How does inequality of wealth skew the free market?

Likewise, capitalism per se is not necessarily a good or bad thing. Much depends on the outcome in terms of wealth creation and distribution. But in a free market economy, absolute wealth equality is an unlikely outcome and extreme wealth inequality is undesirable. A normal, bell curve distribution applies to most things in nature. One would assume it could also be used as a valid measure of wealth distribution. But to my knowledge, little credence is given to an axiom that says, "if you don't have a normal distribution of wealth, you don't have a free marker economy". On the other hand, you may have a productive free market economy but wealth distribution is skewed by inequitable taxation. Admittedly, it gets complicated. But in all cases, the absence of a normal, bell curve distribution suggests something needs to be revised, rescinded or replaced.

 

Wealth inequality tends to skew markets through political influences as well. Our discussions on social spending that is due to wealth inequality is one example.

 

It is not how big the gap is, but how shallow the floor that should worry people. Wealth is not a zero sum game. Please get this idea out of your heads, it is mathematically proven; not an opinion it is hard fact.

 

We already have a fixed Standard regarding poverty in the US. I believe we can still confide in the sincerity of Jesus the Christ regarding the wealthiest.

How can the Right ever convince us to confide in their sincerity when they are willing to wage war on a for profit basis and engender those hellish conditions on Earth, yet balk at social spending for the least wealthy in our republic regarding providing "manna" from the public sector merely for the sake of a moral of "goodwill toward men."

 

Nonsense of course. Your social programs do not reduce poverty, they make it intractable. When will you talk about your results and stop with this money raining from the sky stuff? Because that is not where it comes from.

 

Actually, from one perspective and in that alternative, the only reason we haven't actually solved poverty may be merely due to the moral turpitude of the Right regarding bearing true witness to our own laws concerning employment at will.

 

Except in practice it already has in a great many ways. All the Internet giants of today including Google and Twitter and Amazon and Instagram etc etc were nothing but that.

 

It is what enables a free market as opposed to economic oppression. You want wealth, do the things that will enable you to earn it and then don't be afraid to do it.

 

So that is why you buy particular products or services because you are manipulated and not because you choose a product of service with superior values or features? What was the last product or service you bought because you were manipulated?

 

And forced equality or wealth produces fewer goods or horrible quality built at inefficient plants with inefficient labor distribution with no one accumulating wealth breeding government dependence and oppression.

 

It just makes the rich really, really rich and the middle class and poor even poorer. But in America they are all going to be millionaires really really soon. Because you got your opportunity just about as much as Europe and Canada has.

 

Give me some examples of these products for which you have no choice in purchasing.

 

What things give you quality of life and for fun lets see if they come from government or the free market.

 

I actually concur with this. It bothers me when folks on the left focus on inequality of wealth.

Perhaps more accurately, the problem is the unequal distribution of capital, those assets which can be used to create or add value to other assets. Skillful use of capital is essential to settling conflicts of interpersonal or inter-organizational conflicts of interest. Large gulfs of inequality in its distribution create uneven fields of competition - making market entry rather difficult for folk who have the least, the results of competitions more driven by ones resources rather than their merits, and thus both restricting social mobility to some extent and ensuring that people possess unequal amounts of actionable freedom. By "actionable freedom" what I mean to say is the ability for one to do as they please in practice as opposed to the latent, hypothetical freedom they have to do so provided they first manage to procure enough resources.

More succinctly put, the inequality makes workers less likely to rise or fall within the system based on their relatively hard and skillful work or their relative sloth and incompetence when compared to others. Our capitalism creates a social hierarchy in which the conditions into which one is born and choices made by others have more influence over their fate than their own choices, and in sum this all sees to it that the richest people have far more freedom to do as they please in their daily lives than nearly any of the poor or even average workers ever shall - the same kind of freedom all people need to partake in individualist pursuits of happiness and - yes - property. This becomes especially problematic when people who are doing alright start to think the poor generally want to be that way, and when social programs become stingier and people fall through the cracks, they are cheated of even more of their freedom and some, in spite of others' good intentions, have their very lives put in jeopardy. To survive many focus on the present, not long-term plans to rise out of poverty. When this becomes a way of life they accept people call it the "culture of poverty" and vilify them for it.

Or at least that's the way I generally see it. There are ways to break out of this but having to cope with such problems when there are so many resources to go around seems fundamentally unjust. It is especially so when having an income of $1M or $100M per year is not going to make an individual much (if at all) happier over the long run than if they make $100K or $200K instead. If the liberty and happiness of all are important goals to strive for as a society, and the shallow floor you speak of does not allow for 100% of the population to readily possess all of the basic necessities of life and general wellness of health, it seems reasonable to be concerned about large gaps of inequality in resource distribution.

Just as markets both create and destroy, they also both liberate and suppress inner, human potential for greatness. Capitalists who understand all of this support a strong social safety net and social programs intended to empower those most unfairly put at a disadvantage by markets, while socialists like I seek to address some of the causes of inequality directly in hopes of reducing it to an extent where there is still enough of it to motivate people to work commendably in hopes of earning for themselves better living conditions... yet at the same time not so much that most individuals from the moment of birth on are caught in an economic riptide of forces beyond their control from which they have little hope of escaping. You and I very likely share a number of the same fundamental values yet appear to have arrived at different understandings of how society works.

I often hear from folks that anyone responsible and driven enough to succeed in life can and eventually will if they are persistent and their expectations are not set too high. The exceptions to this are said to be few and far between. I do not share that optimism to quite the same extent, nor do I place as much faith in the charity of individuals - even if provided in concert with a meager, liberal workfare regime - to cope with the shortcomings of capitalist markets alone. It is important to me that we have markets, a rising tide to lift all boats, and rigorous competition of course, sure. But to build on that metaphor I also believe no man, woman, or child should be allowed to drown if they happen to lose their boat or never had one to begin with and, if we do all live at sea, justice demands we each be on a boat so we may freely sail.

Vast inequality does not skew free markets. It just makes free markets under-performing engines of human development.

 

TOM SMITH AND HIS INCREDIBLE BREAD MACHINE
by R.W. Grant

This is a legend of success and plunder
And a man, Tom Smith,
Who squelched world hunger.
Now Smith, an inventor, has specialized in toys.
So, people were surprised
When the found that he instead
Of making toys, was BAKING BREAD!

The way to make bread he'd conceived
Cost less than people could believe.
And not just make it! This device
Could, in addition, wrap and slice!
The price per loaf, one loaf or many:
The miniscule sum of under a penny.

Can you image what this meant?
Can you comprehend the consequent?
The first time yet the world well fed!
And all because of Tom Smith's bread.

A citation from the President
For Smith's amazing bread.
This and other honors too
Were heaped upon his head.

But isn't it a wondrous thing
How quickly fame is flown?
Smith the hero of today -
Tomorrow, scarcely known.

Yes, the fickle years passed by:
Smith was a millionaire,
But Smith himself was now forgot -
Though bread was everywhere.
People, asked from where it cam,
Would very seldom know.
They would simply eat and ask,
"Was not it always so?

However, Smith cared not a bit,
For millions ate his bread,
And "Everything is find," thought he,
"I am rich and they are fed!"

Everything was fine, he thought?
He reckoned not with fate.

Note the sequence of events
Starting on the date
On which the business tax went up.
Then, to a slight extent,
The price on every loaf rose too:
Up to one full cent!

"What's going on? the public cried,
"He's guilty of pure plunder.
He has no right to get so rich
On other people's hunger!"

(A prize cartoon depicted Smith
With fat and drooping jowls
Snatching bread from hungry babes
Indifferent to their howls!)

Well, since the Public does come first,
It could not be denied
That in matters such as this,
The Public must decide.
So, antitrust now took a hand.
Of course, it was appalled
At what it found was going on.
The "Bread trust," it was called.

Now this was getting serious,
So Smith felt that he must
Have a friendly interview
With the men in antitrust.
So, hat in hand, he went to them.

They'd surely been misled;
No rule of law had he defied.
But the their lawyer said:
"The rule of law, in complex times,
Has proved itself deficient.
We much prefer the rule of men!
It's vastly more efficient.
Now, let me state the present rules,"
The lawyer then went on,
"These very simple guidelines
You can rely upon"
You're gouging on you prices if
You charge more than the rest.
But it's unfair competition
If you think you can charge less.

"A second point that we would make
To help avoid confusion:
Don't try to charge the same amount:
That would be collusion!
You must compete. But not too much
For if you do, you see,
Then the market would be yours
And that's monopoly!"

Price too high? Or price too low?
Now, which charge did they make?
Well, they weren't loath to charging both
With Public Good at stake!

In fact, the went on better
They charged "monopoly!"
No muss, no fuss, oh woe is us,
Egad, they charged all three!

"Five years in jail," then the judge then said
"You're lucky it's not worse.
Robber Barons must be taught
Society Comes First!

Now, bread is baked by government.
And as might be expected,
Everything is well controlled:
The public well protected.

True, loaves cost a dollar each.
But our leaders do their best.
The selling price is half a cent.
(Taxes pay the rest!)

 

Nobody has a "right" to capital, they have to accumulate it as best they can, and then they have to do the right things with it, or it's scattered again. Welcome to life as a free man. In cased you missed the memo, today's modern socialist state with only the thinnest veneer of capitalism is showing the natural ever-increasing poverty and dependency rates.

If your definition of "working" is the elimination of poverty, then socialism doesn't work. It couldn't since religions always promote poverty to expand the base gullibility. Socialism infecting capitalism doesn't work, since you can't mix hard work with laziness and expect anything but more laziness as the hard workers are punished. Capitalism will work to reduce poverty, as it did in the US until LBJ put a stop to that with his Great Giveaway Programs and his Vietnam War which converted productivity into explosives. LBJ also ended hopes of restoring the US to capitalism and freedom.

Then again, the United States never founded on the principle of "reducing poverty", and it's central philosophical tenet is still, to the great disgust of the devout socialists, fascist, commies, *******s, eco-freaks ("Green is the new pinko") fools, not the "greatest good for the greatest number" but "the most freedom for ALL people".

And "freedom" isn't measured with a paycheck, but with how few chains the people are forced to wear.

 

I like camping and hiking in the woods and clean lakes and beaches to swim at. The best places to do this are in state and national parks and forests and other recreational lands owned by the government. In the summer time I like to go into the city for festivals and concerts, very few of which are not on a public street or in a public park. I take public transportation because it is cheaper and more convenient and more fun. Now that I think about it, most of the quality of life and fun that I enjoy is due to the government.

If you are holed up in your suburban fortress or rural compound I can understand that you do not see the very real and distinct benefits that government brings to the quality of life of people who live in or near the cities or go to the public lands. I can understand that your paranoia and distrust prevent you from availing yourself of the opportunities for fun and quality life experiences offered by the public amenities of urban existence. You should get out more often, go see some of our great public places, like the Grand Canyon or the beaches of Cape Cod. Or maybe go to one of the summer festivals in your nearest city.

 

I just posted this in another thread, and it seems to apply here as well:

 

I am not so sure about that since the preamble to the Constitution is pretty explicit that the government operate "to promote the general welfare" and some stuff about securing Liberty but there is no mention of freedom. Anyway, it seems to me that the best way for the government to actually secure "the most freedom for all people" would be to enact legislation that would reduce the freedom of starvation homelessness and destitution that coerces people into the freedom of less than affordable employment situations.

Freedom does not mean much when it is used to describe starvation with or without a job as two different things. If the people are to be unchained then the homeless and unemployed should be given access to assault rifles and unlimited ammunition so they can better assert their freedom to defend their personal liberties from our negligent self absorbed society that has tossed them into the gutter without a second thought.

 

Earning wealth through production is for suckers. Instead do what the great capitalist does, use govenrment-issued privileges and regulations to steal the wealth which others create. For example, you can buy land titles, IP monopolies (create a patent thicket), banking charters (which allow you to create debt money), taxi madallions, just to name a few. Buy any one of these privileges and govenrment will allow you a favored status, and create a barricade agaist your competiton. With governments help in eliminating your competition you can become rich ... that is how the 1%ers do it ... so can you.

Just imagine sitting on your porch swing and watching the “workers” out in the field, plowing, seeding and harvesting the grain, all done with their own machinery and seed ... but when the grain comes in and is taken to the market, you automatically get half of the harvest. Why do you get half the harvest? Well, because you gave them permission to use the land that nature provided, and govenrment told them (the “workers”) that they cannot use what nature provided without your permission. That is the power of government-issued privilege, instead of actually having to produce wealth yourself, you can charge others for your permission. With privilege, simply giving others permission to produce wealth and you automatically recieve a share of what they produce, all without lifting a finger.

Just remember, in a capitalist economy it is better to use privileges to “capture” income rather than to “earn” income, so get yourself some privilege.

 

They should make more " liberals " like you. Competitive capital was something Friedman had talked about too. He argued that government was the poorest suited To distribute but there are some mechanisms available not as easily corrupted. Student loans build human capital, as long as they repaid little room for corruption. Removing social security and death taxes will speed up the rate families acquire wealth. Lowering small business taxes and expensing of capital purchases...Well i have to run look forward to getting back to this

Did you see the negative income tax thread? Would like your input there. That held people drowning. I believe that voucher education can improve skills too... Well I do have to run now.

 

I call that "skewing" those markets even if external to money based markets.

 

You are right of course. Nobody has a "right" to have anything. There is no natural law. We create for ourselves a set of expectations on what privileges people should or should not be entitled to. But I would respectfully contend that having food, water, a basic education, etc. are no less essential to being a free human being in the 21st century than are the rights to expression, association, or to practice the religion of ones choosing.

I disagree. Nearly every businesses in my community is privately-owned instead of owned and run by workers' cooperatives. You and I both oppose the government's policies as they pertain to welfare today but go in separate directions in regards to what should be done. I'd say that since the Clinton administration the government has been run more like a business than before, not the other way around. There are no socialist economies in the First World.

Likewise, the state itself is not socialist in its operations. I work for the government. We do not get to elect our managers or administrators, do not get to vote on anything pertinent to our everyday operations or compensation for that matter, I do not own a share in the local library, from one year to the next my job is at the mercy of legislators who want taxes to be low and - many of them being sympathizers with the Tea Party movement - would probably not be the sort of folks who would respond at all well to being accused of running a socialist system, and though I am allowed some discretion in how to carry out labor there is a very clear hierarchy of superiors and inferiors within the organization. It's a decent job, but I am not part of a socialist economy. Please blame the mainstream American politicians who built the existing system for its imperfections today - not folks off to the side who don't get to call the shots.

The abolition of absolute poverty and the reduction of barriers to market entry yes, but not the elimination of relative poverty. Religions have nothing to do with it and I feel no enmity toward them. I also don't see what laziness has to do with it, since I believe those of us who contribute more to society than others - as determined by the markets - should be rewarded accordingly. You may be greatly overestimating the extent to which I would like to reduce the inequalities in question. My objection is to the excessive lows and highs permitted under our current system. Capitalism can and indeed has fought absolute poverty and promoted individual freedom as you point out by the way... yet that capitalism you speak of was not without substantial social programs, systems of social welfare, or regulation, and in spite of all those measures taken I still do not think that system did as much good as a well-designed socialist alternative could have.

I really have no intention of demonizing capitalism or ignoring its merits. I also accept many valid criticisms of socialism as it was practiced before in oft authoritarian, centrally-planned ways. This is why I wish to incorporate economically right-wing policies into the alternative I favor and am no less opposed to sorts of socialism schemed up by Lenin, Mao, Castro, etc. than you are. So far as I can tell the system I support has never before been implemented. You are talking to someone who favors "right to work" laws, abolition of the corporate tax, a replacement of Social Security and Medicare with a guaranteed minimum income, more free trade agreements, an end to market-distorting government subsidies, elimination of tax incentives used to nudge people toward choices the state wants them to make, raising taxes on low and middle income earners when tax hikes are needed (not just on the rich), and finding ways to discourage abuses of welfare benefits so people become independent and work for a living.

Along those same lines, I qualify for a number of state benefits right now but choose not to take advantage of them. I strive (not always with success) to be self-sufficient, and refuse to use a partial disability of mine to get a leg up on competitors when I apply for jobs, an option that a person could take advantage of right now courtesy of affirmative action. You and I certainly disagree on some issues, but please do not consider me someone who fits the mold of the stereotypical liberal or even that of a stereotypical socialist. A number of the arguments you are making are things that have no relevance to the policies I would propose, and I remain an opponent of both capitalism as regulated by progressives after WWII and as it has been ever since Reagan, Clinton, and others helped to begin dismantle that order.

I am not a collectivist or a communitarian. My core objective is to empower individuals to improve their selves, be as free of coercion as reasonably possible, and find satisfaction with their lives. Poverty is a source of hindrance to the individual's self-improvement and pursuit of happiness. Want for certain basic resources forces the individual to subsist or simply eek by rather than flourish in the fashion that they are supposed to when promised the precious gift of liberty. The United States was founded in very different economic times, and not all of the factors conducive to individual freedom back then are still present today. People like me love the sentiments of classical liberalism but do not think it works anymore. The old ideals should give rise to policies that address 21st - not 18th - century conditions.

Going back to what I just said, you seem to be thinking about freedom in terms of how many chains people are forced to wear by the government rather than how many they are forced to wear on the whole. You are correct on some issues. For example, a person is no more or less free to vote, live in a state which has a republican form of government, or be protected from cruel and unusual punishments based on their income. Yet I have broader perception of rights and liberties. For better or worse, I realize having no or very little money is a much stronger, heavier chain to be bound by in terms of limiting personal autonomy than people having to pay taxes, getting drafted for jury duty, or being told they are not allowed to commit murder. It is all pretty subjective though, I guess?

 

No worries, and I haven't yet seen the thread. I've heard about the negative income tax before and although it is not my method of highest preference, I would accept it over many of the current programs. School vouchers meanwhile are something I am less sure about, namely because I consider education intimately connected to the competency of citizens to vote wisely in their own best interests. It is quite possible however that I could be convinced that private education, vouchers, and perhaps some basic regulation to avoid worst-case scenarios would be acceptable to me. Hmm...

Incidentally, I would be willing to eliminate the estate tax as well provided it - along with the rest of the system in place - would not cause ballooning income inequality. The inequality of wealth meanwhile is comparatively less important to me.

To some extent I agree, aye. For me there is a delicate balance to strike between the ordoliberal strategy of regulating markets for quality of competitive process rather than quality of results on one hand, while on the other I believe markets are a useful tool to be harnessed for the good of all individuals instead of being a desirable end in and of itself. Likewise with the socialist facets of my convictions, I do not value workers' ownership of the means of production or workplace democracy merely for their own sakes! I try to be pragmatic to some extent, and am liable to combine parts of different schools of thought to the best of my admittedly (or obviously, rather?) limited wisdom.

 

Friedman was so anti-government that he was willing to embrace absurdity to forward his proto-libertarian positions. His starting position was that government must be inherently incompetent and grossly inefficient in the delivery of services because it was not driven by the competitive pressure of profit seeking that drives businesses to reduce costs and improve services.

Where he failed was in the real world observation that the attention of both public and private providers to popular concerns over cost and service can be directly scaled to the size and transparency of their operations, regardless of whether the operator was public or private. In other words, the failure of services to the public has a larger relationship to the size of the entity that provides those services than to whether it is publicly or privately operated. This is because these services are operated on a non-competitive basis even where they may have been initially granted through a competitive process.

The only thing that keeps providers of public services responsive is immediate local control, the more local the control the more responsive the service will be. Municipal utilities will concern themselves with applying revenues towards investment in improved reliability rather than increased profitability, a difference that became glaringly apparent in the recent hurricane here where those served by municipal utilities fared far better than those served by private companies. This is because many municipal companies have spent the last few years installing small contraptions that prevent wires from breaking when tree branches fall on them. The private companies deployed them too, but sparingly due to profit concerns. The difference was a few hours without power and waiting a week.

Instead of replacing big unresponsive government with the even bigger corporate unresponsiveness of I think we should just reduce the size and scope of oversight to the lowest level possible. A local school should be governed by a local school board made up of parents whose children are enrolled. Utilities should be overseen and beholden to a board of locally elected directors regardless of its private or public status.