Quantcast
Opinion

Robert J. Samuelson: Myth-making about economic inequality

Comments

Return To Article
  • marxist Salt Lake City, UT
    Feb. 4, 2014 12:29 a.m.

    "For starters, the poor are not poor because the rich are rich." A Marxist such as myself would argue that the process - profits - which has made some wealthy (almost all are business owners) has made others (employees) less well-off compared to what their situation would be with ownership rights.

    The matters of defining what profits are and determining how profits are created has been a point of contention among both economists and accountants. Marx posed the question - in a system like ours where exchange mostly involves things of equivalent value - where do profits come from? Marx argued that for the most part profits come from employers not compensating employees for all of the value they add (Marx's famous surplus value). If Marx is right, labor is almost always exploited. You'll note that few become wealthy without employees. The wealthy make profits off of the employees.

    If nothing else Samuelson's piece shows how necessary Marx's perspectives are. We're ready to debate, but Marx needs a place in the debate denied him by contemporary economics, and by commentators like Samuelson.

  • JoeBlow Far East USA, SC
    Feb. 4, 2014 4:38 a.m.

    "(car dealerships, builders), creating big enterprises (Google, Microsoft), being at the top of lucrative occupations (lawyers, doctors, actors, athletes), managing major companies or inheriting fortunes."

    These avenues for wealth have been around for a long long time. Why are they now producing so much more wealth?

    If we look at the larger picture, worker productivity has grown significantly in the last 30 years and their wages have not. CEO's used to make 30 times their average worker, now it is closer to 300 times.

    The focus on the bottom line has pushed companies to ship jobs overseas in order to maximize profits.

    Granted this is a complex issue. And I agree that the "poor are not poor because the rich are rich".

    But it is hard to deny that the effort of corporations to increase their bottom line has come, to some extent, at the expense of the poor and middle class.

    Those with money can buy favorable legislation. I would contend that in the last 30 years they have tilted the playing field more in their favor, and that has grown the inequity.

    Dont get me wrong. Profits are great. Maximum profits have a downside.

  • Mountanman Hayden, ID
    Feb. 4, 2014 7:03 a.m.

    During his interview with Obama, Bill O'Reilly asked probably the most important question asked in that interview; "What has the government done to address the real cause of poverty in America, the explosion of single parent families, especially in the African American community". Obama's answer was that, "He has talked about this in at least 10 speeches"! More than anything else Obama talks about something he calls "social justice and income redistribution" which are in reality the enablers of the increase in single parent families, not the solution. The government with their easy welfare programs make men in the home irrelevant. Men do not need to provide for their offspring anymore, the government will do that for them which enables and sustains poverty. The solution to poverty is more moral responsibility not more government responsibility. Poverty will never be solved with income redistribution in fact it will increase it!

  • Mikhail ALPINE, UT
    Feb. 4, 2014 7:55 a.m.

    Both Marxist and JoeBlow give the impression that they find the necessity of government intervention or structure to be the answer to the questions of income or profit distribution. I would agree with JoeBlow that "maximum profits" may have been the result of government intervention . It does appear that money does have a significant influence on elections to Federal government representatives and cronyism is the result. Might not the answer be the downsizing of the influence of a centralized government? Would not that reduce the temptation to put your profits where they are the most effective - into the hands of a select few elected officials - who can then determine who benefits and who does not from the centralized empowered few? Might we not be better off with strengthened emphasis on the family, based upon a foundation of moral philosophy where we - as individuals - look for the opportunity to lift the poor and the unfortunate through our individual efforts? Profit motive is not an unworthy endeavor, since it is what provides for each of us the opportunity to provide for the needs of our families - where, hopefully, we are teaching principles that will lift our vision and our efforts.

  • JoeBlow Far East USA, SC
    Feb. 4, 2014 8:05 a.m.

    "most important question asked in that interview; "What has the government done to address the real cause of poverty in America, the explosion of single parent families, especially in the African American community""

    What suggestions would you have? What do you think "the government" should do to address this problem?

    I would sincerely be interested to know.

  • Mountanman Victor, ID
    Feb. 4, 2014 8:05 a.m.

    Marxist. You continue to suggest that workers are exploited. That is totally false for many reasons and here are just a few:
    #1: In a free society businesses compete for talent (workers) and in order to attract and keep the best talent, they must pay workers with competitive salaries and benefits or their business fails.
    #2: Prosperity is always generated by productivity. If low productivity produced prosperity there would be no poverty! America was prosperous because America was so very productive. Marxist societies like N. Korea, Cuba and the former USSR among many others were never productive and therefore never prosperous.
    #3: There is no such thing as productivity without freedom to produce. When the government controls productivity, there never will be any prosperity. Capitalism rewards productivity, which generates prosperity. Marxism punishes productivity and therefore kills prosperity. History is full of examples.
    #4: In a free society, if I don't like my employer and believe my employer is exploiting me, I am free to go somewhere else. In a Marxist society, you are what the government determines you are, not you.
    #5: Only successful employers and employees pay taxes.
    If you think workers in America are being exploited, you should visit a Marxist country.

  • Badgerbadger Murray, UT
    Feb. 4, 2014 8:17 a.m.

    One thing for sure, legislated jealousy is not a solution. Jealousy is of zero use in helping the poor.

  • JoeBlow Far East USA, SC
    Feb. 4, 2014 8:42 a.m.

    " JoeBlow give the impression that they find the necessity of government intervention or structure to be the answer to the questions of income or profit distribution"

    Not true. I do believe however that governmental policies have contributed to the collection of wealth at the top.

    While poor people have a vote, rich people and corporations have a vote AND lots of money.

    This money can purchase legislation which is favorable to the corporations and the rich.

    Look at tax rates in the last 30 years. Look at the favorable tax treatment of capital gains. Look at the loopholes and deductions available to corporation and the wealthy.

    Yes, I understand that the wealthy pay the bulk of the taxes. But they also make a bulk of the money, and with a good accountant and favorable legislation, their % of often lower than many.

    I believe that the playing field has increasingly been tilted to favor the wealthy, hence the growing income disparity.

  • JoeCapitalist2 Orem, UT
    Feb. 4, 2014 8:58 a.m.

    Marxist:

    Of course many wealthly people got that way by leveraging the value of many employees. Profits generated by paying employees less than they actually produce reward those who start businesses and/or invest capital in them.

    The fatal flaw in your agrument (started by Marx) that businesses should pay employees the full value of their labor (i.e. share all the profits with workers) is that the businesses themselves would not exist without the profit motive. The workers would have no place to work.

    Businesses are inherently risky ventures. For every one that succeeds, several more fail. I am trying to start a business. If I am successful, I will employ lots of people and I will become very wealthy. I would not even bother trying if the reward was the same as continuing to work for someone else. It's called capitalism. It works - not always perfectly but certainly better than Marxism ever has.

  • Roland Kayser Cottonwood Heights, UT
    Feb. 4, 2014 9:02 a.m.

    Any discussion of inequality needs to include one fact that this piece omits. The share of the national wealth going to workers has declined precipitously while the share of the national income going to corporate profits and to the hyper-rich has skyrocketed. This discussion is not about the rich vs the poor. It is about the rich vs. the working class and the middle class.

    The CEO of Google recently admitted that Corporate America is shafting the middle class. He also admitted that the reason for the slow economic recovery is that the middle class has no money to spend, thus there is inadequate demand He said that no one corporation can solve this on their own, because any corporation that unilaterally raises salaries for their workers puts themselves at a competitive disadvantage. It is a problem that has to be solved collectively.

  • JoeBlow Far East USA, SC
    Feb. 4, 2014 9:59 a.m.

    "The fatal flaw in your agrument (started by Marx) that businesses should pay employees the full value of their labor"

    I highly doubt that anyone would espouse that idea.

    However, the goal of a business should not be to pay their people as little as possible.

    It is a tough labor market right now. We hear daily about the struggles of college graduates and how under-employed they are.

    Business definitely has the upper hand. The question is how much should they squeeze. How many jobs should they move overseas to increase their profits.

    When the job market is depressed, people have no choice to work for less. Unfortunately, business seems to be all to happy to pay as little as possible while cutting benefits.

    Corporations have had a great run for several years. And their stockholders have done quite well. The employees? Not so much.

    You know, just because you can, does not mean it is the right thing to do.

  • Kent C. DeForrest Provo, UT
    Feb. 4, 2014 10:05 a.m.

    Regarding Marxist's explanation:

    Historically, there have been three basic explanations for where overall profit in an economy comes from. These were put forth by Marx, Joseph Schumpeter, and Thorstein Veblen. Each of these explanations is right in a small sense and wrong in a much larger sense. The question of where profit comes from, when every transaction produces a situation in which every cent of revenue is offset by one penny of expense (all of my income is someone else's expense), is a very complex question. It can be explained, I believe, but not in the 200 words allotted here. Part of the explanation, though, is that money is borrowed into existence. Another part has to do with our system of accrual accounting in which revenues and expenses are not realized in the same year. If the economy grows over time, this results in revenues that exceed expenses (not just for one business), but for the aggregation of all businesses.

    The problem of inequality, though, has a lot to do with initial distribution of wealth, and, as usual, Roland is right on target with his explanation. This is a systemic problem.

  • Tyler D Meridian, ID
    Feb. 4, 2014 10:28 a.m.

    Mr. Samuelson calls out a “half right” analysis (WU economists) and offers in return a half right analysis of his own.

    If we can agree that poor people are often their own worst enemy due to a whole host of bad habits and bad decisions (this is not necessarily a moral condemnation, just a fact), can we also agree that they face entrenched disadvantages that our current economy often exacerbates?

    We can see this in everything from the ubiquitous payday loan stores in poor neighborhoods to the relative lack of basic services (e.g., good police, education, etc…) to the massive economic insecurity (i.e., low skilled jobs can be shipped overseas tomorrow) driven by the modern economic mindset that corporations exist for one reason only – to maximize shareholder wealth.

    Until the Left understands that there is a large component of personal responsibility and the Right understands that modern corporations that do not benefit society are amoral at best and often can be monstrous, we will continue to see half right solutions from both sides which are largely meant not to solve problems but to fuel the political divide.

  • Lew Scannon Provo, UT
    Feb. 4, 2014 10:28 a.m.

    Samuelson's numbers are a bit suspect when he claims that even the poor have experienced economic gains since 1980. He is apparently using actual numbers, not adjusted for inflation. When you take inflation into account, only the wealthy have made gains. So, in real terms, life is more difficult for not only the poor but also those in the middle.

  • Clarissa Layton, UT
    Feb. 4, 2014 11:27 a.m.

    This article reinforces my belief that many people covet what someone else has. If the top 1% earned their money with integrity, good for them. I look at beautiful houses and the luxury trips people take, and I tend to covet, also. I have to watch for this behavior as it is wrong. Also, I am grateful that I do have enough money to fulfill my needs. It took time and a lot of education, but we are doing okay. Anyway, who wants to clean a huge house?

  • Irony Guy Bountiful, Utah
    Feb. 4, 2014 1:22 p.m.

    Who is this "we" who want to punish the rich? I don't. I just want them to pay their fair share. They benefit way out of proportion to the rest of us, who are also hard working, contributing people. I would like to see them become enlightened capitalists and share (voluntarily) their amazing gains with the people who helped them--their employees. I would also like to see them pay their weight in taxes, none of which I consider "punishment." Why does Mitt Romney pay only 13% income tax when I pay a lot higher rate than that off a tiny fraction of his income?

  • Mike Richards South Jordan, Utah
    Feb. 4, 2014 1:38 p.m.

    What is a "fair wage"? How much to you pay your "paper boy"? I made $0.50 per customer when I delivered newspapers. I had to collect for papers sold, pay my own taxes and buy my own supplies. Was that fair? I had 100 customers. The route was five miles from my home. I started immediately after school ended and was usually home within five hours. Do the math. The GROSS profit was $50 per month. Was I being exploited? I don't think so. It was the best learning experience of my life, at the time. I learned that I did not want to always work for $0.30 per hour.

    If "need" drives "covetousness", then society will fail. If "need" drives the desire to self-improve, to learn, to become better qualified, then society will benefit. Telling someone that he "deserves" more because his employer risked capital to provide a job is teaching a person how to fail. If he wants more money, he can either risk his own capital or prepare to get a better paying job. Too many people want to collect the profits without expending effort.

  • marxist Salt Lake City, UT
    Feb. 4, 2014 1:40 p.m.

    Re: IronyGuy " I would like to see them become enlightened capitalists and share (voluntarily) their amazing gains with the people who helped them--their employees." It's a nice thought but it's not going to happen (was Henry Ford an exception?). Why? Once again we need Marx to explain. Capitalists feel driven to maximize profits (surplus value) by minimizing wages, because they fear losing it all. The explanation of this behavior is more complex. There is no room here. But the behavior is obvious is it not? It explains off-shoring and American down-sizing. And the process has gotten really mean - cutting food stamps, cutting unemployment benefits, destroying pension funds (largely completed), and the intent to destroy social security.

    We know that capitalism can't function without a prosperous middle class. Even the wealthy know it, but they can't help themselves - they want maximum profits no matter what the cost.

  • Indiana H Mission Viejo, CA
    Feb. 4, 2014 3:53 p.m.

    We've got to stop paying attention to money - add value wherever you can, get what money you need and then stop focusing on it. Capitalism is much better than the alternatives but is still so blatantly dishonest that how much money a person has means very little.

    So many of us spend most of our lives dishonestly getting paid far below the value we add, all the while shuffling it upstairs to someone who just delegates the hard work back down to us. And if they fail they shuffle the risk down to us through the various safety nets & bailouts. And then we buy their products they misrepresent and overprice and then fight half the time because they don't work or break.

    Focus on your own lives and ignore the rich and celebrities. Every dollar and blessing they have that they don't fully deserve they'll have to square with the rest of us in the end for.

  • Thid Barker Victor, ID
    Feb. 4, 2014 4:44 p.m.

    Every time I hear or read someone say the rich should pay their fair share, I shake my head because of the ignorance it takes to make a statement like that. The wealthiest Americans pay nearly 80% of all federal income taxes paid while around 47% of Americans pay no federal income taxes at all! Obviously the rich are paying their fair share but guess who isn't paying their fair share?

  • SG in SLC Salt Lake City, UT
    Feb. 4, 2014 8:13 p.m.

    As much as I enjoyed reading this op-ed piece (I don't agree with everything Mr. Samuelson has to say in it, but generally it is very good), I have enjoyed reading the comments even more. There have been some excellent observations from people with widely contrasting points of view.

    This (income/wealth distribution, how they have changed over time, and their sustainability) is an exceedingly complicated issue, but it is also one of the most, if not the most, important issues of our time. I think that we are all a little bit like "the blind men and the elephant", including Mr. Samuelson, and the powers that be. This is not an indictment or condemnation, but a recognition of the complexity of the issue itself.

    I think few would dispute that income and wealth distribution trends for the working class and the "enterprise" class are currently out of balance and unsustainable. Potential solutions are harder to come by, though, and are seldom agreed upon.

    This is just my two-cents worth on the subject. Time and word-length limitations don't allow more right now.

  • averageguy WASHINGTON, UT
    Feb. 4, 2014 9:44 p.m.

    Roland, your comment,

    "Any discussion of inequality needs to include one fact that this piece omits. The share of the national wealth going to workers has declined precipitously while the share of the national income going to corporate profits and to the hyper-rich has skyrocketed."

    explains the whole problem...

    There is no such thing as, "National Wealth and National Income". It's individual wealth and individual income. Sorry, but the collective wealth concept has produced only collective poverty every time it has been tried.

  • Utah Soldier Bountiful, UT
    Feb. 4, 2014 11:40 p.m.

    Irony Guy Wrote:

    Why does Mitt Romney pay only 13% income tax when I pay a lot higher rate than that off a tiny fraction of his income?

    ========================

    My answer is that you must have a bad accountant. I make a 6 figure income, and pay the same rate as Mitt.

    Income tax is not just about income - but it is also about lifestyle and spending habits. Because of that 2 people can earn the exact same amount of income but the difference in taxes paid can be thousands of dollars.

  • Tyler D Meridian, ID
    Feb. 5, 2014 8:52 a.m.

    @Thid Barker – “The wealthiest Americans pay nearly 80% of all federal income taxes…”

    A few observations –

    1st – this would be true whether we had a progressive tax system or a flat tax and so tells us nothing other than, because taxes are a percentage of one’s income, the income generated in the U.S. is largely going to those at the top – a point that would appear to support the more left-leaning commentators here.

    2nd – all Americans pay taxes in the form of sales tax, fees, and taxes built into the price of products & services (e.g., payroll & corporate income tax) so your point is really a canard.

    3rd – let’s keep fairness out of the discussion unless you’re prepared to discuss the “fairness” of a hedge fund manager making 10,000 times what a teacher makes. Does that person really work 10,000 times harder/smarter than the teacher? Or is his wealth largely a function of supply (of smart hedge fund managers) relative to demand – why diamonds are worth more than water even though without water we’ll die – and economies of scale.

  • 2 bits Cottonwood Heights, UT
    Feb. 5, 2014 9:18 a.m.

    I guess I'm "cold-blooded"... because I don't worry about what anybody else makes. I really don't care if someone makes more than me or not, as long as I have enough to provide for my family's needs. I guess if I'm not interested in engaging in class-envy... I'm cold-blooded.

    I feel for the poor, and try to help them all I can. But I see no value in this campaign to bring down anybody who makes more than me.

    I don't see how bringing them down... brings me up.

    I don't see how bashing the people who provide most jobs in the United States (good paying jobs at that from the jobs I've had throughout my working life).... benefits me or anybody.

    I don't see how focusing on INCOME... and pretending inequality will go away, and pretending we can end inequality by pulling the plug on our economic engine... is productive.

    Class-envy rants are just whiny.

    If you want to end income inequality... get the skills to earn more! Don't just tear down your boss or anybody who makes more than you do!

  • 2 bits Cottonwood Heights, UT
    Feb. 5, 2014 1:12 p.m.

    Irony Guy
    IF you can give us a definition of what, "their fair share", is.... that everybody would agree on... we may have a solution to this problem.

    But I suspect if you get 2 people in the room, they will probably not agree on what "Their fair share"... is.

    ====

    IMO "Fair" means "Same for all".

    In other words... everybody pays the same percentage of their income. But Barack Obama and Democrats didn't agree. I think there should be no deductions (not even for social engineering). That's what Romney and Cain suggested, but Democrats disagreed (and they won). So obviously we don't all agree on what "Fair" is.

    If our tax code were flat (one percentage rate paid by ALL people) then a 1%er would pay a LOT more than a McDonalds worker (problem solved). And people with no income would pay no income-tax.

    But Barack Obama and Democrats thought it was the most important issue of the election to insure that one minority (a minority defined by their income)... be required to pay a HIGHER percentage than everybody else.

    We obviously don't agree on what "fair" is.

  • silo Sandy, UT
    Feb. 5, 2014 5:35 p.m.

    Every time I hear or read someone say that 47% don't pay their fair share of income taxes, I shake my head because of the ignorance it takes to make a statement like that.

    Do a bit of research on who makes up that 47%, then get back to us on how much income you feel those people should pay on the income they don't have.