REAL WORLD EVENT DISCUSSIONS

Why "wealth" redistribution doesn't work

POSTED BY: SIGNYM
UPDATED: Wednesday, June 12, 2019 14:07
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Sunday, June 9, 2019 11:34 AM

SIGNYM

I believe in solving problems, not sharing them.


At least, not if you equate money with wealth ...

Quote:

Kunstler: America's Not Going Socialist, It's Going Medieval
Authored by James Howard Kunstler via Kunstler.com,

In response to what has become a nation of shameless racketeering, vivid wealth disparity, and shocking destitution on display in city streets, the party of the common man seeks remedies in the redistribution of capital. Seems more than fair to many. It’s not for nothing that they style it “social justice,” the cutting edge of an economic system called socialism — with overtones, of course, of settling racial and gender scores for good measure.

Socialism might seem to be the answer to all this unfairness and indignity. And naturally it focuses on the two activities that have turned into the worst rackets in America: higher education and health care, a.k.a. “Eds and Meds.” Both are now cruel bloated parodies of what they used to be, turning their customers into debt serfs and bankrupts, apart from their dismal failures of basic mission: to prepare developing minds for reality and to “first do no harm.”

The proposed remedy is for the national government to take responsibility for running them and making their services free to all. That would do nothing, of course, to reform the patent idiocies of the gender studies departments; or rescue the sorry victims of obesity and diabetes from their toxic consumption of whoppers, pizza, and slurpees. Those dynamics operate on feedback wheels of futility for which there is no happy ending outside of drastic changes in thought and behavior.

The Left now promises redemption from these great quandaries with the tag-team of Robin Hood and Santa Claus ushering in a new golden era of free stuff. It’s understandable perhaps, considering how desperate so many citizens of this land are, and how desperation feeds rescue fantasies. And the Left may even get a chance to try this wizardry after the next election. But it’s really not where history is taking us. America is not going to go socialist, it’s going medieval. Why is that?

To put it simply, the money is not there. But the “money” is only an abstract representation of material wealth of one kind or another — energy, goods, resources, and delivery systems — and all that is becoming more of a fugitive presence in reality-based civilization. We don’t have the mojo anymore to nationalize and centralize these sprawling activities. It must be obvious that government is not only fatally beyond bankruptcy, but that it has also reached the stage of diminishing returns from over-investment in complexity that translates into generalized incompetency. It’s hardly just Mr. Trump alone that is responsible for the chaotic paralysis all around us.

Societies are self-organizing, emergent phenomena. They respond to the circumstances that reality presents, and they take us in unexpected directions. The general expectation in the USA since the Second World War has been for ever-increasing material comfort provided by an inexhaustible techno-industrial cornucopia, kind of a cosmic goodie machine. Well, we’d better adjust our thinking to the fact that the horn-of-plenty is shockingly out of goodies, and that no amount of financial hocus-pocus is going to refill it. Valiant attempts to redistribute the already-existing wealth are liable to prove disappointing, especially when the paper and digital representations of that wealth in “money” turn out to be figments — promises to pay that will never be kept because they can’t be kept.

So, instead of fantasizing about free PhD programs for everybody, and free insulin for the multitudes, consider instead the vista of a reduced population working in the fields and pastures to bring enough food out of the long-abused land to live through the next winter. Consider a world in which, if we are lucky, the electricity runs for a few hours a day, but possibly not at all. Imagine a world in which men and women actually function in different divisions of labor and different social spaces because they must, to keep the human project going. Imagine a world in which the ideas in your head about that world actually have to comport with the way the way that world really works — and the severe penalty for failing to recognize that. That’s the more likely world we’re heading into. It won’t put an end to dreams of utopias and cosmic rewards, but it will be a sobering moment in history.



While I disagree with parts of his premise ... health care for all is a cost-effective benefit to society, and redirecting time and effort from foreign wars to healthcare is a logical thing to do ... the fundamental premise makes sense:

Imagine that all of the money in the USA is redistributed equally to everyone. If the top 1% own 40% of the wealth in the USA, a rough estimate is that redistributing money would approximately double the median family income, from $50,000 to about $100,000, or roughly $25,000 per person.

Suddenly, the homeless and marginally-housed have money to spend on shelter. Families ould now afford better food and a nicer car. Community college and state university comes within reach. Healthcare becomes affordable.

BUT ...

Are there enough homes for everyone? Is there enough electricity to power these homes? Are there enough teachers and universities to teach? Is there enough beef and pork and chicken and fruits and vegetables ... organically-grown, locally-raised, non-GMO ...to feed everyone? Enough medicine to treat everyone? Enough clinics and hospital beds?

My point is that redistributing money is NOT redistributing "wealth". WEALTH is ACTUAL GOODS AND FACILITIES AND INFRASTRUCTURE. Redistributing "money" doesn't guarantee that there will be those goods and services to purchase. The "money" that the wealthy have acquired does not reflect an increase in production; it was created by the Fed and other banks out of thin air to make lending possible (via fractional reserve banking) and disconnected from the "real" economy of exchange of labor.

More later.

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Monday, June 10, 2019 6:39 PM

JEWELSTAITEFAN


Quote:

Originally posted by SIGNYM:
At least, not if you equate money with wealth ...

Quote:

Kunstler: America's Not Going Socialist, It's Going Medieval
Authored by James Howard Kunstler via Kunstler.com,

In response to what has become a nation of shameless racketeering, vivid wealth disparity, and shocking destitution on display in city streets, the party of the common man seeks remedies in the redistribution of capital. Seems more than fair to many. It’s not for nothing that they style it “social justice,” the cutting edge of an economic system called socialism — with overtones, of course, of settling racial and gender scores for good measure.

Socialism might seem to be the answer to all this unfairness and indignity. And naturally it focuses on the two activities that have turned into the worst rackets in America: higher education and health care, a.k.a. “Eds and Meds.” Both are now cruel bloated parodies of what they used to be, turning their customers into debt serfs and bankrupts, apart from their dismal failures of basic mission: to prepare developing minds for reality and to “first do no harm.”

The proposed remedy is for the national government to take responsibility for running them and making their services free to all. That would do nothing, of course, to reform the patent idiocies of the gender studies departments; or rescue the sorry victims of obesity and diabetes from their toxic consumption of whoppers, pizza, and slurpees. Those dynamics operate on feedback wheels of futility for which there is no happy ending outside of drastic changes in thought and behavior.

The Left now promises redemption from these great quandaries with the tag-team of Robin Hood and Santa Claus ushering in a new golden era of free stuff. It’s understandable perhaps, considering how desperate so many citizens of this land are, and how desperation feeds rescue fantasies. And the Left may even get a chance to try this wizardry after the next election. But it’s really not where history is taking us. America is not going to go socialist, it’s going medieval. Why is that?

To put it simply, the money is not there. But the “money” is only an abstract representation of material wealth of one kind or another — energy, goods, resources, and delivery systems — and all that is becoming more of a fugitive presence in reality-based civilization. We don’t have the mojo anymore to nationalize and centralize these sprawling activities. It must be obvious that government is not only fatally beyond bankruptcy, but that it has also reached the stage of diminishing returns from over-investment in complexity that translates into generalized incompetency. It’s hardly just Mr. Trump alone that is responsible for the chaotic paralysis all around us.

Societies are self-organizing, emergent phenomena. They respond to the circumstances that reality presents, and they take us in unexpected directions. The general expectation in the USA since the Second World War has been for ever-increasing material comfort provided by an inexhaustible techno-industrial cornucopia, kind of a cosmic goodie machine. Well, we’d better adjust our thinking to the fact that the horn-of-plenty is shockingly out of goodies, and that no amount of financial hocus-pocus is going to refill it. Valiant attempts to redistribute the already-existing wealth are liable to prove disappointing, especially when the paper and digital representations of that wealth in “money” turn out to be figments — promises to pay that will never be kept because they can’t be kept.

So, instead of fantasizing about free PhD programs for everybody, and free insulin for the multitudes, consider instead the vista of a reduced population working in the fields and pastures to bring enough food out of the long-abused land to live through the next winter. Consider a world in which, if we are lucky, the electricity runs for a few hours a day, but possibly not at all. Imagine a world in which men and women actually function in different divisions of labor and different social spaces because they must, to keep the human project going. Imagine a world in which the ideas in your head about that world actually have to comport with the way the way that world really works — and the severe penalty for failing to recognize that. That’s the more likely world we’re heading into. It won’t put an end to dreams of utopias and cosmic rewards, but it will be a sobering moment in history.

While I disagree with parts of his premise ... health care for all is a cost-effective benefit to society, and redirecting time and effort from foreign wars to healthcare is a logical thing to do ... the fundamental premise makes sense:

Imagine that all of the money in the USA is redistributed equally to everyone. If the top 1% own 40% of the wealth in the USA, a rough estimate is that redistributing money would approximately double the median family income, from $50,000 to about $100,000, or roughly $25,000 per person.

Suddenly, the homeless and marginally-housed have money to spend on shelter. Families ould now afford better food and a nicer car. Community college and state university comes within reach. Healthcare becomes affordable.

This is fantasy. Assuming all of your numbers above are correct (I have not evaluated them), if everybody suddenly gets an extra $25,000 then EVERYBODY will know that EVERYBODY has an extra $25,000 - and that will become the new "poverty level" or "minimum wage" marker. Rents will suddenly become $20,000 per month for an efficiency. And the homeless will continue to spend all of their newfound wealth on drugs and booze.
Quote:


Are there enough homes for everyone? Is there enough electricity to power these homes? Are there enough teachers and universities to teach? Is there enough beef and pork and chicken and fruits and vegetables ... organically-grown, locally-raised, non-GMO ...to feed everyone? Enough medicine to treat everyone? Enough clinics and hospital beds?

My point is that redistributing money is NOT redistributing "wealth". WEALTH is ACTUAL GOODS AND FACILITIES AND INFRASTRUCTURE. Redistributing "money" doesn't guarantee that there will be those goods and services to purchase. The "money" that the wealthy have acquired does not reflect an increase in production; it was created by the Fed and other banks out of thin air to make lending possible (via fractional reserve banking) and disconnected from the "real" economy of exchange of labor.

More later.


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Monday, June 10, 2019 7:39 PM

SIGNYM

I believe in solving problems, not sharing them.


That was part of the "more later". If everyone suddenly gets more money without a corresponding increase in production, then what you have created is the classic definition of inflation: Too much money chasing too few goods. The reason why all of that money created by quantitative easing and low-low interest rates hasn't created generalized inflation is because the wealthy who were able to get this freshly-manufactured money don't create a demand for the goods and services that ordinary people would. After all, there is only so much food one can eat, so many courses one can attend, so many healthcare services one can soak up. They create a demand for fine art, agricultural land, stocks, yachts etc

-----------
Pity would be no more,
If we did not MAKE men poor - William Blake

"The messy American environment, where most people don't agree, is perfect for people like me. I CAN DO AS I PLEASE." - SECOND

America is an oligarchy http://www.fireflyfans.net/mthread.aspx?tid=57876 .

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Tuesday, June 11, 2019 12:43 PM

SIGNYM

I believe in solving problems, not sharing them.


Now, you CAN induce more "production" with a differential supply of money. For example, college loans have caused existing colleges to invest more money in their facilities to attract and accommodate more students, and private colleges have also sprung up to soak up that existing money. Easy mortgage loans led to an increase in home prices (which led to an increase in loans in a positive feedback situation) which led to more homes being built. But this doesn't lead to decreased prices; for example, easy government money for prescription medication (Part D) has led to increased RX prices, but prices haven't subsequently fallen. Home prices fell, but not because of increased building but because the mortgage business almost collapsed several banks, and college expenses are still going up.

The law of "supply and demand" isn't working in these cases.

-----------
Pity would be no more,
If we did not MAKE men poor - William Blake

"The messy American environment, where most people don't agree, is perfect for people like me. I CAN DO AS I PLEASE." - SECOND

America is an oligarchy http://www.fireflyfans.net/mthread.aspx?tid=57876 .

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Tuesday, June 11, 2019 8:32 PM

REAVERFAN




Keep talking to yourself, Russian troll.

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Tuesday, June 11, 2019 10:10 PM

1KIKI

Goodbye, kind world (George Monbiot) - In common with all those generations which have contemplated catastrophe, we appear to be incapable of understanding what confronts us.


You're really outdoing yourself in stupidity,... and that's saying something!




And if democrats don't do anything different, how are they any better?
tic tac

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Wednesday, June 12, 2019 3:27 AM

SIGNYM

I believe in solving problems, not sharing them.


Actually, I'm trying to find a situation where universal wealth redistribution DOES work, and produces something other than generalized inflation.

Even when wealth redistribution is targeted to a sector of the population ... students, aspiring homeowners, etc .... it seems that more often than not wealth redistribution produced a flurry of speculation and/or price gouging, and doesn't lead to enough increased production which leads to price reductions.

If REAVER, SECOND, CC, OR WISHY have any examples of where either generalized or targeted wealth redistribution led to something other than price increases, I'd be very happy to hear it. Otherwise it seems to me that the way to increase wealth is to increase production: More houses, more high quality food, more clinics and more doctors to staff them etc.

So ... examples, please?

-----------
Pity would be no more,
If we did not MAKE men poor - William Blake

"The messy American environment, where most people don't agree, is perfect for people like me. I CAN DO AS I PLEASE." - SECOND

America is an oligarchy http://www.fireflyfans.net/mthread.aspx?tid=57876 .

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Wednesday, June 12, 2019 7:45 AM

6IXSTRINGJACK

[/i]


Quote:

Originally posted by SIGNYM:
...it seems to me that the way to increase wealth is to increase production: More houses, more high quality food, more clinics and more doctors to staff them etc.



I tend to think that you're right here...

But the problem is, unless we start colonizing space I believe that we've come to a saturation point. And that's our main problem here.

Couple that with the fact that we're quickly running out of 3rd world countries to exploit for cheap labor and we're in a real jam.

I don't honestly see any way that the American Economy is going to improve long term.

There's just too many damn people on the planet in 2019, and everywhere you turn we've got another bubble ready to burst, or another ponzi scheme ready to fall apart.

Do Right, Be Right. :)

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Wednesday, June 12, 2019 9:56 AM

REAVERFAN


Quote:

Originally posted by 1kiki:
You're really outdoing yourself in stupidity,... and that's saying something!




And if democrats don't do anything different, how are they any better?
tic tac

I have to agree. They really are.


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Wednesday, June 12, 2019 12:54 PM

SIGNYM

I believe in solving problems, not sharing them.


Quote:


...it seems to me that the way to increase wealth is to increase production: More houses, more high quality food, more clinics and more doctors to staff them etc- SIGNY

I tend to think that you're right here...
But the problem is, unless we start colonizing space I believe that we've come to a saturation point. And that's our main problem here.
Couple that with the fact that we're quickly running out of 3rd world countries to exploit for cheap labor and we're in a real jam.
I don't honestly see any way that the American Economy is going to improve long term.
There's just too many damn people on the planet in 2019, and everywhere you turn we've got another bubble ready to burst, or another ponzi scheme ready to fall apart. - SIX



Well, if we want to look at just the USA ... America has a LOT of resources. We still have productive iron ore mines, we have lots of arable land, forests, decent coastal fishing. According to climatologists overall the USA will be wetter (and hotter) because of climate shift so - except for the extreme southwestern coast (San Diego to the border), the Four Corners area and some scattered spots in Utah, Idaho, and some of the high plains states where it will be drier (averaged out by an equal number of places where it will be wetter) water won't be an issue.

We have oil and gas ... yes, it has to be fracked, but recoverable at $70+/bbl. We have a fair amount of industrially-essential nonfuel minerals https://www.usgs.gov/centers/nmic/mineral-commodity-summaries Altho we import a number of non-ferrous minerals from China - of all places - much of this is driven by cost, since Chinese production costs (wages, safety, environmental regulations) are much lower than ours.

And seriously, if we were better about recycling our nonfuel resources ... scrap steel, aluminum etc ... we would probably do much better overall.

Services like doctors, nurses, teachers etc ... those don't depend on natural resources but simply on the number of people educated to perform them. CUBA, which has been fully embargoed by the USA since 1962 - is woefully deficient in every resource except good soil, mild climate, good fishing, and limestone (for cement production) has a remarkable healthcare system - their infant mortality is much lower than ours and their people live just as long, https://www.worldlifeexpectancy.com/world-health-review/cuba-vs-united
-states
proving that you don't need a lot of natural resources for a good system of social services.

So I guess what I'm saying, SIX, is that as long as we use our resources wisely and don't strip-mine them from the future ... don't contaminate our water resources with oil and mine waste and fertilizer, manage our forests to reduce the frequency and intensity of forest fires, promote soil-building with carbon-sequestration, clean up our coastal waters and maintain fish "nurseries" (marine preserves), reduce our per-capita energy consumption to that of Europe (about half), and do a much better job of recycling ...

I think the USA has plenty of resources to create an economy for the foreseeable future (provided we stabilize our population). The fundamentals are all there, we just need to use them properly.

However, it would take an entire revamp of our financial system and investment system in order to achieve that goal.

*****
Now. WORLWIDE .... I did an extended estimate once about world energy consumption and whether or not the world really would "burn up" if all nations attempted to achieve our standard of living (as Obama said) ... yes, it would. But if I remember correctly, what I found is that if the USA could achieve energy savings to match Europe's per-capita energy expenditure (and nobody will claim that their standard of living is much lower than ours) and the other energy-hogs of the world (Canada, Australia etc) did the same, AND if we eliminated most of the military-driven energy expenditure from the world, that energy (CO2 emissions) could bring up the woefully-impoverished nations of Africa, India etc to at least the Cuban standard of living. Again, if they use the resources to improve their nations' economies and don't siphon it off into corruption. Also, if they stabilize/reduce their populations. (Birthrate has more to do with educatig females and providing them with life-options besides childbirth, and also providing them with birth control so they can regulate their fertility. Education is reliably linked to lower birthrate).

I'll see if I can find that thread again, I did a fair bit of research for it.

*****

Anyway, I don't see a necessarily dire future for the USA or for the world. HOWEVER, for the USA is means FUNDAMENTALLY changing the way we do things.

-----------
Pity would be no more,
If we did not MAKE men poor - William Blake

"The messy American environment, where most people don't agree, is perfect for people like me. I CAN DO AS I PLEASE." - SECOND

America is an oligarchy http://www.fireflyfans.net/mthread.aspx?tid=57876 .

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Wednesday, June 12, 2019 12:59 PM

SIGNYM

I believe in solving problems, not sharing them.


Sorry for the brain-dump; I was just thinking out loud.

In any case, I figured out the fundamental flaw in wealth redistribution, which I kind of touched on but didn't reduce it to its essentials:

If you disconnect the distribution of money from work, you've simply increased the demand without increasing the supply.

And our system of investment is so fucked up (hostage to debt based speculation) that it's unlikely that we would ever invest in American production to meet that need

So the real problem is our malinvestment: money goes into derivatives and hedge funds and stock/real estate/commodity speculation when it should be going into improving our environment and enhancing our infrastructure and improving services.

And this is all fueled by fractional reserve banking, because the banks can create money out of thin air


-----------
Pity would be no more,
If we did not MAKE men poor - William Blake

"The messy American environment, where most people don't agree, is perfect for people like me. I CAN DO AS I PLEASE." - SECOND

America is an oligarchy http://www.fireflyfans.net/mthread.aspx?tid=57876 .

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Wednesday, June 12, 2019 1:32 PM

1KIKI

Goodbye, kind world (George Monbiot) - In common with all those generations which have contemplated catastrophe, we appear to be incapable of understanding what confronts us.


I'll think about your post some more.

... though I have I think a somewhat similar scenario in the real world. For islands that live off of tourism, even Hawaii, tourists bring money and demand, but not resources or goods per se. Resources and goods have to be imported in a separate economic chain. The increased money supply without an increase in resources or goods makes island living expensive above and beyond the cost of shipping*. In addition, since tourists come with a stash of money ready to spend, the lower supply of local dollars will always be competing with the endless supply of tourist dollars for goods and services, both creating inflation and also putting locals at an economic disadvantage.

*If the cost of shipping was a big deterrent, 'made in China' goods wouldn't be competitive.

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Wednesday, June 12, 2019 2:07 PM

1KIKI

Goodbye, kind world (George Monbiot) - In common with all those generations which have contemplated catastrophe, we appear to be incapable of understanding what confronts us.


"In any case, I figured out the fundamental flaw in wealth redistribution, which I kind of touched on but didn't reduce it to its essentials:

If you disconnect the distribution of money from work, you've simply increased the demand without increasing the supply."

I'm going to do a very small bit of parsing myself.

As was told to me, the entire cost of a good is labor. Raw resources per se don't 'cost' anything, what 'costs' is extraction, shipping, refining, assembly etc - ie, labor. And a service is also the cost of labor, you are paying someone to do work for you you can't do- or don't want to do- yourself. So all 'costs' are labor one way or another.

What distinguishes labor? I think we can distinguish between what I think of as productive labor - which adds use value - and non-productive labor - which doesn't. McDonald's is productive labor, because the people working there are creating ready to eat food from raw ingredients. But a claims adjuster is not engaged in productive work because they're not increasing use value. Neither is a stock-broker.

I think there's another type of productive labor, and that's involved with a 'social good'. Infrastructure work, preservation of resources, mass immunization, and education for example, all create 'social goods'. Despite that they can't be owned individually, they're still adding distributed use value.

So I would say that money distribution needs to be tied to productive work, and not work in general, because only productive work increases real value.


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