Economics question: How much is healthy for the 1%?

[Sarpedon]

We now live in a world where 1% of the population control 50% of the wealth. (in the USA its more like 40%) Most wise people consider this to be too much.

So my question is: What is the healthy amount for the richest to control? And why?

 

[Nice Squirrel]

Is there a historic example somebody knows of?

 

[dismal]

Versus what cure?

 

[arkirk]

We now live in a world where 1% of the population control 50% of the wealth. (in the USA its more like 40%) Most wise people consider this to be too much.

So my question is: What is the healthy amount for the richest to control? And why?

I think the operative word here is control. To own something is not necessarily to control it. Let us say that in terms of land ownership this 1% owns considerably more than 50%. That means they hold title to it. It does not mean they actually control it. The same with money. When you own more than you can personally keep track of, can you be said to control it? I feel that the obscenely wealthy of this world are living with their own very special delusion that they are actually in control, when they are really only contacting everywhere they go, people who reinforce their feelings of power. They are sold investments they truly do not understand. They order things to happen they cannot monitor. They live in a world of fulminating unintended consequences which only other people have to see and have to live with. I cannot give you an ideal number of how wealthy a person should be allowed to become, but clearly there are people who are so wealthy they are completely out of control of their own wealth.

 

[ksen]

Versus what cure?

 

[arkirk]

Versus what cure?

Sometimes, that's how it works out.

It seems like a cheap solution to an expensive problem. Actually it wasn't so cheap. The outcome of obscene wealth...obscene violence...the reign of terror. Oops! I used that word! Now we are fighting THAT today according to Obama. But whose side are we on? It is unclear to me. I think you have provided the historic reference.

 

[Sarpedon]

Dismal, I'm not trying to discuss means of changing anything. I'm only discussing what is felt as a reasonable amount. Do you have a reasonable opinion or not?

 

[ksen]

I once started a thread that talked about $100 million being enough but some of our members here thought that would be the end of the world as we know it.

 

[Axulus]

There is no magic number.

New OECD analysis suggests that income
inequality has a negative and statistically
significant impact on medium-term growth.
Rising inequality by 3 Gini points, that is the
average increase recorded in the OECD over the
past two decades, would drag down economic
growth by 0.35 percentage point per year for 25
years: a cumulated loss in GDP at the end of the
period of 8.5 per cent.

The findings show that the biggest issue is when the gap between the bottom 40% and the rest is especially large, and finds this as the reason:

The evidence is strongly in favour of one
particular theory for how inequality affects
growth: by hindering human capital
accumulation income inequality undermines
education opportunities for disadvantaged
individuals, lowering social mobility and
hampering skills development.

http://www.oecd.org/els/soc/Focus-Inequality-and-Growth-2014.pdf

 

[ronburgundy]

Healthy for what?

Concentrated wealth can impact a number of things, and probably different levels of concentration affect different aspects of society differently.
There are different economic effects, such as overall economic growth versus the quality of life of the majority of people versus the quality of life of the bottom 20%. Then there are social effects, such as stability, civility, respect for law. And then their are political effects, such as defacto corporatism undermining democracy, control over candidates, policies, and the election process itself, wars and other policies for only the interests of the few, etc.

I don't have any answer to the question. I just wanted to be a dick and point out that its really more like 20 different questions that may all have a different answer. Although, I suspect that > 50% in the hands of 1% exceeds the optimal level for nearly all those issues.

 

[Sarpedon]

Right, I'm not looking for an answer, I'm looking for a discussion. Most people realize that the wealthy class serves a purpose, and that in order to fulfill that purpose, they must have capital. We have to discuss what they are needed to do, how much they need to do it, and at what point does them getting more (depriving others in the process) cease to be efficient.

 

[arkirk]

Axulus: While I agree with and accept the general tenor of the OECD paper, I feel the issue is more complex than that. All economic activity is not of equal value to society. A technological society will necessarily have differences in wealth and control between specialists and non specialists. I accept this and have always accepted this...just in case you think of me as some sort of primitive Marxist. There is an assumption in both the Capitalist and Communist economic models that it is possible to centrally control social parameters. Whether it is a rich capitalist oligarch or a communist dictator, these people and their retinues find themselves too isolated from the society they seek to control and ultimately lose control and allow their systems to fall into chaos. This is a regular occurrence in human history.

I differ with the OECD paper in that it fails to recognize the difference between speculative wealth transfers and actual production and gives absolutely no weight to the impacts of the economies shown on the environment. Not all economic activity is good for a society. Money moving through channels is different from human necessities moving to those needing them. Also, economic growth must be squared with environmental carrying capacities. This has been largely ignored in most economic models. Also, the economic model must match a social and political model. Today, the population of almost any country in the world (usually 70% of it) has neither connection with nor any real control of policies that affects it. That is as true in the U.S. today as it is anywhere else excepting perhaps some places in the middle and far east.

 

[ksen]

some sort of primitive Marxist

watch it

 

[dismal]

Dismal, I'm not trying to discuss means of changing anything. I'm only discussing what is felt as a reasonable amount. Do you have a reasonable opinion or not?

I would argue that we should put reasonable policies in place designed to raise overall prosperity and let the chips fall where they may on this particular variable.

So, no, I don't have any particular opinion on what this number ought to be. I do have opinions on what policies ought to be.

 

[ksen]

I do have opinions on what policies ought to be.

I'd like to hear some of them.

eta: and if the guillotine days ever come to pass I'll hide you and your family out for only 1,500 dismos a week.

 

[arkirk]

You can't really discuss this topic without discussing Capitalism...and challenging it. Before you decide how much a person may control, you have to have a means of adjusting wealth. Immediately, those who have all the goodies will object to confiscation and start complaining about supporting no good layabouts. Once the distribution is accomplished, then the rich losers will have less to worry about. That's what Pol Pot thought. Just another primitive commie.

How would things be if suddenly nobody had more than a million dollars? Major infrastructure should be much improved and that would facilitate a lot more personal wealth generation for a lot more people. That would be one scenario. The other is we all pack up and go back to the farm. More equality would inevitably lead to government operation of large multi-billion dollar operations which are part and parcel of modern civilization...at least temporarily. Cooperative worker controlled industries could work in some cases. Once an operation reaches a certain size however, we seem to see loss of control. There still does not seem to be any reason the world needs billionaires.

You see, if you take a lot of money from some very wealthy people, it doesn't disappear. The question is who "you" are and where that confiscated (taxed) money goes. Rather than just vaporizing the money creating absolute chaos. The money would have to be restored to the economy in some form. That is what has made this thread difficult to keep on track.

 

[Sarpedon]

Great, start your own thread and I'll drop in and discuss that topic there.

 

[arkirk]

Great, start your own thread and I'll drop in and discuss that topic there.

I am trying to figure who you are addressing this comment to. The amount you think the richest should have really is the result of how you think the redistribution could be done. the number you are fishing for is hard to determine and whatever number one might offer would immediately require justification.

 

[Sarpedon]

Mostly to dismal, but the two of you seem to have a thing going, we might as well have it here or another thread, I don't care. As I said, I'm not fishing for a number, but a discussion. It seems that everyone's talking about inequality, but no one seems to be talking about what they are aiming for.

I, for one, think its better to start with the goal and then decide what steps to take to reach that goal, rather than deciding on the path to take and then just seeing where it leads us, which seems to be what you are advocating.

 

[ksen]

We now live in a world where 1% of the population control 50% of the wealth. (in the USA its more like 40%) Most wise people consider this to be too much.

So my question is: What is the healthy amount for the richest to control? And why?

A good place to start might be to look back to a period of great economic growth and see how much wealth the 1% controlled then.