Saturday, April 9, 2011

The Trouble With Billionaires

One of my readers pointed me to a recently-published book on the great income inequality debate. Entitled The Trouble With Billionaires, that book explores the economic, social and political ramifications of the growing disparity between incomes of average Americans, and those of the super-wealthy. There are several reviews on the internet, that may be of interest. In addition to the ones cited in the comments to my earlier post, here is another one which may sufficiently pique your interest that you pick up and read that book.


Dan said...

Next you should read "The Trouble with Poor People".

Stefan Poag said...

Next you should read "The Trouble with Poor People".

AKA any book written by Ayn Rand.

One of the troubles (at least in my opinion) with the worship of the amassing of wealth is that when it happens it creates a weaker economy and society less resistant to the occassional ups and downs of the free market.

The advantage of a large middle class holding more of the wealth (as opposed to a small wealthy class holding more of the wealth) is that the spending of the middle class is 'evergreen' and the middle class spending fund social programs and public projects which, in turn, create more jobs... and create more wealth. The rich might buy Tesla Roadsters instead of Volare Station wagons and Novas, but 'boutique items' can't fuel a national economy.

The problem we are having in the US in regards to cities and states going broke is directly related to an unwillingness on the part of our leadership to tax the rich and powerful (i.e.: the friends and financiers of those who make the rules). The rich don't give a shit about public libraries, roads, parks, police, and most of the other things that make life in the US bearable because they can buy those services for themselves.

JB said...

Might I suggest the book, "Confessions of an Economic Hitman" by John Perkins.

Wealth production and impoverishment of the masses isn't just a domestic's global.

Justin said...

It is also a matter of morality and justice. The uber-rich don't do anything economically productive.

They are a parasite class. They live off the work of others.

In a sane world, no one would support this.

bliss_infinte said...

Yes, Confessions of an Economic Hitman is a great book.

I agree, the 'CEO's contribute nothing. The way their system is set up they get a slap on the back and check in their pocket regardless of the ups or downs of the company they are running (usually into the ground). They're also disconnected from all sense of reality. Case in point, the company that was part of the BP spill said that that was their safest year (statistically). Perhaps it was 'statistically' but they still wiped out and damaged an entire ecosystem. I guess that doesn't count for much.

Parasites, indeed.

Alexis Smolensk said...

Actually, if you want to read about the trouble with poor people, and the crime of it, you should try Major Barbara by George Bernard Shaw.

The Ayn Rand = Billionaires makes me laugh, since the billionaires around now are all government supported and subsidized, which is something Rand was clearly and decidedly against. It's funny that the both groups of people, those who claim to love Ayn Rand and those who claim to hate Ayn Rand, don't seem to actually read any of the actual words from the books.

Jeremy Deram said...

But what about this?

(yes I know it's from some bible-thumping conservative organization, but I couldn't find any other articles that showed it to be inaccurate, and found several that supported it. Then again, this is the internet...)

In addition, if you look at the history of the tax rates, in the 40's and 50's on your chart which seem to show a more ideal situation with the spread of income, the top tax rate was ranging between 80% and 90%. If you think it's reasonable to tax ANYONE at that rate, well I can't really have a conversation with you on the subject.

Interesting chart, but as with all things economic, it needs context.

Aaron E. Steele said...

I'm no tax expert.

Yes, I'd be unhappy having my 'next dollar earned' being taxed at 90%.

We can always have a conversation.


What would be ideal is if we had more money circulating. If wealth is shuffled off to the sidelines, it restricts consumption, which therefore restricts growth.

Again, observations from a non-economist. But it seems to me that the hoarding of wealth is ultimately counter-productive.

Jeremy Deram said...

I see what you mean, but that hasn't really been the case since way back in the day when hoarding your wealth meant socking it into a mattress, or perhaps some great ruler had a vault full of gold.

Today, even if you are hoarding your wealth, it is either in a bank somewhere, and the bank is issuing loans against that money - loans to businesses large and small, and loans to consumers to buy cars or homes or whatever. Otherwise, they might have it invested in stocks or bonds, which companies use to fund growth.

In this day and age, money is never truly "hoarded".

I just don't buy into the idea that someone who is a billionaire is inherently bad. I have never met a billionaire, but I suspect that for the most part they are just like everyone else in that there are some good and some bad - even the good ones have bad days and even the bad ones have good days.

And we shouldn't tell them how to spend their money any more than I should tell you how to spend the money you make at your job. Just because there are more zeroes involved doesn't change that principle in my mind.

At any rate, I do appreciate the post as a topic for discussion, and I appreciate your ability to remain civil around these topics, as I see a lot of people rapidly devolve into name calling, and I've never seen you go down that path.

Happy Friday!

Aaron E. Steele said...

Again, i'm not an economist, but as part of my poli-sci degree, decades ago, I took a four econ courses.

The memory is hazy now, but I think there is something called the marginal consumption effect. Money earned by lower/middle class wage earners is more likely to be spent on consumption goods than that earned by high wage earners. The purchase of consumption goods fuels more production. More production results in more employment. More employment results in more consumption. And on it goes, It's a virtuous cycle.

The converse is true. Less money to lower/middle class means less consumption. Less consumption means less production. Less production means less employment. Thus a vicious cycle.

The problem with money "in investments" is that it is money chasing money. It doesn't matter how much you invest, there is no excess demand to take up the products you want to produce from your investments.

That's why extreme distribution of wealth is ultimately self-defeating. No one else has money to buy what you want to sell.

Again, this is a pretty simplified explanation and i'm no economist. Maybe i'm wrong, but that's how I remember it being explained to me -- albeit through a 20-year lense.