Absolutely correct. This is the same thing that happened to France and Europe from 1760-1789. I just wrote about this in a recent post. History repeats itself, mostly because of predictable human greed, ineffective political institutions, a failure to learn from human history, and unrelenting kondratiev waves.

I’d need to write a book to deal with all this.

Let me tackle one tiny part, for now.....

I’m not sure whether it is the disparity of wealth that is the problem; or even the disparity of income.

Even if Mr. Rich has a hundred million a year income, I cannot see that this creates a problem for Joe Average if Joe Average gets as little as 1% of Mr. Rich’s income.

Joe’s wellbeing does not depend in any way on Mr.Rich’s income or wealth. It depends solely on what he, Joe, gets in relation to what he needs.

It is not the disparity of wealth or even the disparity of income between Joe Average and Mr. Rich that matters. It is the disparity between what Joe gets and what he needs to meet his needs, that is the problem. It just simply does not matter to Joe what Mr. Rich gets as long as Mr. Rich isn’t taking what is rightfully Joe’s.

What matters to Joe is, “do I make enough to meet my needs.” If a million a year will do it then any disparity of wealth and/or income between Joe and Mr. Rich is simply irrelevant.

Even in a situation where Joe needs an income greater than he is earning, the wealth that Mr. Rich has is not Joe’s concern. Joe’s concern is his own income and how to either increase it or to reduce his requirements. Neither of these things has anything at all to do with the difference in wealth between the two men. The disparity is between Joe’s actual income and his needed income.

I’m not at all sure that I understand your thesis here vzn. Perhaps you are not saying what I think you are saying at all. This is a new concept to me and, as with all new concepts, it takes me a while to absorb it.

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hi skypixie, I think you have a valid perspective/point and thanks for being the devils advocate so to speak. I covered a lot of this in my prior post on class warfare, linked above, where I challenge your viewpoint head on. ok, but whats the cliff notes version? Im all in favor of capitalism, you wont find anyone who likes it more in some ways. however, basically, if the rich guy gets his $$$ through manipulating the system, then indeed, its a serious problem isnt it? the system needs to be fair, one cannot assume that it is fair, and it is the governments job to serve as a sort of referee and guarantee that it is fair. anyone who does not understand this does not understand the key history of our country. during the last depression, we changed government significantly because the fundamentally lassaiz-faire govt-business balance was seriously out-of-whack and led to the disaster. the 20th century was largely about creating a social safety net, which is seriously unravelling in this country [see krugmans book of that title, The Great Unravelling which he presciently wrote several yrs before the stock market crash]. strong echoes of that now. a market crash is not a inherent mystery of economics as the multimilliondollar CEOs testified in front of congress. there will inevitably be "cyclicity", I agree, but the degree of corruptness in the business-government nexus is what determines how *harsh* and *intense* and *prolonged* your next downturn will be. and surprise-- we are already in one of the harshest ones seen in the 20th century, in some ways in fact surpassing it, and our own century is still young. so yeah, the system had veered into some pretty serious unbalance and yes, outright corruptness, and we're still paying the price, and we will continue to pay the price until humans learn their economics 101 lessons....

hi Rw00 thx for dropping by and I think you're one of the most intellectual bloggers on here. I was just telling my sig other today about you & your legendary blog post on the reasons for the Fall of Rome. epic, man!! she didnt believe me when I told her about your blogs talking about legal outsourcing, she didnt think it was possible. "lawyers will always make a lot of money, there will always be a big demand for them"... I tried to summarize some of your points & draw similarities to my own field... she was unconvinced haha. oh well

vzn
I think the phrase “the rich guy” is soooo misleading. There are actually 3 “rich guys” out there. The “coupon-clipping inheritor”, the “corporation”, and the “banks”.

The inheritor is the only true “rich guy”; he owns his wealth himself. The inheritor group includes the entrepreneur, a rare bird, but whose children will be inheritors. The corporate and bank wealth is owned by the corporation or bank as institutions. As such the wealth is earned from the efforts of those who work for/in them. These workers are NOT usually drawn from the ranks of those who are inheritors of great wealth.

I have no quarrel with the rich guy. The rules, as they are today, allow inheritance. Those same rules do not require that he supervise those who run the corporations he holds his wealth as stock in. He is unlikely to be sufficiently knowledgeable to do so at any rate.

Inside the corporations are a large quantity of “wanna-be-rich” people, most of whom come from the middle/working/lower classes. In order for them to climb the ladder to wealth they MUST show themselves capable of finding profits for the corporation/bank.

These ambitious wanna-be types are the ones who come up with, initiate, and implement the scams of the public, each other, and anyone else they can find to exploit. They too are the ones who bribe legislators so as to gain unfair advantages or profits from the system. I think it is important to recognize just who it is that is actually doing the exploiting and why they are doing it.

When we blame “the rich” we are , firstly, wrong. It is not the rich - they’re busy enjoying life and clipping coupons. It is those who are "trying to get rich" who are the actual perpetrators of these schemes.

Now this set of people are all well educated and trained and get lots of experience as they climb the ladder in their respective organizations. They have bought into the “taught-in-class” concept that an economic system is there to be exploited for personal gain. They have had this drilled into them both in the classroom and by their superiors in their employment. They believe it just as you believe that you need to breathe in order to live. They see all those above them acting on this philosophy and, since those others ARE above them, it stands to reason that they are correct. I think that they are wrong.

I take the position that a socio/economic system is the means by which “the people” of a nation organize to get certain benefits that are better obtained by a group (the citizens) than by an individual.

A “proper" system exists for the purpose of serving all of the citizens.

It is not there for the purpose of aiding one or a few of them to prosper at the expense of the “all”. On the other hand it is not there to prevent the one from achieving great wealth if he can do so legally and ethically, and without improper exploitation of others.

We do not have a “proper” system. We have one that is a hybrid feudalist/capitalist mish-mash. It was never designed to serve the purposes of the “all” of citizens. It has supported the concept of existing to serve the few. It presumes that by doing so, the interests of the all will be served to some degree. This is correct. During times of growth and development this works out fairly well.

But then you reach a point where the technology and other factors cause this “serving the interests of the few” to become harmful to the society and to those of its members who are not of, or employed by, the few.

This indicates that it is time to alter the system to one that IS designed. One that is, in fact, specifically designed to meet the needs of the “all” of society. It need not dis-allow the acquisition of wealth; but it MUST ensure that it serves the citizens interests fully and completely and stands as guardian and watchdog to keep the acquisition of wealth from harming the society.

Some take this to be a form of socialism. I do not. I see no reason at all to give up capitalism just because we ask it to be honest, fair, and decent in its dealings. I also see no reason why capitalists cannot find it better to operate under controls that ensure a level playing field for all involved in this system.

But then I am still, at age 70, naif enough to think that most people are, at heart, good folks.

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Sky's point makes sense. We all need different amounts of money to support ourselves and our family so it really doesn't matter what the guy/girl down the street makes.

Anyway, vzn I was thinking about your "form a third party," statement. I think we should just get rid of all parties. They're all Americans and maybe if they can stop looking at themselves as Republican or Democrat and get back to looking at themselves as American, then maybe they'll actually do something to the betterment of the nation and not the betterment of their singular party. Of course I am well aware that such a thing will never happen.

hi capri thx for comments. Im not fond of political parties but it seems to be a self-organizing feature of all political systems, remarkably. an emergent property. howevever, the flavor of the legislative system seems to affect how many parties tend to stabilize into existence. for example in much of europe there are 3 parties in many of the legislatures, from what I understand. I dont know why this is the case but it does seem to have to do with different legislative structure. what we can do is take heart from history and notice that new political parties occasionally arise due to crises sometimes and old ones die out due to obsolescence or achieving their objectives. the tea party, the demons that they are, have accomplished something remarkable in the last elections. they seemed to arise in short time after the obama reformation. only 2 yrs later! thats an amazingly brief time to build a political party. they are having a major effect in a short amt of time. so I am not so fond of all their politics, but it shows that a new political movement can change our govt in a short amt of time. now, the tea party is still somewhat of a mystery to me and I fear that it was significantly funded by "astroturf" and billionaires who are manipulating it for their own ends. we will see where this leads. I dont see their philosophy as much sustainable, I personally suspect their influence will wane as soon as everyone discovers the actual personal consequences of their social programs cut heavily.....

hi skypixie I read some of your essays last nite... Ive seen your comments around and noticed your contrarian nature. we are in agreement on some basic areas. as for millionaires a good book on the subj is "the millionaire next door" which I skimmed yrs ago. I am not sure I agree with your basic classification of their types. as for capitalism vs socialism, it is a pity that the Right has sometimes convinced the public with near-propaganda that any imagination of fixing our broken system is equivalent to socialism, or communism or whatever. it works on what are sometimes called Low Information Voters. seriously, they have actually been studied by academics, they are numerous, and they vote....
I noticed your essay that focuses on a Death Inheritance Tax [effectively arguing for 100% in one essay] which was a big republican/conservative/Right issue during the bush years. its not so intuitive but the Right is extremely against inheritance tax, and I agree with you that its generally a weak flank in their agenda/policy, it seems the independent voters may question it esp for the extremely wealthy.... maybe we could have a progressive death tax? where the rates go up the more wealth you have? that seems pretty reasonable & maybe not hard to sell that to the overall public.... yes I agree that heavy inheritance can be another one of the "distortions" of extreme capitalism....

re socialism/communism, a point I have sometimes made elsewhere is about how Marx was actually highly in favor of labor, and that the public has been highly manipulated in its pejorative feelings about marxism, and the idea that serious labor protections or wage controls are inherently marxist....

Most interesting treatise. Lots of economists should read your views.

skypixie writes, "We do not have a “proper” system. We have one that is a hybrid feudalist/capitalist mish-mash. It was never designed to serve the purposes of the “all” of citizens."

yes agreed. it is somewhat striking how much the US constitution evades issues of wealth etcetera. their accomplishments are 1st rank & justifiably legendary but it seems all the elites of the country who build it were wealthy landowners and slaveowners, and the system they built has a subtle/invisible anti populist bias built in from the origins. it seems to be protecting property mainly, as they say, property is 9/10s of the law... but, the issue of wealth [disparity] and taxation have come to the forefront over 100s of years...

Thanks for the excellent post. The problem is more complicated than solely blaming it on tax cuts. Well done.

What I particularly enjoy about this is the focus on the difference between productivity and overall benefit to the nation. If one guy in the US made 20 trillion and paid 4 trillion in taxes and everyone else starved to death, many conservatives would call this a wonderful success. Something in our analysis is missing, and you are pointing it out. The problem of course in addressing this is that approximately 50% of the nation that treats the ideas of Ayn Rand and Hayek as if they were transcendental truths about the universe instead of policy choices.