The truth is economic growth hasn’t been occurring in real terms for most people for a long time and the rich have been transferring money from the poor to themselves at a dramatic rate.
I’m starting to think the entire system is corrupt and we are headed for a destroyed Europe and a civil war in the US. Maybe I’m very pessimistic but this moment in history feels like the end of the American empire, what comes after this is extremely uncertain but people only seem to demand a fair piece of the wealth after a world war.
Thomas Piketty lays it all out in "Capital in the 21st Century"
Basically he compares two kinds of growth rates : the growth rate of the 'real' economy and the growth rate of wealth itself. You need the wealth rate to be low enough that rich people want to invest some of it in the real world, not leave it in the bank.
If you do tax the rich, they do very well and you also have money to pay for things like education, roads, affordable housing, medical services, scientific research .. which benefit all and lubricate the general economic market.
If you dont tax the rich, you end up with a gilded age of emperors and kings or a few robber barrons, a small rich coterie around them and the gawping masses of poor eeking it out.
Postwar 70s and 80s were a unusual period of relative lower-inequality, in which we had money in the real economy to develop things.
Garys Economics made an interesting point that inequality _itself_ is a problem - because the actual real value of the world remaining the same [ goods, energy available, land, workers, housing, technology ], when there is higher inequality, then the poor are losing a proportion of that real wealth to the rich. Extreme inequality itself starves almost all the population of a share of real wealth, for them to use their skills effectively - renovate a house, invest in stocks, get a masters degree, do a garage project, travel, have kids, install solar panels etc.
> Basically he compares two kinds of growth rates : the growth rate of the 'real' economy and the growth rate of wealth itself. You need the wealth rate to be low enough that rich people want to invest some of it in the real world, not leave it in the bank.
I think your second sentence, and thus your explanation of Piketty's thesis, is wrong. Piketty's point was that if wealth grows faster than the economy, the total share of all assets held by the wealthy will grow and grow. I don't think he was concerned about the choice to invest 'in the real world'. In any case it's not clear what 'not investing in the real world' means or if it's meaningful. Any return on capital either comes from direct investment or from lending to someone else who will invest directly. There is a fundamental accounting equation which proves that all net saving is net investment.
Even if you try to tax the riches, they have billions of ways to evade it. The tax laws are so complicated for a reason. Here in Australia, there were cases that some individuals that earned just about A$1M pa., and they paid ~A$980K to companies registered in Virgin Islands etc. for managing tax affairs. Such arrangement knocked down their taxable income to ~A$19K, and thus they paid probably a couple of dollars taxes if not not even a dime. Eye-opening, right? But those were not those super rich ones. You can just imagine what those super rich people can do. So the burden of the tax would be on mid-income people. I would expect the same in US.
> rich people want to invest some of it in the real world, not leave it in the bank
Honestly, I have no idea why would anyone need that. Money is not value. Money is just a way of keeping track who is owed by future society how much value. It's a way of keeping tabs who gets to consume in the future.
When rich people hoard their money it's not a problem, you can just print more money to replace what they sucked up and hoarded. It's exactly when they try to spend it where the problems start to show up. Because they are doing it stupidly causing at least some inflationary pressures but more often than not societal and environmental harm.
Countries should make every effort to make spending their money as hard as possible for the rich people. Disincentivize them with high (and highly progressive) luxury, investment and real estate taxes. If that causes them to hide their money to avoid tax, even better. Every dollar of rich money hidden is a dollar of value not wasted by society on servicing the rich and their whims and gambling.
Rich people generally don't keep the majority of their money as cash in a vault. When money lies in the bank, the bank invests it in the real world. Or more directly, when money lies in stocks and bonds, it is invested in the real world.
Gary is great laying it out for the layman but he talks as if he "thought" it all up. It's really Thomas Piketty who pointed out the issue way before Gary.
> invest some of it in the real world, not leave it in the bank.
The richer you get, the more likely you are to engage in wealth management. This necessarily means investment. No one who's rich has that much liquidity or money just laying around. This is as stupid as hiding cash in your mattress.
The question is which are genuine investments or scams. And this cannot be emphasized enough: either money is made from value-generating labor, or you are in the business of theft. There is no middle ground or third option.
This is why I think one key element of restoring sanity to economies is the categorical criminalization of usury. Compound interest is theft, and it boggles the mind how easily people are intimidated into going along with the rationalizations purporting to explain that it is not (all that nonsense about opportunity cost, as if that is the borrower's problem or responsibility). Banks are important, but they are not productive per se. The only ways a bank can legitimately make money is through service fees and investments (and real investments, where there is a kind of partnership and proportionate skin in the game, not magic bailout money or some kind of weird accounting magic).
Once we destroy the superstitious idea that money can be bred, stop using euphemisms for theft, and acknowledge labor as the basis of all economic value, we will see a healthy economic shift and more distributive justice. Housing markets will improve, too. The change is deep cutting.
The whole discussion about inequality or taxing the rich or inheritance is confused and frankly a distraction from real problems, and I suspect at times a purposeful distraction, because it preserves perverse economic norms (making the tax simply the cost of doing business) instead of correcting them, which is the real threat.
The fundamental theorem of capitalism: rich people get paid for being rich in proportion to how rich they are.
This is why your savings account looks like an exponential. The thing to understand is the difference in lived experience depending on where it starts. If you are poor, the returns are a joke, you tend to ignore them. If you are middle class, the returns fund your retirement, and it seems roughly fair: you work hard and at some point you earn the right to not work any more. Only if you are rich do you see the fountain of free money (homework: calculate yearly returns for the typical 10%er, 1%er, .1%er, and centabillionaire), and of course being the beneficiary you rationalize away the possibility that this could be a problem at all. It's a tidy system.
"That's an unfair characterization of capitalism!"
So is the one you get in economics which bends over backwards to hide the "fundamental theorem" as I have stated it inside a choice of units: "under conditions of market equilibrium every financial asset has an equivalent risk-adjusted rate of return from the perspective of its marginal buyer." Did you miss the class warfare? It was all hidden inside the word "rate." Very clever.
Piketty is a hack. Most billionaires don't spend anything even close to their net worth. In effect, they have a bunch of IOUs from other people and never cash them in.
The problems with Piketty's arguments are addressed in the article:
"if America’s rich families in 1900 had invested passively in the stockmarket, spent 2% of their wealth each year and had the usual number of children, there would be about 16,000 old-money billionaires in America today. In fact, there are fewer than 1,000 billionaires and the vast majority of them are self-made"
Yes, if rich people invested their money wisely, gave nothing to charity, spent small amounts, and left their wealth to one of their children, wealth inequality would grow unchecked.
Perhaps my friends and I are outliers, none of us inherited any wealth or were given trust funds or lump sums when hitting adulthood but all of us are better off than our parents at the same age and their parents are better off than their parents (with one exception).
All either studied hard in school and went on to get a degree or left school at 18 and apprenticed in a trade or got specific qualifications.
I read so much about declining wealth and how each generation is worse off that I have to assume I’m in a lucky bubble because it’s not the case for me.
None of us are rich but the system appears to be working from a sample of say 30 people aged 25 to 45 from different parts and backgrounds in the UK.
I feel like software has been an outlier here for a decade; the only place where traditional economic intuitions still apply (semi-smart people can work hard, learn a technical skill, find a job in their field, pay off their loans, make more than their parents, afford a house, and have a comfortable personal life and relatively fulfilling work life)
Everything I've heard from the rest of the economy is that this model is dead
Yes, you and I are outliers and so are many people here.
Those of us who work in tech, and many of the people we find ourselves bonding with and staying close to in our adulthood, are lucky to have taken up in a sector that happened to see disproportionate growth during our careers and admitted many people from modest backgrounds.
But people who didn't stumble onto that path, or perhaps hoped to follow their parents into professions that were more flat or failing (medicine, education, academia, farming, manufacturing, "the trades"). In aggregate, some of those people are still doing okay, some are doing well, and some are flailing in desperation for having made the wrong bet.
Of the people I grew up with in a modest blue collar community, I don't know anyone besides the few most ambitious and capable that were able to find the security that their parents had. And as one of those more ambitious and capable people who later circled with people of fancier backgrounds, I similarly don't know anyone who pursued things like academia or medicine and found what they expected there either.
I'm a little surprised by this. While I'm better off than my parents I went into a much more highly paying field (software engineer vs teacher/social worker.) If I did a similar job to them I would have no hope of ever affording a similar house to them.
They were part of a generation that benefited from enormous house price appreciation due to a combination of falling interest rates went from almost 15% down to under 5% (this is about 3x on its own) and the fall in house building which drove up prices and rents generally.
This effect is somewhat less pronounced outside of southern England.
I have a very different experience. I did all the right things, more or less, got into a good field with a secure job in the broader tech industry, and indeed I make very good money.
Despite this, I can not afford to buy the house I grew up in; a 3 bedroom SFH with a decent sized yard and a pool, around 1400 square feet, 45 minutes away from downtown without traffic in a hot real estate market. My father was able to purchase this home as a tradesman with 4 kids, being the only parent who worked outside the home.
> None of us are rich but the system appears to be working from a sample of say 30 people aged 25 to 45 from different parts and backgrounds in the UK.
I have a similar sample, all middle class in their 30's. The only ones who have bought houses have been given significant assistance from their parents, now none of them are poor by any stretch, but few have any significant assets.
Well things worked out for you and they have worked out for me as well. For a long time I have this arrogance expressed privately usually to myself or very close people that it is all due to hard work, diligence, thrift that I reached where I am today.
But lately after reading and observing around quite a bit I come to realize due to being ended up in a fast growing sector at least a minimum level of success was guaranteed. I see same thing at my company where a lot of VPs, Sr VPs and above reached to that level primarily they started a decade or two earlier than me and growth was much faster than compare to when I joined in mid 2000s.
They can talk down to me just like I can talk down to more juniors about value of hard work, drive and so on. However, joining a growing sector early was best thing career wise. No amount of hard work will help if one is starting at a middling IT job in middling company in 2025 like I did in 2005.
You're not an outlier. If you look at US GDP per capita, adjusted for inflation, it's higher than ever. If you then look at the median personal income, also adjusted for inflation (i.e. the middle class), you see the same trend.
There's a lot of doom and gloom but it doesn't seem consistent with the data.
There's a weird tendency to zoom in on particular data points that paint a particularly negative story and leave out the rest. For example, we look at housing and will say that its prices outpaced inflation. And that's true, sort of. But it's also completely untrue. For example, if I look at my own situation compared to my parents: I have a 1.5% interest rate on my mortgage, my parents paid 15%. Homes are now about 50-75% bigger than my parents' generation, on average. And the average home is shared by 33% fewer people than my parents' generation. So the cost to rent the money to buy a certain area of home for 1 person, i.e. housing costs, has actually gone down, despite the average price of a house having gone up.
In all fairness I wouldn't want to trade with the average person in past generations.
My dad migrated to London in the 70s and bought his first property in London around age 26. He didn't have a degree but did get a professional qualification.
I ended up getting a good degree at a top uni and started my career at Amazon but definitely couldn't have amassed the necessary amount for a down payment for a place in London by the time I was 26.
By the time my dad was 35 he had two kids and my mum was a full time mum.
This doesn't sound remotely close to the reality of my numerous banking, lawyer, accountant, engineering and doctor friends.
The only people I know who are remotely close to being able to own a property in London and have only one breadwinner work in hedge funds.
Sure maybe there was some inertia from the benevolent bettering institutions of the New Deal that have given a chance to Americans.
I just think you'd have to be so willfully in denial as to miss the darkness we are descending into. To miss how bitterly the GOP and the wealthy are building empires of lies and bespoke manufactured realities to make up down and left right, to cover for horrible treacherous actions against the possibility of the individual, stacking the deck for empire and inherited wealth. (And Dems are frequently unwilling to bite the donor class that makes winning elections possible, after the courts have obstructed democratic funding reforms.) Are actively opposing the possibility of people doing good for themselves & the world.
I strongly recommend folks go read one of the darkest periods of America, before enough was enough
Adam Hochschild's American Midnight (2022) tells an amazing story of a circa-WW1 state that had radicalized against people, that had been totally overrun by well monied powers. Of Hoover using the full power of the police state to surveil as Ralph Van Demand had done during the Philippines civil war, of of the postal service run by someone using it for information control, of American Defense vigilanism.
Its not a tale of what happened next, how that broke, just a long amazing story of how dark America got, how badly the state was an extension of capital and power, and how deeply it subverted the individual, the union, any attempt for everyday humans to make any claim to life liberty, or pursuit of happiness.
We face today not quite such amassed power, but a completely warped infosphere where these bespoke realities create lifestyle beliefs where people are on board with incredible trains of lies crafting false enemies, supporting the opposite of the signalling they claim. Its different than dark; the world today is overloaded by hell's din, by monsters of abuse, doing their worst to harm us for greed and for the possibility of undoing the good of the world.
In the US, my anecdotes seem to show that things have stayed neutral or declined slightly. It seems harder to get a decent job than our parents. It seems that fewer of us have bought homes, or delayed buying due to financial reasons. Seems like more of us are working multiple jobs too. I think the aggregate measures showed real income only trending up slightly over the past couple generations.
I'm in the same position as you, but I see myself as rather lucky. I worked very hard but I also was taught hard work translates into success, many people don't see that relationship. And I happened to be interested in a lucrative career path.
How can you compare these experiences to a greater upward mobility which does not exist? You don’t have a baseline for comparison. What if you had 2x more leisure time with the same fiscal wealth? What if you had easier access to healthcare?
The argument in your case is you should actually be _much_ better off than you are without this massive wealth transfer.
That’s part of the challenge in the populous understanding this issue. Many people are better off than their parents, but for being the richest country in the world most people should be far better off.
Very anecdotal. You can't just look at yourself and your circle (which is similar to yourself) and extrapolate to the general population. Also most people in HN are in Tech which did well in the last 15-20 years comparing to other fields.
Some of it might be declining costs of everything apart form limited resources (like housing).
Perhaps you generation is better off than their parents were in terms of everything except real estate. But their parents are also better off now than they used to be when they were their age, because everything (except housing) is much cheaper (relatively) than it used to be thanks to optimizations in production and economies of scale of last 5 decades.
> Perhaps my friends and I are outliers, none of us inherited any wealth or were given trust funds or lump sums when hitting adulthood
> all of us are better off than our parents at the same age and their parents are better off than their parents
These are conflicting statements. Your group are all beneficiaries of generational wealth by this description. Maybe it isn’t as overt as a trust fund, but you definitely inherited wealth and opportunity from your parents.
Same here, but we are in a very similar boat in our voyage through socioeconomic statuses (though I'm in Ohio River Valley US). I may be fooled by the discourse that [Xennials/Oregon Trail gen/Gen Y/Elder Millennials], but we supposedly saved more, delayed gratification, planned more, and worked more than even Gen Z (who, don't get me wrong, have it worse because of undercompensation vs purchasing power and sheer hopelessness).
Yep. A good friend of mine grew up to a very poor immigrant family, both him and his sister got full rides to good schools because of grades, and at age 30 bought a house in NJ with a very good school with 4 kids after saving non stop and living with his parents and taking care of them.
The system works fine if you don't need nonstop luxuries
> rich have been transferring money from the poor to themselves at a dramatic rate
Anyone not familiar with it needs to look up Georgism.
This transfer happens primarily via housing costs and rent payments.
The stratification of the rich happens via investment opportunities, but the core underlying mechanism for the majority of the population is via housing costs and Ricardo's law of rent.
Yeah, you can't have an realistic economy that will eventually inflate small, entry-level houses to $1mm+ and college costs to the $100k's but still have jobs paying $10-20/hr (or less). Any kid who does the math will realize how hopeless that economy is. Even if you scrape by, one emergency turns you into a debt slave.
Housing needs to stop increasing in price for a number of generations. Surely the rich can find someplace else for their money.
You’re probably right. The historical norm is that there are owners and there are workers. We seem to be regressing to that.
The difference is that medieval peasants knew their manorial lords had bigger houses and ate more meat, but the visible local differences were small and religion could operate (for worse or better) as a stabilizing force. People tolerated a caste system because they were information poor.
There’s no reason today, though, for people to put up with the kind of inequality that is not only extreme and senseless but constantly being shoved in their faces via social media. The only way the rich stay out of the guillotines is by creating new, weird cultural spectacles like litter boxes in schools (not even a real thing) for “furry kids.”
They were uninformed then, but people are misinformed now.
I think the latter is worse, because it means those in power now have an information lever they can use to manipulate the masses. When there were no broadcast or network media sources, those levers didn't exist and the powerful had fewer tools to control people.
> People tolerated a caste system because they were information poor.
Well no. Peasant rebellions/uprisings happened all the time. People tolerated the feudal system because those rebellions could at best pressure for greater leniency within the system, while it took the later historical developments of urbanization and increasing labor productivity to actually overthrow the system.
The new way to sell the lower and middle classes on persistent inequality and a caste system is the culture war. You scare them about culture war bogey men: trans people, immigrants, gays, etc. The deal is "let us rule over you and tax you and charge you rent, and we will marginalize people whose existence disturbs you."
A closely related variation is the appeal the current oligarch class is making to men all over the world: let us rule over you and tax you and we will keep women in their place and set things up so you have most of the power in relationships. Men get to rule over women, and in exchange the oligarchs get to rule over men and take most of their productivity in rent and taxes. You're poor, but your wife can't leave.
Workers have been sold the lie that if they work hard and smart, they too can get to the top and enjoy a life of luxury.
Relentless propaganda on social and legacy medias funded by billionaires succeeded in creating the most overtly pro-billionaire government ever.
They are now giving themselves massive tax cuts, implementing austerity and straight up picking in the treasury, and a lot of Americans are still defending them.
>The truth is economic growth hasn’t been occurring in real terms for most people for a long time and the rich have been transferring money from the poor to themselves at a dramatic rate.
The US is setting up to make this worse by cutting services for the average person (like the CFPB and OSHA) and continuing to give tax breaks to the wealthy...again.
This is after the same group of people set off sky-rocketing inflation by injection almost a trillion dollars of new money into the economy by way of the PPP program, of course hurting the average person more than their wealthy financial backers.
Medicaid cuts are going to be the real nightmare fuel. People think Medicaid is for the poor (which some Americans are always happy to screw over) but Medicaid is what makes it possible for many working folks’ parents to afford geriatric care. God knows what happens when the GOP succeeds in slashing it.
That 1970 middle-classer would be making around $450k in 2022 dollars, which sounds insane, but I also know my parents had normal jobs and were able to buy a house shortly after getting out of college.
Consider how big the difference is between each segment identified here. Realise that the upper income bracket itself could be broken down into three segments that would show an ever starker difference.
Unequal gains is the problem, and your intuition can help inform why: the 2023 dollar index used is based on what rate of inflation? CPI? RPI? Something else? Why is it that in 1970 a median income household could buy a home on a single income and raise a family (including sending kids to college), on a 2023-dollar income of $66k, but that's mostly not possible on $106k in actual 2023 for most households.
When you adjust for real buying power using a less favourable means of assessing inflation and taking into account housing costs more fully, I sense you'll find that the bottom two brackets are behind their 1970-adjusted counterparts, and the upper income bracket is significantly better off, especially if you then break that upper segment up a little into more categories.
And, without something happening to adjust this, the effect is going to just get worse and worse, and everyone knows it.
Nothing lasts forever. The rich get most of the economic growth is inevitable. It's the Matthew effect. In general, the more assets you have, the more passive income you have, which in turn frees people up from worries about making breads for the family, and thus can spend more time on think and do things more important in the long run. Again, that would reinforce their financial status. In the meantime, the poor would have to worry about next meal, and mostly don't have the reserve for investments. Thus, they will most likely struggle to save something, and even if they do manage to save some, an unexpected event can easily wipe it out before it reaches the threshold.
If the riches were conscious enough, they would return a fair share to the poor and the eventual crash will be deferred much longer. But you know, everyone wants more money, no exception for the riches. It looks the only thing we learn from the history is that we learn nothing from history. So here we are: the same drama of empires' rise and fall, the only differences are the locations and the actors.
Things that can be produced with machines rather than labor have become more affordable over time. Electronics, travel, clothes, and even food are cheaper than they used to be relative to wages. Then there are fields like education, childcare, and construction, which have not seen substantial productivity gains. The prices of their outputs can be expected to rise at the same rate as wages. (And then there is healthcare, which is complicated.)
But what has actually happened that increased housing costs have eaten the productivity gains for many people. Largely because of deliberate policy. Desirable areas often discourage new construction. When new construction is allowed, they prioritize single-family homes. And if really pressed, rental complexes.
As a rule of thumb, if you can afford to rent, you can afford to buy. If you expect to stay longer than a couple of years, you should buy. But in many places, if you can't afford a large home, you have to rent a small apartment. Because there is a shortage of small condos to buy. If the units available for purchase grow larger while the price per square foot grows at the same rate as wages, housing becomes less affordable.
In many of the denser population areas of the US _generations_ 30, 50, maybe more YEARS worth of insufficient building has left a completely broken situation of stagnation relative to population.
> people only seem to demand a fair piece of the wealth after a world war.
I think it's more that war has a tendency to literally destroy capital which is effectively a tax on the rich. When factories get bombed, factory owners lose out more than people who don't own factories.
War is horrible but it historically has at least been somewhat of an economic equalizer.
One of the real tragedies of the pandemic was that it turned that upside down. The virus didn't touch capital but destroyed humans, and the humans hit the worst were those in "essential" but low-paying jobs who couldn't socially isolate. The effect was that the pandemic increased economic inequality.
Are you sure it's true that the pandemic increased economic inequality?
The humans worst hit were by far the elderly, and the elderly tend to have more assets than the young in industrialized countries.
Among working-age people, lower-paid "essential" workers were exposed to more risk, but by a significant margin, old people are the ones who died more.
"Everything feels increasingly like a scam," she said. "Not only are grocery prices going up, but it's like everything has a fee and a surcharge. And I think that anger is put out at government."
people don't demand wealth equality after a war, they just create massive inflation during the war and solve it by taking everyone's savings after the war...half the countries in europe post ww2 did something akin to replacing the national currency at exchanges rates of like 10:1 in some cases like germany...and germanys post-war inflation solution is hailed as an 'economic miracle' by many history books. Somethings tells me I wouldn't feel too jazzed about taking 90% of my savings, but I would also be resigned to do whatever because war is worse.
I get really worried when I see people glamorize equality post-war...post-war times are not good times for the middle class. The most equal wealth humanity has ever had is during caveman times, but that is not the goal.
war does not make things better folks, I hope that's not what OP was trying to say, but just in case let's be very very clear about how awful war is for progress and humanity.
post-war reconstruction fervor can inspire wealth creation. This is largely because there are no NIMBYs and eco-warriros sat around saying that the returning troops cant have a place to live and we cant have new infrastructure. If we can get that reconstruction fervor without a war it would solve a lot of our problems.
We've had terrible times without completely failing before but I agree with some of your sentiment. That isn't much solace at all but maybe it won't be the end of the entire experiment?
The extreme wealth gap and corruption paired with the loss of virtue (integrity seems to hold very little social value these days) seems like a bad mix to me if you like stability, let alone shared prosperity. Moreover, the response to the United healthcare assassination showed us that a bunch of folks don't think there is justice left in the system. The reactions to covid were a stark example of how a huge swath of people not only won't lift a finger to help their fellow citizens but will actively oppose it and be offended by the suggestion itself. This year the purges of non-straights or non-whites from all positions (and even from some records!) began and we don't yet know where that will end. Politically we've spent this year alienating our allies and generally acting like bullies.
I'm worried we'll be in a war in 3.5 years (real or manufactured) and "need" to delay the next election for a while, "in the name of national security".
A simple way to view this is to look at each economic quintile's "income multiplier", the lower ones spend their money quickly and often locally. Whereas the wealthy spend slowly and often within their own class on possessions or much later overseas. Adam Smith and John Stewart Mill both advocated for a steeply progressive income tax and strict controls on Banks and Corporations. The wealthy can wait to spend while many others can't. I learned about this during my Economics Major.
Estimating the Marginal Propensity to Consume Using
the Distributions of Income, Consumption and Wealth
Jonathan Fisher, David Johnson,
Timothy Smeeding, and Jeffrey Thompson
From https://www.bostonfed.org/-/media/Documents/Workingpapers/PD...
Recent studies of economic inequality almost always separately examine income, consumption,
and wealth inequality and, hence, miss the important synergy among the three measures explicit in the life-cycle budget constraint. Using Panel Study of Income Dynamics data from 1999 through 2013, we examine whether these changes are more dramatic at higher or lower levels of wealth and find that the marginal propensity to consume is lower at higher wealth quintiles. This suggests that low-wealth households cannot smooth consumption as much as other households do, which further implies that increasing wealth inequality likely reduces aggregate consumption and limits economic growth.
> Economic inequality is an umbrella term for a) income inequality or distribution of income (how the total sum of money paid to people is distributed among them), b) wealth inequality or distribution of wealth (how the total sum of wealth owned by people is distributed among the owners), and c) consumption inequality (how the total sum of money spent by people is distributed among the spenders).
> the rich have been transferring money from the poor to themselves at a dramatic rate.
How does this work? Where do the poor get wealth, on a continual basis, for the rich to take? If the poor have so little, and have had their fraction of the wealth taken by the rich for three decades, assuming things have got worse for the poor since the end of the eighties, where’s all this wealth coming from?
I’m not singling out here, this is a question for the general audience.
Seconding the Gary Stevenson rec, he frames in a very digestible way the flow of income from people working day to day being spent on modern day lifestyle (and necessities) to the people who own the assets modern lifestyles are dependent on and how this formulation of an economy may end up becoming increasingly unsustainable.
I think there’s another possibility: people eventually accept inequality and lower their expectations and ambitions for life. A lot of energy is wasted on trying to make everyone equal when the scales have become too tipped. At some point they’re simply isn’t enough activation energy left to right the ship.
In the past (centuries ago), it seems like people simply accepted other classes were better and they could never be their equals. That’s how you end up with royal families, etc.
So in the future, people will simply work to the bone, find whatever pleasures they can when possible, and maybe just not wake up ever again on some morning before their shift starts. They will live in small simple residential units mostly for sleep, eating, bathing and watching some content on a screen.
The rich will segregate themselves away to enjoy a finer life somewhere that they can be shielded from the plight of the poor.
A Civil War in the USA? Where would the battle lines even be drawn? There is no consensus, and there are hardly even blue or red states anymore beyond 60/40 splits. Even racially we are seeing a lot less polarization.
I live in Texas and back when the idea of succession was being thrown around I asked my friends if they’d go toe to toe with the US Marines while bombers and drones loitered above their heads. They got very quiet.
I don’t think a civil war in the us is possible but I think advertisers taking advantage of the divisiveness to see chaos is likely (and already happening).
Edit: I meant “adversaries” instead of “advertisers” but I think advertisers works equally well so left it in.
> A Civil War in the USA? Where would the battle lines even be drawn?
Clear, obvious initial battle lines are not a prereauisite for a civil war. The American Civil War, where the conflict was largely motivated by an issue which had a geographical split among subordinate polities was kimd of a special case.
> we are headed for a destroyed Europe and a civil war in the US
"Capital in the 21st Century" by Piketty does a good job arguing that the historical normal condition is for wealth to concentrate bc the returns on capital are greater than overall economic growth. It's depressing, but creating the kind of world that a lot of us and our parents enjoyed takes special conditions (and political will?) ... but the flip side of this view is that intense inequality can endure for long periods of time and doesn't necessarily lead to political instability.
Is not that they are seeking a transfer, but the incentives and system work is that it eventually converges to “poor get poorer and the money is transferred to the rich” as the most efficient way big biz makes money.
What I like about NFL, NBA, MLB etc is that they will tweek the rules to make things competitive so the rich don’t get too rich and win it all too much. We should have a “DOGE” system for rule tweeting to even things out once in a while
> The truth is economic growth hasn’t been occurring in real terms for most people for a long time and the rich have been transferring money from the poor to themselves at a dramatic rate.
It blows my mind why pension funds continue to invest any money at all in PE and Hedge Funds. It's a straight up wealth transfer from the working class to the investor class. States should pass max fee laws for their own pension fund allocations.
Before the election, everyone on HN was telling me that we live in the best economy ever and we're in a "vibes recession" where ignorant Americans can't understand how impossibly good things are. Now that it's less politically salient, everyone can just say true things. I wish every subject were like this all the time.
Why is the only outcome 'a destroyed Europe and civil war in the US'? This sort of doomer thinking is more like to bring us to that point than anything else, it seems to me.
Maybe an alternative is we'll figure out how to change and fix these corrupt systems as more and more people wake up to how bad they really are.
Is this a serious reply? The poor may not have much, but every dime they do have is spent on necessities… rent, food, healthcare. So where does that money go? Who are the actual recipients of those dimes?
I think we’re seeing his spilt economic system coming into play with computer hardware. Less and less B2C sales over time. It’s just not as profitable to sell to poor people.
In 1995 my parents, both factory workers, bought me a $2500 Packard Bell PC with 100MHz Pentium, 8MB of RAM, and a 1GB hard drive. Adjusted for inflation that would be a $5,283.95 computer today.
> the rich have been transferring money from the poor to themselves at a dramatic rate.
By definition, the poor have almost no money to transfer.
Wouldn't you have to transfer from the middle class - which is shrinking in relative terms?
The poor have never had anything and still largely have nothing. It is literally in the definition.
I don't see how it's possible to enrich yourself (when the amount you need to grow by even small percentages is enormous) from a class with nothing to take.
The poor have no money individually, but in aggregate they have some. $1 from a million poor people makes one millionaire.
IMO the main thing they extract from the working poor is time - what they're stealing is the excess value between their labor and the value is creates, and technology has made it easy to do this at a massive scale. So it's less $1 from each person, it's 8 hours per day from a million people makes 1 person a billionaire.
What about family-owned property? Lots of poor people live in multigenerational homes that might be the last step before not owning anything. Also, the fact that the housing market is this bad just means a large portion of the population will be stuck in rental accommodation for the foreseeable future, and that should be accounted for as a form of money transfer somehow.
And for those who will say, "Then the government should just build more houses", let me point out that we might run out of space before the appetite for real estate investment dies out.
Isn’t Marx, when he documented Capitalism, predicted its collapse?
Capitalism has been tried in 100 countries over the past 100 years. Not a single country has reported a harmonious society without suffering and inequality. Failure over and over.
But no alternative is being seriously researched.
I’m not talking about socialism/communism. A new system designed according to current knowledge in sociology, anthropology, and human biology.
Capitalism wasn’t scientifically researched nor updated according to science. In humans, it amplifies greed and materialism.
And democracy that we use now wasn’t seriously reviewed and updated according to modern science. The democracy we use now is the system the ancient Greeks came up with to replace feudalism. And all they knew back then was feudalism, so they replaced kings with electable kings. And we use that primitive cavemen level system now! It’s so bad you wouldn’t even use it in your Civilisation type game unless you expand it with 100s of in-game regulations, which we are unable to do upon real world.
We need a way to both have the benefits of modern social organization without supressing the means to fall back to simpler but more resilient and decentralised societies which would come together to maintain the form of nations in times of crisis, which inevitably come again and again.
What we have is a social crisis that billionaire class used to exploit the nation for classist gains, with the collateral effect of damaging the nations memory, identity and values.
This is what I've been struggling to articulate more succinctly since my college days, when I started really getting into macro-level systems analysis and long-term planning. Much of the Western world ceded pieces of its sovereignty to external entities without regard to the long-term consequences of said actions. Stuff like outsourcing domestic labor abroad, to countries like China (refining, manufacturing) or India (knowledge work) means those countries now have an outsized influence on domestic affairs that aren't easily clawed back. Ceding sovereignty of infrastructure (be it data centers, roads, hospitals, schools, etc) to private enterprise means those entities have dictatorial say over how those pieces of infrastructure are operated, maintained, and replaced.
In essence, the limited sovereignty the West retained was broadly centered around consumption and wealth, opposing ends of a larger economic system that are now grossly out of balance. It's at the point where there is no singular "silver bullet" to fix it, either. Taxing the wealthy will help, but absent meaningful reshoring of industry and jobs domestically, it won't actually right the economic ship. It's also not merely an American problem, but one largely affecting the neoliberal West that spent decades outsourcing, offshoring, contracting-out, and generally doing everything possible to min-max cost vs returns, quarter after quarter. I think the only country not substantially affected might be Germany, but there's still talk of automakers shuttering factories there in favor of using Chinese labor and shipping the vehicles back to save on costs.
We have created a global economy but without global regulation, which in turn has resulted in artificially depressed consumption prices (relative to actual local costs) and artificially increased wealth extraction through rampant exploitation. Absent a singular global currency and standard of living (which, let's be real is centuries away at the earliest), the only practical solution is a domestic rebuild of labor markets, supply chains, and industries, with a goal of refocusing national exports on what a country uniquely excels at rather than simply offshoring to whichever country has the optimal labor pool and exchange rate relative to your specific industry.
It's a hot mess to be sure, but not unsolvable. Reshoring industry gives us an opportunity to re-evaluate supply chains and resource management with a focus on closed-loops and renewables. Reshoring work will boost wages and living standards, which in turn will boost birth rates and economic growth. Diversifying the economy back into regions and localities will promote specialization and innovation, rather than the fad-copying of today. There's a lot of good to be had in facing the problem head-on rather than giving into fascist ideology and demagogues promoting "one easy trick" to fixing things, but all of it involves hard, honest work, which some folks will naturally be hostile toward.
Corrupt and fair are key points. I believe it comes from a change in worldview.
The fundamentals used to be closer to the Bible's. They shifted to subjectivity, nationalism, authoritarianism (unchecked), and capitalism. Then, new groups around 1900 shifted to more subjectivity and atheism. Add pleasure-driven culture from the sequel revolution onward. Then, evolution, intersectionality, and feelings over facts.
As I look at these, I see a dangerous combo of not seeing individuals with inherent worth, thinking people are like animals, believe/do whatever without long term consequences, and do what maximizes selfish gain, money or pleasure. Our problems are inevitable under that mindset.
Let's look at specific examples in your post. The rich should take more wealth for themselves since that's maximizing selfish gain. The poor (or scheming) should also try to take their wealth by theft or welfare. If people get hurt, it's an unavoidable problem in a workd of conflict where the fittest survive. No objective morals even exist.
Fortunately, we're seeing a growing rejection of those values leading to life transformations. That's a huge part of Trump getting elected since his policies are appealing to such people. The Spirit of Christ is also causing revivals across the country with thousands to tens of thousands gathered trying to change at the core. Inner change leads to outward effects.
Right now, our college students are taught conflict theory, favoring specific geoups, subjectivism, work against our natural design no matter the losses, and pleasure/money/intellect are god.
What will happen when college students instead are taught objective truth, doing what's right above all, building on our natural design, loving others with sacrifices made, helping those in need onto their feet, unity despite our differences, and building companies that are profitable within those virtues?
I think the results will be beautiful. I've already seen places like that on a small scale. For big ones, Chic-fil-A and Hobby Lobby are pretty close. Part of God's design is some people will be rich and eventually generous. So, that won't change in most places.
His whole narrative he crafted was really unbelievable. I watched a video of him explaining his story, expecting to hear some story of finding consistent signals that stayed alive for a long time or finding crafty wording in bond contracts, but the whole story was that he took a punt on the GFC being worse than the market expected, and he made low 8 figures. And somehow, because of this, by some measure, he was the best trader in the world.
I too was the best trader in the world when I got some skittles from my friend in the playground for free and sold them to another kid for a dollar making an infinity percent profit, but I didn’t feel the need to make a YouTube career out of it.
He has found something of an audience in the social media oriented audiences, who are educated enough to grasp the general idea, but not specialized enough to verify his claims.
I've only heard of him because of this sort of Hacker News comments, and my general impression is that he is usually so off the mark that it is hard to have relevant conversations.
He makes money selling books and having an Youtube channel.
Dude Gary Stevenson is so good, great to see him shouted out on these conversations.
I've long wondered why so many economists get inequality so incredibly wrong without any hint of self-awareness whatsoever, and the answer (in part 3 of that series) was mind-blowing. So, so well put together.
I won't give the spoilers here, but do watch it. It's an experience.
Raise taxes to 80% after making more than a million a year? That's more than enough of a ceiling to keep incentives for 99% of the population. And any taxed income comes back to the masses anyway. Of course this depends on having good government programs so that the money is not wasted or stolen.
The idea that an average person, working hard, can eventually own part of a nation's land and resources, setting up their family with generational wealth, is derived from the pioneer days when land was plentiful.
This was never going to be able to last forever as long as the population keeps increasing. This is why settlers left Europe etc in the first place to seek fortune overseas. And since there is no un-owned land remaining, the market price for land will match or exceed regional population growth worldwide forever, unless a whole lot of people start dying.
Working hard is necessary in its own right for many reasons, but promising everyone that if they "work" hard enough, they too can set up their heirs, is pure marketing. So is shaming anyone who fails to achieve it as "lazy", when it was never going to be possible for more than a fraction.
Land is not scarce in the US. My road trip through Nevada to Salt Lake City convinced me of that much. What is scarce is land people actually want to live in - with safe neighborhoods, good schools, restaurants, shops, etc. Restrictive zoning and NIMBYism is definitely making this worse.
I don't think the amount of "unexplored" or "undeveloped" land is a good metric for social mobility. Economic growth is. New "frontiers" are created all the time. They do not have to be in the physical world (e.g. computers, the web, biotech, the App store, social media influencer, crypto, and now AI). Even in the physical world, frontiers can sometimes expand. Desirable land can be created in the middle of a desert (e.g. Las Vegas), we just don't want to anymore.
Despite its many flaws, I think the US is still better than pretty much anywhere else in the world.
Define "orginally". You might be interested to research how the Native Americans interacted, especially the Lakota. Rights by conquest was not a new idea.
There were a few hundred thousand of them across the entire continent. In the best case scenario, most of them still would have died to disease. Unless you believe a few hundred thousand people own should own an entire continent as their blood and soil birthright the land was always going to end up like this
There’s still a lot of land out there. The only problem today is nobody wants to start over with no plumbing, electricity, or other modern conveniences.
The truth has always been and will always be that the people who are most technologically advanced will end up with the land, weather by force or purchase.
Simply due to the fact that it's more valuable in their hands. Driving out some campers to build a town is the rule, not an exception.
Most first nations at first contact had 0 conception of ownership, rather seeing it as some sort of stewardship (or if you put it in modern terms you could use the marxist notion of personal property where it's 'use it or lose it') as well as low enough populations that they figured there was enough to go around to share the land with settlers.
A big part of the problem is that too many people want and/or have to live in very tiny portions of the country: major cities.
There is a lot of cheap land and even a lot of cheap houses for those willing to live in a different place. Even many of my friends in Seattle, for example, have discovered that if they move 30-60 minutes away their housing costs plummet dramatically. This has opened the door to many of them moving even farther away, unlocking an entire new world of affordability.
There was a brief moment where all of this looked like it was a very real possibility for many of us, but the rubber band is snapping back with remote work and now many are being required to move back to those few cities again to find the best jobs.
> but promising everyone that if they "work" hard enough, they too can set up their heirs, is pure marketing.
I don't think most people believe that you can just work hard and then have generational wealth for your heirs. That feels like a strawman argument. Generational wealth has always been a difficult feat for the few, not something we promised everyone could achieve.
However, people also underestimate the power of compounding for retirement savings. Obviously not helpful to someone working at McDonalds and trying to pay rent in a big city, but people working average mid-life jobs at average salaries who consistently save $100/month or more can amass significant retirement wealth over 30-40 years. Not "generational wealth" or "setting up your heirs", but enough to make big contributions to education, helping kids with emergencies, possibly leaving some non-trivial inheritance. This happens all the time and continues to happen with millenials, as it will happen with Gen Z. Again, not literally everyone but to suggest that it's out of reach is really out of alignment with the reality of what we see people earning and saving.
> but people working average mid-life jobs at average salaries who consistently save $100/month or more can amass significant retirement wealth over 30-40 years.
You’re off by at least a factor of ten.
40 years of $100/month savings at a generous 5% compounding is $148,242. And that’s in future dollars. Drop it to 4% and you’re down $116,606.
The real formula to consider is what percentage of your monthly spending you are savings. If it’s 100%, then every month worked is one month of retirement. If it’s 50% then two months of working is one month of retirement. If you live frugally and save 400% of your spend, each month counts as four retired months.
It’s a simple fraction with the numerator as your net savings and the denominator your total spending. And lowering the denominator scales things much faster.
> Even many of my friends in Seattle, for example, have discovered that if they move 30-60 minutes away their housing costs plummet dramatically.
And there are plenty of nice places to live in that radius! I'm in Tacoma which I really like. And Seattle is plenty accessible for shows, events, a night out.
I did what your friends did. After 6y of paying off student loans and saving cash (not even being frugal - enjoying Seattle for sure), we looked at Tacoma and realized "oh we have our pick of wonderful homes here."
America isn't overpopulated. The pyramid scheme you're describing is not a Malthusian constraint but the product of bad monetary policy privileging non-productive investments in real estate. There's still no better place on earth for normal people to build wealth, unless you're playing the digital nomad game.
It does not come about magically from monetary or even fiscal policy. The demand for housing (and other construction) was and is real. People find use for, and like having much space, while being close together. What was and is lacking is supply.
"
This is why settlers left Europe etc in the first place to seek fortune overseas."
And why you guys are looking at Mars now.
Here in latam we haven't filled the land at all, you guys have been hard working and filled with riches. But our laziness might give us more longevity, we are playing the long game with the amazon
LATAM will get a lot of remote work if the wages stay lower than the US since they're in better-for-US-company-timezones than India or others overseas. That's what my company is outsourcing to.
In the US you can buy land at quantity for, say, ~$1k/acre in places where there aren't people/infrastructure/etc...
There is no shortage of land in the US. There is a shortage of land in a few high density areas. But increasing their density makes them more attractive.
I don't think it's reasonable to make the pioneer comparison-- if you want to do what pioneers did and build something from almost nothing in the middle of nowhere with great effort then there is still an analogous route open to you.
The Puritans became settlers in the New World because they were hated and thrown out of Europe / England so they set up shop and managed to derange society to this day in the US.
"is derived from the pioneer days when land was plentiful."
Land is still generally plentiful. The need to all live in one spot is more social/artificial and really accelerated in the late 19th and early 20th centuries due to rapid urbanization.
And since there is no un-owned land remaining, the market price for land will match or exceed regional population growth worldwide forever, unless a whole lot of people start dying.
Land use is a complex topic, but you’re basically right. Everything good—not just land but social opportunities—is spoken-for and what we’re seeing in South Korea and Japan is probably the best solution: peaceful natural attrition and non-replacement of capital’s reserve army that is unwanted labor.
It always strikes me as bizarre that people can "own" land. It existed before you and will exist after you, so how can a short-lived being really "own" it?
It would make so much more sense if land "ownership" was related to whether you live on or work that particular piece of land rather than relying on arbitrary pieces of paper that were mainly decided before any of us were even born.
I wonder about the economics of places with declining population like Japan and South Korea. I always read that declining population is bad for the economy but feels like those countries will have more opportunities for the young in the future.
Look at Georgism, and LVT. A 100% "tax" on the value of unimproved land would ensure the forces of market itself would push away from the situation you describe.
of course this was never going to last forever, we have more than 8 billion people in the world, if even 0.00001% of people wanted to do what you proposed, eventually own a part of a nation’s land, thats 80 thousand people.
This is a fairly simplistic/wrong view. If this were the case, say, you’d expect housing costs to be fairly reliably lower in low density European countries than high density ones. Spoiler: nope.
In practice housing costs are driven by shortages of _housing_, not land. And these are quite different.
From the article:
"Building enough houses in the right place is the single biggest action governments can take to restore the link between work and wealth"
No greater truth can can be spoken about what's wrong with the economy in rich countries today.
I think Austin, TX is just a great proof point for this over the past 5 or so years. We built a ton of housing over the past 5 years, and last I read rents have fallen 22% and house prices have also gone down considerably (though they were so insane during the pandemic I still think they've got a way to go).
I may consider myself liberal, but general housing policy by most liberal leaders has been a total disaster and should be recognized as such.
Looking at the Case-Shiller index for Austin[1], Dallas[2], NYC[3], SF[4], and LA[5], it doesn’t seem like Austin’s prices have grown any less in the last five years. They’ve basically all nearly doubled in that time. If there is any improvement it’s too small for my eyes to see. In fact, SF seems to have had the lowest price growth (perhaps due to fears about crime?).
I don’t understand how rents actually go down in a market. My landlord has raised rent every year save for when covid laws prevented that. It is their incentive to always raise rent even when articles about my city claim “rents went down 5%” or whatever this past year. Whose rent? Expensive commercial landlord new construction rents where they try and hide the price anyhow with two months free on the first year? The rent that therefore only matters for the bank to put a valuation on that property because people move in year 2 at these sort of properties to avoid paying that full rent? Maybe that is what they are referring to. No one I know has ever had a call from their landlord telling them to pay less money next month due to the declining value of their asset.
> I may consider myself liberal, but general housing policy by most liberal leaders has been a total disaster and should be recognized as such.
? Private development is the heart of liberalism. We haven't had anyone but liberal leadership since, like, LBJ I think? And he was also a liberal acting out of character. Any alternative would surely imply public investment in housing. No, re-zoning is not going to make a dent in homelessness.
I'm aware that you're referring to liberal in the sense of "loyalist democrat" or whatever, but the reality is that both parties have virtually the same policy when it comes to housing: blame the market, act as though the market will still answer our problems even though it hasn't in the past, and feign helplessness that the government can directly influence housing in the first place outside of zoning. I.e., liberalism.
“The people” (local voters in the places that have the lomits in place) are the ones who want rules against building housing, not some external-to-the-people government.
If I've said it once I've said it a thousand times, there is no cogent and respectable argument for why income from labor is taxed at a higher rate than income from capital.
I hope we start there, a very simple and straightforward action to take.
If you’re looking for what to tax instead of income, the best things are: land, pollution and consumption.
Land is great because people will not use less of it, no matter how high the tax. Pollution is great to tax, because we want to produce less of it. Consumption (or purchases or spending) is good to tax because economic growth is good and this tax encourages investment rather than spending your wealth. The most common consumption taxes are the sales tax or VAT tax.
You may have heard of consumption taxes described as “regressive “, but that comes from looking at only part of the policy. For example, a universal basic income funded by a sales or VAT tax would see the poor better off than the rich.
"Pollution" is not great to tax if you want a functioning society.
Since apparently Carbon Dioxide is considered pollution now you have somehow defined the very action of living and working as taxable. Not going to end well.
Consumption tax leads to LESS investment because it leads to LESS viable companies over all. So unless you goal is More investement into a handful of megacorps you shouldn't do this.
Land tax is horrible because it's already our most abundant untapped resource, maybe in dense urban environments it might be justifiable, but that's it.
Stop trying all this dumb shit just say "suburban tax" if you want to make a tax that targets suburbanites. People appreciate honesty more than BS! Democracies can't function without it! The entire point of having representatives is to taxes that the people don't want, if they can't do that then American democracy has already failed decades before Trump.
my guess is because capital has more options than labor, and the decision makers since time immemorial are more afraid of capital leaving than labor leaving
This seems backwards to me. Labour can leave; someone can get on a plane in the UK where they get taxed 40%, and arrive in Dubai where they're taxed 0. Their buildings and assets can't come with them however. Capital that's not ethereal assets like stocks, shares, credit, etc, can't be moved. If you want to leave the country you need to become liquid, which means you sell off your assets and whoever is left in the country gets to buy them at cheaper rates.
The issue is when we allow people who do not live or pay tax in this country to make profit on assets in said country. A landlord who lives in the Cayman Islands should not be able to collect rent on UK assets while not paying the UK government tax in turn.
The noncogent and unrespectable argument is that labor is less liquid and more difficult to move around for tax-dodging purposes than capital. States have been reduced to opportunists in the realm of taxation and tax enforcement.
As predicted in Piketty's book "Capital in the Twenty-First Century". He posited that wealth trumps labour and the post-war period was an anomaly. His proposed solution is a wealth tax. I can't see those with wealth/power implementing a wealth tax, so the alternative is to invest to accumulate wealth and know that your children, who are not in a position to invest, will probably be relying on that wealth.
Capital flight is a thing. Land isn't going anywhere.
Economists including multiple Nobel laureates on both the left and right have been screaming for land value tax for almost a century for this and many other reasons.
The big problem with a land tax is that you'd have billionaires paying little tax. One may reasonably counter that that's fine if they aren't actually consuming much and it's probably correct. The majority of society won't go for it though.
the chief challenge is: how does one actually value land?
if I own 1000 acres in the middle of nowhere that holds an enormously profitable business, I could end up paying almost zero tax simply because I dont have any nearby real estate development
except that capital flight usually takes place in the form of exchanging one asset for another (stocks for crypto or money, for example), an event that is subject to taxation (in the US at least) if a profit is realized.
I also enjoyed the comic book version of “ Capital and Ideology” by Picketty, Claire Alet and Benjamin Adam which follows the fortunes of a French family through the generations.
I haven’t read Piketty, but another book pointing in the same direction is The Meritocracy Trap, essentially explaining how non-meritocratic a lot of the economy is despite the common belief that it is. Wealthy parents spend a ton of resources developing the human capital of their children. It has basically eroded the middle class as a result. The author calls for an inheritance tax among other things.
Almost everyone I know got several hundred thousand dollars gifted for a down payment and most of these people are from typical middle or upper middle class backgrounds. I have a top 2% income (by Canadian standards) but the best I can do is a 2 bedroom condo or a bottom of the market townhouse with a long commute
I don’t know a single neighborhood in this city where the average household in that neighborhood makes enough to live there with current prices.
I genuinely don’t know why I even work anymore. I don’t have any achievable financial goals except save as much as I can until I move away to live off my savings in a cheap area
I see this a lot as someone that came from a solidly middle-class background (parents were a teacher and secretary) and went to a "highly-ranked" university with plenty of upper-middle or upper class students.
I work in the same jobs as my peers, but there is a clear wealth difference in how our lives are spent.
We have a nice house in a good neighborhood, but our peers have very nice houses is some of the best neighborhoods due in large part to down payment gifts, gifts for remodeling, etc. We can both afford the mortgage payment, but the down payment would take us probably a decade to save for.
On vacations, we'll drive a couple hours away with the kids, while our peers will fly to Europe and spend two weeks since they pay for the flights and their parents pay for lodging and food.
And then there is family support. Some of my peers have parents who bought second (or third) homes to be closer to their grandchildren, or will pay for the very nice private school, etc.
It's taken me a lot to not very bitter about this -- and I'm clearly still a little bitter -- but I also know that we will likely be in a position to offer some of this support to our kids in 20+ years.
> It's taken me a lot to not very bitter about this -- and I'm clearly still a little bitter -- but I also know that we will likely be in a position to offer some of this support to our kids in 20+ years.
Wealth inequality has been increasing for decades, if the trend continues and nobody does anything the wealth gap could easily become so large that you might not be able to provide any meaningful support to your kids, and even if you manage to, your children won't stand a chance to provide it to theirs in 40+ years.
Many of our current rights are only there thanks to bitter people.
Grew up in a very small house with two lower middle class parents. Frugal upbringing.
My wife and I out earn my parents by more than 10x. And so we can afford to do some things that I couldn’t as a kid like “ski weekend in Park City”
I’ve jealously looked around many times and frustrated myself with comparisons to wealthier people. They can do X and I can’t.
But as I’m getting older and raising kids, I’m continually reassessing the value of these high cost adventures. Am I happier, healthier, more refreshed, etc or is it instead my access to high-cost that fools me into feeling those ways?
I see the path forward similar to you. I’d like to help my kids however I can while not giving them a financial ticket for life. Want to do things that fulfill us without feeling too extravagant or costly.
I moved to the USA and got 2.5x my salary in CAD. Canada is fucked and I'm glad I left. I've lived in tiny apartments there and now I just bought my first house in an expensive city with 0 help from my parents. Am also starting a family here which is something I could have never dreamed of in Canada.
I suggest you look at historical trends for USD to CAD and trends for home prices vs income in Canada.
I've got one friend who was gifted a house when he graduated from college. He works a similar type of job and makes a similar salary to the other members of our friend group, but the gift of the house, given from his wealthy parents, makes his financial situation drastically different from the rest of us.
I'm glad for him. But it's incredible how different one's life can be from their peers just based on their parent's wealth.
I don't have any wealthy relatives, so I'll never be so lucky as a lot of my friends. It's a struggle to even save up a down payment to buy a car, as our car is pretty old now - and I make 200k a year. Renting a house is really the only realistic way I'll ever get to live in a house, at least in the expensive city I've lived in most of my life.
Becoming? This may sound like a trope and a canard, but indeed this very publication, The Economist is partially owned and controlled by the Rothschild dynasty.
If you read the second paragraph the authors explain what they mean by "becoming".
>People in advanced economies stand to inherit around $6trn this year—about 10% of GDP, up from around 5% on average in a selection of rich countries during the middle of the 20th century. As a share of output, annual inheritance flows have doubled in France since the 1960s, and nearly trebled in Germany since the 1970s. Whether a young person can afford to buy a house and live in relative comfort is determined by inherited wealth nearly as much as it is by their own success at work. This shift has alarming economic and social consequences, because it imperils not just the meritocratic ideal, but capitalism itself.
And they do not need to be correlated even. What if rich families maintain their wealth, and meanwhile other families create wealth and become rich. How is this incompatible?
Because as wealthy families produce offspring who do not need to work or earn income in order to compete for finite resources with those who do, the cost of those resources increases, while the burden of labor and stress falls increasingly on the employed.
Eventually the man dying while making an income and spending no time with his child will grow to resent the one making the same income through family wealth who has enough time for that and more.
Readit News
The truth is economic growth hasn’t been occurring in real terms for most people for a long time and the rich have been transferring money from the poor to themselves at a dramatic rate.
I’m starting to think the entire system is corrupt and we are headed for a destroyed Europe and a civil war in the US. Maybe I’m very pessimistic but this moment in history feels like the end of the American empire, what comes after this is extremely uncertain but people only seem to demand a fair piece of the wealth after a world war.
Basically he compares two kinds of growth rates : the growth rate of the 'real' economy and the growth rate of wealth itself. You need the wealth rate to be low enough that rich people want to invest some of it in the real world, not leave it in the bank.
If you do tax the rich, they do very well and you also have money to pay for things like education, roads, affordable housing, medical services, scientific research .. which benefit all and lubricate the general economic market.
If you dont tax the rich, you end up with a gilded age of emperors and kings or a few robber barrons, a small rich coterie around them and the gawping masses of poor eeking it out.
Postwar 70s and 80s were a unusual period of relative lower-inequality, in which we had money in the real economy to develop things.
Garys Economics made an interesting point that inequality _itself_ is a problem - because the actual real value of the world remaining the same [ goods, energy available, land, workers, housing, technology ], when there is higher inequality, then the poor are losing a proportion of that real wealth to the rich. Extreme inequality itself starves almost all the population of a share of real wealth, for them to use their skills effectively - renovate a house, invest in stocks, get a masters degree, do a garage project, travel, have kids, install solar panels etc.
https://taxpolicycenter.org/statistics/historical-highest-ma...
Honestly, I have no idea why would anyone need that. Money is not value. Money is just a way of keeping track who is owed by future society how much value. It's a way of keeping tabs who gets to consume in the future.
When rich people hoard their money it's not a problem, you can just print more money to replace what they sucked up and hoarded. It's exactly when they try to spend it where the problems start to show up. Because they are doing it stupidly causing at least some inflationary pressures but more often than not societal and environmental harm.
Countries should make every effort to make spending their money as hard as possible for the rich people. Disincentivize them with high (and highly progressive) luxury, investment and real estate taxes. If that causes them to hide their money to avoid tax, even better. Every dollar of rich money hidden is a dollar of value not wasted by society on servicing the rich and their whims and gambling.
If I take raw materials, and create something with them, I have increased the real value of the world.
The richer you get, the more likely you are to engage in wealth management. This necessarily means investment. No one who's rich has that much liquidity or money just laying around. This is as stupid as hiding cash in your mattress.
The question is which are genuine investments or scams. And this cannot be emphasized enough: either money is made from value-generating labor, or you are in the business of theft. There is no middle ground or third option.
This is why I think one key element of restoring sanity to economies is the categorical criminalization of usury. Compound interest is theft, and it boggles the mind how easily people are intimidated into going along with the rationalizations purporting to explain that it is not (all that nonsense about opportunity cost, as if that is the borrower's problem or responsibility). Banks are important, but they are not productive per se. The only ways a bank can legitimately make money is through service fees and investments (and real investments, where there is a kind of partnership and proportionate skin in the game, not magic bailout money or some kind of weird accounting magic).
Once we destroy the superstitious idea that money can be bred, stop using euphemisms for theft, and acknowledge labor as the basis of all economic value, we will see a healthy economic shift and more distributive justice. Housing markets will improve, too. The change is deep cutting.
The whole discussion about inequality or taxing the rich or inheritance is confused and frankly a distraction from real problems, and I suspect at times a purposeful distraction, because it preserves perverse economic norms (making the tax simply the cost of doing business) instead of correcting them, which is the real threat.
The fundamental theorem of capitalism: rich people get paid for being rich in proportion to how rich they are.
This is why your savings account looks like an exponential. The thing to understand is the difference in lived experience depending on where it starts. If you are poor, the returns are a joke, you tend to ignore them. If you are middle class, the returns fund your retirement, and it seems roughly fair: you work hard and at some point you earn the right to not work any more. Only if you are rich do you see the fountain of free money (homework: calculate yearly returns for the typical 10%er, 1%er, .1%er, and centabillionaire), and of course being the beneficiary you rationalize away the possibility that this could be a problem at all. It's a tidy system.
"That's an unfair characterization of capitalism!"
So is the one you get in economics which bends over backwards to hide the "fundamental theorem" as I have stated it inside a choice of units: "under conditions of market equilibrium every financial asset has an equivalent risk-adjusted rate of return from the perspective of its marginal buyer." Did you miss the class warfare? It was all hidden inside the word "rate." Very clever.
"if America’s rich families in 1900 had invested passively in the stockmarket, spent 2% of their wealth each year and had the usual number of children, there would be about 16,000 old-money billionaires in America today. In fact, there are fewer than 1,000 billionaires and the vast majority of them are self-made"
Yes, if rich people invested their money wisely, gave nothing to charity, spent small amounts, and left their wealth to one of their children, wealth inequality would grow unchecked.
But rich people don't do that.
All either studied hard in school and went on to get a degree or left school at 18 and apprenticed in a trade or got specific qualifications.
I read so much about declining wealth and how each generation is worse off that I have to assume I’m in a lucky bubble because it’s not the case for me.
None of us are rich but the system appears to be working from a sample of say 30 people aged 25 to 45 from different parts and backgrounds in the UK.
I feel like software has been an outlier here for a decade; the only place where traditional economic intuitions still apply (semi-smart people can work hard, learn a technical skill, find a job in their field, pay off their loans, make more than their parents, afford a house, and have a comfortable personal life and relatively fulfilling work life)
Everything I've heard from the rest of the economy is that this model is dead
Those of us who work in tech, and many of the people we find ourselves bonding with and staying close to in our adulthood, are lucky to have taken up in a sector that happened to see disproportionate growth during our careers and admitted many people from modest backgrounds.
But people who didn't stumble onto that path, or perhaps hoped to follow their parents into professions that were more flat or failing (medicine, education, academia, farming, manufacturing, "the trades"). In aggregate, some of those people are still doing okay, some are doing well, and some are flailing in desperation for having made the wrong bet.
Of the people I grew up with in a modest blue collar community, I don't know anyone besides the few most ambitious and capable that were able to find the security that their parents had. And as one of those more ambitious and capable people who later circled with people of fancier backgrounds, I similarly don't know anyone who pursued things like academia or medicine and found what they expected there either.
Appreciate what you have! Many don't share it.
They were part of a generation that benefited from enormous house price appreciation due to a combination of falling interest rates went from almost 15% down to under 5% (this is about 3x on its own) and the fall in house building which drove up prices and rents generally.
This effect is somewhat less pronounced outside of southern England.
Despite this, I can not afford to buy the house I grew up in; a 3 bedroom SFH with a decent sized yard and a pool, around 1400 square feet, 45 minutes away from downtown without traffic in a hot real estate market. My father was able to purchase this home as a tradesman with 4 kids, being the only parent who worked outside the home.
I have a similar sample, all middle class in their 30's. The only ones who have bought houses have been given significant assistance from their parents, now none of them are poor by any stretch, but few have any significant assets.
But lately after reading and observing around quite a bit I come to realize due to being ended up in a fast growing sector at least a minimum level of success was guaranteed. I see same thing at my company where a lot of VPs, Sr VPs and above reached to that level primarily they started a decade or two earlier than me and growth was much faster than compare to when I joined in mid 2000s.
They can talk down to me just like I can talk down to more juniors about value of hard work, drive and so on. However, joining a growing sector early was best thing career wise. No amount of hard work will help if one is starting at a middling IT job in middling company in 2025 like I did in 2005.
There's a lot of doom and gloom but it doesn't seem consistent with the data.
There's a weird tendency to zoom in on particular data points that paint a particularly negative story and leave out the rest. For example, we look at housing and will say that its prices outpaced inflation. And that's true, sort of. But it's also completely untrue. For example, if I look at my own situation compared to my parents: I have a 1.5% interest rate on my mortgage, my parents paid 15%. Homes are now about 50-75% bigger than my parents' generation, on average. And the average home is shared by 33% fewer people than my parents' generation. So the cost to rent the money to buy a certain area of home for 1 person, i.e. housing costs, has actually gone down, despite the average price of a house having gone up.
In all fairness I wouldn't want to trade with the average person in past generations.
I ended up getting a good degree at a top uni and started my career at Amazon but definitely couldn't have amassed the necessary amount for a down payment for a place in London by the time I was 26.
By the time my dad was 35 he had two kids and my mum was a full time mum.
This doesn't sound remotely close to the reality of my numerous banking, lawyer, accountant, engineering and doctor friends.
The only people I know who are remotely close to being able to own a property in London and have only one breadwinner work in hedge funds.
I just think you'd have to be so willfully in denial as to miss the darkness we are descending into. To miss how bitterly the GOP and the wealthy are building empires of lies and bespoke manufactured realities to make up down and left right, to cover for horrible treacherous actions against the possibility of the individual, stacking the deck for empire and inherited wealth. (And Dems are frequently unwilling to bite the donor class that makes winning elections possible, after the courts have obstructed democratic funding reforms.) Are actively opposing the possibility of people doing good for themselves & the world.
I strongly recommend folks go read one of the darkest periods of America, before enough was enough Adam Hochschild's American Midnight (2022) tells an amazing story of a circa-WW1 state that had radicalized against people, that had been totally overrun by well monied powers. Of Hoover using the full power of the police state to surveil as Ralph Van Demand had done during the Philippines civil war, of of the postal service run by someone using it for information control, of American Defense vigilanism.
Its not a tale of what happened next, how that broke, just a long amazing story of how dark America got, how badly the state was an extension of capital and power, and how deeply it subverted the individual, the union, any attempt for everyday humans to make any claim to life liberty, or pursuit of happiness.
We face today not quite such amassed power, but a completely warped infosphere where these bespoke realities create lifestyle beliefs where people are on board with incredible trains of lies crafting false enemies, supporting the opposite of the signalling they claim. Its different than dark; the world today is overloaded by hell's din, by monsters of abuse, doing their worst to harm us for greed and for the possibility of undoing the good of the world.
In the US, my anecdotes seem to show that things have stayed neutral or declined slightly. It seems harder to get a decent job than our parents. It seems that fewer of us have bought homes, or delayed buying due to financial reasons. Seems like more of us are working multiple jobs too. I think the aggregate measures showed real income only trending up slightly over the past couple generations.
That’s part of the challenge in the populous understanding this issue. Many people are better off than their parents, but for being the richest country in the world most people should be far better off.
Perhaps you generation is better off than their parents were in terms of everything except real estate. But their parents are also better off now than they used to be when they were their age, because everything (except housing) is much cheaper (relatively) than it used to be thanks to optimizations in production and economies of scale of last 5 decades.
> all of us are better off than our parents at the same age and their parents are better off than their parents
These are conflicting statements. Your group are all beneficiaries of generational wealth by this description. Maybe it isn’t as overt as a trust fund, but you definitely inherited wealth and opportunity from your parents.
I doubt we're typical, is my point.
That's it, you're outliers.
The system works fine if you don't need nonstop luxuries
Anyone not familiar with it needs to look up Georgism.
This transfer happens primarily via housing costs and rent payments.
The stratification of the rich happens via investment opportunities, but the core underlying mechanism for the majority of the population is via housing costs and Ricardo's law of rent.
Housing needs to stop increasing in price for a number of generations. Surely the rich can find someplace else for their money.
The difference is that medieval peasants knew their manorial lords had bigger houses and ate more meat, but the visible local differences were small and religion could operate (for worse or better) as a stabilizing force. People tolerated a caste system because they were information poor.
There’s no reason today, though, for people to put up with the kind of inequality that is not only extreme and senseless but constantly being shoved in their faces via social media. The only way the rich stay out of the guillotines is by creating new, weird cultural spectacles like litter boxes in schools (not even a real thing) for “furry kids.”
I think the latter is worse, because it means those in power now have an information lever they can use to manipulate the masses. When there were no broadcast or network media sources, those levers didn't exist and the powerful had fewer tools to control people.
Well no. Peasant rebellions/uprisings happened all the time. People tolerated the feudal system because those rebellions could at best pressure for greater leniency within the system, while it took the later historical developments of urbanization and increasing labor productivity to actually overthrow the system.
A closely related variation is the appeal the current oligarch class is making to men all over the world: let us rule over you and tax you and we will keep women in their place and set things up so you have most of the power in relationships. Men get to rule over women, and in exchange the oligarchs get to rule over men and take most of their productivity in rent and taxes. You're poor, but your wife can't leave.
By which you mean the most recent 1% or so of human history.
Before that societies were a lot more egalitarian [0].
0 - https://medium.com/inside-of-elle-beau/yes-our-ancient-ances...
Relentless propaganda on social and legacy medias funded by billionaires succeeded in creating the most overtly pro-billionaire government ever.
They are now giving themselves massive tax cuts, implementing austerity and straight up picking in the treasury, and a lot of Americans are still defending them.
The US is setting up to make this worse by cutting services for the average person (like the CFPB and OSHA) and continuing to give tax breaks to the wealthy...again.
This is after the same group of people set off sky-rocketing inflation by injection almost a trillion dollars of new money into the economy by way of the PPP program, of course hurting the average person more than their wealthy financial backers.
This is just not true.
At least in the U.S., people of all income tiers have seen their incomes grow[0] while their working hours shrunk[1].
Inequality is a problem in itself, but equating unequal gains with "transferring money from the poor" seems like bad faith.
[0] - https://www.pewresearch.org/race-and-ethnicity/2024/05/31/th...
[1] - https://ourworldindata.org/grapher/annual-working-hours-per-...
[0]: https://ourworldindata.org/explorers/inequality?tab=chart&Da...
$1 in 1970 == $7.54 in 2022
That 1970 middle-classer would be making around $450k in 2022 dollars, which sounds insane, but I also know my parents had normal jobs and were able to buy a house shortly after getting out of college.
https://www.bls.gov/data/inflation_calculator.htm
(yes we all have more luxuries than back then, toys got cheaper, necessities exploded in cost)
Unequal gains is the problem, and your intuition can help inform why: the 2023 dollar index used is based on what rate of inflation? CPI? RPI? Something else? Why is it that in 1970 a median income household could buy a home on a single income and raise a family (including sending kids to college), on a 2023-dollar income of $66k, but that's mostly not possible on $106k in actual 2023 for most households.
When you adjust for real buying power using a less favourable means of assessing inflation and taking into account housing costs more fully, I sense you'll find that the bottom two brackets are behind their 1970-adjusted counterparts, and the upper income bracket is significantly better off, especially if you then break that upper segment up a little into more categories.
And, without something happening to adjust this, the effect is going to just get worse and worse, and everyone knows it.
2. How have living expenses grown?
If the riches were conscious enough, they would return a fair share to the poor and the eventual crash will be deferred much longer. But you know, everyone wants more money, no exception for the riches. It looks the only thing we learn from the history is that we learn nothing from history. So here we are: the same drama of empires' rise and fall, the only differences are the locations and the actors.
Things that can be produced with machines rather than labor have become more affordable over time. Electronics, travel, clothes, and even food are cheaper than they used to be relative to wages. Then there are fields like education, childcare, and construction, which have not seen substantial productivity gains. The prices of their outputs can be expected to rise at the same rate as wages. (And then there is healthcare, which is complicated.)
But what has actually happened that increased housing costs have eaten the productivity gains for many people. Largely because of deliberate policy. Desirable areas often discourage new construction. When new construction is allowed, they prioritize single-family homes. And if really pressed, rental complexes.
As a rule of thumb, if you can afford to rent, you can afford to buy. If you expect to stay longer than a couple of years, you should buy. But in many places, if you can't afford a large home, you have to rent a small apartment. Because there is a shortage of small condos to buy. If the units available for purchase grow larger while the price per square foot grows at the same rate as wages, housing becomes less affordable.
I think it's more that war has a tendency to literally destroy capital which is effectively a tax on the rich. When factories get bombed, factory owners lose out more than people who don't own factories.
War is horrible but it historically has at least been somewhat of an economic equalizer.
One of the real tragedies of the pandemic was that it turned that upside down. The virus didn't touch capital but destroyed humans, and the humans hit the worst were those in "essential" but low-paying jobs who couldn't socially isolate. The effect was that the pandemic increased economic inequality.
The humans worst hit were by far the elderly, and the elderly tend to have more assets than the young in industrialized countries.
Among working-age people, lower-paid "essential" workers were exposed to more risk, but by a significant margin, old people are the ones who died more.
"Billionare" is not a word which should exist.
"Everything feels increasingly like a scam," she said. "Not only are grocery prices going up, but it's like everything has a fee and a surcharge. And I think that anger is put out at government."
She realized prices are going up just now?
I get really worried when I see people glamorize equality post-war...post-war times are not good times for the middle class. The most equal wealth humanity has ever had is during caveman times, but that is not the goal.
war does not make things better folks, I hope that's not what OP was trying to say, but just in case let's be very very clear about how awful war is for progress and humanity.
The extreme wealth gap and corruption paired with the loss of virtue (integrity seems to hold very little social value these days) seems like a bad mix to me if you like stability, let alone shared prosperity. Moreover, the response to the United healthcare assassination showed us that a bunch of folks don't think there is justice left in the system. The reactions to covid were a stark example of how a huge swath of people not only won't lift a finger to help their fellow citizens but will actively oppose it and be offended by the suggestion itself. This year the purges of non-straights or non-whites from all positions (and even from some records!) began and we don't yet know where that will end. Politically we've spent this year alienating our allies and generally acting like bullies.
I'm worried we'll be in a war in 3.5 years (real or manufactured) and "need" to delay the next election for a while, "in the name of national security".
1. The poor don't have money to be transferred to the rich
2. The top 1% pay 40% of the Federal income taxes
3. Medicare, Medicaid, Education and Social Security are wealth transfers to the poor
The wealthy businessmen created their wealth, it was not transferred to them.
Deleted Comment
[0] researchgate.net/figure/US-Productivity-and-Hourly-Compensation-Source-Bureau-of-Labor-Statistics_fig1_270640833
From https://www.bostonfed.org/-/media/Documents/Workingpapers/PD... Recent studies of economic inequality almost always separately examine income, consumption, and wealth inequality and, hence, miss the important synergy among the three measures explicit in the life-cycle budget constraint. Using Panel Study of Income Dynamics data from 1999 through 2013, we examine whether these changes are more dramatic at higher or lower levels of wealth and find that the marginal propensity to consume is lower at higher wealth quintiles. This suggests that low-wealth households cannot smooth consumption as much as other households do, which further implies that increasing wealth inequality likely reduces aggregate consumption and limits economic growth.
> Gini Index: https://en.wikipedia.org/wiki/Gini_coefficient
Find 1980 on this chart of wealth inequality in the US:
> GINI Index for the United States: https://fred.stlouisfed.org/series/SIPOVGINIUSA
Are there additional measures of wealth inequality?
World Inequality Database: https://en.wikipedia.org/wiki/World_Inequality_Database
USA!: https://wid.world/country/usa/
Economic inequality: https://en.wikipedia.org/wiki/Economic_inequality :
> Economic inequality is an umbrella term for a) income inequality or distribution of income (how the total sum of money paid to people is distributed among them), b) wealth inequality or distribution of wealth (how the total sum of wealth owned by people is distributed among the owners), and c) consumption inequality (how the total sum of money spent by people is distributed among the spenders).
How does this work? Where do the poor get wealth, on a continual basis, for the rich to take? If the poor have so little, and have had their fraction of the wealth taken by the rich for three decades, assuming things have got worse for the poor since the end of the eighties, where’s all this wealth coming from?
I’m not singling out here, this is a question for the general audience.
In the past (centuries ago), it seems like people simply accepted other classes were better and they could never be their equals. That’s how you end up with royal families, etc.
So in the future, people will simply work to the bone, find whatever pleasures they can when possible, and maybe just not wake up ever again on some morning before their shift starts. They will live in small simple residential units mostly for sleep, eating, bathing and watching some content on a screen.
The rich will segregate themselves away to enjoy a finer life somewhere that they can be shielded from the plight of the poor.
I don’t think a civil war in the us is possible but I think advertisers taking advantage of the divisiveness to see chaos is likely (and already happening).
Edit: I meant “adversaries” instead of “advertisers” but I think advertisers works equally well so left it in.
Clear, obvious initial battle lines are not a prereauisite for a civil war. The American Civil War, where the conflict was largely motivated by an issue which had a geographical split among subordinate polities was kimd of a special case.
Deleted Comment
"Capital in the 21st Century" by Piketty does a good job arguing that the historical normal condition is for wealth to concentrate bc the returns on capital are greater than overall economic growth. It's depressing, but creating the kind of world that a lot of us and our parents enjoyed takes special conditions (and political will?) ... but the flip side of this view is that intense inequality can endure for long periods of time and doesn't necessarily lead to political instability.
What I like about NFL, NBA, MLB etc is that they will tweek the rules to make things competitive so the rich don’t get too rich and win it all too much. We should have a “DOGE” system for rule tweeting to even things out once in a while
It blows my mind why pension funds continue to invest any money at all in PE and Hedge Funds. It's a straight up wealth transfer from the working class to the investor class. States should pass max fee laws for their own pension fund allocations.
Maybe an alternative is we'll figure out how to change and fix these corrupt systems as more and more people wake up to how bad they really are.
Deleted Comment
By definition, the poor have almost no money to transfer.
Wouldn't you have to transfer from the middle class - which is shrinking in relative terms?
The poor have never had anything and still largely have nothing. It is literally in the definition.
I don't see how it's possible to enrich yourself (when the amount you need to grow by even small percentages is enormous) from a class with nothing to take.
IMO the main thing they extract from the working poor is time - what they're stealing is the excess value between their labor and the value is creates, and technology has made it easy to do this at a massive scale. So it's less $1 from each person, it's 8 hours per day from a million people makes 1 person a billionaire.
And for those who will say, "Then the government should just build more houses", let me point out that we might run out of space before the appetite for real estate investment dies out.
What we have is a social crisis that billionaire class used to exploit the nation for classist gains, with the collateral effect of damaging the nations memory, identity and values.
The universal dismay of humanity is that we actually built and held onto Democracy for a time.
Not perfectly, but better than suffering any dictatorship by "royalty" and oligarchs.
The transnational petroleum business was never going to go quietly into energy decline. Its component interests are flexing their influence.
This is what I've been struggling to articulate more succinctly since my college days, when I started really getting into macro-level systems analysis and long-term planning. Much of the Western world ceded pieces of its sovereignty to external entities without regard to the long-term consequences of said actions. Stuff like outsourcing domestic labor abroad, to countries like China (refining, manufacturing) or India (knowledge work) means those countries now have an outsized influence on domestic affairs that aren't easily clawed back. Ceding sovereignty of infrastructure (be it data centers, roads, hospitals, schools, etc) to private enterprise means those entities have dictatorial say over how those pieces of infrastructure are operated, maintained, and replaced.
In essence, the limited sovereignty the West retained was broadly centered around consumption and wealth, opposing ends of a larger economic system that are now grossly out of balance. It's at the point where there is no singular "silver bullet" to fix it, either. Taxing the wealthy will help, but absent meaningful reshoring of industry and jobs domestically, it won't actually right the economic ship. It's also not merely an American problem, but one largely affecting the neoliberal West that spent decades outsourcing, offshoring, contracting-out, and generally doing everything possible to min-max cost vs returns, quarter after quarter. I think the only country not substantially affected might be Germany, but there's still talk of automakers shuttering factories there in favor of using Chinese labor and shipping the vehicles back to save on costs.
We have created a global economy but without global regulation, which in turn has resulted in artificially depressed consumption prices (relative to actual local costs) and artificially increased wealth extraction through rampant exploitation. Absent a singular global currency and standard of living (which, let's be real is centuries away at the earliest), the only practical solution is a domestic rebuild of labor markets, supply chains, and industries, with a goal of refocusing national exports on what a country uniquely excels at rather than simply offshoring to whichever country has the optimal labor pool and exchange rate relative to your specific industry.
It's a hot mess to be sure, but not unsolvable. Reshoring industry gives us an opportunity to re-evaluate supply chains and resource management with a focus on closed-loops and renewables. Reshoring work will boost wages and living standards, which in turn will boost birth rates and economic growth. Diversifying the economy back into regions and localities will promote specialization and innovation, rather than the fad-copying of today. There's a lot of good to be had in facing the problem head-on rather than giving into fascist ideology and demagogues promoting "one easy trick" to fixing things, but all of it involves hard, honest work, which some folks will naturally be hostile toward.
Either way, we'll all find out together, I guess.
no amount of graffiti and stickers will change what the numbers have always said since the days of theocracy and the deluge
luigi sadly is not a revolutionary but a substitute for the car crash in Oklahoma :)
The fundamentals used to be closer to the Bible's. They shifted to subjectivity, nationalism, authoritarianism (unchecked), and capitalism. Then, new groups around 1900 shifted to more subjectivity and atheism. Add pleasure-driven culture from the sequel revolution onward. Then, evolution, intersectionality, and feelings over facts.
As I look at these, I see a dangerous combo of not seeing individuals with inherent worth, thinking people are like animals, believe/do whatever without long term consequences, and do what maximizes selfish gain, money or pleasure. Our problems are inevitable under that mindset.
Let's look at specific examples in your post. The rich should take more wealth for themselves since that's maximizing selfish gain. The poor (or scheming) should also try to take their wealth by theft or welfare. If people get hurt, it's an unavoidable problem in a workd of conflict where the fittest survive. No objective morals even exist.
Fortunately, we're seeing a growing rejection of those values leading to life transformations. That's a huge part of Trump getting elected since his policies are appealing to such people. The Spirit of Christ is also causing revivals across the country with thousands to tens of thousands gathered trying to change at the core. Inner change leads to outward effects.
Right now, our college students are taught conflict theory, favoring specific geoups, subjectivism, work against our natural design no matter the losses, and pleasure/money/intellect are god.
What will happen when college students instead are taught objective truth, doing what's right above all, building on our natural design, loving others with sacrifices made, helping those in need onto their feet, unity despite our differences, and building companies that are profitable within those virtues?
I think the results will be beautiful. I've already seen places like that on a small scale. For big ones, Chic-fil-A and Hobby Lobby are pretty close. Part of God's design is some people will be rich and eventually generous. So, that won't change in most places.
https://archive.is/DguLm
I too was the best trader in the world when I got some skittles from my friend in the playground for free and sold them to another kid for a dollar making an infinity percent profit, but I didn’t feel the need to make a YouTube career out of it.
I've only heard of him because of this sort of Hacker News comments, and my general impression is that he is usually so off the mark that it is hard to have relevant conversations.
He makes money selling books and having an Youtube channel.
I've long wondered why so many economists get inequality so incredibly wrong without any hint of self-awareness whatsoever, and the answer (in part 3 of that series) was mind-blowing. So, so well put together.
I won't give the spoilers here, but do watch it. It's an experience.
Who defines what is “fair”? If it’s people, people are imperfect AF and centralized planning economies tend to fail spectacularly.
I would agree that a system can be unfair, but what changes to the system are sustainable while still incentivizing risk-taking and achievement?
This was never going to be able to last forever as long as the population keeps increasing. This is why settlers left Europe etc in the first place to seek fortune overseas. And since there is no un-owned land remaining, the market price for land will match or exceed regional population growth worldwide forever, unless a whole lot of people start dying.
Working hard is necessary in its own right for many reasons, but promising everyone that if they "work" hard enough, they too can set up their heirs, is pure marketing. So is shaming anyone who fails to achieve it as "lazy", when it was never going to be possible for more than a fraction.
I don't think the amount of "unexplored" or "undeveloped" land is a good metric for social mobility. Economic growth is. New "frontiers" are created all the time. They do not have to be in the physical world (e.g. computers, the web, biotech, the App store, social media influencer, crypto, and now AI). Even in the physical world, frontiers can sometimes expand. Desirable land can be created in the middle of a desert (e.g. Las Vegas), we just don't want to anymore.
Despite its many flaws, I think the US is still better than pretty much anywhere else in the world.
Cities can outbid agriculture, but the water rights market is complicated.
A better example might be the California Forever project which seemingly had this figured out, but was blocked because they couldn't get permission.
I think you mean to say "When we could steal land from the people who were originally on that land"
- Land Appropriation for "Public Need" with Direct Transfer to Wealthy: https://fastercapital.com/content/Land-appropriation--The-In...
- Heirs property, property tax sales, and Torrens Acts (article focuses on black people, yet works equally well on all skin colors): https://inequality.org/article/black-land-theft-racial-wealt...
- Wealth City / Suburb secession to leave poor areas to pay bills, and then buy them in destitution: https://www.bloomberg.com/news/features/2022-02-11/atlanta-s...
- Rezone areas to make new cities, take all the businesses and good land, and leave the remaining "city" with the bills (another Atlanta idea): https://www.google.com/maps/place/Union+City,+GA/@33.6158433...
- Sell vacant land out from under land owners with false listings: https://www.fbi.gov/contact-us/field-offices/newark/news/fra...
- Purposely Induced Foreclosure, Bankruptcy or surprise tax assessments to cause a forced sale: https://www.businessethicsnetwork.org/forced-sale-implicatio...
There’s still a lot of land out there. The only problem today is nobody wants to start over with no plumbing, electricity, or other modern conveniences.
Simply due to the fact that it's more valuable in their hands. Driving out some campers to build a town is the rule, not an exception.
That's every single society ever. This has been the civilizational algorithm. It predates our species.
That same tactic is alive and well today.
There is a lot of cheap land and even a lot of cheap houses for those willing to live in a different place. Even many of my friends in Seattle, for example, have discovered that if they move 30-60 minutes away their housing costs plummet dramatically. This has opened the door to many of them moving even farther away, unlocking an entire new world of affordability.
There was a brief moment where all of this looked like it was a very real possibility for many of us, but the rubber band is snapping back with remote work and now many are being required to move back to those few cities again to find the best jobs.
> but promising everyone that if they "work" hard enough, they too can set up their heirs, is pure marketing.
I don't think most people believe that you can just work hard and then have generational wealth for your heirs. That feels like a strawman argument. Generational wealth has always been a difficult feat for the few, not something we promised everyone could achieve.
However, people also underestimate the power of compounding for retirement savings. Obviously not helpful to someone working at McDonalds and trying to pay rent in a big city, but people working average mid-life jobs at average salaries who consistently save $100/month or more can amass significant retirement wealth over 30-40 years. Not "generational wealth" or "setting up your heirs", but enough to make big contributions to education, helping kids with emergencies, possibly leaving some non-trivial inheritance. This happens all the time and continues to happen with millenials, as it will happen with Gen Z. Again, not literally everyone but to suggest that it's out of reach is really out of alignment with the reality of what we see people earning and saving.
You’re off by at least a factor of ten.
40 years of $100/month savings at a generous 5% compounding is $148,242. And that’s in future dollars. Drop it to 4% and you’re down $116,606.
The real formula to consider is what percentage of your monthly spending you are savings. If it’s 100%, then every month worked is one month of retirement. If it’s 50% then two months of working is one month of retirement. If you live frugally and save 400% of your spend, each month counts as four retired months.
It’s a simple fraction with the numerator as your net savings and the denominator your total spending. And lowering the denominator scales things much faster.
And there are plenty of nice places to live in that radius! I'm in Tacoma which I really like. And Seattle is plenty accessible for shows, events, a night out.
I did what your friends did. After 6y of paying off student loans and saving cash (not even being frugal - enjoying Seattle for sure), we looked at Tacoma and realized "oh we have our pick of wonderful homes here."
Bad zoning policy, more like.
And why you guys are looking at Mars now.
Here in latam we haven't filled the land at all, you guys have been hard working and filled with riches. But our laziness might give us more longevity, we are playing the long game with the amazon
There is no shortage of land in the US. There is a shortage of land in a few high density areas. But increasing their density makes them more attractive.
I don't think it's reasonable to make the pioneer comparison-- if you want to do what pioneers did and build something from almost nothing in the middle of nowhere with great effort then there is still an analogous route open to you.
Land is still generally plentiful. The need to all live in one spot is more social/artificial and really accelerated in the late 19th and early 20th centuries due to rapid urbanization.
Land use is a complex topic, but you’re basically right. Everything good—not just land but social opportunities—is spoken-for and what we’re seeing in South Korea and Japan is probably the best solution: peaceful natural attrition and non-replacement of capital’s reserve army that is unwanted labor.
It would make so much more sense if land "ownership" was related to whether you live on or work that particular piece of land rather than relying on arbitrary pieces of paper that were mainly decided before any of us were even born.
It’s paying tax for owning something that is weird to me.
If there had still been a big demand for it, the program would probably still be running. They granted an extension to Alaska for that reason.
that’s just not happening
In practice housing costs are driven by shortages of _housing_, not land. And these are quite different.
I may consider myself liberal, but general housing policy by most liberal leaders has been a total disaster and should be recognized as such.
[1] https://fred.stlouisfed.org/series/ATNHPIUS12420Q
[2] https://fred.stlouisfed.org/series/DAXRNSA
[3] https://fred.stlouisfed.org/series/NYXRSA
[4] https://fred.stlouisfed.org/series/SFXRSA
[5] https://fred.stlouisfed.org/series/LXXRSA
You mean 22% in the last year? Definitely not 22% compared to 5 years ago.
? Private development is the heart of liberalism. We haven't had anyone but liberal leadership since, like, LBJ I think? And he was also a liberal acting out of character. Any alternative would surely imply public investment in housing. No, re-zoning is not going to make a dent in homelessness.
I'm aware that you're referring to liberal in the sense of "loyalist democrat" or whatever, but the reality is that both parties have virtually the same policy when it comes to housing: blame the market, act as though the market will still answer our problems even though it hasn't in the past, and feign helplessness that the government can directly influence housing in the first place outside of zoning. I.e., liberalism.
Deleted Comment
I hope we start there, a very simple and straightforward action to take.
If you’re looking for what to tax instead of income, the best things are: land, pollution and consumption.
Land is great because people will not use less of it, no matter how high the tax. Pollution is great to tax, because we want to produce less of it. Consumption (or purchases or spending) is good to tax because economic growth is good and this tax encourages investment rather than spending your wealth. The most common consumption taxes are the sales tax or VAT tax.
You may have heard of consumption taxes described as “regressive “, but that comes from looking at only part of the policy. For example, a universal basic income funded by a sales or VAT tax would see the poor better off than the rich.
Seems like wealth taxes would be a great target too then.
Since apparently Carbon Dioxide is considered pollution now you have somehow defined the very action of living and working as taxable. Not going to end well.
Consumption tax leads to LESS investment because it leads to LESS viable companies over all. So unless you goal is More investement into a handful of megacorps you shouldn't do this.
Land tax is horrible because it's already our most abundant untapped resource, maybe in dense urban environments it might be justifiable, but that's it.
Stop trying all this dumb shit just say "suburban tax" if you want to make a tax that targets suburbanites. People appreciate honesty more than BS! Democracies can't function without it! The entire point of having representatives is to taxes that the people don't want, if they can't do that then American democracy has already failed decades before Trump.
And what are the pros/cons and outcomes of your preferred alternative?
The issue is when we allow people who do not live or pay tax in this country to make profit on assets in said country. A landlord who lives in the Cayman Islands should not be able to collect rent on UK assets while not paying the UK government tax in turn.
Capital flight is a thing. Land isn't going anywhere.
Economists including multiple Nobel laureates on both the left and right have been screaming for land value tax for almost a century for this and many other reasons.
if I own 1000 acres in the middle of nowhere that holds an enormously profitable business, I could end up paying almost zero tax simply because I dont have any nearby real estate development
I don’t know a single neighborhood in this city where the average household in that neighborhood makes enough to live there with current prices.
I genuinely don’t know why I even work anymore. I don’t have any achievable financial goals except save as much as I can until I move away to live off my savings in a cheap area
I work in the same jobs as my peers, but there is a clear wealth difference in how our lives are spent.
We have a nice house in a good neighborhood, but our peers have very nice houses is some of the best neighborhoods due in large part to down payment gifts, gifts for remodeling, etc. We can both afford the mortgage payment, but the down payment would take us probably a decade to save for.
On vacations, we'll drive a couple hours away with the kids, while our peers will fly to Europe and spend two weeks since they pay for the flights and their parents pay for lodging and food.
And then there is family support. Some of my peers have parents who bought second (or third) homes to be closer to their grandchildren, or will pay for the very nice private school, etc.
It's taken me a lot to not very bitter about this -- and I'm clearly still a little bitter -- but I also know that we will likely be in a position to offer some of this support to our kids in 20+ years.
Wealth inequality has been increasing for decades, if the trend continues and nobody does anything the wealth gap could easily become so large that you might not be able to provide any meaningful support to your kids, and even if you manage to, your children won't stand a chance to provide it to theirs in 40+ years.
Many of our current rights are only there thanks to bitter people.
Grew up in a very small house with two lower middle class parents. Frugal upbringing.
My wife and I out earn my parents by more than 10x. And so we can afford to do some things that I couldn’t as a kid like “ski weekend in Park City”
I’ve jealously looked around many times and frustrated myself with comparisons to wealthier people. They can do X and I can’t.
But as I’m getting older and raising kids, I’m continually reassessing the value of these high cost adventures. Am I happier, healthier, more refreshed, etc or is it instead my access to high-cost that fools me into feeling those ways?
I see the path forward similar to you. I’d like to help my kids however I can while not giving them a financial ticket for life. Want to do things that fulfill us without feeling too extravagant or costly.
If this is in the US, hope for no health issue or it could easily derail the dreams :(
I suggest you look at historical trends for USD to CAD and trends for home prices vs income in Canada.
I like it here but I have no future and it’s seriously impacting my mental health
I'm glad for him. But it's incredible how different one's life can be from their peers just based on their parent's wealth.
>People in advanced economies stand to inherit around $6trn this year—about 10% of GDP, up from around 5% on average in a selection of rich countries during the middle of the 20th century. As a share of output, annual inheritance flows have doubled in France since the 1960s, and nearly trebled in Germany since the 1970s. Whether a young person can afford to buy a house and live in relative comfort is determined by inherited wealth nearly as much as it is by their own success at work. This shift has alarming economic and social consequences, because it imperils not just the meritocratic ideal, but capitalism itself.
But also there is a lot of upwards mobility.
And they do not need to be correlated even. What if rich families maintain their wealth, and meanwhile other families create wealth and become rich. How is this incompatible?
Eventually the man dying while making an income and spending no time with his child will grow to resent the one making the same income through family wealth who has enough time for that and more.
There's increasingly less in the USA. In fact, most people today will end up worse off than their parents.
https://www.weforum.org/stories/2020/09/social-mobility-upwa...
Avenues to upward mobility are blocked by these rich people through various methods.
Deleted Comment