Sunday, May 2, 2021

Wealth inequality — Michael Roberts

 Wealth inequality, real and financial, dwarfs income inequality.

But as I have argued before, real wealth concentration is about the ownership of productive capital, the means of production and finance. It’s big capital (finance and business) that controls the investment, employment and financial decisions of the world. A dominant core of 147 firms through interlocking stakes in others together control 40% of the wealth in the global network according to the Swiss Institute of Technology. A total of 737 companies control 80% of it all.

This is the inequality that matters for the functioning of capitalism – the concentrated power of capital. And because inequality of wealth stems from the concentration of the means of production and finance in the hands of a few; and because that ownership structure remains untouched, any increased taxes on wealth will fall short of irreversibly changing the distribution of wealth and income in modern societies.

There is no solution in the capitalistic system. The system is designed fundamentally, just as feudalism was. Actually addressing wealth inequality to obviate asymmetry of power to save democracy requires a new system. If this new system is a liberal one, then social, political and economic liberalism need to be integrate instead of social and political liberalism being subordinated to economic liberalism, whether classical economic liberalism (laissez-faire) or neoliberalism (dominance of economic liberalism over social and political liberalism). How likely is control of the levers of power shifting without revolution?

Michael Roberts Blog — blogging from a marxist economist
Wealth inequality
Michael Roberts

See also
The welfare state wasn’t created by enlightened dialogue or “sensible” moderate politics. It was a concession won by workers against bosses through decades of struggle.
Class Struggle Built the Welfare State
Asbjørn Wahl


Peter Pan said...

How likely is control of the levers of power shifting without revolution?

More likely. People prefer reform to revolution, because violence.

Ahmed Fares said...

While wealth and income inequality are increasing, the lifestyle gap between the rich and poor is shrinking.

Monopoly profits are social blessings when they “signal to the ambitious the wealth they can earn by entering previously unknown markets.” So “when the wealth gap widens, the lifestyle gap shrinks.” Hence, “income inequality in a capitalist system is truly beautiful” because “it provides the incentive for creative people to gamble on new ideas, and it turns luxuries into common goods.” —George F. Will quoting John Tamny.

Peter Pan said...

The abolition of debtor's prison is a signal for risk-takers to enter previously unknown markets. Hence, the ability to lose other people's money in hair-brained schemes is truly beautiful, because some of those schemes may one day turn a profit. - Peter Pan quoting Bootstraps McGee.

Ahmed Fares said...

re: Schumpeterian Profits in the American Economy: Theory and Measurement (William Nordhaus)


The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits. We then estimate the value of these profits for the non-farm business economy. We conclude that only a minuscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.

Tim Worstall writes:

William Nordhaus (who taught Paul Krugman when Krugman was a grad student) looked at how much of that value creation entrepreneurs get to keep. The answer is some 3 percent or so. The businesses they start, the inventions, the innovations, produce some value. Those people who start it all off end up with just that 3 percent. Nearly all of the rest of it flows through to us consumers. We get the new thing or the cheaper thing or the better thing, and that makes us better off — we’ve received that value.

We also have another estimation of this same point. Jason Furman (who used to be Obama’s chief economist) talked about Walmart. U.S. consumers save some $263 billion a year out of the store. No, that’s not the everyday low prices, that’s the effect of Walmart’s existence. That someone is selling cheap (and the ability to do so is a result of running a better logistics system than anyone else) means that everyone else has to temper their prices and profit margins to compete. That’s the free market part of this capitalist bit.

Sure, the Walton family have that $100 billion to $150 billion in stock (the tabulation varies over time). But that’s a once-off sum, a capital value. The rest of us are getting $263 billion a year. Convert that to a capital sum and it’s what, oh, say $5 trillion among friends? That’s one of the bargains of the century, isn’t it?

Tom Hickey said...

William Nordhaus? And Tim Worst-of-all?

Anything to explain away obscene wealth inequality as "just deserts."

This goes even further and claims that "innovators" are getting the short end of the stick.

Ahmed Fares said...

Anything to explain away obscene wealth inequality as "just deserts."

The problem with talking about wealth inequality is that it mixes together those who have contributed value to society and those who haven't. I also haven't forgotten that not everyone was given a chance to contribute value, i.e., equality of opportunity, which is what society should be addressing.

This goes even further and claims that "innovators" are getting the short end of the stick.

That's what the numbers show. This from the article by William Nordhaus:

U.S. capitalism grinds Schumpeterian profits into such a fine powder that they can barely be detected in the macroeconomic.

Tom Hickey said...

The number don't "show" that. The model into which data is selectively fed is based on numerous erroneous assumptions that heterodox economists, as well as economic sociologists and economic anthropologists, have pointed out in objection.

The model-builders are either extraordinarily ignorant or they have an ideological bias, or both. Tellingly, they refuse to address the objections, because "the issues are settled science." This is not science but dogmatism.

For example, it assumes methodological individualism, perhaps best characterized by non-economist politician Margaret Thatcher as, "There is no such thing as society," a corollary of which is the only money the government has is taxpayer money.

Peter Pan said...

Competition benefits the consumer more than the participants. Duh.