Wealth distribution

[HoreTore]

I'd still go back to gold standard

Going back to the gold standard makes no sense at all. Sure, you gain a thin layer of additional artificial stability, but at the expense of a severe lack of available money. The market is naturally flowing with ups and downs. Going back to the gold standard will do nothing to reduce the down periods, but it will do wonders at eliminating the periods of high growth we get. All around a very bad idea.

The noted Commie pinkos from Google explain why stagnating and falling incomes for the middle-and-lower tier people are a bad thing all around.

The stagnation in middle-class wages is not just a middle-class problem. It's an economic problem. And it's one of the main reasons that global economic growth is so lousy.

Why do stagnant middle-class wages hurt the economy?

Because the middle-class folks whose wages are stagnant are the global economy's biggest spenders.

And when they don't have money to spend, their lack of spending hurts not just them but all the companies that depend on them for revenue.

Including, Schmidt pointed out, Google.

Put differently, one company's expenses (wages) are another company's revenues. So, collectively, when companies are cutting wages, they're also cutting their own future revenue growth.

Right now, companies are so focused on cutting wages — by paying their employees as little as possible and replacing them with technology whenever possible — that wages as a percent of the economy are now near an all-time low (see chart below). And this weakness in wages is the big reason demand in the economy is so weak.

Looked at from this perspective, ruthless cost-cutting with employees is just another variant of the Tragedy of the Commons.

The tragedy of the commons is an economics theory [...] according to which the depletion of a shared resource by individuals, acting independently and rationally according to each one's self-interest, act contrary to the group's long-term best interests by depleting the common resource.

Or to put it even more bluntly, when a Walmart executive complains that his customers have no money, he is whining about a mess he helped create.

Again an excellent post, and I have to expand on it:

In addition to undercutting each others market, lower wages also means that technological progress is slowed.

When your wage costs are 10 million per year, you can easily buy a 500.000 dollar piece of machinery that will allow you to cut 10% of your wages through layoffs. You will end up making 500.000 from your 500.000 investment.

If your wages are half of that, you might not bother doing it, since you're not going to make anything on it, you are simply breaking even. With wage costs of 1 million, you are actually losing 400.000 if you try to increase your productivity through automation. This affects not only you, but also the technological progress, since that cannot occur without an end-user buying the stuff they invent(barring an active state).

This is part of the reason why African countries are piss-poor, yet cannot even compete on price.

And I love the mention of the tragedy of the commons: the mechanisms it describes is one of the main reasons I am a pinko-commie hippie. The free market simply has no mechanisms to counter the irrationality, so we have need of a strong and active state capable of regulating us from painting ourselves into a corner.

[Lemur]

The free market simply has no mechanisms to counter the irrationality, so we have need of a strong and active state capable of regulating us from painting ourselves into a corner.

Adam Smith would agree with you. So would Edmund Burke.

It's equal parts amusing and sad that the fathers of modern capitalism and conservatism, respectively, would be dirty RINO traitors by today's warped standards.