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A new study (abstract and free PDF available) authored by several economists at the IMF (International Monetary Fund) reveal an inverse relation between increases in inequality and GDP growth. In what could also be considered a heavy blow to trickle-down economic theory, data analyses show (page 7) that increases of income share on the fifth quintile actually hurt growth, while increases in any other quintile favours growth with the lowest quintile showing the strongest push.
From the abstract:
We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class.
Original Submission
(Score: 3, Disagree) by bradley13 on Friday June 19 2015, @03:38PM
"you can either have growth or much greater redistribution to bring all the people of the world up to a decent standard of living"
That's a false choice. In fact, it'd dead wrong, because people just don't work that way.
Your second option is basically a restatement of Karl Marx: "From each according to his ability, to each according to his need". That's what redistribution is, right? Taking from those who produce - and giving to those who don't.
The problem is that darned thing called human nature: If someone is productive, but sees the results of their hard work taken away and given to others, then the motivation to work is going to evaporate. Welfare and disability fraud are already huge problems within any individual country that provides them.
You talk about doing this worldwide - raising everyone up to a decent standard of living. That's a wonderful ideal, but: do you know what happens to aid sent into the third world [soylentnews.org]? Most of it winds up in the wrong pockets - if not sucked off by the aid organizations themselves, then it's stolen by corrupt politicians on the receiving end.
Most people, given the chance, will be greedy and lazy; they need an incentive to work. Take the fruits of their labor, and they stop laboring. Give them a "free" decent standard of living, and that stop laboring. Want to help the poor? Capitalism has done more for worldwide standard of living than any other system [stanford.edu] - precisely because the principles of capitalism let people keep most of their earnings, and a rising tide floats all boats. More productivity - more economic growth - is the best possible way to help the poorest people.
Do note: the perversions that occur through corruption and regulatory capture are counterproductive in any system, including capitalism. That's people being greedy and lazy again, and needs to be stopped.
Everyone is somebody else's weirdo.
(Score: 5, Touché) by Immerman on Friday June 19 2015, @04:52PM
> If someone is productive, but sees the results of their hard work taken away and given to others, then the motivation to work is going to evaporate.
Exactly. If we all bust our asses steadily increasing our productivity, and see our real wages fall while the executives pocket all the profits without contributing any more than they did before getting a 20-fold raise over the last few decades, where's our motive to continue striving?
It's not like the only solution to income inequality is wealth redistribution, it can also be eliminating radical income disparities. This country was doing great back in the days when the difference between the highest and lowest paid employees (CEO and janitors) was typically only a factor of 30, rather than the 600+ that is common today. Why should we allow a select few to pocket all the wealth generated by the rest of us?
(Score: 1) by khallow on Friday June 19 2015, @07:27PM
If we all bust our asses steadily increasing our productivity, and see our real wages fall while the executives pocket all the profits without contributing any more than they did before getting a 20-fold raise over the last few decades, where's our motive to continue striving?
A: It would be even worse, if you didn't strive for what you want. Now, I would think that a decline in effective wages would result in people entertaining other wants than merely working more.
(Score: 3, Insightful) by tathra on Friday June 19 2015, @10:28PM
exactly. wealth redistribution will happen if inequality gets pushed so high the system breaks, except it'll be driven by guillotines and gunpowder rather than governmental intervention. we need to stem inequality before any kind of forced redistribution occurs, be it by the government or mob. taking corporate taxation back to historical levels (pre-reagan) and incentivizing the creation of cooperatives would go a long way to restoring the middle class and preventing the need for forced redistribution. if things continue on as they are, our options will become more and more limited, leaving us with few options, like executing the unemployed (or otherwise letting them starve and die because "its not my problem" and plenty of victim blaming) or implementing a basic income. if cooperatives become the standard, they could probably continue forcing the perverse "work or die" concept on everyone because there would be a healthy enough distribution of capital for there to be enough work for everyone; if capital continues to concentrate and stay hoarded and locked away, corporations will just wither and die because there will be no demand for goods (because already too may people can barely afford the bare necessities), and a market where even established corporations can't survive is certainly not one where new ones can grow.
(Score: 2) by Phoenix666 on Saturday June 20 2015, @09:54AM
I sense "guillotines and gunpowder" is already in motion. it may accrete, or a trigger could cause an eruption. the TPP could be the trigger, or it could be the collapse of the student loan debt bubble. but it's coming. stock up and stay safe, everyone.
Washington DC delenda est.
(Score: 3, Insightful) by Pav on Saturday June 20 2015, @02:38AM
Thomas Piketty has compiled a huge volume of data [wikipedia.org] that strongly suggests that what we call "developed economies" grow slowly because a powerful elite suppresses the rest of the economy. Low growth alone proves these elites don't deserve this wealth/power - if they did GDP wouldn't be sluggish, and society as-a-whole wouldn't be condemned to such stagnant growth and the many other negative consequences [wikipedia.org]. We shouldn't blame them though - if the game is rigged it's human nature to attribute success to inate ability... there's plenty of research [pbs.org] showing such cognitive mistakes are part of all of us. Game theory even has a model showing with mathematical rigour how economic negotiation in an unequal environment works (ie. positive-sum economics in a coercive environment [wikipedia.org]). Interestingly in perpetually poor countries with a well established elite the same low growth model holds true - it's most often countries where elite power isn't strong eg. postwar high-tax USA, recent China, Russia (for a time until Moscow began reasserting control), Lulas Brazil etc... which get to enjoy high growth and a dynamic economy.
(Score: 0) by Anonymous Coward on Friday June 19 2015, @08:31PM
Hence the reason why open source tanked immediately. Why should I bust my ass contributing to open source software when others, who didn't contribute anything, benefit from all the hard work I put into it? It completely saps my motivation when I see stuff like that going on.
But not nearly as huge a problem as big corporations...sorry, I mean, uhhh, job creators...demanding sweetheart government subsidies and tax breaks.
(Score: 0) by Anonymous Coward on Friday June 19 2015, @10:35PM
False analogy. Nobody is directly profiting from your hard work in open source, and when they do sell the open source stuff everyone who contributes to it certainly does throw a shitfit. Why should you work your ass off when somebody who isn't you is profiting from your work while you get nothing?
(Score: 0) by Anonymous Coward on Friday June 19 2015, @11:06PM
Hence the reason why open source tanked immediately. Why should I bust my ass contributing to open source software when others, who didn't contribute anything, benefit from all the hard work I put into it? It completely saps my motivation when I see stuff like that going on.
False analogy. Nobody is directly profiting from your hard work in open source, and when they do sell the open source stuff everyone who contributes to it certainly does throw a shitfit. Why should you work your ass off when somebody who isn't you is profiting from your work while you get nothing?
Different AC here.
WHOOOOOSH!!
(Score: 3, Insightful) by Mr Big in the Pants on Friday June 19 2015, @09:06PM
This entire conversation is about as informed as a uninformed thing with no clue...
"That's what redistribution is, right? Taking from those who produce - and giving to those who don't."
Not necessarily. Redistribution comes in many forms. Also the opposite (wealth concentration) does and COMBATING it is called wealth redistribution.
For example, in the US wealth is being concentrated in the hands of shareholders - most of whom DO NOT PRODUCE. They used their concentrated wealth to capture the proceeds of further growth for themselves - many times to the detriment of those who DO produce.
To combat this you would simply have to return more of the profit to those that are doing the work and this would benefit EVERYONE long term.
I don't see why the concept of inequality harms growth is so hard to take and why it is such a surprise? Has the neoconservative insanity penetrated the mouth breathing consciousness that deeply....oh wait...stupid question.
Let's make it simple:
If most people have less money there is less money for them to buy all the stupid shit that makes the economy churn.
Rich people do not spend like the poor thus there is a LOT less churn when we shovel all the money to them.
QED
(Score: 0) by Anonymous Coward on Friday June 19 2015, @11:46PM
B-b-b-but, those are our job creators! We need them to keep the market for mansions and yachts growing! Think of all the suffering it would cause to the importers of fine champagne and caviar if we rob them so that Joe Sixpack can put food on the table for himself and his family! Next thing you know, Joe Sixpack and his mooching, freeloading kids will be expecting another meal tomorrow! It will never end, I tell ya!
/sarcasm Unfortunately, there are probably some idiots reading and posting comments here who actually believe this.
(Score: 0) by Anonymous Coward on Friday June 19 2015, @11:54PM
> shareholders - most of whom DO NOT PRODUCE
You're right. I don't produce. Well, I did produce to get the money I invest, but now I share my petty wealth so you can have some place to produce. Who do you think finances that building where you work? The furniture? The computer you waste half your day on watching cat videos?
All I ask is a small return on my investment. Many times I don't get it. Many times I end up with less than I started. That's called risk. I like to be compensated for risk too, hoping in the long run to come out ahead. But if there's no chance to earn a return, I won't invest, and you can go back to planting potatoes with your bare hands... on somebody else's land.
(Score: 1, Insightful) by Anonymous Coward on Saturday June 20 2015, @12:35AM
You remind me of the owner of my workplace. He talks just like you. He steals my wages - I'm not exaggerating, he modifies my time sheets because he feels that even though I worked through my meal break (for free, and in violation of the law) and my two ten minute breaks (also in violation of the law), and even though I just worked four hours for free, I'm not doing enough to earn $4 less than minimum wage.
Clearly, I'm just a lazy bludger, stealing from his $10 million yearly profit.
Those safety lights in the stairwell? Nobody needs those on. New equipment that actually works? Why? I can be blamed when it all breaks, and that helps.. well, with something.
As far as being a job creator, well, that's just not true. He makes $10 million a year because he creates those jobs, right? If it weren't for him, nobody would have anything to do, right?
Government funding pays for all of our wages, this "wealth creator" doesn't put a fucking penny up. Who bought all his equipment? The taxpayer. Of course, he bought second hand stuff that just won't last. He's relying on us to generate new ideas for him. Yes, that hour I didn't get paid for? I came up with ideas that will generate nearly half a million dollars in profit, to generate new wealth for him but I got nothing for it. Didn't even get paid for the hour I was labouring when I came up with them.
Well, that's too bad. He wants my ideas, he fucking pays me for each one. If I'm to be his wealth creator then he can give me 20% or just plain go without. Guess which he will choose - pay up or go without? He'll go without.
The loss of wealth is his problem. I've got my ideas on paper and I'm not able to use them because I'm owed about $65k in salary backpayments, so I will fucking well burn them. It'll keep me warm so I will profit from them. If he wants me to prop up his fortune, he can fuck off and die.
The sooner he dies, the better off we will all be.
(Score: 2) by Mr Big in the Pants on Saturday June 20 2015, @07:59PM
If you think the fact that you DID produce is relevant you are missing the point.
CHURN is what keeps an economy going, not historic production. The problem is the amount of wealth that is tied up this way, not that it exists.
I could just as easily say:
The only reason you have a place to put your investment to earn interest is that there are people with enough spending money to purchase the shit that place produces or other associated support industries.
And again we come back to inequality == bad!
It is not rocket science...
(Score: 0) by Anonymous Coward on Sunday June 21 2015, @01:45PM
So you two would rather I not invest the money I earned over my career, because according to you, investors are leeches.
So what do you want me to do with my earnings?
A. Spend them right away, on crap I don't need, so that I can be dependent on government benevolence in my old age? (How's that working out in Greece, BTW?)
B. Men with guns will force me to part with my money. In which case why did I bother to earn it in the first place?
You have to think about the incentives created by your success-hating proposals.
Oh and meanwhile where are the employers of the world going to get the money to buy trucks, lay railroad tracks, build factories and office spaces, and so on... everything you don't bring to the table when you demand a job because you have a right to employment because you breathe?
I suppose the government will provide that too.
So the choices are:
A. I earn money by producing, invest it so you can produce too, and we both gain.
B. I earn money. Men with guns take it. They use it to create infrastructure. You work there. They take your earnings too. Soon we both grow old and have to hope the men with guns haven't squandered all that money they took from us. (Hint: they have, sure as the sun shines.)
(Score: 2) by Mr Big in the Pants on Monday June 22 2015, @03:25AM
You have made your argument increasing both personal and anecdotal and with this post have reached 100% irrelevant and off topic.
This has nothing to do with the money you currently have. Spend it however you will.
This discussion is fruitless and thus I am moving on...