Friday, July 16, 2010

growing wealth disparity

I regard growing wealth disparity as uncontroversial and an indictment of the system which produces such disparity. I'll just quote an extract from David Harvey's Limits to Capital which provides substantial evidence for growing wealth disparity:
"According to the UN by the mid 1990s the net worth of the 358 richest people in the world was then found to be equal to the combined income of the poorest 45 per cent of the worlds population - 2.3 billion people. The world's 200 richest people more than doubled their net worth in the 4 years to 1998, to more than $1 trillion, so that the assets of the world's top three billionaires were more than the combined GNP of all least developed countries and their 600 million people.... The share of the national income taken by the top 1 percent of income earners in the US more than doubled between 1980 and 2000 while that of the top 0.1 percent more than tripled. The income of the 99th percentile rose 87 percent between 1972 and 2001 while that of the 99.9th percentile rose 497 percent. In 1985 the combined wealth of the Forbes 400 richest people in the US was $238 billion with an average net worth of $600 million, adjusted for inflation. By 2005, their average net worth was $2.8 billion and their collective assets amounted to $1.13 trillion - more than the GDP of Canada. Much of this shift has been due to rapidly rising rates of executive compensation. In 1980, the average chief executive made about $1.6 million a year in today's dollars but by 2004 this had risen to $7.6 million." (p. xi, Intro to the 2006 Verso Edition)
I quoted an extract of Harvey's figure on a reddit thread and received this reply from mrhymer:
"Wealth is not a finite pool that all humans pull from. There is no evidence that if the millionaire in Dubai releases his wealth back into the wild that it will ever find the hand of the poor man in Bangladesh. So studies highlighting the gaps and distributions are foolish post hoc, ergo proctor hoc arguments."
For a more detailed outline of Harvey's views where he does connect the increasing of wealth disparity with the evolution of the capitalist economy into neo liberalism try this interview. I don't agree with all of Harvey but his analysis of the effects of neo liberalism seems sound to me.


Mark Miller said...

Hi Bill.

I thought you would be interested in this article. I found out about it yesterday. It talks about a report on what caused the recent financial crash. The article is from a conservative publication. It references the issue of growing wealth disparity, but does not address it. The report criticizes the efforts of governments to address that disparity, which it calls "under the table" Keynesian methods. In the opinion of the author of the report these methods ended up leading to the crash. It goes further to say that Obama's efforts are just a continuation of the same methods. The implication I take away from it is "we can expect similar results". It makes a point to note, however, that the line of thinking that led to the crash had been going on "for decades". I think it included "tax cut stimulus" as Keynesian.

Bill Kerr said...

hi mark,

I have seen lots of articles like that. The Post Keynes position is that capitalism is inherently an unstable system and requires government intervention to stabilise it. The position of the Monetarists (eg. Milton Friedman), Austrians (eg. Hayek) and Thomas Sowell is that if only government would get out of the way and stop interfering then the "free market" will magically obtain its own equilibrium through some sort of spontaneous order, the invisible hand of Adam Smith was the original form of this argument. It's always possible to argue that neither position has been fully trialled because the Keynesians keep meddling and don't give laissez faire a real chance or the free markters keep meddling and don't give Keynes a real chance. This mutual blaming of convenient scapegoats, between the advocates of intervention and the advocates of free market will go on forever or that is until a superior social system is developed. So, I can't respond in detail to every article or argument you put up about this never ending tendency for supporters of capitalism to say, it would only work better if we tried (less intervention), (more intervention). The Marxist position is also that capitalism is inherently unstable but parts company with Keynes in that no amount of meddling or free market will change or fix that fundamental instability. I think you have a mental block about exploring Marxism because you think it is against human nature and also that it has been tried and failed. But if you never read the Marxist argument, which is complex, you will never understand it. The for and against is far more complex than the way you have depicted it. I would argue that capitalism is being trialled as we speak and in very important respects (such as growing wealth disparity) is failing, that the Marxist analysis seems to be correct or at least deserves serious consideration.

Mark Miller said...

In case there's any mistake, I don't claim that capitalism is stable, and I disagree that any amount of government intervention would stabilize it. Just as an example, even the draconian measures our government tried to impose on the economy to stabilize it during the Great Depression did not stabilize it, and the "mean" that was achieved was not good at all. Once again we run into the issue of how much complexity humans can comprehend unaided.

From what I have read of Marx, I think he accurately describes the instability of capitalism. You are right that I should give Marx a fair hearing. I remember reading the Communist Manifesto in high school, though I can tell I didn't understand much of it, because I barely remember it.

I think my mental block comes down to the dichotomy which I think Sowell describes well in "A Conflict of Visions". I think the best I could muster is to plumb Marx for good ideas.

A challenge I have set for myself is to understand better why the legacy of the Enlightenment period is a "new kind of barbarism," in the words of Kenneth Clark. He was referring to the Industrial Revolution, and everything that flowed from it. I think there is validity to that viewpoint. The question in my mind is what to do about it. What he showed is that in a post-Christian Europe (after the 17th century) there was no grand civilizing force. What I see some have tried to do in modern times is make government the civilizing force, but from the evidence I've seen I don't think it does a good a job at that. I suppose there's less that inspires.