economy

benb said:

I think the argument that "the rich are too rich" is just a projection - the real problem is there's a growing number of poor and lower middle class, and the question is how to help them live better lives. 

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I kind of agree that the "the rich are too rich" is a projection when your talking about individuals, but it is not a projection when your talking about the system that supports them.

They way to help poor and lower middle class people is to pay them more for the hard work they do.

For instance look at the Chobani yogurt company. The CEO plans on giving his employs up to 10% of the company when it goes public or if it is sold. Depending on how long an employee worked there, some of them will be a million dollars richer.

http://www.latimes.com/business/la-fi-on-leadership-chobani-20160430-story.html

What a crazy idea.

benb said:

Rich people's money is in banks or brokerage accounts or stocks or bonds where others are borrowing it to buy houses, build buildings, start or expand businesses, etc.

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I think that's just a fraction of what's lent by banks though. It's essentially insignificant. Although perhaps that's beside the overall point you're making.

benb said:

But of course, then the argument becomes whether an individual should have control of that much money, regardless of the "hoarding" argument.

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I'm ok with it if it's a decision made democratically. As it stands, it is essentially not, at least not in practice.

benb said:

I think the argument that "the rich are too rich" is just a projection - the real problem is there's a growing number of poor and lower middle class, and the question is how to help them live better lives.  Would there be so much focus on how much the richest are worth if the poorest didn't have to worry about basics such as food and shelter?

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It is however to a degree a "zero sum" game. The the degree it isn't new wealth is created 'above' and once it's trickled down it's caused a moderate amount of inflation or skewed the economy already. In other words, if the system itself didn't contain the mechanisms that made the very wealthy very wealthy, then ok, fair point. But since the system contributed to it those mechanisms must be taken into account. So "the rich are too rich" isn't so much a condemnation or criticism of the rich as it is of the system.

I recently saw an article about Maduro's (Leader of Venezuela) top economic adviser... Alfredo Serrano (a 40yo Marxist economics professor from Spain) who is advising Maduro to impose even more state control over the dysfunctional economy already struggling from hyper-inflation and deep recession from that very state control.

Serrano believes inflation is caused by class struggle, and that government bureaucracy should be replaced by revolutionary communes.  Conventional economists blame the food shortages which have caused riots on government price controls and expropriations, Serrano blames speculative capitalism. 

There is a reason Serrano went to SA. Economic ideas like state domination, price controls, and fixed exchange rates are already unwelcome in Europe.

JR

PS: Maduro is likely to be recalled by a very unhappy electorate. Right now he trying to delay that recall into next year so his hand picked #2 serves out the rest of his term. He has loaded the court with hand picked justices so may succeed. Maduro came to power as Chauvez' hand picked successor.

JohnRoberts said:

What a great discussion...... It also answered my question about what to buy instead of stocks, I need to buy some robots.  ;D ;D ;D

I have mentioned before that Hon Hai, the huge contract manufacturer in China has announced their plan to buy 1 million robots.

It seems we are still some time away from robots taking over all human tasks, while ironically minimum wage laws are a strong incentive to advance automation of many fast food industry entry level jobs. Another unintended consequence of government helping. 

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I saw a funny line in an old Jean Harlow movie ("Dinner at eight"), Jean Harlow mentioned reading an article about automation replacing all human workers. The matronly actress she was talking to looked at Harlow's body in a slinky white dress, and said "not all.".  ;D ;D

JR

What's is called: Double Irish?

EU Commission(?) pressing/sueing Apple to pay full corporate taxes? Looks like they had that super-deal for many years paying only 50 euros of corporate tax for every 1,000,000 euros of profit they made. Wow.

Now, without any of the widely hated EU institutions (1+), it would have been impossible for anyone to actually press charges. I absolutely welcome this move. Hope they'll also target the Facebooks, Starbucks, Microsofts, Amazons, McDonalds and God-knows-whos next/soon. No matter how many jobs Apple et al. have created across Europe, some people's claim that a corporate tax rate of 0,005% is the same as stealing tax money is not that far off the mark in my books. Not sure whether it's stealing (cos I guess states knew about the deals), but it definitely sounds unethical. Fornicate them.

And now the funny part: Ireland is not the only country that doesn't even want to have their share of the missed-out Apple corporate tax money 

I don't think "stealing" is a necessarily appropriate word here. If they followed the rules they obviously shouldn't have to pay. If they 'misinterpreted' the rules then they should pay, and if they did so knowingly it's arguably criminal I would say. From a standpoint of morality perhaps it's splitting hairs discussing whether 'withholding' qualifies as stealing.

Either way,  the corporations shouldn't be exempt from paying their share when everyone else has to. They benefited tremendously off of the labor of everyone who worked and paid taxes in that area, so they should share the burden.

Script said:

What's is called: Double Irish?

EU Commission(?) pressing/sueing Apple to pay full corporate taxes? Looks like they had that super-deal for many years paying only 50 euros of corporate tax for every 1,000,000 euros of profit they made. Wow.

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Funny business indeed... multiple entities set up with sham transactions that shelter most income.

Now, without any of the widely hated EU institutions (1+), it would have been impossible for anyone to actually press charges. I absolutely welcome this move. Hope they'll also target the Facebooks, Starbucks, Microsofts, Amazons, McDonalds and God-knows-whos next/soon. No matter how many jobs Apple et al. have created across Europe, some people's claim that a corporate tax rate of 0,005% is the same as stealing tax money is not that far off the mark in my books. Not sure whether it's stealing (cos I guess states knew about the deals), but it definitely sounds unethical. Fornicate them.

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A quirk of how the EU treats corporations. Apple can sweep all of their EU sales income into Ireland where they manipulate it to realize near zero taxes. Apple considers Ireland its corporate home clearly a tax avoidance transaction, but nothing recent. Ireland has been promoting low corporate tax rates for a long time.

And now the funny part: Ireland is not the only country that doesn't even want to have their share of the missed-out Apple corporate tax money 

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Irish taxation has been a thorn in side of France and Euro zone governments because it attracts business investment away from the continent.  Ireland's tax revenue is actually a higher fraction of GDP than the US. 

Now that should be the headline, the US has relatively low tax revenue (around 25% of GDP) simultaneous with high marginal rates (34-35%).  So clearly the large companies who haven't moved to Ireland yet are paying less than 35% here in the US.  The actual tax rate in Ireland is more like 12.5% (not 0.005%) and I expect that loophole apple and others are abusing to get closed thanks to the recent drama.

The EU has long been aggressive about protecting their domestic industries from large US tech companies. What is fair probably depends on where you live.

I have long been calling for US corporate tax reform.  Since the actual tax collections as a fraction of GDP are  closer to 25% than the 35% rate, it seems to me a 25% rate that everybody pays would raise the exact same tax revenue while helping the small companies who don't have expensive tax lawyers and/or influential lobbyists to compete against the big crony capitalists.  Now that's fair... A 25% US tax rate may slow down the rush for the door as companies move to lower tax jurisdictions to remain competitive with the Apples of the world.

I ASSume (hope) the current Apple situation is a momentary outlier that will now get fixed thanks to the recent sunlight, to at least make them pay the proper Irish 12.5% rate .  The EU needs to normalize tax policy and much more if they expect the union to survive and prosper.  Allowing the entire union's sales to be  taxed at the lowest member's rate  seems like a bad strategy for everybody but that lowest rate member. Ireland is understandably happy with the status quo.

JR

[...] The EU needs to normalize tax policy and much more if they expect the union to survive and prosper.  Allowing the entire union's sales to be  taxed at the lowest member's rate  seems like a bad strategy for everybody but that lowest rate member [...]

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Yes. EU countries might just as well move closer to one other to accomplish this (as in fiscal union). However, you can't really have a union of such kind and uphold national borders at the same time.

On the part of huge companies and corporations, it gives proof to low standards in Corporate Social Responsibility (CSR). Not necessarily illegal but highly deplorable. Apple has been known to be aggressively innovative also in terms of tax avoidance -- actually to the point that other companies/corporations* simply copied their strategies. Looks like that this is finally being targeted.
(*Insert any huge corporation's name here, not just US companies.)

With banking secrecy already abolished across most industrialized countries (meaning tax offices have easy access to any bank account, both corporate and private, in any country that signed the agreement), a network of sham transactions can easily be traced -- well, it's a question of time, cost and feasibility -- but possible in practice.

Just read that Bill gates proposed a robot tax. That is, if a worker is replaced by a robot, which basically does the same work, why not tax it? That tax money, he continued, could then be used to hire more dearly needed staff in the caring and education sectors. Interesting idea, I'd think.

That idea has been floated numerous times throughout history. What prevents it is capitalism and the people supporting it. It ends up being nothing more than yet another overreach by government through yet another tax, and taxes and regulation = bad, profit good, because.... 'trickle down' (even though it's really the exact opposite).

So, only the most progressive societies with educated compassionate unselfish citizens can pull something like that off. Hard to get the population in that shape as well though since education too should be for-profit in the hands of private corporations, and state mandated and operated education just ends up spreading liberal propaganda.

On the other hand I maintain that we will see ubiquity in so many fields not that far in the future that control to maintain the power and wealth imbalance will take such extreme measures that people will finally revolt. In other words; capitalism by definition can't work when there's ubiquity and so something else must take its place to maintain the disparity. People won't accept it however once the capitalist "illusion" disintegrates.

...ever so pessimistic and dystopian...

Script said:

Just read that Bill gates proposed a robot tax. That is, if a worker is replaced by a robot, which basically does the same work, why not tax it? That tax money, he continued, could then be used to hire more dearly needed staff in the caring and education sectors. Interesting idea, I'd think.

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That is indeed interesting and AFAIK a "new" idea since we are on the cusp of robots (self driving vehicles, etc) causing massive displacements to the labor market. Just look at truck drivers... and this can happen pretty quickly IMO (decades).  Hon Hai a major Chinese contract manufacturer has plans to engage one million assembly robots in their factories (because Chinese labor is so expensive  : )

Any such tax to be effective would need to be perpetual, i.e. tax the ongoing labor replacement, not a one time expense that could be capitalized and forgotten.  Of course this tax can not generate the major fraction of revenue needed to carry the displaced workers without being hugely anti productivity growth. 

The only win-win for all these displaced workers is more education, and cultivating some way for them to create value that will support them.  I only half joke they they can become drone pilots, and monitor prisoner's ankle bracelets, but we need to think of new kinds of employment. Making it easier to start businesses could help. 

This new wave of automation will unleash a bunch of wealth and it would be fair to channel some of this wealth toward helping make the displaced workers more valuable.

Paying them to do nothing will not end well... Saudi Arabia is the poster boy for that.

I suspect this too will be framed as capital vs  labor, or the evil rich people screwing the poor, but this is not the first time we have seen such manufacturing shifts, and the Luddite response didn't turn out well in centuries past. 

I don't see simple answers to this but glad to know at least a few of the smart people in the room are thinking about solutions, this is better than hearing scary predictions about our future robot overlords when they eventually become smarter than us (not just science fiction).

JR

PS: For my even further outside the box idea, instead of taxing robots, and expecting the government to manage that revenue effectively  : ,  let's say that every worker displaced by a robot, is given his own robot to put to work for him. I didn't say this was a great idea or fully formed, just a thought.

For my even further outside the box idea, instead of taxing robots, and expecting the government to manage that revenue effectively  : ,  let's say that every worker displaced by a robot, is given his own robot to put to work for him. I didn't say this was a great idea or fully formed, just a thought.

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A robot to do what? Queue up at the offices to file for unemployment money and do the house cleaning in the afternoon? -- Now I am being dystopian  ;D

As for care giving robots look at Japan. Highly effective machines. And they do not replace human beings but assist them by taking over the strenuous work of lifting a person out of bed  or a bathtub so that the human caregiver has more time to 'talk' and 'attend' to the care receiver while being less exhausted physically in the evening.

Script said:

A robot to do what?

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to do work... and earn money for the worker/owner... This is classic capital vs labor argument.

Queue up at the offices to file for unemployment money and do the house cleaning in the afternoon? -- Now I am being dystopian  ;D

As for care giving robots look at Japan. Highly effective machines. And they do not replace human beings but assist them by taking over the strenuous work of lifting a person out of bed  or a bathtub so that the human caregiver has more time to 'talk' and 'attend' to the care receiver while being less exhausted physically in the evening.

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Yes Japan has been working on personal use robots for decades.  The US is still barely scratching the surface with roombas (vacuum cleaning robots).

Japan has an aging demographic so not the same economic calculus here.

JR

Script said:

...ever so pessimistic and dystopian...

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It's not necessarily pessimistic and dystopian. I'd say it's realistic with the possibility of something better happening after some serious social upheaval.

The reason I'm saying realistic is I guess outlined in my previous post, but just to make it clear; capitalism relies on selling something at a profit, but when a good or service is obtain with virtually zero cost you end up with a problem. So, ubiquity = super-low to zero cost, which in turn means zero profit, which in turn means it's not a viable business proposition to produce something like that. So in the end you'll have to somehow distort the market to make it possible (profitable) to produce such things.

Of course another issue though is the one that pro-capitalists routinely regurgitate, namely that without the promise of accumulating wealth there's no reason for doing anything. Well, if greed truly is the reason for doing anything then once we get or even approach ubiquity we'll have a huge problem in that these greedy people will need to find a different way to satisfy their desire to accumulate wealth, even though goods and services are essentially ubiquitous. It is the disparity that matters here. We don't have infinite resources and infinite space, so somehow there needs to be an artificial division of it all to satisfy the greedy. How can that be done without people questioning it when we obviously all can divide things equally now that we can produce things so cheaply? As it is now a person working two jobs for low wages can dream of at some point becoming a millionaire even though it is completely unlikely and unrealistic. But the dream is there. So his labor, just like the factory worker's or anyone else's can be exploited by the owning class and many don't understand the problem because of this 'dream'. But once that's gone then what do you do? How do you justify the discrepancy?

JohnRoberts said:

PS: For my even further outside the box idea, instead of taxing robots, and expecting the government to manage that revenue effectively  : ,  let's say that every worker displaced by a robot, is given his own robot to put to work for him. I didn't say this was a great idea or fully formed, just a thought.

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It's an interesting thought.

However, there are a few problems with it. The first and most obvious one is that if this was the only thing that happened then it would effectively be equivalent of owning a share of the means of production, which is what socialism is based on. That won't happen in a capitalist society. If that doesn't happen, and if the manufacturing and deployment of robots still is "free" to corporations to engage in then workers still won't be able to compete in that new environment, simply because they are not robot-manufacturers.

Lastly, if it still worked it'd only alleviate the problem for those that are displaced, and not really address the fundamental problem which would be that human labor as a whole is going away. That issue still needs to be solved. I don't think there are any other solutions than either creating new forms of labor which will be increasingly more artificial and less connected to reality, or changing the underlying socio-economic system.

mattiasNYC said:

It's an interesting thought.

However, there are a few problems with it. The first and most obvious one is that if this was the only thing that happened then it would effectively be equivalent of owning a share of the means of production, which is what socialism is based on.

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No it would be like the worker owning his own mechanical slave that he can profit from.  "Owning" his own means of production (using your terminology) that he can personally direct for his own benefit.  Free of the socialist central planners that may have different ideas of how to use his means of production. 

That won't happen in a capitalist society.

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?? 

If that doesn't happen, and if the manufacturing and deployment of robots still is "free" to corporations to engage in then workers still won't be able to compete in that new environment, simply because they are not robot-manufacturers.

Lastly, if it still worked it'd only alleviate the problem for those that are displaced, and not really address the fundamental problem which would be that human labor as a whole is going away. That issue still needs to be solved. I don't think there are any other solutions than either creating new forms of labor which will be increasingly more artificial and less connected to reality, or changing the underlying socio-economic system.

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Your outlook is kind of depressing. 

Life is complicated and if the answers were easy, anybody could come up with them (they'd come inside fortune cookies).

The success of capitalism is based on private ownership, self direction, and a huge dose of optimism.  The next few years will reveal if we can wake up the sleeping giant (our economy), or if it down for the count (prolonged weak growth) as some negative nellies predict.

JR

Let me just say that I understand that you threw out an interesting idea, so I'm not arguing for the sake of arguing or proving you wrong or anything.

JohnRoberts said:

No it would be like the worker owning his own mechanical slave that he can profit from.  "Owning" his own means of production (using your terminology) that he can personally direct for his own benefit.  Free of the socialist central planners that may have different ideas of how to use his means of production. 

?? 

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I worded my post poorly. Sorry.

What I meant to illustrate was a couple of different ways one could interpret your idea.

In one scenario the company where the worker used to work would get the robot, but it would belong to the worker. So now the robot is taking the labor from the worker, but since the worker owns the robot he is getting compensated (one way or another). I was merely saying that I don't see that scenario happening, because it would indirectly be a corporation giving up the means of production to the workers.

The other scenario is that the worker gets a robot with which he can do as he sees fit. But in that case the worker now competes on the presumably free 'robot-market'. On that market he can't compete efficiently. It'll be a bandaid at best since robots will get more sophisticated every year, and now that those who would have hired the worker has a choice of robots they'll not choose the worker's robot after only a year or two because newer more efficient ones then exist. Fair enough, the worker can lower the price to rent his robot, but that's a race to the bottom as are all other labor costs.

Obviously this all depends somewhat on exactly what type of labor any given robot is supposed to replace and can perform.

JohnRoberts said:

Your outlook is kind of depressing. 

Life is complicated and if the answers were easy, anybody could come up with them (they'd come inside fortune cookies).

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The principles of capitalism are fairly simple, and to an extent effects of it are foreseeable. That's more about realism than pessimism. But then again, if one grows up in a society that praises capitalism all the time and paints any alternative not just as inferior but borderline 'evil' then one won't have eyes wide enough to see it, in my opinion.

JohnRoberts said:

The success of capitalism is based on private ownership, self direction, and a huge dose of optimism.  The next few years will reveal if we can wake up the sleeping giant (our economy), or if it down for the count (prolonged weak growth) as some negative nellies predict.

JR

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"success" is above implied to be a positive value, and I argue that that's.... debatable.

Either way I'd predict continued growth simply because the 'rigged system', to borrow a phrase from you-know-who, will guarantee 'printing' more money against future debt. Not doing so would be terrible. The banks and financial institutions will continue to automatically reap the benefits of this monetary system. Taxation levels and regulation will have little effect on that.

We need to move more towards taxing capital rather than labour. This will take care of the "robot workers".

I just finished the book "Rise of the Robots", it has good information about the economic implications of developments in the not so distant future. 

A lot of this has already happened, for example, Instagram was bought for a billion $$ while it had 12 full time employees. This is only possible due to automation of most of the services it provides. Taxation needs to be adapted to this reality.

MattiasNYC wrote:

The principles of capitalism are fairly simple, and to an extent effects of it are foreseeable. That's more about realism than pessimism. But then again, if one grows up in a society that praises capitalism all the time and paints any alternative not just as inferior but borderline 'evil' then one won't have eyes wide enough to see it, in my opinion.

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^This.



Also, pessimism is a key emotion among many (though not all) Trump and Brexit promoters. Not to mention fear.
But we have other threads for that.