Reality Straight Up!

Thoughts & Observations of a Free Range Astrophysicist

Saving Capitalism from Itself

VII. What is Wealth?

Whether as inherited capital, high incomes or the coffers of corporate “persons,” money begats money as never before. In a modern capitalist economy, that is really all you need to know. (Part 7 in a series on Thomas Piketty’s “Capital in the Twenty-First Century.”)


You don’t have to look far to find data that supports what Thomas Piketty has to say about the growth of wealth inequality. Reporting on a study by the Harvard Business School, Chrystia Freeland writes, “Americans actually live in Russia, although they think they live in Sweden. And they would like to live on a kibbutz.”

According to Forbes Magazine, the average American CEO earns 331 times as much as the average worker, or 774 times that of someone working at minimum wage. Corporations themselves have effectively been declared people, adding a whole new tier to the top 1% of the 1%. And while the income of ordinary Americans is effectively stagnant, incomes of the wealthy are still increasing by roughly 10% a year and have been for decades.

But wait a minute! Most of that money is income, not capital, so Piketty is all wrong! That’s certainly what Tino Sanandaji says in National Review. After all, the name of Piketty’s book is Capital in the Twenty-First Century. Surely concentrating all of that money in the hands of a few hard-working business owners is an altogether different thing. Isn’t it…?

Wealth, by any other name, remains as sweet

Granted I’m not an economist, but I have trouble understanding the practical difference between the effects of capital and income when it comes to wealth inequality in a modern capitalist economy. Although I don’t feel too bad about that. Given the wild range of things economists have to say on the matter, I get the sense that they are a bit fuzzy on the distinction themselves.

Let’s face it, wealth is wealth. And regardless of details, that wealth is used in ways designed to benefit the wealthy. The only real assumption that you need to make to understand why inequality grows is that money begats money. In today’s world, there are a lot of ways other than simple investment to turn dollars into more dollars.

Wealth begats influence, and influence begats wealth.

For as long as there has been wealth it has been used to buy influence. That has certainly not changed. The urge to donate millions to a billion dollar political campaign is not an altruistic act. Neither is the decision to spend millions to make sure that your lobbyist is in the room every time a decision is made that affects your interests.

Corruption cases such as those against Virginia’s ex-governor Bob McDonnell or New Jersey Senator Robert Menendez might get headlines, but those headlines distract from the more profound effect money has on policy. Meanwhile, the individuals and corporations directly responsible for the worst economic disaster since the Great Depression came through smelling like a rose. Rather than being held accountable, they were bailed out using public funds. As of the end of 2013 the five largest banks actually held 38% more assets than they did in 2008.

A recent study by Martin Gilens of Princeton University and Benjamin Page of Northwestern University found that the influence of ordinary Americans on public policy is at a “non-significant, near-zero level.” They conclude that the United States can no longer really be considered a democracy at all. It is a plutocracy, pure and simple.

Who needs facts when you have Fox News?

In the days of Mad Men, clever people sat around and thought of engaging ways to sell cars. In today’s world, wealth buys not only airtime but conduits directly into the brains of millions. Wealth employs that bandwidth, using ever-better science to manipulate opinion, spread disinformation, and persuade people to vote and act against their own self-interest.

One of the clearest examples is Rupert Murdock’s Fox News. Fox News dominates cable news ratings. Even so, a recent study by Fairleigh Dickinson University found that regular viewers of Fox News actually know less about current events that those who watch no news at all.

Technology in the service of wealth

Since Kuznets, economic orthodoxy has been that as technology improves worker productivity, inequality will fall. But that argument assumes that a worker’s income goes up along with productivity. According to a study by the Economic Policy Institute, that was true until the 1970’s. But since then real wages have remained essentially flat, even as productivity has risen by over 250%.

Rather than reducing inequality, technology is controlled by a few and wielded to their own benefit. One of the most amazing stories of the use of technology to siphon money into the hands of the wealthy is the story of high-frequency trading described in Michael Lewis’s book, Flash Boys. It is the story of how a group of people quietly reshaped the computerized stock market in a way that allowed them to front-run orders and without producing any value, literally skim untold billions off the top.

When it comes to spying, the NSA is not the real problem

Big Data is an even larger issue. Edward Snowden created a world-wide stir when he revealed the mind-boggling power of the US intelligence apparatus to collect communications from not just anyone, but everyone. There is far less outcry over a type of electronic spying that has far greater immediate impact. Corporations use electronically-collected data no only to market to you, personally, but to control the information that you see so as to influence your behavior. Again, all of that is in the interest of maximizing the flow of wealth into corporate coffers.

This article could be a lot longer. There is no shortage of evidence that money begats money in more ways today than ever before.  The skyrocketing inequality that we see is exactly what Piketty predicts.

So when National Review or Financial Times tells you that Piketty is wrong because a lot of wealth is in the hands of hard-working corporate executives, just smile and look at who controls what appears in the pages of those publications.

 

 


Saving Capitalism from Itself: An eight part series exploring ideas from Thomas Piketty’s Capital in the Twenty-First Century

  1. Thomas Piketty & Capitalism in the 21st Century
  2. There is No Such Thing as a Perfect System
  3. Piketty in a Nutshell
  4. Three Cheers for Small Business
  5. Inequality in a Growing Economy
  6. Economic Fairy Tales
  7. What is Wealth?
  8. Win-Win or Lose-Lose, Our Choice

Saving Capitalism from Itself ^ VII. What is Wealth?  © Dr. Jeff Hester
Content may not be copied to other sites. All Rights Reserved.

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Click on thumbnail to select post:

  • Real Anti-Racism:It’s not what you thinkPosted in Thoughts
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  • Shaking the hand of someone you disagree with isn’t as much fun as shouting them down, but it is far more effective.


    When you live in small groups on the savanna, as our ancestors did for most of our evolutionary history, it pays to be suspicious of strangers. Other groups were competition. Strangers didn’t drop by for a cup of tea and a friendly chat about our emotional well being. We couldn’t afford to see a stranger as a real person at all.  It was an “us versus them” world. Fear and aggression were the only rational responses. People who did well in that world (AKA our ancestors, the people from whom we get our DNA), knew that the only safe thing was to beat strangers with a club first and ask questions later.

    Fear of “The Other” is hardwired, and talking about it doesn’t help.

    We may not live in small groups on the savanna any more, but our brains don’t know that. For better or worse we are stuck with our evolutionary baggage. Nothing is going to change that. When you encounter someone who your brain perceives as “other”– and by this I mean you personally, dear reader, as well as myself and every other human on the planet — all of that machinery jumps to life in milliseconds. Long before we are consciously aware of anything, our brains are screaming “Danger Will Robinson! Danger!”

    Call this tribalism. Call it racism. Call it in-group/out-group dynamics. Call it identity politics. Call it polarization. Call it whatever you like. It all comes down to the same thing. When we perceive someone as other our reactions are hard wired, preconscious, and impossible to turn off.

    Good intentions don’t matter. Get high and sing Kumbaya all night. Talk about it until the cows come home. Hold workshops. Post platitudes or scream about it on the internet. If you want to judge the effectiveness of those strategies all you have to do is pick up the paper. The louder the mob screams, the more ground they lose. We’ve tried those approaches. They make things worse, not better.

    Quoting Einstein’s famous parable, “Insanity is doing the same thing over and over and expecting different results.”

    There is only one solution: Humanize yourself by embracing the humanity of others.

    If you perceive someone as other you will respond to them as a threat. There’s nothing we can do about that. Or is there? Take a step back and the answer is obvious. We can’t change how we react to other, but we can change who we perceive as other.

    There is going on 70 years of really fascinating sociological, psychological, political and even neurological research that all supports the same conclusion: If you know and respect someone, it’s hard not to care about them. Break bread together, laugh together, talk deeply, listen, show respect (even when it’s difficult), build bridges, find common purpose and work arm in arm.

    I could dig into that research, but mercifully for you I won’t. Instead I am going to share an uplifting and illustrative story of what effective anti-racism really looks like.

    How did a Black musician change the hearts of hundreds of Klansmen?

    Daryl Davis is a Black blues and jazz musician with a very strange hobby. He goes to events like KKK rallies not to shout or protest, but to listen, shake hands, talk, and befriend. Literally hundreds of the Klan members who Daryl Davis has become friends with have renounced the Klan. He has a large collection of their robes, including the robe of a man who, when they met, was the Grand Wizard himself.

    Read that last sentence again. Then if you honestly care about fighting racism you owe it to yourself to invest 18 minutes and listen to Daryl Davis’s story in his own words.

    This is not your Woke friend’s Anti-Racism.

    It feels good to gang up and shout at people. The difference between the shouters and the shoutees makes it really easy to tell who is “us” and who is “them.” Our brains love that. The dopamine flows like a river.

    But that is not what Daryl Davis did. There was no shouting about racism. Terms like “White privilege” and “White fragility” were never used. Daryl Davis never complained about microaggressions or political correctness. DEI workshops were not part of the program. Mr. Davis did not wear his feelings on his sleeve. Quite the contrary, Daryl Davis listened even to open hatred and tried to understand where it was coming from. There was no talk of victims and oppressors. There were no social media attacks or calls for deplatforming. There was no virtue signaling about Wokeness.

    Instead, Daryl Davis treated those who were predisposed to hate him with dignity and respect. He listened. He questioned. He befriended. He humanized himself by seeing and acknowledging the humanity of others, including those with whom he deeply disagreed. In the process he did what few have ever accomplished. Daryl Davis changed the hearts of hundreds of the most committed racists in the nation.

    This is what real, effective anti-racism looks like. And as Davis mentions at the end of his talk, if he can do it, so can we.

  • What do record fire seasons in the West, record hurricane seasons in the Atlantic, record winter storms in the South and the hottest years in history have to do with each other? Everything.

    This article originally appeared in the December 2019 issue of my Astronomy Magazine column, For Your Consideration.

  • You don’t tug on Superman’s cape. You don’t spit into the wind. Yes, schools are desperately important to kids. No, COVID-19 doesn’t care, and COVID is making the rules right now. Attempts to open schools this fall will fail of their own accord. The relevant question is how to meet the needs of children, families and the community in the face of that reality.

  • Currently new cases of COVID-19 in Arizona are doubling every 7 days. ICU beds in the state are already full. The rest of the country isn’t that far behind us. You do the math.

  • Now is not the time for scientists to be circumspect and silent. We are on the short end of a battle over whether truth even matters. If scientists do not stand up for what is real, who will?

  • The morning cyclist in my neighborhood may not be standing in the Michigan Statehouse carrying a gun and demanding her right to spread contagion far and wide, but she may as well be.

  • You know those nice charts and graphs that make it look like we are over the hump of COVID-19 and that things are about to get better? Those predictions are dead wrong, with an unfortunate emphasis on “dead.”

  • Imagine three gregarious scientists, each with the gift of the gab, all coping with stay-at-home orders. Of course we started a livestream/podcast talk show! What else would we do? Welcome to the kickoff episode of Scientists Stuck Inside.

  • Even after COVID-19 kills hundreds of thousands in the U.S. over the coming weeks, we will still be almost as vulnerable to the pandemic as we are today. We’d all love to “get back to normal” after that, but the price could be a second wave, worse than the first. Some see us facing either economic Depression or allowing vast numbers of preventable deaths, but that is a fool’s choice. There are better options if we have the will to find them.

  • There is a lot of information about COVID-19 out there, much of it misleading. When looking at the future, start with what the science really says.

  • If someone can’t tell you how they would know that they are wrong, they don’t have a clue whether they are right.

    This article originally appeared in my Astronomy Magazine column, For Your Consideration.

  • Once seemingly incomprehensible, the origin of life no longer seems such a mystery. Most of what once appeared as roadblocks are turning out to be superhighways.

    This article originally appeared in my Astronomy Magazine column, For Your Consideration.

Over his 30 year career as an internationally known astrophysicist, Dr. Jeff Hester was a key member of the team that repaired the Hubble Space Telescope. With one foot always on the frontiers of knowledge, he has been mentor, coach, team leader, award-winning teacher, administrator and speaker, to name a few of the hats he has worn. His Hubble image, the Pillars of Creation, was chosen by Time Magazine as among the 100 most influential photographs in history.
©Dr. Jeff Hester LLC, 5301 S. Superstition Mountain Dr., Suite 104 #171, Gold Canyon, AZ 85118