The General Economics Thread

And even still, some of the elites were willing to keep fucking over the poor even with the overwhelming evidence the poor were almost ready to revolt. Luckily, saner minds prevailed.

@Captain Caprese: That may be true in the relatively short term, but given how the more recent generations can expect to be worse of then the preceding generations I don’t see middle class conservatism as a bulwark aganist revolutionary sentiment holding up in the long-run.

Capitalist will always seek new means to extract wealth, usually by reducing cost to themselves or creating new markets. This dynamic pretty much ensures that things like labor laws, the welfare state, public services, and even basic national infrastructure and access to technologyare always at risk and can not be assumed to be their to satiate the needs of even just enough of the masses.

Mind you, that doesn’t necessarily mean that those revolutions will be leftist. In fact given the current trajectories and the fact that it is more palatable to the current elite that the successful popular movements will be right-wing.

I mean, that's pretty much exactly what happened in a certain Central European nation almost 90 years ago.

Extractive (and thus zero-sum) acquisition of wealth (rent-seeking behavior) is a generalized economic problem older than capitalism*;


It's also not something exclusively practiced by capitalists; labor can in principle be rent-seeking in situations where capital is in a weak position; you have extreme examples like Venezuela that the right loves to go on about, but also less dramatic examples such as the economic issues in France that can be traced by labor unions and extremely stringent labor protections. This is far less common than the reverse situation because of the inherent advantages capital has over labor, but it's not something that can be ignored.


The optimal situation is one where the balance of power between labor/capital and producers/consumers is such that rent-seeking behavior is minimized. That's obviously easier if you have a society that's less stratified by income, but actually having a meaningful impact on wealth inequality is extraordinarily difficult, and perhaps impossible without either large scale destruction of wealth or extractive (and hence detrimental in the long term) wealth redistribution policies** of the sort practiced under Marxist-Leninist communism and other such attempts at post-capitalist economic systems.

* In pre-industrial (and consequently pre-capitalist) times wealth was acquired almost exclusively through extractive means since virtually all labor activities involved directly working the land and productivity multipliers were few and far between, leaving the economic output of land fairly static in the short term, hence wars in pre-modern times could often be profitable because of looting and/or the acquisition of new territories.

** This is not to say that redistribution is inherently extractive; quite the opposite in fact. It isn't and some degree of redistribution is necessary and desirable for a well functioning economy, but it can become harmful in certain situations or when taken to an extreme.

Edited by CaptainCapsase on Mar 28th 2019 at 11:11:09 AM

As I said in my last post, such a hypothetical balance between capital and labor is almost inherently unstable and almost always unravels in favor of capital. Just look at the decline of welfare states, deregulation, offshoring, and the fact that orthodox Keynesian policy is regarded as left-wing in many circles still.

Since Labor encompasses the bulk of humanity, while Capital wields almost all the power and influence despite being a relatively minuscule slice of the world’s population. In that sense, I don’t see too much of a problem in favoring their interest of Labor over that of Capital.

Edited by Mio on Mar 28th 2019 at 1:09:23 PM

Yes, extreme wealth disparity had been the norm for basically all of human history prior to WWI, but that is not necessarily relevent, because no one thinks that there is any realistic chance of returning to those political arrangements. We dont live in a world of monarchs, feudal lords, or an agricultural based economy. Democracy and capitalism are here to stay, and that changes the playing field. At the very least, we can be confident that no one really knows how this is going to play out. It could go in a multitude of different directions, some of which might result in ever increasing levels of wealth disparity, but others not.

For one thing, it isnt difficult at all to develop a policy that would reverse the trend. Its as simple as a global progressive tax on total income, but its also that difficult (in the sense of finding the political leverage to pull it off).

Another thing I am confident of- some sort of global crisis will occur. The current economic arrangements are destroying the climate, after all.

You have to consider the political dimensions of these problems. If it essentially requires a One World Government, it's not going to happen in the foreseeable future.

No it doesn't, just a treaty. It's a simple attempt to eliminate tax havens, at least within the developed world. But yes, the primary barriers to reducing increasing wealth disparity are political, not economic.

The two aren't really separate, and that would be the kind of policy that could only ever be enacted if the UN were to become a quasi-supranational union like the EU.

Or if enough collective military force was commited to the removal of tax havens. A lot are just British or American overseas territories, just the US and UK working together could do a lot, throw in the EU and get the three of them to commit military forces and you’ve got an end to a lot of tax avoidance.

Now getting even just one of the three to agree to combat tax avoidance it a nearly impossible task, all three doing it simultaneously would be a miracle, but it dosnt require a one world government.

You dont need every country in the world to agree. If the US and EU got together and agreed to sanction anyone who taxed US or EU citizens less than a set rate, all the little tax havens would scramble to get in line. I understand the political resistance that the wealthy elites within the US and the EU can deploy is considerable, but lets not make this seem harder than it really is.

The US is a declining power (especially in the soft power arena), and the UK's time in the sun ended in the prior century; I think you'd realistically need the entire G20 to more or less agree on this to make it feasible, and it's already something that would go way further than any existing or proposed trade deals or international institutions.


The problem isn't just tax havens though; especially in the context of the US, which has a fairly progressive tax system (highlighting once more the difference between how tax revenue is collected and how it is spent) high tax compliance rate for a country where a significant portion of one political party believes that "taxation is theft", those are a high profile drop of water in a larger bucket in the context of the US.


By all means we should try to deal with that sort of tax dodging where it becomes feasible, but at the end of the day we have to be cognizant about where income inequality is actually coming from; most of that is economic growth and wealth creation rather than rent extraction.

Edited by CaptainCapsase on Mar 30th 2019 at 3:57:23 PM

A lot of the major tax havens are UK crown dependencies ffs, that's why the UK could do a lot to reduce this. It has nothing to do with vague notions of soft power.

I wasn't talking about tax havens, I was talking about (and still am) the suggestion of a global tax on wealth, sorry if that's unclear, but I don't think addressing tax havens will accomplish very much for countries will high tax compliance rates.

Edited by CaptainCapsase on Mar 30th 2019 at 4:05:13 AM

Thing is there’s no failure in tax compliance caused by tax havens, because the people are companies aren’t legally in the UK/France/etc, they’re legally in the Cayman Islands or such, they’re tax compliant with the UK because they’re complying with their 0 tax burden.

You can also do a lot more about tax dodging when the wealthy can't bounce all their taxes through offshore accounts or mass transfer funds out of the country without paying taxes on it.

You don't need a one world tax scheme if it's not so easy to dodge the country's.

If there are no tax havens, then what prevents the world's leading economies from instituting an international tax agreement?

"...where income inequality is actually coming from; most of that is economic growth and wealth creation rather than rent extraction."

That's an interesting claim. Not that I necessarily disagree (my argument doesn't depend on where the wealth disparity is coming from), but do you have any references for that? I would be interested in how experts distinguish between the two- in the developed world they overlap quite a bit (esp in terms of election campaign finance and consequent federal policies that favor some forms of wealth creation over others).

The World Economic Forum; broadly their findings were that wealth inequality is not a global problem; inequality is declining in low income developing countries, as is absolute poverty. Technology enabled efficiency and productivity multipliers have been the largest contributors to this trend, much more than public policy.

The global GINI coefficient is also declining due to fewer people living in absolute poverty, and further WEF findings suggest that income inequality is decreasing globally. The story of the 2000s and 2010s is very different outside the developed world. I wouldn’t go so far as to say income inequality is a first world problem, but prioritizing it at the expense of globalization and economic growth is out of touch and US/Eurocentric.

Opening borders and allowing labor to be globalized as capital has would be a far more prudent solution (though equally utopian) than a global tax on wealth that serves no purpose other than to reduce income inequality, which it would likely fail to meaningfully address except at radically high rates.

Edited by CaptainCapsase on Mar 31st 2019 at 9:02:19 AM

... out of touch with what?

"Out of touch" is telling the poor in developed countries "yeah, but you're better off than Africa so solving your problems doesn't matter".

Those people in Africa bleed the same blood as your countrymen. What happened to the left standing for internationalism; the human species before the nation?

Edited by CaptainCapsase on Mar 31st 2019 at 9:21:42 AM

Are you really going to try that line while adamantly defending the idea of wealth inequality?

I'm not defending wealth inequality, just pointing out that it's A. basically a first world issue (sorry I had to say it), and B. that it's only detrimental when it comes from extractive/rent seeking economic activity, which is categorically bad. This argument is entirely consistent given that global wealth inequality is dropping due to inclusive growth in the developing world, which is a direct consequence of globalization, which along with technology is the major driver of rising wealth inequality in the developed world, meaning current growth trends are largely positive sum and thus desirable.


If you want to deal with wealth inequality so badly, the Brexiters and the Bannonites of the world are the people you should be joining hands with (and to the extent that protectionists like Corbyn and Sanders are popular on the left, that's already happened), because you have more in common with them than me or other globalists.

Edited by CaptainCapsase on Mar 31st 2019 at 9:39:58 AM

The left also stands for the poor and the disenfranchised.

Seeming to toss the lower classes out in favour of globalisation is what got us Brexit in the first place.

Let alone if you embraced "you've got it good enough, let's help other countries" as a political mindset.

Also, stop and think: "Sure, you might be struggling to afford accommodation, and your flat might have damp in the walls and mould around even though you're trying to raise a child, and you're struggling to afford food whilst other people in the country are pocketing billions... but hey you're better off than some starving villager in Africa."

That's the viewpoint you're espousing.

Are you just trolling at this point?

Like do you even hear yourself?

I know I'm saying things that will set off ideologues on both the left and the right, and I know I won't change your mind, so I suppose in a certain sense I am "trolling", but no I'm being serious; radical protectionism coupled with appeals to ethno-nationalism is the only path (other than pie in the sky utopian schemes) I can see towards decreasing wealth inequality; the ethno-nationalism being a cheap and easy means to distract the population from the negative economic consequences of turning away from globalization.

Which suggests to me that the alt-right may be right about democracy and diversity being inherently at odds with each other. They pick (Herrenvolk) democracy, I pick diversity. I'd rather not make that choice, and by rediscovering the "representative" part of representative democracy, perhaps we can avoid it, but there's no denying the extent to which the left-right divide is being displaced by globalism vs nationalism.

Edited by CaptainCapsase on Mar 31st 2019 at 10:03:23 AM