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Sunday, March 13, 2011

What Don't You Understand About Growing The Pie?

The 400 wealthiest people control more wealth than that controlled by bottom economic half the population. Michael Moore said it, and PolitiFact checked it, so it must be true.

So what?

There is no limit to wealth in a free-market, capitalist society, unlike a socialist society where government controls the means of production and decides who gets what from the finite pie.

No one is stopping you from starting and building the next Microsoft, or Google, or Facebook, and joining that list.

The creation of wealth is very dynamic.  Look at the Forbes 400 list and you will find some old-line families, but they are shrinking in prominence. 

But look towards the top of that list, and you will find families or individuals that built great businesses which created hundreds of thousands of jobs and lowered the cost of living for hundreds of millions of people (the Waltons, Jeff Bezos of Amazon, Michael Dell), and entrepreneurs who invented or developed the technology which is the foundation of our economy (Jeff Page and Sergey Brin of Google, Bill Gates and Paul Allen of Microsoft, Larry Ellison of Oracle ).

Interestingly, politics doesn't control.  You find the Koch brothers and George Soros near the top as well.  So industrialists and currency speculators all have a shot.

There is nothing holding you back, except your own talents and imagination, and stifling government regulations, taxes and mandates which make it increasingly difficult to grow a business.

Growing the pie is a concept the Democratic Party doesn't understand.  Instead, it is focused on slicing the pie we have.  Which is why the Democratic Party and the Michael Moores of the world hold no promise for our future, they dwell on the past.

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  1. You see this


  2. Completely agree - One nit, Larry Elison should be tagged for Oracle not Sun (even though they did buy Sun in the end).

  3. Michael Moore has eaten way too many pies to be lecturing us on anything.our point is about economics, though, isn't it? Oooops. Well, er... I don't see him volunteering to pay extra taxes to the almighty State. Did you see Mary Katehrine Ham's response to his Rotundity? It's at http://bighollywood.breitbart.com/jjmnolte/2011/03/11/courtesy-of-mary-katharine-ham-michael-moores-woes-extend-into-day-two/ and a few hundred other conservative web sites.

  4. Michael Moore's problem is slicing the pie and eating every piece. He really doesn't want to share, and it shows.

    Not sure how to "grow" a pie, but we certainly can bake a bigger one. For the love of American apple tarts and Mom, don't tell Michael!

  5. And J.K. Rowling created a multi-billion dollar industry while sitting at her kitchen table.

  6. I have tutored over a dozen people whom I work/have worked with on investing. Except for one, the others have been non-white females (more than half single mothers) who had never invested before in their lives.

    I've lent them books on investing, shown them websites and online brokers, spent hours explaining the basics, etc. I'm passionate about this and I give freely of my time (the only thing I ask in return, I tell them, is that they vote Republican). We have to get people invested in America and capitalism.

    If our schools have any time outside teaching the "three Rs," why is personal finance and investing not at the head of the line? A liitle more likely to ensure people end up leading happy lives compared to taking a middle-school class in rock poetry, no?

  7. I have a question that is a bit off topic, but does involve the collectivist pie. I am a bit confused why the farmers in Wisconsin have joined the protests. I did a little digging and found out the "Tractorcade" was organized by the Wisconsin Farmers Union. They are worried about higher property taxes under Walker's new legislation. Now I get that if the state pays less then the local communities have to pay more. In this scenario wouldn't the farmers (and other taxpayers) want more leverage when deciding the salaries and benefits of the public employees. Wouldn't ending collective bargaining give local taxpayers more power to decide how much of their money is confinscated to pay someone elses salary? Perhaps I am just plain wrong and I will accept that if so. The understanding that I have leads me to believe that the farmers are fighting the wrong people. If high property taxes are their concern (as is the concern of many people on both sides), then they need to be able to sit down at a table in their local community and tell the teachers and other public employees that the tax burden is too much to bear and since they are paying their paycheck they are going to have to make sacrifices. The teachers cannot expect the taxpayers burden to go up up up without even having a seat at the bargaining table. The farmers can't expect the State to be endlessly funded by some fabled "evil" rich guys to relieve their tax burden. Everyone needs a place at the table.

  8. growing the pie and income inequality have nothing to do with each other. No matter how big the pie is if all of it goes to one person everyone else goes hungry. There's a reason for this and it's called inflation. The bigger the pie the more we have to eat not to be hungry (to step out of the increasingly tortured metaphor the more wealth in the country the more bread costs).

    So yes it does very much matter that we have grotesque levels of income inequality. Now it's true that we'll never have complete parity, it might even be true that complete parity would be undesirable by discouraging endeavor. On the other hand the insane levels of disparity we see now are unhealthy and more to it unsustainable. Those at the top will have to realize that they cannot continue to gobble up a disproportionate amount of taxes or sooner or later they will face a revolution. It will happen if they continue their "let them eat cake" routine.

    I have no sympathy for an elite class with such a poor sense of history (to say nothing of humanity) that they drive the masses to build guillotines.

    So make your choice.

  9. LukeHandCool- You had me until the Republican thing. What if they're an 'independent'? I agree that students should at least understand compound interest before they take out a student loan and credit card invitations start arriving in the mail.

    Isn't it possible that the entrepreneurial spirit has taken a hit with people's faith in the fundamental fairness of the system? Not everyone is an entrepreneur, of course, but we used to think of this as the American spirit and a kind of birthright.

    But reality and that identity clash when the markets are dominated by massive players with supply chains that cross the globe and have a hand in making the rules. I think the left and the tea party could have a productive partnership here.

    Dems understand the value of a bigger pie. And they certainly support small business. But in the era of the mega-corp, building wealth on the kitchen table isn't as easy as 'see a need and meet it.' Who wants a better mouse trap when the one at Walmart is only 35 cents because it cost them 5 cents to get it on the shelf?

    The tea party faults regulations for undermining their enterprise. This is hard for me to grasp since (stock speculations aside) the rags to riches story of 2011 usually involves selling to a large corporation--be it a biomedical or energy or education company--who have a lock on distribution on any scale. Never mind trying to compete with companies that manufacture off shore. These mega coporations have no loyalty to the United States.

    One thing that would engage more Americans in wealth creation (which will grow a bigger pie than Walmart ever has-- given their Chinese products) is enough transparency that consumers know the full of what they're buying. Was it made in the USA? Or just assembled in China? What's the company's human rights record?

    Buying low and selling high just can't work where there are billions of people who will do it cheaper, sell it cheaper. Even chubby Michael Moore (and why his weight matters a whit, I couldn't guess) would start to believe in a bigger, kinder pie if the mega companies were distributing value that was created at home, and without sweat shops and the destruction of other people's lands, that kind of thing. Especially, if the people in his hometown were at full employment.

    Fairness is an important to sustaining our system. Republicans and democrats might disagree on what that is, but it's important that Americans, on the whole, believe the system is fundamentally fair. This has been eroded by a war fought for reasons that weren't transparent, no bid contracts, Halliburton's looting, the partnership between very big business and govt, and outsourcing, outsourcing, outsourcing... at least this has eroded Dems belief that unregulated markets result in free and open competition without barriers to entry for the better mousetrap.

    Is it in the interest of small business that public policy be infinitely influenced by the biggest players?

  10. Well, just how did the porcine propagandist Moore become a multi-millionaire? Did he inherit all his wealth from somebody or did he "earn" it by selling a pile of BS to fools who are too dimwitted to understand they are being taken advantage of? The man obviously has enough money to keep himself in cheeseburgers for the rest of his life so why doesn't he donate the proceeds from any of his future pork fests to help the people he feels capitalism is leaving behind? Or is that a silly question?

  11. The Donut Shop. One owner's effort to reduce inequality of earnings.

    Customer: Where are the donuts?
    Clerk: We ran out at about 1 o'clock.

    Customer: But, I love your donuts!
    Clerk: Sorry, the owner didn't want to be selfish.

    Customer: That doesn't make sense.
    Clerk: The shop is very successful, and he is feeling guilty about that. So, he is only making as many donuts as he needs to, to get by comfortably. He is allowing other donut shops to have their piece of the pie.

    Customer: But, I love your donuts!
    Clerk: It is selfish attitudes like yours that keep our society from being good.


  12. The best part of this article was the "So what?"

    I don't resent what the 400 wealthiest Americans have, why should I? And I'm content.

    In contrast, Michael Moore has millions more than I'll ever have, a palatial home on an expensive estate and is he happy? No. He's still frosted that somebody's got more than he's got. And he's miserable.

  13. Well, think of it this way: the rationale for separation of powers was that the US Founding Fathers didn't trust power concentrated in too few hands. Yet, there is no corresponding check upon the power of concentrated wealth.

    In the 1950's, it used to be that extremely high tax rates on the wealthy(around 90% on income over the equivalent of 2 million) aligned the interests of the wealthy and the rest of the country.

    See Malcolm Gladwell: www.newyorker.com/online/blogs/festival/2010/10/video-malcolm-gladwell.html


    However, this outcome seems unlikely given that the mainstream media is controlled by both the wealthy and the stupid (non-mutually exclusive).

    So, if the wealthy will see to it that they won't be taxed even at Clintonian levels, the legal system prevents accountability for wealthy bankers who can afford the best lawyers, and Obama cannot take on Big Money by himself (while he does take poor people's guns to preserve stability and the status quo), what is the check upon the power/greed/oligarchy of the wealthy?

    Or, think of it this way -- money is a vote. Money is a direct, legally backed claim upon the allocation of scarce social resources. That's what a vote is. Voting is merely an indirect claim upon scarce social resources, and voting fails due to both a principal-agent tension and the speed/relative strength of money.

    This is why we live in oligarchies and not democracies - the rich simply have more say as to the allocation of scarce social resources, and the poor have almost no say. A positive feedback loop makes the rich richer, and because the poor cannot financially compensate those who help them, altruism toward the poor is punished in our society...yet, each of us WANTS to be altruistic. That is human nature.

    Therefore, Money is a Law, because it governs how we must live. We have created a society in which capital = fitness, and thus we are socially selecting at the upper echelons of power psychopaths who will do anything for money. There is no cost to their fitness if they exploit people or pollute or waste money or hoard money, and so their insane behavior continues.

    The legal system (1) protects the wealthy, who can afford the best attorneys, buy politicians, and manipulate the tax code, and (2) takes violence off the table so the poor can't retaliate, when the rich commit daily acts of violence against the poor. Yet, game theory suggests that both punishment and reward are necessary for cooperation to exist.

    So, as an example, can we redesign money to create "digital financial karma" to capture the "externalities" of people's behavior? Could we each digitally destroy money, at the same rate (we could have the option to pay $1 per day to destroy $2 of someone's ill-gotten money, depending on how much deflation we want)

    Could we decentralize the Federal Reserve's creation of money (votes) so that it is no longer created for central banks and lent back to the public? Could we digitally give everyone, say, $3 (votes) per day to buy FOOD so they can have healthy brains? Why not?

  14. To Michael Jeffcott,

    What exactly are you proposing? Do you want to destroy money earned by people you don't like, that is, take it from them?

    Is this the usual leftiest idea that profits should be illegal, and only the salaries of the leftists in government should be legal?

    Or, what exactly?

  15. You're not listening - the government is bought and paid for, because money is a vote. Unless you're wealthy enough to influence an election or buy a politician, you have no vote. Taxpayer money is doled out to the highest bidder.

    I'll ask the question again this way: We have a separation of powers in the government of this country, because the founding fathers mistrusted human nature when it has a concentration of power. What is the corresponding check upon the power of the wealth oligarchy? Answer me that question.

    Like the founding fathers, we should mistrust human nature when it has concentrated power.

    So I have two proposals:

    (1) During the most prosperous periods in American history, we had top marginal tax rates of over 90%, meaning that no one really made more than the equivalent of 2 million dollars per year.

    Again, see Malcolm Gladwell: www.newyorker.com/online/blogs/festival/2010/10/video-malcolm-gladwell.html


    It was a beautiful system, because (a) no one needs more than 2 million to survive, and (b) it aligns the interests of the wealthy and the interests of everyone else, because the rich were just a hop skip and a jump away from being just like everyone else, so their incentive was to improve the wellbeing of the average person - i.e., by improving the social safety net, improving social wellbeing, etc.

    Until a similar check, like the checks within the government, are placed upon wealthy individuals, we will continue to live in an idiotic oligarchy, where the divergent interests of the super-wealthy and the poor lead to class warfare. There really are "Two Americas." Yet, a great man once said that a house divided cannot stand. This is turning out to be the case. The interests of both Americas should be aligned. This every man for himself nonsense can't last.

    (2) The Federal Reserve should not digitally create money for the banking cartel, with money lent back to the public at interest.

    http://www.thisamericanlife.org/radio-archives/episode/423/the-invention-of-money (at 10 mins)

    Instead, money should be created at the same rate ($3 per day, or something) in every individual (because money IS a vote), so people can buy necessities, like food. Money should also be destroyed when it is ill-gotten, to prevent inflation and to keep the honor of the currency intact.

  16. Further points:

    (1) Not all money is earned (or kept) as a result of contributing something of value to society. You can earn money by creating artificial scarcities, by exploiting people's ignorance (as long as people are ignorant you can sell your expertise to them), by polluting (particularly if the free market fundamentalists have limited oversight of big business), by bribing politicians, etc.

    Because it is not only possible, but likely that people can earn money by doing harm to others, the rule should be that if you care more about money than your country, we don't want you in America.

    (2) Understand that we live in an oligarchy. We have to put up with "supply side" NONSENSE, tax cuts for the wealthy, wars to enrich oil companies, neoclassical economists, bankers who destroy the financial system; blackmail the country; and then escape prosecution, etc. The left-right divide is almost nonsense in understanding this.

    I mean, I'm calling for a decentralization of the Federal Reserves money creation power from the banking cartel to the individual. Doesn't that make me closer to a libertarian? Get rid of your labels - as human beings we dehumanize/demonize outgroups, when in fact we probably have more in common than not.

    (3) So your concern seems to be that you want to keep your hard-earned money, and it shouldn't go to government bureaucrats, and therefore taxes should be lower for you. The problem is that people with more money than you can manipulate the government to (a) take your money, and (b) give it to them, because money is a vote. See: the financial bailouts, for example.

    My solution to this problem is that in the digital age, (1) the right to vote should vest roughly equally within every person, and (2) there is such a thing as having enough money. If you can't live on 2 million dollars per year while kids' brains are being damaged by poverty, we don't want you in this country.

    It doesn't matter how much money you have if you're an idiot. And that is the problem with drastic income inequality right there -> having money won't necessarily make you smart. But living in poverty eventually WILL make you stupid.
    Supposedly, all men are create equal (we’re all 99% genetically identical), yet only the wealthy have a say in American politics.
    We should live in a society where people understand that money is a vote. We need to understand that our oligarchs vote to keep the public stupid, they allocate resources to themselves, and they live with concentrated and unchecked power.