The world has become more unequal in income and wealth in the last 40 years. That’s according to the World Inequality Report 2022, available here. Produced by the World Inequality Lab, run by Thomas Piketty and a group of over 100 analysts from around the world, the report has the most up-to-date and complete data on the various facets of inequality worldwide: global wealth, income, gender and ecological inequality.
The report shows how in 2021, “after three decades of trade and financial globalisation, global inequalities remain extremely pronounced … about as great today as they were at the peak of Western imperialism in the early 20th century.” Although the World Inequality report found inequalities between nations had declined since the end of the cold war (mainly due to the rise in living standards in China), it said inequality had increased within most countries and had become more pronounced as a result of the global pandemic over the past two years.
The global concentration of personal wealth is extreme. According to the WIR, the richest 10% of adults in the world own around 60-80% of wealth, while the poorest half have less than 5%.
This is a similar result to the other important survey of global inequality of wealth produced each year by Credit Suisse. That report finds that just 1% of adults in the world own 45% of all personal wealth while nearly 3bn people own nothing. Wealth inequality is much higher than income inequality – something I have reported on before.
But income inequality is still very high. The WIR finds that the richest 10% of the global population currently takes 52% of global income, compared with just an 8% share for the poorest half. On average, an individual from the top 10% of the global income distribution earned $122,100 (£92,150) a year in 2021, whereas an individual from the poorest half of the global income distribution makes just $3,920 a year, or 30 times less!
Indeed, the share of income presently captured by the poorest half of the world’s people is about half what it was in 1820, before the great divergence between western countries and their colonies. In other words, the rise of imperialism as the ‘latest stage’ of capitalism has delivered increased inequality of income globally. The personal income share of the poorest 50% of the world’s adults or around 3bn people is half what it was in 1820! So much for even and combined development after 200 years of capitalism.
Back to wealth, the WIR notes that while “Nations have got richer — governments have got poorer”. Wealth, both tangible and financial, is not held commonly at all. “Over the past 40 years, countries have become significantly richer, but their governments have become significantly poorer. The share of wealth held by public actors is close to zero or negative in rich countries, meaning that the totality of wealth is in private hands.” As lead author for the report, Lucas Chancel from the Paris School of Economics, put it: “What we need to increase equality, combat the climate emergency and create the conditions for a good life for all is private sufficiency and public luxury, but the opposite has been happening.”
In the 21st century the inequality of wealth has risen significantly. Indeed, the wealth of the 50 richest people on earth increased by 9% a year between 1995 and 2001, with the wealth of the richest 500 rising by 7% a year. Average wealth grew by less than half that rate, at 3.2% over the same period. Since 1995 the top 1% took 38% of all additional global wealth in the last 25 years, whereas the bottom 50% captured just 2% of it. The rise of the so-called middle class income group in the graph below is mostly due to China’s reduction of poverty levels.
The top 0.01% of adults increased their share of personal wealth from 7.5% in 1995 to 11% now. And billionaire population increased their share from 1% to 3.5%.
The last two years of the pandemic have only accelerated inequality. During the first waves of the Covid-19 pandemic, global billionaires’ wealth grew by $3.7 trillion. According to Chancel, this amount is “almost equivalent to the total annual spending on public health by all governments in the world before the pandemic — approximately $4-trillion.” (Total spending on health from all sources was $7.8-trillion in 2017 according to the WHO). But in the same period, 100 million more people around the world have been thrown into extreme poverty as a result of Covid.
And it is the rich that make the most carbon emissions (through transport and travel) and reap the most of the benefits of the vaccines to avoid disease or death.
Both the COVID pandemic and climate change are increasing the share going to the already rich. Lucas Chancel: “Global economic inequality fuels the ecological crisis and makes it much harder to address it. It’s hard to see how we can accelerate efforts to tackle climate change without more redistribution of income and wealth”. All the international agencies dealing with clmate change and the pandemic agree with Chancel. Tedros Adhanom Ghebreyesus, WHO Director-General, told a Special Session of the World Health Assembly, that: “Global health security is too important to be left to chance, or goodwill, or shifting geopolitical currents, or the vested interests of companies and shareholders.” And last week, a group of nearly 40 UN Special Rapporteurs issued a statement saying that “addressing the health crisis equitably must take priority over profit maximisation by corporations and vaccine hoarding by high-income countries.”
But nothing will be done to address these inequalities of wealth, income and health.
Michael Roberts Blog 
Very opportune and rounded article. At this rate Marx’s gravediggers wont be able to afford spades, still with billions of hands, anything is possible. Let’s be clear. It is not inequality on its own that will end capitalism, but inequality that squanders the surplus of society. Workers will tolerate exploitation, but only when they see the results of this exploitation being managed and reinvested, not wasted nor being used for speculation.
Wealth in the U.S. grew by $23.1 trillion in 12 months, July 2020 to July 2021, shows the Fed’s Flow of Funds report for Q2 2021. This was more than the nation’s total personal income of $19.4 trillion and more than GDP $22.7 trillion (taken from the same report). This is called “total household net worth”. How does savings grow by more than income? I think the savings rate was high, around 11% because of the pandemic and lockdowns, it’s at the BEA site. 11% of $19 trillion is $2.1 trillion, not $23.1 trillion. The accelerated effect is the result of a finite amount of financial assets receiving a flood of additional investing funds. Corporations devote over 90% of profits to dividends and stock buybacks, this is the finding of Wm. Lazonick’s well publicized reports. The ratio between income and wealth is at a high, 1 to 7.3. In 1996 it stood at 4.4. — that means 40% of current wealth is above the 1996 level. 40% would be $56 billion. The Build Back Better plan calls for spending $3.5 trillion over a 10 year period, $0.35 trillion per year. Two months of wealth gains equals more than $3.5 trillion. Think of it, it is absurd. How much savings does a society need? What does the savings mean, especially when it sits unused? It means waste and hoarding. It means deprivation for those not wealthy. It means excessive power of a minority. It is actually a source of shame and dysfunction, but what else is new? I write a blog, Economics Without Greed, http://benL88.blogspot.com, I posted an article yesterday, The Economy Is Broken.
This is the normal pattern of capitalist societal composition.
The anomalous bubble of the post-war miracle, where capitalism was forced to mix with socialism in some nations because of the existential threat of the USSR, is coming to its absolute end (it was already dead since the neoliberal ascension of 1979-1980, but its remains are only now starting to get destroyed).
Expect this – and worse – to be the rule, for your children, for your grandchildren and beyond.
While it’s true that both wealth inequality and income inequality have increased, consumption inequality has decreased. A quote from a 2012 article:
“What about the standard of living over those years? The Department of Energy regularly surveys Americans and asks them to report on the characteristics of their homes, including the types of devices and appliances they have. If the standard left-wing narrative is correct, then a typical poor American would trade his current circumstances for those of the past in a heartbeat.
Yet the access of low-income Americans—those earning less than $20,000 in real 2009 dollars—to devices that are part of the “good life” has increased. The percentage of low-income households with a computer rose to 47.7% from 19.8% in 2001. The percentage of low-income homes with six or more rooms (excluding bathrooms) rose to 30% from 21.9% over the same period.
Appliances? The percentage of low-income homes with air-conditioning equipment rose to 83.5% from 65.8%, with dishwashers to 30.8% from 17.6%, with a washing machine to 62.4% from 57.2%, and with a clothes dryer to 56.5% from 44.9%.
The percentage of low-income households with microwave ovens grew to 92.4% from 74.9% between 2001 and 2009. Fully 75.5% of low-income Americans now have a cell phone, and over a quarter of those have access to the Internet through their phones.”
Another quote to that effect, while dated, from Wikpedia:
“Conservative researchers have argued that income inequality is not significant because consumption, rather than income should be the measure of inequality, and inequality of consumption is less extreme than inequality of income in the US. According to Johnson, Smeeding, and Tory, consumption inequality was actually lower in 2001 than it was in 1986. The debate is summarized in “The Hidden Prosperity of the Poor” by journalist Thomas B. Edsall.”
Consumption inequality is sometimes referred to as the “lifestyle gap”.
“Consumption inequality is sometimes referred to as the “lifestyle gap”.
Indeed, and it’s related to life expectancy. The poor might be able to buy smart phones, but they will live their lives in poverty when they can no longer work and still have to pay rent.
Ahmed. Neil, and Henry: “the hidden prosperity of the poor” is really not so hidden. Visit the freeway underpasses of our country (USA)–Sacramento, for example: teeming with prosperous consumers of tents, tarps, old fans and dented propane heaters, broken t.v.’s (with antennas), mattresses, coats, blankets, piles of perfectly good, edible garbage, clothing piled in sodden mounds, rideable bicycles, baby carriages, shopping carts piled with cartons, pitchers, canes, bottles, and mittens…and, sometimes children. ….Near my home an old woman house in at least five layers of clothing has been luxuriating on a bus stop bench for a few months now, surrounded by her worldly goods, barely contained in two shopping carts she re-arranges every morning. Neighbors stop by and hand her a few of our rapidly shrinking dollars, which she accepts with a turn of her beautiful face, marked with more dignity than any of you three can accumulate in your mindless, heartless, miserly calculations….which, at bottom, depend on imperialist theft and wars your blind-mouthed-minds take for granted. …What in the world are you doing on this blog besides taking up space?
mandm, I think what they’re getting at is that consumption patterns can blunt inequalities of income and wealth, because consumption correlates more closely with the personal experience of poverty.
I believe it’s a specious argument, for several reasons:
i. It’s dated, the data they refer to are from 2012, so things might have gone downhill in consumption during the past ten years since.
ii. It’s debt-driven, and so might collapse very quickly. Assuming it IS true that today’s poor have more home appliances than they did 20 years ago, and that chattel ownership can alleviate poverty enough to make inequality of wealth or income less than relevant – that a dishwasher or a PC can make life comfortable enough even when you’re broke – we’d have to correlate it with the debt burden of the poor. That credit card debt mammoth every talks about. While these poor people were consuming to alleviate their poverty, how did that correlate with personal debt?
And I wonder whether these inequality in wealth data include personal debt. If it doesn’t, then when the poor’s net worth is calculated by subtracting liabilities, the situation may be revealed to be even direr.
iii. It can’t be true everywhere. I’d be surprised if lower classes in other countries that are also showing signs of inequality squeeze are also increasing their consumption patterns to offset their losses (how that’s possible is beyond me, but let’s assume it is for argument’s sake). I live in a poor country and I’ll readily admit that a common sight here is a ramshackle house with a fancy middle-class brand-new car parked next to it. And it’s not uncommon to see LCD TV sets in dingy rooms when you pass by. Textbook commodity fetishism. But just a step below in the poverty ladder, the rule is to be in squalor – no smartphones or TV set, you have nothing and live from collecting alms or from charity.
There seems to be some truth to Ahmed’s assertion that some people seek relief from the daily grind in the acquisition of chattels. That would explain the reports during the London riots of 2011 that rioters absconded with electronic appliances of the stores they thrashed. And who can blame them? If you don’t have a job, health services, education, might as well get an iPad. In fact, keeping the poor indebted and well-furnished with home appliances may be even an added benefit for the wealthy, the equivalent of debt servitude and bread & circus at the same time.
I think consumption is a valid economic parameter and Marxian analysis would do well to engage it. It may be true that mainstream economists are just moving the goal posts to dismiss the importance of income and wealth and vindicate the system as it is – it’s what they’re paid for, anyway. Not unlike Summers’ infamous saying that the rise in inequality merely means people are getting closer to be paid what they deserve and thus a good thing. But that doesn’t mean they’re being dishonest: they may have empirical data and believe their conclusions. The task is then to verify whether the data hold up and tease out what they mean in the wider scheme of things.
DGE, you seem earnest and I’m sorry that you completely missed the point of my comment, which, admittedly, was more an expression of anger than analytical. But your response both misunderstood me and (like the trio I condemned) was innocent of any reference to the Piketty graphs or Robert’s comments regarding them.
All four of you are infected by the liberal virus, which is much more deadly than Covid: it not only undermines the natural environment and alienates working people from the means of our subsustence but creates an politicl/social elite and its apologists that cannot think clearly and humanely. A good example of the viruse’s elite is Larrry Summers and his “infamous” heartless comment, which you mention, but only as a reflexion of his obnoxious personality, when more than that, it reflects his mechanical belief in the workings of an illusory free market. Liberalism’s notion of freedom assumes another man’s slavery (e.g. Jefferson’s “Declaration of Independence”).
Anyway this blog offers a marxist critique of capitalism. Victims of the liberal virus should come here with as open a mind as possible, and stick to the topic of discussion rather than display their contempt for marxism, socialism, etc.
I should point out that Henry Rech had some clear and helpful things to say about mmt.
That’s rather harsh… and here I was, thinking that I didn’t have a liberal bone in my body. When it comes to liberalism, I follow the Assata Shakur line: “I have never really understood exactly what a ‘liberal’ is, since I have heard ‘liberals’ express every conceivable opinion on every conceivable subject. As far as I can tell, you have the extreme right, who are fascist racist capitalist dogs like Ronald Reagan, who come right out and let you know where they’re coming from. And on the opposite end, you have the left, who are supposed to be committed to justice, equality, and human rights. And somewhere between those two points is the liberal. As far as I’m concerned, ‘liberal’ is the most meaningless word in the dictionary.”
What you may rightly impute to me is lack of a solid Marxian foundation. I’ve only picked up bits and pieces here and there, reading Roberts’ blog, Paul Cockshott’s books and some other essays. It’s what I can do in my free time, since I’m still in working age and my field is life sciences.
I didn’t quote Summers to illustrate the personality issues of extreme market believers. I did it to point out that it’s understandable that mainstream economists will find *something* to say even if you rub on their faces that their damn system isn’t delivering. So it’s to be expected that if you point to wealth and income, they’ll try to find some parameter where capitalism can be construed as working for the wage earners – consumption in this case.
In a sense, what I’m saying is that we shouldn’t do like, say, vk did when Dr. Roberts presented us his findings on a Marxian theory of inflation, and he said he didn’t see why such a theory is necessary.
Maybe because I’m a scientist by profession, I try to think that models must be tested. I’m thoroughly convinced on the TRPF and the LTV because they matched the data. I wandered into this blog as an agnostic, from an MMT sympathiser’s blog that listed this one among their recommendations. I was favourably inclined to MMT back then, now I’m no longer because I was convinced by Dr. Roberts’ series on MMT a couple years ago. But unlike in my field of specialty, here I’m a dilettante, so it’s quite easy to sway me in one direction or other.
So, if this blog critiques capitalism, I think there’s no harm in applying Marxian economic analysis to engage mainstream economists on every sort of arena: so by all means, let’s see what Marxism has to say about inflation, taxation, consumption inequality etc.. It will only build a stronger case. I’m not saying it’s Dr. Roberts duty to do all this, but surely we can comment on it? If the answers are already out there, just tell me where to look and I duly shall. I’m reading Murray Smith’s “Twilight Capitalism” with great interest.
I may not deserve to be called a Marxist due to my lack of knowledge. But if I’m espousing liberal values without knowing, it’s due to ignorance and not ideology. Please don’t be so quick to assume things about me. I spend a great deal of my idle thinking hours trying to conceive of way to initiate the transition from capitalism. Appointments to legislative office by lot, labour tokens, direct democracy, end of intellectual property… I take an interest in all issues that may help.
It seems communication is a difficult thing. I replied to Ahmed Fahres who wrote: “consumption inequality has decreased” with my observation “The poor might be able to buy smart phones, but they will live their lives in poverty when they can no longer work and still have to pay rent.” For that observation I earned your opprobrium ie, “mindless, heartless, miserly calculations”
For my part I see the MMT Job Guarantee as the solution to eradicating poverty; I would have hoped Marxists would be more amenable. A nation’s productive capacity ought to be allocated to eliminate poverty first, and then output allocation after that basic requirement is satisfied (by government) can be determined in the private sector market.
I’m not interested in ideology, I’m interested in sustainable common prosperity. I despise mainstream economists telling us we have to go out, get pissed and spend….or whatever mindless consumption they have in mind, to “save the economy”….
A proper knowledge-based economy lifts everyone’s living standards, funds R&D into AI and IT, environment protection, and a circular no waste economy. Profit driven junk production and consumption – grog, gambling, toy food etc is evil.
I guess I was still under the influence of my anger in lumping 4 very different individuals together. I sensed your honesty but obviously underestimated you. I’m a chastened ignoramous in the sciences.
Liberalism is an established ideology, formed in England during the civil war period to justify Cromwell’s side and the Republic as against the Royalists. Hobbes, who was a kind of secretary to Cromwell, and John Locke, who was a kind of secretary to Hobbes, as well as the “mathematical” politician, and William Petty (who surveyed for Cromwell, and for himself, large expropriated “properties” in Ireland) are early theorists. (Hobbes was the best and most honest of them all).
…The essence of liberalism can be caught in John Locke’s position regarding the peasants uprooted during the enclosures following the wars. He called the land occupied by such subsistence farmers “deserts” (think Bill Gates and Africa) and claimed that only those who “worked the land” had the right to own it, which sounds very democratic, but he really meant that only those who worked the land for profit on the market–i.e. capitalists, had the right to own land. Ownership of land was problematic in post feudal 17th century England. Liberals like Locke helped create bourgeois private property, first in the land, then in other assets (like slaves in the constitution he wrote for the Virginia colony). Liberalism became a term for non-socialist do-gooders in English speaking countries, but in the 1980’s was restored to its original meaning by conservatives pushing privatization of non-performing social assets for profit-making , as in “neoliberalism”. Do-gooder “liberals” were mocked by the new, neoliberals.
As an ideology, liberalism is very real and very slippery. In the United States the democrats for a time were do-gooder, non-socialist liberals. Republicans retained the traditional, market-driven “liberalism” of old. But both were firmly “liberal” defenders of private property in the means of production. “Neoliberalism” brought both (fundamentally tethered) poles rather nakedly together, though the pretence of opposition remains. Western European “democracies” followed a lagged, but similar process. Beware of terms like democracy, freedom, authoritarian, humanitarian, etc. in the mouths of liberals.
Neil, mmt assumes two global conditions: 1. the super-exploitation of wage goods-producing-labor in the “global south”, and 2. the USA/NATO war economy, its bases, carriers, wars, and uprooted populatiions that coerce that impoverishing neocolonial global social relation. (You might take a look at the Gates-inspired Modi mandated version of surveillance mmt in “democratic” India.) But I agree with you this much: US subsistence income support (maybe at least 15 dollars an hour?) might be much more generous than the Gates/Modi plan. But even given NATO terrorism and expensive upkeep, such generosity would be unworkably inflationary within the capitalist system.
People confuse improvement in quality of life with technological development, two mistakes. 1st a king in the Middle Ages died of any infection, what defines wealth is the consumption of luxury products. 2° If you look at peripheral countries, where “garbage is poorer”, you will see people feeding on bones, crow’s feet, snakes and lizards or even tree bark, simply because imperialism drains the resources of these countries.
As for the ownership of household appliances, it is an imposition of liberal-libertarian society to increase the reserve army of workers by imposing outside work on women.
Let’s see the case of Switzerland, through the tax is discouraged the second job for the couple, resulting the unemployment rates for adults and young people is of 2.5% and 2.4%, that is, full employment. The Radical Liberal Party (PLR / right) wants to change the legislation to induce the second member of the couple to work to lower everyone’s wages and increase the profit of the bosses.
1. Is media giving prominence to left wing ? i don’t think so!
2. compensation is less than productivity gains is tone of the arguements and also why is income and wealth going to top so much
3.cell phones & internet are recent things – how they spread so easily must be down to companies producing low cost cell phones, mid range,high range as part of marketing to earn more money by selling more quantity. ( low manufacturing cost due to china ,dollar exchange ratio with other currencies, loan extension etc.,)
4.AC’s ,dish washers, washing machines took a very long time (more than 70 years) ( low manufacturing cost due to china etc.,) – so, after 5 generations poor people got them!
5.houses with more rooms – bank loans(2008 ) may be-also US has so much land (but still a long time)
“It’s hard to see how we can accelerate efforts to tackle climate change without more redistribution of income and wealth””
Easy. Authorize central banks to print the bloody stuff (money) – debt free.
[with concurrent expansion of public sector activity and reduction of private sector activity; the inflation constraint is real resources and productivity, not money.
Neil,
How high can a non-inflationary, printed money financed, deficit be without a large change in taxation?
I am betting that it’s not all that large.
And taxation changes are essentially eschewed by MMT. (I am a little confused by MMT on this point. On the one hand, MMT says taxation is not required to fund government spending. On the other hand it says inflation can be controlled by changes to taxation. Perhaps you can clear this up for me.)
To me, the inflation constraint is as potent as the mainstream budget constraint.
MMT argues that the Phillips Curve effect has been negligible these last twenty years. Maybe so. But this has been during a period at the height of globalization – cheap goods produced for the West by cheap labour in the East. It seems to me that globalization is on the back foot, for the moment at least. So the Phillips Curve might come into play a little more. (Put aside pandemic induced supply chain failures.)
MMT says it will rely on the JG scheme to keep inflation in check. A JGS should only be fired up when there is considerable unemployment, when there is little inflationary pressure. There would no reason for it to be set in at full employment. In fact, it would be madness..
Henry: in MMT, a real full-employment economy, without welfare, means all working age citizens are employed above poverty level, regardless of variations in private-sector employment levels. If the private sector creates real, above poverty, full employment (which it never does) then the variable JG ‘pool’ of workers would be zero. But if structural inflation arises with full employment, then demand can be reduced by taxing private sector consumption (to reduce demand back to the economy’s productive capacity) and move some workers onto the lower JG wage.
Note: productivity should be measured other than by price discovery in free markets alone; much profit-seeking, consumption encouraging, private sector activity is worse than useless for creating true wealth, health and happiness.
As for funding transition to renewables via central bank (debt-free) ‘money printing’, obviously choices might have to be made eg, between private and public transport, to free up the necessary resources.
Neil,
It would seem then that the inflation/real resource constraint is as problematic as the mainstream notion of a government budget constraint. In which case, what is it that MMT offers that is practically different?
MMTers who think that money printing provides a boundless source of finance are deluding themselves. Even if they accept the resource constraint, this constraint practically limits money printing to what the mainstream notion of a budget constraint limits government expenditure to.
So what’s the big deal with MMT?
Henry, the “big deal” with MMT is real, full, above-poverty employment, without ‘welfare’ (‘sit-down money’) and its associated poverty, crime, and demoralization.
That’s a big deal, in anyone’s language.
“It would seem…..”. No. There has never been full employment since governments were cowered by the neoliberal ‘fighting inflation first’ mantra, which is responsible for millions of unemployed and massive underemployment, in the neoliberal era.
Note: covid government debt can be written off at the stroke of a pen. Indeed government debt should never have been issued to bond holders in the first place.
“Note: covid government debt can be written off at the stroke of a pen. Indeed government debt should never have been issued to bond holders in the first place.”
Depends on who’s wielding the pen. A revolutionary class seizing power can do that; anything else will be overwhelmed by the reaction before the ink is even dry. The class of bondholders will gut even the most modest measures.
Neil,
It seems to me that MMT is offering no more than Keynesianism is.
Fine with all the neoliberal stuff.
If there is less than full employment then there is room for government expenditure to the point real resources are fully employed again.
If there is full employment then room can be made for desired government expenditure by taxation or issuing bonds to private economic agents.
I can’t see anything special in MMT prescriptions.
Henry, Keynes died in 1946; (Marx in the 19th century). If you think “Keynesianism” or any of it’s offshoots like Neo Keynesianism will give us the answers we need today, think again.
Interestingly, in 1943, Keynes wrote to an associate: “(Abba Lerner’s) argument is impeccable, but heaven help anyone who tries to put it across.” (tell me about it!)….
[Lerner developed “functional finance” a forerunner of MMT]. So we don’t know how Keynes’ ideas would have developed in the post war economy, he might have promoted a JG.
And when “Keynesianism” was abandoned as a result of stagflation in the 70’s, Keynes himself ( being acquainted with Lerner) might have recommended vastly different policies to the neoliberal nightmare of the Reagan and Thatcher era which has seen increasing inequality, high unemployment, and entrenched poverty ever since.
MMT is offering vastly more than “Keysianism.” On inflation: supply shocks (eg oil in the 70’s and supply chain blockages in this pandemic) require something other than monetary policy to fix the problem. Biden is hanging in there. Let’s see how soon Powell is forced to lift rates by bond vigilantes hoping to make a killing when rates rise.
Neil,
What’s Neo-Keynesianism have to do with Keynesianism? Very little.
And where did I mention Neo-Keynsesianism? You have no argument so you’re left with throwing me in with the NKs.
Where do you think Functional Finance came from?
Silly 1970s Keynesians were suckered into jumping ship by Lucas and Sargent.
The stagflation of the 1970s was the result of two shocks – the supply shock, which everybody recognizes, which accounted for the inflation part and the demand shock, which no-one recognizes, which was caused by the massive transfer of income from oil consumers to oil producers, which accounted for the stagnation. There’s not much to be done with these two shocks other than to grin and bear the adjustment process. The recycled “petrodollars” ended up in asset markets and particularly gold. (Perhaps the other beneficiaries were the manufacturers of Rolls Royce and Bentley.)
MMT has no solution to this twin shock situation.
For DGE: in MMT, neoliberalism means the system established by the Chicago school in the early 80’s to deal with stagflation, which posited unemployment as an inflation control, see the NAIRU.
In Australia, “Liberal” means conservative (Right); in the US it means progressive (Left) .
But they are both committed to the “neoliberal monetarist orthodoxy” of current mainstream economists.
Which is why the “Left” cannot win elections or properly fund health care, age care, universities etc etc; the Left is adrift and rudderless, since the demise of communism.
correction: remove “and” (in front of “William Petty”) from the second paragraph
I talk about decreasing consumption inequality, and people start talking about people living under freeway underpasses. Meanwhile, 40% of Americans can’t climb a flight of stairs without running out of breath. Maybe we should take some food away from them and give it to those people living under those freeway underpasses. We’d be doing both groups a favor.
As an aside, most of the homeless have mental illness and/or drug addiction problems. That’s how they ended up homeless. That’s not a money or resources problem.
@Henry Rech,
Speaking as an MMTer, MMT is all about releasing resources, which you get from taxing the middle class, not the rich. You should still tax the rich to reduce their power, but it is the tax on the middle class that releases resources. This is because the rich have a low average and marginal propensity to consume.
If you don’t tax the middle class, then the money you spend from taxing the rich will end up fueling inflation. The Fed steps in with higher interest rates, which strike hardest at the poor. In effect, a tax on the rich translates into a tax on the poor. There’s an interesting saying:
“What fiscal policy giveth, monetary policy taketh away.”
It does no good to give people money with one hand and then take away with the other hand with higher interest rates. At best, it’s a wash.
Also, the higher interest payments end up in the hands of the rich, in effect returning the money you took away from them in taxes.
While it’s true that MMT sounds like Keynesian economics, it also adds the Job Guarantee (JG) which is foundational to MMT. As Bill Mitchell says, it ends the scourge of unemployment. You always have the option of working for the government, and the private sector has to induce you away from the government labor pool with higher wages. It completely changes the power structure between workers and employers.
I agree partly about increasing mental illnesses when there are economic crises, but our luck that with crises does not only increase people with mental problems that have seen homeless, some people turned into another location, they turn to Intenet to post Eugenian theories Social, “A Aside, Most Of The Homeless Have Mental Illness and / or Drug Addiction Problems. That’s How’s Not To Money or Resources Problem.”
Ahmed,
If an economy is at less than full employment, a Keynesian would increase government spending to bring it back to full employment in the process producing useful public goods.
I am not sure what a JGS would do. Does it produce useful goods which would contribute to the productive capacity of an economy? For instance, installing new road systems to free traffic and lowering costs. While giving the unemployed work is admirable is it the kind of work that is satisfying and produces useful public goods?
And while a JGS might increase wages thru the economy it could end up being inflationary unless the business sector is willing to let go profit share, which is unlikely. So this has to be considered.
Neil,
“… it failed to deal with the oil-embargo shock in the 70’s. …”
MMT would also fail. A JGS scheme would add to the inflationary pressures. A choice would have to be made about how much inflation could be tolerated. A prices and incomes policy sort of might work but it would only delay the inevitable adjustment process.
“…it failed to deal with the massive loss of Western competitiveness to newly emerging *low wage Asian economies…”
A JGS would add cost pressures to local industry and make it less competitive. Despite superior technology western capitalists put their money into Asia rather than invest locally. MMT would fail to have an impact.
“And if Men can’t set up a UNSC without veto, well then……war – economic or hot – it is.”
So is that an official policy MMT prescription? The cause is irrelevant. You admitted MMT has no answer to the supply shock.
“is that an official policy MMT prescription” No. MMT is concerned with facilitating the best resource mobilization by the currency-issuer (government) within a given nation. [“best” is open to choices by the electorate]. Bill Mitchell does speak of the need for international assistance, in the case of resource poor countries; I’m going further, to deal with geopolitical supply shocks like the 70’s oil embargo; and international competition shocks such as that which destroyed Detroit, part of the 1st world “rustbelt”. In fact an MMT-informed IMF could solve all these problems, backed by a UNSC without veto if necessary….
You asked Ahmed whether a JG produces useful public goods; of course assisting elderly people to remain in their own homes with home maintenance tasks is a public good.
See the latest posts by ucanbpolitical and Ahmed Pares., to address your concerns about inflation.
YOUR solutions please. The market-based status quo – with mounting global, ecological and environmental pollution, entrenched poverty and increasing inequality – is a one way ticket to hell….which many are already living in, if they are still alive, unlike the young Iraqi woman who drowned in the English Channel last week. attempting to escape her own destroyed homeland.
Neil,
“YOUR solutions please. ”
My solution is not to blow the place up. The market is terribly problematic. But it doesn’t have to be totally subverted, I believe.
“The market-based status quo ……is a one way ticket to hell”
I agree.
Other than that, anything that I might offer, I am sure, would be trivial.
Henry, Ahmed Fares in his subsequent reply to you has explained MMT well, disproving your contention MMT has nothing more than “Keynsianism” to offer. MMT eliminates poverty. While It might be said Keysianism nearly eliminated poverty in the immediate post war period in the West, during a period of massive postwar reconstruction, obviously it failed to deal with the oil-embargo shock in the 70’s. And it failed to deal with the massive loss of Western competitiveness to newly emerging *low wage* Asian economies at about the same time. (Eg Detroit’s decline, as Toyota Corollas conquered the global market).
[btw Ahmed has redeemed himself: I mistakenly took his original post – referring to reduced consumption inequality – to mean he was defending the increasing wealth and income inequality that Roberts’ article is highlighting].
[2nd btw: I mentioned “neo-keysiansism” to show how both it and “Keysianism” likely have little to do with what Keynes himself would have actually done if he had lived into the post war reconstruction era].
You speak of the demand shock in the stagflation era; MMT can obviously deal with demand shocks, via the JG.
{in effect the entire city of Detroit would have become a JG city, interesting to ponder the possibilities to save the city’s economy).
As for the supply shock in the stagflation era, that had a geopolitical cause. And if Men can’t set up a UNSC without veto, well then……war – economic or hot – it is.
Keynes had his first heart attack during the Bretton Woods negotiations when he realised Britain was to be shafted. He lost his final grasp on health when sent to Washington to beg for a grant on the lines of the Marshall plan but all he got was a loan which Britain took nearly 60 years to pay off. So capitalism was not kind to the most quoted and misunderstood of bourgeois economists. And as for that special relation between the US and UK in reality it was more like an imperialist sado masochist relation. Britain as much as Germany stood in the way of the US achieving hegemony.
UCBP,
One minor detail – Keynes had his first heart attack in 1937 – well before Bretton Woods was thought of.
“Britain as much as Germany stood in the way of the US achieving hegemony.”
Prior to Pearl Harbour the US was isolationist and hardly looked as if it was in an empire building phase.
It only began to expand its influence on world affairs when a powerful strategic competitor appeared on the scene during and post WWII.
No, 1898 -philippines, US fought WW-1 and intervened in Russia in 1919.didn’t recognise USSR till 1933 .established new country liberia in africa, then there is monroe doctrine had taken part in china thing in 1900’s along with other powers.Sanctioned Japan before pearl harbour ,supplied fuel to germany through it’s private companies during WW-II etc.,
“Prior to Pearl Harbour the US was isolationist and hardly looked as if it was in an empire building phase.”
Really? Well that will sure come as a surprise to the people of the Philippines, Cuba, Puerto Rico, Mexico, Brazil, Venezuela, Colombia, Bolivia, Honduras, Guatemala, Panama, etc etc. Good to know that “isolationism” and empire building are mutually exclusive.
Let’s go for a bit more rigor, people, and not waste time repeating the banal, the trite, and the flat out ignorant.
AC,
“Let’s go for a bit more rigor, people, and not waste time repeating the banal, the trite, and the flat out ignorant.”
Good idea. There are many ways at looking at these things.
Firstly, I distinguished US policy pre and post WWII.
The context of the Monroe Doctrine was the fact the US itself had gained independence from a European monarchy. The Doctrine professed that any European interventions in the New World were seen as a security threat to the US. It had nothing to do with empire building.
Cuba, the Philippines, Guam and Puerto Rico were Spanish possessions. There were independence rebellions in Cuba in the 1890s. Spain responded by incarcerating 100,000s and reportedly murdering 100,000s of rebels in the camps. The US government and US public opinion supported the rebels. That’s how the Spanish-American war essentially started.
Pre WWII, Brazil and Venezuela even sought US assistance at various times. There are complex histories involved which had very little to do with empire building.
A different matter post WWII. US policy was driven by a combination of protecting its commercial and strategic interests which can be seen in the light of the developing Cold War.
I would say, how developments post WWII are seen, depends one’s ideological predilections.
“There are many ways at looking at these things.
Firstly, I distinguished US policy pre and post WWII.
The context of the Monroe Doctrine was the fact the US itself had gained independence from a European monarchy. The Doctrine professed that any European interventions in the New World were seen as a security threat to the US. It had nothing to do with empire building.
Cuba, the Philippines, Guam and Puerto Rico were Spanish possessions. There were independence rebellions in Cuba in the 1890s. Spain responded by incarcerating 100,000s and reportedly murdering 100,000s of rebels in the camps. The US government and US public opinion supported the rebels. That’s how the Spanish-American war essentially started.
Pre WWII, Brazil and Venezuela even sought US assistance at various times. There are complex histories involved which had very little to do with empire building.
A different matter post WWII. US policy was driven by a combination of protecting its commercial and strategic interests which can be seen in the light of the developing Cold War.”
Henry thinks his acritical relativism–“there are many ways of looking…” amounts to more rigor when, like relativism is and is always, it amounts to nothing another than distortion of the actual history, and a justification for exploitation.
One only has to look at the record of US military interventions in Latin America from the 1890s through the 1930s, and the reasons for those interventions to recognize Henry’s endorsement of a history that never was.
As for the Philippines, Henry’s displays profound ignorance of the US role in suppressing the battle of the people for not just independence but a republic, and the desire of the US bourgeoisie to establish the Philippines as a “Cuba of the Pacific”- an economy completely subservient to that of the US, and a convenient base for its Navy to spread the gospel of the American Way.
Cuba? There were independence rebellions well before the 1890s– like 1868 for example. The “rebellion of the 1890s” was actually initiated in the early 1880s. The United States military occupied, literally, Cuba from 1917-1933, and Cuba was considered a protectorate of the US. Last time I checked that was before WW2.
“Pre WWII, Brazil and Venezuela even sought US assistance at various times” Really? Henry should have been a detective. The wealthy and powerful of Brazil and Venezuela sought the assistance of the wealthy and powerful of the US? After the revolution of 1930, the Brazilian bourgeoisie adopted policies designed to reduce constraints on Us investment. Last time I checked, that was pre WW2.
And do we need to go through the sordid history of US intervention in and subordination of Mexico, going back to the mid 19th century? Or the actions taken in Central America to prop up the regimes that supported US interests?
I asked for more rigor, not rigor mortis.
A-C,
“Henry thinks his acritical relativism–“there are many ways of looking…” amounts to more rigor when, like relativism is and is always, it amounts to nothing another than distortion of the actual history, and a justification for exploitation.”
There are no absolutes in history.
“Facts” looked at from any distance are subject to the viewer’s prejudices and perspectives.
“Facts” are always subject to interpretations, generally because not all the facts are apparent and there are complex relationships between facts which are not always resolvable.
I am not saying my very distilled version is the whole story. It isn’t. But neither is yours.
Henry says facts, in quotes, as if the word has no legitimacy, are subject to interpretation.
OK Henry here are some facts. Show me how they support your particular interpretation.
Argentina 1890 Troops Buenos Aires interests protected
Chile 1891 Troops Marines clash with nationalist rebels
Haiti 1891 Troops Black workers revolt on U.S.-claimed Navassa Island defeated
Nicaragua 1894 Troops Month-long occupation of Bluefields
Panama 1895 Naval, troops Marines land in Colombian province
Nicaragua 1896 Troops Marines land in port of Corinto
Cuba 1898- Naval, troops Seized from Spain, U.S. still holds Navy base at Guantanamo
Puerto Rico 1898- Naval, troops Seized from Spain, occupation continues
Nicaragua 1898 Troops Marines land at port of San Juan del Sur
Nicaragua 1899 Troops Marines land at port of Bluefields
Honduras 1903 Troops Marines intervene in revolution
Domi Republic 1903-04 Troops U.S. interests protected in Revolution
Cuba 1906-09 Troops Marines land in democratic election
Nicaragua 1907 Troops “Dollar Diplomacy” protectorate set up
Honduras 1907 Troops Marines land during war with Nicaragua
Panama 1908 Troops Marines intervene in election contest
Nicaragua 1910 Troops Marines land in Bluefields and Corinto
Honduras 1911 Troops U.S. interests protected in civil war
Cuba 1912 Troops U.S. interests protected in Havana
Panama 1912 Troops Marines land during heated election
Honduras 1912 Troops Marines protect U.S. economic interests
Nicaragua 1912-33 Troops, bombing 20-year occupation, fought guerrillas
Mexico 1913 Naval Americans evacuated during revolution
Dom Rep 1 1914 Naval Fight with rebels over Santo Domingo
Mexico 1914-18 Naval, troops Series of interventions against nationalists
Haiti 1914-34 Troops, bombing 19-year occupation after revolts
Dom Republic 1916-24 Troops 8-year Marine occupation
Cuba 1917-33 Troops Military occupation, economic protectorate
Panama 1918-20 Troops “Police duty” during unrest after elections
Honduras 1919 Troops Marines land during election campaign
Guatemala 1920 Troops 2-week intervention against unionists
Costa Rica 1921 Troops
Panama 1921 Troops
Honduras 1924-25 Troops Landed twice during election strife
Panama 1925 Troops Marines suppress general strike
El Salvador 1932 Naval Warships sent during Faribundo Marti revolt
A-C,
This is all getting out of hand.
Please go back to where it started with my statements:
“Prior to Pearl Harbour the US was isolationist and hardly looked as if it was in an empire building phase.
It only began to expand its influence on world affairs when a powerful strategic competitor appeared on the scene during and post WWII.”
A critique of my statements would have to begin with definitions of “isolationism” and “imperialism”. I don’t want to go there because I don’t feel competent to do so – these are big technical issues.
What I feel I can say is the following. When I made those statements it was from the global perspective.
Prior to Pearl Harbour, the US stood by while Japan rampaged through Asia and Germany through Europe. It did not seek to intervene. US public opinion was against intervention. It only became involved in the war after Pearl Harbour.
And during and after the war the expansionist impulses of the Soviet Union became obvious. I would say that this is when the US seriously decided it had to protect its global economic, political and strategic interests.
Prior to Pearl Harbour, it did seek to promote its economic, political and strategic interests in its own back yard. From the early 1800s it was intent on keeping the European monarchies out of the Americas. From the early 1900s onwards it sought to protect its economic interests and to forestall leftist insurgencies in central and southern America. I agree that at times, these activities involved appalling, egregious and despicable behaviour. If you want to call this imperialism, fine by me.
What about Russia now intervening in the internal affairs of the buffer states in eastern Europe, the outright invasion by the Soviets of Czechoslovakia and Hungary in the 1950s and 1960s, the unilateral declaration of by China that its territorial waters extend to the “9 dash line”? And not to forget China’s invasion of Xinjian and Tibet and the 70 year subjugation of their peoples. Is this imperialism?
Australia (I am Australian) recently landed a force of military and police personnel in the Solomon Islands (at government request) where certain groups had rioted and were destroying Chinese owned properties, claiming the Solomon Islands Prime Minister was unduly being influenced by China. (There also appears to be secessionist motives involved.) Australia landed troops in East Timor in 1997, ostensibly to end the murder and torture of East Timorese by Indonesian forces and militias. Australia involves itself in the affairs of its one time protectorate, Papua New Guinea. Is this all part of some secret imperialist plan by Australia? What will historians in 100 years time say about this period?
As I continue to argue, “facts” are relative and their interpretation subject to prejudice.
MMT has been described as 90% descriptive, 10% prescriptive. Apart from the JG, MMT is a lens through which one sees how the economy operates. It relies heavily on Wynne Godley’s sectoral balances equations. In a sense, you’re always doing MMT.
The biggest thing I learned from studying MMT is to think about resources and not money. First a Buffett quote:
“I don’t have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It’s like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GDP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don’t do that though. I don’t use very many of those claim checks. There’s nothing material I want very much. And I’m going to give virtually all of those claim checks to charity when my wife and I die.” —Warren Buffett
Me, I say, leave Buffett alone. He isn’t hurting anyone. On the contrary, he’s like a modern day Robin Hood, taking money from the rich and helping the poor. Now contrast that to John Travolta. Another quote:
“Travolta is a private pilot and owns four aircraft, excluding the ex-Qantas Boeing 707… His estate in Ocala, Florida is situated at Jumbolair Airport with its own runway and taxiway right to his house, with two outbuildings for covered access to planes.” —Wikipedia
Now John Travolta’s net worth is $250 million, much less than Warren Buffett’s $100 billion. But if it was up to me, I’d tax the hell out of John Travolta, because he’s using up society’s resources that could have been used for health care, education, etc. I would, however, leave him with enough money to have a nice life and still have the incentive to make movies because that enriches the rest of us.
Or maybe we need a heavy tax on luxury goods. That way, we tax on consumption instead and leaves people like Buffet alone. We’d let Travolta have one plane, and the resources that went into the other three planes would be available to society instead.
Again, it all comes back to resources and who’s consuming them. Another quote about Buffett:
“He lives in the same home he bought back in 1958. While most billionaires bulk up on expensive real estate, Buffett originally paid $31,500 for his Omaha, Nebraska, home — that’s around $288,700 in today’s dollars — and he’s lived there for over 60 years.
His home is by no means tiny, however. The 6,570-square-foot, five-bedroom home has had plenty of renovations and additions over the decades and is worth about $1 million today.”
Perhaps we should honor people like Buffett and shame the rich who buy yachts and such. That would be another way of doing it. China is taking that approach by threatening the rich who flaunt their wealth.
Not even the most charitable billionaire, the most honest, the wisest, can do more good with the productive forces at their command (I’m deliberately not saying their money) than good social commandeering of the same productive forces would. All of Buffett’s assets would be put to better use for the advancement of society by society itself. All of his charitable work does much less for the welfare of people than the public services of any developed country that still has some remnant of public interest in policy-making, like the Nordics. Probably even the blockaded Cuban state provides more people with welfare on their tiny budget than Buffett ever will.
Trying to tell good billionaires from bad is a fool’s errand. Private accumulation of wealth, by itself, means that surplus has been extracted from workers. In developed countries, people work on average half their time for themselves, the other half for their employer. Any worker would admit they’d prefer to work as much as they can for themselves, and only so much as democratically decided should go to the common good, with nothing for “the boss”, who shouldn’t even exist in the first place.
Wealth itself is the obverse of poverty somewhere.
“And I’m going to give virtually all those claim checks to charity when my wife and I die.”
…Being more like Marie Antoinette than Robin Hood, one could say that Buffet missed his punch line: “until then, let them eat cake!” … or he choose to keep mum for fear of being done in by the cant and kindness of the educated bourgeoisie. And if so, he is right.
WTF? Honor Buffett? Perhaps you ought to look into the sources of his wealth; the record of the companies he owns under the Berkshire Hathaway umbrella. I’m just sure as hell that all those workers and others screwed over by Apple, Amazon, Bank of America, Proctor and Gamble, Verizon, US Bankcorp, Chevron, Coca-Cola are just so grateful to the sage from Omaha, this incarnation of all that is good and right with capitalism. Sure thing. Build a statue, why don’t you?
This isn’t about “lifestyle” or charity. It’s about class, and class struggle. As has been demonstrated ad infinitum and ad nauseum here, MMT has nothing to say about class and ownership. MMT is just another distraction in a world already cluttered with husks of ideological justifications for preserving capitalism.
Honor Buffet? Because he “lives” in the same home. THAT says all you need to know. Not the slightest clue about capitalism as a social force and Buffets role in that, as that, social force.
What’s more important than who owns the means of production is who gets to consume the output of the means of production.
And that isn’t Warren Buffett.
If we assume that Buffett earns a 10% rate of return on his $100 billion of assets, that is $10 billion of income that Buffett is not consuming. That allows the US government to deficit spend $10 billion into the economy without causing inflation. In point of fact, this is what the government is doing right now, i.e, spending Buffett’s income, and it is imperative that they continue to do that to prevent recessions.
Incidentally, and in respect of class struggle, Warren Buffet was free when he made his first million dollars. The rest of it is a number in a spreadsheet. Here, have a quote from Bill Gates:
“I can understand wanting to have millions of dollars, there’s a certain freedom, meaningful freedom, that comes with that,” Gates said. “But once you get much beyond that, I have to tell you, it’s the same hamburger.”
“If we assume that Buffett earns a 10% rate of return on his $100 billion of assets, that is $10 billion of income that Buffett is not consuming. That allows the US government to deficit spend $10 billion into the economy without causing inflation. In point of fact, this is what the government is doing right now, i.e, spending Buffett’s income, and it is imperative that they continue to do that to prevent recessions.”
1. That’s thrilling to know, but just not accurate. The profit is not automatically categorized as a government asset.
2. And if it were true, then your “principle” would refute your own assertion that Buffett is somehow different or better than the most miserable, petty, vicious of that most miserable, vicious class– the bourgeoisie. Rockefeller? Allowed the US to spend billions. Henry Ford? A wonderful humanitarian. and the DuPonts, can’t forget the good things the DuPont’s have done. And before we go any further, god bless Elon Musk, subsidies and all.
3. Your argument is nothing but a warmed-over iteration of the old “free market” laissez-faire, Friedman, Rand, Greenspan bulls##t that says that the capitalist, acting in his or her own interests to maximize profit, provides the most good to the rest of society.
4. I’m sure that the indigenous people of Ecuador are ever so grateful to Buffett for his investments in Chevron, etc.
5. Like the advocates of political economy in general, you simply don’t know what you’re talking about. Sorry to sound so harsh, but it is what it is.
”1. It is exciting to know, but it is not accurate. The profit is not automatically classified as a government asset. ”
Not only is commentator Ahmed Fares’s argument inaccurate, it is completely wrong. So the returns of a capitalist such as W. Bufett end up being “assets” of the Government. Well, since when does such a miracle happen? – Except for a confiscatory imposition that DOES NOT EXIST TODAY in any country nor has ever existed in the West, such a miracle of fish is impossible. Or is it that the private property of capital has ceased to exist ?. Does the Good Samaritan Bufett grant donations to the Federal Government? The rest of Ahmed’s comment indicating that the government needs Buffet’s money to “spend without inflation” and to “avoid recessions” is honorary at Harvard. Besides being laughable and false, of course. True, such an argument can only come from a staunch and absent-minded follower of Friedman, Rand, et all liberal. It’s not much worth criticizing, in my opinion.
So called A Fares first came in dehumanising the homeless describing their situation as simply the result of mental illness. He seems ignorant of the millions who lost their homes & jobs during covid & during 2008, also ignorant of mental illnesses too. Then he came in glorifying the poor puppy buffet. Thanks for those who ridiculed his shallow arguments.
Haz is so right. A. Fares’ glib ignorance about the causes of homelessness is just intolerable. Anyone interested in the real causes will discover that mental illness and substance abuse are well down the list of primary causes. See for example: https://homelesslaw.org/wp-content/uploads/2018/10/Homeless_Stats_Fact_Sheet.pdf
I’m loathe to suggest censorship, or banning commenters, but really this guy’s a troll and should be blocked.