rickyp wrote:Governments are the tool through which the middle class (and aspiring working and poor) manage the resources of their society for the betterment of society.

wow

Please, never try to deny being a socialist again.

You're absolutely wrong. Maybe re read the link from the first post. When wealth accumulates in the fewest hands, development slows.
There's a reason the dark ages are called the dark ages. Advancement of civilization slowed for hundreds of years.. It may be true that what advancements there were "sponsored" by the few wealthy. However, education,was restricted, science knowledge actually went backwards in Europe, and mans average life span decreased. (from the Greek/Roman periods )

Your displaying (a) a fundamental misunderstanding of my point, and (b) not a great knowledge of history. As for (a), I'm saying that wealth accumulation is a result of progress. Even assuming I accept that progress is driven by a healthy middle class, I'm making the point that eventually, in every society, we move towards the emergence of the mega-rich, because no one WANTS to stay middle class, they want to be wealthy. So the smartest and luckiest accumulate wealth and we end up where we are today. With increasing wealth disparity. Its unavoidable. And on to (b), your displaying a very narrow minded view of history. For example... take the Medici. Ultra rich family who sponsored the arts to a degree never before seen, and played an integral role in the Florentine Renaissance. Couldn't have happened without them having the disposable wealth to support the arts. Or how about Late Republican Rome? Tell me, when did Rome's true expansion into greatness begin? In the middle of the second century, is it fair to say? When do we see the emergence of the super-rich elite? Coincidentally, around the same time. Which one is causing the other is debatable, but what isn't is that the progress and expansion of Roman civilization was inextricably linked to the accumulation of wealth by the few.

The "Dark Ages" were a time of ignorance and fear because of the Catholic Church above all. There was little progress because lending was discouraged (by the Church) and thus the necessary capital for public expenditure wasn't available... and for a whole lot of other reasons, often tied to Christian dogma, but my views on this are sufficiently well known and sufficiently ignored that I'll stop there. There was no "wealth accumulation" in the Middle Ages. Rather, there was a general loss of wealth, and realignment of views on economic value, so that everyone became poorer. So don't try and throw that kind of shitty history at me and expect me to buy it.

Is the person who runs the fortune 500 company more important then the guy who takes your garbage away every week?

Rolls wrote:Is the person who runs the fortune 500 company more important then the guy who takes your garbage away every week?

No, it is the character of the person that matters. If the CEO uses his money to better those around him and treats his employees fairly, whereas a garbage man is beating his family and dog; I would go with the CEO. Vice versa and I side the other way.

Grow where you are planted. To those which much is given, much is required.

Well i aint no commy, but i will say this. Every man has the right to be paid what he is worth. A teacher who excels in there profession is no less valueble to a banker who gets rich off of customers money.

The soldier who fights on the battlefield for 60,000 a year is he really doing less then his fair share to an actor who is paid 250Million per episdoe of there tv show?

Who determines worth? The person? The government? The market?

The soldier who fights on the battlefield for 60,000 a year is he really doing less then his fair share to an actor who is paid 250Million per episdoe of there tv show?

Well thats an age-old question. But since we have no objective way to assign value to the intrinsic roles each person plays in society, we compensate in large part based on value added. David Tepper made $4 bn last year because his fund made four times that for his investors. While your views on the nature of that wealth added may be less than complimentary, the point is he made his clients a boatload of money and was compensated commensurately. While a garbageman performs a more basically vital function for society, his role is also (a) far more replaceable, and (b) doesn't add nearly the value that a successful hedge fund manager does.

Since we don't, and shouldn't, have someone who goes around deciding on the relative value of any given person's profession, the best way to compensate is to let the market decide.

ozzy

Even assuming I accept that progress is driven by a healthy middle class, I'm making the point that eventually, in every society, we move towards the emergence of the mega-rich, because no one WANTS to stay middle class, they want to be wealthy. So the smartest and luckiest accumulate wealth and we end up where we are today. With increasing wealth disparity. Its unavoidable.

Actually it is avoidable. And desirable to avoid because of the consequences of extreme wealth disparity. (Banana republic s are a geat example of modern nations with extreme wealth disparity. Another would be Egypt. ). Societies with extreme wealth disparity cannot long survive. If you understand the root causes of the Egyptian revolution you'll understand the folly of your statement.

But comparing current modern nations who have different wealth disparities reveals the following:

John Schmitt and Ben Zipperer (2006) of the CEPR have analyzed the effects of intensive Anglo-American neoliberal policies in comparison to continental European neoliberalism, concluding "The U.S. economic and social model is associated with substantial levels of social exclusion, including high levels of income inequality, high relative and absolute poverty rates, poor and unequal educational outcomes, poor health outcomes, and high rates of crime and incarceration. At the same time, the available evidence provides little support for the view that U.S.-style labor-market flexibility dramatically improves labor-market outcomes. Despite popular prejudices to the contrary, the U.S. economy consistently affords a lower level of economic mobility than all the continental European countries for which data is available

The issue of economic inequality is related to the ideas of equality of outcome and equality of opportunity. It is a contested issue whether economic inequality is a positive or negative phenomenon, both on utilitarian and moral grounds. A study published in 2009[1] has shown that negative social phenomena such as shorter life expectancy, higher disease rates, homicide, infant mortality, obesity, teenage pregnancies, emotional depression and prison population correlate with higher socioeconomic inequality.

Compare the GINI co-efficiency of nations and the socio econ conditions like social mobility and I don't think anything is inevitable. Because with enough disparity, you get revolutions...
Nice of you to blame the catholic Church entirely for the Dark Ages. The Church and the Feudal rulers had a nice thing going...but it was the feudal structure to which the Church heirarchy pandered . Because they had most of the money.

Which one is causing the other is debatable, but what isn't is that the progress and expansion of Roman civilization was inextricably linked to the accumulation of wealth by the few.

Industry is the only true source of wealth, and there was no industry in Rome. By day the Ostia Road was crowded with carts and muleteers carrying to the great city the silks and spices of the Ast, the marble of Asia Minor, the timber of the Atlas, the grain of Africa and Egypt - and the carts brought nothing out but loads of dung. That was their return cargo.
Winwood Reade, The Martyrdom of Man

Roman law and the peace of Rome was really good for the spread of Christianity. But even with Roman law covering most of the known world, it eventually collapsed upon itself.
As long as a significant enough portion of the population have a stake in the success of the nation - a nation can suceed. But once the nation appears to exist primarily for the benefit of only a small elite ...it falls. Part of the reason Rome failed was too great wealth disparity.

ozzy

David Tepper made $4 bn last year because his fund made four times that for his investors

Not true Ozzy. He made MOST of the money for himself.
In 2009, Tepper's hedge-fund firm earned about $7 billion by buying distressed financial stocks (including acquiring Bank of America common stock at $3 per share) in February and March of that year and profiting from recovery of those stocks,[3]with $4 billion of these profits going to Tepper's personal wealth.

Tepper traded in deritivatives. He was one of the winners. What good did derivatives like Credit Default Swaps do for society?
In effect they were an artificial creation, comparable to a pyramid scheme in many ways, that alllowed a handful of people to make a lot of money before an awful lot more people got stung. They had nothing to do with real industry or real productivity.
He did give $55 million to Carnigie Mellon University but they had to change the name of the Business School to Tepper School for Business.
Do you think the School will teach his use of CDS as a productive industry?

Actually it is avoidable. And desirable to avoid because of the consequences of extreme wealth disparity. (Banana republic s are a geat example of modern nations with extreme wealth disparity. Another would be Egypt. ). Societies with extreme wealth disparity cannot long survive. If you understand the root causes of the Egyptian revolution you'll understand the folly of your statement.

Alright, then name me one society throughout history which managed to not only avoid wealth inequality (and I don't mean pure socialism, but something more on par with America in the 60's) and simultaneously managed to persist as a politically relevant polity for a few hundred years without any statistically significant change in the wealth gap. We've had 5000 years to get it... if we haven't done it yet, it probably won't happen.

Industry is the only true source of wealth, and there was no industry in Rome. By day the Ostia Road was crowded with carts and muleteers carrying to the great city the silks and spices of the Ast, the marble of Asia Minor, the timber of the Atlas, the grain of Africa and Egypt - and the carts brought nothing out but loads of dung. That was their return cargo.
Winwood Reade, The Martyrdom of Man

Roman law and the peace of Rome was really good for the spread of Christianity. But even with Roman law covering most of the known world, it eventually collapsed upon itself.
As long as a significant enough portion of the population have a stake in the success of the nation - a nation can suceed. But once the nation appears to exist primarily for the benefit of only a small elite ...it falls. Part of the reason Rome failed was too great wealth disparity.

Firstly, industry is the only source of wealth in an industrial society. In feudal and pre-feudal societies, there were a variety os substitutes... land, precious metal, grain, whatever.

And you're right. One of the reasons Rome failed was wealth disparity. One of many, to be sure, but a reason. The problem is, your assuming that just because it benefited some more than others, that it didn't benefit the others. The general standard of life was much, much higher in Roman times, with its extremes of wealth, than it was in feudal eras, when the entire population was poorer.

And I don't see the connection between Roman rule spreading over Western Europe and the Mediterannean Basin and its failure as related to wealth disparity.

All I'm saying on this entire issue is that every society, from the earliest urbanisation ar Uruk to today, has suffered from wealth disparity, and in increasing numbers. Babylon was mistress of the world for nearly 2000 years, and the problems of wealth redistribution in that society was worse than at any other point in history, I would argue.

The concentration of wealth into the hands of the few is the unavoidable result of human nature and the ability of the wealthy to accumulate more wealth. Its immutable, for better or worse.

Alright, then name me one society throughout history which managed to not only avoid wealth inequality (and I don't mean pure socialism, but something more on par with America in the 60's) and simultaneously managed to persist as a politically relevant polity for a few hundred years without any statistically significant change in the wealth gap. We've had 5000 years to get it... if we haven't done it yet, it probably won't happen

.

I would have started with America in the 60's.... The USA's best periods of realized expansion (In that it wasn't a period of expansion followed by sudden contraction, like the 90s) ocurred in periods when the US had the least income disparity. The 1950's, 60's ... The 1870s...

The concentration of wealth into the hands of the few is the unavoidable result of human nature and the ability of the wealthy to accumulate more wealth. Its immutable, for better or worse

.

Fine. But then compare the collapse of the US in 1929 when the US had achieved enormous income disparity versus the expansion of the US in the 50s and 60s when income disparity was at the low end.
The point I'm making isn't that income disparity doesn't exist, nor that there shouldn't be greater rewards going to a few more deserving, due to theri talent and industry.. Its just that when it is out of control and becomes extreme societies tend to blow up. They also don't produce the innovation and leaps in technology and industry that occur when a greater portion of the society is profiting a greater share of the rewards for the advances.
There are examples where the opposite (Communinism and Socialism) put a damper on innovation, drive and advancement. The development of a Chinese middle class since the 1980s is a great example of a suddenly created middle class driving a country forward. In their case, it was the elimination of a policy of no disparity.
The Gini coefficent and rates of crime , especially violent crime - are closely related. Other factors incluide social mobility and reward through effort. When an elite class has all the money, they usually have all the opportunity.
One of the shocking things for Americans is that class migration is becoming very difficult in the US. A person born into a working class family, has a lot less chance of moving up in the US then in say Germany or Canada. A lot of that is because income disparities aren't as great, therefore oportunities for education, tend to be easier to achieve for middle class and working class young..
(By the way, a component of socail mobility is the oportunity to move. Americans were once a very mobile populace often moving great distances for employment opportunities. But both the economy but mostly the health insurance business has put a great damper on thst. If beleive can't readily move to take advantage of an opportunity, their ability to move up is diminished. )

Income equalite doesn't matter so much as perception of inequality at least in modern western countries, but i believe that's partially true for 3rd world countries too.
Where the resulting anger is directed is different for every country, depending on the culture towards economics, for example in the US it's energizing the right far more than the left, while in Germany for example it was the left (now that their economy is steaming ahead again, so is the much of the anger).
But i really don't believe that in somewhat modern countries with decent standards of living and economic growth the objective income equality plays anykind of role, it's all an emotional thing.

Fax

But i really don't believe that in somewhat modern countries with decent standards of living and economic growth the objective income equality plays anykind of role, it's all an emotional thing.

So being pissed off that your house is worth less than your mortgage, that you can't afford to send your kids to college, that you can't move out of a job you hate because you won't get insurance...(I guess that might change soon) none of these are valid because its just an emotional response?

The inability to better one's self through hard work and effort occurs when the economy is rigged in a way that rewards for that effort and work go elsewhere. When that is because the economy is rigged to provide an elite most of the money and rewards thats one thing. When its because people are taxed without seeing any significant benefit to their standard of living ..that's another.
But to dismiss this as emotional is silly. People are emotional creatures. They are motivated not just by physical rewards but by emotional rewards.
The people of Egypt marched and ended Mubareks reign becasue they had amassed an emotional resevoir of resentment. In Egypt income disparity is enormous and was at the heart of that resentment.
The same can be said of any society.
Sometimes, the resentments come out in other ways than revolution. Certainly in most western societies a smaller reaction occurs. Respect for law and order breaks down in societies where the disenfranchised and poor see no personal reward from the adherence to law and order. When the rules seem rigged to ensure that an elite gain and the poor have nothing you end up with greater crime.
But all of that is triggered by emotional reaction NOT some kind of intellectual struggle.

The rage of the Tea Party is caused by resentment to a changing society that they seem to have trouble gaining personnally. Some it directed at the demographic reality that the US is becoming. Some of it aimed at Wall Stret. Muych at govenrment. They might not have a real rationale focus on whats really letting them down ...but their emotions are real and valid .

Ozy, don't let the Keynesians get you down. You're on the right track. Here's a link to a UT (Hook 'em Horns!) site for the study of income inequality. They use the much more mathematically sound Theil index rather than the Keynesian Gini coefficient that ricky used. Check out this pdfif you have a mind for a good Left/Right balanced account of how wage inequality has happened, is happening, and strategies for correcting it.

The study confirms what you hinted at Ozy, innovation is a big driver of wage inequities. "Booms" are great for some...not so much for others. The authors warn that you don't want to throw the boom out with the bathwater...but also that you can't always rely on booms to keep lifting your economy.