts off people looking for a cheap buck but allows people who can efficiently provide quality housing stock to make a fair profit.
I am not an economist. Compared with the hard sciences (physics, biology, chemistry, mathematics) economics is still quite new and I suspect there would be more people seeing these trends and offer other models trying to explain them.
From a libertarian acquaintance the root cause is clear. Going off the Gold standard[1] in the US. I am not completely convinced.
Some consolidation is natural, but a huge part is caused by mergers and acquisitions (M&A) fulled by Private Equity. The M&A benefits the shareholders of participating companies at the expense of consumers, employees, and other companies.