Saturday, April 15, 2017

Drowning in Riches: Income Inequality and the Future of Capitalism and Economics



Drowning in Riches: Income Inequality and the Future of Capitalism and Economics

Economist Joseph Stiglitz and many others have noted that income inequality continues to rise, particularly in affluent countries, and that it may inevitably continue to rise in our current economic system where it is money that makes money. We have not only billionaires but plenty of ten-billionaires and we are closing in on the first one-hundred-billionaire, a person who would be a millionaire 10,000 times over! (as a ten-billionaire is a millionaire 1000 times over!). Sure these billionaires are often (but not always) philanthropic. Many also seek to influence elections and social policies. The U.S. is now literally being run by billionaires in what is quite possibly the most affluent presidential administration to ever be assembled. According to Oxfam total global wealth is at $256 trillion, the six wealthiest men are worth $412 billion, and the poorest half of our seven-plus billion people are worth $410 billion. Thus, they conclude, the six wealthiest men are worth more than half of the world’s population on the poorest end. The article, referenced below, refers to this situation as “morbid inequality,” and seriously at issue is that this inequality has been growing and continues to grow. The six wealthiest men: Bill Gates, Warren Buffet, Amazon CEO Jeff Bezos, Amancia Ortega, Facebook CEO Mark Zuckerberg, and Carlos Slim Helu (with Google’s Larry Carlson very close at no. 7) have continued to get wealthier, according to the article gaining $69 billion in the past year alone! It seems they can’t lose. Interestingly, these are not your typical conservative resource baron/tycoon billionaires (of which there are many) but most are tech billionaires – so probably more liberal in outlook. Incidentally, if the total global wealth of $256 trillion were divided by the global population of 7+ billion, the avg. worth of all if all were equal would be somewhere around $35,000 – a pittance for those used to wealth but a fortune to the global poor in developing countries.

Apparently, Jeff Bezos’s company Amazon has never showed a profit but has vastly increased revenue over the years. This means simply that creative accounting was employed, which allowed the company to dodge taxes on profit and defer it to capital gains at a much lower rate. This has allowed Amazon to grow and Bezos to become one of the richest humans on the planet – basically by running and growing a marginally profitable company. Amazon is not alone.

The Intuitive Sense of Justice and Fairness

Experiments by social psychologists and cognitive neuroscientists have shown that humans have an intuitive or innate sense of justice and fairness. This is related to the reward system in the brain. We value being just and fair. Income inequality does not seem fair. In America and elsewhere the quest for a strong and stable “middle class” is basically a quest for fairness and a reasonable income equality where a large percentage of the population can meet their basic material needs through stable employment. The goal is always to grow the middle class with more people entering from below. That has not been the trend in recent years. Perhaps more people should re-enter the middle class from above. Some data even suggest that income inequality is directly related to degree of social problems as well as physical and mental health. The implications of that suggestion are that within a society seen across the board as fair the people in it will be healthier and social problems will be minimized. This makes sense intuitively as well. Inequality has negative effects on society. Thus it is entirely possible, even likely, that increased wealth equality leads to greater degrees of overall social well-being. Thus billionaires are not only robbing the poor they are stealing from the entire society as well. And yet we seem to hear more about some poor sod bilking the system for food stamps. I know people who lost food stamps and have foregone food because of it so I know it happens.

Trends of Income Inequality and Effects of Income Inequality

According to Joseph Stiglitz and Members of the UN Commission of Financial Experts in the 2010 Stiglitz Report, income inequality has been rising in developing and developed countries and was partially responsible for the 2008 global financial crisis. They also note excessive deregulation of financial markets as a cause for the financial crisis. They see the 1990’s as having been a time of economic growth and prosperity with considerable stagnation since then but income inequality continues to increase. Increasing inequality has been happening in most developed countries and particularly in the U.S. and U.K.  

“It is now recognized that in most advanced industrial countries, median wages stagnated during the last quarter century, while income inequalities surged in favor of the upper quintiles of the income distribution. In effect, money was transferred from those who would have spent to meet basic needs to those who had far more than they could easily spend, thus weakening aggregate effective demand.”

Weakening the aggregate effective demand basically “unstimulates” the economy. While Milton Friedman argued that the rich stimulate the economy by funding corporations that provide work, that relationship may be considerably different now than it was then. Wealth inequality has grown and how much economic activity is funded by the wealthy is theoretically less. The stock portfolios and bank accounts of the wealthy do secure financial risk and keep money behind various economic endeavors but all of their money is not so invested and the moderately wealthy may be able to provide as much as the super wealthy in this regard. Friedman’s argument here may not apply so much to the super wealthy. Friedman’s argument is a good argument against forced equality and socialism but forced equality is not the same as forced decreasing of a vast inequality that has been increasing steadily, through higher taxation, fees, surcharges, etc. 

Joseph Stiglitz, in his book, The Price of Inequality, talked much about “rent-seeking,” which refers to increasing profits by manipulating social and political factors, which does not have the effect of stimulating an economy or creating wealth like making and selling a product does. His argument is that in making money through rent-seeking there is no overall benefit to society. Thus, he sees our current form of capitalism that depends much on rent-seeking, as dysfunctional. He points out that it is not the super-wealthy making money itself that is the problem but the super-wealthy making money while those at the bottom and in the middle are not likewise prospering. He also points out that before and after the economic crisis, after a slight dip in 2008, the 2010 ratio of annual CEO compensation compared to the typical worker returned to 243 to 1!  

Super-Taxing the Super-Rich?

Apparently, in Organization for Economic Cooperation and Development (OECD) countries, “the tax rate for the highest tax bracket has been reduced by more than 10 percentage points on average [to 2010]” Are such trends evidence of attempts to stimulate the economy from above in “trickle down” fashion? Reducing taxes on the super-rich is a surefire way to guarantee the rich get richer. It gets no simpler than that. One might say the ultra-wealthy are getting deregulated or one might say that the working poor and the middle class are getting regulated by being taxed at a far higher percentage of their critical spendable income than the wealthy. Apparently, one of the payment mechanisms for the Affordable Care Act (ACA) was increased taxes on the insurance industry, pharmaceutical manufacturers, medical device manufacturers, and a Medicare tax surcharge on Americans earning above $250,000. The recently proposed and failed ACA replacement, the American Health Care Act (ACHA) cuts those taxes, saving these industries and wealthy Americans about $600 billion over ten years. The wealthiest 400 Americans would have saved $7 million each over that time period, further increasing their ever increasing wealth. Increased taxation of the wealthy was thus threatened to have been taken away as a funding mechanism for something that primarily benefited poorer people. Another analysis showed that U.S. millionaires would have saved $165 billion over the 10-year period – somewhere around $1500 savings per year. Cutting this surcharge tax would have greater benefit to the wealthiest, thus spurring greater inequality. Such funding, super-taxing the super-rich is one way to check-and-balance their super-advantageous money-making abilities. Apparently, the Republican-controlled Congress thinks that such Robin Hood-style taxation is unfair. In 2015, there were 10.4 million U.S. millionaires with 300,000 being added that year. That is about 3% of our population! Apparently, insurance industry executives are not suffering too much since Humana’s CEO’s annual compensation roughly doubled from 2015 to 2016 to nearly $20 million.

Implications of Automation

Bill Gates recently made the argument that automation, or robots that take jobs from humans, should be taxed in order to help provide for the displaced humans. The EU parliament has been considering the idea for some time now. Certainly the replacement of human labor with AI can increase the profitability of companies and their shareholders. But what about those who hold no shares? Job creation is often a stated political goal but automation does just the opposite. However, there are also many benefits to automation besides saving money. These include increased efficiency, increased safety, lower environmental impact, sometimes better quality, and making systems more sustainable. Thus, automation is most often a net good and should be pursued. Unfortunately for many workers mining and manufacturing jobs have often been assumed by robotics. Thus, the lower paying blue-collar jobs are replaced by automation while the higher paying white-collar jobs remain. This would tend to exacerbate income inequality. Customer service and self-driving vehicles are likely to become a large chunk of the ‘machines replacing humans’ trend over the next five years. When customer service people, taxi drivers (and Uber and Lyft drivers), and truckers are replaced there will be some new jobs created to oversee them but those jobs will require a totally different skill set (see Guardian article referenced below). Banking, retail, and healthcare are also vulnerable. Calls for robot taxation indicate that the threat of mass automation is being taken seriously as a looming potential political problem. As one of the Guardian articles referenced below notes:

“Mass automation presents a serious political problem – one that deserves a serious political solution.”

The article also reminds us that automation replacing labor is not new as it has been happening since machines of mass production were first invented. It also does not always result in a net loss of jobs as in the example of ATMs where they made banks more efficient and available but also allowed those banks to open up more branches.

Robot capital and robot capitalism has the potential to vastly redistribute wealth toward the rich and reduce the bargaining powers of labor since labor is less necessary with increasing automation. While I agree with many that capitalism has in the past been the best means of creating value for all of society it now threatens more and more to continue its imbalance toward increasing income inequality. The Occupy Wall Street protesters called for greater income equality and that was their best argument for change. However, since then CEO pay has continued to grow relative to low wage earner pay. Something will have to be done and the sooner the better. Wholly deregulated free market capitalism will not clear up these issues, it has become clear to many.  

The Insecurity of the Middle Class 

Increased automation is also one factor perpetuating the insecurity of the middle class. Breakthrough Institute authors Ted Nordhaus and Michael Shellenberger wrote about such insecurity in their 2007, 2009 book, Break Through, where they noted that in the 1990s and 2000s there was a very substantial feeling among workers that their jobs were not secure. Part of this was due to digital and other “disruptions” that happened when new and better ways of doing things replace old ways. A sense of insecurity tends to keep people in basic survival mode and focused on basic needs rather than on higher societal well-being which would be further up Maslow’s ladder or hierarchy of needs. Economist Tyler Cowen has also noted the very real threat to the middle class in his 2014 book, Average is Over: Powering America Beyond the Age of the Great Stagnation. He noted that three-quarters of the new jobs created since the Great Recession pay barely above minimum wage on average. As noted, in the past 15 years or so it has been so-called ‘digital disruption’ that has rearranged the work field, with some companies becoming obsolete with others taking their place. New apps and smarter ways of doing things are adopted readily due to convenience, greater efficiency, and cost reduction. In terms of class struggle the elite have been getting more elite and the lower classes have been stagnated. This is perhaps a recipe for future political problems. The rise of Trump populism on a platform of a renaissance in American manufacturing, often through incentivization by removing regulatory barriers, is perhaps a response to both wage stagnation and less job availability partially due to automation. It is perhaps nostalgia for a return to a past that may no longer be possible.   

It is not only job security that is sought. There is also health care security, retirement security, and child care security. We now tend to accept that jobs can be quite temporary. Markets fluctuate and down-cycles often mean downsizing. 

Insecurity increases risk aversion. Business people need to feel secure in order to take risks, the data has shown. Risk takers seek to be insured, underwritten, in case they fail. So called “safety nets” like welfare and social security increase economic security for those at the very bottom. I listened recently to Ohio Governor John Kasich’s state of the state address where he venerated risk-taking among business people. He noted that risk-takers and innovators are shaping the future as they always have. 

Milton Friedman argued that subsidies for higher education and social security benefit the middle class more than the poor and the poor as a whole pay more into them. He said this of all social programs but is that correct these days? I believe it still is with higher education as more of the middle class will go to college than those at the bottom. I don’t believe it is true of social security and other social programs these days. Why? Because those below the poverty levels don’t really pay taxes as they get it all back, in income tax if they are employed, and as social benefits if not employed or employable.  

Market Manipulation: The Interface Between the Public and Private Spheres (and Evonomics)

As mentioned earlier, many now think that wholly deregulated free market economies are well on their way along trajectories that increase income inequality and class disparity. Clearly, the principles espoused by Milton Friedman and championed by Ronald Reagan have been shown to be a recipe for such inequality. Even college economics classes are shying away from such principles. Adam Smith’s “invisible hand” concept argued for free markets without interference, particularly government interference, but it has been shown that there are different kinds of invisible hands, otherwise known as incentives and disincentives. Incentives (and disincentives) have been shown to be variable in their successes. Regulations are mostly disincentives. The free market mantra that “competition creates efficiency” is refuted by analogy when compared to biological competition as entrepreneur and writer Jag Bhalla notes. He and others have compared economics and biology in the “evonomics” approach to economics. Evonomics (evonomics.com) was started by Seattle-based entrepreneur Steve Roth and includes short essays with several prominent economists as contributors. Adam Smith’s invisible hand idea suggested that individual self-interest spurred collective good. In reality sometimes this is the case and sometimes it is not. Biologist Edward O. Wilson made a very good case that in biology there is individual selection and group selection so there is competition (and collaboration) both between individuals within a group and between groups. Thus whether individual self-interest leads to collective good depends simply on whether the net aggregate effects of the various individual self-interests align with the goals of society. Many individual-group relationships are varying mixes of competition and collaboration, antagonism and synergism. Simple relationships can become complex if individual and group goals are antagonistic or out of phase. Thus competition as competing self-interests and competing group interests is not necessarily the most efficient way of economics. Collaboration through aligning individual goals to societal goals through the guidance of smart regulations and redistribution can offer a more synergistic approach where both individual and societal interests are promoted. It was noted that in complex systems such as biology or economics there are often indirect effects, effects that must be monitored and mitigated by the public interests as mentioned in the “diablog” referenced below between Jag Bhalla and evolutionary biologist David Sloan Wilson. Is there a societal benefit for billionaires to become ten-billionaires? Aside from more money in Gates-style foundation global philanthropy there would seem to be none.  

Land, Capital, and Labor: Economic Growth Has Been Steadily Exceeding Wage Growth (and more Evonomics)

Another example of increasing income inequality can be measured in the trends of capital growth exceeding wage growth. According to one of the Guardian articles referenced below:

“Technology has made workers more productive, but the profits have trickled up, not down. Productivity increased by 80.4 % between 1973 and 2011, but the real hourly compensation of the median worker went up by only 10.7%.”

Free market fundamentalists argue that markets self-organize and self-organization is a fundamental good. However, in biology self-organization can be either good or bad, functional or dysfunctional. Spontaneous order due to self-organization can be very useful and powerful in biology and theoretically could be selected for in economics as win-win synergisms between the individual and the group and/or between groups. However, the evonomics think tankers note that these relationships are not always easy to determine or clear. Some free market capitalists see the market as sacred in the sense that messing with it is seen as corruption or fraud. Thus regulation is seen as a kind of corruption to the free flow of goods – a tax, a bribe, etc. This is what the purists, the essentialists, tend to think. Any kind of wealth redistribution is seen by them in the same way. 

Minimum wage is another issue that has been debated much as of late. The typical argument against raising wages is that if they are higher, then prices will rise AND fewer workers will be employed. The argument from the other side is that people will have more money to spend so sales will increase. Better wages also lead to higher worker satisfaction and likely to better worker productivity.

Adam Smith noted that land, capital, and labor are the inputs to economic activity but that only those who provide capital and labor take risks and contribute to the economy. The land-owners merely rent their land assets, generally risk-free. This “economic rent” (or rent-seeking) has been called ‘parasitic,’ since there is benefit to the landlords but no significant societal benefit. Dustin Mineau (in article referenced below) notes that there was a change in economic theory at the end of the 19th century that treated land and capital as the same thing thus defining neo-classical economics from the previous classical economics. Thus rentiers were lumped with capitalists even though their money came merely from renting. He thinks that much of the problems liberals have with capitalism is really a problem with the seeming unfairness of rent-seeking. He suggests that 99% of Wall Street profit comes from rent-seeking. He sees rent-seeking as the reason for monopolies and windfall profits. I think he goes quite a bit too far but it would be a plausible argument in a less extreme sense. Rentiers do have to work to evaluate, purchase, develop, and market their “land” assets so calling them parasitic and their profit unearned is not accurate. However, once their assets are ready, there is typically not much further contribution from them. 
   
The Case for Welfare and Redistribution

Although these topics - welfare and wealth redistribution – have long been taboo among free market advocates more economists are now arguing that a certain amount of both are required in order to develop an overall healthy economy. One line of evidence is that the modern capitalist economies with the largest amount of welfare and wealth redistribution are simply the healthiest. The proof seems to be in the pudding there. Milton Friedman style free market capitalism which emphasizes increasing shareholder profits as the sole goal of business and conservative notions of “trickle-down” economics have clearly not functioned as planned in recent years and some economists argue that those ideas are essentially flawed as they favor increasing income inequality which is basically what we have seen. 

Redistribution through government incentive has long been practiced to further the goals of society. Calls for and appropriations for infrastructure spending are an example of such market enhancement. The financial bailouts and economic stimulus bills were other large doses of public-sourced “market manipulation.” The fact is we don’t really have free markets but they are guided, regulated, enhanced, and stimulated in various ways in response to problems. Those ways in aggregate are increasing income inequality. Perhaps the bottom line to all this is that increasing income inequality is not aligned with the goals of society at most every level. What seems to be the score? The billionaires are winning and increasing their lead. Economic growth has remained modest globally since the financial crisis with some exceptions like China which is now slowing a bit. The amount of money going to social programs is not on the rise, even though the evidence shows that those who commit to the most social spending tend to have the best financial health. Trump has spoken much of rebuilding (as a real estate developer he is also a builder) and has pledged infrastructure spending. He has also pledged to create incentive through tax advantage for corporations so they will be based at home rather than abroad. These are market manipulations in favor of home markets against markets abroad. Consequences of isolationist policies (including the immigration ban and crackdowns) can be retaliations such as the EU now requiring visas for American travelers and trade wars, regardless of trade deficits. Arguments in favor of the Trump America First economic policies include ‘eye for an eye’ leveling of the playing field by counter-acting things like Chinese currency manipulation and the rigged state capitalisms of authoritarian countries.

Ian Bremmer pointed out in his 2010 book, The End of the Free Market, that there is massive market manipulation by the relatively new state capitalisms from authoritarian states such as Russia, China, and Saudi Arabia. These are politically rigged forms of capitalism representing much of the people on the planet so a very large part of the global economy. Thus, he concluded that there is a battle between the goals of corporations and these state capitalisms. But state capitalism is not exclusive to the authoritarian states. The financial bailouts from the Great Recession are a prime example of state capitalism where markets were manipulated by the state by being stimulated. Infrastructure spending and other spending by increasing deficits is another example.  

Calls for welfare reform have been focused for some time on cutting so-called “entitlement” spending for programs like welfare and food stamps where those who receive the benefits are pretty much certified as being on the bottom economic rungs of society. Cases of welfare fraud are now far more scarce than once thought and many people get very small amounts of benefits. Often monthly food stamp benefits are less than a couple meals at a high-end restaurant. I know this because I know a few people who get food stamps. Some are near starving and still accused of bilking the system and being lazy by those who have the power to take their benefits away. In aggregate these sums paid for entitlements are high but they should be seen as necessary for several reasons: taking care of the needy, promoting a sense of fairness, promoting solidarity by evening out incomes a little, and demoting classism. In short, the data show that wealth inequality makes a society weaker, less coherent, and more deeply separated into classes. Proposed cuts in Medicare, Medicaid, and Social Security or most other social programs will by definition increase wealth inequality. Proposed cuts to food stamps are a blow to those, and there are many, who rely on them. Some people can’t work and others simply can’t get hired. It’s not easy. I was looking for work for a short-time recently and even with a college degree and 25 years of experience in my field I was ignored for low-wage jobs. 

Politicians rage about food stamp fraud while raking in millions and billions. It seems rather heartless. The real question is, “Who is really cheating?” Is it fair to get endlessly wealthy though the system while depriving others of basic necessities? We should all be proud to live in a country where everyone can meet their basic needs whether that be through employment or government assistance. We should be ashamed of the wealthy elite who as well as being such also seem to have much sway in how things are done. In light of automation there will be less jobs in the future for non-skilled workers, those at the bottom, so based on that more welfare would be needed not less. The word “entitlement” is really a misnomer. Are the wealthy elite ‘entitled’ to their millions and billions and tens of billions? Are those at the bottom not entitled to have enough to meet their basic food, shelter, and survival needs? The behavior from the political right is shameful to be nice about it. I am no socialist as I believe capitalism overall has provided and continues to provide the best means to create wealth. However, under the current scenario it is creating way more wealth for the wealthy elite and far less for those at the bottom who need it for survival. Thus, it is a “no-brainer” that we need more welfare and social programs and not less. The economic downturn, created by the Wall Street elites, is what caused the economy to tank, causing people to lose retirement buildups and making the job market poor for all. While there was indeed some response to increase welfare at the time, now some are saying that those increases should be taken away now that the economy has stabilized somewhat. After all, we need to build a $20-50 billion wall and add another $50 billion to military spending. We also need to cut the corporate tax rate by a vast amount (I can understand small cuts as there is merit to luring companies back to the U.S.) so that corporations can thrive – since theoretically wealth “trickles down.” But now we know it does not trickle down and increasing income inequality is the proof, simple as that. The right sees job creation and getting more people to work, presumably in minimum wage jobs as the only real solution to welfare reform. I think that is partially true but I only think it can have a limited effect, especially since low-wage jobs are the most likely to be replaced by automation.  
   
Universal Basic Income and Socialization of Wealth?

Some have argued in favor of a basic income for all citizens below a certain poverty level, at least in countries theoretically wealthy enough to offer such a benefit. Of course, this is more welfare and those particularly on the right are blinded by ideology that says welfare is socialism and so is some sort of evil. In the past the wealthy have argued for things like flat rate tax percentages for all. While that would be simpler it would obviously be vastly unfair to the poor. In places like Europe the wealthy do pay much higher tax rates, higher than in the U.S. Some wealthy Europeans settle in the U.S. as a result. The luxury class, some with private jets and private islands (kinda like corrupt dictators or James Bond villains) is profiting at the expense of those below the poverty level. The wealthy can and do employ “creative accounting” in myriad ways to decrease their tax burden. The poor can only take what is given to them. Yes it is true that universal basic income would be a form of socialism. However, Steve Roth points out in an article referenced below, a healthy economy should be composed of aspects of democracy, capitalism, and socialism. He says that most economies are indeed necessarily composed of all three and that the purists who are staunchly anti-capitalist, or anti-socialist, or anti-democracy, are all deluded. We have long been redistributing wealth and for many years now that wealth has been trickling up to the wealthy. Milton Friedman was wrong. Reaganomics failed. Unfettered deregulated free market capitalism needs checks and balances and those are provided by democracy and socialism, both of which invoke our sense of fairness. We like to say so and so worked hard and so deserves to be rich but in reality some people work just as hard, whether in a job or in everyday life, and gain little. 
   
Charlie Young, in the Evonomics article referenced below, notes that the various UBI scenarios proposed by both liberals and conservatives, vary considerably. He puts the various proposals in three basic categories: 1) recalibrating existing tax and benefit systems, 2) replacing the welfare state, aka “voucherisation,” and 3) communalizing common assets. The first category involves re-structuring existing taxes and benefits to be more efficient and fairer and is seen as a “no-frills” version of UBI. Much of this method involves wealth redistribution from the wealthy to the poor via taxation and benefits and is generally favored by liberals such as the UK Green Party. The second category, replacing welfare with vouchers, is favored on the political right, particularly among libertarians. One version of this is neoliberalist Milton Friedman’s notion of a UBI as a negative income tax. Matt Orfalea, in an article referenced below gave five reasons Friedman advocated for such a UBI: 1) reduced bureaucracy – lump sums instead of hundreds of administrated and watched-over anti-poverty programs, 2) relying more on the free market – giving poor people money to spend as they wish rather than tallying their assets and liabilities and basing what they get and how they get it based on that, 3) to end the so-called welfare trap, where people on welfare find work and lose their welfare, with only small overall gains from before which reduces the incentive to work, 4) it enables other kinds of “work” like charity and family and community development and enrichment by lessening the demands of basic income maintenance, and 5) the negative income tax treats everyone the same (in reference to the poverty level as defined by tax categories) – Friedman’s idea was a flat payment to all of 50% of how much money they are below their designated poverty level. Simplification of welfare certainly has merits. Young’s third category, communalizing common assets, seems to involve paying for UBI by taxing things like land ownership, financial trades, and resource ownership and extraction – which in effect are all basically wealth taxes. The idea is that ownership is shared by all. Other versions of this are automation taxes. Young also notes that his three categories are not necessarily mutually exclusive.

I think the main solution to income and wealth inequality is fairly simple: make the ultra-wealthy pay more, much more, in taxes, fees, and surcharges – tax the super-wealthy more. Increasing incentives to work and decreasing disincentives to work will be useful to a point until things like automation make jobs more scarce. Give public money and food stamps to the needy as well as job training and other assistance. Keep social spending at healthy levels or increase it. We should see social spending as an investment in the overall health of our society. In reality, the poor are being aided by their very slightly more affluent families and friends as well as by the government. Either way it is a point of shame that there are struggling poor in our modern affluent technological society that are not being assisted while they could be. Reversing the trend by increasing wealth equality should be a goal as the benefits to society are proven and significant. We have situations in government spending where whole programs in the hundreds of millions of dollars up for renewal or cuts could be easily funded by one single billionaire without affecting the billionaire much. Morbid inequality makes that possible. It is almost surreal. Is income inequality a form of corruption? I think an argument can be made that a welfare state, which has proven to lead to more overall affluence and equality, is preferable to a state soaked in the corruption of morbid income inequality. The world is awash in corruption and fraud. In some countries dealing with bribes is the only way to do business. Although we in the U.S. like to think we are the least corrupt we should consider that the system as it now is with increasing income inequality, many opportunities for creative accounting, lower tax rates for the wealthy compared to other countries, and calls to decrease social spending, is innately corrupt. The morbidly wealthy are defrauding the poor, not so much intentionally, but by participating in a system that is quite obviously rigged in their favor – otherwise their wealth would have some sense of boundary. No one person or family on earth “needs” a billion dollars. The fact that there is increasing wealth at the top indicates that there is some capital there to help pay for social programs. 

We reasonable and compassionate humans value personal freedom, equality under law, and equality of opportunity. Why should we not also value some degree of wealth equality? Is it because of some ideological thinking about economics?  Or could there be darker reasons for our tolerance of a high degree of wealth inequality? Do some see the poor as a lower caste, somehow unworthy of access to wealth? The wealth inequality that Occupy Wall Street demonstrated against in 2009 has gotten significantly worse since then. Those who follow Ayn Rand might say that the government has no right to take the money of those who earned it. Paul Ryan seems to think that redistribution is inherently bad and that people are poor because they are lazy. As he said referring to social assistance programs at the recent Conservative Political Action Conference (quoted from article referenced below): “The left,” he said, “thinks this is a good thing. They say, ‘hey this is a new freedom – the freedom not to work.” I know a few people dependent on welfare and they are just trying to survive, sometimes close to literally. And of course many people work and also get assistance. Sure it helps but even with it they are still far below most or all of the working class and often below their own basic subsistence levels. While the aggregate costs of social assistance programs are indeed very high, some say unsustainable, the benefits are palpable and the social costs of cutting them may be worse. Cutting social programs may put a few more people into the working class where they can be accommodated but it would also increase income inequality by making some of the dirt poor even poorer, it would increase insecurity for those at the bottom which is a real threat rather than the mere anxiety of insecurity among those who actually have incomes, it would likely increase participation in shadow economies and black markets, and it could even lead to increases in crime and homelessness. None of those possible outcomes are beneficial to society. 

The article referenced below of a rebuttal to an op-ed in the New York Times by University of Chicago economist Diedre McCloskey shows that even an academic economist can make math mistakes so fundamental that a grade-school person may be able to see the fallacy of it, and present it as some sort of legitimate argument (She claimed that wealth redistribution from the rich to the poor does not help the poor very much using an arithmetic model assuming that both were equally wealthy to begin with). Perhaps we should peer review op-eds? She also referred to taxation as “state violence” and complained about forced equality – giving away her strong ideological bias. The loss of integrity of information and all this talk about fact-checking and ‘alternative facts’ seems to sow uncertainty into arguments in general and such uncertainty tends to benefit those with less palpable arguments – ‘your argument cannot be proven with certainty to be valid so my more unlikely and less logical argument is just as valid.’ If people cannot come to an agreement about what is most logical then logic itself is devaluated. If logic is devaluated then ideology can fill the vacuum. Economics is often seen as a hard science but in reality it is a set of competing theories that are essentially ideological. In addition one has to deal considerably with its social implications so it is really a soft science.  
    
References:

Why Welfare and Redistribution Saves Capitalism from Itself: Rich Countries Share Wealth and Create Economic Security – by Steve Roth, in Evonomics, Feb. 2017

Morbid Inequality: Now Just Six Men Have as Much Wealth as Half the World’s Population – by Paul Buchheit, in Alternet, Feb. 20, 2017

Robots Won’t Just Take Our Jobs, They’ll Make the Rich Even Richer – by Ben Tarnoff, in The Guardian, March 2, 2017

The Stiglitz Report: Reforming the International Monetary and Financial Systems in the Wake of the Global Crisis – by Joseph Stiglitz and Members of a UN Commission of Financial Experts (The New Press, 2010) 

Robots Will Eliminate 6% of All U.S. Jobs by 2021, Report Says – in The Guardian, Sept. 13, 2016
Richard Dawkins’s Tree Metaphor: Why Free Markets Are So Inefficient – by Jag Bhalla, in Big Think (2015?)

Here is Why Economics is Built on a Monumental Mistake: It’s Time to Update the Invisible Hand – by Jag Bhalla, in Evonomics

Universal Basic Income Accelerates Innovation by Reducing Our Fear of Failure – by Scott Santens, in Evonomics, Feb. 12, 2017

The Science is In: Greater Equality Makes Societies Healthier – by Richard Wilkinson and Kate Picket, in Evonomics, Jan. 26, 2017

Here’s How Much Millionaires Would Save Under GOP Obamacare Repeal Bill – by Tami Luhby, in CNN Money, March 11, 2017

No Easy Answers: Why Left-Wing Economics is Not the Answer to Right-Wing Populism – Updated by Zack Beauchamp, in Vox, March 13, 2017

Average is Over: Powering America Beyond the Age of the Great Stagnation – by Tyler Cowen
Economist Dierdre McCloskey: False Math about Inequality – Adam M. Finkel, in Evonomics, March 18, 2017

Paul Ryan Says He’s been “Dreaming” of Medicaid Cuts Since He Was “Drinking Out of Kegs” – updated by Matthew Yglesias, in Vox, March 17, 2017

Canadian Province to Give Every Citizen $1320 Income Boost to Overcome Poverty – by Gabriel Samuels, in Independent, Nov. 11, 2016

The Conversation about Basic Income is a Mess. Here’s How to Make Sense of It – by Charlie Young, in Evonomics, March 19, 2017

Why Milton Friedman Supported a Guaranteed Income (5 Reasons) – by Matt Orfalea, in Basic Income, Dec. 11, 2015

Milton Friedman – Negative Income Tax, 1968 interview on William F. Buckley Jr.’s Firing Line (youtube)

Milton Friedman on Taxing the Rich to Help the Poor – at youtube.com

The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers – by Robert Heilbronner – (7th Ed. Touchstone/Simon & Schuster, 1953, 1999)

The End of the Free Market: Who Wins the War Between States and Corporations? – by Ian Bremmer (Portfolio/Penguin 2010) 

The Price of Inequality: How Today’s Divided Society Endangers Our Future – by Joseph Stiglitz (W.W. Norton Company, 2012)

How Accounting Smoke and Mirrors Makes Corporate Profits – and Rich People’s Income – Invisible – by Steve Roth, in Evonomics, Feb. 17, 2017

How Economists Duped Us Into Attacking Capitalism Instead of Parasitic Rent-Seeking – by Dustin Mineau, in Evonomics, Nov. 19, 2016

Democracy. Capitalism. Socialism. Choose Any Three of the Above – by Steve Roth, in Evonomics, Oct. 2, 2016








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