Creation of wealth, the ideal distribution

[Sach]

To tie this in with the thread on petrol consumption - If we actually did spread the wealth the way that we all think we want, we'd just run out of resources even faster. It would radically change the state of supply and demand.

 

[niky]

True. If the entire population were to be raised to first-world levels of energy and food consumption, we would run out of resources right quick.

 

[Villain]

So the ideal distribution is what is asked for. I have a suggestion. People should get what they earn, and not get what they don't earn (unless it is a gift from someone who earned it). Sound good?

 

[Sach]

Don't know why but that gif just made me bust up.

 

[RTSolvalou]

The people who donate to world vision are actually the cause of ongoing starvation and poverty. I had actually typed out two paragraphs but I lost it with the back button on the side of my mouse, so I'm just going to put it simply, let them die. A company would go bankrupt if it kept supporting a division with no future.

 

[Villain]

Don't know why but that gif just made me bust up.

The sad thing is that the Republican candidates (Romney/Santorum) aren't much better.

 

[sumbrownkid]

The people who donate to world vision are actually the cause of ongoing starvation and poverty. I had actually typed out two paragraphs but I lost it with the back button on the side of my mouse, so I'm just going to put it simply, let them die. A company would go bankrupt if it kept supporting a division with no future.

Pretty bleek outlook don't you think. At least give them a chance.

A micro loan of $30 can go a whole lot further in a third world country than in Europe or America.

 

[wfooshee]

But it wouldn't be a loan, it would be a grant, and would be the equivalent of throwing it in the fireplace, not productive to any economy at all.

 

[huskeR32]

On the face of the two broad competing theories here (capitalism vs socialism), I'm completely capitalistic. In an ideal world, you get what you earn, period.

The thing about that though, is that's is so black and white, and our world is full of gray.

The fact of the matter is that the "haves" get lots of breaks along the way that the "have-nots" will never get. Maybe a family member gets them a job they may not be the most qualified for, and which pays them more than they have the skills to justify. Maybe a college admits them on "legacy" status, and they get better training than their previous school performance should have earned them.

Until we can truly say that everybody gets the same chances to succeed, I'm not sure that I have any problem with societies taking steps to try and spread the wealth a little bit (higher tax rates for the wealthy, for example). Does everybody deserve to be a millionaire? Of course not. But wealth current wealth disparity is appalling, and it can't be neatly explained with black and white answers.

 

[Zenith]

The person who has risen into a position good enough to earn huge amounts of money has the right to keep it.Pouring money to people who didn't have what it takes to get into a good position is just plain stupid.

The assumption that the reason that one person is in a high paying position is due to them "having what it takes" and a person in a lesser position doesn't is extremely flawed.

Suppose I'm a CEO that worked my way to the top "the right way". What happens if I decide to buy my slacker son a restaurant. I buy out top chefs and equipment and just give him the profits. Does that mean that he's "got what it takes"? Of course not. Am I really that corrupt? Not really. He's my son and I love him. He just has connections.

Connections as well as corruption and luck are a huge factor in the free market.

Although, everyone should be equal in the beginning, and that requires equal chances to get educated, no matter how rich or poor the parents are. To achieve that, all education should be free or the cost should be percentually the same for poor and rich alike.

Should be, but how do you guarantee this? What happens when the rich buy extremely expensive tutors and training for their offspring? That is by no means a level playing field.

At the root of things, I agree with you. I believe we are entitled to what we've earned and that pay should directly correlate with work and skill. Your opinion, however, seems idealistic to me. The ideas would work if people were robots that were immune to bias and corruption.

 

[Danoff]

The fact of the matter is that the "haves" get lots of breaks along the way that the "have-nots" will never get.

In our current world that is not the case. The "haves" have to make do with huge penalties that the "have-nots" don't even know about. Our government is set up to milk you for every dime the more money you earn. Almost half of the people in this country don't even pay income tax (the lowest earners). That's how much of a break they get.

Also, I think it's over-simplification and rationalization to try to pretend that rich people got there because they got lucky or got handouts. Lots and lots of rich people make fortunes out of hard work and innovation rather than handouts. The recent big American success stories are all about people who made an empire out of nothing.

Until we can truly say that everybody gets the same chances to succeed, I'm not sure that I have any problem with societies taking steps to try and spread the wealth a little bit (higher tax rates for the wealthy, for example).

That's absurd. The guy who gets hit by a car at age 6 and has to go through life with one arm doesn't have the same chance to succeed. That doesn't justify taking money from someone who earned it and giving it to him. He's unlucky, yes, that doesn't change anyone else's claim to their productivity.

 

[Dotini]

...is there a system that distributes the wealth according to wealth creation? For me wealth is linked to value, thus subjective, what is the wealth created by the stock owner or the CEO? Clearly they provide tools and organisation for the labour so the whole can create the wealth, but is it not only the labour that creates the wealth, the tools and organisation without labour are theoretical and empty? How to get to a fair system between the 2?

A) If you start with a society that is homogeneous, well-organized, hard-working, and well-educated (think Switzerland), then it is much more straightforward to create and distribute wealth. It hardly matters what your system is.

B) On the other hand, if you have a nation of open borders where shiftless people can immigrate and levy claims for valuable services and rights, then you are in a more hopeless position to start with. No system is going to fix you up to the standards of A.

Respectfully submitted,
Steve

 

[huskeR32]

In our current world that is not the case. The "haves" have to make do with huge penalties that the "have-nots" don't even know about. Our government is set up to milk you for every dime the more money you earn. Almost half of the people in this country don't even pay income tax (the lowest earners). That's how much of a break they get.

I can't agree that living in poverty is catching a "break."

Also, I think it's over-simplification and rationalization to try to pretend that rich people got there because they got lucky or got handouts. Lots and lots of rich people make fortunes out of hard work and innovation rather than handouts. The recent big American success stories are all about people who made an empire out of nothing.

Re-reading what I wrote, I realize it comes off as me saying that all wealthy people got lucky or got in handed to them. That's not at all what I meant, I should have worded it differently.

Certainly many people get wealthy strictly of their own efforts. But there are enough people who do get the luck and the handouts, and conversely, there are enough people that will never get those same opportunities. And that's the gray area I was referring to.

You can't say that wealth is 100% attributable to intelligence, skills, willpower or work ethic. Some people simply get opportunities that most people never will. And until we reach a point where it is 100% down to individual effort and control, then I stand by what I said: I'm not sure that I have any problem with societies taking steps to try and spread the wealth a little bit.

That's absurd. The guy who gets hit by a car at age 6 and has to go through life with one arm doesn't have the same chance to succeed. That doesn't justify taking money from someone who earned it and giving it to him. He's unlucky, yes, that doesn't change anyone else's claim to their productivity.

See above. You simply can't claim that everybody who is wealthy earned it completely through their own efforts, and that everybody has the exact same chances to get the same. It's just not true.

 

[Danoff]

I can't agree that living in poverty is catching a "break."

It's not exactly living in poverty. A friend of mine is making 6 figures and paying approximately 1% income tax per year because of all of the deductions our government gives "poor people". I think at one point I figured out that the salary cutoff for actually paying your share of taxes is somewhere near $70,000 per yer, but obviously given the above case it depends on just how poor you can make yourself look on paper.

You can't say that wealth is 100% attributable to intelligence, skills, willpower or work ethic. Some people simply get opportunities that most people never will. And until we reach a point where it is 100% down to individual effort and control, then I stand by what I said: I'm not sure that I have any problem with societies taking steps to try and spread the wealth a little bit.

Let's say 10% of rich people get their like Paris Hilton did. You're talking about taking from the other 90% also to try to somehow even out the luck of the 10%... but those 90% worked hard for their money. Why should it be taken from them?

(Also, Paris's money comes from people who got there from hard work, why should we stigmatize their children for them wanting to give to give the hard earned fruits of their labor to their children?)

See above. You simply can't claim that everybody who is wealthy earned it completely through their own efforts, and that everybody has the exact same chances to get the same. It's just not true.

...but I can claim that redistribution of wealth is taking money from people who earned it completely through their own efforts. The net that is cast catches them too.

 

[Vince_Fiero]

I was trying to look at wealth and the relationship to richness, luxury.

For me you can be wealthy and poor; e.g. you live in a tropical island, with plenty of natural fruit, plenty of seafood that you can just pick and with access to natural pure water sources. If you had guests you could just give to them what they need to survive, so wealth is no issue, you can share with almost no effort. However you can not get health care, a car, a PS3 that way, since you do not convert the wealth into something convertible, you are poor in the sense that you can not access to things beyond the essential products.
Richness is accumulated wealth, you produce too much, then keep it or convert it into something you can reuse later.
Luxury is an abundance of choice: if you get what you need you are OK, when you can choose what you want that is luxury.

So actors and sports people that earn a lot of money, do not create wealth for me. What they succeed to do is receive the accumulation of wealth that others created. Very similar for people mining precious stones, etc...
An other good example on wealth I find is stealing. In stealing you do not create wealth, your assets are equal to your liabilities, however you can get rich by selling the assets you took and not honoring your liabilities, as long as you get away with it.

So richness is no measure for wealth creation, you could be converting it better or not honoring your liabilities and being better at getting away with it.

Edit:

You can't say that wealth is 100% attributable to intelligence, skills, willpower or work ethic. Some people simply get opportunities that most people never will. And until we reach a point where it is 100% down to individual effort and control, then I stand by what I said: I'm not sure that I have any problem with societies taking steps to try and spread the wealth a little bit.

This sounds like you want "Equal opportunity". That will never happen, it depends where you are born, if you can get good education, what time you where born, etc...

Where I do agree is that your effort should be rewarded and not that people that have accumulated wealth before you are able to impede your effort to create wealth for yourself. That some have more opportunity to convert their effort in richness is no issue, but that they get away not honoring their liabilities against you is against your rights.

 

[Danisfast]

Why are we dealing with societal theories as absolutes? Surely, it's about balancing out the social needs with the individual? It's about allowing the individual to thrive in an open market, whilst protecting the needs of the proverbial "little guy" who, by virtue of his social status or a number of factors, may be without an even vaguely equal opportunity to succeed...

Success and market value SHOULD be recognised and rewarded, but allowing that to create imbalances in society beyond what is "fair" (a term of perception and thus, the likely heart of the conflict) is functionally, legally and morally wrong. That word (fair), by the way, applies whether you are arguing for or against capitalism and independent of our acceptance of the premise of such a concept. Surely, because the concept of "fair" exists on a sort of sliding scale, that we should recognise it as such, and then seek to find that balance...?

 

[niky]

Equal opportunity is impossible unless you forcefully redistribute wealth periodically.

Say you drop everyone in a mild tropical paradise with large plots of land equally distributed between breeding pairs (husband-wife). Under the same conditions, you expect all of them to prosper equally, right?

Unfortunately, there will always be someone who is more productive, who has more, who gets more and who saves more, who then passes it on to his children... or even child.

The fact that the prosperous tend to have less children means that after several generations, the pie slices will start looking incredibly uneven, as the less prosperous, in order to increase their productivity, start having more children to care for their land. This means after two or three generations, their pie slices are incredibly small compared to those who have just one or two children per generation. Then there's the problem of marriages of the second generation and third generation. The "haves" will tend to intermarry, making their larger slices even larger.

You can avoid all of this by equally distributing shares every generation, but this means that those who have more children are unfairly given precedence, and if such behaviour is rewarded with prosperity, the pie slices overall will get very small very quick.

So now, not only do you have to control property rights, you have to control breeding rights. And even then, you still have the problem of those who don't produce commesurate to what they receive from this utopian socialism, so now you have to actively disincentivize unproductive behaviour, since you are working on a non-capital / non-barter system, because no one owns anything.

What you now have is effectively collective slavery. And I don't think anyone wants that.

-----

I agree that there should be a balance between personal capitalism and social support systems. But these systems should be enabling rather than disabling... i.e.: turn unproductive members of society into productive members of society.

 

[Danoff]

The fact that the prosperous tend to have less children means that after several generations, the pie slices will start looking incredibly uneven

What does this mean? Are you talking about limited natural resources on this island? Or are you talking about wealth? In an economy there is no such thing as a pie that gets divvied up. Wealth is created from nowhere. The "pie" grows as the economy grows. Nobody's "slice" of anything affects anyone else's "slice".

 

[niky]

This is in a given hypothetical situation in which everyone is given an equal share of land within a limited crop-growing region.

While technically, such regions can be unlimited for a small population, the amount of energy resources that are cost-effective to tap right now, on a global scale, are not, hence the reference to the pie.

But still.. even with an infinite plot of land, there are those who will soon have more capital output per person and those who have less due to inefficient production and poor planning. While one man may technically own untold square miles of land, he cannot till it all, which is a real limitation to the generation of capital.

In the end, again, no matter what the starting condition, the ending condition will always be an unequal distribution of wealth, unless one forces redistribution. Which is something most of us don't want to see, since at its most extreme, redistribution incentivizes unproductiveness.

 

[Vince_Fiero]

This is in a given hypothetical situation in which everyone is given an equal share of land within a limited crop-growing region.

While technically, such regions can be unlimited for a small population, the amount of energy resources that are cost-effective to tap right now, on a global scale, are not, hence the reference to the pie.

...

In the end, again, no matter what the starting condition, the ending condition will always be an unequal distribution of wealth, unless one forces redistribution. Which is something most of us don't want to see, since at its most extreme, redistribution incentivizes unproductiveness.

This is clearly getting to the heart of the matter.

We were hunters-gatherer, all we possessed we could carry. Then we innovated and started to settle. To protect our wealth creation, we needed to protect the earth we worked on, so we invented land as property.

The next thing is that size does matter. So many tried to acquire more land and people (in a community) to increase the wealth production. But this essentially changes the game, where in the beginning there was plenty of availability of land, it becomes more and more a rare resource.

There are the next issues:
1) The land the first settled people got, belonged to everyone, so they have a liability to everyone.
2) As land becomes a rare resource, newer generations get less land; since you start to divide the available land between more people.

Where 1 has a conflict between protecting the result of your work and unfair appropriation of resources to a limited number of people (even if they were not productive); 2 has the issue that some get rich by chance (not work, but some random property becomes rare) and society (individuals with limited resources) needs to become more and more focused on wealth creation with resources being more rare.

So where you can not help that there are differences, the 'fair' seems to play in that the ones that get rare goods by chance, recognises this and does not use it to exploit the ones that had less chance. This is not giving wealth without effort, but giving the opportunity to create wealth.
Where you have no responsibility on what happens to the others (unless you act against them) you have a moral choice to exploit your chance to the fullest or recognise that it is not all your action that created you richness (e.g. Warren Buffet, Bill Gates, ...)

Ayn Rand. Atlas Shrugged.

Did not think that her fiction work would be interesting, but it seems it is more a theoretical philosophical work that is the basis of the Objectivism. Interesting.

To come back on the pure capitalist view, are you prepared to let the dummest/laziest person in your family die of famine (not the admin) since nobody believes she creates sufficient wealth to survive?

Charity does exist in capitalism, so not sure what you are actually trying to argue there.

My point is that very little people hold capitalistic ideas till the very end, where capitalism is certainly the basis of everyone (read about communist societies, they all have their house/room/bed, their books, etc...), there is also a certain "social" aspect in most of us. The issue with socialism is not the "social" but the imposed way of being social. The issue with capitalism is not the accumulation of goods, but the un-social use of such accumulation.

P.S.: had to keep some thoughts for later.

 

[Vince_Fiero]

I finally watched "Wall Street" the original version (surprisingly actual themes).

It made me think of this thread:

Gordon Gekko: The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It's ********. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you're not naive enough to think we're living in a democracy, are you buddy? It's the free market. And you're a part of it. You've got that killer instinct. Stick around pal, I've still got a lot to teach you.

Carl Fox: Stop going for the easy buck and start producing something with your life. Create, instead of living off the buying and selling of others.

Bud Fox: How much is enough?
Gordon Gekko: It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.

Gordon Gekko: [at the Teldar Paper stockholder's meeting] Well, I appreciate the opportunity you're giving me Mr. Cromwell as the single largest shareholder in Teldar Paper, to speak. Well, ladies and gentlemen we're not here to indulge in fantasy but in political and economic reality. America, America has become a second-rate power. Its trade deficit and its fiscal deficit are at nightmare proportions. Now, in the days of the free market when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake. Today, management has no stake in the company! All together, these men sitting up here own less than three percent of the company. And where does Mr. Cromwell put his million-dollar salary? Not in Teldar stock; he owns less than one percent. ou own the company. That's right, you, the stockholder. And you are all being royally screwed over by these, these bureaucrats, with their luncheons, their hunting and fishing trips, their corporate jets and golden parachutes.

Gordon Gekko: What's worth doing is worth doing for money.

Little has changed after many scandals.

 

[XoravaX]

Should be, but how do you guarantee this? What happens when the rich buy extremely expensive tutors and training for their offspring? That is by no means a level playing field.

For example, the system in Finland is more equal than the system in the US (to the newly-born):
Everyone is as equal as possible by the chance to get highly educated. Our schools are state-funded and so are our universities - the students don't have to pay a single cent to become, eg. surgeons, even if they are foreigners (although they have to have permit to stay here). In addition to that, all students get free healthcare and are entitled to small payment for living by the government. We don't have private schools either.

Only in high school and uni we have to acquire most material (books and pencils) by ourselves (libraries loan out schoolbooks tho), in elementary and junior high all is given free of charge.

However, our system comes with a heavy tax burden, up to total of 65% progressively. That's pretty unfair for those who are rich, as middle class pays around 35% tax total compared to that maximum tax which is reached at around 100k yearly income.

To date, I've never heard of anyone getting significant advantage of expensive extra training (and who really does want that, I'm in the second-best high school by nation-wide final exams there is in Finland and people are lazy and reluctant as hell to do any extra work for school). Only place where you could get advantage by this are the entrance exams, by dropping someone more potent out.

Of course people aren't born equal no matter what, even if you got all the money there is no chance to do something to your genes and such biological factors. Those who are more intelligent have more money in general, though.

Even corruption doesn't necessarily make the situation unfair - those who adapt themselves to the current situation the best also succeed. And we don't even have ground-level corruption here - last recorded incident of a bribery was several years ago when a Russian truck driver tried to bribe a police because of a speeding fine, which resulted him getting locked up immediately. The driver faced 8 years in prison for that. The politicians' benefits aren't real corruption IMO.

 

[Vince_Fiero]

Again you can argue that paying for the education of all is unfair.
e.g.: I have to pay for the kids of others (not having children myself).
The counter argument is that having a well educated workforce is creating work for the community by attracting companies that need that workforce. So everyone in the community should contribute. (going into tax discussions, that is an other thread).

You can counter argument the last, the work that is going to China/India now is partially because we have less "uneducated" workforce then they have.

The point relevant to this thread in the end is that education does create wealth in the sense that it helps a community to survive better. Also rich people will understand that they need educated talents and that talent is not purely linked to your social context, but it is linked to you.

 

[niky]

Industry doesn't require uneducated grunts. It requires a skilled workforce. Not necessarily college grads, but technically trained people. Industries are moving to China for the simple fact that those technically trained Chinese are cheaper to hire than technically trained Americans.

 

[Vince_Fiero]

Industry doesn't require uneducated grunts. It requires a skilled workforce. Not necessarily college grads, but technically trained people. Industries are moving to China for the simple fact that those technically trained Chinese are cheaper to hire than technically trained Americans.

I believe the whole point is why are these Chinese cheaper?

If they do the same level of wealth creation, it is logical for the Americans to get the same reward as them or that we give the work to the Chinese (leading to the same, the west will have to come to equal level of compensation to compete).
=> this really is about distribution, people try to use national borders, import rights, etc.. to oppress the ones that want to work cheaper, i.s.o. letting the free market work.

The discussion on "College grads" my point was exactly that we might over-educate and thus not have people that want to work for the same pay. Education asks more investment then skill, so you expect more return. Maybe we over-evaluate education?

P.S.: Here skilled people (plumbers, etc...) are more and more rare and pay (as independent) is going up for them; supply and demand!

 

[Joel]

It has more to do with minimum wage, benefits, dental, health insurance, 40 hour work weeks, employer insurance, taxes, paid vacation, sick leave, maternity leave, it all adds up. Chinese labour is significantly cheaper due to the lack of these things.

It is also true that people growing up in Western culture expect the world on a silver platter if they have a college degree.

 

[niky]

Labor is traditionally cheaper in less-developed labor markets. In mature markets, with highly-evolved educational systems, laws protecting workers and higher wealth, labor will cost more.

Chinese labor costs less because for decades, China was dirt poor. Not the government, mind you, but the people. There's no arbitrarily high minimum wage that disincentivizes foreign investment (like we have here, in the Philippines... despite the country being poorer than China) and a lack of unions and workers' benefits to suck away from the bottom line.

As China grows more prosperous, the balance will shift... once Chinese get richer, the cost-of-living will naturally go up, as you'll have to pay farmers and manual laborers even more to grow food and make basic goods, to prevent them from all migrating to industrial jobs... which means you'll have to pay even more to those working in the industry... which means you'll have to pay even more to teachers at Colleges and Trade Schools... which means more expensive education... which means even higher expectations in terms of salaries when those students graduate... a vicious cycle... but it will take a long time before that production goes anywhere else... especially as the huge Chinese internal consumer market guarantees a good return on investment for almost any factory opened there... whatever the cost of labor. It's like a micro-global economy within a single country.

Ironically... if you take away minimum wage laws in other countries, you could get some of those jobs back from China, but the cost-of-living in the United States will have to go down a whole lot for that to happen, too.

 

[Vince_Fiero]

... but the cost-of-living in the United States will have to go down a whole lot for that to happen, too.

The "cost of living" is probably one of the issues in wealth distribution.
I believe there are 2 systems:
1) We create our society and protect it = protectionist system, avoiding international trade.
2) We follow a free market and use the most efficient, low cost solution = free market, using global resources.

Many people that want to keep the status in the West, do not want to admit the only way to reach this is to exclude a big part of the world and put up protectionist systems.

Somehow if you produce the same thing all your life you will get poorer and poorer due to inflation (rising cost of living) = imagining you production is not following inflation perfectly and you have not invested all in your production.
Inflation does not make sense in many ways.