atomic_fungus (atomic_fungus) wrote,

#144: More of the Same


...and it is more of the same BS we see from "egalitarians" and "progressives".

The piece, in its subtitle, bills itself as "An essay concerning the origins, nature, extent and morality of this destructive force in free market economies." It's actually a diatribe against capitalism. "Wealth and poverty are connected, in fact recent sociological theory shows our institutions routinely design inequality in,..." it goes on to say.

The author begins with a brief discussion of the "excesses" of the wealthy and then proceeds to discuss the issue. He waits six paragraphs before saying "people are going hungry in America" and adding that it is estimated that 3 out of 10 Americans will "face poverty sometime in their lives."

I could go on demonstrating that this is in fact an anti-capitalist rant; but I'll let his quotations speak for themselves:

  • Some corporations' CEOs have been making over 400 times the hourly rate of their lowest worker....
  • To a person receiving the average allocation of $83 per month in food stamps, the inequality is astronomical....
  • Around 20% of American children are living in poverty. An estimated two million are homeless some time during the year, including whole families and people who have full- or part-time jobs....
  • My first point is that these extremes of wealth are connected. While the rich are growing richer, the poor are growing poorer, and this is no coincidence....
  • Scarcity oppresses. And the worst signs of unhappiness cluster in the lowest cuts: we have among the highest national rates of imprisonment, and the Administration concedes there are 5 million hard-core drug users in America and millions of alcoholics, all disproportionately among the poor.
  • Besides hunger and fear, lack of health care, decent education and housing shortages, which make living hard, the poor live with brash opulence in their faces.
  • A survey released by the Milton S. Eisenhower Foundation attributes our enduring levels of violence to "vast and shameful inequality in income, wealth and opportunity among urban poor" who are often "trapped in places of terror"....
  • We do not properly protect our poor.

The article spends a lot of time discussing, in detail, these issues and other similar ones. It discusses a "logical failing" of Adam Smith's economic theories--just one--and insists that this failing is fatal and that others need not be discussed.

His remedies are to suggest taxation, government control, and socialism. (He does not call it that, though.) The manifesto concludes with a game called "Nuts", which demonstrates the destructive nature of greed.

The guy needs a good editor. There's no way to refute his entire article, point by point, without writing a longer article. It is eminently possible for me to do so; but I value my time, so I will deal with the popints I mentioned above and leave the rest up to others.

Some CEOs...

The invocation of the "CEO" label is itself a code word for "greedy capitalist". The oft-quoted statistic about a CEO making 400 times minimum wage is here mangled a bit, but not unreasonably.

There are very few people who can do the job of Chief Executive Officer of a large corporation. It takes a certain type of temperament; a certain set of skills; and a vast array of training and experience. A CEO can reasonably expect to have to know something about business law, real estate law, investing, banking, and insurance law; and liability (tort) law, over and above having some knowledge related to the field his corporation actually functions in. Besides all that, he must have judgement, wisdom, the ability to make decisions under all kinds of circumstances, the constitution of a horse, and the social ability of a successful politician.

A CEO is on call 24/7/52. When a CEO goes on vacation he is never more than a couple of days' travel from someplace where he can run his company; he can't be. His company cannot afford to have him that far out of contact. Most of the time they vacation in places where there are telephones, satellite television, internet connections, and helicopter service which can get them to the nearest airport in a matter of minutes, as needed.

If a CEO makes a mistake, it can be a catastrophe--not just for him but for thousands of other people. Look at the Enron situation: CEO malfeasance caused a great deal of pain and suffering for tens of thousands. A mistake, rather than a deliberate unlawful act, could carry much the same sort of consequence. Even a mistake carries the risk of jail time if the CEO is not careful.

Let's contrast that with the guy 'way down at the other end who makes 1/400th of the CEO's salary.

Virtually anyone can do his job. His job requires him to be able to communicate on a basic level and to show up on time, when scheduled. He is required to work a certain number of hours per week, and if he works more than about 40 hours in a week, subsequent hours are paid at 150% of his regular wage. In practical terms it is rare for any person earning minimum wage to work more than 80 hours in a week at a single job; it happens, but it is not very common--certainly it is not de rigeur.

The minimum-wage earner usually has little responsibility beyond correctly performing his assigned tasks. His adverse decisions may cause minor perturbations to the smooth flow of work, but can usually be corrected without any serious damage to the company's well-being. In general when he punches out for the day, his job-related worries end, and he need not think about his job until he punches back in on his next workday.

Most minimum-wage earners are teenagers, earning spending money, and not supporting a family.

...the average allocation of $83...

If you know any math at all, you learn that an "average" is a slippery concept. What sort of average? Mean? Median? What are the extremes? How big is the sample?

The writer may have meant the most commonly used "average", the "arithmetic mean", where you add all the samples together and then divide by the number of samples. But that's not representative of the actual mean of all the samples unless the samples are fairly close together.

For example, the average--arithmetic mean--of 1, 50, and 100 is a bit more than 50. The average of 1 and 1000 is 500. The average of 1, 3, 5, 7, and 60 is 15.2, where the average of 1, 3, 5, 7, and 9 is 17.8.

Not surprisingly, food stamps are allocated according to a sliding scale. The more money you earn, the less food stamps you get.

He says that the food stamp program is only "0.0017 of the Federal budget"; at around $2 trillion per year that comes to $3.4 billion dollars. In his footnotes there is mention that Federal spending on food aid programs was in the area of $274.5 billion dollars for his sample year. Why single out food stamps, then? Because it represents a tiny, tiny fraction of the total federal budget, of course.

And he does not mention that the food stamp program is not the only food aid program in his article, does he? What does the average "poor" person in the US receive from the other food aid programs? He does not say.

...20% of American children are living in poverty...

Considering how the economy works, 20% is actually a good figure.

Of course, it depends on how you define "poverty". Generally, in the US, "poverty" is defined as a family of four--two adults and two children--living on less than around $20,000 per year of total income, excluding government aid.

Consider that 50% of the income taxes in the United States are paid by 5% of the people--the richest 5%. It means that the remaining 50% is paid by the poorest 95% of the people in the country. (45% of income taxes are paid by the top 1% of income earners.)

Around 10-15% qualify as "upper middle class". Another 40-50% qualify as "middle class", and these folks earn around $40,000 for a four-member family. This leaves 35% of people; of them, maybe 10% of the total number of income earners is "lower middle class", earning above $22,000 but not more than around $38,000 per year. And the rest?

Well, the bottom 20% are "poor", making less than around $20,000 per year.

It could be larger; it could be as much as 40% of the total working population. It depends on what you define as "working" and "population"; if you include illegal immigrants and people who work one day a week, it may be larger.

Even so, being "poor" in the US does not mean you starve. In fact, of late, obesity is a disease of the poor in the United States. One cannot be both fat and starving.

Most of the actual hunger caused by poverty in the United States is not due to the failings of capitalism or the welfare system, but the people who are themselves in dire straits. (I'll deal with that one in a little bit, though.)

...the rich are growing richer, the poor are growing poorer....

In fact if you look at the actual data you will see that the poor in the US are not, in fact, growing "poorer" unless you compare their incomes to that of the rich. Everyone's income increases with time.

The notion that the extremes of wealth are "connected" is at least partially correct. Without "rich", there is no "poor", and vice-versa. But if the author of this manifesto believes that the rich are only rich because they're taking money from the poor, he has either never studied economics at all, or else studied under a Marxist. It is not only untrue; it is impossible.

Consider the case of the US. Assume that 90% of the people in the US earn $100,000 per year. That would be a total aggregate income of around $26 trillion.

The other ten percent--some 29,000,000 of them--get rich by taking the income of the first 90%, and they all make a billion per year. That's $29,000 trillion. where did the extra three orders of magnitude come from?

This example is simplified, but an examination of the actual facts shows that it is not far wrong. The actual truth of a capitalist economy is that the rich do not get rich by taking money from the poor.

If I bend my effort to an economically worthwhile task--ie something that someone is willing to pay me to do--my effort becomes valuable. My labor creates wealth. I trade something--my time and effort--for money. My employer pays me for my time and effort to do a job which is economically necessary. My employer needs me to do this job because if my job is not done, my employer suffers an opportunity cost and doesn't make as much money as it does if my job is done.

Would I do this job if my employer did not pay me? No. (Not just "no" but "hell no".) Does my employer earn more money from my efforts than I do? Yes. Would my employer pay me what I get paid if it only earned as much money from my efforts as it pays me? No. (Again, "not just 'no'....")

The idea that there is only so much money to go around, and the rich get "more than their fair share"--the "zero-sum game"--is not only wrong, but economically impossible. The United States is the richest nation on the planet; it most certainly did not start out as such. The wealth of the United States represents the effort of generations of people, working their asses off. The amount of money that exists in the economy now is many times what it was even a century ago.

Scarcity oppresses.

Here we are told that the numbers of substance abusers and criminals are disproportionately larger among poor than among the affluent. It is implied that this is because they are poor.

The opposite is more true: that substance abuse and criminal behavior are causes of poverty, not effects of it.

An alcoholic makes a poor employee. (Do I need support that assertion?) Because an alcoholic is a poor employee, his earning potential is lower than that of a non-alcoholic. If his alcoholism is severe, he might spend large periods of time unemployed, or working at jobs which are far below his training and ability. This is not a failure of capitalism but a failure of the alcoholic. For all that his problem may be a disease, it is still not capitalism or scarcity which has caused him to become alcoholic; if this were true, everyone who was poor would be an alcoholic, or a significant fraction; and this is not so.

The same goes for criminal behavior. While some criminal behavior is caused by poverty, the causes are not direct. That is to say, people do not turn to a life of crime solely because they don't make more than $20,000 per year. Again, if this were so, a significant fraction of wage earners below the poverty line would be criminals, an assertion which is not borne out by reality.

However, a criminal is likely to spend time in jail, where his income-earning potential is rather sorely limited. Once out of jail, the criminal faces difficulty finding a job because criminals tend to make poor employees. (Someone who broke the law badly enough to warrant a jail term may do it again. Especially in the case of violent criminals.)

Additionally, "...the Administration concedes [emphasis mine] there are 5 million hard-core drug users...." "Concedes"? I find the use of that term interesting, as if "the Administration" has been forced to admit an embarassing statistic which is, in fact, all its fault. *sigh*

In any event, "5 million" is about 1.7% of the total US population. That makes "hard-core drug users" a very tiny minority. Considering that hard-core drug use is both a criminal and an addictive behavior, I fail to see how this is the fault of poverty. I do see how it can cause individual poverty--the person who spends every dime he can on crack won't have any left over for a BMW or food--but I fail to see how poverty can force a person to buy crack and start smoking it.

Besides hunger and fear, lack of health care, decent education and housing shortages, which make living hard, the poor live with brash opulence in their faces.

That's quite a list of things which beset the poor, isn't it?

It's the standard list. Someone who is poor in the US faces a lack of food, health care, "decent education", and housing. And all the while they are forced to see other people living in opulence while they live in fear!

"Hunger"--I dealt with that one already. "Fear"--what can I say? The writer makes no effort to explain what he means when he says the poor live in fear. Fear of starvation? Fear of what? (I earn below the poverty line and I live in fear of terrorism; does that count?)

"Lack of health care": if you go to a hospital with a definite need they can not turn you away untreated, regardless of your ability to pay. That's the law in the US. There are free clinics all over the place to which the poor can go for "routine" medical treatment.

What "lack of health care" means, in this context, is not lack of availability of health care, but that it is not paid for by the government.

"Decent education"--school systems in major metropolitan areas pay a median figure of around $8,000 per student per year. That's 36 weeks per year at a bit more than $200 per week, per student. The United States currently spends more on its public school system than it has at any time in its history--including times when the output was noticeably better. The problem is not money.

I will concede that the public educational establishment in the United States is broken. It's not due to money problems, though.

"Housing shortage": Again, I'm not sure what he means by this. I have never lived anywhere there was a shortage of housing. There are cities where it's a problem; but these cities are cities which have price controls on rent; and price controls always limit supply. Always, always. And people who can afford to pay more for their housing almost never give up their rent-controlled housing so that someone who truly needs it can move in. Most rent control policies do not have means testing; and those that do only means test at the beginning of the lease. (And it is not strictly enforced.)

A survey released by the Milton S. Eisenhower Foundation....

The "vast and shameful inequality" they find endures because our government makes it possible for it to endure. Government welfare policies allow people to survive in cities under circumstances which most Americans would find reprehensible. Local politicians make it impossible for people to protect themselves from crime, allowing it to run rampant in some areas of the cities. Cities enact policies which discourage investment by large corporations.

The problem of urban blight has gotten worse, rather than better, since the enactment of Johnson's "Great Society" in the 1960s. The transfer of literal trillions of dollars from rich to poor has worsened, rather than improved, the situation; and very little of the situation can be blamed on "the rich getting richer and the poor getting poorer", particularly since the transfer payments have been going on for over 40 years, now.

We do not properly protect our poor.

He says that the Great Society and the "War on Poverty" have "...failed to improve opportunity for the poorest Americans." But people of this political bent often use "opportunity" when they actually mean outcome.

It's a fact that people who are poor in America do not generally stay poor. People change income brackets all the time; and the classifications look only at annual income, not actual wealth.

The college student who earns $7 per hour at a hardware store is "poor", but he will not remain "poor" for very long unless he is majoring in something useless. The 65-year-old couple which has an annual income over $100,000, pre-retirement, may only get $18,000 per year of taxable income from their pensions and investments after they retire; they show up as "poor" in the statistics but they are emphatically not since they own a $200,000 home and will not be making any serious changes to their lifestyle.

I was "poor" while in college; I worked in several jobs which elevated me above the poverty line; and after 9/11 I became a displaced worker and am "poor" again.

There is always opportunity for those who are willing to work but not all outcomes are guaranteed to be the same. Some people will do well; others will not.

* * *

Roughly there are, I suppose, two kinds of people. The first divides the world into Good versus Bad. The second divides the world into the Strong versus Weak. These two types never can communicate. Among the latter, the concern is never to be caught weak because hell takes the hindmost, and among them all talk about goodness and ethics is irrelevant, and every effort is given to staying strong. This second type infests corporations. They are refractory to talk of humanity and you can shout all you want and they will not listen; every ounce of their attention is given to their competition.

No discussion of "the first type" is given. I think we are expected to understand implicitly what the first type is like, how he behaves. The author implies, however, that the first type is all right-thinking types who see every word of his manifesto for the truth that it is.

The black-and-white discussion of personality types implies that the second type is "bad". "All talk about ethics and goodness is irrelevant." "This...type infests corporations [emphasis mine]."

Understanding these implications, I think the "first type" is code for "liberal" or "progressive", and "second type" is code for "conservative". Little else makes sense; the utter lack of definition of "first type" fits the pattern typical for liberal screeds: it need not be defined because the reader already knows what "good versus bad" means; it means someone who understands that "liberal=good; non-liberal=stupid/crazy/evil, ie BAD." The writer's constant emphasis on anti-corporation, anti-capitalism, anti-competition would seem to enforce this view.

* * *

There were no surprises in this essay. Conservatives have heard the entire discussion before, too many times; liberals who bring up these issues are never satisfied with even their own solutions to these problems, because they never do any good.

Rich people are too rich, the poor people need help, blah blah blah, etcetera.

America was founded on the idea of opportunity--real opportunity, meaning the chance to do well. The Declaration of Independance lists "the pursuit of happiness" as one of Man's inalienable rights. It does not list "happiness" as an inalienable right.

Time and again, programs have been tried to guarantee equality of outcome--and every time it has been tried, it has utterly failed to bring about equality of anything but misery.

Human nature is essentially capitalist. We will not strive to make our lives better if someone is going to take away the fruits of our labor at gunpoint and redistribute it "fairly" (ie, according to the distributor's notion of "fairness"). If we do not strive to make our lives better, it takes an essential driving force out of the machine which has made the US economy the powerhouse it is.

The entire essay is a denouncement of "greed", including the suggestion that "greed" be labeled a mental illness and treated psychiatrically. But without "greed", the essayist would likely not have a computer on which to write his manifesto, and he would be hard-pressed to find a way to make it available for free, on-line. (He pays a fee to have it hosted; look at the URL. Someone has to want his money--be GREEDY--for that to happen, no?)

In the end it's a collection of sloppy thinking, a melange of Marxism and progressive non-thought masquerading as a serious examination of economics. No matter how you judge "rich" and "poor" there will always be some of each; you cannot escape it. Saying that wealth is the result of greed and calling greed a mental illness will not change anyone's mind about the issue.

Ultiamtely this is where his frustration stems from. "You can shout all you want" but people won't listen to an idiot.

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