Yves here. It can’t be said often that the explosion of growth of the billionaire and other super well off cohorts is strongly correlated with the drop in top tax rates.
By Drummond Pike, Governing Board of the Institute for New Economic Thinking. Originally published at Social Policy Magazine; cross posted from the Institute for New Economic Thinking Website</strong>
So, in this land of plenty, what could possibly be bad about someone chasing the dream and accumulating a larger than normal portion of the pie? Isn’t this what capitalism is supposed to be all about? “Land of the free, home of the brave” and all that…aren’t we all supposed to revel in our freedom to accumulate, particularly if it results from uncommon bravery in risk-taking? Isn’t this just what Bill Gates, George Soros, and Jeff Bezos (not to mention Elon Musk) are so admired for doing?
The problem is that free and unfettered capitalism of the ilk promoted by the GOP and corporate lobbyists in DC is terribly hindered by “government regulation,” too much taxation, and purported “liberal bias for socialism” or, as Tucker might be wont to say, nattering nabobs of negativism.* Actually, that of course is a quote from Spiro T. Agnew, the only (at least I think the only) corrupt Vice President proved to have actually received piles of cash while in the White House. (Rachel Maddow’s superb Bag Man lays out this fascinating story for those who don’t recall the Nixon Years or thankfully are too young to have lived through them.)
Socialism has returned to our political conversation as a kind of epithet thrown at anyone who believes in a social safety net, progressive taxation where higher earners pay more, or constraints on corporate over-reach, like ever-larger quasi-monopolies or price gouging opportunists. In its purest form, “socialism” was used by Marx to describe a transition state between capitalism and communism in the 1800s. But in practice over the nearly 2 centuries since his Manifesto, the concept has evolved into the European notion of “social democracy” which Merriam-Webster defines as “a democratic welfare state that incorporates both capitalist and socialist practices” that describes most European systems that attempt to balance out public and private goods.
But here in the good ol’ US of A, the idea that anyone seriously espouses European social democratic ideas is a joke. The closest we got was FDR in the depression with Social Security and LBJ in the ‘60s with Medicare. Obamacare, in contrast, was a weak echo of those high-minded times, acquiescing as it did to Big Pharma in a sort of Hobson’s Choice (no real option) if a dark-money contaminated DC was even to consider it. And now, of course, the heroic Obamacare vote of John McCain has been replaced by “centrist” Sinema who has taken in Pharma dollars by the boatload. Wonder how she would have voted then, don’t you?
Our political system has become so bloated and corrupt with untraceable money, it barely rates a headline when a billionaire like Peter Theil – an out gay man – announces his departure from the Meta (Facebook) Board so he can work full time on electing Trumpists to Congress so they can join the gay-bashing, Fox-touted, anti-tax, anti-vax, and pro “freedom” crowd. I think it fair to say that Thiel has ignored GOP/Trumpian social policy just so long as another humongous tax cut for the super-wealthy might be engineered. Good ROI for his estimated “$20 million, so far” committed to this good cause. Not that intellectual consistency has ever been the strong suit of the billionaire class.
So let’s for a moment consider just how much $1 Billion really is. Just a one with a lot of zeros you say? In January 2019, historian Rutger Bregman tried to explain to a bunch of billionaires at the World Economic Forum (held in Davos) why philanthropy is not the way to address inequality. Rather, it’s taxes. On his own website, he helps us understand just how much a billion dollars is in 2019 numbers:
If you made $50k a year, and you didn’t ever spend one penny of it — you just put that money into safekeeping and saved it up — do you know how long you would have to work to save up a BILLION dollars? TWENTY THOUSAND YEARS. That’s right… Roughly 4X the length of recorded human history.
In his recent book, Davos Man, Peter S. Goodman has chosen a great subtitle: “How the Billionaires Devoured the World.” Perfect description for all of them from Thiel to Putin. (And, yes, he’s one of them, this vaunted war-monger of a Communist leader who is in the midst of invading Ukraine). By the time this is published, he may well have come to terms with what is now widely perceived as over-reaching actions that could reshape the world order, and not for the better. Whether he will be able to enjoy his super-yacht that barely reached Russian waters just days before his war was launched is anybody’s guess. It doesn’t look, though, that it will be welcomed in foreign ports anytime soon. And, for a billionaire, hanging out on a superyacht is part of what makes life worth living (ask Bezos, owner of the longest superyacht yet built at 400 plus feet). In the current era, the B-people have clear sailing to keep adding to their piles.
So, back to taxes. For the moment, let’s just consider incometaxes for the highest tax brackets. Again from Bregman’s website come these compelling numbers:
Here are the marginal tax rates by president (since WWII) for the top income brackets:
And we can see that as the top marginal tax rate decreases, so does the strength of the middle class… The rich get richer, and the poor get poorer. And they give any attempt to correct this trend the evil & scary-sounding moniker of “Socialism.”
As is clearly demonstrable in the chart, the middle class was in most ways built DURING the period of highest marginal taxation – the 50s and 60s – completely belying the standard GOP “trickle-down” argument that lowering rates creates jobs. But when you overlay this irrefutable data with the Clintonian era’s overt embrace of “Davos Man” calls for globalization abetted by the World Economic Forum (which attracts a fleet of some 1600 private jets every year) you can begin to gather just why working-class wages have been in a tailspin since Reagan’s famous line, “government is the problem, not the solution.” That the right has been so successful in turning the resulting alienation into political rage against immigrants and intellectuals is beyond telling. It is no surprise that Thiel and others continue to invest heavily in anti-government politics and the accompanying phenomenal ROI they achieve by drowning the beast in the bathtub.
Just where this dismal state of affairs ends and the pendulum swings back toward some semblance of balance is not clear. But one thing for sure is true. Dems have to decide if they want to keep dark money flowing and their diminishing number of increasingly safe seats, or if instead they want to step up to embrace powerful economic policies that really would change peoples’ lives. Like a wealth tax. Or the kind of Estate tax in the Eisenhower years (70%). Or serious penalties for hiding wealth off-shore. Or putting the light of day on “shell companies” used primarily to hide assets from tax authorities. Any of those things might begin to erode the emerging economic royalty that is able to permanently endow nearly endless generations of heirs that, thanks to the Supreme Court, will be able to spend untraceable and countless dollars defending their privilege.
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Billionaire fun! The best part of billionaires is that you can have a lot of billionaires, but you can only have a limited number of powerful political decision makers who are influenced by a limited number of billionaires. What befalls the poor billionaire that despite his or her billionaire status who has no political influence? Will they accept being denied membership in the club, or will they fund political extremists and build private armies?
to own and control that much of the world’s wealth and productive capacity is to have a certain amount of political influence, whether one tries to buy specific politicians or parties or not.
one would imagine that power at that scale has no choice but to play the game, even if it’s through many emissaries.
I think the answer to that question has just been answered in Shasta County Ca.
How Bond villains become Bond villains (movies only).
Ah, the good old times.
When Brits, Yanks and Russians were largely in agreement that blowing up the world was not a brilliant idea, enemies treated each other with a modicum of respect, and only lone, crazy billionaires tried to destroy everything, without being supported in their maniacal goal by the full might of the American state apparatus.
James Bond, symbol of empire and ultimate reactionary hero, who woulda have thought that his exploits would one day look like an utopian vision of a better, saner world?
Why the gratuitous dig at Putin? I have read in various places claims, unbacked by any evidence, that he is a super billionaire blah blah, the Guardian even tried its utmost in the Panama Papers expose to finger him, but he was not even mentioned in those papers. The so-called gaudy palace claimed by super sleuth Bellingcat to belong to Putin, proved not to be the case. I have no idea of how much personal wealth Putin has accumulated, but unlike US politicians, he does at least improve quality of life for ordinary Russians.
Or does every academic paper in the west now have to include anti-Russia smears to get published? Sure looks like that.
You make a very good point about the quality of life. In Russia and also in China the standard of living and life expectancy have been rising while the US is in decline on both fronts, except for the oligarchs.
If it keeps up, USians might start getting ideas about “democracy” not being all it’s cracked up to be.
It is obligatory to insult the Russians and pretend Putin is a billionaire, no matter what the subject of the article. Didn’t you get the memo?
But to pretend that Putin–an Orthodox crypto-Tsarist and open hater of Lenin and Trotsky–is a “Communist?”
Always a little disappointed about remarks along the same line. I haven’t been able to determine how much money he has either. But, I doubt the politicians in any other country can have the kind of money we see in the US. The millionaire politician is worth hundreds of million by the time they leave office.
Putin has a super yacht! A $100M one called Graceful, or maybe a $700M one called Scheherezade. Maybe both! After all he’s worth $40B (CIA) or $200B (Browder). Typical Communist!
Should Browder not have been completely discounted & ignored by now, being such a poor loser?
I am really tired of this tone deaf narrative by the credentialed.
Sadly, the tone is perfect for most of the target audience of liberal/leftist #McResistance types whose politics consist primarily of advertising their moral vanity and aghastitude… along with a heaping helping of Stupid when it comes to Russia and China.
Magnificently well-stated, Drummond Pike! Many thanks!
WTF is this clause doing in an article about American social policy: Putin. (And, yes, he’s one of them [billionaire], this vaunted war-monger of a Communist leader [ of I guess the USSR] who is in the midst of invading Ukraine). Is it now an :obligatory to include an anti Putin screed to burnish ones ‘expertise’ or is it to get article past the Silicon Valley thought police. It is too bad Philip K. Dick is not still alive. He along with, of course George Orwell could make “sense” of this madness that has taken over supposedly well-tuned minds? This article makes me sick!
I’ve been watching the half hour Alfred Hitchcock Suspense series from the late ’50s and early ’60s (there are over 250 of them!)
They are mostly very good, and showcased rising and established stars, however, the prologues and epilogues are often the most amusing parts of the show. His deadpan delivery was absolute genius. It got me thinking of the Review Board and how Hitchcock used the epilogues to placate The Board as many of his stories did not have a morally just ending. He would announce how the perps did not fare well in the end!
A little heavy on the Fox/Trump/Republican/Putin bashing side when of course there are plenty of money grubbing Democrats too, but otherwise a good reminder of how things were and should be again.
One minor quibble – Spiro Agnew may have uttered “nattering nabobs of negativity” but William Safire wrote it: https://www.inquirer.com/philly/blogs/attytood/Nabobs_natter_about_the_passing_of_William_Safire_1929-2009.html
Safire was often a huge jerk in his days as a NYT oped writer, but he did have a way with words. Credit where credit is due.
A little heavy on the Fox/Trump/Republican/Putin bashing
Yeah, Clinton Foundation and Burisma… Rachel had to go back to the turn of the 70’s to find an equally open grifter. Of course, in hindsight Clinton led the way for republicans becoming democrats by wearing a blue tie. Schumers for every blue collar worker we lose we get two karens in the suburbs. Democrat, such as I understand it and is implied in the post, are for regulations. Clinton was a deregulater…and who was it rounded up the Simpsom Bowles committee?
Yeah…Our Savior, (if you’re a billionaire, heck, even if you’re a millionaire as most of that are people who own a house outright that was pumped up in value by who exactly?…)
A dem with zero intention of re regulating is in charge right now, but you wouldn’t notice if you looked at the policies they promote.
My first view of that ghastly neologism “neoliberal” was in a Safire column!
Personally I am not too worried by billionaires – if they got their money from earned income and not just as part of a rentier economy that is. But what I do object to is when those same billionaires equate their billions with actual votes in the say of running their countries. Thinking that running a country is the same as running a corporation means that not only are they not qualified to do so but are actually incompetent to do so.
Hubris… the entire Musk v. Putin pay-per view smackdown main event is perfect evidence of a world view: two can fight for a Nation-State. All the marbles.
Apparently, the notion is given license and consent by the adoring masses?
Defacto reality: Musk appropriates lower-orbit space for his Starlink system, bills US military and Intelligence for highets level billing of rents, and I have yet to see my royalty check as a Citizen of the Earth and theoretical part owner of that commons. Or an offer of discounted access.
What’s that you say, I own nothing? Ownership is a delusion?
I think the covid lockdowns were not quite long-enough in duration where we could really grok an alternative way and path, and start to make it so. Especially in the age of the Anthropocene, 8 Billions, warming, and warring for evidently scarce resources, from soup to nuts to a perception of threat to security and lifestyle.
Putin feeling cornered… get ready, there are many on earth who may feel just as threatened and lash out.
Freedumb!
I seldom disagree with you, Rev, but here I must: nobody EARNS a billion dollars. They may take it, but they surely don’t EARN it.
They even make money while sleeping!
As it says in the Bible – ‘The rich a**holes ye shall always have with you.’
The highest earned incomes go to a tiny number of elite athletes making (before taxes and agents’ loot) around $30-35 million per year for 5-10 years. Their athletic peaks would have to last several lifetimes for their children to inherit even one billion!!!
sometimes i have bad days also where my foot goes into mouth.
Billionaire “philanthropists” favorite book: “To Serve Man”. / ;) (Twilight Zone reference.)
We’d be better off if writers would stop the only the Dems can help us PR bs. The Dems already decided and the writer knows it by the warning at the end; trying to convince the Dems to do moral thing.
The Dems have been active participants in dismantling the New Deal since before the last of the New Dealers died off. The author hints at that with Clinton’s embrace of the Davos Man. (Hello Clinton Foundation reboot. Give me dark money!)
And, if we needed more direct proof about Dem (or Rep) caring, all we need to do is examine everything which has happened (who has been sacrificed / saved, rules implemented, money / credit deployed, how many billionaires and millionaires were created / pr spun / scapegoats created) in Western civilization (not just the US) since the pandemic was first announced.
What the Dems and their Republican friends have to decide is how fast they can finish the dismantling of the New Deal so the game board can finally be cleared. Only then can the billionaires and their helpers create their brave new world. (Hey, Ukraine I think you might be the first new game prototype. I have to admit I’m not liking this game very much.)
Of course, now other world billionaires will speed up development of their own home field advantages, umpires, etc. They will even want to be part of the new rules committees. Which rules to keep, which rules to dismantle.
“Our” billionaires may find out that throwing away the game board to create something new means that they are no longer guaranteed wins. That may actually have to compete instead of being handed wins / money. Perhaps they will also learn that they are mediocre compared to their competition. Poker style bluffing when you’re wagering with a country only pretending to have a gas station* or anything left in the tank means sooner or later your luck just runs out.
What the Dems and Reps really have to decide is whether or not they are ready to compete in the new world order that they seem hell-bent on bringing into existence now without the proper preparation. Shock doctrine is fine and good when you can guarantee outcomes. Should the US lose now, any chance that our billionaires could be reigned in in the near future is lost with it. Of course, I think that’s already baked in, so there’s that.
* Sen. Menendez (D) Jan 30th CNN interview reference to Russia being a gas station masquerading as a country. Sen Risch (R) was right by his side in said interview. Both stating that sanctions should be deployed for what Russia has done in the past, not just IF they deployed their military to Ukraine.
Yep, O and the Dems could have ended W’s huge tax cuts… but they didn’t. Instead they held GFC unemployed hostage with threats of cutting unemployment insurance unless the tax cuts remained in place. No logic, no financial logic, but it pleased the big Wall St donors. That’s who they’re working for. / ;)
nafta billy clinton actually raised taxes on the real wealth creators, labor, and lowered taxes on the parasites, a capital gains tax reduction.
the often cited he raised taxes on the wealthy was a complete smoke screen. that income tax hike did not touch wall street type paper assets, it touched people who earn a income.
Senator Menendez! A typical Demoncrudic crook who was proven in court to have taken massive bribes, and then was routinely acquitted because nothing had been put in writing.
The easiest way for me to visualize how much a billion dollars is this:
If you spent a million dollars a year it would take you 1000 years to spend the entire billion.
By just listing the marginal income tax rates, you mislead. Much of the very wealthy’s income is through passive, that is unearned, means and so they pay only the capital gains rate, which is much lower.
Rather than using an outlandish example of how long it would take a person to save up a billion dollars, challenge them with spending a billion dollars. If they could spend a whole billion dollars within one year, they would be allowed to keep everything they bought. (Make a great game show, no?) I calculated that, using ordinary business working hours and allowing for federal holidays and two weeks of vacation, that they would have to spend over $500,000 per hour to meet that goal. Now that is a number to wrap your head around.
What about millionaires? There are 14 million in the US. For some strange reason its almost impossible to find the net wealth of this group but I would guess over 100 trillion dollars. That is compared to 4.1 trillion for the billionaires. I’m sure the millionaires don’t have much influence and power.
I’m afraid this argument, while I’m sympathetic to its point, falls into the same category that the little people must be taxed more – even at the nickle and dime level – because there are so many little people that in total their tax increases (user fees, reduced revenue sharing, cut govt programs, raised retirement ages, etc) add up to a huge amount of money, thus supposedly “paying” for the billionaires tax cuts. You know, the “pay go” scam so loved by Pelosi and other DemGops.
Or, another option, start taxing big businesses instead of giving them the treasury. Of course, that might show up in lower stock prices (higher business costs). Wall St. wouldn’t like that. Most of the billionaires have a large bulk of their wealth held in stocks. What would happen to Bezos net worth if Amazon had to pay higher corporate taxes? You get the point.
A cool million isn’t what it once was. Still a remarkable place to land if you started from scratch, but let’s not talk about actually little people earning degrees 40 years ago and, dare I add, planning for their future.
I’m not there. But I started a plan 25 to 26 years ago, which was a good thing – to have a plan at all.
nafta billy clinton basically created the davos man.
“Globalism is the creation of a set of property rights that, precisely because they span multiple sovereignties, cannot be touched by one government without inviting conflict with another.
Organizing property and production across borders—whether through free trade, protections for foreign investment, currency unions or other devices—does more than limit the power of governments. It also serves, “to dissolve the small, discrete collective of mutual identification—which means a country.”
offshore tax havens are a direct result of free trade: the pathology of free trade is being exposed
Today’s global rich are increasingly stateless, detaching their money from nation states and conventional representations of ownership to hide and preserve it. A global oligarchy is growing — and it does not bode well for everyone else and the planet.
free trade enables the plundering of the wealth of nations, especially hurting the world’s most poor and vulnerable populations. It allows wealthy individuals and corporations to dodge and evade their tax responsibilities, shifting obligations onto those with fewer resources. It empowers criminals, deadbeats, and kleptocrats
in 1983 there were only 15 billionaires in the u.s.a., under nafta billy clintons free trade, billionaires have ballooned into more than 615, and under free trade, this is happening globally
https://www.bostonglobe.com/2021/04/01/magazine/costs-secretive-wealth-defense-industry-shell-companies-offshore-tax-havens-empty-luxury-condos/
See Brooke Harrington’s “Capital Without Borders.”
But a billion ain’t what it used to be. For a lot of my life a $billion was worth about 28,555,000 ounces of real money (gold) (at $35 per ounce). Today its value is merely 500,000 ounces (at about $2,000 per ounce).
Simple observation suggests that the dynamics surrounding ‘parables of rich fools’ and their ‘bigger barns’ have been around for some time, noting that the humans that long ago preceded the current generation were exceptionally keen observers of both themselves and their larger environmemt. For the current crop of ‘enlightened’ humans, the grating harshness of death and decay for even the overly abundant wealthy has spawned, not surprisingly, a renewed quest for earthly immortality.
Somehow, it seems that the desire for limitless growth displayed as personal avarice, wealth accumulation, unlimited accumulation of material possessions, ect., is somehow entangled and intertwined with the dogma that drives the pursuit of unlimited economic growth and resource exploitation in and on a finite world, the multiplicity of negative spillovers and the obligatory lip service directed at those same spillovers notwithstanding.
Realizing that counter narratives, such as and in the form of steady state alternatives have largely both arrived still born and unworthy of serious consideration, even as,
“The assumption of the need for a steady state economy is that the current generation of humans has as an ethical or a moral obligation to future humans and perhaps to nonhuman species. Inherent in almost any definition of sustainability is the idea that there is an intergenerational imperative that we leave the future no worse off in terms of its ability to meet its needs. If the steady state economy is a necessary constraint on unsustainable growth in order to allow the future to meets its needs, the steady state economy becomes an article of trust for the present generation. . . . It is essentially a reciprocal intergenerational bargain.”
“Economics, Steady State”
https://umaine.edu/soe/wp-content/uploads/sites/199/2013/01/Economics-Steady-State.pdf
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$1 in 1900 = $34 today. The 1900 billionaire-equivalent was worth $34 million. The billionaire is not a modern phenomenon. Here’s a list of what it claims are history’s richest men: https://www.celebritynetworth.com/articles/entertainment-articles/25-richest-people-lived-inflation-adjusted/. No Chinese? The list is incomplete. But one thing is obvious; until the 1850-1900 Astor/Rothschild/Carnagie/Rockefeller era, the richest people in the world either conquered or inherited a country.
The 1930-70s “91% tax rate” is a bit of a misnomer. There were many ways around it. The 1930s produced a crop of very rich in the new industries: oil- Hughes and Getty; movies- Autry, Warner; radio- Sarnoff, Paley; cars- Chrysler; airplanes- Boeing. The press gave us Annenberg and Cox. And don’t forget the real-estate people. All got very rich without paying 91% of their money to Uncle Sam.
Many of the new rich followed the example of the robber barons, people like Carnagie who broke the Homestead strike and gave us Carnagie Hall, Mellon who gave us the National Gallery and Rosenwald who gave us half the Black schools in the South. They converted their money and brains into status and good works. The 1930-70 people followed their example although on the other side of the ledger the Kennedy clan was the first family to buy the White House. Not one person on this list was a 100% parasitic oligarch.
There are differences between the 1870-1970s rich and the legitimate modern billionaires. The modern billionaires seem to be younger, more public and more involved in ephemeral abstractions like software, Amazon and Facebook. In that respect they were more like the 1930s movie people. They met the first wife in grad school. The second wife has a nose ring.
After the internet billionaires we get the oligarchs. The first proto-oligarch I can identify is
Armand Hammer, the Zelig-like Soviet-American billionaire who got the USSR pencil monopoly in the 1920s, stashed Lenin’s millions in Switzerland, financed Al Gore’s daddy in the 1960 and got seriously rich on oil concessions in out-of-the-way-places. The modern Eurotrash billionaire oligarchs of whatever color and ethnicity are like him. They combine brains and corruption to steal a fortune and feel little responsibility. They are more like Mafia dons than internet billionaires: big houses, big pleasure boats, big girlfriends. The modern wave of overseas oligarchs wise enough to get a foot in the first world seems to be unprecedented and the flow of capital from them into the money laundering states like the US, Great Britain, Israel, Cyprus and Abu Dhabi appears to be a new development.
But maybe it is not really unprecedented. Their kids seem to like Palm Beach. Until recently Putin’s daughter lived in London. And don’t forget the British Empire gave us American rich girls like Winston Churchill’s mom marrying down-at-the heal aristocrats, the Iraqi-Bombay Sassoons and South African gold families who became more British than the British and the pretty Mitford girls flirting with Hitler. Crude, rich salesmen and brilliant nerds are easy prey for classy girls. They interbreed and produce some interesting offspring; a possible hint about the future.
It seems to me that the ability to convert electoral and political success into money and vice versa has radically increased. Clinton, Zeninskyy and the Panama Papers crowd, Bo Biden, Carlos Slim and the Chinese princelings are humming the same tune. If the Russian front had become a stalemate, and Hitler had died of a stroke in early 1942, Goering’s grandchildren wound be living in Karinhall with the stolen art and probably marrying rock stars, athletes or one of Ibn Saud’s 1,200 grandchildren. Real greenwashing, the money kind, is never pretty.
The US doesn’t get garden-variety oligarchs; we aren’t yet corrupt enough. Instead we get Ghislaine Maxwell, Jeffrey Epstein, Clinton, Randy Andy and the occasional Harvard law professor or ex-Prime Minister. What a show. Teenage sex like Genghis Khan, the NKVD’s Beria, 1970s rock stars and the Emir of Kuwait; power like a decadent a Davos; money and bad taste like the Sultan of Swat, Trump, #FridayNightZillow and the Oligarch Navy. I just wish Jeffrey Epstein had lived long enough to write his autobiography. Fitzgerald’s Jay Gatsby was a Sopwith Camel compared to these modern Oligarchs who are hypersonic stealth missiles aimed straight at the front page of People Magazine.
Brilliant!
Wealth which exceeds 1000 times median household income is a threat, cap it.
2021 Median Household Income – I see different numbers, let’s use $79,000.
1000 times that is 79 million.
You can live on 10 times median for 100 years.
You can live on 20 times median for 50 years.
You can blow it all on a jet or mansion or yacht or in Vegas & be broke.
You can try to get the rules changed & you can have 10 years living in a cage, eating nursing home garbage.
Why do we call the rich in the US billionaires but the Russian rich oligarchs ? What is the difference?
Make
America
Great
Again
RAISE TAXES ON THE RICH!
(Sorry for all the yelling!)
A billion dollars in stock does not equal a billion dollars of cash.
I have looked at a slightly longer timeline and it has all become clear.
Mariner Eccles, FED chair 1934 – 48, observed what the capital accumulation of neoclassical economics did to the US economy in the 1920s.
“a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion of currently produced wealth. This served then as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied themselves the kind of effective demand for their products which would justify reinvestment of the capital accumulation in new plants. In consequence as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When the credit ran out, the game stopped”
A few people have all the money and everyone else gets by on debt.
Is that why Keynes added redistribution?
Yes, it stopped all the wealth concentrating at the top.
A strong, healthy middle class developed in the West.
Maggie and Reagan removed the redistribution and inequality soared as things returned to the old normal of neoclassical economics.
Did you notice the neoliberal ideology was a new ideology wrapped around old economics that has still got the same problems it’s always had?
I am one of the very few that has noticed.
Did you notice the neoliberal ideology was a new ideology wrapped around old economics that has still got the same problems it’s always had?
I am one of the very few that has noticed.
I believe in free markets.
Where did it all go wrong?
Relying on price signals from the markets.
“Everything is getting better and better look at the stock market” the 1920’s believer in free markets
Oh dear.
In the 1930s, they were wondering what had gone wrong with their free market beliefs and worked out what had happened.
What had inflated the stock market to such ridiculous levels in 1929?
1) Share buybacks
2) The use of bank credit for margin lending.
The US stock market is doing really well with share buybacks and margin lending driving prices ever higher.
A former US congressman has been looking at the data.
https://www.youtube.com/watch?v=7zu3SgXx3q4
He is a bit worried, hardly surprising really.
We didn’t realise we were making the same mistakes they made last time.