Posts Tagged ‘Heather Boushel’

The Worst Problem: The Most Imminent Danger

June 23, 2019

Of all the issues raised in Douglas Rushkoff’s book “TEAM HUMAN,” which is the worst; which constitutes the most imminent danger. Although HM would argue that global warming is the most imminent danger, economics presents a possible existential threat. Adam Smith was aware of the dangers presented by large corporations and stressed that regulations would be necessary to keep them from destroying the marketplace. There are regulations, but one can readily question whether they are adequate and can anticipate future problems.

In 1969 the CEO of a typical company made about 20 times the salary of the average worker. Currently, CEOs make 271 times the salary of the average worker.

The following statistics are taken from “Resisting the siren song of ‘modern monetary theory” by Heather Boushel in the 21 April 2019 issue of the Washington Post. “Between 1979 and 2015, after accounting for taxes and transfers, Americans in the middle 60% of the income spectrum saw their incomes rise by 46%, while those in the top 20% saw their incomes rise by nearly 103%. High inequality is associated with less upward mobility and with the capture of politics by elites.”

What is more important and more worrisome is accumulated wealth. This problem was discussed in the post The Piketty Insight on the Accelerating Wealth Gap. In the United States in 2010, the top 1% had 35.4% of the wealth. In 2010, the top 5% had 63% of the wealth; and the top 20% had 88.9% of the wealth. That left the bottom 80% with 11.1% of the wealth. So what is being lost? The freedom that wealth can buy, and the power that wealth can buy. Technically, we may still have one person, one vote (but given the menacing Electoral College, not for Presidential elections). But the effect of one person on elections has gone way down.

It is important to appreciate the difference between inherited money and earned money, and more importantly the distinction between inherited money and earned money. Earned money is earned and deserved. Inherited money is not earned and creates a wealthy class analogous to royalty. Presumably the United States broke away from England and its royalty to form a society of equal citizens. This inherited wealth destroys this goal of equality.

It is important to note exceptions. Perhaps the most famous exception is the most successful capitalist, Warren Buffet. He does not believe in inherited wealth. Similarly the most successful entrepreneurs, Bill and Melinda Gates, do not believe in inherited weather. They have created the Gates Foundation, which uses the techniques of operations research to maximized the effectiveness of their giving. Both Buffet and the Gates regard inherited wealth as being unhealthy for their children. It also needs to be mentioned that there are billionaires pledging to give away significant portions of their wealth.

But unfortunately, these people are the exception. Greed seems to be the governing principle for the remainder. One wonders, how many billions does a billionaire need? For too many the answer appears to be infinity. They use their wealth as a measure of their success, and, according to their calculus, how they rank against the rest of humanity.

Corporations need to grow continually and at ever higher rates. This creates the treadmill or rat race that just gets worse. Add to this effect of automation and the loss of future jobs, which will likely exacerbate the problem.

In the past politicians would promise jobs and expect voters to grovel at their feet, even those these jobs would damage further the environment.

We need to stop or get off this treadmill, or we shall eventually, and perhaps, shortly, reach disaster.

© Douglas Griffith and, 2019. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Douglas Griffith and with appropriate and specific direction to the original content.