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Author Topic: Would you rather have the poor poorer if the rich were less rich?
Pete at Home
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http://www.youtube.com/watch?v=rv5t6rC6yvg&feature=related

The question is not particularly relevant to this election, where the top 1% have enriched themselves at the demonstrable expense of the bottom 99%. But Thatcher's question is still one I'd be interested to see addressed.

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rightleft22
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Would you rather have the poor poorer if the rich were less rich?

How do you answer a negative question?

What she is saying is that the rich getting richer = the poor becoming less poor

quote:
The extraordinary transformation of the private sector has created the wealth for better social services and better pensions—it enables pensioners to have twice as much as they did 10 years ago to leave to their children. - 1990 Nov 22 Th Margaret Thatcher
Its been 12 years does anyone know if this statement is upheld by the facts?

Has the rich getting richer helped the poor to become less poor?

[ October 03, 2012, 02:55 PM: Message edited by: rightleft22 ]

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JWatts
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quote:
Originally posted by rightleft22:
Does the rich getting richer help help the poor to become less poor?

Well, it clearly depends on the country and its underlying institutions. In a typical Latin American country from the 1960's, the answer is a clear No. In the US in the same time period (high growth period), the answer is Yes. (Assuming causation.)

Today (low growth period) it's harder to say, but the answer is still a modest Yes. Median household income was pretty stagnant from the late 90's till 2008. Since 2007 it's dropping at an unprecedented rate in the US (since 1967). However, that being said, the poor in the US haven't been hit as hard as they were in previous era's due to a thicker safety net. The middle class is bearing the pain of the current anemic recovery.

So the rich getting richer adds more tax money for the government (since they pay higher rates). This helps the poor, since they benefit proportionally more from governmental programs. The rich getting richer also provides more investment capital to the economy, since a higher proportion of their money is saved and invested. This helps with economic growth. However, it's unclear who this helps the most. Obviously the rich benefit directly, but jobs are created, so everyone benefits indirectly. But, when growth is slow, most of the created jobs are snagged by the middle class and therefore most of the indirect benefit goes to them.

Median Household Income

[ October 03, 2012, 03:19 PM: Message edited by: JWatts ]

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Pyrtolin
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quote:
Does the rich getting richer help help the poor to become less poor?
No. The complete inverse is true- the poor getting richer will help the rich become more rich, (and correspondingly the poor getting poorer has a negative effect on how rich the rich can become) but it's the poor the pull the string, pushing on it from the side of the wealthy has little effect.
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Wayward Son
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To answer the initial question: no, I would not rather have the poor poorer to make the rich poorer. I'd rather have everyone become richer.

Just as long as the situation stayed that way... [Wink]

Which is to say, if inflation or monetary devaluation or some other such mechanism suddenly took away the gains of the poor, especially down to threatening the very survival of the poor, then I would review the situation.

If all boats rise, then there really isn't much of a problem. Those who do better should get more. But if the poor boats suddenly begin to sink while the rich's boats continue to rise, then there is a definite possibility that the rich are getting rich from the poor. And if the poor reach a point where they begin to starve, then for simple stability of our society, we need to see about getting the poor what they need, from whatever source.

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Pete at Home
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"What she is saying is that the rich getting richer = the poor becoming less poor"

No. She's saying that during the 1980s, in great Britain, that both the rich and the poor got richer, but folks were whining because the disparity between rich and poor grew.

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KidTokyo
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quote:
So the rich getting richer adds more tax money for the government (since they pay higher rates). This helps the poor, since they benefit proportionally more from governmental programs. The rich getting richer also provides more investment capital to the economy, since a higher proportion of their money is saved and invested. This helps with economic growth. However, it's unclear who this helps the most. Obviously the rich benefit directly, but jobs are created, so everyone benefits indirectly.
This assumes too much, i.e., that the rich do not also generate governmental cost, and that they do not generate societal costs. It also assumes that "governmental programs" are purely a matter of social benefit -- that they are not compensating for detriments that would not otherwise be imposed in the absence the rich being richer or the government being "bigger," thus bypassing the issue of whether or not such programs are adequate.

[ October 03, 2012, 03:32 PM: Message edited by: KidTokyo ]

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MattP
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quote:
She's saying that during the 1980s, in great Britain, that both the rich and the poor got richer
Well that's preferable to the poor being poorer while the rich get richer, but it's less ideal than the rich staying as rich but having the poor become even less so.

[ October 03, 2012, 03:34 PM: Message edited by: MattP ]

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rightleft22
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Ok but the question "Would you rather have the poor poorer if the rich were less rich?" implies, at least to me, a belief that the rich becoming richer results in the poor becoming less poor.

I would like to know if the facts bear that out?

[ October 03, 2012, 03:41 PM: Message edited by: rightleft22 ]

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Pete at Home
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quote:
Originally posted by rightleft22:
Ok but the question "Would you rather have the poor poorer if the rich were less rich?" implies, at least to me a belief that the rich becoming richer results in the poor becoming less poor.

That analysis of the question implies, at least to me, a desire to dodge answering the question: Isn't prosperity for all a good thing, even if it leads to exacerbating economic inequality? Or does one man's castle make another man's mansion less comfortable?
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MattP
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Inequality alone doesn't tell us the whole picture. It's just one indicator. If all of the billionaires became trillionaires but all of the paupers became millionaires (somehow avoiding the economic chaos of such an event) then I'd be fine with that, even though inequality has increased in terms of proportion.
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Pyrtolin
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quote:
So the rich getting richer adds more tax money for the government (since they pay higher rates).
Which is irrelevant, except in as much as those taxes help shift their behavior toward better uses of their money in order to evade them.

quote:
This helps the poor, since they benefit proportionally more from governmental programs.
That's a total non-sequitur, those programs help improve the lot of the poor and create jobs for those that provide the goods and services that the programs offer, but none of that has anything to do with tax revenue. Tax revenue is a waste byprouct of feeding more money into the economy, like exhaust fumes from a car, and are about equally relevant to actively moving it forward.

quote:
The rich getting richer also provides more investment capital to the economy, since a higher proportion of their money is saved and invested.
Or, rather, lent or gambled, respectively, unless consumer demand is strong enough to make productive investments worthwhile. This captures exactly why it's the poor that set the standard- if they get richer, the wealthy can make more money by working to provide for their increasing demand. On the other hand, if the wealthy get more wealthy, there is no real change in demand, so the additional wealth stagnates in nonproductive investments and does nothing for anyone else.

quote:
This helps with economic growth. However, it's unclear who this helps the most. Obviously the rich benefit directly, but jobs are created, so everyone benefits indirectly.

Jobs are only created when consumers have money to spend and create the demand for those jobs. Wealthy people can broker that work and have the resources to invest in getting it done with less work and fewer jobs overall, but they do very little to create new jobs themselves, given that have many fewer unfilled needs to be met once they can afford to pay someone to meet them.

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Pyrtolin
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quote:
Originally posted by rightleft22:
Ok but the question "Would you rather have the poor poorer if the rich were less rich?" implies, at least to me, a belief that the rich becoming richer results in the poor becoming less poor.

I would like to know if the facts bear that out?

Not at all- we have thousands of years of historical precedent of aristocracy existing along side of abject poverty, and the efforts of that aristocracy to expand its wealth trampling on the poor even further.

On the other hand, we also have plenty of evidence that wealth at all levels rises as you directly work to alleviate poverty; as the poor get richer, everyone else benefits along the way and the total pool of wealth increases much more quickly.

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JWatts
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quote:
Originally posted by rightleft22:
Ok but the question "Would you rather have the poor poorer if the rich were less rich?" implies, at least to me, a belief that the rich becoming richer results in the poor becoming less poor.

I would like to know if the facts bear that out?

I think the consensus among Economists is that given:
a) stable infrastructure
b) definitive property rights
c) growing economy
d) low corruption / fair legal system

The answer is Yes.

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rightleft22
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In the dialog Mr Hughes makes the following statement:
“The gap between the richest 10 per cent. and the poorest 10 percent in this country has widened substantially”

Today we talk about gap between the richest 1% and everyone else.

If I understand correctly the gap is acceptable because the 1% have been given the title of job creators and drivers of the economy.

It seems reasonable that those with the most money create the most jobs but I question if that is actually true?

The data I've seen would indicate that its the middle class that are the job creators?

In my own microcosm when the company I work for got purchased by another investor group at great profits for everyone at the top the end result was the loss of jobs and cut backs in benefits.

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Pete at Home
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quote:
Originally posted by Pyrtolin:
quote:
Originally posted by rightleft22:
Ok but the question "Would you rather have the poor poorer if the rich were less rich?" implies, at least to me, a belief that the rich becoming richer results in the poor becoming less poor.

I would like to know if the facts bear that out?

Not at all- we have thousands of years of historical precedent of aristocracy existing along side of abject poverty, and the efforts of that aristocracy to expand its wealth trampling on the poor even further.

On the other hand, we also have plenty of evidence that wealth at all levels rises as you directly work to alleviate poverty; as the poor get richer, everyone else benefits along the way and the total pool of wealth increases much more quickly.

Ah. Trickle up economics?
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JWatts
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quote:
Originally posted by rightleft22:
If I understand correctly the gap is acceptable because the 1% have been given the title of job creators and drivers of the economy.

Why is the gap only acceptable in that case and that case only?
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rightleft22
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What are the other acceptable cases being made for the gap?
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JWatts
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quote:
Originally posted by rightleft22:
What are the other acceptable cases being made for the gap?

My original phrasing was poor, sorry about that.

You stated that there was one acceptable case. I don't think that any case has to be made at all. I didn't so much mean that it's not the particular case that should be made, as I meant you haven't proven the need for any case at all.

American's have far more money than Mexican's. We don't have to make an acceptable case for the gap between American income and Mexican income.

It is what it is. No case has to be made.

[ October 03, 2012, 05:08 PM: Message edited by: JWatts ]

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Wayward Son
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So would it be acceptable if 1% had 99.99% of the wealth, and the rest of the nation was literally starving?

Because you can easily do that with:
a) stable infrastructure
b) definitive property rights
c) growing economy
d) low corruption / fair legal system
given the right circumstances.

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Pete at Home
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quote:
Originally posted by JWatts:
quote:
Originally posted by rightleft22:
What are the other acceptable cases being made for the gap?

My original phrasing was poor, sorry about that.

You stated that there was one acceptable case. I don't think that any case has to be made at all. I didn't so much mean that it's not the particular case that should be made, as I meant you haven't proven the need for any case at all.

American's have far more money than Mexican's. We don't have to make an acceptable case for the gap between American income and Mexican income.

I don't think that argument worked for Al Capone.
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KidTokyo
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To answer the question posed by the title of this thread, the answer seems to be -- for first-world democracies at least -- YES.

THIS is a TED talk I stumbled across on late-night TV in Japan this summer. About 15 minutes, and very much worth your while (just to clarify -- it's in English by an English person).

The gist of it is: in developed (not developing) countries, economic inequality is the overwhelmingly determinative factor in crime rates, lifespan, health, social mobility, rate of incarceration, education outcomes, overall happiness -- pretty much anything you could care to name that you might consider important in a society.

More astonishingly (and again, this for developed countries) there is absolutely no correlation between these factors and per capita wealth.

Still better -- there is no correlation between these factors and "traditional family values".

Note the comparison around the 10-minute point between Japan and Sweden -- very different countries politically and culturally, but they both are relatively "equal" in the wealth gap, and display similar metrics on these social issues, even though one is "big government" and the other (Japan) is "smaller government."

Anyone interested in knowing how a low-tax country like Japan ends up like Sweden -- I'll be happy to talk your ear off about it! [Smile]

[ October 03, 2012, 07:08 PM: Message edited by: KidTokyo ]

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KidTokyo
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So it seems the question has be answered in terms of inequality. It's not enough to say that the rich getting richer helps the poorer if a little wealth trickles down. It has to narrow the gap, or it doesn't help.

"The rising tide that lift all boats" is no good if the boats are on a steepening water-slope. That's not so much a tide as a tsunami.

Which is bad.

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Pete at Home
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Correlation is one thing, but what's your case for causation?
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KidTokyo
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Pete,

Some of it is explained in the lecture, a little pseudo-sciency for my taste, since it relies on social stress, cortisol levels, etc., but I do concede these have verifiable effects on criminal behavior, cognitive function, and physical health -- that has been repeatedly demonstrated.

I'd also argue that greater inequality drastically increases social instability -- by which I mean, an ability to maintain one's status and therefore to make plans for the future -- for people at the lower strata.

It also increases the perception that "the law" does not speak for you -- leading to a general distrust of entrenched authority.

This will then lead to ethnic balkanization among poorer people where diversity exists because, in the absence of a social contract, they will gravitate towards familiar groups to achieve the stability, cohesion, and trust they do not get from society at large.

Furthermore, the inequality tends to narrow the proportional segment of society with avenues to mainstream media, so that their interests are disproportionately represented.

One you've got the above-mentioned factors in place, the rest takes over as a vicious cycle.

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TomDavidson
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The rich spend money less efficiently than the poor. The more money as a percentage of the total economy that is in the hands of the rich, therefore, the less efficient your economy. There is a point at which the cost of this disparity-driven inefficiency exceeds the capital-suppressive cost of redistributive policies.

Personally, I believe we are at that point, and have been for some time.

[ October 03, 2012, 07:56 PM: Message edited by: TomDavidson ]

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KidTokyo
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quote:
The rich spend money less efficiently than the poor. The more money as a percentage of the total economy that is in the hands of the rich, therefore, the less efficient your economy.
That is an interesting point I han't considered -- or rather, it neatly summarizes a longer list of points I'd be inclined to make on a more granular level. But I like the long-view here.
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