as covered by TechCrunch
15 responses to “The coming Tech Crunch”
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Link on title (with some odd spaces corrected):
techcrunch.com/2014/02/15/vcs-on-inequality-unemployment-…😉
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I hope you find time to more thoroughly develop the ideas that you started on in the video. I think this economic divide is going to be a defining issue of the next generation (which both sides of the political spectrum will try to capitalize on but not necessarily try to fix).
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Since I watched the whole video I feel I can now post a comment. It was a good and brave speech. Clearly Steve is not a libertarian elitist. He cares about humanity, he has a good heart as someone well known has said. Wealth disparity is not ,I think, a function of technological advancement. Wealth disparity has been around since feudal times and before. Think about the French and Russian revolutions the English class system and so on. Great wealth is created through technological innovation but the real wealth really does get distributed through the means Steve describes. I resent google’s, apple’s, even microsoft’s wealth not one wit because their products improved my life and productivity providing space in which I could be more creative. It is good to have a concept of what a good economy is. I think a good economy is one in which there exists a wide variety of high quality goods and services that at least a significant majority of people can afford to purchase. To achieve this the economic ecosystem needs to be a bit like a rain forest where resources get used and reused very efficiently. Large cities are like this I think. Money is earned and spent and re-spent quickly and thereby does lots of work. The more work a dollar does the better of the community is because that it what money is for. Its primary purpose is as a medium of exchange for goods and services. Having said what a good economy is like and that technological advance does not correlate with income inequality I guess I should say where I think income inequality does come from. Quickly put I think it is due to the way the financial framework operates. Low income people earn wages and have fewer physical assets. Inflation erodes the value of wages for significant periods before there is an adjustment. Business owners see price changes immediately and adjust accordingly. Over time this effect becomes significant. If most of your assets are in stocks or land and buildings etc the value of these things rise automatically with inflation. Poorer people do not benefit from this effect. Also wealthy people generally have quick access to capital. This means they are well placed to take advantage of opportunities. Over time these things lead to increasing wealth disparity especially when the political and economic framework is remains essentially stable. Big disruptions like wars tend to flatten everything and even things out for a while. Here is where I get political but really I think I am looking at what really happens and trying to see a way for a bit of a reversal in income inequality but also a general improvement in the economy. Recently I saw Noel Chomsky video in which he considered the insanity of having wealth, work and idle hands. The wealth was the strength and resources of the US economy. The work was all the infrastructure that needs repair and upgrade and this includes all things that come under the banner of public works and the idle hands are the unemployed. Money that goes to people on a low income gets spent and repent. Money that goes to rich people gets saved or invested. In other words the money rich people get does less work. Its pretty clear by now that money flows up the pyramid not down. So much for trickle down. The main way money gets redirected to the bottom of the pyramid is by the government. Government spending and by rules like minimum wages and conditions of employment. The government is the heart of the economy. If the government stopped taxing and spending and abolished minimum wages the economy would soon grind to a halt with massive wealth disparity. If the government taxes progressively and spends effectively the money does more work and there is more demand for goods and services. The more demand there is the better the economy is. Henry Ford had the right idea. He knew he needed to make a product that people could afford and one way to help that was to pay his workers enough that they could afford to buy his cars. He knew how to create demand for his products and saw the fruits of the increased productivity that his manufacturing technology created go to those who his technology had helped become more productive. There is an important lesson here. There is no point having increased productivity without increased demand. If the vision of a future Utopia is realized, as I think it can be, there must be wide spread demand for the fruits of the increases in productivity. One rich person can only provide so much demand. Many poor people are a potential source of huge demand but they need to be able to access the fruits of increases in productivity so that their demand can be realized. A progressive tax system in a government that taxes and spends adequate minimum wages and increased public debt in line with increased GDP are one way to achieve this. Bear in mind that the more work that money does the more tax revenue is generated and the more the government can spend and so on. On a final note in a very long post on a private blog I would like to mention that if people are replaced by robots that are powered by sunlight and can be repaired by other robots where is the demand for their productivity going to come from? Realistically humans not involved in high level tech will need to have a very rich cultural life or risk being very bored and unhappy. Hopefully this boredom would not be accompanied by hunger cold and sickness. What sort of society would allow that to happen? I have saved this elsewhere so feel free to delete if to long etc.
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@scleroplex – yes, and those power law distributions remind me of Albert-László Barabási’s book Linked:
These common patterns arise when a network grows with preferential attachment of new members, and in our modern network economy, they should emerge even more strongly.
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@Simon Keith simnonkeith1 – You might like the NYT review of Piketty’s new book Capital in the Twenty-First Century:
Pikketty defies left and right orthodoxy by arguing that worsening inequality is an inevitable outcome of free market capitalism.
Piketty proposes instead that the rise in inequality reflects markets working precisely as they should: “This has nothing to do with a market imperfection: the more perfect the capital market, the higher” the rate of return on capital is in comparison to the rate of growth of the economy. The higher this ratio is, the greater inequality is.
There are a number of key arguments in Piketty’s book. One is that the six-decade period of growing equality in western nations – starting roughly with the onset of World War I and extending into the early 1970s – was unique and highly unlikely to be repeated. That period, Piketty suggests, represented an exception to the more deeply rooted pattern of growing inequality.
According to Piketty, those halcyon six decades were the result of two world wars and the Great Depression. The owners of capital – those at the top of the pyramid of wealth and income – absorbed a series of devastating blows. These included the loss of credibility and authority as markets crashed; physical destruction of capital throughout Europe in both World War I and World War II; the raising of tax rates, especially on high incomes, to finance the wars; high rates of inflation that eroded the assets of creditors; the nationalization of major industries in both England and France; and the appropriation of industries and property in post-colonial countries.
The six decades between 1914 and 1973 stand out from the past and future, according to Piketty, because the rate of economic growth exceeded the after-tax rate of return on capital. Since then, the rate of growth of the economy has declined, while the return on capital is rising to its pre-World War I levels.
“If the rate of return on capital remains permanently above the rate of growth of the economy, it generates a changing functional distribution of income in favor of capital and, if capital incomes are more concentrated than incomes from labor (a rather uncontroversial fact), personal income distribution will also get more unequal — which indeed is what we have witnessed in the past 30 years.”
The 2100-year view:
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Thanks for the link Steve. There is a lot of interesting discussion in the comments thread.
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and now comes the news about an industry-wide blacklist system –
http://www.motherjones.com/politics/2014/02/google-apple-class-a...which apparently contributed to inequality by consciously breaking numerous laws
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