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Is Capitalism Broken?

Discussion in 'Tilted Philosophy, Politics, and Economics' started by ASU2003, Mar 3, 2013.

  1. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    If you don't have an answer to my questions, just say so. You don't know where a single student can get $100,000 in financial aid. Is that right? (A simple yes or no will do.)

    Well, if you were to tell me that hay and bullshit are independent of each other, what would you expect me to say?

    So what does she do? Self-breastfeed? Shelter herself underneath them during rainstorms? Wrap herself in them to keep warm? What? Make your theory work for me. Walk me through it, Mr. Theoretical Economics That Will Blow Your Mind.

    Where does wealth come from? When is it made useful in a utilitarian way? If you don't know these things or can't explain them, then there is no point in my wasting my time with you. It's like trying to talk about American realism with my cats. They may "say" a bunch of things, but I don't think they really get it. Not unless they can prove it. (Which is tragic, really, because I'm always going on with them about the work of Henry James.)

    So, where does wealth come from, and how is it used?

    It depends. Do we assume a starting point of $0? How does the net worth grow by $1 million? Am I stealing it? I'd have to steal it, right? How else could I get $1 million in assets without (or even with!) an income and no net worth?

    Income, basically, is money earned through work or investments. Some define it more broadly in terms of accounting, but we can keep it simple if you want.

    Not really. Just about all of the stuff you write that I agree with is stuff I already know.

    You don't recommend having an income; you recommend having wealth. Can you help me in running those numbers? I want to be wealthy, but I'm stuck with an income.
     
    Last edited: Mar 12, 2013
    • Like Like x 1
  2. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    I personally know a young man that graduated from the Air-force Academy. Some put a half million value on that education - he did not pay a penny. I know a young man currently on a football scholarship at Duke. I know that Harvard is offering free tuition for low income families. Can you make your point and move on rather than trying to prove what I may or may not know! If you are hung up on the number 100,000, make it 10,000, make it 100 make it whatever your mind is comfortable with - realize some people think big, some don't.

    This is turning into a B.S. interaction - if you think it is my fault I can not help you, perhaps someone else can. Good luck.
     
  3. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    I get it. Those living in poverty have a better standard of living than those from $100,000 households when their children get degrees from the Air Force, get football scholarships from Duke, and are accepted to Harvard.

    My point? You're full of shit.

    We can make it $10,000, or $100, if you want, but then that still makes the $100,000 household better off, doesn't it?

    Do you know of anyone besides you who is fluent in bullshit? I'm in the market for an interpreter.
     
    Last edited: Mar 12, 2013
  4. redux

    redux Very Tilted

    Location:
    Foggy Bottom
     
  5. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    If you don't understand the point, that is one thing. To say I am full of shit is another.

    I will explain it to you one more time. Family A may have a high income and will be expected to contribute to the the $37,000 tuition (that is just the tuition) per year. Family B is not expected to pay the $37,000 tuition. When a person is calculating the wage gap between the two families and draws conclusions based on that gap, the conclusion can be misleading because family B is getting a $37,000 benefit that is not considered income.

    Not complicated for most people to understand.

    This is not a commentary on family A or B, it is a commentary on the data being used to promote wage disparity arguments. This is one type of an example, there are many others. Over four years, of tuition and other expenses the difference can be as much as $200,000 for a Harvard Degree.

    You getting lost and confused with a misdirected focus on trivial matters is your problem.

    For those who care is some Q's and A's from Harvard's website:



    Questions & Answers

    Knowing this how would you plan for your child?
     
    Last edited: Mar 12, 2013
  6. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    I think I got it now!

    The real problem of growing income inequality and stagnant middle class wages (while profits soar and top salaries rise significantly) can be made trivial by misdirecting the discussion to two imaginary families.
     
    • Like Like x 3
  7. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    I know the context has been long forgotten, but my point was in response to a video posted where it was stated that wages have been stagnate while economic growth has doubled. I simply stated that wages as a measure is inadequate. There are other factors to be taken into consideration. An honest discussion requires an acknowledgement and understanding of these factors.
     
  8. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    Or an acknowledgement and understanding that the context and the facts are that both income and wealth are concentrated at the top at levels unseen since the robber barons.
     
  9. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    I don't know if this is true. Because I believe we are looking at incomplete data. However, I do acknowledge that many people who do not participate in owning assets get left behind. that is why I support giving people a real ownership interest in their social security contributions - real private accounts. Allow people to leave what is left to their heirs. Allow them to participate in our economic growth.

    Also understand what is happening with a person's incentive to accumulate wealth. A person a the margins with a child planning on attending Harvard for example would be harmed if they actually planned, sacrificed and saved to pay the costs. Even high middle income people over $100K/per year could see a big difference in living standards relative to spending up to $200,000 over four years compared to a similar family that does not. Today, the key is to plan for the aid - in order to do that you have to manage income and assets.

    Here is Yale's description:

    57% get need based aid and 43% do not.​
     
  10. Charlatan

    Charlatan sous les pavés, la plage

    Location:
    Temasek
    I want to move to America where the streets are paved grants, scholarships and free money! There is no inequity there at all, only unreported benefits!

    And where that fails, I can find a cow (not buy because who needs income) and have it multiply into wealth untold (apparently being able to feed and house itself as well), or grow breasts that will make me a millionaire (of course I will have to lose them in order to take advantage of the, somehow free, insurance upon them).

    I have been doing it all wrong. America is the BEST!
     
    • Like Like x 2
  11. rogue49

    rogue49 Tech Kung Fu Artist Staff Member

    Location:
    Baltimore/DC
    You just need magic beans.
    The government supplied magic harps and geese that lay golden eggs are at the top of the stalk.
    You just have to fill out the right forms, cows aren't necessary these days. ;)

    Quite frankly, from an "old-days" conservative context.
    All I want is businesses to treat us with some integrity...but perhaps this never truly existed in the past.
    But it seems like there's always another fee for something...nothing is all up front.

    Use to feel like I bought a service, I got a service...but now I'm always waiting for the other shoe to drop.
    Is this just me??? :confused:
     
  12. Charlatan

    Charlatan sous les pavés, la plage

    Location:
    Temasek
    Strictly speaking, aceventure is correct. Capitalism isn't broken. It works just fine for those who have the means and ability to make capital work for them. This has always been the case.

    What people mean when they ask if Capitalism broken is: Is the economy broken? Or better still: Is the engine that drives our economy broken?

    This means very different thing to different nations. While Capitalism is one of the main features of the economic engine that runs many nations around the World, each of these nations has a slightly (sometimes vastly) different take on how to manage Capitalism more negative aspects. This is typically realized through regulations (e.g. preventing monopolies, dictating a minimum wage, child labour laws, etc.).

    Completely unfettered, Capitalism can be monstrous. Over the years, democracies have recognized this and introduced legislation to tame the nastier elements and harness its power to betterment of all.

    Doing this is not an easy task. Too much interference and the economy can fail (e.g. Soviet Russia). Too little and the economy can fail (e.g. Great Depression). Could things in the US be simplified? Sure. Should they be completely deregulated? No. One need only look at the US economy from WW2 until the mid1990s. It was, arguably, one of the most regulated times in American economic history and yet was one of the periods where the middle class was strongest and the difference between the poorest and the wealthiest was much closer.

    Since that time, there has been a massive push to deregulate the financial sector. What was the result?

    I don't think I need to spell it out.
     
    Last edited: Mar 13, 2013
  13. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    Okay, $37,000/year would likely include room and board, and it (tuition plus room and board) would also be as low as $15,000 at a public institution. How much of that is funded for the average student belonging to a household earning $20,000 or less? Do you know? The gap you're talking about between a $20,000 household and a $100,000 household doesn't sound as narrow as you're implying. You need to do way more math. College lasts between 2 and 4 years.

    You aren't making a very good point, counterpoint, whatever. The fact remains: trickle-up economics is a serious problem. The vast majority of the growth in wealth is accumulating among the top minority of earners. Placing a greater financial burden on the lower and middle classes will exacerbate the problem. The middle class is eroding.

    Do you deny this?

    Do you have anything else to add?

    Well, you're the one with the pockets full of trivial matters. (Obviously.) You have spent your past several posts trying to prove that impoverished households are de facto middle class households by suggesting that money must come from somewhere other than them to fund post-secondary education, even if it's Harvard itself (a school with an undergrad student population of about 10,000).

    I'm not lost and confused, but I am rather amused.
     
    Last edited: Mar 13, 2013
  14. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    I do not hold the position that there is no disparity. What I suggest is that we give it some thought. For example, and I clearly do not expect a reasoned response, we can have this comparison in terms of wealth -

    Person A - 26, lives in a 1500 sq/ft. home in Waxhaw, NC valued at $100,000 fully paid for, he earns $60,000 in a trade. He spends his weekends doing what he loves (perhaps hunting, fishing, four wheeling, watching NASCAR), he vacations regularlly, spends holiday's with a family he enjoys, is healthy and is loving life.

    Person B - 26, lives in Manhattan, NY in a 600 sq./ft apt. with a $1,000,000 mortgage, he an investment banker earns $225,000 in a good year with bonuses, has $100,000 in student loans, works 60 hours per week, works weekends, rarely takes vacation, hates his family, is already developing ulcers and thinks a guy who lives in Waxhaw, NC is a hick.

    How would you begin to compare the wealth between these two guys?

    Just looking at the real-estate aspect of the question - how do you measure the wealth of a person that owns a property in a place like NY compared to a person who ones property in NC? Just because you may value a NY property at a certain level does not mean I do.

    Factoring in taxes, fees and other costs to live in one area compared to another, do you make adjustment for that in the measure of wealth - for example if a person's wealth is measured at $1 million and it costs $100,000 per year to maintain that wealth, with no income the wealth goes away in 10 years. So, then one can calculate the net present value of that wealth. Compared to a person whose wealth is measured at $10,000 but it costs nothing to maintain the wealth, again one can calculate the NPV. Then what do you get.

    If you folks won't run the numbers, if you refuse to apply basic math to these questions, I can see why my posts seem like I don't know shit. all I can say is I would rather be me, doing what I do.

    I understand that young people today have no idea about rural lifestyles. And to some degree things have changed. but I am not that far removed, and I spent summers in rural Arkansas with my grandparents, people who had almost no income. Here is an example of how things worked. They may get some seed, perhaps on credit. Plant some crops, pay off the loan in trade - get more seed and other needed items. Plant more crops - perhaps trade for a new born calf. They feed the calf, it grows into a cow - they use the cow for milk/butter. They find another farmer with a bull. They agree to allow them to make baby cows, splitting the output. Then they might trade a calf for other goods, perhaps sell, perhaps fatten it up and eat it - all depends. And the cycle continues.

    But outside of farming - there is this concept called intellectual property. It is where someone does something with their mind, they get an idea (perhaps planted in their mind while the dreamed of unicorns). then that intellectual property develops value, but rather than selling it - they develop it themselves (they may live in their parents basement or sleep on their best friends couch earning no income) -then one day the magical venture capitalist come along and infuse capital into the idea - and before any sales occur before and income the guy with the intellectual property is sitting on a company worth multiple billions of dollars. Sounds like pure fantasy doesn't it? But it has happened a time or two, perhaps the details are different - perhaps it was his girl friend's couch, etc.

    I agree.
    --- merged: Mar 13, 2013 at 12:07 PM ---
    You folks truly confuse me. Do you really think getting seeds is an obstacle? Even as a metaphor? What definition do you use for income? When I started my business I personally did not earn income fro about 2 years - but my business grew during that time period. What is it about hard work or sweat equity that is foreign - it is not magic, no magic beans - it is getting off your ass and doing what needs to be done!
     
    Last edited by a moderator: Mar 20, 2013
  15. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    I really dont know what is so hard to understand about after tax corporate profits being at record highs and wages at record lows.

    [​IMG]
    Red is corporate profits, blue is private sector wages

    Capitalism is working just fine for corporate America, just not for the growing number of middle class workers living from paycheck to paycheck.
     
  16. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    Of course I have more.

    To the degree that there is wealth disparity, it is the result of some people having ownership interest in the economy and some not having an ownership interest in the economy.

    People who own appreciating assets or productive assets in our economy (capital - making them capitalist in my view) will have their wealth grow in relationship to economic growth - making them less dependent on income or wages. People who do not participate in "ownership", people who do not engage in capitalism in our capitalist society, run the risk of getting left behind.

    Read this and understand that this is the type of analysis that is need for many topics applicable to the question of wealth distribution:

    The Effects of 401(k) Plans on Household Wealth: Differences Across Earnings Groups

    People like you discourage others from getting "in the game", you promote fear, you say the market is broken the system is rigged. You should say, start small, save, invest, run the numbers, trust the numbers. Regardless of income everyone should get involved with ownership in our economy.
    --- merged: Mar 13, 2013 at 12:30 PM ---
    It is not difficult to understand the chart, my focus is explaining why. Do you think it is because business owners are corrupt or simply bad people who don't care about others? Wages stagnate for a number of reasons, one is that although wages are flat - employee costs are not. When an employee cost exceeds an alternative - the alternative is employed.
     
    Last edited by a moderator: Mar 20, 2013
  17. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    And how do you do that if your wages have been stagnant for 10+ years while your cost of living has risen...leaving you as one of the 35-40% of workers living from paycheck to paycheck?
     
  18. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    Develop a habit of savings - you know "pay yourself first". Have you ever done Future Value calculations? Do you have issue with the concept of the effect of compounding interest? When a person works for a company with a ESOP, would you encourage them to participate? What a about 401(k)?

    Would you take a lower wage to work for a company with a differed qualified profit sharing plan? I would. Why would anyone want higher taxable income at the expense of deferred non-taxed income? Do you know what the impact of this trend has had on the numbers you cite? I don't think so!

    Do you know the impact of the increase in independent contractors (1099's) have on the numbers you cite? I don't think so!
     
  19. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    Save more? When you can barely pay the mortgage and feed/cloth your family or provide basic amenities?


    Sure. The current job market is so great and workers have so many choices that they can leave their current job for a job with better benefits.

    In both of the above, I dont know what world you are living in, ace.
     
  20. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    This is both an oversimplification and huge assumption. Poor people are poor because they don't want to be wealthy? That's what I'm getting from this statement.

    But, alas, there is only so much one can do when they start with nothing and have a low income. It's not that they're risking getting left behind; they are already behind.

    I don't do this. You're making a pretty big assumption.

    This is something I'd say, but it's something you've turned into a convoluted mess in your claim that income and wealth aren't connected. Suddenly they are? Suddenly saving one's income can lead to ownership in the economy? Why the flip-flop? Maybe it wasn't a flip-flop. Maybe you just aren't very good at expressing yourself.

    I mean, anyone who understands the basics will know that income and wealth are two different things, but they will also know that income is used to build wealth. They also know that wealth can build wealth (often based on the income it generates). The problem in the American economy is that the bottom income earners have so little left over as discretionary income that they cannot invest at the same levels as those who earn, in many cases, several times more. Sure, there are a lot of ignorant and undereducated people who don't have an investing mentality, a saving mentality, and they waste their money, etc., but, still, it's not that they have a lot to work with, and it's not that their incomes are increasing with economic growth (i.e., growth in productivity, not just wealth). So without assuming everyone is stupid, lazy, or too afraid to "play the game," also realize that many of them are trying their darndest to do their best financially speaking but still can't get anywhere. Somewhere along the line, there is a crossover from the trials of personal responsibility to the heavy influences of a system that's not very conducive to helping, or even allowing, less fortunate people succeed.

    That said, it's easy to say start small, save, invest, etc., but it takes decades for those starting with nothing, or starting with a substantial debt, as is the case with most recent graduates, to build even a modest portfolio, let alone enough to retire on or be considered "wealthy."

    It is a complex problem, and no single source deserves all the blame, but the fact that wealth disparity in America is so severe and getting worse, identifies more than one problem. And again we come to this idea that the poorest in America should take on more of the burden to make up for the deficit, whether it's in the form of spending cuts to programs that the lower classes depend on or tax increases on the already cash-strapped middle class. All the while the top earners glut themselves on the majority of the wealth generated in the country.

    It doesn't make very much sense, which is the point of the video.
     
    Last edited: Mar 13, 2013