[p2p-research] The rich...no longer getting richer?

Paul D. Fernhout pdfernhout at kurtz-fernhout.com
Sat Aug 22 02:57:02 CEST 2009

Ryan Lanham wrote:
> The rich are no longer getting richer…?
> http://www.msnbc.msn.com/id/32505284/ns/business-the_new_york_times

 From there:
Some economists say they believe that the contrasting trends are unrelated. 
If anything, these economists say, any problems the wealthy have will 
trickle down, in the form of less charitable giving and less consumer 
spending. Over the last century, the worst years for the rich were the early 
1930s, the heart of the Great Depression .
   Other economists say the recent explosion of incomes at the top did hurt 
everyone else, by concentrating economic and political power among a 
relatively small group.
   “I think incredibly high incomes can have a pernicious effect on the 
polity and the economy,” said Lawrence Katz, a Harvard economist. Much of 
the growth of high-end incomes stemmed from market forces, like 
technological innovation, Mr. Katz said. But a significant amount also 
stemmed from the wealthy’s newfound ability to win favorable government 
contracts, low tax rates and weak financial regulation , he added.

And unrelated to the main theme, but interesting here:
In the late 1980s, he founded McAfee Associates, the antivirus software 
company. It gave away its software, unlike its rivals, but charged fees to 
those who wanted any kind of technical support. That decision helped make it 
a huge success. The company went public in 1992, in the early years of one 
of biggest stock market booms in history.

“We are coming from an abnormal period where a tremendous amount of wealth 
was created largely by selling assets back and forth,” said Mohamed A. 
El-Erian, chief executive of Pimco, one of the country’s largest bond 
traders, and the former manager of Harvard’s endowment.
   Some of this wealth was based on real economic gains, like those from the 
computer revolution. But much of it was not, Mr. El-Erian said. “You had 
wealth creation that could not be tied to the underlying economy,” he added, 
“and the benefits were very skewed: they went to the assets of the rich. It 
was financial engineering.”

Note that the "gains" from the computer revolution are not necessarily 
egalitarian. Tom Golisano became a billionaire from creating the Paychex 
company to do automated payroll processing, but that no doubt eliminated a 
lot of jobs or free-lance consulting for accountants. From:
"Today, Paychex serves more than 500,000 clients from over 100 locations 
across the United States and employs more than 9,400 people." So, basically, 
one person is now doing the payroll for about fifty companies, and likely 
many of these are medium size companies.

To be clear -- I think the innovation is wonderful, and freeing people from 
doing jobs through automation is generally a good thing -- as long as the 
benefits are shared with society. But as it is now, we have one more 
billionaire and (guessing) maybe 100,000 less accountants. That kind of 
thing can't go on much longer in job sector after job sector. Even within 
Paychex, I can wonder if those 9,400 jobs could be mostly eliminated if 
Paychex or the industry in general tried hard (robotic material handling of 
checks, a move to electronic deposits, more web data entry, better AI for 
complaint processing, etc.)? So, job destruction may go in waves, as 
sections of the economy become more and more structured.

   "Another Jobless Recovery Predicted"

Or (written originally in 2003 or so):
The Washington Post notes that we are now witnessing, "the longest hiring 
downturn since the Depression". [ref] The article also notes, "The vast 
majority of the 2.7 million job losses since the 2001 recession began were 
the result of permanent changes in the U.S. economy and are not coming back."
   There is no mystery -- the jobless recovery is exactly what you would 
expect in a robotic nation. When automation and robots eliminate jobs, they 
are gone for good. The economy then has to invent new jobs. But it is much 
harder to do that now because robots can quickly fill the new jobs that get 
invented. See the FAQ for additional information.

Also, better design, better systems engineering, better intelligent 
software, and so on, can also all eliminate the need for many jobs.

If demand was infinite, as many economists assume, we might see more jobs 
eventually. But if demand is limited (the best things in life are free or 
cheap, and there is a law of diminishing returns on more stuff), or demand 
grows more slowly than productivity, we will see job loss.

Why even millionaires should support a basic income, even as they lose 
money: :-)
   "[p2p-research] Basic income from a millionaire's perspective?"
The fact is, the basic income is already about what most millionaires might
be earning off their investments after inflation (assuming they have
anything left after the recent market crash). So, in a way, this proposal
makes everyone in the USA into effective millionaires (or close to it). So,
that means that millionaires have a lot more potential friends in the local
neighborhood with a millionaire-level of spare time to do fun things with
during the day. So, being a millionaire will be a much less lonely thing in
our society. And should a millionaire have children, the millionaire knows,
no matter how irresponsible with money their kid might be, that child will
always be a millionaire, in terms of a basic income.

--Paul Fernhout

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