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Inequality is the enemy of growth. Discuss

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Jon Southall

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The BBC has recently published an article "Is inequality the enemy of growth?" The suggestion is that inequality is the enemy of growth.

http://www.bbc.co.uk/news/business-29501233

The journalist includes comments such as "There is perhaps something slightly odd about an economic system in a democracy which channels the spoils only to the richest."

Perhaps income inequality can be the enemy of growth.

It depends on what the cause of the inequality is. If inequality happens as a result of some individuals being more productive than others, by means of their own efforts and exertions and not by wronging anyone, then who could complain about this, and how could it cause growth to decline? I cannot see the logic.

If people claim more and more unearned income, then I can see this as the cause of income inequalities which are an enemy of growth. It is the producers who pay, and when they have more to carry on their shoulders, they will end up on their knees. The government is one culprit. Landowners are another.

The Government taxes producers and takes away part of what they have produced by force (if you refuse to pay tax, you will be imprisoned - so tax is a price of permission to produce and trade in that community). When income inequalities increase, currently governments tend to react by collecting more taxes, which leads to even more sub-optimal outcomes through its effect on the interplay between supply and demand. Less is produced and consumed as a result at the macro level - so unearned redistribution due to taxation is an enemy of growth. Redistributing wealth to those who have not earned it, in order to narrow income inequalities is an enemy of growth.

Landowners also tax producers and take away part of what they have produced by force (if you refuse to pay the landowner, you will be evicted from the land). This is a tax on production and not a trade - it is a payment for permission to be free to live and work on that land. Producing nothing, a landowner can demand more and more unearned income from producers who are creating a thriving community. They get rich while the community of producers - particularly the relatively less productive, have their earnings forced down to the level of subsistence. When this is the cause of income inequality, it most certainly is the enemy of growth.

Edited by Jon Southall
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Jon said:

It depends on what the cause of the inequality is. If inequality happens as a result of some individuals being more productive than others, by means of their own efforts and exertions and not by wronging anyone, then who could complain about this, and how could it cause growth to decline? I cannot see the logic.

Thats because your not rationalizing the world through Marxist "logic".....

The government is one culprit. Landowners are another.

Or maybe you are.... Edited by Plasmatic
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Landowners also tax producers and take away part of what they have produced by force (if you refuse to pay the landowner, you will be evicted from the land). This is a tax on production and not a trade - it is a payment for permission to be free to live and work on that land. Producing nothing, a landowner can demand more and more unearned income from producers who are creating a thriving community. They get rich while the community of producers - particularly the relatively less productive, have their earnings forced down to the level of subsistence. When this is the cause of income inequality, it most certainly is the enemy of growth.

 

Did you make this thread just to discuss this again?

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wealth/income inequality is a good thing.

 

references:

 

http://georgereismansblog.blogspot.com/2014/01/the-very-deserving-super-rich.html

http://alibertarianperspective.wordpress.com/tag/income-inequality/

http://mises.org/efandi/ch9.asp

http://www.youtube.com/watch?v=7pq79lYauZo

http://object.cato.org/sites/cato.org/files/pubs/pdf/pa640.pdf

http://www.americanthinker.com/2011/09/inequality_its_a_good_thing.html

http://www.nationalreview.com/articles/229100/fallacy-fairness/thomas-sowell

http://www.cato-unbound.org/2013/03/21/tom-g-palmer/some-thoughts-inequality-wealth-moral-claims-we-may-make-each-other

http://investorjunkie.com/26637/wealth-inequality-america/

http://lubbockonline.com/editorial-columnists/2014-01-20/williams-wealth-redistribution-bad-solution-income-inequality#.UuM5lBAo670

http://www.forbes.com/sites/johntamny/2013/03/03/the-life-enhancing-unrelenting-brilliance-of-income-inequality/

http://www.policymic.com/articles/12319/6-myths-about-income-inequality-in-america

http://www.nydailynews.com/opinion/happy-tale-cities-article-1.1483174?pgno=3

http://paulgraham.com/inequality.html

http://www.american.com/archive/2007/may-june-magazine-contents/the-upside-of-income-inequality

http://www.businessweek.com/stories/2007-07-08/an-upside-to-inequality

http://newasiarepublic.com/?p=28740

http://www.redstate.com/imperfectamerica/2012/05/29/three-cheers-for-wealth-inequality/

http://qz.com/96836/inequality-can-be-a-good-thing/

http://www.examiner.com/article/income-inequality-is-a-good-thing

http://blog.heritage.org/2011/11/15/income-inequality-and-the-founding-fathers/

http://www.nextgenjournal.com/2012/01/extreme-economic-inequality-is-good/

http://www.stlouisfed.org/publications/re/articles/?id=986

http://www.oregonbusiness.com/contributed-blogs/11474-income-gap

http://www.youtube.com/watch?v=OzfDxWYlCkQ

Edited by epistemologue
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Did you make this thread just to discuss this again?

Ironically in the previous thread Snerd said:

Consider a journalist trying to prove that land-ownership has caused a huge disparity in wealth that has been compounded over generations. He may start with the ten richest people in the country and demonstrate that their wealth is primarily the result of the original unfair land-ownership granted to their great-great-great grandfather. he would show that this is true of specific billionaires: Bill Gates, Warren Buffet, Larry Ellison, the Koch brothers, the Walton family, Bloomberg, Zuckerberg, the Google pair. Failing here, he might focus on the more moderately rich. he might focus on the 250K + plus crowd. He might try to show that these people who work for banks, and consultancies, and live in New York apartments also own decently large land-holding (more than any modest farmer). That's the type of reality-check that can make a theory really convincing.

Edited by Plasmatic
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Plasmatic,

Hilarious, you are calling me a Marxist. How many Marxists are arguing for producers to keep the full fruits of their labours. I thought the Marxist mantra was "to each according to his need, from each according to his ability" - the exact opposite of what I was writing about.

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Plasmatic,

Look at the advances in medical science today that was originally made possible by what Nazi scientists did in WW2.

By your logic, you would say those advances are the kind of reality check that would make Nazism "really convincing".

Drop the passive aggressiveness Plasmatic.

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Landowners also tax producers and take away part of what they have produced by force (if you refuse to pay the landowner, you will be evicted from the land). This is a tax on production and not a trade - it is a payment for permission to be free to live and work on that land. Producing nothing, a landowner can demand more and more unearned income from producers who are creating a thriving community. They get rich while the community of producers - particularly the relatively less productive, have their earnings forced down to the level of subsistence. When this is the cause of income inequality, it most certainly is the enemy of growth.

 

Ah... and I mistook you for an Objectivist... this removes all doubt that you are not.

 

Someone with the time and patience can explain to you why this analysis of land ownership is wrong on so many levels.

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SL,

I wish I could find someone who could show me why the arguments I have about land ownership are at odds with Objectivism.

Rand was very clear. The law of causality is the root of ownership. A lot of posters here struggle to comprehend that they were not the cause of something that preexisted them.

If you are saying that because I do not adhere to that irrationality I am not an Objectivist, then you do not know Objectivism. Look at Galt's speech and find the reference.

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Jon said:

 

 

Plasmatic,

Hilarious, you are calling me a Marxist. How many Marxists are arguing for producers to keep the full fruits of their labours. I thought the Marxist mantra was "to each according to his need, from each according to his ability" - the exact opposite of what I was writing about.

First, I said "maybe".....Second, you seem to operate on the premise that one can learn a "mantra" and understand an entire philosophical doctrine. Notice that I did not quote that mantra (from each)so as to isolate that aspect of Marxism. I am referring to Marx's claim that "all property is theft". The notion that all governmental structures began with a land grab by force. That "mantra" is historically Marxist. Just so you know, one can tout a philosophical mantra like Galt's and accept premises that contradict it. Your claims about land are an example of this. What's more is, a philosopher can create a mantra and then misintegrate it with premises that don't follow. Lets add the whole "class warfare" between the "have's an the have not's" from marxist and we have more than a few similarities here....

Jon said:

 

 

Look at the advances in medical science today that was originally made possible by what Nazi scientists did in WW2.

By your logic, you would say those advances are the kind of reality check that would make Nazism "really convincing".

You just built a huge castle out of thin air. Quote anything I said personally that rescues this arbitrary statement from being dismissed.

Jon said:

 

 

Drop the passive aggressiveness Plasmatic.

Drop the pretense of your commands having any significance whatever if you don't like wasting your time... I was not being passive at all. But I would love for you to start a thread on this alleged distinction between aggression and assertiveness so we can evaluate this premise you seem to give so much weight to.

 Edit: I found your thread on this.

 

CT,

We're discussing income inequality and growth, not the (im)moral basis of claiming to own what you were not the cause of. But we can discuss again why you think you are entitled to the unearned if you like.

Your OP rest on the very same premise being debated in your other thread concerning land ownership. Objectivist apply Rands Razor

Edited by Plasmatic
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Jon said:

 

Rand was very clear. The law of causality is the root of ownership. A lot of posters here struggle to comprehend that they were not the cause of something that preexisted them.

 

You did not create the sperm and egg that caused you to become a zygote. Do you own your own body? The point was made by different people before that all creation involves use of the metaphysically given material used.

 

 

Miss Rand said:

 

A notable example of the proper method of establishing private ownership from scratch, in a previously ownerless area, is the Homestead Act of 1862, by which the government opened the western frontier for settlement and turned "public land" over to private owners. The government offered a 160-acre farm to any adult citizen who would settle on it and cultivate it for five years, after which it would become his property. Although that land was originally regarded, in law, as "public property," the method of its allocation, in/act, followed the proper principle (in /act, but not in explicit ideological intention). The citizens did not have to pay the government as if it were an owner; ownership began with them, and they earned it by the method which is the source and root of the concept of "property": by working on unused material resources, by turning a wilderness into a civilized settlement. Thus, the government, in this case, was acting not as the owner but as the custodian of ownerless resources who defines objectively impartial rules by which potential owners may acquire them.

CUI - 10. The Property Status Of Airwaves

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Technically Marx said:

“Here, in small-scale agriculture, the price of land, a form and result of private landownership, appears as a barrier to production itself. In large-scale agriculture, and large estates operating on a capitalist basis, ownership likewise acts as a barrier, because it limits the tenant farmer in his productive investment of capital, which in the final analysis benefits not him, but the landlord.” (Das Kapital, III. Band, 2. Teil, S. 346-47.)[3]

"All property is theft" is a french phrase.

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Landowners also tax producers and take away part of what they have produced by force (if you refuse to pay the landowner, you will be evicted from the land). This is a tax on production and not a trade - it is a payment for permission to be free to live and work on that land. Producing nothing, a landowner can demand more and more unearned income from producers who are creating a thriving community. They get rich while the community of producers - particularly the relatively less productive, have their earnings forced down to the level of subsistence. When this is the cause of income inequality, it most certainly is the enemy of growth.

Jon,

I see that you are from London, so maybe things are different?  I would say that the overwhelming majority of land in the States has been developed since the end of World War II and that land ownership is not something that is un-obtainable or even particularly hard to come by in the US.

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New Buddha,

Yes things are different here. Land can be very expensive depending on the nature of the permissions you are buying, and the location.

Though the same is true of locations in America. Take a typical apartment that you may find in many cities, of a similar standard. Is the rent the same in all cities?

If it varies, what is the cause of that variance? We have ruled out the apartment.

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Plasmatic,

Marx is correct in that short paragraph, about the landlord being the beneficiary of owning the land, to the cost of the producer.

If you believe otherwise, then put forward your reasoning.

"All property is theft" More passive aggressiveness.

I've always wondered the psychological state of individuals who need to resort to sarcasm and jibes to make themselves feel good. Tells me all I need to know about your nature.

I suspect no reasoning will be forthcoming, maybe a cheap throwaway comment or a crowd pleasing rant - who knows. What's the best within you capable of?

Edited by Jon Southall
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Epistemologue,

Most of the links I have looked through - the top four or five, basically make the point I did. If people exert themselves and become more prosperous, there will be more growth and wealth at the same time as income inequality - that's no bad thing.

I think even the less intellectually honest or able in our present company do not disagree that taxation of production is wrong, and is the enemy of growth. Like your link about the 'war on poverty' shows.

I do also think that land ownership is a cause of income inequality. People find it hard to separate the concepts of improvements by individuals and the land which preexisted them. Can someone trade their improvements or enjoy them, tax free? I say yes. Can they demand a whole load of unearned income on the unimproved land? No! But they do and most of the Objectivists here can't identify the self-contradiction.

They say - there is a farm there! The money the landowner gets is for the farm! The land is not unimproved anymore! What they don't realise is the rent on the land is the value of the land if it were unimproved. Anything above that is a payment of interest (for the farm) or wages (to the landlord for his time in managing the contract with the farmers who are using his farm etc). They think this unearned income for the unimproved land is an entitlement under private property, not realising they are crapping over a concept they hold dear to their hearts.

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New Buddha,

Yes things are different here. Land can be very expensive depending on the nature of the permissions you are buying, and the location.

Though the same is true of locations in America. Take a typical apartment that you may find in many cities, of a similar standard. Is the rent the same in all cities?

If it varies, what is the cause of that variance? We have ruled out the apartment.

The cause of the variance in land prices in an area is the variance in the past actions of the land owners in that area. If they built companies, tall buildings, infrastructure on their lands, the price will be high, if they didn't, the price will be low.

One thing is for certain: if the land was unowned, no one would've built anything on it. Not unless the state, which would become the de facto owner of the land in the absence of private property rights, also assumed ownership of the population (which is what happens when communism or fascism are implemented as a replacement for the property rights system socialists abolish).

Plasmatic,

Marx is correct in that short paragraph, about the landlord being the beneficiary of owning the land, to the cost of the producer.

If you believe otherwise, then put forward your reasoning.

The "reasoning" is in the mind of the producer, who freely agreed to work for the landlord. He did it because, for some reason, he thought doing so would benefit him. The underlying motivation for allowing people to freely make that choice is the belief that humans are capable of rational thought, and acting in their rational self interest.

Marx is only right if the producer was wrong. His claim rests on the assumption that people who work for others by their own free will, for either a wage or a share of the profits, are generally wrong, and that some mystical force he terms "the people" would be able to make far better decisions for them.

 

"All property is theft" More passive aggressiveness.

I've always wondered the psychological state of individuals who need to resort to sarcasm and jibes to make themselves feel good. Tells me all I need to know about your nature.

The "psychological state" of individuals who resort to sarcasm and jibes is contempt for their subject. When somebody's position is absurd and stupid enough, satire is the best way to show it.

And sarcasm and jibes are not what passive aggressiveness is. Doesn't seem like you know what passive aggressiveness is. So you should probably stop saying it.

Edited by Nicky
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Nicky, "Passive-aggressive behavior is the indirect expression of hostility, such as through procrastination, sarcasm, stubbornness, sullenness, or deliberate or repeated failure to accomplish requested tasks for which one is (often explicitly) responsible." My usage was correct.

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