Majorities in each of the seven populations we surveyed agreed that the rich get richer and the poor get poorer in capitalist societies. Even in America 55% believe that capitalism makes the condition of the poorest people worse. On the face of it these are devastating findings. At the very least they suggest that people no longer believe that capitalism is the universal engine for social mobility that it was.
and big business is not thought highly of either
More than 70% of people in Britain, Germany, Brazil, India and Thailand believe that the big business has – to some extent – bought, cheated or polluted its way to success. Even in America 65% believe that “ethical business” is probably not a natural combination. Only 10% of Americans, 6% of Britons and a measly 4% of Germans do not think big businesses are guilty of malpractice.
https://social.shorthand.com/montie/3C6iES9yjf/what-the-world-thinks-of-capitalism
Comrades man the barricades 😉
Worth a read as the overall stuff is more nuanced than that link suggests and as always its a mixed picture
It used to be the case (in the US) that even though the poor knew capitalism hurt them most they supported it as they believed they would be the 0.00001% who could escape the ghetto and make it big. Turkeys voting for Christmas etc...
To be fair, everyone knows that it's a poor way to run the world, but it's the one that works best in practice right now.
Also, footflaps has it... It could be YOU.
I am not really sure what works best means as we can all easily think of ways of improving it even if this just means spreading the wealth about a little bit more fairly or companies being made to pay a fair rate of tax.
The second part seems to suggest most folk think and accept social mobility is a myth
Capitalism vs what? How was the survey question framed? The question is quoted in JY's link, but it doesn't define what 'capitalism' is. So in some ways it's a question about people's perception of capitalism.
There's a spectrum of capitalism vs socialism, with the wild west at one end and communism at the other. Most people seem to agree that societies need to be somewhere in between those two, I think. So lots of support from the state, good infrstructure and long term planning, paid for by taxes on private enterprise and maybe with some government owned businesses. The devil is in the detail of how much of each of those things.
Apart from "for interest" purposes, surveys of what people THINK are generally misleading. But reality is genuinely more mundane or different as the article in the Guardian noted today:
"The dramatic fall in global poverty over the past two decades is the best news in the world today. "
Pity such facts don't suit the convenient lazy narratives
+1 for "what people think" being a pointless metric - what we think and the facts are not terribly familiar with each other, generally 🙂
Also worth noting what happened to communism. I have some interesting conversations with my GF who's the same age as me (42), grew up in the USSR and left for the US and then UK as soon as she could. Having actually experienced the reality of it, she's not a fan of communism...
It's also a matter of perspective - global power is rebalancing and in the West that feels like we're losing. In developing countries I suspect the sentiment is different.
Also worth getting some data on global poverty - globalisation has had a very positive impact for millions of people outside the rich world...
Mind you, big caveat to all this: the way capitalism has been managed by the West/rich world in the 20th and early 21st centuries has been massively detrimental to the planet and is currently in a massive debt crisis, the extent of which is being kept hidden from the electorates by zero interest rates and QE. The Central Banks may or may not be able to move us out of this crisis without a bigger crash than 2008 - time will tell...
The biggest challenge is that capitalism as we currently know it hasn't shared the wealth enough to ensure support from all it's participants - hence the current sentiment. Communism failed. State-run capitalism Chinese Style looks like it's not working too well either.... so it's not clear quite what system is the one which provides long-term sustainable stability...
I remember reading research into fmcg marketing back in early 90s and the difference between people say the do and what they actually do. Can't remember exactly but broadly one result was approx 80% of people who claimed that one type of margarine was their favourite had never actually bought it!
In the aftermath of decades of bingeing on debt to bring forward consumption, we are now enduring the hangover in which we will have sub par growth for a sustained period. Get used to it!!!
Yes THM it is a pity that they did not agree with you and what you THINK and they still think the system does not help the poor IMHO its probably because they can see the vast disparity in wealth between the ...even Jesus noted how bad this was for the rich never mind the poor and we all know they could do so so much more.
so it's not clear quite what system is the one which provides long-term sustainable stability...
No system will offer long term sustainable stability. A growing population means that sustainable isn't an option and stability can't be guaranteed due to the complexities of the system. Best you can do is look to try and smooth out the peaks and troughs and make sure that over a long enough period the majority trend is most people do better.
capitalist societies
Well we don't have a purely capitalist society anywhere I can think of. Molgrips 2nd para above sums up most of the balance of options.
Indeed we like most societies have a mixed economy
No system can guarantee stability - things change and you need flexibility not the opposite to react. We prefer government inspired (sic) panaceas instead! Why the surprise when we are disappointed?
So what has happened to earnings over our generations?
In the aftermath of decades of bingeing on debt to bring forward consumption, we are now enduring the hangover in which we will have sub par growth for a sustained period. Get used to it!!!
Having grown up in 70s and 80s I'm frequently astonished at the level of material wealth we now seem to think is the baseline essential. IMO we've massively lost perspective on how much stuff we really need so having less than we have now feels like a massive fail to a lot of people, dropping back to 1980s living standard would feel like poverty, when in fact I remember it being rather ok. Walking to the shops instead of driving really wasn't that much of a challenge.
Main problem is that no-one told Joe Public what the deal was: "have lots of debt to buy lots of shiny things. This'll go on for a while and then like any binge, it'll come to a painful end and it'll hurt like hell."
If they had maybe we'd have a) been more sensible and b) be less shocked now the obvious end game has been reached.
A lot of people seem to think that rampant consumerism and massive increases in material wealth was some kind of manna from heaven which would go on for ever and ever. Silly of us to be so daft really..
It is human nature, always has been, always will be. You have those with power and wealth and those without.
Natural Selection, except these days we (on the whole) we do not go around clubbing each other over the head.
dropping back to 1980s living standard would feel like poverty
I remember being confused when we bought a second car in the mid-80s, I honestly didn't think you were allowed to own two.
http://www.alternet.org/economy/100-ceos-nest-eggs-retirement-savings-41-families
reading the above link its hard not to to be sickened by the style of capitalism that fails to give back to society but instead make's one or two individuals so wealthy, its broken and it needs to be bought back into line or it will destroy it's self and probably the rest of us as well.
A simple analogy "monopoly" the game ends up unplayable because all the wealth on the board is in one players bank.
· For all of the negativity towards capitalism, more people in all seven nations believe that the free enterprise system is better at lifting people out of poverty than government;· Although doctors, teachers and charity workers may be more admired than business leaders in popularity surveys there is a widespread recognition that entrepreneurs and business leaders are just as important to society;
· The populations of India, Indonesia and Thailand are all more optimistic about the future – especially in India, where 50% of respondents expect life for the next generation to be improved;
· Overwhelming majorities in all seven countries recognise that strong community and family life underpin a strong economy;
· Most countries – other than Germany – recognise that government should spend less on welfare benefits in order to fund greater investment in infrastructure.
Comrades stop wommaning your barricades!
A simple analogy "monopoly" the game ends up unplayable because all the wealth on the board is in one players bank.
Many economists are already saying that the current polarisation of wealth is hurting productivity, with not enough money in the general population for people to consume enough to drive growth. We're back at 1930s levels of inequality (which prompted dramatic intervention and wealth taxes to redistribute wealth between 1940 and 1970).
For a lot of Americans there is no socialism, it's Capitalism v Communism and they've got a mutli-generational propaganda fuelled problem with Communism. You only have to look at the videos of sick Americans without insurance shouting that 'Obamacare' is a Commie Plot.
Someone once described the "American Dream" is the belief that those who don't, will accept those who have, have the right and duty to screw them over to increase their wealth. In exchange for the opportunity to one day be one of the haves.
But enough of the Americans, they're certainly not alone in that - it's a fact that 'rich' and 'poor' are relative terms and you can't have one without the other - if every one had a million pounds no one would feel rich. More importantly they wouldn't be, because if everyone has got a million pounds no one is going to fix your washing machine for £50, you need to find someone to whom £50 is a worthwhile amount of money to get their hands dirty.
One of the cornerstones of a capitalist society is the ability to make money, with money - if the Rich have lots of money, they make lots of money simply by having it, the poor on the other either need what they have to live, or have none at all and starve - so the gap widens thanks to inflation - it's very telling that in the history of the Western World - the powers that be argue endlessly about Income Tax, some would say to distract anyone looking at Wealth Tax.
It's not easy to reverse the process either - whilst on the face of it we live in a democracy, it's by no means a completely fair one - most Countries in the West are governed by 2 to 4 political parties, usually 2 - and whilst one persona has one vote, someone with lots of money can influence the tiny number of people who receive them.
I think history shows the best tool to reverse the "Rich getting richer" mechanism was the guillotine.
So in this environment in which nothing is given back, what is the difference between outcome after earnings and outcomes after earnings are redistributed via tax?
In the 40s technological change led to a rapid increase in the demand for unskilled labour at the same time as the supply of skilled labour was increasing => lower inequality
More recently, technological change has led to a sharp decline in the demand for unskilled labour combined with higher global supply plus increased demands for skilled labour => higher inequality
Things and supply and demand change. Governments are largely passive observers (phew) implementing ST fixes (eg tax credits) instead of training and raising skill levels
In a historical context there is nothing exceptional about current levels of inequality. The exceptional period was the 40-70s
Hmm, I thought that that things like infant mortality, life expectancy and BMI were better recognised indicators of poverty?
Plus, I have to wonder how well Yougovs polling methodology penetrates beyond a narrow section of Indian or Chinese society? I find it hard to believe they are going out to poll random agricultural villages in the middle of bumf*** nowhere.
Was reading a fascinating article on micro-finance initiatives in developing countries the other week, about Bangladesh and the Grameen bank (evil bankers, boo, hiss!) well worth having a look for.
In a historical context there is nothing exceptional about current levels of inequality. The exceptional period was the 40-70s
No reason why we can't chose to return to the 'exception' of the 40-70s though. I don't really fancy the whole peasant / serf thing as something to aspire to.
Socialism sounds wonderful on paper.
Not many South Koreans want to live in North Korea.
+1 for "what people think" being a pointless metric - what we think and the facts are not terribly familiar with each other
What people think is a useful metric exactly [i]because[/i] what we think and the facts are so disparate.
One aspect of capitalism that truly grips my shit is that when the shit hits the fan we all of a sudden become a collective, once the blades have been cleaned and the fan re-started we then become a capitalist society again where greed becomes king.
Indeed we can help out the farmers but the steel workers can **** off
It is human nature, always has been, always will be. You have those with power and wealth and those without.
Its really not small scale humans civilisation cooperate effectively
Even if it were true it used to be "human nature" to invade countries and rape and pillage I would not use this argument to support it or argue it was good]]No human brings their child up going no dont share with your brothers or friends keep them to your self its just human nature that some have more. I honestly dont think that point is actually true. SOme humans are greedy and some are altruistic the problem is the greedy ones accumulate wealth and power which enables them to get their way more easily[quote=hugo opined]Socialism sounds wonderful on paper.
Not many South Koreans want to live in North Korea.
Yes that is the choice that faces us what we have now or North korea with nothing inbetween and certainly no way we could make South Korea fairer 😕 Its not really helpful to take extreme examples and rung with them. There are also corrupt regimes which are capitalistic that are nothing to be admired with no rushing there. Eritrea for example or Somalia but gin atypical choices there.
So in this environment in which nothing is given back, what is the difference between outcome after earnings and outcomes after earnings are redistributed via tax?
Straw man is strawy Capitalism does not do this the state does this and the argument is that they should do more
DO you wish to argue that many corporations dont go to extraordinary lengths to avoid paying tax/ minimise it ,often to piss taking levels? DO you really wish to claim the tax system is massively redistributing wealth? AS levels of debating there IMHO
The big issue I have with capitalism is its demand for continuous growth.
And when, such was the case a few months ago, when growth had stalled for way too long, someone or some people, somewhere, who has/have a vast amount of wealth, decide that the only growth they're going to get is to devalue the engines of capitalism, the stock markets, thereby reducing the worth of the smaller players, buying them up, reducing competition in the process, and the resultant demand from their shopping spree increases the value of shares and they all suddenly get wealthier. On paper at least, but also with additional assets of the organisations they have devalued in their process.
Which is all very well, especially for all you profit and greed is good merchants. But stop and think, just for a moment...
How many times can this particular method continue to work? Because eventually, all that will be left will be a handful of extremely, nay, obscenely wealthy players who will have to duke it out between themselves for the ultimate boss fight.
Furthermore, given that we've also done the lets create wealth by pretending it exists, i.e. credit, how will the capitalists dream of continuos growth next be exploited? Especially as we reside, live and exist on an infinite resource? It'll be air next, you heard it here first.
One aspect of capitalism that truly grips my shit is that when the shit hits the fan we all of a sudden become a collective, once the blades have been cleaned and the fan re-started we then become a capitalist society again where greed becomes king.
The big issue I have with capitalism is its demand for continuous growth.
And when, such was the case a few months ago, when growth had stalled for way too long, someone or some people, somewhere, who has/have a vast amount of wealth, decide that the only growth they're going to get is to devalue the engines of capitalism, the stock markets, thereby reducing the worth of the smaller players, buying them up, reducing competition in the process,
Corporatism ? Capitalism - in fact failure is essential to capitalism as fear of loss is the ultimate regulator of risk
Glad that's sorted then. Next.
dropping back to 1980s living standard would feel like poverty
That's the trouble with relevative poverty. The world has far less actual poverty thanks to capitalism but everyone wants more than they have. Which is why capitalism works...
"There is plenty of food in the world today to feed everyone, but the fact of the matter is that food is part of the world's economic system and only available to those of us that can afford it."
How the other half dies 1977
[quote=Junkyard ]Majorities in each of the seven populations we surveyed agreed that the rich get richer and the poor get poorer in capitalist societies. Even in America 55% believe that capitalism makes the condition of the poorest people worse. On the face of it these are devastating findings.
Hardly surprising that people see increasing inequality and assume that means the poor are getting poorer. Yes we've done the arguments about increasing inequality being a bad thing and I agree, but that doesn't mean the perception is correct.
[quote=hugo ]Socialism sounds wonderful on paper.
Not many South Koreans want to live in North Korea.
Is North Korea genuinely socialist?
As lots of other have opined, what we ideally want is capitalism mixed in with social democracy - all the good things from capitalism with a state reigning in the worst excesses and controlling inequality. I'm surprised to find myself on the socialist side of this debate - I think our country is too capitalist and not enough socialist.
As lots of other have opined, what we ideally want is capitalism mixed in with social democracy - all the good things from capitalism with a state reigning in the worst excesses and controlling inequality.
I think almost all want that what we debate is where that balance and where that line of state interference/control/redressing gets drawn and what the actions are. The majority seem to think its drawn to favour the [very very] rich and not reigning in the excesses and I think they have a point.
As lots of other have opined, what we ideally want is capitalism mixed in with social democracy - all the good things from capitalism with a state reigning in the worst excesses and controlling inequality.
Which to all intents and purposes is what we have. But that makes for crap debate so we have to create absurd exaggerations in order to stimulate debate/froth. Even the original link can't seem to make its mind up.
5thE very true!!!
As lots of other have opined, what we ideally want is capitalism mixed in with social democracy - all the good things from capitalism with a state reigning in the worst excesses and controlling inequality.
In which case we need to align ourselves with Scandinavian thinking and loosen ties with America.
Why align ourselves with Scandi thinking? Another myth...
Most of the features that are admired about Scandi society predate (by many years) the model that is falsely claimed to be typical of the region as did their greatest periods of prosperity. Scandis success was under a rather different (albeit quite familiar 😉 ) model.
If capitalism makes the poor worse off why are the worlds poor in huge numbers trying to get to the capitalist societies of Europe, USA, Australia etc?
Assuming what you said about "huge number" was true the the reason that poor people from one capitalist country are moving to another better off capitalistic country is because its richer and possibly because its human nature to be greedy.
Now we have cleared that up shall we get back to discussing whether capitalism causes iniquities and seeing if we can think of a way to improve it ?
shall we get back to discussing whether capitalism causes iniquities
Whoah there a minute - when was that proffered as a subject? Certainly not in the original post...
Tell me about capitalism again !!
http://demonocracy.info/infographics/eu/debt_piigs/debt_piigs.html
I wasn't aware the world's poorest countries were capitalist. High economic freedom doesn't seem to be a characteristic of the poorer countries
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I wasn't aware the world's poorest countries were capitalist.
I was not aware that I claimed they were or that I had said anything about economic freedom not least as I have no idea what it means.
I just answered your question.
Probably best to put a list if people who "come here" and say where their country of origin is and we can see if its a capitalist country
Most of the worlds countries are capitalist you made a very weak point as they dont come from socialist countries - not least because there are hardly any and its hard to leave them. Its not that big a deal I have nothing further to add on this point.
No human brings their child up going no dont share with your brothers or friends keep them to your self its just human nature that some have more. I honestly dont think that point is actually true. SOme humans are greedy and some are altruistic the problem is the greedy ones accumulate wealth and power which enables them to get their way more easily
Yep it's a self selecting group.
Does 'too big to fail' exist in actual capitalism?
Socialism sounds wonderful on paper.Not many South Koreans want to live in North Korea.
Free enterprise sounds wonderful on paper.
Not many Swedes want to live in Somalia.
If capitalism makes the poor worse off why are the worlds poor in huge numbers trying to get to the capitalist societies of Europe, USA, Australia etc?
Is that an actual question?
Most of the features that are admired about Scandi society predate (by many years) the model that is falsely claimed to be typical of the region as did their greatest periods of prosperity. Scandis success was under a rather different (albeit quite familiar ) model.
Not really. For example the Norwegians used their oil money to build a productive society, not piss it up the wall on tax cuts for the rich. Scandi countries continue to have more equal societies and environmentally responsible policies.
SOme humans are greedy and some are altruistic the problem is the greedy ones accumulate wealth and power which enables them to get their way more easily
There are some that argue that true altruism doesn't exist, and allege that altruistic decisions can have their true motivations found as selfish reasons. The easiest(laziest) example to find would be religious do gooders looking for a way into heaven.
And I don't really buy into the 'some' are greedy, and 'some' are altruistic. We all look to be both at the same time to me! Most people would help a friend in a time of need, most will not sacrifice their lifestyle entirely to help those in need thousands of miles away they've never met and never will. That's not to say they won't do something, but there's a lot of shades of grey involved.
Scandi countries continue to have more equal societies and environmentally responsible policies.
This is not a personal opinion, I'm just looking for other people's thoughts on the below;
I have read that Scandinavian societies are indeed more equal, so long as you are the right colour. If you happen to be a bit swarthy, then your cleaning toilets!
Pretty sure I read that online but it might have been the telly box. I'll post a link if I get time/can find it.
so it's not clear quite what system is the one which provides long-term sustainable stability
I think we are stuck between a rock and a hard place. Capatlisum requires ever growing everything (Inc population) but if we were sustainable then currently there would be massive problems.
If capitalism makes the poor worse off why are the worlds poor in huge numbers trying to get to the capitalist societies of Europe, USA, Australia etc?
ok what they are fleeing is not socialism but mainly dictatorships which has to be the ultimate capitalism or religious theocracy type zealots and they are not fleeing to capitalism but running to states with good welfare systems where they perceive a better chance for quality of life.
Scandi societies have become less equal not more equal as a result of the increasing role of the state
Yes, their attitudes towards foreigners are not exactly liberal - go check the wage rates for foreigners - bit of a cheek to be lambasting the E Europeans now!
Its amazing how the UK can be represented - at the start of the 20C, government spending was equal to just over 10% of national income. In this capitalist, free-market nightmare (sic) of the 20 and 21 Centuries the state had been marginalised 😉 by the capitalists to account for almost 50% of national income. How did that happen? And now an ideological driven nasty party is looking to reduce this role to a catastrophically low, mid 30s% - almost as bad as the late 1980s. Would you Adam and Eve it?
And in the selfish society where the poor are neglected and only the rich prosper state spending on health has gone from nothing to almost 10% of national income and social spending from almost zero to 15%. What an uncaring society this is? Shocking....
Its fair to say the evidence is mixed and one can pick and choose from the available statistics but , whatever the state has done, it has certainly not eradicated the fantastically wealthy who continue to grow and accumulate wealth.
This is the injustice that people object to and one that we do the system creates. We are really only discussing if you are comfortable with this or uncomfortable and I am not comfortable with it.
Scandi societies have become less equal not more equal as a result of the increasing role of the state
I would like to see a source and evidence of that claim - no idea if true or not but lets see the evidence
Scandi societies have become less equal not more equal as a result of the increasing role of the state
Sauce.
And in the selfish society where the poor are neglected and only the rich prosper state spending on health has gone from nothing to almost 10% of national income and social spending from almost zero to 15%. What an uncaring society this is? Shocking....
What's more shocking is that economists confuse correlation and causality.
Isn't the problem all pervasive ideologies? Democracy IMO should be the foundation on which we build a multifunctioning system. Unregulated Capitalism cannot be argued for if you have a single moral bone in your body. But then communism is equally as bad as it concentrates power and decision making. In fact both systems seem to mimic each other once they are followed to their extremes. Both control the media, communism by force, capitalism by wealth (and bribing politicians see Murdoch). We soon wont have a truly free press in this country if the Tories have their way. Deregulation only favours the rich. Democratic, socialist societies with regulated capital based economy seems a fair solution. You always seem to get idealogues spoiling the balance. My greatest fear is the completely distorted and F****D up leviathan in the shape of China. Communist control with capitalist inequality. We will all be happy when they rule the world? Russia too...
😯it has certainly not [b]eradicated[/b] the fantastically wealthy who continue to grow and accumulate wealth.
Personally I'm of the opinion that capitalism is great provided that regulation of industries takes place. However, there should be less micromanaging prescriptive regulation and more smarter regs e.g. goal setting legislation for safety.
when we tried that we had the dark satanic mills* and regulation exist to stop this
What is your issue with not having fantastically wealthy people?
IMHO it's better to eradicate starvation and people dying from impure water rather than have some more folk worth hundreds of billions
* owners would literally rather kill staff including children than stop a machine as people were cheaper than machinery
it has certainly not eradicated the fantastically wealthy who continue to grow and accumulate wealth.
This is the injustice that people object to and one that we do the system creates
Do people really object to it?
Charlotte church, Billy Bragg - both are very rich, but due to a free market trade of skills/product, for a token price, repeated many, many times because people liked their singing. Is that injustice? Do people hate them for their wealth?
would people hate them if they took that money and invested it in a record company, to promote new artists, and through that ended up with even more money (the accumulation of capital)?
How about if they used the money to purchase and rent out a few houses? Or maybe invest in a winemaking business?
When exactly does the money become 'dirty'?
owners would literally rather kill staff
Some still would (private or nationalised) which is why under current regs in the UK we work to things like ALARP, which IMO is good legislation because it isn't your classic prescriptive 'you must do x,y,z', that in a complex world would eventually fall down.
Deregulation only favours the rich.
The poor of Africa would tell a very different story with deregulation of mobile phones and banking has resulted in access to banking services that would have otherwise remained out of reach.
Ditto the internet and e-services in the developed world
And the source for your Scandinavia claim?
For example the Norwegians used their oil money to build a productive society, not piss it up the wall on tax cuts for the rich.
Where are these "tax cuts for the rich" then?
The highest marginal rate of tax on earnings in the UK is 62% excluding employer NI payments. The highest in Norway is 53.7% - and that includes a 14.1% social security contribution by employers.
Most households (62%) in the UK are net recipients of the state - the proportion of tax paid by the wealthy and ratio of households that are net recipients from the state has probably never been higher.
The highest marginal rate of tax on earnings in the UK is 62% excluding employer NI payments. The highest in Norway is 53.7% *- and that includes a 14.1% social security contribution by employers
* This is not the marginal rate so you are not comparing like with like
In your case i am not sure whether the error is a deliberate distortion or just stupidity.
FWIW the highest rate of tax in norway is 47.2 and the Uk its 45 %
Both without NI
https://en.wikipedia.org/wiki/Tax_rates_of_Europe
Where are these "tax cuts for the rich" then?
It's really tax exempt, just become ex-domicile and you can agree with the IR to pay a few £10k in tax on unlimited earnings.
http://www.independent.co.uk/news/business/news/revenue-defends-tax-deal-with-fayeds-72426.html
Where are these "tax cuts for the rich" then?
Did Thatcher not cut taxes for the rich?
Not my words but worth a read
[b]Elite power and unearned wealth[/b]
By now you may have noticed a common theme in these descriptions of how the banking sector and the financial markets make money: they do so not by creating real wealth but by manipulating a virtual-money economy. They can only do this because the banks are able to create money at will. This would be fine if they were dealing in matchsticks or Monopoly money, but they are dealing in the same money that is essential to the process of creating real wealth.
The real wealth they purchase with money so acquired is entirely unearned. Landowners also benefit from unearned wealth, but, unlike bankers and financiers, they have not created an entire industry dedicated to its pursuit. They simply buy land from which they receive the benefit of unearned wealth because, ever since the establishment of private property in land ten thousand years ago, nobody has thought to question the entitlements of landowner-ship in a world where most land is owned by very few people.
Unearned wealth is the principal basis for the exercise of elite power.
Democracy didn’t deliver the current economic and financial system. In a properly functioning democracy the economy would be configured to serve the interests of the majority, not a tiny minority. It is the power and influence of a global elite and the coterie of professionals that serves them which sets the global economic agenda today. Why democratically elected governments are unable to challenge this power is a matter for debate. Perhaps they realize that the only way to curb it is through reforms so radical that the mere thought stops them sleeping at night. Whatever the reason, the path to a just and inclusive economy will not be clear until ways are found to curb the privilege of unearned wealth. The only way to do this is to acknowledge and then tackle elite power and entrenched privilege.
The process by which unearned wealth is acquired is sometimes described as ‘rent seeking’. The concept of rent seeking was first outlined by Gordon Tullock in 1967, and given its name by another economist, Anne Krueger, seven years later. Use of the term can be confusing because it brings to four the number of different meanings ascribed to the word rent. It’s worth, therefore, spending a moment on definitions.
As well as the conventional use of the term – you might rent a flat, or a car while on holiday – economists use the word in three different ways. As we noted, Adam Smith used it to describe that part of income that is distributed to landowners. There is also the slightly different concept of economic rent, which is the amount paid for the use of any factor above the minimum necessary to bring it into production. Confusingly, both labour and capital can command economic rent. If you went for a job interview and were ready to accept a salary of £30,000, but your future employer was so impressed with you that she decided to offer you £35,000, the difference is your economic rent.
In rent seeking we encounter yet another form of rent. It is the business of earning money, not by investing effort and resources in trying to generate new wealth, but by working to secure for oneself a greater share of already existing wealth. Whereas profit seeking describes the process of investing capital in return for a share of the new wealth created, rent seeking is about skimming off a share of wealth created by others.
Rent seeking can take many forms. It might involve lobbying politicians to enact legislation that will make it harder for new producers to gain entry to a particular market. The pre-crash craze for private equity takeovers of perfectly viable businesses is another form of rent seeking. In such cases, the distribution of income between wages and capital is altered substantially, even though the new ‘capital’ supplied makes no contribution to wealth creation. The income earned by rent seekers often comes in the form of land rent. Russian oligarchs, for example, owe their immense wealth to the fact that they were effectively given free use of vast quantities of natural resources after the fall of communism.
Rent seeking always has a cost in terms of resources that could otherwise be applied to the creation of new wealth. Not only is it a legalized form of economic theft, but it also diverts resources from the real economy. And of course, the only people able to engage ‘successfully’ in rent-seeking activities are people who are already so well off that they don’t need to find work in the real economy.
To clarify, legitimate economic activity does not have to involve the conversion of the resources of nature into something physical for consumption. There are thousands of activities, employing millions of people, which produce services for exchange in the marketplace which are perfectly legitimate. This book is printed on paper that began life in a forest, but you didn’t buy the book for the paper, you bought it for what is printed on its pages. The Four Horsemen film that accompanies this book makes even less use of the resources of nature, but thousands of people have paid at the box office to see it, or bought the DVD. Many vital and necessary service industries exist to facilitate and support the exchange of goods and services in the marketplace – retail is perhaps the best example. Income derived from non-tangible service activities is perfectly legitimate as it’s part and parcel of the process by which genuine wealth is created. It’s quite different from the rent-seeking activities of bankers, landowners and speculators. Regardless of the propaganda, none of these activities generates any new wealth or adds any real value to society.
The Greek philosopher Plato said the ratio of earnings between the highest and lowest paid in any organization should be no more than six to one. In 1923, banker J.P. Morgan declared that twenty to one was optimum. Today the earnings ratio between the highest and lowest paid in large corporations can be as much as a thousand to one. Herman Daly has a clear insight into the problems this causes: “when you are up in the range of five hundred to one inequality, the rich and the poor become almost different species, no longer members of the same community. Commonality of interest is lost and so it’s difficult to form community and to have good, friendly relationships across class differences that are that large.”There is a further form of rent seeking, driven by more established methods, that has recently become rampant and which negatively impacts the labour market. If, with the proceeds of their rent-seeking activities, top executives of banks and financial institutions pay themselves huge salaries and bonuses, the labour market dictates that senior execs in firms that do create real wealth should be similarly rewarded. This skews the market mechanism because it doesn’t distinguish between the CEO of a rent-seeking investment bank and the CEO of a wealth-creating firm: both end up earning inflated salaries. In order to justify these, they have to keep their shareholders happy. They do this by rewarding them with higher dividends. As a result, a disproportionate share of revenue is taken by shareholders at the expense of wages. Within the distribution of wages, a similarly disproportionate share goes to senior executives at the expense of the rest of the workforce. This doesn’t reflect any change in the contributions of capital and labour, or within the relative contributions of different sections of the workforce; it is a direct result of the impact of rent-seeking behaviour on the labour market. It explains the massive increase in the pay multiples earned by senior executives compared with other employees over the last three decades.
And it gets worse. By shifting incomes from people who would spend most of what they earn on things they need, to people who already have everything they could possibly want, the prospects for future wealth creation are further damaged. The over-paid use their additional wealth to drive up the prices of non-productive assets like land and housing, expensive jewellery and fine art. Looted rent spoils are exchanged for things that represent real wealth. Even the best wines in the world are no longer available to be enjoyed by wine lovers, because they’re appropriated as investment assets. Claret and Burgundy chips are now traded in all the best financial casinos.
There can be no doubt that the economy as currently arranged promotes a totally unfair distribution of wealth. Bankers, speculators and landowners engage in activities that extract wealth created by others. In companies that do create real wealth, the factors of production are rewarded unjustly. The rich are getting richer at the expense of those who do most of the work. The hangover of empire that has shaped the western economies means that rent-seeking activities are still regarded as entirely legitimate.
Excerpt from Four Horsemen: The Survival Manual.
There are at least some things that are vaguely accurate* in that, if not the main ones....
* largely grammar
Did Thatcher not cut taxes for the rich?
When Thatcher came to power, the top 1 % paid about 11% of all income tax receipts
By 86, that had increased to about 14% of all income tax coming from the top 1%
From '88 onwards, the proportion of all income taxes received paid by the richest 1 per cent increased to 21 per cent.
So, by that measure, Thatcher increased taxes on the rich, no?
2013 data from XXX shows that at the time, 20% of the working-age population in the country was supported by at least one form of government benefit. During the following six years the XXX economy was significantly affected by the global financial crisis. Despite this, the share of the working-age population supported by government benefits fell to 14% as reforms that reduced the generosity of the benefits system and reduced taxes, encouraged people into work.
Name XXX
Be careful what you wish for - the reality in some countries is often a long way from the public perception
If you defend the current reality of capitalism (and neoliberalism) you're either someone who has been hoodwinked by hegemony or your heartless..take your pick.
So, by that measure, Thatcher increased taxes on the rich, no?
Too funny. Maybe it has something to do with the 15% unemployed people not paying much tax?
If you defend the current reality of capitalism (and neoliberalism) you're either someone who has been hoodwinked by hegemony or your heartless..take your pick.
Typical lefty. Disagree and you are either stupid or evil. The reality of capitalism is that along with the rule of law, property rights and science it has produced the wealth in western countries which allows them to have a welfare state which helps the poor.
irc - my post was a bit blunt I admit and probably not how i meant it to come across. However, nothing stupid about hegemony and the way it works. Your response appears to be a good example as any as to how it works and the beliefs it creates...
Along with but seperate from? He said the 'current reality of capitalism'. He does not say any form of capitalism. There are lots of different ways to have a capitalist economic model exist within society. It should be a tool for society not how society models itself. To adhere to a capitalist ideology without reference to its injustices is inhuman. This isn't to say people who believe capitalism in one form or another are inhuman. But there is no justification for the level of inequality in the world and in this country. A self perpetuating inequality. To think that humans HAVE to live like this is just nonsense and defeatist. As for the rule of law it is heavily imbalanced in favour of the elite. The police force were not created to protect the poor. To be honest I have no envy of people with extreme wealth. But I do have a probem when other people have to live in relative poverty. I am luckily not one of those people. But to think you deserve that much more than another human being by right or have somehow earned it, seems egotistical at best.I often wonder why some people just want more and more. I think they must quite seriously have something lacking in themselves. I don't mean that as a veiled insult, I think it must be true. Its ungracious and uncivilised.
I agree with that every time i see a billion pound super yacht I just think of the millions living in slums and wonder why we let this happen and why we are not using the will of humans to end this suffering
JY I don't think you'll find many super yachts costing a billion. Isn't Ambramovich's yacht around £350m ?
What capitalism (vs subsistence farming, barter and communism for example) has allowed is the world's population to explode the vast majority of those people being very poor and providing very cheap labour to undercut developed world wages.
[quote=irc ]Disagree and you are either stupid or evil. The reality of capitalism is that along with the rule of law, property rights and science it has produced the wealth in western countries which allows them to have a welfare state which helps the poor.
If stupidity includes comprehension failure, then congratulations on proving the point.
I'll just point out that I'm very much in favour of capitalism - rather more so than most (of the vocal) on here I think. I'm not at all in favour of unfettered capitalism of the sort we're currently getting far too close to.
Unlike you I actually fact checked before posting as I am claiming what i say is true. £1.5 billion FWIW though its a DM source so unlikely to be true.
Anyway glad you got to the moral heart of what I was saying and commented on it so eloquently 😕
Its fair to say the evidence is mixed and one can pick and choose from the available statistics but , whatever the state has done, it has certainly not eradicated the fantastically wealthy who continue to grow and accumulate wealth.
This is the injustice that people object to and one that we do the system creates. We are really only discussing if you are comfortable with this or uncomfortable and I am not comfortable with it.
Could that not also describe the Soviet Union, North Korea, China, and most other communist states; huge numbers of basically peasants, with an obscenely rich ruling class?
Just asking.
Much better to frame the debate in political economic terms, then we can at least learn from the lessons of history. We are currently at the end of a second wave of globalisation that existing political systems have been unable to manage. The first was at the end of the 19C and saw many of the characterisics of the recent trends. Significant economic and welfare benefits, strong growth, free(r) movements of factors of production etc. But with the benefits came a cost. The rapid development of many poorer nations was driven by their ability to export agricultural products to the fast growing but more developed parts of the world. The losers? The farmers in the latter. And the result.....
The political systems in place were unable to cope and the system collapsed. The second wave mirrors many of the aspects of the first except for the fact that you need to replace primary with secondary industries in the developed world as the main losers. This requires greater not less cor ordination but already the familiar waves of isolationalism and protectionism can be heard (blame the migrants etc). History suggest that political systems fail to balance the wider benefits of globalisation with the more limited loses suffered by some. The scary thing is that this is exactly the time when we should be making a commitment to Europe and wider integration to avoid the horrors of the past.
Not a nice prospect for the next two generations to come.....