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Bill Gates: Piketty's Attack on Income Inequality Is Right
New submitter rvw sends word that Bill Gates has posted a review of Capital in the Twenty-First Century, an acclaimed book by economist Thomas Piketty about how income equality is a necessary result of unchecked capitalism. Gates, one of the most successful capitalists of our time, agrees with Piketty's most important conclusions. That said, he also finds parts of the book to be flawed and incomplete, but says Piketty has started vital debate on these issues. Gates writes,
Yes, some level of inequality is built in to capitalism. As Piketty argues, it is inherent to the system. The question is, what level of inequality is acceptable? And when does inequality start doing more harm than good? That's something we should have a public discussion about, and it's great that Piketty helped advance that discussion in such a serious way. ... I agree that taxation should shift away from taxing labor. It doesn't make any sense that labor in the United States is taxed so heavily relative to capital. It will make even less sense in the coming years, as robots and other forms of automation come to perform more and more of the skills that human laborers do today. But rather than move to a progressive tax on capital, as Piketty would like, I think we'd be best off with a progressive tax on consumption.
Hopefully (probably?) what he means is that the only taxes are on consumption.
I don't want to achieve immortality through my work. I want to achieve it by not dying. - Woody Allen
I'd say one extra thing...don't tax food, that way it wouldn't be regressive against the poor which is often the argument for a consumption tax.
I'd also be for a flat tax too....one simple form, done.
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
The Fair Tax solves this by giving everyone a subsidy equal to the amount of taxes that would be paid at a certain income level (directly related to the poverty line, I believe). Everyone essentially pays no taxes on necessary food/housing/etc... So it's actually better for the poor than the middle and upper classes. I'm sure that most consumption tax proposals do something similar.
I don't want to achieve immortality through my work. I want to achieve it by not dying. - Woody Allen
Except that the rich spend much less of their income on stuff other than groceries/rent/mortgage than the poor and middle class. Making those exclusions helps the poor, but still shifts the burden toward middle class and lower-income households.
The tax code is used and exploited for votes and social engineering.
It was created specifically for those purposes.
“He’s not deformed, he’s just drunk!”
The discussion started long ago: Thomas Piketty and Mises’s ‘The Anti-Capitalistic Mentality’
There is a TED talk from the author of the book Bill Gates is commenting about at https://www.youtube.com/watch?... pretty good watch
The founder of Capitalism was very clear that the failure of Mercantilism was due to unregulated monopolies which resulted in a 2 class system. The upper class could, and did, fix prices to maximize profits creating false scarcities and reducing wages in the labor pool. Capitalism was intended to be regulated to prevent a two class system, yet we have seen large reductions in our regulations over the last few decades. Hence, we are moving further toward yet another two class system which will end in predictable results if not checked.
I kind of agree with you, but don't agree that you have only two variables. Capitalism is supposed to have a third variable which can move toward either end of the scale. The mobile variable is supposed to increase productivity and allow class mobility. The stability factors are supposed to be the top and bottom ends, primarily due to what Socrates discussed with the Artisan and economics.
Paraphrasing Socrates pretty heavily here, but the logic will remain. Jobs paying too little result in a labor shortage and hopeless class of society. Jobs paying too much result in not just a lack of productivity by the wealthier class, but frees the same people to meddle in everyone else' affairs to gain until the point at which revolt is necessary to balance society again. The Government's job is to ensure that people are secure, which having no caps on wealth does not allow.
As we have seen deregulation occur, we have also seen wealth disparity change drastically in favor of those who already have wealth. Meanwhile the middle class has been reduced drastically and rates of poverty have increased dramatically in the US.
Before anyone claims "but that is unfair to rich people" Consider that up until Nixon, anyone making 1,000,000 a year in personal pay was paying 90% income tax (true since income tax was implemented). In 1968, making 100,000 a year was a very healthy wage, many times the average and very few making 1M/yr complained. Reagan reduced taxes further, so any wealthy person paying into the tax system paid a lesser rate than the average worker. Today, we have a guy admitting to make millions and pay 9% tax(Rupert Murdoch), compared to a person making 100K paying 30% tax. (It should go without saying that the income tax incentive was not just to prevent massive personal wealth, but to ensure that profits from companies went back into the company instead of a person's pocket).
Nixon promised that reducing taxes on the Rich would stimulate the economy, and Reagan claimed the same thing. Yet we have not seen any such stimulation and wealth disparity has moved in the exact opposite direction as promised.
-The wise argue that there are few absolutes, the fool argues that there are no probabilities.
From http://en.wikipedia.org/wiki/E...
"Effects of inequality researchers have found include higher rates of health and social problems, and lower rates of social goods,[81] a lower level of economic utility in society from resources devoted on high-end consumption,[82] and even a lower level of economic growth when human capital is neglected for high-end consumption.[83] For the top 21 industrialised countries, counting each person equally, life expectancy is lower in more unequal countries..."
Your definition of capitalism is wrong.
Capitalism does not indicate "free market" or "laissez-faire" or minimal regulation or low taxes or lack of welfare state. You may see "free market" used in dictionary definitions of capitalism, but not in the strict economic definition.
All capitalism means is that the means of production are owned by private individuals and corporations rather than the state. And the means of production in the United States have never been more thoroughly owned by corporations and individuals. Except for a brief period when the government owned a stake in GM (which it has since completely sold), there is no government ownership of the means of production.
Income inequality, the kind we've seen growing in the US, is how all capitalist systems end up. It's happened in large part because there has been an all-out attack by corporations and government on labor unions. True capitalists don't pay someone unless they absolutely have to. As long as you have concentration of capital, you will have increasing income inequality. The only reason we saw income inequality start to decline was because for a few decades labor unions were very strong.
You are welcome on my lawn.
I have yet to see someone actually explain why income inequality by itself is a bad thing.
It isn't. But excessive income inequality can be.
History is full of examples, like feudalism. Basically, really concentrated money tends to go with really concentrated power, and that rarely ends up well for the poor people.
When I hear folks talking about this, what I really hear is, "since one person doesn't need that much money to live, the government should take the difference and use it to make MY life better,"
Yeah, the only people who say that are truly crazy extreme egalitarians, not the majority of political and economic theorists.
Very few people talk about taking "the difference" and redistributing things until we're all equal. In such a situation, there's no incentive for anyone to work harder or do better than anyone else, and thus innovation fails. This is bad for everyone, but especially the poor, who tend to benefit the most from continued improvements in overall infrastructure, standard everyday access to things that lead to a better quality of life, etc.
One of the more popular formulations in political theory is John Rawls's "difference principle" (or "Maximin" principle). In Rawls's formulation of Justice as Fairness, he discusses two primary criteria for a just society: (1) basic liberty, and (2) basic equality. The second does not imply that everyone has equal outcomes, but rather incorporates two additional elements: (1) equal opportunity for everyone, and (2) inequality will not lead to degradation of the worst-off (this is the "difference principle").
There's a lot to the theory, but the basic idea is that allowing some inequality gives an incentive for innovation and hard work and in general improving society overall, which will include benefits for the poorest members.
But at some point, the additional accumulation of wealth among the richest will stop raising the standard of living among the poorest and can even decrease it.
Rawls postulates that inequality is beneficial as long as that inequality is raising the overall standard of living for everyone. When greater inequality ceases to do so, it's no longer just. You can think about this on a smaller scale in terms of running a business -- to some degree, paying management and executives more will draw more talented and skilled people who will make the company do well, and if the company does well, all employees will reap the benefits in terms of better salaries, working conditions, and job stability. But at some point executives can become a drain on the companies resources if they take too much, which hurts everyone else, but generally especially those at the bottom.
And that is generally the point at which we should say that we need to tax the rich a little more or put in place some sort of regulations to redistribute some to the worst-off.
Someone explain this harm to me, because from where I'm standing in a first world country, it seems to be just so much complaining over sour grapes.
In the real world, not everyone is born equal. Some people are smarter, or have more valuable natural talents, or whatever. That's the justification for Rawls -- he says to imagine you had to design a just and fair society without knowing in advance where you'd fall within it. (Rawls calls this the "original position" or the "veil of ignorance.") You might be the smartest and most talented person, or you might be a complete idiot compared to everyone else in that society. You just don't know.
And if you were in a position, how would you come up with fair rules for society? You probably wouldn't want to set up a system so if you were the dumbest person that you could be enslaved and exploited for your entire life, right?
Rawls thus formulates his "difference principle," which allows inequality to exist for the talented or skilled, but only if it results in society's improvement overall.
Regulation is not control, it just sets the ground rules.
By your definition, there has never been a capitalist economy in the history of the world. By your definition, "Capitalism" is a fantasy.
Now that I think about it, maybe you're on to something.
Who talks like this?
I imagine you believe that "capitalism" is a gift handed down from the God and can exist without regulation. If that's the case, why has it never happened? Free markets do not exist in nature. They exist because there are rules.
If you can say that there can be capitalism without regulation, without, as you put it, "control", then I call you a fabulist and prevaricator and say you have nothing but bullshit in you. Typical free market fantasist. Pissed off because you're not allowed to own people.
You are welcome on my lawn.
I would not say unsubstantiated. Like climate change, economic historians have to deal with second rate data sets. People in different times and places survey and assemble the data differently. Wars, tax changes, and technology changes the relationship of the underlying variables. etc. It is why I give some of his arguments a lighter weight. However, as I have said before, he has posted his data.
As for lower growth equaling higher inequity, his arguments and data are stronger. In an enterprise, profits are split between capital and labor. If growth is low then demand for new capital is low. A low demand for new capital by definition means low interest rates. With 7% interest and 20 years compound interest is your friend. A modest income can build wealth. If interest rates are at 2%, compound interest is a miserly friend. Better hope you inherit or marry well.