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posted by cmn32480 on Friday June 19 2015, @11:27AM   Printer-friendly
from the spread-the-money-around dept.

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

 
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  • (Score: 1) by khallow on Friday June 19 2015, @07:18PM

    by khallow (3766) Subscriber Badge on Friday June 19 2015, @07:18PM (#198375) Journal

    The same argument could be used against excessive hoarding of riches.

    I note here that "hoarding" refers to productive investment which helps everyone, just not as much as you'd like. I think we should get past the dishonest use of language first.

  • (Score: 0) by Anonymous Coward on Friday June 19 2015, @08:57PM

    by Anonymous Coward on Friday June 19 2015, @08:57PM (#198422)

    While a large amount of wealth is invested, there is also a large amount that is literally hoarded in assets and offshore accounts. Also, your idea of those investments helping everyone is the same old trickle down theory, so move on to reality please where the parasites justify their existence by trying to make themselves look like saints. The only saving grace is "not as much as you'd like" where you almost admit there is a problem.

    Back to the solution, its been pointed out before that progressive tax increases on higher wealth, up to 90%(?) back in the day, allowed for a strong middle class. That is a pretty good solution that's already been shown to work. If you believe that a single person is literally worth millions of times more than another, then I will have to ask you to turn in your humanity badge.

    • (Score: 1) by khallow on Saturday June 20 2015, @01:48PM

      by khallow (3766) Subscriber Badge on Saturday June 20 2015, @01:48PM (#198660) Journal

      there is also a large amount that is literally hoarded in assets and offshore accounts

      Which are then invested by the banks who keep the funds.

      lso, your idea of those investments helping everyone is the same old trickle down theory

      Just because the effects of "trickle down" have been exaggerated doesn't mean that they don't exist.

      its been pointed out before that progressive tax increases on higher wealth, up to 90%(?) back in the day, allowed for a strong middle class

      There has never been a 90% tax on the wealthy due to the many tax loopholes of the time. And what allowed for a strong middle class was both the relative ease of employing people and running businesses (a long running US feature since its beginning) combined with a lack of competition from foreign sources. Keep in mind that for decades, the US was one of the few developed world countries which hadn't been devastated by the Second World War. I think it's foolish to confuse the US's temporary advantages of the time with an imaginary high tax rate on the wealthy.

      Such a high tax policy now would be epic folly, studied for centuries. The US has far weaker advantages these days than in the past. I think making the US vastly unprofitable for businesses and such would chase away almost all capital from the country. What would be the point of employing US workers when you lose 90% of what you earn from them? Better to take your chances with China or India.

    • (Score: 1) by khallow on Saturday June 20 2015, @10:36PM

      by khallow (3766) Subscriber Badge on Saturday June 20 2015, @10:36PM (#198818) Journal

      If you believe that a single person is literally worth millions of times more than another, then I will have to ask you to turn in your humanity badge.

      I believe some people have negative value due to their actions. So yes, a single person can be worth more than millions of times another. For example, I believe you are worth more than millions of Charles Mansons.

  • (Score: 2) by monster on Monday June 22 2015, @10:18AM

    by monster (1260) on Monday June 22 2015, @10:18AM (#199358) Journal

    Hoarding refers to hoarding. If the rich people decide to use the money to run a factory, buy themselves a megayatch or have an olympic pool of gold coins to swim in those are just different uses of the hoarded money. Some may be more positive towards the common good than others, but it's still the same accumulation of economic power nonetheless. With the added fact that a large share of rich people tend to prefer the second option and not the first, which takes away the myth of the "enterprising capitalist".

    • (Score: 1) by khallow on Monday June 22 2015, @03:27PM

      by khallow (3766) Subscriber Badge on Monday June 22 2015, @03:27PM (#199442) Journal
      A megayacht or a pool of gold coins is not economic power. It is instead the dispersal of that economic power. Rich people who dump all their money into fancy boats or whatever don't tend to stay wealthy.

      With the added fact that a large share of rich people tend to prefer the second option and not the first, which takes away the myth of the "enterprising capitalist".

      Because enterprising capitalists never buy anything nice? It's a silly argument: we need to screw up our society economically because otherwise very rich people might buy really big boats or even flaunt their wealth.

      Fortunately, I have a solution here. How about you find a real problem to worry about? Like how to get rid of all the obstacles thrown in the way of employing people?

      • (Score: 2) by monster on Monday June 22 2015, @03:54PM

        by monster (1260) on Monday June 22 2015, @03:54PM (#199459) Journal

        I think we should get past the dishonest use of language first.

        It's really irony that you say this just a few comments back, given your current comment:

        Because enterprising capitalists never buy anything nice? It's a silly argument: we need to screw up our society economically because otherwise very rich people might buy really big boats or even flaunt their wealth.

        If you keep raising strawmen at the rate you do in this article, you could have a whole division in little time.

        Fortunately, I have a solution here. How about you find a real problem to worry about? Like how to get rid of all the obstacles thrown in the way of employing people?

        Very nice of you to worry so much about how I misuse my time. But don't worry, I'm not one of the people who took the time to make a study which just by coincidence is at odds with your vision of reality. I guess it's the new motto in the USA: "If the facts don't agree with your theory, ignore the facts"

        • (Score: 1) by khallow on Monday June 22 2015, @04:22PM

          by khallow (3766) Subscriber Badge on Monday June 22 2015, @04:22PM (#199471) Journal

          I'm not one of the people who took the time to make a study which just by coincidence is at odds with your vision of reality.

          How is the study actually at odds? The conclusions are at odds, but the study itself isn't. They just choose to ignore the common factors (such as being an uncompetitive developed world country in a world subject to globalization) which provide a better explanation.

          Speaking of dishonest language, we have you using the term, "hoarding" to mean without distinction any use of money which doesn't involve destroying or giving it away. And how do you measure "excessive hoarding" when you don't consider the use of the wealth in the first place? And then there's the vague concern about "accumulation of economic power". There's all this bizarre economics-like language, but nothing serious to attach that language to. But at least it sounds alarming.

          If you keep raising strawmen at the rate you do in this article, you could have a whole division in little time.

          Perhaps you should write something less full of straw, if you don't want me to characterize it so easily? You were the one stating coyly that rich people buying megayachts or pools of gold coins somehow magically demonstrates the "myth of the 'enterprising capitalist'" which I gather somehow is supposed to be a devastating rebuttal of Reagonomics (at least the "trickle down" idea which kicked this thread off), but is rather an embarrassing display of juvenile rhetoric. I believe I characterized that accurately: rich people buy toys hence they can't possibly be enterprising capitalists.

          • (Score: 2) by monster on Monday June 22 2015, @04:49PM

            by monster (1260) on Monday June 22 2015, @04:49PM (#199496) Journal

            How is the study actually at odds? The conclusions are at odds, but the study itself isn't.

            Maybe you didn't read it? I did before submitting, given the controversy it would likely raise here, and the data is clear. Let me quote it again for you: "If the income share of the top 20 percent increases by 1 percentage point, GDP growth is actually 0.08 percentage point lower in the following five years". Maybe you disagree with the next sentence ("suggesting that the benefits do not trickle down") but such disagreement doesn't negate the stated fact.

            Speaking of dishonest language, we have you using the term, "hoarding" to mean without distinction any use of money which doesn't involve destroying or giving it away. And how do you measure "excessive hoarding" when you don't consider the use of the wealth in the first place? And then there's the vague concern about "accumulation of economic power". There's all this bizarre economics-like language, but nothing serious to attach that language to. But at least it sounds alarming.

            Let me google the word for you:

            Hoarding: To accumulate money, food, or the like, in a hidden or carefully guarded place for preservation, future use, etc.

            Do you find dishonest the use of the word? Why? Also, would you agree that we can call "excessive hoarding" to when some people have so much money they couldn't spend it in their lifetimes, even if they tried? Because there are people like that, you know.

            As for your language rant, let me introduce you a new word: Synonyms.

            • (Score: 1) by khallow on Monday June 22 2015, @06:12PM

              by khallow (3766) Subscriber Badge on Monday June 22 2015, @06:12PM (#199531) Journal

              Hoarding: To accumulate money, food, or the like, in a hidden or carefully guarded place for preservation, future use, etc.

              Now, let's look at what you claimed was hoarding: investing, buying a big yacht, and the pool of gold coins. Investing is by definition risky so it fails the definition. Buying large status objects like yachts fails because the rich guy isn't preserving the wealth. Finally, the pool of gold coins might be or it might just be another bling expenditure. Definitions are nice because if you had followed your definition, we wouldn't have bothered with this thread at all and have had more time for cat videos.