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Where is more poverty: Russia or the United States

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We recently read that some are claiming the economy is doing well. But many see that in the USA there is still a tremendous amount of poverty. If the economy is doing well, there are a few families who take all the wealth generated by that work, and more and more people are falling into extreme poverty.

 

For the US look at:

 

http://www.worldhunger.org/articles/Learn/us_hunger_facts.htm

 

where it says:

 

In 2013, there were 45.3 million people in poverty. and

19.9 million Americans live in extreme poverty.

 

Compare to poverty in Russia at:

 

http://www.telegraph.co.uk/sponsored/rbth/society/9775359/russia-rich-poor-divide.html

 

where it says:

 

18 million Russians ... live below the poverty line in 2011.

 

 

More people in America live in extreme poverty than people in poverty in Russia. Who is doing better?? Obama or Putin? I know, Obama inherited bush's disaster, but he has yet to act to restore our nation. He has done a few good things, but leaving this disaster for the next republican to build up even more poverty is unconscionable

 

For people in America who have to work three part time jobs a day and still can't afford to have a family, can;t afford food, can't afford medical care, the American dream is absent.

 

If the US can't do better than a collapsed communist state, then something is dramatically wrong. We have to do better than this.

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The US has more than twice Russia's population...Russia, by almost any measure, is doing much worse than the US.

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According to the OP article on Russia, poverty and hunger are declining, indicating a rising standard of living for ordinary Russians.

 

http://www.telegraph.co.uk/sponsored/rbth/society/9775359/russia-rich-poor-divide.html OP article

Dig deeper, though, and the picture is slightly more nuanced. GDP has jumped from $260bn in 2000 to $1.86 trillion today, and fewer and fewer Russians live below the extreme poverty line – a signal that rising living standards have trickled down.

According to Natalya Bondarenko, a sociologist at the Levada Centre, in the mid to late Nineties, 15 to 20pc of Russians considered their income enough only to buy food as opposed to just 5 to 6pc of Russians who say the same thing now.

Although the US may currently have less poverty than Russia, the US is catching up. While poverty is decreasing there, it is increasing here.

http://www.worldhunger.org/articles/Learn/us_hunger_facts.htm OP article

Six years after the onset of the financial and economic crisis, hunger remains high in the United States. The financial and economic crisis that erupted in 2008 caused a significant increase in hunger in the United States

 

In the US, there is no trickle-down, wages are static, and the middle class continues to shrink while the numbers of poor grow.

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And one wonders what the effects of the ongoing Russian financial crisis will be over the next few years.

 

One also wonders why anyone is buying the "trickle down" argument just because it is applied to Russia.

 

Look up "Russian demographic crisis" and then try to sustain the point that the US is doing worse than Russia. It can't be done.

 

BTW, the fact that the US is doing better than a dystopian police-mafia state should not be considered a point of pride or a reason for complacency.

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The point is that there is entirely too much poverty in the USA and it is increasing. Certainly it is more nuanced that a few lines from a few articles. And these comparisons can be made in many ways. But the fact remains that the US has way more people in poverty than Russia. With what is reported about the US economy there should be almost no poverty.

 

I take it a step further. The level the government calls poverty is too low. I would argue that if someone is working and cannot afford to pay for his own shelter, food, medical care, education, family, have a bit left over, and pay taxes, they are not making a sustainable living. I would further argue that this is the situation for about 50% of Americans.

 

We are being robbed of the fruit of our labor. We need to treat those who are stealing from us as robbers, or at least properly identify them as robber barons.

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I agree with all of the above. The US has more people in poverty than Russia, it also has more people in poverty than, say, Chad because the US population is 300 million and Chad's is only 12.8 million.

 

In reality since Russia's population is less than half the US the poverty rate in Russia is about twice as high as in the US.

 

I agree there should be no poverty in the US, it is more than wealthy enough, and the government definition of poverty is probably skewed towards underestimating the suffering of the poor. You see an analogous situation with unemployment where the "natural" unemployment rate keeps rising over time...

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The US has about 330 million people, reporting 45.3 million in poverty

 

Russia has about 143 million people,reporting 18 million in poverty.

 

The US rate is therefore: 13.7% in poverty

 

The Russia rate is therefore: 12.6%

 

Very close to the same, certainly within the margin of error.

 

I would argue that it would then be difficult to claim the US has a better economy than the failed communist state.

 

As others have stated, the rate of poverty in Russia is declining, while poverty in the US is increasing. It won't be long before the US rate of poverty far exceeds even Russia.

 

And now we have at least one popular republican candidate for president openly stating they need to work to lower wages of working Americans even further to be competitive in the world. Vote for the GOP for your next pay cut, that is if you have a job.

 

These stats give lie to the republican meme that there exists opportunity in the USA today.

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One also wonders why anyone is buying the "trickle down" argument just because it is applied to Russia.

 

If you're referring to the author, OK. The term "trickle down" originated when Will Rogers, said during the Great Depression that "money was all appropriated for the top in hopes that it would trickle down to the needy." It was said in jest and IMO, has no basis in reality.

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The US has about 330 million people, reporting 45.3 million in poverty

 

Russia has about 143 million people,reporting 18 million in poverty.

 

The US rate is therefore: 13.7% in poverty

 

The Russia rate is therefore: 12.6%

 

Very close to the same, certainly within the margin of error.

 

I would argue that it would then be difficult to claim the US has a better economy than the failed communist state.

 

As others have stated, the rate of poverty in Russia is declining, while poverty in the US is increasing. It won't be long before the US rate of poverty far exceeds even Russia.

 

And now we have at least one popular republican candidate for president openly stating they need to work to lower wages of working Americans even further to be competitive in the world. Vote for the GOP for your next pay cut, that is if you have a job.

 

These stats give lie to the republican meme that there exists opportunity in the USA today.

 

My mistake, I misread the number of people in "extreme poverty" in the US as 19M when it was actually the 45M.

 

 

 

If you're referring to the author, OK. The term "trickle down" originated when Will Rogers, said during the Great Depression that "money was all appropriated for the top in hopes that it would trickle down to the needy." It was said in jest and IMO, has no basis in reality.

 

I'm referring "to whom it may concern," you might say. I think the idea that wealth has "trickled down" to the Russian people from the oligarchs is absurd.

I'm not sure what exactly Rogers was talking about, but the New Deal and WW2 combined resulted in an enormous and unprecedented transfer of wealth downward from the highest reaches of the US economy.

 

In any case what matters a lot more than the numbers below the poverty line is measures of real welfare. Again, look up "Russian demographic crisis' and you will see the claim that the people of Russia are better off than the people of the United States is simply not sustainable.

 

Of course, we do not need to let this get in the way of working for real and necessary change in the States. It's my belief that Russia is what the US will be after another couple of decades of "business as usual," and I certainly do not underestimate the similarities between the predatory systems existing in Russia and in the United States.

 

Of course, one point that hasn't yet been brought up is the role of the US and the West in Russia's current situation. The dismantling of Soviet Communism was, to put it lightly, not well-executed.

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My mistake, I misread the number of people in "extreme poverty" in the US as 19M when it was actually the 45M.

 

 

...

In any case what matters a lot more than the numbers below the poverty line is measures of real welfare. Again, look up "Russian demographic crisis' and you will see the claim that the people of Russia are better off than the people of the United States is simply not sustainable.

 

Of course, we do not need to let this get in the way of working for real and necessary change in the States. It's my belief that Russia is what the US will be after another couple of decades of "business as usual," and I certainly do not underestimate the similarities between the predatory systems existing in Russia and in the United States.

 

Of course, one point that hasn't yet been brought up is the role of the US and the West in Russia's current situation. The dismantling of Soviet Communism was, to put it lightly, not well-executed.

I think we agree more than disagree. I was not trying to claim that people in Russia are better off than in the US, just making a point about poverty. There are a great many comparisons which can be made which show people in the US are better off. I picked this example, because there is a long history of claims about the superiority of the US economically over communist countries, and better than failed economies.The US economic system is "supposed" to be economically superior to a failed communist state, and yet for millions that is not the case.

 

I might suggest it won't take decades at the rate the US is declining.

 

There are many things that the US did not execute well. Consider the middle east for another horrible example.

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I think we agree more than disagree. I was not trying to claim that people in Russia are better off than in the US, just making a point about poverty. There are a great many comparisons which can be made which show people in the US are better off. I picked this example, because there is a long history of claims about the superiority of the US economically over communist countries, and better than failed economies.The US economic system is "supposed" to be economically superior to a failed communist state, and yet for millions that is not the case.

 

I might suggest it won't take decades at the rate the US is declining.

 

There are many things that the US did not execute well. Consider the middle east for another horrible example.

 

Yeah, well I perhaps overreacted since I've been arguing with Leninists who actually think that Putin is "better than the West" (that's a direct quote).

We do obviously agree more than we disagree.

You should do some research about the immediate aftermath of the Soviet Union's collapse. I would certainly agree that many people in the US are basically facing third-world conditions, which stems from the fact that our institutions have been hijacked by the wealthiest among us.

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Let's say there is Artificial Intelligence/ er a super computer that continues to surpass itself in intellect and becomes smarter than humans by several orders of magnitude. Let's just say for the sake of argument that what we think of as intelligence is really quite dumb. Like E. O. Wilson, the idea of the ant, this insect that basically has no brain by itself yet does extraordinary things as a species, or if you will like a superorganism, the colony of ants does amazing things, shouldn't it be studied much much more than it is.

 

The ants shall inherit the Earth. Well, the point here is biologically speaking, NI might be more advanced than say AI, it just hasn't had time to realize this. There are a lot of pitfalls along the way.

 

It's like a Jello ratio/ a liquid state that holds the semi state of a solid.

 

When I studied economics long ago, it was always in the micro sense about say, renting versus owning, or about economy of scale, where the average cost is driven down by fixed cost being offset by mass production. This is of course offset by macro economics, whereby monopolies drive down prices and key owners or producers of goods become many magnitudes richer than average folks.

 

What's AI to do about this? If AI's goal is to rationally find some equitable singularity, if the condition it seeks, or the constraint for sustainability is based on some equitable distribution of wealth?

 

What is NI, the ant, the mind in it's natural human state? Natural intelligence. I call it the next big thing.

 

Go there, see the people in other countries that have ideas that surpass our own, study history, see what works. What works? Well, think of finite resources. Consider the human brain, emotions, sociology, logic.

 

The US has too many in poverty. China, which has at least three times as many people as the U.S. has way too many people in poverty, India does too. The world is soaked in poverty and imbalance. There is clear evidence of tremendous waste of resource, and all of this is happening at the same time that people are in poverty.

 

Why? It's worth discussing at least.

 

Peace!

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There have been predictions for computers which exhibit intelligence greater than human for quite some time. I think it is valuable to speculate on what problems they might attempt to solve. Which problems are more important and should be prioritized as high on the list. I would suggest that the distribution of wealth is one of those problems.

 

There is a system to distribute wealth, and currently it takes the fruit of the labor of billions of people and distributes most of it to a few wealthy families. We need a better system. It is not redistribution, it is proper distribution. Although some redistribution is needed.

 

How to equitably distribute the wealth generated? Great question, and when the greater intelligence provides an answer I will be very interested. In the meantime we can speculate.

 

I would suggest that with current manufacturing knowledge, there is the possibility of providing every person with the necessities of life. There is enough food, yet people starve because of distribution/political issues. That demonstrates that in many cases the "leaders" of nations do not have the interests of the people in mind.

 

So if every person has all his needs provided for, will people work? I suggest most will. They will still take jobs, but not just any job. They will take those jobs that they believe are beneficial to themselves, to their communities, to their nations, and to the world. Those who don't take jobs will still need to do something. Looking back at history of science, many of those who made significant advances had found someone to pay enough to take care of their needs, and the science is what they did when they didn't have to work. I would expect an increase in the Arts and sciences as people become free to pursue those endeavors.

 

This type of distribution will arrive sooner or later as our current method results in one person owning everything and everyone else in the world in abject poverty. The billions of people will by force take the ill gotten gains of the one person owning everything, then hopefully distribute to everyone. Of course they may take it before all the wealth gets down to just one person.

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Imagine that you created a perfect utopia with 100 people. No criminals. No lazy bums. No racists. No megalomaniacs. Give them all equal resources, equal rights, equal opportunities.

 

Then, allow them to work together for 10 years. When you come back, your utopia will have changed. Whether by skill or luck, some will have accumulated more resources than others. Some will choose to enjoy life in the here and now while others save for the future. Some will find their natural talents in greater or lesser demand than others. Some will work more industriously...some less.

 

When you come back and see what has become of your utopia, what will you do? Do you take from those who have saved and give to those who have spent? Maybe you put rules in place that don't allow saving at all?

 

The best way to redistribute wealth is to let people freely give it to those who provide the most value to them. No one is "stealing" my money. The only entity than can take my money without my consent is the government (and even then, I get to vote).

 

Bill Gates doesn't steal my money. I am free to buy his products...or not. My employer doesn't steal my labor. I don't have to work there if I don't want to. I really don't understand why so many people feel mistreated. Does everyone think they deserve to be a millionaire by virtue of their ability to consume oxygen? When you provide goods or services that are valued by your fellow citizens, you are compensated appropriately. If you find yourself underpaid, the most likely explanation is that your skills aren't as valuable as you think they are.

 

In the USA you are free to pursue whatever life you want. Some of you will launch an internet startup and others will get drunk and watch porn. Whatever. Freedom is awesome...choose your own goals in life. But, I do get ticked off when the drunk porn watcher wants to take the entrepreneur's cash.

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I need to expand a bit on that above post. Those who prosper should definitely pay a larger proportion of their wealth (taxes) toward the needs of society (health, safety net, education, services, defense, etc). That wasn't my point. I'm only arguing against 'wealth redistribution' for it's own sake. I disagree with the premise that people should not be allowed to accumulate wealth as well as the implication that there's something inherently immoral about accumulating wealth.

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Imagine that you created a perfect utopia with 100 people. No criminals. No lazy bums. No racists. No megalomaniacs. Give them all equal resources, equal rights, equal opportunities.

 

Then, allow them to work together for 10 years. When you come back, your utopia will have changed. Whether by skill or luck, some will have accumulated more resources than others. Some will choose to enjoy life in the here and now while others save for the future. Some will find their natural talents in greater or lesser demand than others. Some will work more industriously...some less.

 

When you come back and see what has become of your utopia, what will you do? Do you take from those who have saved and give to those who have spent? Maybe you put rules in place that don't allow saving at all?

 

The best way to redistribute wealth is to let people freely give it to those who provide the most value to them. No one is "stealing" my money. The only entity than can take my money without my consent is the government (and even then, I get to vote).

 

Bill Gates doesn't steal my money. I am free to buy his products...or not. My employer doesn't steal my labor. I don't have to work there if I don't want to. I really don't understand why so many people feel mistreated. Does everyone think they deserve to be a millionaire by virtue of their ability to consume oxygen? When you provide goods or services that are valued by your fellow citizens, you are compensated appropriately. If you find yourself underpaid, the most likely explanation is that your skills aren't as valuable as you think they are.

 

In the USA you are free to pursue whatever life you want. Some of you will launch an internet startup and others will get drunk and watch porn. Whatever. Freedom is awesome...choose your own goals in life. But, I do get ticked off when the drunk porn watcher wants to take the entrepreneur's cash.

 

 

I need to expand a bit on that above post. Those who prosper should definitely pay a larger proportion of their wealth (taxes) toward the needs of society (health, safety net, education, services, defense, etc). That wasn't my point. I'm only arguing against 'wealth redistribution' for it's own sake. I disagree with the premise that people should not be allowed to accumulate wealth as well as the implication that there's something inherently immoral about accumulating wealth.

 

 

 

This appears to be a reworking of the thread:

Bias, Prejudice, Discrimination, Ideological Purity...Enemies of Logic

 

It strongly emphasizes the Conservative theme of "Blame the Victim".

 

It does not take the enormous scale of wealth disparity into account between the top 2% and the rest of us. Nobody who has billions of dollars truly earned it. Nevertheless, they can be taxed at very high rates and still enjoy opulent lifestyles and plenty of wealth in reserve. The tax system needs to be highly progressive and foolproof as we can make it. As of now, it is leaking like a sieve from the top income brackets.

 

There are too many ways for the ultra-wealthy to avoid taxes today. The main way is to hide income by depositing earnings in secret, offshore bank accounts. We need to make and enforce laws preventing the hiding of income. Also, in order to end a growing aristocracy of wealthy, idle heirs, we need to enforce estate taxes.

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I need to expand a bit on that above post. Those who prosper should definitely pay a larger proportion of their wealth (taxes) toward the needs of society (health, safety net, education, services, defense, etc). That wasn't my point. I'm only arguing against 'wealth redistribution' for it's own sake. I disagree with the premise that people should not be allowed to accumulate wealth as well as the implication that there's something inherently immoral about accumulating wealth.

 

The problem with your post, as I see it, is that it is based on a false premise. No one really "earns" anything in this economy.

 

 

Your view of the marketplace where all is perfectly just, and what people are paid always matches their productive contributions to society, is not borne out empirically despite more than a century of effort by economists to prove it.

 

Though you probably don't know it, your view is rooted in a particular economic theory, called the Marginal Productivity Theory of Labor Value. It postulates that wages match the "marginal contribution" of a worker--that is, a worker's wages match the amount of value the company would lose by firing that worker.

 

Now, this chart here destroys that view:

 

04e656c70.png

 

We can see that it is obviously untrue that productivity matches wages. You are not paid "what you are worth." Maybe some people are paid what they're worth, but only by accident, not by design.

 

This is of particular interest, because the economist who came up with Marginal Productivity Theory in the late 19th century, John Bates Clark, was doing it specifically to provide a continuing justification for capitalism (as opposed to socialism). He came right out and said if this theory is wrong then capitalism becomes ethically indefensible.

 

Well, the theory is wrong. The general disconnect between wages and productivity isn't the only proof of this--one study looked at the real wages earned by people who worked at Burger King around the world. They were performing the exact same job function (I forget what it was exactly), and so contributing exactly the same amount to the productive process, and yet in different countries the wages were different.

 

The reason for this is that wages are the result, not of impersonal market forces, but of the balance of power between employers and employees (this is the view that Adam Smith takes in Wealth of Nations).

 

Now, if you notice, this theory--we might call it the "comparative power theory of wages" actually accomodates some of the observations which appear to be explained by marginal productivity theory. So for instance, lawyers are paid more highly than janitors not because lawyers are "worth more" per se (my belief is they are worth more but this difference cannot be precisely measured so there is no way to confirm it) but simply because their skills are rarer, and they thus have more power relative to their employers than janitors or other unskilled workers do.

This is also why unions and legislation can increase wages, because they can affect the balance of power between employees and employers.

 

Now, what does all this mean? In my view, the realization that the private economy is characterized by what is in essence a power struggle, the position that the government must keep its hands off and not engage in wealth redistribution becomes ethically indefensible. The law of the jungle is not a way to organize a civilized society.

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Asoka, you've lost me. How is that you believe "no one really earns anything"? My house didn't build itself. I didn't find it abandoned beside the road. I earned it through hard work. I provided value to others and was given value in return.

 

I never said wages match productivity. That's an entirely different question. What I said was that you're compensated according to the value of the services you provide. If your services are common and easily replaced, then they are less valuable. That's why Burger King employees make more/less depending on their location. It's ridiculous to think your work has intrinsic immutable value based on your skill at performing difficult tasks; the value is determined by your fellow citizens depending on the current demand/supply for those skills. It's an awesome mechanism. Too few plumbers? The value of plumbing skill goes up, encouraging more people to learn plumbing.

 

When you provide services that your fellow citizens value highly, yet find in rare supply, you are amply rewarded. It doesn't matter if your name is Zuckerberg or Winfrey, that's how you get rich. For delivering desirable and rare services, they were voluntarily compensated by millions of everyday people.

 

The "balance of power" and "power struggle" you mention are better described as supply and demand. It's not a case of evil oligarchs holding down serfs. It's a case of too many people with low-value skills. It's not the sinister CEO's fault that many people can't read or do basic math. And, you can't blame employers for creating low-paying jobs for employees with low-value skills. They're essentially doing the best they can with the resources available.

 

I am not blaming the victim for the condition of our workforce. I blame our education system, media, and parenting. We have created a population with aspirations that far exceed their ability. I do blame folks for trying to take from others instead of increasing the value of their own labor.

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Asoka, you've lost me. How is that you believe "no one really earns anything"? My house didn't build itself. I didn't find it abandoned beside the road. I earned it through hard work. I provided value to others and was given value in return.

 

 

I mean that the moral question of who has earned what cannot be answered by reference to economic outcomes. Your view, and the "mainstream" view, is that "market outcomes" are just by definition. This is a non-explanation, a non-answer. It is in reality completely immoral to rely on the law of the jungle for the organization of society.

I never said wages match productivity. That's an entirely different question. What I said was that you're compensated according to the value of the services you provide.

 

To say "you're compensated according to the value of the services you provide" is to say "your wages match your productivity." It is not an "entirely different question," it is literally the exact same thing.
If your services are common and easily replaced, then they are less valuable. That's why Burger King employees make more/less depending on their location. It's ridiculous to think your work has intrinsic immutable value based on your skill at performing difficult tasks; the value is determined by your fellow citizens depending on the current demand/supply for those skills. It's an awesome mechanism. Too few plumbers? The value of plumbing skill goes up, encouraging more people to learn plumbing.

When you provide services that your fellow citizens value highly, yet find in rare supply, you are amply rewarded. It doesn't matter if your name is Zuckerberg or Winfrey, that's how you get rich. For delivering desirable and rare services, they were voluntarily compensated by millions of everyday people.

 

The "balance of power" and "power struggle" you mention are better described as supply and demand. It's not a case of evil oligarchs holding down serfs. It's a case of too many people with low-value skills. It's not the sinister CEO's fault that many people can't read or do basic math. And, you can't blame employers for creating low-paying jobs for employees with low-value skills. They're essentially doing the best they can with the resources available.

 

I am not blaming the victim for the condition of our workforce. I blame our education system, media, and parenting. We have created a population with aspirations that far exceed their ability. I do blame folks for trying to take from others instead of increasing the value of their own labor.

 

You have it backwards.

 

The theory of supply and demand can explain much of what we see in the labor market, but not all of it.

 

For instance, your imaginary scenario about plumbers: let's actually look at a real-world example: Fortune 500 CEOs. The demand for Fortune 500 CEOs remains constant at 500. The number of MBAs in the United States, meanwhile, has massively increased in the years since 1980. In that same time frame, the pay of Fortune 500 CEOs skyrocketed!

 

How can supply and demand explain this? You have constant demand, increasing supply, yet wages...increase? How does this work?

 

The answer, obviously, is that a variety of factors increased the power of CEOs relative to their employers.

 

Supply and demand is only one factor that influences the power balance between workers and employers. There are many other factors as well and supply and demand simply cannot account for a great deal of what actually goes on in the real world.

 

Bottom line, you are saying that productivity always equals wages (because, you know, supply and demand--the magic of the market ensures it!). This is very wrong.

 

The reason for stagnating wages has nothing to do with the declining skills of workers (by any measure the current US workforce is better educated and has more skills than any previous generation). The reason for stagnant wages is political changes in the structure of the US economy. There are two interrelated parts of this story: one is the destruction of labor unions, which allowed employers to foist lower pay cuts on workers almost at will; the second is the emergence of the "maximizing shareholder value" ideology of business management. As the name suggests this demands running businesses in such a way that the shareholders are the principle beneficiaries, so there is very little money left for wage increases commensurate with the productivity increases we see in the economy.

 

I do blame folks for trying to take from others instead of increasing the value of their own labor.

 

I blame the rich for using their control over investment and enterprise to appropriate massive amounts of wealth from the people.

 

 

On a different note, redistribution of wealth is desirable from an instrumental perspective, it isn't merely a moral imperative. Read your Keynes. Redistribution is frequently necessary to maintain effective demand so the economy can keep growing. We are currently in an economic crisis caused by greatly depressed demand. Consumption was mainly driven by debt through the late 90s until 2007 when the debt bubble collapsed--and the underlying reason for this is that wages are too low.

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. The law of the jungle is not a way to organize a civilized society.

 

The law of the jungle applied to civilized society has often been called Social Darwinism.

https://en.wikipedia.org/wiki/Social_Darwinism

Social Darwinism is a modern name given to various theories of society that emerged in the United Kingdom, North America, and Western Europe in the 1870s, which claim to apply biological concepts of natural selection and survival of the fittest to sociology and politics.[1][2] Economically, social Darwinists argue that the strong should see their wealth and power increase while the weak should see their wealth and power decrease. Different social Darwinist groups have differing views about which groups of people are considered to be the strong and which groups of people are considered to be the weak, and they also hold different opinions about the precise mechanism that should be used to reward strength and punish weakness. Many such views stress competition between individuals in laissez-faire capitalism, while others are claimed to have motivated ideas of eugenics, racism, imperialism,[3]fascism, Nazism, and struggle between national or racial groups.[4][5]

 

 

 

wages are the result, not of impersonal market forces, but of the balance of power between employers and employees (this is the view that Adam Smith takes in Wealth of Nations).

 

Now, if you notice, this theory--we might call it the "comparative power theory of wages" actually accomodates some of the observations which appear to be explained by marginal productivity theory. So for instance, lawyers are paid more highly than janitors not because lawyers are "worth more" per se (my belief is they are worth more but this difference cannot be precisely measured so there is no way to confirm it) but simply because their skills are rarer, and they thus have more power relative to their employers than janitors or other unskilled workers do.

This is also why unions and legislation can increase wages, because they can affect the balance of power between employees and employers.

 

Now, what does all this mean? In my view, the realization that the private economy is characterized by what is in essence a power struggle, the position that the government must keep its hands off and not engage in wealth redistribution becomes ethically indefensible.

 

This is why labor unions are needed. One of the main things government can do to to prevent a lopsided relationship between employers and employees is create fertile legislative soil for labor unions to proliferate.... The opposite of the present trend.

 

During my time as a union steward in CWA, it became apparent the worker/management relationship is a constant power struggle. Wages, worker treatment, benefits and paid time off are all determined by where the balance of power lies.

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The law of the jungle applied to civilized society has often been called Social Darwinism.

https://en.wikipedia.org/wiki/Social_Darwinism

 

 

 

This is why labor unions are needed. One of the main things government can do to to prevent a lopsided relationship employers and employees is create fertile legislative soil for labor unions to proliferate.... The opposite of the present trend.

 

During my time as a union steward in CWA, it became apparent the worker/management relationship is a constant power struggle. Wages, worker treatment, benefits and paid time off are all determined by where the balance of power lies.

 

Darwin himself, though he was a scientific racist, disagreed with Social Darwinism. I would venture that Darwin would not have been racist had he been around to see genetics.

 

It is disturbing how prevalent social darwinism is among people who post on internet debate forums. It is really a noxious far-right ideology that logically leads immediately to fascism.

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Even if you like Supply and demand, it has been perverted. The government has actively sought to increase the supply of labor and decrease the demand. For example, the US government has allowed millions of illegal aliens to enter the nation and flood the supply of labor. This has been going on unabated for decades. Once we had laws that would fine employers for hiring illegals. Those laws were essentially suspended by Reagan, and never brought back. Yes there is the occasional minor fine for political purposes, but when you save millions of dollars, and get fined $1000, your decision is to keep hiring the illegals. On the demand side, the government has provided incentives to move factories out of the country. Those who work had to pay taxes to give money to the rich who moved the jobs away and cost those workers their livelihood. A great many thousand factories have been shipped overseas. The combination of decreasing the demand while simultaneously increase supply is a recipe for lowering wages. The concept of supply and demand has been perverted. Pay is not provided based on supply and demand, when the laws have been changed to prevent supply and demand being independent. Supply and demand are controlled by the government, not by market forces.

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The government has actively sought to increase the supply of labor and decrease the demand.

 

 

Bingo.

 

Unemployment being an object of policy, and all....

 

For example, the US government has allowed millions of illegal aliens to enter the nation and flood the supply of labor. This has been going on unabated for decades.

 

 

Yes, a convenient source of slave labor for the Republicans' cronies....

 

Once we had laws that would fine employers for hiring illegals. Those laws were essentially suspended by Reagan, and never brought back.

 

 

A great simplification of the situation. The correct response, obviously, is to give people who are here a legal status...

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I mean that the moral question of who has earned what cannot be answered by reference to economic outcomes. Your view, and the "mainstream" view, is that "market outcomes" are just by definition. This is a non-explanation, a non-answer. It is in reality completely immoral to rely on the law of the jungle for the organization of society.

To say "you're compensated according to the value of the services you provide" is to say "your wages match your productivity." It is not an "entirely different question," it is literally the exact same thing.

 

You have it backwards.

 

The theory of supply and demand can explain much of what we see in the labor market, but not all of it.

 

For instance, your imaginary scenario about plumbers: let's actually look at a real-world example: Fortune 500 CEOs. The demand for Fortune 500 CEOs remains constant at 500. The number of MBAs in the United States, meanwhile, has massively increased in the years since 1980. In that same time frame, the pay of Fortune 500 CEOs skyrocketed!

 

How can supply and demand explain this? You have constant demand, increasing supply, yet wages...increase? How does this work?

 

The answer, obviously, is that a variety of factors increased the power of CEOs relative to their employers.

 

Supply and demand is only one factor that influences the power balance between workers and employers. There are many other factors as well and supply and demand simply cannot account for a great deal of what actually goes on in the real world.

 

Bottom line, you are saying that productivity always equals wages (because, you know, supply and demand--the magic of the market ensures it!). This is very wrong.

 

The reason for stagnating wages has nothing to do with the declining skills of workers (by any measure the current US workforce is better educated and has more skills than any previous generation). The reason for stagnant wages is political changes in the structure of the US economy. There are two interrelated parts of this story: one is the destruction of labor unions, which allowed employers to foist lower pay cuts on workers almost at will; the second is the emergence of the "maximizing shareholder value" ideology of business management. As the name suggests this demands running businesses in such a way that the shareholders are the principle beneficiaries, so there is very little money left for wage increases commensurate with the productivity increases we see in the economy.

 

 

 

I blame the rich for using their control over investment and enterprise to appropriate massive amounts of wealth from the people.

 

 

On a different note, redistribution of wealth is desirable from an instrumental perspective, it isn't merely a moral imperative. Read your Keynes. Redistribution is frequently necessary to maintain effective demand so the economy can keep growing. We are currently in an economic crisis caused by greatly depressed demand. Consumption was mainly driven by debt through the late 90s until 2007 when the debt bubble collapsed--and the underlying reason for this is that wages are too low.

 

 

I appreciate your thoughtful response.

 

Let me try to clarify what I'm saying about productivity vs. wages. Productivity is a measure of output divided by input. Typically, we measure worker productivity by dividing the sales price of the end item by the labor hours required to produce it. So, I understand why you would say that wages should match productivity.

 

However, I'm saying that the worker's customer is not the purchaser of the end item. The autoworker's customer is not the auto purchaser...it's the automotive producer. The sales price of the end item (automobile) is a function of the entire company's efforts including everyone from the CEO to the file clerk. It depends on the quality of raw materials, the design, the marketing, the strategic positioning, efficient supply chains, etc. So, an increase in the sales price of the automobile is not easily translated into increased productivity for any individual. Consider Volkswagen. Their sales are in the tank due to cheating on emissions tests. The actions of a few individuals have damaged the productivity (measured by traditional means) of many thousands of auto workers. They still do their jobs as well as ever, but the value of their end item has plummeted.

 

If (traditional) productivity determined wages, Volkswagen salaries would need to decrease due to the decreased value of their product.

 

Instead, an individual's value in the marketplace is what they get compensated for, not their productivity. Those Volkswagen workers can move to the companies taking over Volkswagen's market share and maintain their compensation. It really is all about supply and demand.

 

The 500 CEO question is a false premise for several reasons. First, the selection of 500 is purely arbitrary and does not exist in the marketplace. There is in fact demand for thousands upon thousands of CEOs. Second, not all CEO needs are the same. You would not pick the same CEO to lead GM as Twitter. It's as different as mechanical engineer versus electrical engineer. Third, an MBA is not even close to being an adequate measure of qualification for the CEO position. At the Fortune 500 level, an MBA gets you an entry level position. If you demonstrate outstanding ability and continue to learn and grow for 25 years, you might...maybe...be qualified for consideration as a CEO. And, finally, (fourth, if you're counting), the size of companies on the Fortune 500 list has increased significantly since 1980. That means the demands of the CEO job are greater, the potential impact of their performance is greater, and the companies' ability to pay is greater.

 

It doesn't matter if you're an executive, artist, athlete, or whatever, there will always be very high demand for "the best". I saw where Lebron James just signed a deal with Nike that's going to make him over half a billion dollars. I think he's earned every penny.

 

I want to talk about stagnating wages and your very good points about reduced demand, but I'm out of time. I need to go 'earn' some money.

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Let me try to clarify what I'm saying about productivity vs. wages. Productivity is a measure of output divided by input. Typically, we measure worker productivity by dividing the sales price of the end item by the labor hours required to produce it. So, I understand why you would say that wages should match productivity.

 

However, I'm saying that the worker's customer is not the purchaser of the end item. The autoworker's customer is not the auto purchaser...it's the automotive producer. The sales price of the end item (automobile) is a function of the entire company's efforts including everyone from the CEO to the file clerk. It depends on the quality of raw materials, the design, the marketing, the strategic positioning, efficient supply chains, etc. So, an increase in the sales price of the automobile is not easily translated into increased productivity for any individual. Consider Volkswagen. Their sales are in the tank due to cheating on emissions tests. The actions of a few individuals have damaged the productivity (measured by traditional means) of many thousands of auto workers. They still do their jobs as well as ever, but the value of their end item has plummeted.

 

If (traditional) productivity determined wages, Volkswagen salaries would need to decrease due to the decreased value of their product.

 

Instead, an individual's value in the marketplace is what they get compensated for, not their productivity. Those Volkswagen workers can move to the companies taking over Volkswagen's market share and maintain their compensation. It really is all about supply and demand.

 

The 500 CEO question is a false premise for several reasons. First, the selection of 500 is purely arbitrary and does not exist in the marketplace. There is in fact demand for thousands upon thousands of CEOs. Second, not all CEO needs are the same. You would not pick the same CEO to lead GM as Twitter. It's as different as mechanical engineer versus electrical engineer. Third, an MBA is not even close to being an adequate measure of qualification for the CEO position. At the Fortune 500 level, an MBA gets you an entry level position. If you demonstrate outstanding ability and continue to learn and grow for 25 years, you might...maybe...be qualified for consideration as a CEO. And, finally, (fourth, if you're counting), the size of companies on the Fortune 500 list has increased significantly since 1980. That means the demands of the CEO job are greater, the potential impact of their performance is greater, and the companies' ability to pay is greater.

 

It doesn't matter if you're an executive, artist, athlete, or whatever, there will always be very high demand for "the best". I saw where Lebron James just signed a deal with Nike that's going to make him over half a billion dollars. I think he's earned every penny.

 

I want to talk about stagnating wages and your very good points about reduced demand, but I'm out of time. I need to go 'earn' some money.

 

 

I am not suggesting that productivity should determine wages. Productivity is a problematic measure when applied to economic processes for a whole variety of reasons, and as you rightly point out there is no way to really determine an individual's productivity because production is a social process and the worker's productivity is affected by much more than just his own behavior.

Instead, an individual's value in the marketplace is what they get compensated for, not their productivity. Those Volkswagen workers can move to the companies taking over Volkswagen's market share and maintain their compensation. It really is all about supply and demand.

 

So, having correctly identified the problem with productivity, you then handwave this "value in the marketplace" nonsense. There is no difference in economic terms between "productivity" and value added to the company, because by definition productivity is the end sale price of the company's product divided by the worker-hours (labor hour per person) it took to produce the product.
When wages fall below productivity, it means, by definition, that workers are not being compensated for the value they bring to the process.
This "value they in the marketplace", as distinct from productivity, is an unmeasurable quantity that you made up. As I said it really is productivity that you are talking about.
The 500 CEO question is a false premise for several reasons. First, the selection of 500 is purely arbitrary and does not exist in the marketplace. There is in fact demand for thousands upon thousands of CEOs.

 

 

Of course there is; however we are talking about a limited set of 500 CEOs in order to keep demand constant for the purposes of the "experiment." Since the demand for CEOs in the whole economy (as opposed to just in the Fortune 500 positions) is constantly fluctuating and changing it wouldn't tell us anything.
Second, not all CEO needs are the same. You would not pick the same CEO to lead GM as Twitter. It's as different as mechanical engineer versus electrical engineer.

 

 

It's certainly not as different as mechanical vs. electrical engineer. The fact that "not all CEO needs are the same" means nothing for the purposes of this experiment.
Third, an MBA is not even close to being an adequate measure of qualification for the CEO position.

 

Of course not, but that an MBA is not immediately qualified to be a CEO is irrelevant. More MBAs means, eventually, more candidates who will be qualified to be CEOs. The number of MBAs is just a useful proxy for the number of qualified CEO candidates.
If you demonstrate outstanding ability and continue to learn and grow for 25 years, you might...maybe...be qualified for consideration as a CEO.

 

 

I think you have a vastly inflated view of how difficult it is to be a CEO.

 

And, finally, (fourth, if you're counting), the size of companies on the Fortune 500 list has increased significantly since 1980. That means the demands of the CEO job are greater, the potential impact of their performance is greater, and the companies' ability to pay is greater.

 

 

Yes, I would posit this as one of the reasons for increased CEO compensation. But notice how this has nothing to do with supply and demand.

 

It doesn't matter if you're an executive, artist, athlete, or whatever, there will always be very high demand for "the best". I saw where Lebron James just signed a deal with Nike that's going to make him over half a billion dollars. I think he's earned every penny.

 

Lebron James makes millions of dollars for tossing a ball around. And you want to say he "earned" every penny? :D

This, BTW, is what I mean. You simply define whatever outcome exists as just. It is just by definition, because The Market (a nice stand-in for God) ensures that everyone's contributions are matched by their pay. Justice is served; diligence and hard work are paid off, laziness and stupidity are punished.

 

It's a charming view of the world, but actually life ain't fair. The rich have rigged the game so that the gains from economic activity go overwhelmingly to them. There is nothing in economic theory anywhere that justifies CEOs being paid 300 or 500 times what an average worker is paid. There is nothing in economic theory that says it's desirable for companies to spend 91% of their profits on stock buybacks and dividends (another primary reason executive compensation is so high).

 

Just to see how ridiculous it is that pay reflects performance, look at the bank collapse in the US in 2007. CEOs were paying themselves 8-figure bonuses even as they rendered their own firms insolvent.

 

This silly idea that CEO pay reflects supply and demand ignores the realities of corporate governance, which are that CEOs nominate the members of the executive committee, that even notionally "independent" directors are mostly CEOs of other companies with a vested interest in high executive pay, and corporate strategies which bring the highest executive pay (stock buybacks, leveraged acquisitions, etc.) are not good for the wider economy. They actually leech value from the economy rather than adding it.

 

The point of all this is that wages should be determined by the principles of justice and fairness, not by the religion misnamed economics.

 

 

 

 

 

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