To Tackle Inequality, We Need To Start Talking About Where Wealth Comes From

Yves here. While it was refreshing to see some Democratic presidential candidates depict inequality as an important political and economic issue, it would help if they sharpened their critique of why concentrated wealth is suspect. Too much inherited money lead to the creation of dynasties. As Bloomberg is so vividly demonstrating, the rich can buy politicians (just listen to the complicated rationalizations of his black endorders); Charles Keating boasted he owned five senators. Having the rich able to secure advantaged positions for their kids and close relatives is destructive, since it undermines the perception of fairness, the value of working hard, and also prevents capable people from modest backgrounds from getting access to those opportunities. For instance, when I was a kid, they were vastly fewer legacy slots at Harvard than there are now.

Yet most want to believe they deserve what they have, and with that comes the need to believe the system is fair. And the US has so much worship of money that it’s easy to depict criticism of the way the top wealthy continue to widen the financial gap between them and everyone else as envy, as opposed to luck, subsidies, and then finding ways to pull up the ladder they climbed before others get on it.

This article focuses on how Thatcherism created a narrative that wealth creation resulted from meritocratic forces, but it clearly is relevant to the US. The credentialed elites are particularly big on promoting the view that they are where they are because they are “talented” and worked hard. One of Timothy Geithner’s few redeeming qualities was that he described himself as a not-at-all dedicated student; people who knew him from grad school concurred, saying he would never have been identified then as likely to occupy important administrative posts.

By Laurie Macfarlane. Originally published at openDemocracy

Do people in Britain resent the rich? According to two new studies published this week, the answer to this question is: not really.

The studies, one commissioned by Trust for London and another by Tax Justice UK, explore public attitudes towards wealth based on focus groups held across England. Both found that most people are relatively content with people getting rich, and that attacks on the wealthy are often viewed negatively.

This presents a dilemma for progressives. In recent years left-wing leaders on both sides of the Atlantic have taken a more confrontational approach towards the super-rich. In Britain, the Labour Party’s war cry under the leadership of Jeremy Corbyn has been ‘For the many, not the few’, while in the US Bernie Sanders has made no secret of his contempt for billionaires.

But what if it turns out that ordinary people don’t agree? One response to this dilemma, as outlined by Sonia Sodha in the Observer, is to accept that “the belief that Britain is a meritocracy is ingrained in our collective psyche”, and adjust policies and narratives accordingly. This would mean ditching the class-war rhetoric and instead putting forward solutions designed to appeal to a meritocratic worldview. This might include, for example, closing tax loopholes and increasing particular taxes on grounds of fairness and efficiency.

Sodha is right to point out that this strategy is more likely to chime with people’s existing attitudes towards wealth. As the authors of the Tax Justice UK report note: “The participants in our focus groups largely believe in meritocracy. Those with wealth were seen as having acquired it through hard work.” Participants in the Trust for London research expressed similar views.

But does this mean that progressives should accept the way things are and move on? Not necessarily. As a well-known philosopher once said: “The philosophers have only interpreted the world in various ways; the point, however, is to change it.”

People’s views aren’t formed in a vacuum: they are shaped by social and political forces that evolve over time. Margaret Thatcher’s neoliberal revolution wasn’t just successful because it reorganised the economy – it was successful because it embedded a particular narrative about how wealth is created and distributed in society. This is a world where, so long as there is sufficient competition and free markets, every individual will receive their just rewards in relation to their true contribution to society. There is, in Milton Friedman’s famous terms, “no such thing as a free lunch”. It’s a world where businesses are the “wealth creators” who create jobs and drive innovation, and business owners are entitled to the financial rewards of success – regardless of how enormous they are.

Tony Blair’s ‘Third Way’ largely accepted this narrative of wealth creation, and until relatively recently nobody in the mainstream of British politics challenged it. Is it really any wonder that most people believe it?

The problem, of course, is that it bears little resemblance to how the economy actually works. While it is true that working hard will generally help you earn more money, this causality doesn’t hold in reverse: not all wealth has been attained through hard work. In practice, the distribution of wealth has little to do with contribution, and everything to do with politics and power.

Someone that is born in the UK will earn more than someone born in Sub-Saharan Africa, even if they perform exactly the same labour. Why? Because one was lucky enough to be born in a powerful country with a legacy of imperialism that has rigged the rules of the global economy in its favour. The economist Branko Milanovic has estimated that 60% of someone’s income is determined by where they were born, and an additional 20% is determined by the income level of their parents. This means that place of birth and parental background accounts for around 80% of someone’s earning power on average.

In the age of the ‘self-made’ millionaire, the lottery of birth is more important than ever. As George Monbiot once said: “If wealth was the inevitable result of hard work and enterprise, every woman in Africa would be a millionaire.”

Within countries, extreme fortunes almost always derive from control over a scare resource – fossil fuels, minerals, land, monopoly networks, money etc. To the early classical economists, this kind of wealth – attained by simply being a gatekeeper to scarce resources – was deemed to be unearned, and referred to it as ‘economic rent’. But today the Sunday Times Rich List is dominated by rentiers – financiers, real estate tycoons, oil barons, monopolists and aristocrats – many of whom acquired their original fortune in somewhat questionable circumstances.

As Grace Blakeley puts it: “You do not become a billionaire through labour. You become a billionaire through inheritance, corruption or economic rents – or, in most cases, some mixture of all three.”

But it’s not just billionaires that accumulate wealth without working. Over a third of all the income in Britain is paid out as capital income (dividends, rents and interest) rather than labour income (wages and salaries). Capital income is inherently passive: it doesn’t correspond to work or skill, but ownership. And while capital ownership is distributed extremely unequally, in recent decades changes to pensions and the housing market have enabled many middle class households to join the capital income gravy train and accumulate wealth without lifting a finger.

As I’ve written about before, since 1995 three quarters of all wealth accumulated in the UK – totalling £5 trillion – has come from rising house prices. The driving force behind rising house prices has been rising land prices. But land is not a source of wealth but of economic rent. The truth is that most wealth made through the housing market has been gained at the expense of others who are now seeing more of their incomes eaten up by higher rents and larger mortgage payments. The housing boom is not an example of wealth creation, but wealth redistribution on an unprecedented scale.

And then there is inheritance: around £100 billion of wealth is passed on to new owners every year without any corresponding productive activity, much of it escaping any tax.

Overall, the proportion of wealth in Britain that can truly be ascribed to “hard work”, however loosely defined, is infinitesimally small. The idea that Britain is a meritocracy, however appealing, is objectively false – and we shouldn’t be afraid to say so. But it’s hardly surprising that many people believe Britain is a meritocracy when the Thatcherite narrative has gone unchallenged for decades.

If the left is to achieve its historic aim of achieving distributive justice, it can’t do so by parroting a narrative on wealth that was designed to promote the cause of Thatcherism. Instead, we must develop a distinct and compelling narrative about how wealth is really created and distributed in society.

This means recognising that wealth creation is a collective process involving many different interdependent stakeholders – workers, the government, the natural environment, civil society, and, yes, entrepreneurs. It means highlighting how the mechanism linking contribution and reward for each of these stakeholders is fundamentally broken: workers are being paid less than the value they create, owners are appropriating wealth they didn’t create, vast profits are being made by destroying our ecosystems, and the role of the state in wealth creation is undervalued. And it means proposing new mechanisms for distributing financial rewards that more accurately reflect the collective nature of wealth creation, and rebalance power between capital and labour.

Crucially, it also means challenging the idea that rising asset prices – Britain’s favourite form of wealth – constitutes wealth creation. As John Stuart Mill wrote back in 1848:

“If some of us grow rich in our sleep, where do we think this wealth is coming from? It doesn’t materialise out of thin air. It doesn’t come without costing someone, another human being. It comes from the fruits of others’ labours, which they don’t receive.”

This isn’t just about winning a technical argument – it’s also about winning at the ballot box. Both pieces of research published this week found that although most people view wealth accumulation in a positive light, they hold a much more negative view of wealth that has not been earned through hard work or skill. As the Trust for London report notes:

“Those who were thought to have achieved their status and financial position through hard work were deemed to be deserving of it… By comparison, those deemed not to have had to work hard were viewed less favourably.”

Where people’s wealth comes from matters. If people can be persuaded that Britain isn’t quite as meritocratic as it’s made out to be, public attitudes towards wealth can be shifted in a more progressive direction. Indeed, the authors of the Trust for London report conclude that “if policy makers wish to address inequality, they may do better to think in terms of narratives of how riches are acquired”.

These narratives won’t change overnight. But they won’t change at all unless progressives fight to change them – just as Margaret Thatcher did in the 1980s.

This doesn’t mean criticising people’s natural desire to earn more money, or attacking successful business owners who treat their employees and the environment well. But it does mean drawing attention to the fossil fuel executives who are enriching themselves by destroying the planet; the bankers who cashed-in on the crisis they caused; the aristocrats who live off their ancestors’ ill-gotten gains; and the exploitative bosses who underpay their staff.

In politics you can either shape the world, or be shaped by it. On this issue, there’s no middle ground.

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  1. vlade

    See, this is where I believe the right has a massive advantage over the left.

    The right is almost _always_ built on narratives, often with some cultural grounding (selective or not).

    The left often ignores those cultural grounding, and says “it’s obvious”, without building any cogent narrative (and when it does build some narrative, it’s often one that’s hard to relate to, like “international proletariat”, or “wide masses” etc. etc.). Cf the UK elections, where Corbyn didn’t really have any cogent narrative (a manifesto is not a narrative), while Johnson did. Blair, the last Labour politician to convincingly win, did have a narrative too – as did Thatcher, and, believe it or not, even Cameron (“we’re not the free-spending Labour who caused GFC”).

    This is, IMO, where Sanders and AOC seems to be different – because (as far as I can tell, from outside the US) they build narratives people can relate to (AOC is a Cinderella story if there ever was one).

    Until left learns that narratives matter, it will have problems tacking on the right.

    1. Susan the other

      I’m so impressed with AOC. I think she’s a genius with a gift of clarity and communication skills I have never seen before. I doubt she’ll marry a prince. But it would be a good thing if she got the VP slot with Sanders ;-)

      1. The Historian

        AOC’s time will come but not this presidential election. You have to be 35 to become VP and AOC is only 30.

        1. Jokerstein

          Is that correct? I know you can’t be POTUS, but I don’t think it’s true of Veep. It simply means, AIUI, that Pelosi would become POTUS if she’s still alive when Bernie pops his clogs.

          1. The Historian

            It isn’t explicitly stated in the Constitution or the Amendments. I don’t think the Founding Fathers thought it necessary to state the obvious – like why would you choose a Vice President that could not become President if necessary?

            1. marym

              Amendment 12: “ But no person constitutionally ineligible to the office of President shall be eligible to that of Vice-President of the United States.”

    2. Robert S

      I agree, and I find it so perplexing. It’s not as though the left doesn’t have good narratives available. And the essential truths they would impart are familiar to all of us from our stories. (I would hazard that is true, whatever your cultural or religious background.)
      How come left politicians, at least in the UK, keep missing this trick?

    3. xkeyscored

      Perhaps it’s easier to come up with narratives in defence of the status quo; they can agree on their goal and more or less unite around that, whatever their other differences. Those who want change often can’t agree on what they want to change or replace.

      1. vlade

        I believe the problem is more that a lot of progressives focus on policies, not the narrative, because “it’s blidnly obvious”. And another bunch hates to use cultural archetypes, because “it’s not progressive”.

        The right is way more pragmatic in this, and, I’d say, understand the human nature better (well, the drivers on the right, not necessarily its voters), and is happier to exploit it to get its goals.

    4. hemeantwell

      The “not really” in the author’s first sentence — “Do people in Britain resent the rich? According to two new studies published this week, the answer to this question is: not really.” — is doing much, much more work than she realizes.

      One of the worst failures of most survey research on class relations is that it doesn’t take seriously enough one of the paramount tasks faced by workers — having to work in an authoritarian, often physically challenging situation for poor compensation and still having to not only endure it, but _accept_ it. When surveyors go out and ask people about fairness, they are very likely going to prompt a brief testimony to adequate adjustment, an oath of allegiance. Why? Because to be angry about such things is not only painful, it is also dangerous.

      Some researchers have done a much better job than others. Sennett and Cobb, in the Hidden Injuries of Class, brought out how much shame played a role in the self-restriction of workers. It wasn’t just a matter of “Who do you think you are to complain, you failure!” It was also feeling ashamed at knuckling under. When, in their _interviews_, they went beyond the surface adjustment, they found workers own narration of the experience of class to be shifting and dynamic, running from brief expressions of anger to morose regret over not done the meritocracy thing, etc.

      It is simply astounding how reporting these narratives can be mismanaged by researchers. In her recent Strangers in Their Own Land, Arlie Hochschild managed to take hundreds of hours of interview-based work and completely deny any of these dynamics. Instead of trying to carefully engage workers around obvious and tremendous tensions inherent in their work in the chemical industry, she capped off her work with a concocted “Deep Story” about resentment towards people “cutting in line,” ie. getting help from the *government*. and asked if it seemed to fit their lives. You betcha! Ideological mission accomplished! Everyone could go back home and take a rest, Dr. Hochschild congratulating herself on her tact, while her interviewees felt their adjustment to capitalist labor relations was ratified by a researcher from the East they had gradually come to trust. Out of nominal respect for her interviewees she minimized what they try to minimize. Government is the problem, after all.

      Sanders is kicking that kind of story in the trash. It is not just that he’s providing a new narrative. He’s providing workers with some scaffolding and support for outrage that they have had to stuff. Of course, not everyone will rework their adjustment in the terms he encourages. But enough will that it will hopefully prompt researchers to stop denying the complex nature of adjustment to class hierarchy with methods that tend to underestimate mass discontent. It’s not just a matter of a poor charting of reality. It also involves systematic misrepresentation of the distribution of “opinion” in the public holding it, with an inherently conservative and demoralizing bias.

  2. Sound of the Suburbs

    The USP of 1920s neoclassical economics – It concentrates wealth.
    Let’s use it for globalisation.

    Wrap it in a new ideology, neoliberalism, so no one notices.
    The global elite are clever aren’t they?

    Mariner Eccles, FED chair 1934 – 48, observed what the capital accumulation of neoclassical economics did to the US economy in the 1920s.
    “a giant suction pump had by 1929 to 1930 drawn into a few hands an increasing proportion of currently produced wealth. This served then as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied themselves the kind of effective demand for their products which would justify reinvestment of the capital accumulation in new plants. In consequence as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When the credit ran out, the game stopped”

    The problem; wealth concentrates until the system collapses.

    “The other fellows could stay in the game only by borrowing.” Mariner Eccles, FED chair 1934 – 48
    Your wages aren’t high enough, have a Payday loan.
    You need a house, have a sub-prime mortgage.
    You need a car, have a sub-prime auto loan.
    You need a good education, have a student loan.
    Still not getting by?
    Load up on credit cards.
    “When the credit ran out, the game stopped” Mariner Eccles, FED chair 1934 – 48

    This is what it’s supposed to be like.
    We know because we have used this economics before.

    Einstein’s definition of madness “Doing the same thing again and again and expecting to get a different result”
    I see what you mean Albert.

    1. Sound of the Suburbs

      The economics of globalisation has always had an Achilles’ heel.
      In the US, the 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at private debt, neoclassical economics.
      Not considering private debt is the Achilles’ heel of the economics of globalisation.

      What could possibly go wrong?
      Economies will run on debt until they hit the Minsky Moment, in the same way as the US in the 1920s.

      At 25.30 mins you can see the super imposed private debt-to-GDP ratios.
      Economies ran on debt until they hit the Minsky Moment.
      1929 – US
      1991 – Japan
      2008 – US, UK and Euro-zone
      The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart above.

      Einstein’s definition of madness “Doing the same thing again and again and expecting to get a different result”
      I see what you mean Albert.

      1. Susan the other

        Capital. Weird thing that it is, is very fragile. It requires constant attention. It needs to be reinvested on a continual basis to make enough profit to invest again and again. A liberal “free market” was thought to be the solution. But as we have just learned, or admitted, there are limits to every insane thing. We are now at the stage of beating a dead horse. Because there is no place left on earth to reinvest for enough profit to continue to reinvest if we are forced to pay for all our “externalities”. The critical resources we need are dwindling, agriculture is in danger of failing, even though we have overpopulated the planet and are faced with huge social expenditures, populations have slowed and even reversed, which accelerates the demand-profit spiral downward. Nobody’s gonna say that the whole thing has imploded. But it has. Hoarded wealth is a red herring at this point. It won’t hurt to tax the rich but it won’t solve one single thing. Except maybe to finally admit as a civilization that the way we live has got to change. It’s actually really easy to change. The consensus for change is already here. We, as nations, are well equipped to fiat our way out of this. We have good science and best practices. And the squillionaires are already looking for redemption. Well, maybe not Bloomberg, he’s pretty arrogant and stupid, but even Bezos is making changes.

      2. Jerry B

        Sound –

        Your two comments above and your reference to the adherence to the model of neoclassical economics seems to follow a recent economics movement in Europe, particularly France, called Post Autistic Economics. If anyone finds the use of autistic in this sense offensive I apologize but I did not come up with the name.

        From what I have read the post autistic economics movement is criticizing neoclassical economics for a an over reliance and repetition of the same thinking over and over again. A preoccupation with abnormal behavior, such as repetitive acts and excessive attachment to certain objects i.e. theories and models. In other words it is a criticism of the over reliance on outdated ideas and theories and on mathematics and mathematical models. Also an over reliance on mathematical models that are devoid of reality.

        From the link above

        The post-autistic economics movement (French: autisme-économie)[1] or movement of students for the reform of economics teaching (French: mouvement des étudiants pour une réforme de l’enseignement de l’économie)[2] is a political movement which criticises neoclassical economics and advocates for pluralism in economics

        From the link above:

        As Nobel Prize-winning economist Ronald Coase pointed out in a speech at the University of Missouri five years ago, that one could (and many still do) teach economics today using Samuelsons 1948 textbook is an indictment of the disciplines stagnancy. While physics and chemistry have been fertile ground for innovation, economics continues to rely on the same basic tools

      3. Paul Hirschman

        Henry Ford did not go under during the Depression, nor did the Rockefeller’s or the Morgans or the Mellons. So economic collapses do not turn the world upside down for great property holders, folks who are able to weather such economic storms. Indeed, from their point of view, such events are just part of the wonderful world of free markets. As Treasury Sec Mellon said during the early days of the Depression…””liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. … enterprising people will pick up the wrecks from less competent people.” The really, really rich folks are too protected to suffer from such events..only us losers have to be “purged.” The only fear these guys have is from real revolution…. So old Albert was right, of course, but in this case, doing the same thing over and over and getting the same result is exactly what the monied folks demand!!

        1. Anthony K Wikrent

          A very elderly friend of mine had a mother who immigrated to USA from Sweden, and was hired by a branch of the Rockefellers as a cook. She was also spying on them for the Swedish Social Democratic Party. One snippet of table conversation she passed on to her son: “Depressions are how we harvest the wealth accumulated by the lower classes.” Probably was passed on to Stockholm, also.

    1. Jesper

      I found the post you linked to great, thank you for posting it.
      The part that resonated the most with me was:

      If money is the transfer of work and time, we’ve decided our kids will need to work more in the future, and spend less time with their families, so wealthy people can pay lower taxes today. If that sounds immoral, trust your instincts.

      Efficiency gains taken out as money appears to often end up largely with the owners, efficiency gains taken out as time on the other hand is something that benefits all workers and capitalists equally (ignoring the fact that some find their bliss by being at work and while there being told what to do).

      1. J7915

        Being at work=being away from family, spouse, kids,etc
        Taking a stay at home vacation=freedom from bosses, co-workers, commute.

      2. JTMcPhee

        If “we” (whoever “we” are, in this linguistic construct) could change just one verb in the Narrative, I’d argue it should be to remove “earn” in connection with money, or “wealth” if you will, that flows to CEOs and billionaires. These people TAKE money/wealth. Call it what it is — it is TAKING of unearned money/wealth from the reservoir of the political economy. A CEO gets to TAKE what his captive board and his captive “compensation committee” validate as his TAKING — periodic, or golden handshake-golden parachute. Along with TAKING whatever monetized gobbet of the corpse of the Commons s/he has been able to claw off.

        Maybe I’ve missed it, but one does not hear much of a little fable that was a meme, a few years ago:

        A CEO/billionaire sits down at the table with a bunch of workers. One of the workers puts a plate of a couple of dozen freshly baked, warm and luscious chocolate chip cookies in the middle of the table. The CEO reaches over and grabs the plate, gobbles all but one of the cookies, looks around the table and says to the workers, “You better watch out — the guy or gal next to you is going to eat that last cookie.”

        1. OpenThePodBayDoorsHAL

          Isn’t believing the “millionaire myth” the only path people have left? It used to be you could get a reasonable job, save up little by little (and earn a little interest at the bank), have some level of job security, keep your head down, put in your time…and end up with a white picket fence, your kids educated, no medical debt, an occasional vacation at the lake, and a modest retirement watching your kids maybe do a little better.

          That_Is_Over. Your only hope is to get some chips on 00 and they’ll spin the wheel. You know the game is rigged so you just need a lucky break to get into their club. It’s not “Get Rich Or Die Tryin”, it’s “Get Rich Or Die”.

          (And I could rave about how money that takes no labor to create, post-1971, cannot possibly store your labor, all you can hope to do is get closer and closer to the gushing spigot so you can fill up your pail faster than your purchasing power flows out the bottom. Take the shit stuff they call “money” today and immediately convert it into a house or a stock portfolio or a bar of gold, otherwise all you’re left with is a wet excrement sandwich that dissolves between your fingers).

          1. J7915

            Cruise lines = Strength through joy? Subsidized vacations for those who can’t afford the better things in life?
            Sorry but it all sounds better in the old country lingo.

            Didn’t the ceasars pay for the circuses and the bread?

          2. notabanktoadie

            (And I could rave about how money that takes no labor to create, post-1971, cannot possibly store your labor, all you can hope to do is get closer and closer to the gushing spigot so you can fill up your pail faster than your purchasing power flows out the bottom. Take the shit stuff they call “money” … OpenThePodBayDoorsHAL

            Fee, fi, foe, dumb!
            I smell the blood of an Austrian (Economist)!

            Hint: Ethics should be the basis of fiat and credit creation – not shiny metals and the wasted effort (and environment) digging them out of the ground in order to rebury them in Central Bank vaults or use as needlessly expensive coins.

            Yes, the current system is unjust, no doubt, but the answer is ethics, not idolatry.

        2. eg

          Yes, the distinction between “earned” and “unearned” income central to classical economics was “disappeared down the memory hole” by the neo-classicals.

          I am increasingly of the opinion that this was not an accident …

  3. TomDority

    The way to correct the imbalance – IMO, Is to realign the tax system. Those making huge amounts through the tax favored rentier system are doing so because the taxing system favors it.
    In fact, the tax system favors and incentives the destruction of a habitable planet through the machinations of fanciful economic education and an unjust tax code. Bloomberg – I think – made his money off of computer platforms designed for wall street to run a massive scimming operation through HFT – or at least the Licensing thereof.
    When private equity burdens a company with debt and borrowings and directs all revenue streams to financial vehicles that are tax favored ( like splitting off property of the original target to a separate entity, under PE control, jacking rents to siphon revenue and using artificial depreciation and other tricks to tax advantage) and away from actual physical capital investments – usually to claim – we can’t afford labor or pensions and we might go bankrupt and lay-off etc – Just to maximize private equity returns because the tax system favors that activity – it needs to hammer predatory behavior from actual capital improvements.
    The biggest and most rewarding capital improvement would be that of improving the long term habitablity of the Earth
    Rant done – sorry

    1. Bill Carson

      I have never understood the justification for taxing capital gains at a lower rate than we tax wages on labor. It seems to me that we should be doing the opposite. We should not unduly penalize people for wages earned by the sweat of one’s brow, especially for those wages required to provide the necessities of life: food, clothing, shelter and the like. We should encourage people to earn money from hard work and labor, not penalize them for it. We should discourage income from rent extraction.

      1. Amfortas the hippie

        digging a ditch is low pay, for some reason…as is growing a tomato…or sitting with a frail old person.
        if $ is a measure of what we value, as a civilisation, it would seem that we value grand larcenists and warlords above all.

        11 years since the GFC, and the bailouts…overt and covert…and ordinary people still keep their money with BOA, WF, etc etc.
        I avoid even walmart, if i can help it…and refuse to do business with crooks and shysters who treat their people badly.
        are there no small banks left besides out here in the hinterlands?
        i know i mention it often…but i really dig actually knowing my bank president…and where he lives(his wife made us a casserole when we were in the emergency a year+ ago, and i knew just where to go to pick it up…freezer on their back porch.”just go get it…it’s unlocked…”)…and think everyone should have that kind of relationship with their banker.
        how to make that happen, I don’t know.
        if the government is useless in reining in these monsters, then it’s up to us: withdraw your consent, and your money.
        boycott…capital flight from below.
        make it the cool thing to do…like appletinis and the Rachel hairdo…
        and watch the monsters cry and wither.
        like in the other thread, pandemic, exposing the stupidity of global supply lines, might do this for us.
        Know Your Farmer.

        1. JTMcPhee

          How to get 8 billion people to “withdraw consent” when what we’ve got now is the real-life version of “Elysium,” — The tiny Few withdrawing to their pristine satellites, while the mopes on a ruined Earth struggle and die? Elon Musk to facilitate (with subsidies, and looting the “Commons” of near-Earth space with his Starlink “constellation”) the migration of the Few to another planet, to be looted like this one, just like the villainous Aliens we got to hate and abhor in “Independence Day.”

          You’ve mostly done it yourself, via hard work and having a place of your own in a mostly favorable location — but there’s not enough “place” in America, let alone among the teeming hordes in Mumbai and Indonesia and such, to pull of such a massive change.

          I guess mass die-offs, finally of humans as well as the species we collectively have extinguished, is one way of having consent withdrawn…

          1. Amfortas the hippie

            but where does that wealth and privilege exist, in reality?
            in our collective Belief in it…from the value of money, to the value of a stretch limo.
            when you get right down to it, the elysiumites can’t live without Us…our Belief and Assent, however tacit… and our Labor and consumerism……and a giant portion of the Mindf%ck has been devoted to obscuring that fact, as well as to erecting barriers, physical and mental, to the proverbial Means of Production.
            it IS probably too late to do anything but wait for the die off, but that doesn’t mean we shouldn’t try.
            among other ways we divided ourselves at LATOC(a peak oil forum of some repute) was between “F&&k It!” and “let’s be Ethical”….regarding what we considered the inevitable collapse.
            (most of our burning bushes have been borne out, BTW)
            my stance was: Decline and Collapse are a given, but how we enter that decline and collapse is not…we have a choice to go down into perdition as firemonkeys, f&&king in the mud, or as Humans, exhibiting the best of what we have and do.
            Gandalf said “even the Wisest cannot see all ends…”, so we don’t know what effects the latter methodology will have as things fall apart….me changing the Klansman tire might well have beneficial follow on effects that i cannot foresee.
            but we do have a pretty good idea what the former will do…make it worse for everyone.(see: any number of brown countries we’ve destroyed and turned into gangland hellholes.)
            so it’s a sort of Pascal’s Wager…and i choose to engage in the failure of empire with the tools i have and the moral sense i care about. To do otherwise is just laying down before the steamroller.
            “do not go gently into that good night…”, and all.

            1. xkeyscored

              the elysiumites can’t live without Us
              I think they hope that stuff like robots, AI and the internet of things will enable them to.

        2. notabanktoadie

          are there no small banks left besides out here in the hinterlands? Amfort

          Except ALL banks, credit unions, etc. are, due to government privilege such as deposit guarantees, essentially thieves on behalf of themselves and the more so-called “credit worthy” of what is currently, in essence, the public’s credit but for private gain.

          Therefore, since I have no choice but to use one thief or another, I’ll continue with BoA until we collectively decide to de-privilege them all.

          In other words, I don’t buy the logic “A few big thieves – bad; thousands of smaller thieves – good.”

          1. Amfortas the hippie

            essential to that logic is close contact.
            during the 08 crisis, i asked my banker what their exposure was. he said, “almost none, except for where we’re required to be plugged in to the system”
            he then went on to lay out essentially what i’ve been saying…that they’re very conservative in their investments and management, because if they got all crazy with the local’s money “my house would burn”….his words.
            scale matters…and in this case, a small thief IS a whole lot better than a great big one, far away and all but anonymous.
            and since thieves are still a necessary evil in the way we do things(i’m with you on that…postal banking for a start), better to have small thieves close by where they can be watched….and better to have them afraid of their customers/neighbors.
            i wonder if whomever runs BOA endures such fear…i would
            guess that they don’t….and it shows in their behaviour, over time.
            this is the same argument i make for Article the First (

            smaller polities, all around, and close contact between the ruled and the rulers…so the latter know that they are being watched.
            “my” congresscritter pays me no mind…because i am one out of 700,000+ people, and he doesn’t feel the need to.
            if that polity were shrunk to even 10,000, there’s a better chance of me having some influence.
            my road doesn’t get graded…i call the frelling county judge(and he more often than not answers the phone!)

            1. notabanktoadie

              that they’re very conservative in their investments and management, because if they got all crazy with the local’s money “my house would burn”….his words. amfort

              “Prudent” theft is still theft and is even more insidious in that it hides the injustice of, for example, workers being dis-employed by automation financed with what is, in essence, their own legally stolen purchasing power/investment opportunity.

              Speaking of burning, bank runs can be likened to small brush fires that preclude much larger ones by keeping the debris cleared. Of course, no one should be forced to use a private bank, credit union, etc. in the first place so only willing gamblers/risk takers should have to suffer from bank runs.

            2. notabanktoadie

              my road doesn’t get graded…i call the frelling county judge(and he more often than not answers the phone!) Amfort

              Yes, I’m for land reform too or rather the Old Testament is so all citizens can have some land to live, work, and work on and with modern communications (enabling a lot of work from home) and a Citizen’s Dividend, a “Little House on the Prairie” lifestyle is not to be despised, imo, and per your testimony – thanks for that.

        3. J7915

          IIRC Peter Drucker had a comment in one of his books on management: it takes longer to train a ditch digger than a white collar worker.

          That might no longer work as technology has simplyfied desk jobs, and Ditch Witch has mechanized the digging.

      2. MJ

        I, too, have questioned that policy.

        I suppose the argument for it is that we need to encourage investment in businesses to provide jobs and grow the economy. I could go along with that argument if the proceeds from the stock purchases were going directly to the company. But when I purchase stock in the open market I’m simply buying it from another investor. Doesn’t seem to me to provide much of a benefit.

        1. Heraclitus

          Allow me to explain why capital is taxed at a lower rate than labor:

          Capital is taxed at a rate that will bring it out from the mattress. Back in the ’70s, when capital was taxed more harshly, there wasn’t enough available to fund a venture capital industry, or even home purchases. Many home purchases only happened because a seller took back a second mortgage.

          Today, capital is much more widely available, but treat it badly, and it will disappear back into the mattress.

          1. JTMcPhee

            Does your explanation explain how so much “capital,” trillions maybe, is stuffed in obscure “mattresses” all over the planet, see Panama Papers, and much of what gets posted here? Where it sits and magically “grows” itself via the machinations of the financial system?

            Capital is taxed at a lower rate because “capital” has bought the engines of legitimacy that pass the laws and regulations that say that “capital” is super-special and omigod, the mopes must understand that the Owners and Rentiers would NEVER take the loot out of the mattress but for the special treatment they have bought and paid for.

            As to the supposed “much more availability” of capital, these days, really?’ And its used for stock buybacks and billion-dollar paydays for PE and Vulture Capitalists and CEOs of death-dealing corporations, oh, and of course funding foreign wars and regime change and stuff like that, to pursue hegemony and more looting and “the oil must flow!”

            How much of that sainted “capital” is being put to work reducing the human impact on the planet, or stopping the looting of fossil resources like oil and water and soil? As opposed to “new social platforms” and of course “mining” bitcoin and other funny munny? And let us not forget the whole derivative bomb, and other financial explosives talked about here…

            1. baldski

              Amen, Cayman Islands, population @ 70,000 owns $240 billion in US Treasury bonds. Is this capital in the mattresses or what?

          2. Jeremy Grimm

            I thought U.S. capital already left the country for parts far far away. If by capital you mean cash for speculation, perhaps it should go back into the mattress or back to the Fed.

      3. eg

        The oligarchs run the system — that’s why labor is taxed unfavorably and capital, to the extent that is taxed at all (I’m looking at you, tax haven industrial complex), is taxed favorably.

        This struggle is as old as civilization itself — since the rural usurers first began to arrogate to themselves the labor and produce of the farm families due to the temple/palace complex which built and sustained life giving and affirming public works and the military. The solution during the Bronze Age was “andurarum” (deror/jubilee) — the return to the initial balance state by the cancellation of non-commercial debts.

        The evolution of law over time has obscured this basic and eternal conflict between labor and oligarchy — see Katharina Pistor’s “The Code of Capital” to see how law and the coercive power of the state are fundamental to how the oligarchs structure our system to their advantage in their ongoing war against labor.

    2. lyman alpha blob

      Sanders had a good reply to Bloomberg last night, reminding him that his wealth came from those who worked for him. Too bad we don’t have real debates which would give Sanders the time to elaborate on this, where he could have explained that while Bloomberg made his wealth from these terminals, he certainly didn’t construct and program them himself, and quite likely doesn’t have the foggiest idea how. His wealth comes from not paying the people enough who did the actual work for him. All he did was have an idea, which he may have simply copied from someone else, as Zuckerberg did.

      The C suite types essentially manage revenue streams, and the bigger the revenue stream, the more compensation they feel they deserve, even though someone managing a smaller revenue stream may be doing more actual work. So a CEO heading a company that does a billion in annual revenue will make quite a bit more than one running a $50 million company. Why should that be?

      To put it in terms everyone could understand, as a bank teller I didn’t get paid more for processing $100,000 payments than I did for $10 payments, so why should a CEO? The difference between the bank teller and the CEO is that the CEO essentially gets to decide their own salary and the tellers’ salaries, and the tellers are left with no agency of their own. Which is why we need unions.

      Solidarity. Bernie or bust!

      1. cnchal

        > . . . he certainly didn’t construct and program them himself, and quite likely doesn’t have the foggiest idea how.

        I bet you are wrong about that. My understanding is that when he started that business he was getting his hands dirty, whether in the shop or writing programs.

        Where does wealth come from?

        My version of MMT.

        (Material Meets Tool X sales) – expenses = profit or loss

        If it’s profit, wealth creation, if it’s loss, hell.

    3. Joe Lambke

      thank you Yves and everyone else for clarifying that inequalities is NOT due to economic growth, like the poor article from two days ago tried to fake.

      “ sharpened their critique of why concentrated wealth is suspect. Too much inherited money lead to the creation of dynasties. ”

      inequality needs to be revised in a big way, Saying growth causes inequality is ridiculous.

      thank you for bringing the more important issues to light!

  4. Steve Ruis

    Re “The credentialed elites are particularly big on promoting the view that they are where they are because they are “talented” and worked hard.” This is a typical argument of the wealthy to justify their wealth. The problem is that it all depends on not just that they have talent, everyone has talent, or that they work hard, many people work hard, but how much of each those.

    I calculated out that if someone “made” one billion dollars in a single year (and year after year the number of people to do so is increasing) and assuming eight hour work days and normal holidays, etc. that that billion dollars works out to in effect getting paid $532,000 per hour of every work day. In my 35 year “career” as a college professor I made about $2,000,000 (corrected for inflation, that is about $4M in today’s currency). So, my entire career’s work is worth as much as one day’s work of this billionaire.

    Nobody “earns” that kind of money. Nobody is worth that kind of money. Nobody works that much harder that they deserve that kind of money. And the only way one can make that much money is by gaming the system (the political system, the tax system, etc.) So, when those who claim they have the talent and work hard, so they deserve their wealth, if that were actually true, they wouldn’t have to game the system, would they? And if it is true and they still game the system, then they are despicable greedy people.

    Oh, and do recall that Mitt Romney recalls that no one helped him on the way up. Apparently the $2M of seed money his father gave him and access to his father’s Rolodex weren’t help. (I use that example, because Romney’s father gave him what it took me 35 years as a college professor to earn as “getting started money.” But everything Romney now has was because he was talented (no argument there) and worked hard (don’t know, don’t care) but how much more talented was he that I and how much harder did he work than I?

    1. Susan the other

      It’s too amusing. The elites are (or were recently) bragging about being the smartest and hardest working stiffs on the planet and that they are where they are – at the top of the pile – because of it. But just exactly where are they? And by virtue of their “leadership” where then are we? In one giant mess – that’s where. But we’ll never hear the ultra wealthy-but-now-embarrassed admit it. They continue to brag up all their superior, meritocratic, habits as if we’ve got a great country, a great civilization, a great planet.

      1. CanCyn

        Agreed STO …Funny is one way to put it, in a you gotta laugh or you’ll cry kind of way. How do these squillionaires manage to convince themselves that they’re so GD special? Honesty! Think of Monbiot’s quote about women in Africa …. Anyone think Bloomberg, Bezos, Zuckerberg or any of the rest of the world’s squillionaires could walk even one mile in any of those women’s shoes? Not bloody likely would be my vote.

        1. jrs

          I quite literally think Bloomberg would not ever be able to get a job that he criticizes minorities etc. as being unable to get in his view. Because what does he know about that? Nothing.

          1. Shonde

            I recently read that Bloomberg was a C student in his undergrad years. Somehow he still gained entrance to Harvard Business School. A C student? How did he do that?

    2. MLTPB

      I’m always puzzled about the fact that a baseball player can hit 20 homeruns a season and get paid x dollars when there are 1 miilion fans, but the same work, when there are 10 million fans watching, from here, to Tokyo, London, Beijing, etc., he gets maybe 10x, 7x or 12x.

      The same amount of work.

      Some people economists have a good explanation for that.

  5. Carolinian

    Of course even the poor in relatively rich countries like Britain or America benefit from inequality as they buy inexpensive goods from truly poor places like Bangladesh. As the above says, the country you are born in is a big part of the lucky sperm club.

    So perhaps that’s another explanation why the less fortunate tolerate inequality. There’s always someone else lower on the totem pole. It’s likely that those who are truly at the bottom in third world countries have a considerably less benign attitude toward oligarchy. As George Kennan once said, the purpose of our foreign policy is to make sure we aren’t them. Would the less fortunate in places like the UK or US be willing to spread the wealth evenly among all of the world’s people? I doubt it.

    So the real problem could be that our system of “managed capitalism” has broken down due to corruption. Undoubtedly media narratives celebrating the rich are part of this breakdown of the social contract. The problem is, as it always has been, making the rich see reason, not the poor. We need more FDRs, fewer Bloombergs.

      1. Carolinian

        I think you miss my point which is about universality, not whether the top 400 (or 600, or 1000?) are somehow different. As the possibly apocryphal story goes:”The rich are different”–“Yes they have more money.” (Fitzgerald/Hemingway). I’m contending it’s the power that corrupts and we all suffer from this disease to some extent.

        1. inode_buddha

          I think power corrupts only to the extent that one is willing to sell out ones soul. A person who cannot be bought off is anathema to those in power. Example: Sanders.

  6. Walter G Antoniotti

    Begin by including the PV of Soc. Sec and Medicare as wealth.
    Why? You can not take 16% of a low wage earner’s paycheck and expect them to lower consumption and save.

    1. Bill Carson

      We should also include the PV of pensions as wealth. People don’t understand that the right to receive a future income stream for life is an extremely valuable asset, especially at today’s historically low interest rates.

      1. JTMcPhee

        Of course pensions are risky investments too — how many PE looters have found “all nice and legal, see?” ways to take pension money through bankruptcy and other frauds? And how many pensions are indexed to inflation, and where does the money come from to pay out to pensioners? Not too many fully funded pensions (absent including PBGC public money) out there, and pensions are a dying item.

        WAG, so you want to monetize SS and Medicare benefits? Is that what I hear? Maybe so low income people can put that money in the stock market, where it can “grow?” As to “saving,” with what? Killing payroll deductions and “giving them back” to low wage earners, who are in no position to either “save,” with no place to put such “savings” where it won’t be looted by “legal” thievery like proposed negative interest rates on deposit accounts and the fees banks charge on savings accounts and the infinitesimal interest they pay? And to even mention “lowering consumption” in connection with almost everyone in the bottom 50% is nonsense — they have no savings, shop at Kwik Stops for junk food and Dollar Stores for junk goods, and live hand to mouth.

        So just what are the PVs of SS benefits (to which all wage earners contribute, to benefit all wage earners) and Medicare (same)?

  7. Steven Bailey

    I am no fan of Jay Gould but his observation that he could hire half the workers to kill the other half is about as accurate and concise of an assessment of human behavior that I have seen. The bottom line is too many people only care about inequality only when it affects them on a personal level. I can’t remember who this quote is attributed to but it has always been one of my favorites, “10% of people are truly good, 10% of people are truly evil, and 80% never quite figure out what side they are on”.

    1. The Historian

      I respectfully disagree. Inequality affects all of us in many ways. It affects how much money is in the economy for us to use, it affects the kinds of healthcare we receive, it affects the kinds of education we receive, etc., and I think that most people sense that on some personal level. The problem is that the current narrative does not point that out. The current narrative tells us that if someone has more than the rest of us, then that person must have worked harder. It’s not true but that really doesn’t matter, does it? The cognitive dissonance can be drowned out by “belonging”.

      Humans are basically cooperative and want to be a part of a group – we’ve known this forever – and therein lies the problem. We are herd animals – and we will accept the norms of whatever group we want to be part of. That is why there are religions and political parties. Most people I have ever talked to about economics or political parties or even religion believe whatever those people they consider significant around them believe. That is why you hear people say “I’ve always been a ” _________” even though what a “________” is has changed over the years. It isn’t that they’ve done introspection and think about their basic morality and what they should be doing – it’s what their parents did and what their friends do – to do otherwise would make them an outcast from their herd – a fearful and unsafe place to be and only for the hardiest among us.

      That is why it is so important to change the narrative because people will always believe in the group narrative over anything, even reality, because it translates to safety and security in their minds. And like vlade, I don’t think the left has done a good enough job in giving people a basis that protects their need for safety and security so that the current narrative can be changed.

    2. Jesper

      I’d agree. Possibly I’d lower the percentages a little. Maybe 5% are truly good, 5% truly evil and the rest never quite figure out what side they are own and mostly go with the flow.
      & I’d agree that many (possibly most) only care about inequality when it affects them, possibly I’d add a qualifier that they only care enough to actually do something when it affects them on a personal level. Many say they care, not quite as many take actions to match their words. But it is only my personal opinion so my words might say more about me than indicate what the reality is.

  8. antidlc

    “The bottom line is too many people only care about inequality only when it affects them on a personal level.”

    So true.

    1. JTMcPhee

      How to explain how things work in other places, where the GINI And similar measures indicate a collective willingness to share more equitably, without apparent reference solely to one’s own personal well being or lack thereof?

      “We could do better, but we choose not to…”

  9. Susan the other

    “Wealth creation is a collective process.” Yes it is. But wealth shouldn’t be represented by money. Money is not the referent of wealth at all. That’s our first mistake. That leads to the illogic of taxing the rich, redistributing it to the poor whom we have employed in profit-making enterprises so the consumer world keeps turning. Subsidizing housing and food and medical care at national “expense” … etc. That’s not gonna work. We need to spend our sovereign money, directly – no borrowing necessary – into society. Giving people what they need to survive and thrive. It’s fine to create jobs if they are not created to enhance profits but instead to enhance the health of the planet and etc. This class war stuff is ideological marxism – and per yesterday’s link to David Ciepley – that horse has long since left the barn. Our corporations and legal structures have usurped the legal sovereignty necessary to self-perpetuate their bridge to nowhere. It has almost nothing to do with labor. It is all privatizing profits and socializing losses at this point and they are rapidly running out of new profits. We need actual material benefits given to us by… ourselves, in order to set society on the right track.

      1. Susan the other

        Just off the top, I think accounting would be a completely different animal with lotsa columns of whatever thing contributes to the wealth of the economy both large and small scale… all the things we refuse to include now like taking care of aging parents and small children; various community projects like daycare; city maintenance – etc. etc. If the politics change in a political economy the items on the spread sheet change too, no? (well, clearly not in the western world quite yet). And to extend – then the tradeoffs also increase, so lotsa balanced accounts just by doing your share.

    1. Adam Eran

      “Wealth isn’t about having lots of money; it’s about having lots of options.” – Chris Rock

  10. m sam

    One response to this dilemma, as outlined by Sonia Sodha in the Observer, is to accept that “the belief that Britain is a meritocracy is ingrained in our collective psyche”, and adjust policies and narratives accordingly. This would mean ditching the class-war rhetoric and instead putting forward solutions designed to appeal to a meritocratic worldview.

    I’m not so sure this is the best way forward. “Meritocracy” is just another word for oligarchy, “except those mertitocrats really do deserve all the wealth and power.” Accommodating that point of view in the end just props it up. To me oligarchy is central to the issue of inequality, and is the part that needs to be unambiguously smashed if inequality is going to be lessened.

    There can be no accommodating oligarchs who will never agree to give up their wealth and power. Trying to accommodate our way to a more level playing field is not a new idea, has not worked in the past, and will not work in the future. Accommodation only leads to more neoliberalism.

    1. meeps

      > There can be no accommodating oligarchs who will never agree to give up their wealth and power.

      Speak it. They, more than anyone, must believe and perpetuate the myth of merit in order to justify their takings.

      For example, in last night’s debate Mike Bloomberg promoted his philanthropy and congratulated himself for all that hard-earned money he so generously gives away. Is it not self-evident that he’s doing a piss-poor job in that regard? I mean, he still has 60 billion dollars.

      That is one bare-a$$ed emperor. People need to start pointing at him every time he parades around so scantily clad.

  11. Iapetus

    Yves – I agree that most billionaires want to believe they deserve what they have, and that the system is fair. Michael Bloomberg all but confirmed this when he suggested that Elizabeth Warren and Bernie Sanders “could’ve been billionaires, too, if they’d worked hard enough“. But, as this post suggests, Bloomberg’s accumulation of wealth was in fact deeply dependent on a regulatory rent that he was lucky enough to stumble onto soon after he started his company.

    Bloomberg profited immeasurably from the SEC’s decision to abolish fixed-rate securities trading commissions in May 1975 (often referred to as ‘May Day’). Prior to this, all trades made on the New York Stock Exchange were executed for the same commission price per share, and brokers regularly took an additional 2% or more for themselves on these trades. The SEC mandate eventually dropped commission prices to pennies per share and led to the creation of discount brokers. What this meant for buy side investment advisors was that they now had a fiduciary responsibility to seek to obtain the best price and execution for their securities transactions, and if they didn’t this might constitute fraud. A loophole was soon created, Section 28(e) of the Securities Exchange Act of 1934, which established a safe harbor for money managers who use client funds to purchase brokerage and research services for their managed accounts. What this meant is that managers could pay higher commissions, or direct lots of commissions to a single broker, if the broker helped them pay for ‘research services’.

    Enter the Bloomberg terminal. Bloomberg was ideally positioned as one of the earliest and best funded providers of ‘research services’ to Wall Street. An investment advisor could now guarantee Goldman Sachs $10 million in trading commissions per year, if Goldman promised to pay for Bloomberg terminals and research services that are say $1 million or 10% of this amount. As a consequence the commission per share paid to investment banks dropped significantly, but their allocated share of trade commissions from the largest investment managers remained relatively unchanged. These Soft Dollar agreements were negotiated with all the major investment banks. This is why Bloomberg was for decades able to charge thousands of dollars per terminal and not have any customers balk at his price. By the time these soft dollar agreements became obsolete, Bloomberg had already established its pricing, its infrastructure, and a low cost way to distribute its data (now online instead of via coaxial cables). The rest is history.

    So while I’m sure Michael Bloomberg works hard, if Section 28(e) of the Securities Exchange Act of 1934 indicated ‘ice cream’ instead of ‘research services’ then the owners of Ben & Jerry’s or Baskin-Robbins would probably be billionaires instead of him.

    1. Jeremy Grimm

      A small quibble — do “most billionaires want to believe they deserve what they have, and that the system is fair”? I would agree wholeheartedly that most billionaires want — us — to believe they deserve what they have, and that the system is fair, but I am skeptical that most billionaires care whether they deserve what they have, and that the system is fair.

      1. Adam Eran

        As someone acquainted with a few wealthy philanthropists through a relative, you remind me that my relative used to say “A lot of these guys were born on third base; all of them want to act like they hit a triple.”

        …looks like human nature, to me.

    2. inode_buddha

      The BS about “hard work” is coming from those who get the most from it. Hint: it’s not the people who are actually doing said work.

    3. Yves Smith Post author

      This is incorrect. Do not spread disinformation. It is a violation of our written site Policies.

      Bloomberg is for getting prices for bonds, not stocks. Help me. Yes, you can also now get stock and FX prices and all sorts of things, but what made those terminals valuable was bond pricing. The fact that you don’t even know that utterly disqualifies you.

      Bonds were always traded over the counter and not on exchanges. They were never subject to commissions.

      Dealers make money because they quote only one side of the trade. There is an implicit bid-asked spread but when you called for a quote, you would have to say if you were a buyer or a seller and in what size and then you get a quote. There was never an exchange price.

      Needless to say, because buyers and sellers (save for a handful of active traders) had no idea where the market was, they could and regularly were really taken by bond traders.

      The only exception is a very small number of corporate bonds listed on the NYSE and they are a microscopically small fraction of the value of the bond markets.

      Bloomberg got Merrill to give indicative prices (Merrill was not the #1) in return for 40% of the company. Merrill DID show both sides. Still indicative, you’d have to call with a size and which side of the trade to get a quote, but it could not be too far off the indicative price, otherwise Merrill would look silly and not get any calls.

      That bit of transparency in a heretofore totally opaque market quickly became a must have. And other dealers quickly felt they had to post prices on Bloomberg to keep their competitive position.

      And Bloomberg does not provide research, as in have research analysts that tout securities. The terminals are valuable due to not just the prices but also the additional bond analytics (BTW which are in some cases wrong but they’ve become a convention and bond prices reflect the BBerg analytics, that’s how pervasive they are).

      1. Democrita

        Hi Yves — Thanks for this because I grabbed this post too quickly.

        I had recalled reading an earlier post on the site that detailed Bloomberg’s rise as owing partly to legal/reg changes at the time. Then I could not find it.

        In sum, the question is in part whether MB owes his money to his own genius or whether there was luck in his timing. Does your response here mean there was no such luck involved? Or is it merely being incorrectly described?

  12. Dan

    Why is everyone so enamored with hard work, intellectual or otherwise?

    Ben Franklin commented on the fact that “Indians” would always go back to living the way they lived even after being exposed to this great new way of life the colonists were engaged in. Likewise, colonists who were exposed to the indigenous way of life much preferred it to the colonial (“civilized”) way of life. They “went into the woods” and never came back.

    Franklin wasn’t able to psychologically handle a carefree, egalitarian, peaceable way of life. The Indians had to be taught industriousness, acquisitiveness, etc. Ultimately, they had to be slaughtered.

    We may abhor what happened, and is continuing to happen, to the indigenous peoples of this world. But our psyches are much more in tune with Franklin than with the Indians. And that’s the problem.

    1. Jeremy Grimm

      I heartily agree with you. It is time to give praise to idleness. Hard work seldom or never serves to foster imagination or creativity. I value both these far more than ‘hard work’.

    2. Adam Eran

      The “deserving” of things is a perennial problem. People want to act like they deserve their circumstances. The deserving of good things (“salvation”) has often been something to be “deserved”… Salvation by works is a recurring theme. JFYI, orthodox Christianity endorses salvation by grace (gifts, charis).

      One of the many fascinations of David Graeber’s Debt: The first 5,000 years was his account of how this “deserving” stuff played out in human history. Michael Hudson says that Jesus’ mission was to cast doubt on the absolute obligation of debt (unlike the Romans). Jesus began his ministry by declaring “The Year of the Lord” (a jubilee year) and had conflicts with the Pharisees who wanted to write IOUs exempt from jubilee forgiveness.

      I’d go further and say several parables are Christian equivalents of Zen koans, getting people to think outside the box of obligation and deserving. For example, the “prodigal son” was not the one who deserved a celebration for being reunited with the family he abused…but he got it.

      So…”deserving” is just another little narrative we tell ourselves. It’s useful, but has its limits. The sooner we get that, the happier and more enlightened we’ll be.

    3. xkeyscored

      Unambitious idlers and indigenous peoples also bear little responsibility for the great crises facing the world, such as environmental destruction and nuclear weapons.

      1. MLTPB

        It would seem Basic Income is preferable to Work Guarantee, from reading the comments here.

        ‘Here, take the money. Go be idle.’

  13. Jeremy Grimm

    I disagree with the premise of this post as stated in its title.

    Before going further I also object to the use of the word ‘inequality’ to describe our present distribution of wealth and income. The word ‘inequality’ obscures the astronomic scale of inequality. Consider the beginning of this post — “most people are relatively content with people getting rich”. What is not clarified is what “most people” mean when they think of “getting rich”. Most people have no concept of how much a billion is — I am not able to comprehend that amount. I would venture that for many people “getting rich” means having enough money to feel truly secure in their lives and able to enjoy some of the pleasures that money can afford. I also suspect that for many people failure in achieving “success” means something less dire than the misery visited upon the growing mob of the poor, destitute, and homeless.

    While I do suppose “we need to start talking about where wealth comes from” as the post states, I think that prescription is woefully inadequate. Assume we have a working meritocracy and “every individual will receive their just rewards in relation to their true contribution to society”. These assumptions do not imply individuals are “entitled to the financial rewards of success – regardless of how enormous they are”. Individuals might “receive their just rewards in relation to their true contribution to society” with that “just relation” scaled to constrain the rewards of success to more closely match what I believe most people mean when they think of getting rich. As Ian Welsh stated in one of today’s links “money is, of course, power”. In a democracy, indeed in any State ruled by sources of power other than money, the accumulation of money must be constrained.

    I believe an attack on Neoliberalism — which is what I believe this post is discussing — should begin by attacking the Neoliberal concept of the Market and the associated claims of the Market’s ability to compute what is ‘best’. Issues of whether we actually have a meritocracy or a just distribution of wealth and income can follow — preceded by a description of the true scale our present ‘inequality’.

    1. KiWeTO

      A market exists when participants agree to operate within an agreed set of rules.

      A free market as their advocates advance for quicker operations without regulatory friction, is essentially a false market, since there are no agreed rules anymore. Also known as anarchy, or grab what you can.

      All this talk about meritocracy being seen as a positive thing, belies the fact that the term was originally coined satirically.

      Black can become white with enough bleach applied.

  14. Paul Hirshman

    This thread is a bit goofy. There’s not much here that’s new. What’s going on is that we’re lamenting the ideological whipping we continue to receive from Capital. The old labor theory of value, even if it’s not the best economic theory, is still a riveting story to tell. As a story it holds up rather well. Michael Hudson’s take on rent comes close to being the best we have, but his story is not an easy one to tell. (The Left needs another Trotsky to tell this story in a gripping way.) For instance, maybe every kid should see “The Organizer” to get in touch with this story…a great film, very easy on the eyes and brain, though not on the soul.

    1. Jeremy Grimm

      The “Organizer” sounds like an interesting film … but from the description I read about the film it’s story is more than a little dated. Most of the factories in the U.S. are long gone. Most of the remaining unions in the U.S. were co-opted long ago. Now days in the U.S. a strike would have little effect. Most Industry has consolidated and globalized. Strike a U.S. factory and the factory will close, the capital will be shipped far far away and a few Senators and Congressmen will receive some grease to adjust the requirements for a “Made in U.S.A” label. Perhaps a new maquiladora in a special ‘trade zone’ created in the U.S. near the border might be built.

      You long for another Trotsky and find Marx’s labor theory of value convincing and there is “not much here that’s new”? I think Neoliberalism is a new. Neoliberalism is not the same as the Capitalism Marx analyzed.

      1. JBird4049

        Perhaps today’s Neoliberalism is different in the details of what Karl Marx described and critiqued; the essential part of capitalists, those ostensible job and wealth creators extracting or extorting, sometimes at gun point, the wealth created from those who created it is still germane. Further, I am not even sure that the differences are all that different.

        The destruction of unions, political organizations, schools of thought, and industries, the rapid industrialization, deindustrialization, and financialization with great increases in poverty and concentration of wealth, the use of the military to force concessions that succeeded in the United States, the British Empire, and elsewhere in the 18th and 19th centuries was repeated in the second half of the 20th century and the first two decades of the 21st.

        There is a difference in that the elites colonized the United States this time. It wasn’t Ottoman, Indian, and Chinese industries that were destroyed. It was American and British industries that were destroyed and the the factories shipped elsewhere. Like China, India, Mexico, and Central America.

  15. xkeyscored

    Were slaves aware of the obvious and eternal truth that hard work would make them rich, I wonder?
    This might be another angle via which to subvert the meritocratic narrative, especially in the USA.

    1. Jeremy Grimm

      Thank you for the info. I try hard not to let the origin of an idea deflect an analysis based on its inherent merit or lack thereof — although I find this effort difficult and too often fail in such effort. The devil may speak Truth — but I we should take special care weighing that Truth for its full meaning and merits.

    2. Yves Smith Post author

      That is false as well as ad hominem. Both are violations of our site Policies.

      openDemocracy has many funders and it’s clear none of them are big enough to have editorial influence. And Open Society is not the biggest funder on top of that.

      It has been funded by the Charles Stewart Mott Foundation among other organisations including the Open Society Foundation the National Endowment for Democracy, the Ford Foundation and Joseph Rowntree Charitable Trust[

  16. smoker

    Glad the author added this about some property owners in the middle class, because it needs to be included (some links omitted for postability, and emphasis mine):

    ….And while capital ownership is distributed extremely unequally, in recent decades changes to pensions and the housing market have enabled many middle class households to join the capital income gravy train and accumulate wealth without lifting a finger.

    As I’ve written about before, since 1995 three quarters of all wealth accumulated in the UK – totaling £5 trillion – has come from rising house prices. The driving force behind rising house prices has been rising land prices. But land is not a source of wealth but of economic rent. The truth is that most wealth made through the housing market has been gained at the expense of others who are now seeing more of their incomes eaten up by higher rents and larger mortgage payments. The housing boom is not an example of wealth creation, but wealth redistribution on an unprecedented scale.

    The at the expense of others link, which is titled: It’s time to call the housing crisis what it really is: the largest transfer of wealth in living memory, includes this chart, showing UK Net Wealth from 1995 to 2016, and the obscene amount of passive activity wealth increasingly attained through owning abundant land and dwellings by the end of 2016.

    I’d love to see a similar chart for the US, and particularly for California’s huge hot spots of Unsheltered Homeless, which are increasingly being populated by those over 50,and so called okay boomers (which include millions who’ve rented their entire lives, with no return whatsoever on their significant, life long real estate investments) over 60, who – amidst the as yet to be discussed by any candidate, increasing workplace Age Discrimination that exploded during the Obama reign – have not much hope of anything left but dying on the streets and being denied an option to peacefully and painlessly end their lives – since it’s quite clear that avaricious Landlords and our hideous Politicians (many of whom are also predator LANDLORD investors) have no intent to stop the utterly unnecessary, EVIL tragedy of exploding homelessness.

    The fact that the ghastly term, LandLord, has never been reviled, to my recollect, by any popularly proclaimed politician, or Social Justice pundit of recent years, leaves me with zero hope.

    1. notabanktoadie

      The fact that the ghastly term, LandLord, has never been reviled, to my recollect, by any popularly proclaimed politician, or Social Justice pundit of recent years, leaves me with zero hope. smoker

      Some reasons for hope:
      1) A large number of US citizens are at least purported Christians.
      2) Christians MUST consider the Bible “The Word of God”.
      3) “The Word of God” is that all families should permanently own some land to live, work and work on (cf. Leviticus 25, also Isaiah 5:8-10).

      1. JTMcPhee

        Nominal “Christians” are supposed to follow the path Jesus laid out, supplanting the Old Testament with a new covenant. All the vast number of references to and applause of the Old Testament in the churches I have attended are to confirm patriarchy and the virtue of the sword as applied to others, as well as hero worship of some pretty vicious, deceitful and murderous characters.

        I’d not be looking to most “Christians” to support much other than the inequality complained of. See “prosperity gospel,” all Old Testament stuff, unquestioning support and rooting for Israel, Rapture theology, etc. “Your rewards will be great in Heaven,” so kwitcherbitchin’!”

        1. notabanktoadie

          I’ll testify to this: that if one will read the Bible sufficiently, one will find it consistent and very reasonable; e.g. the inhabitants of Palestine were given 430 years to repent of such things as sacrificing their children to Moloch, incest, and other abominations while the children of Israel (Jacob) lived in Egypt under increasingly harsh conditions.

          As for “patriarchy”, don’t women KNOW they have an indispensable role (“It is not good for man to be alone”, Genesis 2:18, not to mention Deborah, Jael, Mary, and other heroines of the Bible)?

      2. smoker


        Your repeated Christian™ pedantry, without a whiff of sorrow attached – under the auspices of being a well read theologian (male I’m betting on, given your last risible response regarding Patriarchy to JTMcPhee, below – I’ve not noted the said to be a Rabi, Jesus, promoting Patriarchy at all, in The Gospels) is fairly unbearable.

        And, certainly, Jesus would not have stood by and proclaimed that God promised a piece of land (a transient, utterly unhygienic, humiliating and degrading concrete infertile sidewalk/underground subway patch in the circumstances you claim should give hope) without first damning those who own countless acres, even square miles, they don’t even take care of – and charge increasingly impossible amounts to live upon.

        1. smoker

          sorry, regarding that: …your last risible response regarding Patriarchy to JTMcPhee, below, … , I should have written above, not below.

        2. notabanktoadie

          (a transient, utterly unhygienic, humiliating and degrading concrete infertile sidewalk/underground subway patch in the circumstances you claim should give hope) smoker

          Huh? Where do I claim such nonsense? I’m talking about every family owning some arable land to grow their own food, live and work on. But that’s mild compared to what true Old Testament reform would do to large land ownings since the OT provides for roughly equal ownership of all agricultural land. Is that your point? Fine, let’s do it.

          As for Patriarchy, I’m simply pointing out that the Bible is more nuanced than many people give it credit for and they shoot themselves in the foot thereby by throwing the baby out with the alleged dirty bathwater. Not that Christians are under Old Testament Law anyway but we should AT LEAST EQUAL IT wrt economic justice and we don’t by a far cry.

  17. TheCatSaid

    The post does not mention the problem of erased history. Wikileaks is one helper–by crimes of omission.

    With so much of our history airbrushed out, we do not have the context of the origins of the wealthiest and the source of their multi-generation acquisitions of money, resources and power and the highly-placed connections that led to our current state of affairs.

    To give some idea of how extensive this airbrushing of history is, check out the meticulously documented research done by Mark Kulacz on his website (Research tab contains an alphabetic list.) A better starting point might be some of the narratives on his YouTube channel Housatonic Live, then refer to the extensive documentation on his own website. Many volunteers contributed to Kulacz’s research.

    The family backgrounds he has uncovered include Jeff Bezos (look under Gise), William Barr, Robert Mueller III, the Symington family, Adam Schiff, current election candidates (Buttigieg, Warren), Gibson Island dwellers, Alexander Sachs and many more are fascinating and eye-opening. Information that is missing speaks volumes. What is missing is often what guides Kulacz’s research.

    The reach of the past into the present is crucial to discover the falseness of the narratives we have been fed and have come to believe about prominent people rising to the top, not to mention the cross-party webs of corruption and influence that have been woven across many generations and often seem to have been carefully concealed.

    Without understanding our true history we rely on *deliberately misleading stories* we’ve been fed that form a foundation of pretense that nonetheless shapes our understanding of current events and discussions about policy options today.

    Issues such as income/wealth redistribution, resources/nuclear/mining/climate, government/intelligence/military networks–I’ve been amazed to discover the historical facts of key players stretching across national boundaries and political parties in often unexpected ways.

    History matters. Where peoples’ backgrounds have been concealed or misrepresented there are good reasons and this warrants a closer look. We are living with the consequences of our ignorance of our past.

    If anyone wants some specific examples have a look at the website I mentioned or ask me here.

    1. Yves Smith Post author

      I’m sorry but I don’t agree. The history is there but people have become lazy about investigating. If they can’t find it in a click or two, they don’t bother.

      And frankly, the caliber of information on the Internet is very mixed.

      1. TheCatSaid

        Saying “the information is there” (implying just a moderate effort is sufficient) while true of some things is not the case in the research Kacz has done. Compare the narrative about Bezos in the public bios to the reality of the levels of influence and highly specialized knowledge of both his grandparents. This involved weeks/months of research by many people requiring paid-access tools and special IT skills in some cases to uncover obscure sources then connect the dots. . .
        The pattern of concealment combined is too systematic. The effort, time and expertise to uncover high-quality documentation from dozens of sources that destroys the public narrative is immense. The documentation is far beyond anything typically accessible on the Internet.
        This is intentional concealment–clear after one sees the patterns of secrecy, records wiped and not mentioned, and pablum narratives provided that are repeated so often that we assume they must be valid.

        So many of the people who wield great power in our daily news have personal histories that, when known, create a completely different context for understanding current events.

        Even the most scholarly research is based on faulty assumptions of numerous kinds.

        This becomes quite clear as I’ve seen the HousatonicITS research evolve. If one never looks at it it’s easy to criticize.

        1. Yves Smith Post author

          Bullshit. Your premise is information is or ought to be on the Internet.

          First, tons of things that were once there aren’t due to sites disappearing or are effectively not there due to the crapification of search engines.

          More important, information pre 2000 is not much on the Internet because it was not generated on the Internet. There are some exceptions like the New York Times archives, but not all that many.

          Information is there. In print. Information about Bezos’ parents would be presumed to be in print save to the extent he or Amazon wanted to highlight selected bits or they decided to be interviewed in the Internet era. This would be true of pretty much any public figure. This isn’t a conspiracy, this is bog standard normal.

          And even electronic information being hard to find now due to the state of the Internet isn’t a surprise either.

          To write ECONNED, a considerable amount of my sources were…gah…books! As in print because they were old enough not to have e-book versions (even if I found them useful, which I don’t for reasons I’ve gone over elsewhere). I’ve spend most of my career as a consultant doing actual research, and too many people fail to appreciate that that entails actual effort.

          1. TheCatSaid

            I didn’t say I thought all information should be on the Internet.

            Many of the resources used were not Internet sources. Including books. Including finding out from primary source materials that books and other supposedly authoritative sources were often flat out wrong–or at best completely misleading by omission.

            Your research skills in your field are formidable. Other researchers are also formidable and use numerous non-Internet sources.

            Before making assumptions you might have a look at the research before jumping to incorrect conclusions and posting them.

            I am in agreement that many are lazy to apply much effort. That is compounded by systematic challenges to getting accurate information combined with persistent disinformation. Just look at NC reporting on CalPERS and Uber and–many still believe the persistent narratives that are wildly inaccurate.

            When figures in positions of financial or political power are pro-active about covering the actual sources of their wealth, connections, and access to insider knowledge and control it makes finding the overlooked breadcrumbs very difficult.

            I have great respect for you and others who take the time to do detailed quality research.

            1. Yves Smith Post author

              I don’t mean to sound harsh, but your degree of indignation is disproportionate. First, you give the impression that there is or ought to be an agreed set of facts about someone. In reality, as attested by the regular presence of multiple biographies written about famous people, that is seldom the case. There is ample difference of opinion as to what information is important and what to make of it (before even getting to issues of whether “facts” are agreed, like whether Churchill was born prematurely, as his parents liked to maintain, or his mother, Jenny Jerome, got pregnant before she married Randolph Churchill and she carried Winston to a full term).

              Second, you give the impression that you think propaganda is a recent development. I suspect you don’t but you may not know how long propaganda has been a major feature of public life. Among many sources, the four part Adam Curtis classic, The Century of the Self, or Alex Carey’s classic, Taking the Risk Out of Democracy, demonstrate otherwise.

              For instance, Edward Bernays, in his 1926 book Propaganda, pointed out that half the articles on the front page of the New York Times were propaganda, as in planted by business or government officials to promote what we would now call their narrative.

              And I don’t consider these hereditary finds all that impressive. Bezos went to Princeton, fer Chrissakes, and when he went, it has way more legacy admits than Harvard or Yale. I already knew Adam Schiff was from the old Schiff banking family.

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