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A Brief Digression into Heterodox Economics

The rich get richer and the poor get poorer. The Parable of Talents, found in Matthew 25:24-30, is perhaps the earliest written statement of this famous aphorism:

For unto every one that hath shall be given, and he shall have abundance: but from him, that hath not shall be taken away even that which he hath.

Because of this verse, the entire phenomenon of “the rich getting rich and the poor getting poor” is often called the Matthew Effect.

However, the aphorism was first stated in its modern formulation by the great Romantic poet Percy Bysshe Shelley. In his 1821 book A Defence of Poetry, Shelly criticized the “utilitarians” of his day by remarking that under their administration “the rich have become richer, and the poor have become poorer.” Today the aphorism is commonly expressed in present indicative tense, expressing a seemingly unchanging pattern observed over time: “the rich get richer and the poor get poorer”

Whatever its source and tense, no one disputes the truth of the Mathew Effect. Indeed, its factuality is in evidenced everywhere! The Guardian reports:

The world’s five richest men have more than doubled their fortunes to $869bn (£681.5bn) since 2020, while the world’s poorest 60% – almost 5 billion people – have lost money.

The details come in a report by Oxfam as the world’s richest people gather from Monday in Davos, Switzerland, for the annual World Economic Forum meeting of political leaders, corporate executives and the super-rich.

The yawning gap between rich and poor is likely to increase, the report says, and will lead to the world crowning its first trillionaire within a decade. At the same time, it warns, if current trends continue, world poverty will not be eradicated for another 229 years.

…click on the above link to read the rest of the article…

Wrong for a different reason

September 19, 2021

Wrong for a different reason

Alexandria Ocasio-Cortez – A well-meaning but not particularly bright left-leaning US politician – made a stir earlier this week by wearing a figure-hugging dress emblazoned with the slogan “Tax the Rich” to the prestigious 2021 Met Gala. Since the slogan was clearly political, it wasn’t long before the various political tribes took to social media to pass judgement.

“Hypocrisy!” was the charge made by the libertarian right. As Amanda L Gordon at Bloomberg explains:

“The message itself wasn’t surprising — Ocasio-Cortez has been one of the biggest supporters of raising taxes on the rich to help pay for more social services and narrowing the massive wealth gap between America’s rich and poor. But the latest setting in which AOC — as she is known — chose to express it drew attention.

“The annual event at New York’s Metropolitan Museum of Art is the haunt of celebrities, designers, billionaires and various other members of the jet set that are willing to pay $35,000 a pop for the privilege to attend.”

But, the left ask, “where better to demand that the rich pay their fair share of taxes than in a gathering of the rich themselves?” According to Hannah Selinger at the Independent, for example:

“The truth is, women have always used clothing — the most accessible medium — to express their politics. One might say that such choices in the everyday sphere have been more subtle. Ocasio-Cortez’s dress, of course, was anything but. And that was entirely appropriate for the space in which the statement was made.”

Ocasio-Cortez has also clarified that she did not pay $35,000 to attend and that the dress was borrowed for the evening:

“The time is now for childcare, healthcare, and climate action for all. Tax the Rich.

…click on the above link to read the rest of the article…

Evil Geniuses: How the Rich Took Control of America (and Canada)

August 29, 2020

Evil Geniuses: How the Rich Took Control of America (and Canada)

Kurt Andersen looks at the not-so-secret conspiracy by the rich, right and big business.

Donald Trump’s presidency is just one result of a 50-year conspiracy to ensure the rich and the right controlled America. Photo: US government.

They may have sentenced Leonard Cohen to 20 years of boredom for trying to change the system from within, but a whole generation of American conservatives were richly rewarded for doing just that.

As Kurt Andersen says in summarizing his own book, “Evil Geniuses chronicles the quite deliberate re-engineering of our economy and society since the 1960s by a highly rational confederacy of the rich, the right and big business.”

Canada, Britain and many other countries were pulled along in the Americans’ wake, though without quite the same awful results. Canada may be able to recover, but it will not be easy.

Andersen admits the re-engineering of America sounds like a great conspiracy theory. But he documents the efforts to transform the country meticulously and credibly.

That’s possible in part because the conspirators made no attempt to conceal themselves; on the contrary, the arch-conspirator was a famous corporate lawyer, Lewis Powell, who authored the memorandum that sparked the movement in 1971 and was soon after appointed to the U.S. Supreme Court. Taking the 1960s radicals more seriously than he should have, Powell argued for long-term changes that would further enrich the wealthy at the expense of workers and the middle class.

The memorandum was probably the single most influential American document since George F. Kennan’s “long telegram” of 1946, which set the terms of the Cold War that followed. Corporate leaders fell in behind Powell, and began to pour millions into think tanks, foundations and law schools — not to mention journalism scholarships to develop a new generation of right-wing pundits.

…click on the above link to read the rest of the article…

The One True Thing

April 1, 2019

wikimedia

The One True Thing

Until you understand it, it will rule your life.

Until you see clearly how the rules of society work, you will be trapped within a system of control.

What you mistake for reality is instead a fabricated simulation, designed to keep you trapped right where the system wants you.

Your social conditioning, education, and family structures program you with a set of beliefs, values and norms — often unexamined — that “properly” align you in such a way that you focus your life and labor on keeping the existing social hierarchy in place and that you never deeply question this arrangement.

Put visually, your culture is in the shape of a pyramid. And what keeps you pinned to your particular layer is your belief system.

Every civilization has its own defining narratives that, while beautifully diverse, all generate exactly the same structure: a pyramid consisting of many more people at the bottom than at the top.

Every civilization throughout history had One True Thing that determined each person’s position on that pyramid.

In some past eras, it was royal bloodline. In ancient Egyptian culture, it stemmed from being a direct descendent of the Sun god Ra. And today, it’s a function of how much money you have.

No matter the marker, the pecking order is held in place because everyone accepts the rules. They’re fully understood by the citizenry, and are only rarely questioned (usually at great personal risk).

But even though accepted as “100% true” by the participants of one culture, social markers often don’t translate when applied to another.

For instance, if you traveled back in time to the height of the Aztec empire with $1 billion in cash, your paper bills wouldn’t have any accepted value. You’d probably have trouble acquiring even a single tortilla with them.

Your modern currency just wouldn’t be money to that ancient culture.

…click on the above link to read the rest of the article…

How long will the rich be willing to share the roads with the poor?

January 24, 2018

How long will the rich be willing to share the roads with the poor?

In Ray Bradbury novel “Fahrenheit 451” we are told of a world with no private cars (above, a still from the 1966 movie by François Truffaut). Bradbury had correctly understood that dictatorships not only tend to burn books but also don’t like their citizens to own private cars. In this post, I argue that the growing social inequality in the West may soon lead to the demise of the private car for the middle class. This evolution may be helped by such concepts as TAAS (transportation as a service).

In his “The Betrothed”, (1827) Alessandro Manzoni tells us of how a dispute on the right of the way led to a bloody duel between two noblemen. The story takes place during the 17th century and it seems that, at that time, whether one should cede the way to another was a question of rank.

Of course, in our (perhaps) enlightened times, this attitude looks absurd. When you see a stop sign at a crossroad, you are supposed to respect it, independently of whether you drive a rusty Toyota Corolla or a shiny Porsche Cayenne. But, if you think about that, the rich must be very unhappy about having to share the road with all those poor people with their clunkers. They might well be thinking of ways to have the street all for themselves, avoid traffic jams, and regain the mobility that cars provided when there weren’t so many of them.

Is it possible? Well, think of this: the diffusion of private cars in the Western World, and in particular in the US, took place during a period when inequality was declining and reaching values which were possibly the lowest in modern history. But things have changed a lot since then. Here are some data for the Gini Index in the US (from the US Census Bureau)

…click on the above link to read the rest of the article…

Let Me Tell You About the Very Rich

April 7, 2016

Let Me Tell You About the Very Rich

The Panama Papers highlight, with painstaking clarity, that austerity is not a shared sacrifice.

It’s not like we didn’t know what was going on. But the “Panama Papers,” the largest-ever document leak and one that implicates political leaders and business executives around the world, confirms it — cementing a widespread distrust of public and private institutions in the global economy.

It remains to be seen whether the scale of the revelations, whose full scope is only slowly starting to emerge, will be a catalyst for positive change or just more fodder for curmudgeonly conspiracy theorists. But one thing is clear: The debate over global economic policy is going to be deeply affected for a while to come.

The epic document dump, which includes 11.5 million files from the Panamanian law firm Mossack Fonseca, implicates a string of world leaders, their families, and close associates in an intricate web of shell companies constructed for the sole purpose of hiding money from tax authorities.

Following the Great Recession and world financial meltdown, policymakers have fallen broadly into two camps: those who see a significant role for official intervention through fiscal and monetary stimulus policies, and those who see government as the problem and push for structural changes to push it out of the way.

Both Europe and the United States imposed considerable austerity on government finances despite prevailing modern economic thinking suggesting governments should spend more, not less, in times of economic weakness.

This budget-cutting approach to exiting the economic crisis, predicated on the dubious notion that fiscal prudence will boost confidence and hence growth, was sold to the public as a shared sacrifice across society. But as the Panama Papers appear to show, the very wealthy play by an entirely different set of rules than the average person when it comes to paying taxes.

…click on the above link to read the rest of the article…

Warming means unfair share for poor

March 7, 2016

Warming means unfair share for poor

A bumper catch off the coast of northern Norway may be bad news for fishermen in southern waters. Image: Bo Eide via Flickr

As temperatures rise with climate change, the Earth’s natural capital will change too − but there may be few winners, even among the wealthy.

LONDON, 5 March, 2016 – Climate change could seriously redistribute resources and reallocate wealth – but not in a fair way.

In a reverse of the famous Robin Hood folklore, it could rob from the poor to give to the rich, according to researchers. Yet even the rich may not feel any richer.

In one clear instance, as scientists have repeatedly warned, fish stocks are likely to move away from the equator and towards the poles, as the tropics heat up and expand.

This means that at least one valuable resource will move away from some of the world’s poorest nations, and in the direction of societies that are relatively wealthier − if only because economic power has for so long been vested in the temperate zones. And this shift will have economic consequences.

Eli Fenichel, assistant professor of bioeconomics and ecosystem management at the Yale School of Forestry and Environmental Studies in the US, says: “People are mostly focused on the physical reallocation of these assets, but I don’t think we’ve really started thinking enough about how climate change can reallocate wealth and influence the prices of those assets. We think these price impacts can be really, really important.”

Real cash value

Only last month, Dr Fenichel identified a way of calculating a real cash value for what environmentalists call “natural capital”.

Now he and other colleagues, in a study for Nature Climate Change, have started to think about where and for whom the cash might start accumulating. He has no immediate answer.

…click on the above link to read the rest of the article…

Seven Things You Need to Know About Inequality

May 19, 2015

Seven Things You Need to Know About Inequality

The gap between rich and poor is growing, but there are solutions, says The Tyee’s author of ‘A Better Place on Earth.

In recent weeks I’ve had the chance to talk at launches in Victoria and Vancouver about economic inequality and my bestselling book A Better Place on Earth: The Search for Fairness in Super Unequal British Columbia.

There’s been attention from Global News, the Vancouver Sun, CBC radio, CKNW and other media outlets. B.C. Booklook said I should be gagged for spreading “malicious truths.”

Following are seven key facts I think you should know about the growing gap between rich and poor in B.C. and elsewhere:

1. Inequality has been rising for three decades: Anyone in a city in British Columbia is well aware that while some people have wealth counted in the billions of dollars, others sleep in doorways and eat from food banks. What we know from experience is borne out by statistics, which show that inequality has grown in Canada, like in much of the economically developed world, since the 1980s. In B.C. the gap has grown even faster, with inequality spiking from below the Canadian average to well above it in the early 2000s. The top 10 per cent now hold 56.2 per cent of the wealth in the province, the biggest share anywhere in Canada.

2. High inequality has many consequences: Research from around the world shows that greater inequality is associated with all kinds of negatives, including worse health outcomes, poorer education, more teen pregnancy, greater substance abuse, higher rates of mental illness and higher levels of incarceration. It is also linked to reduced opportunity, where children are likely to be stuck in the same income bracket as their parents. Inequality makes economies weaker, since many people in the bottom and middle tiers lack buying power. It is frequently cited by economists as a key reason why the recovery from the 2008 financial crisis has been so lacklustre. We’re all affected.

…click on the above link to read the rest of the article…

The Rich Get Richer: Titanic Stock Bubble Fueled by Buyback Blitz

May 6, 2015

The Rich Get Richer: Titanic Stock Bubble Fueled by Buyback Blitz

Why are stocks still flying-high when the smart money has fled overseas and the US economy has ground to a halt?

According to Marketwatch:

“For the eighth week in a row, long-term mutual funds saw more money flowing out of U.S. stocks and into international stocks, according to the Investment Company Institute……For the week ended April 22, U.S. stocks saw $3.4 billion in net outflows from long-term mutual funds…For the year to date, net outflows for U.S. stocks are $13.79 billion, while inflows for international stocks are $41.12 billion.

Those figures, however, don’t count exchange-traded funds. In April alone, mutual funds and ETFs that focus on international stocks saw $31.8 billion in net inflows, while U.S.-focused funds and ETFs shed $15.4 billion, according to TrimTabs Investment Research.” (“Why U.S. stocks are near highs even as fund investors flee“, Marketwatch)

So if retail investors are moving their cash to Europe and Japan (to take advantage of QE), and the US economy is dead-in-the-water, (First Quarter GDP checked in at an abysmal 0.1 percent) then why are stocks still just two percent off their peak?

Answer: Stock buybacks.

The Fed’s uber-accommodative monetary policy has created an environment in which corporate bosses can borrow boatloads of money at historic low rates in the bond market which they then use to purchase their own company’s shares. When a company reduces the number of outstanding shares on the market, stock prices move higher which provides lavish rewards for both management and shareholders. Of course, goosing prices adds nothing to the company’s overall productivity or growth prospects, in fact, it undermines future earnings by adding more red ink to the balance sheet. But these “negatives” are never factored into the decision-making which focuses exclusively on short-term profits. Now get a load of this from Morgan Stanley via Zero Hedge:

…click on the above link to read the rest of the article…

Paul Tudor Jones Warns This “Disastrous Market Mania” Will End “By Revolution, Taxes, Or War”

March 20, 2015

Paul Tudor Jones Warns This “Disastrous Market Mania” Will End “By Revolution, Taxes, Or War”

“This gap between the 1% and the rest of America, and between the US and the rest of the world, cannot and will not persist,” warns renowned trader Paul Tudor Jones during his recent TED Talks speech, as he addressed the question – can capital be just? Hoping to expand the “narrow definitions of capitalism,” that threaten the underpinnings of society, Tudor Jones exclaims, “we’re in the middle of a disastrous market mania,” adding “one of worst of my life.” Perhaps most ominously, he concludes, historically this ends “by revolution, higher taxes or wars. None are on my bucket list.”

As TED blog reports,

Can capital be just? As a firm believer in capitalism and the free market, Paul Tudor Jones II believes that it can be. Tudor is the founder of the Tudor Investment Corporation and the Tudor Group, which trade in the fixed-income, equity, currency and commodity markets. He thinks it is time to expand the “narrow definitions of capitalism” that threaten the underpinnings of our society and develop a new model for corporate profit that includes justness and responsibility.

It’s a good time for companies: in the US, corporate revenues are at their highest point in 40 years. The problem, Tudor points out, is that as profit margins grow, so does income inequality. And income inequality is closely linked to lower life expectancy, literacy and math proficiency, infant mortality, homicides, imprisonment, teenage births, trust among ourselves, obesity, and, finally, social mobility. In these measures, the US is off the charts.

…click on the above link to read the rest of the article…

We Live In An Era Of Dangerous Imbalances

February 15, 2015

We Live In An Era Of Dangerous Imbalances

And history shows they correct painfully

The intervention by the world’s central banks has resulted in today’s bizarro financial markets, where “bad news is good” because it may lead to more (sorry, moar) thin-air stimulus to goose asset prices even higher.

The result is a world addicted to debt and the phony stimulus now essential to sustaining it. In the process, a tremendous wealth gap has been created, one still expanding at an exponential rate.

History is very clear what happens with dangerous imbalances like this. They correct painfully. Through class warfare. Through currency crises. Through wealth destruction.

Is that really the path we want? Because we’re for sure headed for it.

…click on the above link to see the video…

States Consider Increasing Taxes for the Poor and Cutting Them for the Affluent

February 14, 2015

States Consider Increasing Taxes for the Poor and Cutting Them for the Affluent

A number of Republican-led states are considering tax changes that in many cases would have the effect of cutting taxes on the rich and raising them on the poor.

Conservatives are known for hating taxes but particularly hate income taxes, which they say have a greater dampening effect on growth. Of the 10 or so Republican governors who have proposed tax increases, nearly all have called for increases in consumption taxes, which hit the poor and middle class harder than the rich.

Favorite targets for the new taxes include gas, e-cigarettes, and goods and services in general. Gov. Paul R. LePage of Maine, who wants to start taxing movie tickets and haircuts, is also proposing a tax break for the lowest-income families to relieve some of the pressure.

At the same time, some of those governors — most notably Mr. LePage, Nikki R. Haley of South Carolina and John R. Kasich of Ohio — have proposed significant cuts to their state income tax. They say that tax policies that encourage business growth provide more jobs and economic benefits for everyone.

A new report suggests that these states could be creating financial problems down the road. The strategy of shifting from income taxes to consumption taxes has caused huge budget shortfalls in Kansas and, more recently, North Carolina, which announced a budget shortfall of nearly half a billion dollars.

…click on the above link to read the rest of the article…

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