This is another example of caging the eyes to a nation when the network effects are global.
Worldwide inequality is falling, that is well documented. So the Keynesian prognostication about a life of desirable idleness based on re-investment of capital into local markets and automation was slowed because the capital found cheaper means than automation for growth.
So when you want to talk about social equality look at the impact global capitalism had on South Korea from 1950-today (as just one example).
>Worldwide inequality is falling, that is well documented.
I was under the impression that this is mostly or solely due to extravagant growth pulling hundreds of millions of Chinese out of poverty, and that once you factor this out (which you should, since the Chinese are employing protectionist, state-capitalist policies rather than standard IMF/WTO-flavored neoliberal ones), global inequality has been rising.
Where is the documentation for worldwide inequality falling? According to this page for instance GINI (a measure of inequality) has been rising in most countries since the 1980s: http://geo-mexico.com/?p=5044
The stat I've heard (in soundbite form; I don't have solid data for this) is that inequality within countries is rising across the board, but inequality between countries is falling. In other words, a rich Chinese person is now much richer than a poor Chinese person, a rich Mexican is now much richer than a poor Mexican, and a rich American is much richer than a poor American. However, a rich Chinese person or Mexican is now almost as rich as a rich American, while a poor American is now nearly as poor as a poor Mexican. And a rich Chinese person is significantly wealthier than a poor American, while it used to be that poor Americans were significantly wealthier than even wealthy Chinese.
There's plenty of anecdotal evidence to support this, eg. the richest person in the world was Mexican from 2010-2013, and it also makes a lot of sense when you consider how globalization works.
I wasn't suggesting anything with my original post, merely stating a hypothesis about how the world is. It's possible to have a fact without a value judgment.
...but now that you ask, yes, I do think this is a good thing. It strikes me as a ridiculous injustice that the biggest single determinant of your lifetime income is the geographic location of your birth. Anything that makes that less arbitrary and more under your control will lead to a more just world, in my book.
Yes, that means that the economic system is chaotic at present and some people are getting left behind. However, it's far easier to pick up the skills needed to survive in today's economy than it was to move to the U.S. and get American citizenship in past generations.
How is it not? Or are you saying there is some sort of nationality inferiority that should drive the attainment of non-Americans below that of all others?
Over the past half century, China has brought the most people out of poverty in world history. These are the forces at play.
Inequality within a country is a far greater (inverse) predictor of your unborn grandchild's standard of living than worldwide inequality. There's enough wealth in the world to go around if evenly distributed.
Decreasing inequality between nations is surely a good thing. However, the increasing inequality inside nations is dangerous not just because of a sense of injustice - concentrated wealth implies concentrated power, and concentrated power tends to be at odds with a democratic model.
Also, China may have brought a lot of people out of poverty but they're doing so partially by sacrificing the health and in effect lives of hundred of millions of citizens with pollution way off the safety scale.
World Bank report 2012[1]: For the first time since this monitoring task began, the data indicate a decline in both the poverty rate and the number of poor in all six regions of the developing world
Kings College 2013[2]: In this paper we explore who have been the winners and losers from global growth since 1990
Economist Special Section 2012[3] - More nuanced and could offer a slightly alternative if generally positive example
What GINI misses is that the floor is rising across the board. So while internal to a country it may be spreading, between nations is shrinking: meaning a higher quality of life at the mean. See my other comment for documentation.
>the American government was responsible for much of the social equality
The people that fought for social equality are the ones who are responsible for making it politically desirable. After their fight came the post-war economic boom which made US labor an economically valuable resource worth treating well. Globalization and the rise of automation now brings us back to considering US labor a surplus to be had cheap. Government policy will likely claw back expenses that contribute to social equality accordingly until unrest grows.
> The people that fought for social equality are the ones who are responsible for making it politically desirable.
Absolutely, but I'm pretty sure when writing for a US audience it's foolish to so much as hint that good working conditions may in any way relate to the work of union organisation.
Basically, America is separating into aristocrats and peasants.
There's one very, very important difference: aristocrats were generally in a heritable position that couldn't be taken from them, and peasants were generally in a heritable position from which they couldn't rise. In the U.S., at least, relatively wealthy / successful people can fall and relatively poor / unsuccessful people can rise. In classic feudal societies, this was basically impossible without revolutions.
To be honest, I have no idea what will do the trick. There is unlikely to be another WW2, another G.I. bill, another 50s-type broad-based economic boom.
This is really true, and it's arguably the most important part of this blog post, of Tyler Cowen's recent book Average is Over, and in many of the more honest discussions by people who are trying to get a handle of what's going on in the larger world.
>>There's one very, very important difference: aristocrats were generally in a heritable position that couldn't be taken from them, and peasants were generally in a heritable position from which they couldn't rise. In the U.S., at least, relatively wealthy / successful people can fall and relatively poor / unsuccessful people can rise. In classic feudal societies, this was basically impossible without revolutions.
That's true for now. But the way things are heading; the rich get richer and the poor get poorer. The barrier dividing the 2 gets a little harder to cross every year.
You're right -- Ye olden aristocrats had land, and land produced rents and taxes. Today's plutocrats aren't in as stable a position as a feudal lord, but many are in effect landlords, either literally or figuratively via control of critical businesses.
The postwar US was a totally different story. Europe and Asia's losses were our gain. The government had billions of dollars in off book debt, (ie. social security trust fund) and used that capital to launch the computer revolution.
Will it happen again? I wouldn't dismiss it... No nation is more strategically embedded in the new information economy than the US. At the end of the day, the US is the devil the world knows and needs.
Indeed. And middle-class consumer demand not only drives significant parts of the economy directly, it has major spin-off effects that impact the health as the economy as a whole and the potential healthy growth rate of the economy.
For anyone who depends on a healthy, growing economy for their livelihood and/or wealth, there's a pretty good case to be made that it is in your enlightened self-interest to do anything within reason to promote a large, prosperous middle class with the surplus purchasing power to drive future economic growth.
HN is for things hackers find interesting. I, for one, find ruminations on the deepest problems facing society to be more interesting than SnapCrush's Series B or the latest Javascript that isn't Javascript.
A year or so ago I felt that the discourse on HN was so expert, I was afraid to join in. If a topic such as this came up, I would wonder, "Christ, is everyone on this board an economist too?" Time was, the pathos, the me-toos, and the ad-homs were unwritten.
I think that a lot of less qualified people recognized the quality of HN and began browsing here. When a general interest topic comes up, it's their opportunity to have an opinion.
With that comes upvotes and comments. I really don't care about your passionate, unnuanced assessment of American politics, or the articles you want me to read because they echo your beliefs. I want the stuff that doesn't make sense to me so I can make it make sense. I want to follow the economic and professional climate of this engine of innovation.
I found HN by following a link in a comment on reddit, to which someone had directed the admonishment, "Please don't ruin that." I won't say that HN has been ruined since I came here but it has undeniably changed.
I've noticed the HN hive mind becomes interested in certain types of non-tech topics for a few days and then moves back to tech.
I find the non-tech links to usually be an interesting diversion but I have to resist the temptation of adding my own hot air to all of the arm chair philosophy in the comment section. I often fail in this attempt.
Surely inventing new technology to disrupt markets requires a deep understanding of those markets, and the social fabric they are woven in? Surely software is made by people, and understanding people is key to understanding the process of making software? It's not an accident that the greatest inventors were renaissance men and women, with broad and deep understanding across many areas.
The book is really good and definitely worth a read, especially for the analysis he presents in the first few chapters. The "Fishtown" vs. "Belmont" graphs are brilliant. They do a great job illustrating just how much trends in marriage vary between classes. The upper 20% still marry and divorce at the same rates they did in the 60s, but the bottom 30% has changed dramatically.
Murray also does great analysis on what he calls "SuperZIPs": the zip codes in the top 5% of combined income and education. You can see you score here:
Thank you for this link. I've only gotten through part 1 so far, but it's a devastating critique of Murray's framing of the problem.
One particularly interesting bit:
> As I looked backward and forward in time, however, I had to face this awkward fact: America became more culturally stable between 1910 and 1960 as it became less economically and socially libertarian. As it became more economically and socially libertarian after 1970, America became culturally less stable:
> "The greatest generation was also the statist generation. Like them or loathe them, the middle decades of the twentieth century were an entirely anomalous period in American history. Never had the state been so strong, never had people submitted as uncomplainingly, never had the country been more economically equal, never had it been more ethnically homogeneous, seldom was its political consensus more overpowering."
People with education and good parents are at the table playing the game. The poor and disadvantaged are playing a different game, with its own pressures and psychological frame. Decision making is dependant on psychological frame, and decisions made by players either game look strange to players in the other. The OP makes the mistake of moralising when he should be empathising.
The problem with that thinking is the poor and uneducated make demands on the educated and productive. If they want to live in squalor, who am I to judge. If they want what I have, I have something to say about that.
Surely you don't begrudge them wanting/aspiring to something better. I presume you mean that if they expect to have the trappings of success without putting in any effort then you have something to say. But even then, that is merely an expectation that will remain unfulfilled. If a group of people actually receives the trappings of success without effort then, I agree with you, but this is not born out by everyday experience. The poor and disadvantaged are comparatively, well, poor and disadvantaged when compared to the successful. So, if my anecdotal experience matches reality then the problem becomes, "how best to help?".
Just the other day I got my hair cut in a poor white neighborhood, and the barber spent the whole time telling me about "that bitch" who was the mother of his children.
Hm. My barber talks that way too, in fact that could easily be a direct quote. And his shop is in a very liberal, progressive university town. Maybe that's just the way guys talk when there's no women around?
My point was not that no guys do, of course I know some do. The OP used 'guys' to seemingly include all men. My point was that, no, not all men do, so you don't get to play the "everyone does it so it's okay" rationalization card.
My point was that, no, not all men do, so you don't get to play the "everyone does it so it's okay" rationalization card.
Well, we aren't stupid either, and I'm sure most of us didn't take it that way, so if you want to address the contextual nature of his comment then maybe do that instead of scandalizing yourself in pity for the silent nongeneralizers.
Labor laws make it difficult for people in lower income tiers to climb up the income ladder. It's difficult for people who are working less than fulltime jobs to work more hours because of the "40hr = benefits" laws, so instead folks have to work multiple jobs which adds transportation costs and scheduling complexities. The preponderance of regulations and complex taxes has made it more difficult to start many types of companies as an individual, putting them out of reach of folks who don't have significant savings and existing income.
Public education is no longer as much of a guarantor of basic literacy as it once was, so college education is increasingly becoming a necessary credential for many office work, knowledge work, and "professional" jobs, putting those out of the reach of many low income folks who are put off by taking on so much student loan debt or can't afford to support themselves and put themselves through college at the same time.
Similarly, anti-blue-collar sentiment has grown, devaluing such jobs culturally and discouraging people from pursuing such positions, even though many are well paying and can serve as spring boards to even higher paying jobs (e.g. self-employment). Moreover, the reduction in vocational training, shop classes, and so forth in public schooling has pushed a lot of those jobs even farther away from the average American adult.
The War on Drugs: which impacts lower income, blue-collar, and non-white people more. If you get caught with weed as a sub-urban white teen you'll face different consequences than if you're an inner-city black teen.
Some of these trends will hopefully turn around, especially with the help of the internet in terms of education, crowd funding, and so forth, but it's still going to be a pretty difficult problem for some time.
The upper middle class are collaborators, taking part in the oppression of the working class in exchange for being lifted above it. The mercenaries of class warfare.
This is the very essence of the Marxist-Leninist doctrine. At first I was repulsed to get involved, but exactly ignoring things is is how they escalate. What kind of oppression do you imply an educated person invariably is guilty of? How about the other way around - what an uneducated "oppressed" person is entitled to have and hasn't? What could you do if you'd be in the leading circle for the lower class given the economic circumstances of our current time? These are just some elementary questions that I think deserve answers before pointing fingers and doing the hanging.
Pretty much, except for those of us trying to find the big red button we push to bring the whole thing crashing down.
Yes, I know how that sounds. Sorry, but I don't want to maintain and support a system in which my parents, my friends, and my children all face a steady worsening of their lives just because they're not programmers and don't have a million in assets. This society can either fix itself, or it is becoming something worth destroying.
I am no sociologist, but I think it would be rather safe to say that to it is going to take a lot for this to change. We've clearly adapted to the divide between the mega-rich and the "middle" class, so I am not sure it is a matter of survival so much as a matter of principle.
I think it would take a lot of people collectively thinking and acting differently than we do now. I am just one person, but it is my goal to live my life with the intent of turning this situation around. I believe the spirit of entrepreneurship, which is generally well-supported on HN, is a piece of this - designing and building the next generation of companies who choose to conduct business in ways that support (rather than exploit) the middle class. Hence, I am an entrepreneur.
The progressive left would solve this problem with increased taxation on the rich, which would ostensibly be used to fund more social programs for the poor. Take from the Belmonts, give to the Fishtowners. Raise the minimum wage, increase regulation, enforce stricter laws that encourage equity for all. Perhaps some form of guaranteed income.
The libertarians would solve this problem by eliminating barriers to success. Lessen business owner regulatory burdens, eliminate federal income taxes, eliminate the minimum wage, and impose as few hurdles as possible to whomever wants to hang their own shingle and provide a service.
I'm not sure what the Republicans would want, really, or at least not specifically enough to enunciate it here on their behalf, but let's say it's somewhere in the middle.
If you're able to succeed as an entrepreneur enough to be able to have some degree of influence on the problem, then you'd be a spokesperson for either the democrats or the libertarians. By your success, you'll be advocating the possibility of one to pull themselves up by their bootstraps, hang their own shingle, and become financially stable in the process, but by having attained that success, you would similarly be the target of progressive taxation, and would now be a sympathetic Belmont, from whom riches will be collected and distributed to Fishtown.
Basic income or a negative income tax actually generally seem to be libertarian ideas, suggested as a way to radically simplify the welfare system and limit how much discretion the government had over whom and how much to pay. They are also usually coupled with eliminating the minimum wage since everyone is already guaranteed an income.
My understanding is that liberals prefer welfare programs with significantly more oversight and targeting. They want fine control over who gets the money and how they can spend it, promoting specific causes like education or environmentalism.
What practices have resulted in things being the way they are now? These practices are largely attributable to businesses whose policies are endorsed and enacted through government. Government politics are a complete morass and you've done an excellent job of painting how various parties might try and solve the problem.
So if government is a morass, how do you approach the problem? Certainly a career in politics is out of the question based on this presupposition. One might consider simply adapting how they act in their daily interactions with others. Personally I think this idea is too small-scale.
In my opinion, one strategy would be through the business side. Create a business whose policies create the type of change necessary for closing the gap between the mega-rich and "middle" class. The argument has been made in this thread that in order to compete, it is impossible to instate these types of policies. However, I believe this to be a false assumption. Certainly companies, even large ones, fall into a spectrum of "good" and "bad" practices. There appears to be no bound to either side. I take the David Deutschian view that any problem can be solved with the right knowledge¹. So the question is, can we think creatively, critically, and intelligently enough to solve this problem in business?
I believe the answer is yes.
¹ EDIT: Any problem whose solution is not explicitly prohibited by the nature of reality.
I don't know that it's a panacea, but at least pertaining to labor laws, Trader Joe's is fairly well regarded.
A couple of simple rules that would take you a very long way towards being the "right" kind of company:
- Pay better than minimum wage. Pay a lot better than minimum wage, in fact; even for the lowest employee.
- Pay your highest paid executives less than we're used to seeing. I don't know why, but people just absolutely hate it when CEO of such and such is making $x million dollars a year, while the cashiers of so and so are absolutely starving on minimum wage. Cap executive wages to some multiple of the lowest wage. If the CEO wants to make a $10 million a year, then the janitor would have to make $1 million a year; as an example.
- Don't cap employee position pay. Have starting wages, of course, and make them generous, but if a cashier has been with you for 172 years, she should have received raises (assuming they were merited) every year, or be let go, if she didn't merit them.
- Don't lobby Congress for personal / business gain. I've argued it extensively elsewhere on HN recently, so I won't go into it again now, but I think that people's problems with capitalism aren't actually complaints with capitalism, but a complaint with the crony capitalism that we have in America. IBM lobbies for increased patent protections, makes a billion dollars, pays the guy who thought of it $10 million, and now everybody hates IBM, and especially that guy. If the system were both fair and fairly applied, sure, the Fishtowners might complain, but there would be more in the way of income mobility for the motivated, which should elevate the lower class to a true middle class for those willing to earn it, which would act as a bulwark against unruliness.
When Warren Buffet complains that he's being taxed too little, the cynic in me thinks that he wants his less rich competitors to be taxed out of being able to truly compete, while he enjoys his largesse, knowing that no amount of taxation would really have any impact on his lifestyle. For as generous as progressive seems when taken away from the uber-rich, it actually is a penalty for those just on the cusp of wealthy, and keeps them stuck in middle class without an effective means of pushing past it.
I absolutely agree with almost everything you've said here. You've essentially described the kind of company culture I want to build.
In particular, you nailed it when you talked about the difference between "capitalism" and "crony capitalism". I personally do not have a problem with capitalism in its pure form (as I understand it). At the risk of sounding like I am parroting a platitude - perhaps I am - I think that capitalism is too often understood to be a zero-sum entity.
I believe that the best way to do this is to set a standard of ethics by which you operate your company and then to be as successful as possible within that context. Be competitive; don't use competition as an excuse to contribute to the American economic divide.
And now I really will parrot the Buckminster Fuller quote that many people are intimately familiar with:
"We must do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest."
All around the world, educated women with a first-world standard of living are the weakest producers of babies humanity has ever known. Wealthy, educated people simply don't overpopulate.
"For as generous as progressive seems when taken away from the uber-rich, it actually is a penalty for those just on the cusp of wealthy, and keeps them stuck in middle class without an effective means of pushing past it."
That is assumption somewhat based on the current marginal tax brackets. There would be no reason that a progressive tax could not be designed so that moderately wealthy individuals would pay
a similar effective tax rates compared to the "middle class", and then require the to X% pay significantly more (those earning more than say 10 million, for example).
Or better yet, do as Warren Buffet himself proposes, which is harmonizing the capital gains and marginal tax brackets such there is a flat effective tax for all income levels. Buffet generally argues that he and his secretary should be paying the same effective tax rate, not that high-income individuals should be coercively taxed. (funnily enough, President Reagan made an identical argument comparing a secretary's tax rate to their boss).
A flat tax could potentially be lower for most or all taxpayers, there's nothing in it that requires it to increase the tax burden.
I was presenting the schools of thought available, so I felt it fair to attribute the beliefs to their bearers as best I was able. There wasn't any malice presented, as there wasn't any intended, nor were there any attempts at backhandedness so often seen with those sorts of examples (E.g., party A wants to lower taxes, party B wants to raise taxes, and party C wants to make sport of killing the poor.)
I'm not selling anything, nor trying to sell anybody on anything, so I didn't see the harm in being forthcoming.
You weren't "being forthcoming", you were stereotyping.
Even a casual read of your comment leaves one with little question which group you think are the "good guys", and which ones you think are full of shit.
Simplistic analyses like that are a big part of why politics in America are as fucked up as they are: because we've been conditioned to generalize about huge numbers of people on the basis of affiliation with one or the other of a more or less completely "forced choice" between political parties.
But, yeah, go ahead and assert that everyone in the progressive left wants to siphon money from investment accounts in Belmont and deposit it into checking accounts in Fishtown. Go ahead and suggest that all libertarians (note, small-l, per original) want to abolish the minimum wage, or Federal income taxes.
That's what I'm talking about when I observe the breadth of your brush. It's impossibly broad.
I don't think either ones are necessarily full of shit honestly. If the problem to be addressed is income inequality, or wealth distribution, or whichever particular categorization of the problem of "poor people are poor" you want to optimize for, they're both decent solutions in theory.
If you'd like to know my personal preference, I'd be happy to discuss that offline, but spoiler alert, it isn't either of the solutions I presented.
As far as the generalizations, if I miscategorized anyone's beliefs, then I'm sorry. None of what I presented was meant as a critique... really. But progressive taxation seems to be the prevailing theory coming out of the progressive camp, and tax abolitionism seems to be the prevailing theory coming out of the libertarian camp.
As for the stereotype though, I will say that I relied upon the reader to reject the assertion that "all" of any demographic wants a particular thing, because I agree that is an impossibly broad assertion. Again though, if I gave cause for offense, I apologize.
I disagree. In the five years I've been posting here, what I've found is that anybody that wanted to get offended would be offended whether I referred to the parties by name or as abstract schools of thought.
If I hadn't put the party affiliations, and had gotten something wrong, I'm not naive enough to think that anybody would have been fooled by that. Had anybody felt that I misrepresented either party, I'd have been corrected, labels or not, only instead of being able to respond directly, I'd have hard to parse through layers of obscurity to figure out which metric was even the topic of discussion.
People are going to be pissed if they feel that their positions are slighted; I just figure the better tactic is to avoid insulting the position vs. obscuring which position I insult. And, as I stated, each of the positions I referenced is, to my knowledge, equally as likely of standing a chance at solving the matter at hand as the other.
I suppose that is a derogatory remark, but I never claimed that to be an entrepreneur is a new thing. It is demonstrably not. What I did try to suggest is that it is perhaps a good way to deconstruct this problem.
He didn't say that being an entrepreneur is a new thing. He made a reference to this: http://en.wikipedia.org/wiki/Petite_bourgeoisie ("Petite bourgeoisie ... is a French term (sometimes derogatory) referring to a social class comprising semi-autonomous peasantry and small-scale merchants whose politico-economic ideological stance is determined by reflecting that of a haute (high) bourgeoisie, with which the petite bourgeoisie seeks to identify itself, and whose bourgeois morality it strives to imitate.")
Ultimately, I think business, whether you're talking about small ones or big ones, socially responsible ones or irresponsible ones, are neither the problem nor the solution. In a market economy, the health of the middle class is function of the supply versus the demand for labor.
Being a well-intentioned entrepreneur isn't going to have any impact on the equilibrium. The minute you become big enough to have a non-zero impact, you'll be big enough to feel the heat of competition from China, India, etc, and will be forced to adopt whatever labor-saving measures they adopt.
I understand the term. I was trying to underscore (unsuccessfully, apparently) that my original point was to be an entrepreneur whose principles depart from that of the current establishment. In other words, what I was suggesting was the exact opposite.
I could only interpret the response as a glib remark that to be an entrepreneur in any sense necessarily makes you an imitator of this establishment. My view on this, however, is slightly less cynical.
>Being a well-intentioned entrepreneur isn't going to have any impact on the equilibrium. The minute you become big enough to have a non-zero impact, you'll be big enough to feel the heat of competition from China, India, etc, and will be forced to adopt whatever labor-saving measures they adopt.
Well said.
Is there a game going on already.. once you get in, you are just another player that must play by the rules.. so how you could change the rules?
The way i see it, you need to create new games, with distinct rules, in a way this alternative game could get so big as the other one to make a stand against it in the first place..
Some ideas that can subvert the current rules for instance, are the ones like the social entrepreneurship.. companies that do profit, with a proper working economical engine; but are not for-profit..
I like this post. How do we solve this as a society? Sometimes I wonder when the earth will reach it's maximum number of human inhabitants. Will there me a meritocratic system for reproduction? What factors will/can be taken into account?
When the Earth reaches peak human occupancy, it's likely nobody will feel the need to do anything about it. Whatever reproduction rate we're at at equilibrium will then be perceived as completely normal.
Interesting post. I pretty much agree on all points and don't see solutions either.
It's not always so easy to peg down where we're at though. I grew up with a Fishtown income and family life but got the Belmont education. I've been wedged in between both groups my whole life and don't really feel a belonging to either. I know very well how both live.
There are a lot of problems; class divide is rapidly getting worse. It looks like this is something that a lot of people are worried about too, so some large change in either direction might be on the horizon. I'd like to hope that change is the right one, but I can't.
Which is beside the point -- the point being that modern society was supposed (for most of the 20th century) to be moving AWAY from all that, not back to Dickensian times or worse.
OP's picture of our economic reality is overly simplistic.
The Urban Archipaelogo[0] is the new era of politics, not this false stratification/dichotomy of proletariat, bourgeoise, and archetypes in between, which cannot explain network effects.
Class is a spectrum condition/disorder of society.
I saw that article as well and almost posted it. Very interesting cross thoughts between the Stranger article and the Noah Smith article. Everyone agrees that there is this is happening but no one seems to know what to do about it.
Worldwide inequality is falling, that is well documented. So the Keynesian prognostication about a life of desirable idleness based on re-investment of capital into local markets and automation was slowed because the capital found cheaper means than automation for growth.
So when you want to talk about social equality look at the impact global capitalism had on South Korea from 1950-today (as just one example).