Or do we have a problem when a small segment of us -- the top 1% of the income spectrum -- capture 121% of the growth?
The reference is to the newest year of income concentration data provided by Piketty and Saez, table 1, column 4.
Or do we have a problem when a small segment of us -- the top 1% of the income spectrum -- capture 121% of the growth?
The reference is to the newest year of income concentration data provided by Piketty and Saez, table 1, column 4.
I can easily imagine a great proprietor of ground rents in the metropolis calling attention to the habitations of the poor, to the evils of overcrowding, and to the scandals which the inquiry reveals, while his own income is greatly increased by the causes which make house-rent dear in London, and decent lodging hardly obtainable by thousands of laborers.
— PROF. THOROLD ROGERS, Work and Wages, Chap. XX., p. 550.
Efforts should be made to prevent the increase of value which is occasioned by the growth of the population of towns enriching private individuals.
— The REV. W. MOORE EDE, Honorary Canon of Durham, The Church and Town Problems, p. 88, note.
Posted on August 07, 2012 at 12:01 AM in a Manhattan acre, a wedge driven through society, absentee ownership, all benefits go to landholder , better cities, buildings depreciate, congestion, cost of living, cui bono?, Earth for All, fixing the economy, housing affordability, human nature, income concentration, land monopoly capitalism, land rent, land value created by community, landed gentry, landlordism, location, location, location, playing by the rules, popular ignorance of land economics, privatization, privilege, reaping what others sow, rich people's useful idiots, toll-takers, urban land value | Permalink | Comments (0)
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It was told of a recently deceased Judge of the Supreme Court of the United States, a man who sat in the Senate of the United States, one of the most eminent men of his generation, how he, a poor lawyer, in a comparatively poor western town, had been able to accumulate some two or three millions of dollars worth of property. How? By "sagacity" in investing in lands at some distance from villages and towns, with foresight that in the course of a few years the growth of those communities, the industry, thrift, talent, virtue, patience of large communities would all keep adding to the value of his property, and in course of time cities, towns and villages would grow up on these lands, and he would be able to command an enormous price for land that cost him but a song. Now, while the law tolerated or even sanctioned what he was doing, he was guilty of an iniquity, of reaping where he had not sown, of exacting tribute where he had contributed nothing.
Posted on April 18, 2012 at 08:45 AM in a wedge driven through society, absentee ownership, all benefits go to landholder , capital gains are land gains, corruption in government, cui bono?, FIRE sector, income concentration, land appreciates buildings depreciate, land speculation, land value created by community, landed gentry, landlordism, location, location, location, playing by the rules, political economy, popular ignorance of land economics, population growth, reaping what others sow, rich people's useful idiots, special interests, toll-takers, wealth distribution or concentration | Permalink | Comments (0)
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36. He worked hard. He played by the rules. He bought up land before the interstate highway was announced, and his widow and orphans now have a very valuable land portfolio, for which others will pay a high purchase price or high -- and rising -- lease prices, for generations. Is it right to change our tax code to tax -- heavily -- year in and year out, the economic value of that land?
Posted on March 06, 2012 at 09:47 PM in a wedge driven through society, all benefits go to landholder , economic rent, financing education, financing infrastructure, financing services, financing Social Security, free lunch, fruits of one's labors, land speculation, land value created by community, land value taxation, landed gentry, location, location, location, playing by the rules, popular ignorance of land economics, population growth, reaping what others sow, the land questions, time making wrongs into rights, unearned increment, wealth distribution or concentration, widow's skirts | Permalink | Comments (0)
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When the structures that our laws and traditions create provide opportunities for someone to capture a windfall, should we blame the fellow who "takes advantage" of those structures, or should we respond by studying and correcting those structures and laws?
Winston Churchill, in his speeches under the baanner "The People's Rights," in 1909, said this:
I hope you will understand that when I speak of the land monopolist I am dealing more with the process than with the individual landowner. I have no wish to hold any class up to public disapprobation. I do not think that the man who makes money by unearned increment in land is morally a worse man than anyone else who gathers his profit where he finds it in this hard world under the law and according to common usage. It is not the individual I attack, it is the system. It is not the man who is bad, it is the law which is bad. It is not the man who is blameworthy for doing what the law allows and what other men do; it is the State which would be blameworthy were it not to endeavour to reform the law and correct the practice. We do not want to punish the landlord. We want to alter the law.
The 99% need to start identifying the laws and structures that must be adjusted. This is not easy work.
What individuals produce, and corporations produce, should not be "there for the taking" -- be it by corporate management in the form of hugely generous compensation packages and golden parachutes, or by simply saying "these resources are OURS, not everyone's" or by establishing monopolies or duopolies or other such structures. We-the-people need to educate ourselves about how things are done now, who benefits from that, and what alternatives exist. It won't be easy. We'll be challenging special interests who somehow think they're entitled to their advantaged positions, and the rest of us exist to keep them comfortable.
Labor should get its share, and capital should get its share, and we-the-people should get land's share. That last could fund a large portion of our common spending, on infrastructure and services, and permit us to reduce or eliminate the dumb taxes which take which individuals and corporations legitimately create. That "keeping what we create" extends, also, to "externalities," to being responsible for the pollution we create, and setting up incentives so that it is minimized, for the good of all of us now here and the good of future generations.
I think it is quite possible, even likely, that a few years after we've made this shift in who gets what, we'll find that we don't need nearly so robust a social safety net, and that we-the-people may get some of "land's share" back in the form of a Citizen's Dividend, just as all permanent residents of Alaska receive an annual dividend from the Alaska Permanent Fund.
In any case, letting some corporations and some individuals grab that which we all create together is just plain wrong. Letting it be "there for the taking" is insanity and injustice. And don't we pledge "liberty and justice for all?"
Our ancestors may have granted some privileges to some lucky folks for one reason or another. That doesn't mean that we can't, politely and firmly, revoke those privileges. A couple of centuries is plenty. Experience has shown us that those privileges don't serve the greater good, and it is time to revoke them. Will the privileged give up those privileges graciously? Quite possibly not. But the first step is to identify them, and then to seek to change the system so that those rightly-common assets aren't "there for the taking."
Posted on December 18, 2011 at 05:00 PM in a wedge driven through society, Alaska Permanent Fund, all benefits go to landholder , civilization, common good, corporations, cui bono?, economic rent, ecosystem services, environment, financing infrastructure, financing services, free lunch, highest salaries, income concentration, inter-generational equity, land different from capital, land value created by community, land, labor and capital, monopoly -- not the game, natural monopolies, Occupy Wall Street's values, pay for what you take, playing by the rules, privatization, privilege, reaping what others sow, socializing risk and privatizing profit, special interests, sufficiency of land rent, unearned income, unearned increment, untaxing production, user fees, wealth distribution or concentration, wealthandwant | Permalink | Comments (0)
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Congress: Trading stock on inside information? - CBS News.
Perhaps you saw "60 Minutes" last Sunday (11/13). Just in case you didn't, here are some excerpts from the transcript. I commend the whole thing to your attention. It begins:
The next national election is now less than a year away and congressmen and senators are expending much of their time and their energy raising the millions of dollars in campaign funds they'll need just to hold onto a job that pays $174,000 a year.
Few of them are doing it for the salary and all of them will say they are doing it to serve the public. But there are other benefits: Power, prestige, and the opportunity to become a Washington insider with access to information and connections that no one else has, in an environment of privilege where rules that govern the rest of the country, don't always apply to them. ...
Most former congressmen and senators manage to leave Washington - if they ever leave Washington - with more money in their pockets than they had when they arrived, and as you are about to see, the biggest challenge is often avoiding temptation.
Peter Schweizer: This is a venture opportunity. This is an opportunity to leverage your position in public service and use that position to enrich yourself, your friends, and your family.
Schweizer says he wanted to know why some congressmen and senators managed to accumulate significant wealth beyond their salaries, and proved particularly adept at buying and selling stocks.
Schweizer: There are all sorts of forms of honest grafts that congressmen engage in that allow them to become very, very wealthy. So it's not illegal, but I think it's highly unethical, I think it's highly offensive, and wrong.
Steve Kroft: What do you mean honest graft?
Schweizer: For example insider trading on the stock market. If you are a member of Congress, those laws are deemed not to apply.
Kroft: So congressman get a pass on insider trading?
Schweizer: They do. The fact is, if you sit on a healthcare committee and you know that Medicare, for example, is-- is considering not reimbursing for a certain drug that's market moving information. And if you can trade stock on-- off of that information and do so legally, that's a great profit making opportunity. And that sort of behavior goes on.
Kroft: Why does Congress get a pass on this?
Schweizer: It's really the way the rules have been defined. And the people who make the rules are the political class in Washington. And they've conveniently written them in such a way that they don't apply to themselves.
The buying and selling of stock by corporate insiders who have access to non-public information that could affect the stock price can be a criminal offense, just ask hedge fund manager Raj Rajaratnam who recently got 11 years in prison for doing it. But, congressional lawmakers have no corporate responsibilities and have long been considered exempt from insider trading laws, even though they have daily access to non-public information and plenty of opportunities to trade on it.
Schweizer: We know that during the health care debate people were trading health care stocks. We know that during the financial crisis of 2008 they were getting out of the market before the rest of America really knew what was going on.
While Congressman Bachus was publicly trying to keep the economy from cratering, he was privately betting that it would, buying option funds that would go up in value if the market went down. He would make a variety of trades and profited at a time when most Americans were losing their shirts.
Peter Schweizer thinks the timing is suspicious, and believes congressional leaders should have their stock funds in blind trusts.
Schweizer: Whether it's uh-- $15,000 or $150,000, the principle in my mind is that it's simply wrong and it shouldn't take place.
But there is a long history of self-dealing in Washington. And it doesn't always involve stock trades.
Congressmen and senators also seem to have a special knack for land and real estate deals. When Illinois Congressman Dennis Hastert became speaker of the House in 1999, he was worth a few hundred thousand dollars. He left the job eight years later a multi-millionaire.
Jan Strasma: The road that Hastert wants to build will go through these farm fields right here.
In 2005, Speaker Hastert got a $207 million federal earmark to build the Prairie Parkway through these cornfields near his home. What Jan Strasma and his neighbors didn't know was that Hastert had also bought some land adjacent to where the highway is supposed to go.
Strasma: And five months after this earmark went through he sold that land and made a bundle of money.
Kroft: How much?
Strasma: Two million dollars.
Kroft: What do you think of it?
Strasma: It stinks.
We stopped by the former speaker's farm, to ask him about the land deal, but he was off in Washington where he now works as a lobbyist. His office told us that property values in the area began to appreciate even before the earmark and that the Hastert land was several miles from the nearest exit.
But the same good fortune befell former New Hampshire Senator Judd Gregg, who helped steer nearly $70 million dollars in government funds towards redeveloping this defunct Air Force base, which he and his brother both had a commercial interest in. Gregg has said that he violated no congressional rules.
It's but one more example of good things happening to powerful members of Congress. Another is the access to initial public stock offerings, the opportunity to buy a new stock at insider prices just as it goes on the market. They can be incredibly lucrative and hard to get.
Schweizer: If you were a senator, Steve, and I gave you $10,000 cash, one or both of us is probably gonna go to jail. But if I'm a corporate executive and you're a senator, and I give you IPO shares in stock and over the course of one day that stock nets you $100,000, that's completely legal.
And former House Speaker Nancy Pelosi and her husband have participated in at least eight IPOs. One of those came in 2008, from Visa, just as a troublesome piece of legislation that would have hurt credit card companies, began making its way through the House. Undisturbed by a potential conflict of interest the Pelosis purchased 5,000 shares of Visa at the initial price of $44 dollars. Two days later it was trading at $64. The credit card legislation never made it to the floor of the House.
Brian Baird is a former congressman from Washington state who served six terms in the house before retiring last year. He spent half of those 12 years trying to get his colleagues to prohibit insider trading in Congress and establish some rules governing conflicts of interest.
Baird: One line in a bill in Congress can be worth millions and millions of dollars. There was one night, we had a late, late night caucus and you could kind of tell how a vote was going to go the next day. I literally walked home and I thought, 'Man, if you-- if you went online and made-- some significant trades, you could make a lot of money on this.' You-- you could just see it. You could see the potential here.
So in 2004, Baird and Congresswoman Louise Slaughter introduced the Stock Act which would make it illegal for members of Congress to trade stocks on non-public information and require them to report their stock trades every 90 days instead of once a year.
Kroft: How far did you get with this?
Baird: We didn't get anywhere. Just flat died. Went nowhere.
Kroft: How many cosponsors did you get?
Baird: I think we got six.
Baird: When you have a bill like this that makes so much sense and you can't get the co-sponsorships, you can't get the leadership to move it, it gets tremendously frustrating. Set aside that it's the right thing to do, it's good politics. People want their Congress to function well. It still baffles me.
But what baffles Baird even more is that the situation has gotten worse. In the past few years a whole new totally unregulated, $100 million dollar industry has grown up in Washington called political intelligence. It employs former congressmen and former staffers to scour the halls of the Capitol gathering valuable non-public information then selling it to hedge funds and traders on Wall Street who can trade on it.
Baird: Now if you're a political intel guy. And you get that information. Long before it's public. Long before somebody wakes up the next morning and reads or watches the television or whatever, you've got it. And you can make real-- real-time trades before anybody else.
Baird says its taken what would be a criminal enterprise anyplace else in the country and turned it into a profitable business model.
Baird: The town is all about people saying-- what do you know that I don't know. This is the currency of Washington, D.C. And it's that kind of informational currency that translates into real currency. Maybe it's over drinks maybe somebody picks up a phone. And says you know just to let you know it's in the bill. Trades happen. Can't trace 'em. If you can trace 'em, it's not illegal. It's a pretty great system. You feel like an idiot to not take advantage of it.
Posted on November 20, 2011 at 10:17 PM in a wedge driven through society, capital gains are land gains, cui bono?, democracy, equality, Film: "Inside Job", FIRE sector, free lunch, land speculation, land value created by community, location, location, location, playing by the rules, popular ignorance of land economics, pork spending, privatization, privilege, reaping what others sow, rich people's useful idiots, socializing risk and privatizing profit, special interests, stock ownership, trickle-down economics, wealth distribution or concentration | Permalink | Comments (0)
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Here's another from a 1926 issue of Tax Facts, a California-focused, business-focused, Single Tax monthly. While I find the intended focus of the article spot on, what caused me to share it here was the horse-grist-stone analogy in the final paragraph.
A SURE THING
Buy real estate in Southern California, says the real estate editor of the Los Angeles Times. Use common sense in making the purchase. Hold on to the property. It will make you independent and your children wealthy.
Fifty-nine years ago Alonza E. Horton bought 960 acres for $265, think of it, at the rate of 27 cents an acre. That . property today is the heart of the San Diego business section. It is worth something like $50,000,000.
The editor goes on to say that since Mr. Horton bought his 960 acres of land at 27 cents an acre millions of people have come to Southern California to live, and the same inducements that brought them will bring millions more. "So don't delay," the editor says, "but buy Southern California real estate while you have the opportunity." And he adds; "It is the fellow with the foresight and the decision to back his jugdment that gathers in the shekels."
This is the counsel of the go-getter. Southern California is an attractive place. Many people have come here. There are indications that many more people will come in the next few years. All these people must have land upon which to live, to do business, and to raise crops. They may bring with them all manner of goods and supplies, but they must use the land that is already here.
Hence, buy that land now, says the realtor, and sell it or lease it to those who come after. To the man who comes to Southern California next year, fix the price a little above the price of this year. Next year add again to the price; the year after, increase it again, and so on, always adding all you dare, short of an amount that will drive the builder away. This is the way the "fellow with the foresight and the decision to back his judgment" reaps the wealth of soil and climate that nature supplied in such perfection. When Mr. Horton came to San Diego in 1867 he bought land at 27 cents an acre. But the man who wants to use that same land today must pay fifty thousand dollars an acre.
This is the law and custom. We must have permanent possession, in order to secure the best use of land. But is there any reason why we should tax alike lands that increase in value so fabulously, and buildings and goods that deteriorate with age?
Some governments do not tax all property alike. Pittsburgh, Pa., taxes machinery and goods not at all, and taxes buildings at one half the rate of land. Mr. Moody, the far-seeing assessor of San Diego, taxed buildings at less than half the rate of land, until he was enjoined by the court. His policy was very popular with the people — business men and residents — excepting a grouchy land owner who evoked the aid of the courts.
When the assessor was compelled to follow the letter of the law there was great distress among the builders of San Diego. Men had built larger and finer buildings because the taxes were lighter on improvements than on land. So great was the burden when the court ruled that they be taxed alike that efforts were made to have the legislature legalize the practice of the far-seeing assessor.
It will come. What has been done in Pittsburgh can be done in San Diego, Los Angeles and San Francisco. It may take time. For years the countryman balanced his grist on the horse's back by putting the meal in one end of the sack and a stone in the other. One day it occurred to him that he could secure the same result by dividing the meal — and save the horse the weight of the stone.
Realtors are merely human when they advise people to buy land on speculation. It is their business. And the man who buys land, and lets it lie idle, while labor and capital build up the community around it, he, too, is human, and is acting within the law.
But what shall be said of the voters who control the laying of taxes? Are they as careful in looking into the tax laws as they are in watching their business affairs?
In the old days when government was simple and taxes were light it did not so much matter, but now it is different. There is hope. The voters will learn to divide the meal, and save the weight of the stone.
Posted on February 10, 2011 at 02:39 PM in absentee ownership, all benefits go to landholder , capital gains are land gains, connect the dots, fixing the economy, land appreciates buildings depreciate, land speculation, land value taxation, landlordism, location, location, location, opportunity, playing by the rules, poverty machine, private property in land, reaping what others sow, rich people's useful idiots, single tax, sprawl, unburdening the economy, underused land, urban land value | Permalink | Comments (0)
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Pursuing some leads on Lizzie Magie (see the related posts, below this one, and in the Landlords Game links at left), I came across a December, 2010, paper by Frances Hutchinson, about the British version of the Landlords Game, called Brer Fox an' Brer Rabbit. She makes some very interesting points, and I learned some things about the games. I commend the entire paper to your attention, and am taking the liberty of posting the last third here:
Brer Fox an’ Brer Rabbit
Georgists argued that a system of land taxation could be introduced gradually, following informed public debate on the issues involved. To that end, during the early decades of the twentieth century they devised a series of hand-made games designed to portray the evils of the selfish system of monopoly land holding, with a view to introducing socially responsible reforms of land holding based upon the Georgist Single Land Tax proposals. The games, which circulated throughout the USA and UK, often under the title The Landlord’s Game, were played in three phases. Phase 1, based upon the existing laws of land ownership, finance and taxation, demonstrates the effects of unchecked greed and self-interest in patterns of monopoly capitalism. In Phases 2 and 3 the rules are altered to eliminate the ability of powerful players to benefit from their greed.
The creators of the game held a profound faith in the human capacity for action based upon reasoned argument. The games were designed to be played co-operatively, providing a focus for discussion which took place at each of the three phases of the game. Monopoly was later developed from Phase 1, where powerful, self-interested individuals reign supreme. The later two phases, which each form games in themselves, demonstrate the potential for communities to regain ecologically and socially viable forms of access to land.
Brer Fox an’ Brer Rabbit is an early version of The Landlord’s Game which circulated in the UK. After some years of research we managed to bring together a copy of the original board with a matching set of rules. Despite the title, this is not a children’s game. However, we have found that a major obstacle to the successful use of this original version of the game as a teaching aid, is the almost universal pernicious influence of the selfish, zero-sum game of Monopoly. Phase 1 does not run as smoothly as the polished version of the commercial version, and it can be difficult to shift to the different mindset envisaged in Phases 2 and 3.
The thoughtful playing of Phases 2 and 3 of the Landlord’s Game raises some veryinteresting questions, such as the relationship between the ‘real’ and the ‘financial’ values of land, traditional patterns of common management of land, and the whole question of landless waged-labour. What emerges most forcefully, however, is the role of the Banker, the mysterious figure whose presence is not explained in the Georgist literature, but who is able to pay out ‘wages’ to the players to enable them to continue to participate in the game. This brings into focus the whole question of the wage/salary-slavery system that is corporate capitalism in the world economy of the twenty-first century.
Playing the Game
Monopoly was developed from Phase 1 of The Landlord’s Game, which demonstrates the effects of a greedy selfish pattern of monopoly land-holding. The object of Monopoly is to buy, rent and sell property with sufficiently focused and ruthless skill to bankrupt the other players and thereby force them out of the game. In real life, the Robber Barons of the American Golden Age dominated steel, oil and other essential resources not by creating wealth, but by dominating the field. Mirroring assumptions of economic orthodoxy, the number of houses and hotels in Monopoly are deliberately kept scarce. The game is so designed that all cannot improve their properties equally, and collaboration is prohibited. “Monopoly models the foundation assumption of economics: the principle of scarcity. Every opportunity you act on is thereby denied to another player.”11
To play a version of The Landlord’s Game it is necessary to step back in time, to forget the rush, bustle and constant worry of the twenty-first century and take time to imagine one is alive in the idyllic years before the First World War. Although the commercially designed Monopoly can be played out in a single playing session, several leisurely sessions need to be set aside for playing The Landlord’s Game. The specific uses of the sites laid out on the board would have been familiar to the players, and would have given rise to discussion of local examples. Thus the game offers a refreshing opportunity to reflect on the purposes of the various ‘money making’ institutions on the board, including the actual money-maker, the bank itself.
Devised over a hundred years ago as a DIY exercise, boards, cards and playing pieces were normally assembled from household materials. Playing tokens were buttons, badges, charms, or anything to hand. Brer Fox an’ Brer Rabbit, produced and patented by the Newbie Games Company of Dumfries, Scotland, in 1913, has been reproduced in the attached format* so that all three phases of the game can be played. The family resemblance to Monopoly is immediately obvious. Bearing in mind the history of Monopoly just described, the leisurely playing of all three phases is an excellent consciousness-raising exercise. The later two phases, which form games in themselves, demonstrate the potential for communities to regain access to land by regaining control over all forms of economic activity, including banking. Personally, I tend to agree with Karl Marx, that “in point of theory, the man [Henry George] is a back number”. The notion that an individual should have the right to buy a piece of land simply by right of landing on it when it is free, is original to the game. Equally, the Georgist game does not raise the question of money creation, the role of finance and banking in the economy or the whole question of wage-slavery upon which the edifice of global corporate capitalism rests. But that does not prevent twenty-first century players from using the sites and situations of Brer Fox an’ Brer Rabbit to review accepted assumptions about the institutions of society which govern access to wealth, property, income and power. The game offers at least as much of interest to present-day campaigners for peace, social justice, monetary reform and political sanity as it did a century ago. We look forward to opening a dialogue with groups who have played the games successfully.
Then go here: http://douglassocialcredit.com/poeticlicence.php to print out the rules, board, cards, and money to play this game yourself.
Posted on January 23, 2011 at 04:49 PM in a wedge driven through society, all benefits go to landholder , cui bono?, economic justice, economic rent, fixing the economy, Henry George, income concentration, land speculation, landed gentry, Monopoly and The Landlord's Game , natural resource revenues, playing by the rules, political economy, popular ignorance of land economics, poverty machine, poverty's cause, privilege, reaping what others sow, single tax, teach your children well, wealth distribution or concentration | Permalink | Comments (1)
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Digging through primary sources can provide some great thrills. I stumbled onto this article about The Landlords' Game in the Autumn, 1902, number of The Single Tax Review (then a 64-page quarterly, later more frequent) . It was the Landlord's' Game which was later revised to create the board game Monopoly. As I've written earlier here, the Landlords' Game (probably in later editions than what is referred to here) came with 2 sets of rules, one which would create widespread prosperity, and the other which would create a winner-take-all situation.
Magie's comments are quite relevant to understanding the game of Monopoly, too:
AN INTERESTING INVENTION OF A YOUNG LADY IN WASHINGTON BY WHICH CHILDREN AT THEIR PLAY MAY BE TAUGHT THE TRUE LAWS OF ECONOMICS.
Miss Lizzie J. Magie, a single taxer of Washington, D. C has invented an ingenious game, played with checkers and dice as is parcheesi, and thus describes it for the Review:
"It is a practical demonstration of the present system of land-grabbing with all its usual outcomes and consequences," says Miss Magie. " It might well have been called the 'Game of Life,' as it contains all the elements of success and failure in the real world, and the object is the same as the human race in general seem to have, i. e., the accumulation of wealth. Representative money, deeds, mortgages, notes and charters are used in the game; lots are bought and sold; rents are collected; money is borrowed (either from the bank or from individuals), and interest and taxes are paid. The railroad is also represented, and those who make use of it are obliged to pay their fare, unless they are fortunate enough to possess a pass, which, in the game, means throwing a double. There are two franchises: the water and the lighting; and the first player whose throw brings him upon one of these receives a charter giving him the privilege of taxing all others who must use his light and water.
"There are two tracts of land on the board that are held out of use—are neither for rent nor for sale—and on each of these appear the forbidding sign: 'No Trespassing. Go to Jail.' One of these tracts of land (the largest on the board) is owned by Lord Blueblood, of London, England, and represents foreign ownership of American soil. A jail is provided for any one who trespasses upon this land, and there the unfortunate individual must linger until he serves out his time or pays the required fine. 'Serving out his time' means waiting until he throws a double.
"Before the game begins, each player is provided with a certain amount of cash, sufficient to pay all necessary expenses until he is well enough along in life to earn his living. Should any one be so unlucky, or so reckless and extravagant, as to become 'broke,' there is a nice little poor house off in one corner where he may tarry until he makes a lucky throw or until some friend takes pity on him and lends him enough to set him on his feet again. And here is where he generally gets 'soaked,' for the other players, taking advantage of the unfortunate one's necessities, demand an enormous rate of interest which the impecunious individual must pay before he can complete his round and get his wages.
"The rallying and chaffing of the others when one player finds himself an inmate of the jail, and the expressions of mock sympathy and condolence when one is obliged to betake himself to the poor house, make a large part of the fun and merriment of the game.
"Each time around the board represents so much labor performed, for which so much wages are paid. When a player has been the rounds ten times he retires from his labors, although he still remains in the game, which is not finished until the last player has made his tenth round. It takes forty moves to make a round and there is in each round one little black-bordered spot marked 'Legacy,' and whenever a player stops on this he receives a cash legacy. In each round there are three spots marked 'Luxury,' and these the player may indulge in or not, according to his inclinations or finances, but each luxury purchased counts the player so much more at the end of the game.
"General directions for playing the game accompany this description, but it is difficult to make a set of rules that will cover all contingencies since no two games are alike. The combination of circumstances are so many that almost every time the game is played new situations are brought out. Thus it is a game that is always interesting—never monotonous. It was the original intention of the author simply to work out a demonstration of how the landlord gets his money and keeps it, but while doing this there gradually developed a game which has proven one of amusement as well as of instruction and one which has attractions for both old and young.
"Children of nine or ten years and who possess average intelligence can easily understand the game and they get a good deal of hearty enjoyment out of it. They like to handle the make-believe money, deeds, etc., and the little landlords take a general delight in demanding the payment of their rent. They learn that the quickest way to accumulate wealth and gain power is to get all the land they can in the best localities and hold on to it. There are those who argue that it may be a dangerous thing to teach children how they may thus get the advantage of their fellows, but let me tell you there are no fairer-minded beings in the world than our own little American children. Watch them in their play and see how quick they are, should any one of their number attempt to cheat or take undue advantage of another, to cry, 'No fair!' And who has not heard almost every little girl say, 'I won't play if you don't play fair.' Let the children once see clearly the gross injustice of our present land system and when they grow up, if they are allowed to develop naturally, the evil will soon be remedied."
To read more about The Landlord's Game, explore the two "Monopoly and the Landlord's Game" tags in the cloud (I can't seem to meld them into a single one!) It is quite an interesting story.
Posted on January 22, 2011 at 02:05 PM in a wedge driven through society, absentee ownership, all benefits go to landholder , cui bono?, economic justice, economic rent, ending poverty, fixing the economy, free lunch, Henry George, income concentration, land rent, land speculation, landed gentry, landlordism, location, location, location, Monopoly and The Landlord's Game, Monopoly and The Landlord's Game , playing by the rules, privatization, privilege, reaping what others sow, wealth distribution or concentration | Permalink | Comments (0)
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"There is nothing to fear," says the complacent Robert Collyer, "from the multimillionaire." The reason for Mr. Collyer's confidence is his assumption that "few fortunes survive three generations." This assumption is a pleasant tradition, formerly phrased as "three generations from shirt sleeves to shirt sleeves;" but it has long since ceased to express a fact, since John Jacob Astor showed Americans how to establish fortunes they have become as stable in America as in England.
But even if the tradition were as true today as it was in the earlier periods of the settlement of this new country, what satisfaction could a thoughtful man draw from it?
The social evil is not great fortunes. It is great poverty among those who earn so much wealth that they do not get.
To them it can make no difference whether fortunes are stable or not.
The great, obtrusive, undeniable and invariable fact is that no matter who may be rich nor how long his fortune may remain intact, the mass of those who do the work of the world, and without whose work there would be fortunes for nobody, are permanently poor and dependent.
To borrow a suggestive illustration from the gambling table, what matters it to the many who never win if the few who do soon lose their winnings again?
-- from "The Public," June 9, 1900.
Posted on January 06, 2011 at 04:34 PM in a wedge driven through society, all benefits go to landholder , cui bono?, economic justice, ending poverty, free lunch, income concentration, landlordism, paycheck to paycheck, playing by the rules, privilege, reaping what others sow, unearned income, wealth distribution or concentration, wealthandwant | Permalink | Comments (0)
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I heard something this morning on the radio which tickled my funny bone, and then got me thinking. The program was "Wait, Wait -- Don't Tell Me" and they were spinning yarns for a contestant to pick out the real one from the two made-up news stories. The theme was about how the wealthy are different, and there was a tale of rich people, perhaps in some form of noblesse oblige, choosing to play the board games Life and Monopoly with $1,000 less in starting money than the rules call for.
Well, my imagination was off and running. (I was stuck in traffic.)
Look at what happens in the board game Monopoly. Everyone starts with the same amount of money, and each one earns the same salary ($200 for each pass around the board). And yet some become wealthy and most end up penniless. The rules and structures are designed to create that situation. Some of it is random, or at least appears to be: what happens to you depends in part on a throw of the dice. Assuming all the players are using the same dice, one assumes that much is due to "chance." There is even a deck of cards by that name, each of which produces a different turn outcome.
Imagine Monopoly if the rules were a little different: that some started the game with a bit more money, or an undeveloped property they already owned, or a block or neighborhood with single family houses on them. After all, we weren't all born the same year.
Or imagine that instead of all players receiving $200 each "year," some of us received $400 or $600, and others received only $80 or $150.
Or combine those two assumptions.
Or imagine that the amount each player receives begins at $80, and for some rises and for others does not.
Or assume that some of us receive nothing, since there is a finite amount of money in the game, and if the powerful players have it all tucked under their side of the board, it simply isn't available when you pass "GO."
Or assume that when you do go to buy a house, having assembled your 2- or 3-lot neighborhood, there aren't any available: the supply is fixed, and the existing players have bought them all up. You'll have to wait, and keep paying rent until they replace them with hotels. (Sounds like California under Prop 13, doesn't it? One of the lowest homeownership rates in the US, except among seniors, whose homeownership rate exceeds that of their counterparts in the rest of the country!)
Those who have explored this blog may know that the board game Monopoly was not created during the 1930s depression, but is a direct descendant of a turn-of-the-century board game called The Landlord's Game, which was created to teach the ideas of Henry George. Elizabeth Magie (later Phillips) patented it in 1904, and later versions in the 1920s. (See a modern rendering here.) I've also seen pictures of another board for the Landlord's Game, showing a community surrounding a lake; one advances around the board.
The game came with two sets of rules, one called the Landlord Rules, rather similar to the game we know today. The other set was called the Prosperity Rules. You might enjoy the recent article in Land & Liberty (pages 14 & 15). Don't miss the last couple of paragraphs.
Posted on August 21, 2010 at 03:51 PM in a wedge driven through society, absentee ownership, capital gains are land gains, cui bono?, economic rent, fixing the economy, free lunch, Henry George, income concentration, land appreciates buildings depreciate, landed gentry, Monopoly and The Landlord's Game , playing by the rules, poverty machine, unburdening the economy, wealth distribution or concentration, windfalls | Permalink | Comments (0)
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I am sometimes amazed by the extent to which people who I wouldn't expect to speak to the issues that matter to ordinary people actually publish something relevant. David Stockman said something I didn't expect to hear from something in his party.
The four deformations:
IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation’s public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That’s a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation’s wealthiest taxpayers be spared even a three-percentage-point rate increase.
More fundamentally, Mr. McConnell’s stand puts the lie to the Republican pretense that its new monetarist and supply-side doctrines are rooted in its traditional financial philosophy. Republicans used to believe that prosperity depended upon the regular balancing of accounts — in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance — vulgar Keynesianism robed in the ideological vestments of the prosperous classes.
This approach has not simply made a mockery of traditional party ideals. It has also led to the serial financial bubbles and Wall Street depredations that have crippled our economy. More specifically, the new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one.
The first of these started when the Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world. ...
The second unhappy change in the American economy has been the extraordinary growth of our public debt. ...
The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector. ... But the trillion-dollar conglomerates that inhabit this new financial world are not free enterprises. They are rather wards of the state, extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives. ...
The fourth destructive change has been the hollowing out of the larger American economy.
Reminds me a bit of something Joe Stiglitz said in Australia last week.
The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing — as suggested by last week’s news that the national economy grew at an anemic annual rate of 2.4 percent in the second quarter. Under these circumstances, it’s a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach — balanced budgets, sound money and financial discipline — is needed more than ever.
When are we going to turn our attention to creating a stable economy in which all of us can prosper -- those who do the basic work which needs to be done but doesn't required extended specialized training or long experience, as well as those whose education or training equips them for more specialized jobs? We will continue to need farm workers, and janitors, and fast food workers, and dozens of other occupations, and it seems to me that we ought to favor a structure which makes a decent life possible for them as well as the more trained and educated. When 1%, 5%, of us get such a large portion of the products of the total labor in this land, something is wrong. The amount that is left to be divided among the other 99% or 95% is insufficient to properly compensate everyone for their labor. A few are reaping what they didn't sow, and we maintain the impolite fiction that they somehow earned it.
And there ARE answers. There ARE solutions. I happen to think that the best solutions -- probably the only solutions, but I'll leave it to you to propose something better -- are likely to come from the thought associated with Henry George. He was not original; he's part of a long continuum of people over many centuries who saw things similarly. But he was perhaps the most eloquent, and, in his first book, Progress and Poverty, very methodical and thorough in laying out his analysis. We, as 21st century people of good will, would do well to understand his analysis and argument, and see for ourselves whether we have a better answer to offer.
Posted on August 07, 2010 at 11:12 AM in a wedge driven through society, America in the world, boom-bust cycles, cui bono?, FIRE sector, fixing the economy, government's role, Henry George, income concentration, middle class, playing by the rules, poverty's cause, privilege, real estate bubble, reaping what others sow, Stiglitz, tax reform, unburdening the economy, unemployment and underemployment, wages, wealth distribution or concentration | Permalink | Comments (0)
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THE LANDLORD'S PRAYER OFFERING IN THE TEMPLE
O God, I thank Thee that I am not as other men. Thou art very wonderful and very kind — for Thou hast made me Thine own selected one!
All Thy works praise Thee — and yield their tribute to me! The earth, created Thou it — and gavest it to me!
The sea also is Thine, but Thou hast given me its bed for a long distance out from the shore — so that none may ride upon its waters without paying toll to me.
The firmament of the Heavens is Thine, and Thou hast set the sun therein to give light and warmth by day, likewise the moon and the stars whereby to radiate through the gloom and the darkness of the night, and these also enrich my exchequer.
Thou ridest Thy chariots in the clouds and causeth the winds to blow, and dost thereby still further increase my plenteousness.
Thou hast decreed that the non-elect of mankind shall live by labour, and hast conferred on me the power to make them hand over annual tribute to me and mine for the opportunity of so doing.
Thou hast ordained that the earth which Thou gavest me shall rise in value through the operation of natural laws and social factors, and hast appointed me to collect these enhanced values and to use them for myself and my house.
In further manifestation of Thy concern for me and mine, Thou hast commanded that the non-elect shall forge weapons for defending that which Thou hast given to me; that they — the non-elect — shall provide forces to use these weapons on my behalf, that they shall pay the capital costs thereof, and that they shall further provide out of their own common labors such funds as may be needed for feeding and clothing themselves and their dependents, and of providing compensation for the dependents of those who fall or are maimed and bruised whilst engaged in safeguarding Thy gifts to myself, in order that no toll shall be made upon Thy goodness to my house. Yea, Lord, I thank Thee that I am Thine own elect, and that Thy wonderful goodness is made plain in the tribute which Thy created handiwork brings to me and to my house. Amen, Amen, and yet again Amen.
This version was printed in Land and Freedom in 1917.
In another version, the final paragraphs read slightly differently:
Posted on June 18, 2010 at 10:52 PM in a wedge driven through society, cui bono?, economic justice, equality, free lunch, income concentration, land appreciates buildings depreciate, landed gentry, Landlord's Prayer, landlordism, one solution for many problems, playing by the rules, poverty machine, poverty's cause, privatization, privilege, prosperity, reaping what others sow, sharecropping, slavery, wealth distribution or concentration, wealthandwant, windfalls | Permalink | Comments (0)
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I came across an interesting paragraph in the January, 1887, issue of The Democrat, a British publication, which speaks to our 21st century economy:
The Rothschilds all over Europe are calculated to possess a yearly income of at least six millions. Suppose they spend only one million, laying aside five, what does this really mean? It means that they demand from the producers a tribute of six millions a year, not in goods, but in money; to raise this tribute-money, the producers have to sell six million pounds' worth of their productions in a market in which the Rothschilds purchase only one million's worth, having no requirements for more goods, their spending capacity, viz., their demand: for necessities and luxuries, not having increased so fast as their income. The producers — the people at large — cannot fill the gap by purchasing these remaining five million pounds' worth of goods, much as they need them, because they have to pay the proceeds of their labour as a tribute to the Rothschilds to the tune of £6,000,000 a year. Here, then, is the solution of the great problem, why goods are not saleable, why labour can find no employment, though the greatest need for goods exists.
It is attributed to Michael Flurscheim, a manufacturer in the Grand Duchy of Baden.
America's FIRE sector -- Finance, Insurance, Real Estate -- continues to harvest huge amounts of the production of American workers who are fussy enough to want a place to live. They don't have sufficient cash to buy the land and structure outright, and 15-year mortgages have given way to 30-year mortgages, fixed rates to adjustable rates, 20% downpayments to 10% and 5% and less -- with private mortgage insurance -- and $8,000 tax credits often are the equity in a newly purchased home. And the top few hundred employees of each behemoth pay themselves and each other awesomely high bonuses, on top of salaries which would alone place them in the top 1% of our income spectrum. Our best and brightest students are drawn, not to medicine, or scientific research, or engineering, or production management, or any of a number of fields in which they could make a positive impact on the lives of their fellow human beings (and be comfortably compensated with opportunities for leaving their children well-situated as well), but into Finance and Consulting, where the goal is to suck the vitality out of productive companies and out of wage-earning individuals.
The alternative? It is remarkably simple. So simple that "smart" people scoff at it. It is also wise, and just, and efficient, and conducive to solving many of our most pressing -- and supposedly intractable -- social, economic, environmental and justice problems.
Posted on May 30, 2010 at 04:40 PM in a wedge driven through society, absentee ownership, charity and justice, connect the dots, cost of living, cui bono?, economic justice, economic rent, FIRE sector, income concentration, landed gentry, landlordism, one solution for many problems, playing by the rules, poverty, poverty machine, poverty's cause, reaping what others sow, sprawl, wealth distribution or concentration | Permalink | Comments (0)
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That figure has been in the news and opinion columns a great deal in the past couple of weeks. It is the percentage of Americans who pay nothing in federal income taxes (as distinct from federal withholding for social insurance).
Some of the articles and related comments have focused on the concept that everyone should be paying something, so that they "have some skin in the game" so that there is an incentive not to vote for spending that others will have to pay for. Some have approached the 47% as "freeloaders."
It is funny that in our largest state, where, for 30+ years, Proposition 13 has put a ceiling on property taxes, so that landholders, who are the primary beneficiary of the effects of state and local spending (and federal funding of state and local projects) can expect their tenants to contribute mightily to the projects they vote for -- and no one has made an impression by pointing this out.
And none of the articles I've seen about the 47% figure -- which went viral after an article by Bob Williams in the WaPo -- have spent much time exploring the policy decisions behind this.
I am reminded that according to our official Federal Poverty Guideline, about 13% of us live "in poverty." And that even the Census Bureau, which collects and reports the data on who lives below the Federal Poverty Threshold (a retrospective figure which relates closely to the FPG) willingly recognizes that the Federal Poverty threshold and guideline are merely a statistical yardstick, with no particular logical relationship to the cost of living anywhere in America.
I am reminded that for the states for which a Self-Sufficiency Standard Study has been published (about 35 in all), the bare-bones cost of living for a young working family typically runs from 180% of the Federal Poverty Guideline -- in the least expensive counties (where very few people live) to perhaps 210% in the major cities of our smaller states to 300% or 400% in the major cities in our larger states.
Should the incomes -- mostly wages -- of our working people whose incomes are insufficient or barely sufficient to meet their own and their families' most modestly defined needs, be taxed?
I am reminded of the Overlooked and Undercounted studies, which typically follow a Self-Sufficiency Standard Study, and seek to quantify the number and percentage of working-age families whose incomes are insufficient to cover their bare-bones cost of living. Significant percentages of these families are at these income levels. 30% to 35% sticks in my mind -- and a larger percentage of America's children.
I am reminded that a large percentage of today's seniors are hugely reliant on their income from Social Security, and that the level of Social Security income is established upon retirement and thereafter only rises to keep up with the CPI-U; our oldest retirees are receiving Social Security incomes which are a function of their wages 30 years ago -- roughly as logical as California property taxes for long-time owners being based on the selling price of California housing 30 years ago!
I am reminded that many people get to deduct their mortgage interest and real estate taxes from their taxable income (they're typically in the coastal states; in the heartland states, the standard deduction often turns out to be higher, since taxes and interest payments tend to be lower ... which may correlate to the percentage of children who attend 4 year colleges).
And I am reminded that state and local taxes fall more heavily on low-income people than they do on high income people. (See "Who Pays? A Distributional Analysis of the Tax Systems in All 50 States", particularly the "Averages for All States" table on page 124 of 130), which shows that, on average, the bottom quintile of us pay 10.9% of our income in state and taxes, while the fourth quintile pays 8.5% and the top 1% pays just 5.2%, on average.
I am reminded of our concentration of income:
So the bottom 40% of us receive less than 10% of the before-tax income. And those who think they don't pay enough in taxes would like them to pay more into the system than they already do? The problem is one of low wages, unemployment and underemployment. The best solution to these problems I've come across lies in the ideas of Henry George. The law of wages is something like the law of gravity: we operate in ignorance at our own risk.
Posted on April 26, 2010 at 07:17 PM in a wedge driven through society, classical economists, common good, connect the dots, cost of living, cui bono?, ending poverty, government's role, Henry George, income concentration, little people pay taxes, natural resource revenues, natural resources, neoclassical economists, playing by the rules, poverty, poverty machine, poverty's cause, prosperity, reaping what others sow, sales taxes are wrong, tax reform, taxation, teach your children well, unburdening the economy, unemployment and underemployment, wealth distribution or concentration, wealthandwant, windfalls | Permalink | Comments (0)
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The Survey of Consumer Finances is published every three years by the Federal Reserve Board. The most recent published is the 2007, the report on which was titled Ponds and Streams: Wealth and Income in the United States, 1989 to 2007. It contains voluminous tables, with very useful detail. This page reports data from Table A3A. Definitions of the various kinds of assets are on page 70 of that report.
You can read trend data in Part 2 and Part 3 of this series, for aggregate NETWORTH (Line 01 in this table) and more data is available in the SCF Chartbook.
This data may understate the concentration of wealth, since the Fortune 400 families are specifically excluded from the SCF. Their holdings represent roughly 1% of the value.
Comments follow this table.
This provides 29 lines directly from the SCF,
and an additional 33
lines which combine various related kinds of assets, or assets and
their related debts.
of Net Worth in Total and by Component, 2007
Dollars in billions of 2007 dollars
|Percentile of the
distribution of family net worth
||Original Reported Data
from Ponds and Streams
||Top 1%, Next 9%, Bottom 90%||
||Top 5%, everyone else
|Column pct|| ||<50 Share||50-90 Share||90-95 Share||95-99 Share||99-100 Share||
||<90 Share||90-99 Share||99-100 Share||
||<95 Share||95-100 Share|
LVTfan's Calculated Aggregations
|Share of Assets Held by Each Quantile
||Share of Assets Held by Each Quantile||Share of Assets Held by Each Quantile|
|Column pct||<50 Share||<50 Share||90-95 Share||95-99 Share||99-100 Share||<90 Share||90-99 Share||99-100 Share||<95 Share||95-100 Share|
BUS+NNRESRE+ORES+HOUSES minus MRTHEL-RESDBT
HOUSES minus MRTHEL
NFIN other than HOUSES & VEHIC
FIN other than RETQLIQ
||NETWORTH other than VEHIC & HOUSES minus MRTHEL minus INSTALL||47,832.4||74.0%||1.4%||18.0%||10.5%||28.6%||41.5%||19.4%||39.1%||41.5%||29.9%||70.1%|
|53||NETWORTH other than RETQLIQ, VEHIC & HOUSES minus MRTHEL minus INSTALL||38,927.8||60.3%||0.8%||13.7%||9.0%||28.8%||47.7%||14.6%||37.8%||47.7%||23.6%||76.4%|
"all other assets" (exc VEHIC, HOUSES & RETQLIQ)
"all other debts" (except MRTHEL & INSTALL
|Source: Ponds and Streams: Wealth and Income in the
United States, 1989 to 2007 (http://www.federalreserve.gov/pubs/feds/2009/200913/200913pap.pdf),
Table A3A and LVTfan calculations. Definitions of
asset and debt detail at page 70.
Line 01, NETWORTH, is quite
concentrated. 5% of us hold 60% of it.
10% of us hold over 70% of it. Depending on how you define "Middle
Class," the "Middle Class" might have as much as 30% of it. Half of
our population owns a total of 2.5% of NETWORTH.
NETWORTH is the sum of ASSET (Line 02) and DEBT (Line 21). ASSET is the sum of FIN (Line 03 -- Financial Assets) and FIN (Line 14 -- Nonfinancial Assets). Within FIN, the largest category is RETQLIQ (Line 10 -- Retirement Qualified Liquid Assets, such as IRAs and 401(k) accounts; this does not include the value of pensions in defined benefit plans). Within NFIN, there are two large items: Line 16 HOUSES and Line 19 BUS, the value of privately held businesses.
Within DEBT, which represents 17.4% of NETWORTH or 14.8% of ASSETS, the largest category is Line 22, MRTHEL -- Mortgages and Home Equity Lines of Credit.
Two additional lines appear in the original report:
Line 53 is everything which is not in Line 48. Almost 48% of that value is owned by the top 1%ers, and over 76% by the top 5%.
Two related pages will follow: Part 2 looks at the distribution of Income to the various quantiles of NETWORTH holders, and how it has changed from 1989 to 2007. Part 3 looks at the changes in the distribution of NETWORTH from 1989 to 2007.
In Progress and Poverty, Henry George wrote of "an immense wedge . . . being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down." If you'd like to understand why wealth concentrates, I commend Progress and Poverty to your attention. And that book provides a simple, logical, just, efficient and economy-invigorating remedy, which can put us well on the road to solving some of our supposedly-intractable social, economic, climate and energy problems.
Posted on April 02, 2010 at 04:42 PM in a wedge driven through society, cui bono?, economic justice, economic rent, FIRE sector, free lunch, Henry George, income concentration, land appreciates buildings depreciate, land includes, land share of real estate value, land speculation, land, labor and capital, landed gentry, landlordism, location, location, location, middle class, natural resource revenues, playing by the rules, poverty machine, poverty's cause, privatization, privilege, reaping what others sow, SCF data, Survey of Consumer Finances data, wages, wealth distribution or concentration, wealthandwant, windfalls | Permalink | Comments (0)
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America's Wealth Distribution, Part 2: Middle Class: Trends in Net Worth Distribution by Income Quantile.
This is the first of a pair of pages which show trends in how America's household Net Worth is distributed. The data source is the Survey
of Consumer Finances Chartbook 2007.
While the distribution of wealth and the distribution of income are both rather concentrated, they are different distributions. That is, a young high-earning couple with two jobs on Wall Street may not yet have accumulated much in the way of Net Worth, but their income could place them in the top 5% or 1% of the income distribution. People with a lot of assets may not need or want to earn a great deal of income in order to live comfortably; even if their assets produce few dividends, they can sell off some each year to meet their needs. Also, assets which appreciate year to year, such as urban land and natural resources produce so-called "capital" gains which the owners do not "recognize" until they sell. Many of the highest income families in any particular year are people who have cashed in on an asset which has been quietly appreciating for a number of years, not incurring any taxes or notice from the IRS; such gains are taxed at 15%. (If you are interested in the relationship between income and wealth distributions, you might appreciate some of the graphics contained in Ponds and Streams: Wealth and Income in the United States, 1989 to 2007.)
This page shows, by quantile of income, how NETWORTH is distributed, and what has happened to this distribution between 1989 and 2007. Part 3 shows the distribution of NETWORTH according to quantiles of NETWORTH. As with Parts 1 and 3, the concentration of NETWORTH is likely understated, because the SCF omits the Fortune 400 families from the study. Their aggregate wealth and income is equal to the aggregate holdings of a large segment of America.
This page was inspired, in part, by my puzzlement about why Tea Party enthusiasts are so incensed about redistribution of income to those below them on the income spectrum. A comment I read online recently made some sense to me:
"If you are “middle class” and you already feel taxed to the hilt. And someone comes along saying they want “rich” people to pay more taxes, well, it isn’t rocket science for the “rich” people to come along and tell the “middle class” hey! they’re robbing “us” blind!!!!"
The Chartbook, page 43, provides the mean value of net worth, by income
quantile, for each of the 7 triennial studies. From that, I've computed the
aggregate holdings for each quantile in order to calculate the share of
aggregate holdings for each quantile. My calculations overstate the holdings of the
bottom quintile somewhat, because they are based on the mean holdings
for those with holdings, and not all households actually have
holdings. But we'll put that aside. (All are in 2007
|Table 1: Mean value of net
worth for families with holdings, by income
[000's of 2007 dollars)
||Quantile of Income|
| SCF Year
|1989||$ 39.7||$ 105.8||$ 163.1||$ 219.0||$ 358.0||$ 1,579.6|
SCF Chartbook, page 43
Note: these are the mean holdings for families with holdings
The average NETWORTH among families in the middle income quintile in 2007 was $210,400. That is not the same as the median, which was $88,100. (That is, half of families in the middle income quintile had NETWORTH higher than $88,100, half had less. The average is always higher than the median, which means that most of us are below average. In fact, according to the Chartbook, the median NW in the fourth income quintile was $205,800.)Multiplying the average holdings in each quantile by the percentage of households in that quantile, I get this. Notice that this does not account for the increase in population from one period to another -- but every quantile grew by the same amount. Keeping in mind that the first four quantiles are all of equal sizes -- and the last two together the same size as the others, the differences are striking:
Aggregate Net Worth Dollars by Income Quantile
|Quantile of Income||Total|
|Bottom Quintile||Second Quintile||Middle Quintile||Fourth Quintile||Second Decile||Top
SCF Chartbook, 2007, page 43, and my calculations.
Note that these are calculated from Table 1, multiplying by the percentage of households in that quantile. This does not account for population growth, but does reflect the shares each holds. It overstates holdings in the bottom income quintile, since not all households have positive net worth, and, as noted elsewhere, understates holdings for the top quantile due to the omission of the Forbes 400 families from the SCF sample.
Shares of Net Worth by Income Quantile
|Quantile of Income||Total|
|Bottom Quintile||Second Quintile||Middle Quintile||Fourth Quintile||Second Decile||Top
|point change, 1989 to 2007
||+ 1.1 pts
||- 3.3 pts
||- 3.4 pts
||- 1.1 pts
||- 1.1 pts
||+ 6.6 pts
SCF Chartbook 2007 and my calculations. See Notes for Table 2.
|Table 4: Shares
of Net Worth, by Income Quantile
|pt chg 1989-2007
||+ 1.1 pts||- 6.6 pts
||+ 5.7 pts
|Table 5: Shares of Net Worth by Income Quantile|
|pt chg 1989-2007
||- 1.1 pts
||- 5.6 pts
||+ 6.6 pts
|Table 6: Shares of Net Worth by Income Quantile|
|SCF Year||Income Quantile
|pt chg 1989-2007||- 4.2 pts
||- 2.2 pts
||+ 6.6 pts
Is this progress? As time goes on, and technological progress continues, and public investment in effective infrastructure continues, and we invest in education and public health, and all sorts of public goods which should elevate us all, the NETWORTH share of the highest income portion of our society grows by leaps and bounds, and the share going to the remainder of us falls.
By this time, I suspect someone is going to point out that over the course of 18 years, some people who were in the bottom income group, by whatever quantile definition you choose, are likely to have advanced into a higher income group, so what's the problem? Our low-income 18 year old becomes a 36 year old; our 36 year old a 54 year old -- and our 54 year old a 72 year old. (You can find the age-related income and net worth data in the Chartbook.) But relatively few of us ever make it into the top 10%, where the bulk of the goodies go.
The kinds of assets held by our highest-income people seem to be appreciating faster than those of the rest of us. (They're also more likely to have spare cash and borrowing power for down payment and mortgages on same, at favorable terms.) This is consistent with the notion that part of what we're seeing is the appreciation of well-located land -- the kind that sits under Manhattan condos and office buildings and suburban single-family homes. And it is consistent with the notion that ownership of corporate stock and privately held businesses often includes the ownership of such assets and of nonrenewable natural resources -- oil, water rights, airport landing slots, geosynchronous orbits, electromagnetic spectrum, and a host of other such assets. All these things collect economic rent from the rest of us. Few of us understand much about it; even college and graduate-level economics majors don't learn much about it at most colleges and universities.
In Progress and Poverty, Henry George wrote of "an immense wedge . . . being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down." If you'd like to understand why wealth concentrates, I commend Progress and Poverty to your attention. And that book provides a simple, logical, just, efficient and economy-invigorating remedy, which can put us well on the road to solving some of our supposedly-intractable social, economic, climate and energy problems.
Posted on April 02, 2010 at 04:40 PM in a wedge driven through society, absentee ownership, common good, commons, cui bono?, economic rent, FIRE sector, free lunch, Henry George, income concentration, land includes, land share of real estate value, land speculation, land, labor and capital, landed gentry, landlordism, location, location, location, middle class, monopoly -- not the game, natural resource revenues, one solution for many problems, playing by the rules, poverty machine, poverty's cause, privatization, privilege, reaping what others sow, SCF data, Survey of Consumer Finances data, technological advances, triple net leases, unburdening the economy, unemployment and underemployment, wealth distribution or concentration, windfalls | Permalink | Comments (0)
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This website is missing the richest part of the story!
You might appreciate these two pages:
The Landlord's Game and Prosperity, at https://docs.google.com/fileview?id=0B5SHdsI4Ysi_ODQ4Y2FjZWMtNGFkMS00ZjZkLWFhNzYtMjNkNjFjMDJiZGE3&hl=en_GB
and the 1923 patent application, at http://www.google.com/patents?pg=PA1&zoom=4&id=lD1cAAAAEBAJ#v=onepage&q=&f=false
I'll post more on the subject over time.
Posted on March 30, 2010 at 03:51 PM in a wedge driven through society, absentee ownership, cui bono?, equality, free lunch, Henry George, land includes, landed gentry, landlordism, little people pay taxes, location, location, location, Monopoly and The Landlord's Game , natural resources, playing by the rules, poverty machine, privatization, privilege, teach your children well, user fees | Permalink | Comments (0)
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The article seems like a pretty good summary, other than that it bends over backwards to suggest that the tenants somehow have reason to think they should either (1) be able to buy this property at a bargain price or (2) continue to pay bargain rents.
The photo suggests more 2-story cottages with porches than I've observed in the photos I've seen of individual homes; this may be a variation relating to the terrain in that particular spot.
I was heartened to read that a law school property law expert thought the 1650 will would still hold:
The math in the article was a little weak:
That represents slightly less than a doubling of rents. And capitalized at 5%, would represent a value of $32,926,000. But this is still far less than the sellers of cottages are valuing the land at.
Cottages assessed at $64,200 to $88,400 carry asking prices of $175,000 to $620,000! These cottages range from 800 to 1779 square feet, and were built between 1910 and 1940. Most have 2 bedrooms, 1 bath, no heat.
The difference between the assessed value of the cottages and the asking price is capitalized land value, over and above the current rents of $9,700 to $10,800.
Are the building assessments too low? I doubt it; assessors tend to overassess buldings and underassess land. It is tough to justify a, say, $80,000 assessment for a non-winterized 900 square foot cottage: that's $88 per square foot. Check construction costs today for a modest cottage, and then depreciate that (1.5% per year for 75 years). Even in suburban Boston.
Here are some recent listings of cottages on Little Neck. Keep in mind that all the tenants currently own is the buildings. Yet their asking prices are many times the assessed value of those buildings.
as % of
Per Square Foot
So how much should rents be to meet the Grantor's requirement of "Market Rents?" Quick and dirty, enough to bring Column 1 down to roughly Column 2. How do we calculate that? Quick and dirty, use a capitalization rate of 5% -- known sometimes as "20 years' purchase" -- and multiply it by Column 7. Add that to the current rents of $9,700 for seasonal cottages and $10,800 for year-round cottages. Yes, it will vary by location within Little Neck. Great views, waterfront, proximity to positive amenities, distance from any negative amenities, and, of course, lot size will all play a role -- just like anywhere else (location, location, location!) and, of course, year-round rights are worth far more than $1,100 per year ($22,000 capitalized at 5%). I'm guessing that the first two listings above might be year-round.
I recommend that the Feoffees announce that they will raise rents on a 5 year schedule to bring rents in 2015 up to what they ought to have been in 2010, and by 2018, raise them to what they should have been in 2015. Then they should watch the price of the houses, which should sell for no more than their depreciated value.
They will have continued to provide a bargain to the existing tenants (via a 5- and then 2-year lag), but by announcing and sticking to the schedule, they will begin to collect something approaching what they were charged to collect. Cottage selling prices will come down to earth (as soon as the market believes the Feoffees will stick to the schedule), and the schools of Ipswich will have a solid income, as William Paine intended.
Yes, some tenants will lose a windfall they'd been counting on. But the Feoffees will not be taking from them anything which the tenants created other than their dreams of the windfall. And they will be living up to what William Paine's trust requires of them. If the current team of Feoffees aren't the men and women for the job, I'm sure Ipswich can find good people who will take it on and live up to the terms, for the benefit of the schools now and forever.
This blog has more observations and history on this story. See them collected at http://lvtfan.typepad.com/lvtfans_blog/feoffees-land/.
Posted on March 21, 2010 at 09:48 AM in assessment, buildings depreciate, commons, connect the dots, cui bono?, economic rent, financing education, free lunch, land appreciates buildings depreciate, land speculation, leased land, Little Neck Feoffees of Ipswich, location, location, location, playing by the rules, privatization, privilege, socialize | Permalink | Comments (0)
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Mason Gaffney has written an interesting piece entitled Corporations, Democracy, and the U. S. Supreme Court at http://www.masongaffney.org/essays/Corporations_Democracy_and_the_US_Supreme_Court.pdf about the recent Supreme Court ruling which said that a corporation can contribute unlimited funds for promoting its views for and against candidates.
On Jan 21 2010 our High Court shocked Americans by ruling in Citizens United v. Federal Elections Commission that a corporation may contribute unlimited funds advertising its views for and against political candidates of its choice –- in practice, the choice of its CEO or Directors. The ideas behind this are that a corporation is a “legal person,” with all the rights (if not all the duties) of a human being; that as such it has a right of free speech; and that donating money is a form of speech. Already K&L Gates, a top Washington lobbying firm, is advising its clients how to funnel money through lobbying groups or “trade associations.” This culminates a long series of actions and reactions (decisions, legislative acts, and electoral results) that bit by bit have raised the power of corporations in American economic and public life. Herein I will take the fall of the corporate income tax as a simple metric of the power of corporations. Nothing about corporations is that simple, however, so I must also touch on other aspects of power.
This is not a paper on the theory of tax incidence. Such a paper is needed, but would take a heavy tome, most of it devoted to fine-spun and pretentious theories that appear in academic journals, and which fail to convince because the authors are weak on distinguishing land from capital. My own postulates here, in brief, are
I'll skip over a lot of interesting and useful historical material -- which I commend to your attention -- and share the final section:
The only thing I can add to this is to provide the data on the concentration of wealth in America, specifically four items reported in the Survey of Consumer Finances:
(The latter two categories could include bonds as well as equities.) I'll also report "all other, net of debt." (For most of us, that's cars and houses.) The data is from the 2007 SCF, and somewhat understates the concentration, since the holdings of the Fortune 400 are omitted from both numerator and denominator. Quick and dirty, add 1% to numerator and denominator.
net of DEBT
|percentage of aggregate NETWORTH (row percent)
Distribution of Holdings: (column percent; sums to 100.0%)
|Top 1% of wealthholders
|source: 2007 Survey of Consumer Finances
So what SHOULD we tax? Urban land value, and the value of natural resources are a fine start. That is value which ought to be socialized, treated as our COMMON property, not as the private treasure and asset of rich individuals; of family trusts of people living -- or people dead 10, 20, 30, 50, 100 or more years for the benefit of their heirs or pet causes; of corporations of any kind (no matter how much free speech they are now entitled to); of foreign landholders; of private "equity" funds; of real estate investment trusts; of pension funds (public or private sector); of foreign or domestic churches; of insurance companies; of universities or other "philanthropic" entities; or anyone else. [See, for example, the blog posts below on Stuyvesant Town, on the NYC Roosevelt Hotel, including links to earlier related stories.]
The way to make that real is to place significant taxes on the annual rental value of the bare land, and the value of those natural resources, and other things the classical economists would recognize as "land" even if they never heard a radio or cell phone, saw an airplane, thought of a satellite, or imagined that fresh air or clean water could be scarce.
Treat that value as the revenue source for our common spending. Lighten up on taxes on wages, on sales, on buildings, on equipment.
Taxing urban land value will not cause a single acre to move offshore, or a single land speculator to "invest" in another property; rather it will encourage the better use of sites in choice locations, creating jobs and housing and venues for carrying on business where it is most efficient to do so: in the center of town, not at the fringe.
Doing this would reduce the tremendous wealth concentration in America. The economic value of certain kinds of assets which currently line the pockets of rich individuals as business owners or as holders of corporate stock or as salaries, bonuses and golden parachutes to top management, would be pre-distributed back to the commons, recycled locally or nationally, for public purposes. Those owners would still have the use of the assets each year, AFTER they had paid society for what they were privatizing that year.
If you've gotten this far, you might want to read Bob Andelson's fine essay, "Henry George and the Reconstruction of Capitalism, linked from the front page of Wealth and Want, as an "essential document."
Posted on March 20, 2010 at 09:31 PM in a wedge driven through society, absentee ownership, commons, cui bono?, economic rent, free lunch, income concentration, land, labor and capital, landed gentry, little people pay taxes, natural resource revenues, natural resources, one solution for many problems, paying twice, playing by the rules, poverty machine, privatization, privilege, public spending, SCF data, Stiglitz, Survey of Consumer Finances data, tax reform, unburdening the economy, urban land value, wealth distribution or concentration, wealthandwant | Permalink | Comments (0)
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I heard part of a radio interview with Harry Markopolos today. He's the fellow who saw through Bernard Madoff's "investment" scheme, and made every effort to get the SEC to pursue it. I have tremendous respect for Markopolos, and hope he will continue to use his talents for public good.
He was talking about "chasing the bad guys," and it got me thinking that while "chasing the bad guys" -- the ones who abuse the rules, who flout them completely, who betray trust others put in them -- is important, there is something else that also needs to occupy our attention.
We have a structure, which few of us are conscious of, which funnels our nation's wealth into the pockets of a particular class of us, and until we -- a large proportion of ordinary people -- become conscious of the particulars of that structure, we are simply putting our attention in the wrong place.
The theft by Bernard Madoff from some of our wealthiest folks -- I'm guessing that few of his victims were below the top 5% of the net worth distribution, counting just the dollars they sent to Madoff and their other holdings, not the assumed increase in the Madoff "investments" -- may simply serve to divert our attention from noticing that major structural matter to chasing a bad guy.
I discovered an interesting book online this weekend. Hardcopy sits in my library -- from my late grandparents' collection -- but I'd been put off by the title, and never bothered opening it. The title is "The Story of My Dictatorship." It turns out to be funny and interesting -- a telling of a dream, a bit along the line of "A Connecticut Yankee in King Arthur's Courts."
We need people who will play whistleblower on our system, our structure. And we need to listen to them.
Posted on March 09, 2010 at 05:03 PM in a wedge driven through society, common good, cui bono?, economic justice, economic rent, ending poverty, equality, free lunch, government's role, income concentration, land, labor and capital, landed gentry, landlordism, little people pay taxes, monopoly -- not the game, natural resource revenues, natural resources, neoclassical economists, playing by the rules, poverty machine, poverty's cause, privatization, privilege, reaping what others sow, teach your children well, unburdening the economy, wealth distribution or concentration, wealthandwant | Permalink | Comments (0)
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7. Shouldn't the beneficiaries of NYC's land value be NYC, NYS and the American people, instead of a private entity of any kind -- be it PIA, an American REIT, an NYC-based corporation, a family-owned real estate dynasty, one or more American pension funds (corporate or public), a British church, a middle eastern sovereign fund, a mutual fund, or any other private entity?
That site is valuable not because of anything its current owner is doing or is not doing. It is valuable because of the presence of millions of residents in the surrounding area, and of millions more who visit NYC on business and as tourists in the course of a year. It is valuable because we-the-people have invested and will continue to invest in infrastructure and services which protect and serve these sites. Why on earth does a private entity get to pocket what we create?
It doesn't come out of thin air.For more background on this story, see some previous posts here:
Posted on March 09, 2010 at 03:09 PM in a Manhattan acre, a wedge driven through society, absentee ownership, better cities, buildings depreciate, commons, cui bono?, economic rent, financing infrastructure, financing services, free lunch, government's role, land appreciates buildings depreciate, land share of real estate value, land speculation, landlordism, little people pay taxes, location, location, location, paying twice, playing by the rules, population, poverty machine, privilege, reaping what others sow, urban land value, wealthandwant | Permalink | Comments (0)
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A new study on the Federal Reserve Board site provides some interesting data from several years' worth of Survey of Consumer Finances data. The data is not new, but it is stark, and worth paying attention to. The study is a working paper entitled The Finances of American Households in the Past Three Recessions: Evidence from the Survey of Consumer Finances.
While the working paper is focused on modeling what has happened to various parts of our population since the 2007 SCF (this is not an analysis of the return to the 2007 panelists in 2009, which will be out later in the year), what I'm presenting here is actual SCF data. It comes from Tables 5 and 7.
|1. Percent of households holding debt:||72%
|2. Percent of households holding mortgage debt:||40%
|3. Median ratio of debt to income:||0.5
|4. Percent of HH with debt payments >40% of income
|Households by Income Percentile:|
1. Percent of households holding debt:
2. Percent of households holding mortgage debt:
3. Median ratio of debt to income:
|4. Debt payments >40% of income|
|Age of Head:|
|1. Percent of households holding debt:|
|45 to 64 years||78
|2. Percent of households holding mortgage debt:|
|45 to 64 years||48
3. Median ratio of debt to income:
|45 to 64 years||0.5
4. Debt payments >40% of income
|45 to 64 years||10
Do you notice the trend? An increasing proportion of us are helping to make the FIRE sector -- the shareholders in the finance, insurance and real estate businesses -- wealthy.
Nearly half of retirees have debt, up 1/3 from 1989, and median debt has n tripled. Nearly 3 in 10 retirees have mortgages, and 15% of retirees (or is that of the retirees with debt?) have over 40% of their income devoted to debt payments.
Among our young people -- <45 years of age, 85% have debt, and at the median, their debt is 1.3 times their income, more than double the ratio 18 years earlier.
A wealth concentrating machine. The FIRE sector -- the banks, the insurance companies, the real estate interests -- are have been permitted to create a giant wealth machine, too big to fail.
But not too big to correct. There ARE things that can be done. I encourage you to take a look at Mason Gaffney's new book, After the Crash: Designing a Depression Free Economy. (read the interview linked at http://www.masongaffney.org/, or find the book at schalkenbach.org's bookstore.
Posted on February 26, 2010 at 12:59 PM in a wedge driven through society, boom-bust cycles, common good, connect the dots, cost of living, cui bono?, FIRE sector, government's role, income concentration, one solution for many problems, playing by the rules, poverty machine, real estate bubble, SCF data, sharecropping, Survey of Consumer Finances data, unburdening the economy, wealth distribution or concentration | Permalink | Comments (0)
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Nation Building creates RENT -- economic rent. To whom should it belong?
And in America, as we consider investing in maintaining existing infrastructure -- roads, bridges, railroads, water mains, sewage systems, airports, etc. -- and building new (e.g., high speed rail), who should reap the benefit in terms of the land value such maintenance and building maintains and creates? Should it be privatized, or recycled for public purposes?
There is a passage in Henry George's book Progress & Poverty which has been excerpted under the title "The Savannah" which I think is relevant here. I'll share it in a moment.
Posted on February 23, 2010 at 10:45 AM in a wedge driven through society, absentee ownership, America in the world, better cities, commons, connect the dots, cui bono?, democracy, economic rent, ending poverty, financing education, financing infrastructure, financing services, free lunch, government's role, Henry George, income concentration, infrastructure, land appreciates buildings depreciate, land speculation, landlordism, location, location, location, natural resource revenues, one solution for many problems, playing by the rules, population, pork spending, privatization, privilege, reaping what others sow, transportation, urban land value, war, wealth distribution or concentration | Permalink | Comments (0)
Technorati Tags: community, distribution of wealth, economic rent, funding infrastructure, Iraq, nation building, privilege, social surplus, unearned increment, wealth concentration, wealth distribution
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The Top 400 and the Rest of Us
2/23: I added a postscript to this one ... scroll down!
The IRS data is in a pdf at http://www.irs.gov/pub/irs-soi/07intop400.pdf
The data prompts a number of questions:
Postscript: See also NYT opinionator blog post, The Great Goldman Sachs Fire Sale of 2008.
The article lists a number of people who will likely be in the 2008 second tier -- not the top 400, but clearly well into the top half percent, based on their selling Goldman Sachs stock; the article isn't clear about what their basis might have been in the stock -- but one sold shares worth $17.6 million plus $55.7 million (he may not be an American). Another, who ran the merchant banking business, sold $29 million worth. The article suggests that most of these sellers still have considerable amounts of Goldman Sachs stock; Lloyd Blankfein's 3.3 million shares are now worth more than $500 million. Should he sell, he'd be well onto the Top 400; the 2007 threshold was $139 million.
I'm guessing that many on the top 400 list in any particular year are people who have sold a privately held business to a large corporation. They've paid 15% on the capital gains, and will likely rail against paying an estate tax on the other 85%.
Posted on February 22, 2010 at 08:01 PM in a wedge driven through society, absentee ownership, boom-bust cycles, common good, commons, connect the dots, cui bono?, democracy, environment, FIRE sector, free lunch, incentives, income concentration, land, labor and capital, landed gentry, natural resource revenues, natural resources, playing by the rules, pollution, poverty machine, privatization, privilege, real estate bubble, reaping what others sow, urban land value, wage taxes, war, wealth distribution or concentration, wealthandwant | Permalink | Comments (0)
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Looking for the phrase "I am for men" (see an earlier post, below) I came across a 1906 book by August Cirkel (circa 1870-1946), of Chicago, entitled "Looking Forward." His prefatory note is as follows:
A passage in the middle of "Looking Forward" caught my eye, and I added the preceding ones for setting the scene. In this age of "too big to fail" and 10% of our households having over 70% of the aggregate net worth, a lot still rings true after 100 years:
An apology is, peradventure, due the memory of Edward Bellamy for the semi-plagiarism in the title of this book. It is true that "Looking Backward" suggested the name I have given it. The ideally happy condition of all the people, that Mr. Bellamy pictured as resulting from socialism, I look forward to as a result of a higher development of individualism.
The variety of topics considered may make the work seem presumptuous. But though the subjects are various, the same strain runs through all. Like the Irishman with his shillalah at the county fair, wherever I have seen a monopoly head, I have taken a whack at it. If there are any sore pates or broken craniums on account of my impartial and promiscuous blows, I shall know that I have not labored in vain.
We have one concern controlling far more than half the oil, another more than half the iron, another half the coal, another forming to control much more than half the copper, a few combinations working towards ownership of all the railroads and steamship lines; another, meat; in our large cities, the public service corporations are one by one being gobbled up by the same group of capitalists who control these other companies. It is probably safe to say that the so-called trust crowd now controls at least forty percent of the business and wealth of the country; moreover, the portion so controlled is organized on such a basis that the profits exacted each year reach the public with almost the directness of a tax. Without exception each one of these gigantic monopolies makes millions in the way of earnings disbursed to pay interest on bonds and dividends on stocks.
The profits of the Standard Oil Company have averaged forty percent per annum for many years; others of these companies are nearly as successful. In ordinary business only the very few after a period of twenty or thirty years can show a larger capital than they had at starting, and many fall by the wayside; but each, and every one, of these giant corporations makes tremendous gains. The public seems to have acquiesced in their right to fix the tribute that they will levy each year, and has grown so accustomed to their demands as not to analyze this right.
A few years ago Henry George tried to stir the people to a realization of the wrongs contained in the private ownership of land; but excepting the few Single-tax Leaguers who still try to keep alive the fires he kindled, few have given serious consideration to this matter, and many think him to be a vain dreamer of impossible conditions.
His theory as to the manner of applying a remedy has doubtless estranged many who accede to the correctness of his views as to existing wrongs. His argument as to the natural right of all mankind to the earth, the air, and the waters on the earth or underneath it, cannot well be refuted.
Let us suppose ten families occupy an island, and that this island constitutes all the land on the earth. Now, assume that they organize a regular government, the rights of each and all being fully considered and agreed to by every one, and, further, that every individual is perfectly satisfied that justice has been done him. Suppose that they agree to divide the island into ten equal parts, giving each family an equal portion, for which a patent is issued by the government, each soul on the island being satisfied that the division is fair and also satisfied with his allotment. There being no one on earth except the ten families, and as they are all content and happy, at first blush it might appear that they had a right to make this apportionment, and that there is no element of wrong concealed anywhere in the transaction. In doing this they certainly would be doing no more than has been done by nearly every people in history, and on a much more equitable basis. They overlooked, however, the changes to be wrought by time. After the apportionment, let us say that the islanders, being ordinary human men and women, went about their vocations in the usual manner, and led their lives as humankind generally does; let us say that there existed among them the same differences in capacity and temperament and habit of life that commonly prevail among people — some being thrifty and industrious, others improvident and idle, as men have been, are now, and perhaps always will be. What would probably happen? In a short space of time possibly fifty percent of the population would sell their share in the island to the provident class, and in the course of time twenty-five percent might come to hold absolute title to all the land. In consequence, the children born of the families that sold their holdings would have no land. The children born to the twenty-five percent would own it all.
If the laws of the island were based on the same principles as now obtain in the laws of the United States, it would be perfectly lawful for the twenty-five percent to say to the seventy-five percent that they might work the land on shares, giving the landlords half of the product of their labor. As there would be no possibility of procuring a livelihood otherwise, this offer would have to be accepted, if the laws were obeyed.
Normally, it is hard enough for a laborer to gain his living by the sweat of his brow, though he gets the full product of his labor. How much more difficult the situation when half of all he produces must be handed to another! In Ireland the situation was parallel to this; the poor Irish tenants tilled the soil of their native land, but instead of getting the full product of their labor, a large portion was pitilessly exacted by alien landlords. In lesser degree in nearly every country on earth the situation is comparable to this, the burden being disguised in various ways.
We, then, have seventy-five percent of the islanders giving up to the twenty-five percent one half of the product of their labor. Assuming that the original ten families that organized the government and apportioned the island have all died, by what God-given principle should the seventy-five percent of the population be required to give half of the fruits of their efforts to the twenty-five percent? Yet under our own laws would this not be possible, yea, natural? Without doing anything whatever, the twenty-five percent would be getting a revenue one and a half times as great as they could produce if working on an equal basis with the others. Because their fathers had got possession of the island, these few without toil get half again as much as they could produce if toiling, while the rest, though constantly laboring, get only half of the results of their labor. There are doubtless those who will say that the thrift of the original provident islanders should entitle them to transmit their gain to their children. Very good, but how about the thrift of the seventy-five percent now? The twenty-five percent may be compared with the original spendthrifts, as they squander without toiling, and by a just continuance of the rule, the children of the thrifty toilers should get back the island. On the face of the proposition this would manifestly be impossible. Let us go a step farther. Suppose the twenty-five percent, grown haughty with power, exercise it so arbitrarily that the others object, would it not be possible under laws like the laws of the United States, for the minority to refuse the majority employment except on the terms of the minority? What must be the consequence? Either submission to slavery by the seventy-five percent or starvation, if the laws are obeyed, or revolution and rebellion, if they are not. It cannot be an answer to the argument to hold that the ordinary principles of morality would restrain the minority in their exactions. History has not demonstrated that those who grow great with power never grow greedy. Then, if there is no justice in requiring the seventy-five percent to give up half their labor, is there justice in a situation or in laws which compel this result?
In the United States we have not even been as fair as the islanders, no equal division ever having been made, nor has every person been satisfied that his share is just; yet most of the land has been passed to the possession of private owners by patent from the government, and the average man has always thought, and the average man now thinks, that as a general proposition this was just, although knowing and admitting the possibility of minor wrongs. People have had the notion of private ownership of land so thoroughly grounded by long custom, that it seems the natural, rather than the artificial, manner of holding. Community of interest is repugnant to most minds. Socialism is believed to be a theory that might answer the requirements of angels, but finds small space for application among the wingless crowd on earth. Yet if the principle of private ownership is wrong as applied to the island, is it not equally wrong with us?
A few years back, owing to financial stress in the business world, vast numbers of men were idle from inability to find employment. Coxey gathered together a tatterdemalion army of the riffraff, tramps, and bums of the country, and marched them to Washington to emphasize to Congress the hardship of the situation, and to beg relief. He was derided and jeered at every hand. The public looked upon the idea as one of a crank, laughed at it, and dismissed it from their minds. Yet out of this army of thousands, how many possibly were sincerely desirous of a chance to earn an honest livelihood? The country at that time was infested with tramps, but since times improved the majority of them have gone to work again, and Coxey is forgotten. But way down deep, unperceived by the casual thinker and busy every-day man, some elemental principle had been violated, and in consequence the deplorable condition resulted. These men had a right to live. They had a right to labor. They had as good a right as any one of us to use God's soil, and to breathe God's air, and pity for them on our part by no means fulfilled our duty towards them. Somehow, little they knew how; somewhere, little they knew where; some time, little they knew when,— they had been cheated of the rights that are due to every human being that comes upon this earth.
The Declaration of Independence holds it to be a self-evident truth, that all men are entitled to life, liberty, and the pursuit of happiness. What a grim sardonic joke this would be, if read some Fourth of July to a ragged army of a hundred thousand starving men, women, and children, willing to labor, but with naught to lay their hands to! Hollow, indeed, would it sound, and the mockery would be so apparent to the multitude that I doubt not they would feel that somehow a terrible injustice had been done them.
When the ten families divided the island they allotted what belonged to God, and not to themselves, except as a blessing flowing from Him. They had no right to alienate the title from the whole community. The island belongs to every child who is born upon it, and each has as good a right to its benefits as every other. The ten families deeded away what they had no right to. Posterity was not considered, but the child then unborn owed no duty to the agreements made adverse to his interests by incompetent, reckless, luckless, or improvident ancestors, who bartered away his birthright. It was not theirs to give.
We must all, high and low, rich and poor, young and old, somehow or other, directly or indirectly, get our living from the earth. Necessity compels every one to eat to live. How fulfill this necessity except by application to Nature? What right has any government so to shape its laws that one single human being is debarred from his God-given right to labor in order to sustain his life? Organize society as you will, if provision is not fully made to protect the unborn souls to come, an injury is done, a seed is planted that will grow and bear suffering.
Henry George's theory is correct. The land belongs to all, the air and the water belong to all. If we are on earth for a purpose, and the God of chance is not ruling our destiny, as no man who thinks deeply can believe, it behooves us to conform to Nature's laws. The rules of conduct prescribed by people hundreds of years ago should have no binding force upon us today against our reason. Because people have always divided the land, it is not proof positive that their methods have been correct. Humanity has not reached the acme of advancement by any means. Some things are done vastly better today than ever before in history. It seems as if progress is being made. The world seems to be growing better. Yet how would this be possible but by the correction of previous wrong conceptions? Progress can never be made contrary to Nature's law; the decay of the nations of history proves the inexorableness of her workings. Conformity to her decrees, through principles of justice, of liberty, of equality, has ever led to advancement at a tremendous pace; but selfish interests have always injected into the laws of the nations the virus of destruction; decay ensues, the people become enfeebled, corruption reigns, and dissolution follows through the onslaughts of vigorous, lusty races that have grown strong through meting out the justice which the older nations had forgotten.
No government is good that does not give the greatest consideration to its lowliest citizens.
Let's talk about "our lowliest citizens." Recall that 10% of us have title to 71.5% of the aggregate net worth. The bottom 75% of us have an amazing 12.7% of the aggregate net worth. A slightly different 10% of us receive 47.2% of the before-tax income, and 20% of us get 61.0% of the pre-tax income. The bottom 60% of us share -- are you ready? -- 20.9% of the pretax income -- and most economists agree that we're paying 15% of that in social insurance taxes on our wages, plus federal and state income taxes, sales taxes, taxes on our buildings and on our land (if we own any). (Remember Leona Helmsley's observation about who pays taxes.)
Looking forward ... to more of the same? To a society which doesn't automatically enrich a small segment of us at the expense of the rest, who, most of us would agree, work equally hard, even if we're not in privileged categories of the real estate, finance, insurance or natural resources sectors, or otherwise endowed with a monopoly which feeds them so abundantly at the expense of others.
In many fast examinations of the Gilded Age, Edward Bellamy's book on socialism, "Looking Backward" is mentioned in the same sentence with Henry George's book best-selling "Progress & Poverty." The former book seems to be more widely assigned reading, in courses which bring in original sources. This is a shame.
Posted on February 14, 2010 at 06:42 PM in a wedge driven through society, absentee ownership, common good, connect the dots, cost of living, cui bono?, economic justice, economic rent, estate taxes, FIRE sector, Henry George, income concentration, individualism, land appreciates buildings depreciate, land share of real estate value, land speculation, land value taxation, land, labor and capital, landed gentry, landlordism, little people pay taxes, monopoly -- not the game, one solution for many problems, playing by the rules, population, poverty, poverty machine, poverty's cause, privatization, privilege, prosperity, sharecropping, slavery, socialize, tax reform, teach your children well, unburdening the economy, unemployment and underemployment, user fees, wealth distribution or concentration | Permalink | Comments (0)
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Three monkeys sat in a coconut tree
The Monkeys Disgrace
Discussing things as they're said to be.
Said one to another, "Now listen, you two,
There's a certain rumor that cannot be true,
That man descends from our noble race -
The very idea is a disgrace.
No monkey ever deserted his wife,
Starved her babies and ruined her life;
And you've never known a mother monk
To leave her babies with others to bunk,
Or pass them on from one to another
Til they scarcely know who is their mother.
And another thing you'll never see -
A monk build a fence around a coconut tree
And let the coconuts go to waste,
Forbidding all other monks to taste.
Why, if I put a fence around this tree,
Starvation would force you to steal from me.
Here's another thing a monk won't do -
Go out at night and get on a stew,
Or use a gun or club or knife
To take some other monkey's life;
Yes, Man Descended - That ornery cuss -
But, brother, he didn't descend from us!"
An ancient ape, once on a time,
Disliked exceedingly to climb,
And so he picked him out a tree
And said, "Now this belongs to me.
I have a hunch that monks are mutts
And I can make them gather nuts
And bring the bulk of them to me,
By claiming title to this tree."
[read the entire poem here]
One source attributes The Monkeys Disgrace poem to Nettie Bates Thomas, another to Ogden Nash. Yet another compares it to a 1950s Broadway show tune, which you can hear here.
But I've also found a lot of other attributions for it, some which date it back to within Cooke's lifetime:
Posted on February 14, 2010 at 05:20 PM in a wedge driven through society, absentee ownership, charity and justice, economic justice, ending poverty, equality, estate taxes, FIRE sector, free lunch, income concentration, land, labor and capital, landed gentry, landlordism, natural resource revenues, natural resources, playing by the rules, poverty machine, poverty's cause, privatization, privilege, sharecropping, teach your children well, war, wealth distribution or concentration | Permalink | Comments (0)
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The study shows the underemployment rates among those 16+ who were employed in 4Q-2009 for each 2008 income decile (Table 1). It ranges from 1.6% in the top income decile to 20.6% in the bottom one.
"We ranked the household incomes of all households in the U.S. in 2008 in ascending order and calculated the cutoff points for each decile (ten percent) of the income distribution (See Appendix A). The bottom decile included all households with annual incomes at or below $12,160 while the top decile was comprised of all households with pre-tax, annual incomes above $138,800.We then assigned each employed person in the October-December 2009 period into the 2008 household income decile that came closest to matching their reported household income on the 2009 CPS interview."
"The underutilization rate for workers in any income group can be interpreted in the following manner: for every 100 members in the adjusted civilian labor force in the fourth quarter of 2009, how many were left unemployed, underemployed, or a member of the labor force reserve."
"The unemployment rates of workers in the fourth quarter of calendar year 2009 varied extremely widely across the ten household income deciles.8 Workers in the lowest income decile faced a Great Depression type unemployment rate of nearly 31% while those in the second lowest income decile had an unemployment rate slightly below 20% (Table 3 and Chart 2). Unemployment rates fell steadily and steeply across the ten income deciles. Workers in the top two deciles of the income distribution faced unemployment rates of only 4.0 and 3.2 percent respectively, the equivalent of full employment. The relative size of the gap in unemployment rates between workers in the bottom and top income deciles was close to ten to one. Clearly, these two groups of workers occupy radically different types of labor markets in the U.S."
Table 4 is the most striking. It shows, by income decile, the number of unemployed people, underemployed people, and the "labor force reserve" -- those who would like to work, but are not considered part of the labor force. It also shows an "adjusted labor force" total and calculates an underutilization rate for each decile. Take a look, and ponder it for a while:
Table 4: The Number of Unemployed and Underemployed Persons, Members of the Labor Force Reserve, the Pool of Underutilized Labor, and Labor Underutilization Rate by Decile of the Household Income Distribution, 4th Quarter 2009 Decile 2008
Lowest $12,160 or less 2,523,484 1,172,379 869,399 4,565,292 9,093,930 50.2% Second $12,160 – 20,725 1,377,456 1,005,855 488,993 2,872,304 7,700,944 37.6% Third $20,725 – 29,680 1,885,492 1,330,302 642,565 3,858,359 12,958,122 29.8% Fourth $29,680 – 39,000 1,686,509 1,012,634 527,184 3,226,327 14,342,149 32.5% Fifth $39,000 – 50,000 1,018,953 632,966 350,506 2,002,065 11,726,027 17.1% Sixth $50,000 – 63,000 925,351 594,148 311,318 1,830,817 12,169,020 15.0% Seventh $63,000 – 79,100 972,009 622,585 29,492 1,894,0367 15,456,882 12.2% Eighth $79,100 – 100,500 875,080 599,808 308,478 1,783,366 17,882,399 10.0% Ninth $100,150 – 138,700 650,691 388,038 246,145 1,294,879 16,689,379 7.8% Top $138,700+ 353,899 174,407 156,885 689,195 11,301,726 6.1% All (1)
14,698,791 8,915,147 5,360,039 28,974,310 158,787,138 18.5% (1) Note: The totals for “All” include persons with missing household incomes on the October/December 2009 files.
Findings on the estimated sizes of the unemployed, underemployed, and labor force reserve groups can be combined to estimate the overall labor underutilization rates for workers in each of the household income deciles.11 The calculations for the underutilization rates for each income group are displayed in Table 4 and for selected decile in Chart 5. The range in these labor underutilization ratios is extremely wide as one would have expected given the huge gaps in each form of underutilization between the bottom and top deciles of the income distribution. The underutilization rate for workers in the lowest decile was slightly over 50% and remained just under 38% for those in the second lowest decile. These extraordinarily high rates of labor underutilization among these two income groups would have to be classified as symbolic of a True Great Depression. Workers in the two deciles in the middle of the distribution (the fifth and sixth) faced underutilization rates of 15 to 17 percent, representative of a severe recession. In substantial contrast, workers in the top two income deciles encountered underutilization rates of only 6 to 8 percent. Given their very low official unemployment rates of 3.2% and 4.0% for the top and second highest deciles respectively, one would have to characterize their labor market situation as a near “full employment environment.11 One cannot simply add the three percentages in Table 4 to generate an underutilization rate since the denominator of the three ratios are somewhat different for each measure. The unemployment rate is based on the official civilian labor force, the base for the underemployment rate is the number of employed, and the labor force reserve is based on the adjusted civilian labor force.
Here are the final two paragraphs of the study:
At the end of calendar year 2009, as the national economy was recovering from the recession of 2007-2009, workers in different segments of the income distribution clearly found themselves in radically different labor market conditions. A true labor market depression faced those in the bottom two deciles of the income distribution, a deep labor market recession prevailed among those in the middle of the distribution, and close to a full employment environment prevailed at the top. There was no labor market recession for America’s affluent.
In testifying before a Congressional committee in the late 1960s on the need for a sub-employment index to capture the high variations in labor market conditions in different neighborhoods and local labor markets, Secretary of Labor Willard Wirtz was asked how workers were doing on “on average”. He reportedly replied, “When you have your head in the freezer and your feet in the oven, on average you are doing Ok.” Similar remarks apply to the state of American labor markets today. Who will tell the people? Does anybody care?
As this blog has pointed out, when it comes to income, most of us are below average. Lake Wobegon in reverse.
I am reminded of Henry George's statement:
It is as though an immense wedge were being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down.
Look at Table 4. What do you see?
Bob Herbert's column on this study ends with this:
Those who believe this grievous economic situation will right itself of its own accord or can be corrected without bold, targeted (and, yes, expensive) government action are still reading from the Ronald Reagan (someday it will trickle down) hymnal.
I think there is a better way. I think it can be found in the ideas of Henry George. Let's not make the situation worse by trying to aid those who are affected without going to the root of the problem. Seek the root, and eradicate it. Don't hack at the leaves.
Posted on February 13, 2010 at 10:08 PM in a wedge driven through society, charity and justice, cost of living, cui bono?, ending poverty, Henry George, income concentration, playing by the rules, poverty, poverty machine, poverty's cause, unburdening the economy, unemployment and underemployment, wages, wealth distribution or concentration, wealthandwant | Permalink | Comments (0)
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| Top income decile:
||59.45% of the net worth|
|Second income decile:||10.92% of the net worth|
|Top income quintile:||70.37% of the net worth|
|Second highest income quintile:||13.48% of the net worth|
|Middle income quintile:||7.54% of the net worth|
|Fourth highest income quintile:||4.84% of the net worth|
|Bottom income quintile:||3.77% of the net worth|
If we define the middle class more broadly -- as the middle 60% of the income distribution -- our "middle class" has 25.86% of the net worth.
And here's how the before-tax income was distributed across the same income quantiles:
|Top income decile:||47.19% of the before-tax income|
|Second income decile:||13.77% of the before-tax income|
|Top income quintile:
||60.96% of the before-tax income|
|Second highest income quintile:||18.18% of the before-tax income|
|Middle income quintile:||11.23% of the before-tax income|
|Fourth highest income quintile:
||6.72% of the before-tax income|
|Bottom income quintile:
||2.92% of the before-tax income|
[Source: SCF Chartbook, page 7 and my calculations]
Using the broader definition of middle class -- again, the middle 60% of the income distribution -- our "middle class" has 36.13% of the before-tax income.
(Think of this quantile data as you read Bob Herbert's recent column "The Worst of the Pain.")
Alternatively, if we define the middle class in terms of net worth -- erase the above income-based definitions from your mind for the moment! -- here's the corresponding data:
The median household arranged according to net worth had net worth of $120,600 [source: SCF Chartbook, p. 39] That doesn't sound so bad, does it?
Let's look at the net worth quantiles:
||Top net worth decile:||71.46% of aggregate net worth|
|Second 15% of net worth holders:||15.83% of aggregate net worth|
|Top net worth quartile:||87.29% of aggregate net worth|
|Second highest net worth quartile:||10.21% of aggregate net worth|
|Third highest net worth quartile:||2.60% of aggregate net worth|
|Bottom net worth quartile:||-0.10% of aggregate net worth|
[Source: SCF Chartbook, 2007, page 73]
If you define our middle class as those between the 50th and 85th percentiles of the net worth distribution, our middle class owns 26.04% of the net worth.
How is the income distributed across those same net worth quantiles?
||Top net worth decile:||41.25% of before-tax income|
|Second 15% of net worth holders:||16.56% of before-tax income|
|Top net worth quartile:||57.81% of before-tax income|
|Second highest net worth quartile:||19.76% of before-tax income|
|Third highest net worth quartile:||13.80% of before-tax income|
|Bottom net worth quartile:||8.63% of before-tax income|
The middle 50% of us, arranged according to net worth, have 33.56% of before-tax income
If you want to define our middle class as those between the 50th and 85th percentiles of the net worth distribution, our middle class is getting 36.32% of the before-tax income. 35% of us getting 36% of the income. That's middle, I guess.
If you've gotten this far, I'll bet that you will think that we might want to tax income more heavily at the upper end of the income spectrum, or tax large estates more heavily.
I'm going to propose something different. Something which digs deeper, and seeks the source, the cause of the problem, rather than trying to redistribute the income or net worth after the fact.
Henry David Thoreau, in Walden, wrote this:
There are a thousand hacking at the branches of evil to one who is striking at the root, and it may be that he who bestows the largest amount of time and money on the needy is doing the most by his mode of life to produce that misery which he strives in vain to relieve. It is the pious slave-breeder devoting the proceeds of every tenth slave to buy a Sunday's liberty for the rest. Some show their kindness to the poor by employing them in their kitchens. Would they not be kinder if they employed themselves there? You boast of spending a tenth part of your income in charity; maybe you should spend the nine tenths so, and done with it. Society recovers only a tenth part of the property then. Is this owing to the generosity of him in whose possession it is found, or to the remissness of the officers of justice?
Henry George wrote this, in the opening chapter ("The Problem") of Progress & Poverty (1879), describing the first 100 years of America's existence as a nation:
It is true that wealth has been greatly increased, and that the average of comfort, leisure, and refinement has been raised; but these gains are not general. In them the lowest class do not share. I do not mean that the condition of the lowest class has nowhere nor in anything been improved; but that there is nowhere any improvement which can be credited to increased productive power. I mean that the tendency of what we call material progress is in no wise to improve the condition of the lowest class in the essentials of healthy, happy human life. Nay, more, that it is to still further depress the condition of the lowest class. The new forces, elevating in their nature though they be, do not act upon the social fabric from underneath, as was for a long time hoped and believed, but strike it at a point intermediate between top and bottom. It is as though an immense wedge were being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down.
Now go back and look at the distributions of income and of net worth in America in 2007. I've not provided the trend data here, but the 2007 snapshot tells the story well enough.
Posted on February 10, 2010 at 08:29 PM in a wedge driven through society, America in the world, charity and justice, common good, connect the dots, cui bono?, economic justice, ending poverty, estate taxes, government's role, Henry George, income concentration, land includes, land, labor and capital, landed gentry, landlordism, little people pay taxes, monopoly -- not the game, playing by the rules, poverty machine, poverty's cause, privatization, privilege, prosperity, SCF data, sharecropping, Survey of Consumer Finances data, tax reform, taxation, teach your children well, technological advances, wage taxes, wealth distribution or concentration, wealthandwant | Permalink | Comments (0)
Technorati Tags: Bob Herbert, Henry George, income concentration, income distribution, income quintiles, income shares, middle class, middle class agenda, net worth, Progress & Poverty, The Worst of the Pain, Walden, wealth concentration, wealth distribution, wealth quantiles, wealth shares
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That's the slogan on the two-story high advertising mural found recently on a building in Galesburg, Illinois. (Photo here.) It is an ad for Henry George 5 cent cigars. (See also this page of cigar ads.)
The "I am for men" slogan was on a pin I found on ebay a few years ago. The seller made some comment about it being anti-feminist. Well, she or he didn't know much about George.
When I googled the phrase, I found some interesting things. Here's one:
Henry George, a nineteenth-century American author and political economist, was nominated for the office of mayor of New York in 1886. He was called to a meeting at the Cooper Institute to speak to working men. The chairman of the meeting gave him a flowery introduction with the customary political rhetoric. The chairman concluded by saying, "Henry George is the friend of the working men." As soon as Mr. George rose to his feet, slowly and emphatically he said, "I would like to announce that I am not the friend of the working man." Stunned silence ensued -- a strange kind of bewilderment. He went on, "Nor am I the friend of capital. I am for men simply as men, regardless of any accidental or superfluous distinctions of race, creed, color, class, function, or employment." [source.]
I found a front-page article in the Scranton (PA) Tribune and Kansas City Journal (among others) of October 30, 1897, the day after Henry George's death, which reported some of the campaign speeches George had given on his last day, a few days before the 1897 mayoral election. Here is one of them:
At College Point there were 1,200 common laborers, a rough crowd, closely packed in the hall. Mr. George was introduced as the friend of the working man.
He began: "I have never claimed to be a friend of the workingmen. I do not now make any such claim (there was a pause of dead silence). I have not and do not intend to advocate anything in the special interest of the laboring man (another dead pause; Mr. George walked the full length of the platform and let out his full voice in a shout:). I am for men! (The crowd set up such a cheering and stamping that the room was filled with a choking dust). I am for men! -- the equal rights of all men. Let us be done with asking privileges for the laboring men."
I also found a 1906 book called "Looking Forward," by August Cirkel, which has a chapter by that title which starts with these paragraphs:
"I am for men." This famous expression, uttered by Henry George, sounds the keynote of the true spirit in which every public policy should be tested. Does it make men? Does it make them stronger, or wiser, or better? These are the all-important questions to be asked, when the effect of any system is to be noted. If the answer cannot be made affirmatively, sophistical must be the arguments that support it.
The kind of laws and institutions any people lives under is the kind of laws and institutions that that people deserves to live under. Every thing of life builds the body that it inhabits, and what kind of abode it constructs for itself, that is the kind of abode it must dwell in. Every people makes its own government. Where a race is ruled by tyrants, craven fear smites the hearts of the masses, and rather than endure the dangers of asserting their divine prerogative of freedom, they shuffle through life in cowardly submission to a few men no stronger than themselves.
I found a 1910 speech by Theodore Roosevelt, entitled "New Nationalism" which contains these paragraphs:
I believe in shaping the ends of government to protect property as well as human welfare. Normally, and in the long run, the ends are the same; but whenever the alternative must be faced, I am for men and not for property, as you were in the Civil War. I am far from underestimating the importance of dividends; but I rank dividends below human character. Again, I do not have any sympathy with the reformer who says he does not care for dividends. Of course, economic welfare is necessary, for a man must pull his own weight and be able to support his family. I know well that the reformers must not bring upon the people economic ruin, or the reforms themselves will go down in the ruin. But we must be ready to face temporary disaster, whether or not brought on by those who will war against us to the knife. Those who oppose reform will do well to remember that ruin in its worst form is inevitable if our national life brings us nothing better than swollen fortunes for the few and the triumph in both politics and business of a sordid and selfish materialism.
Near the end of the same speech, TR says this:
One of the fundamental necessities in a representative government such as ours is to make certain that the men to whom the people delegate their power shall serve the people by whom they are elected, and not the special interests. I believe that every national officer, elected or appointed, should be forbidden to perform any service or receive any compensation, directly or indirectly, from interstate corporations; and a similar provision could not fail to be useful within the States.
The object of government is the welfare of the people. The material progress and prosperity of a nation are desirable chiefly so long as they lead to the moral and material welfare of all good citizens. Just in proportion as the average man and woman are honest, capable of sound judgment and high ideals, active in public affairs; but, first of all, sound in their home, and the father and mother of healthy children whom they bring up well; just so far, and no farther, we may count our civilization a success.
(TR by that time had become quite comfortable with Henry George's ideas. See his party's 1912 platform "A Confession of Faith.")
In 1917, Luke North (James Hartness Griffes) published a book of poetry entitled "Songs of the Great Adventure" which included this:
"I AM FOR MEN"
He stood for Men —
Not for parties, sections, classes;
Not for dogmas, doctrines, isms —
Nor all the minutiae of over-elaborated plans for the future,
Nor for craven caution, dissimulation, equivocation —
Patience that now outrages virtue —
Program'd ways and means which if not followed
The world may stay in hell.
He stood for Men —
For in his soul he knew the line of cleavage
Was not between the robber and the robbed —
Was not marked by external difference,
By rank or class or occupation or wealth or poverty.
He knew that poor men could be very cruel and rich men kind.
He knew the line of cleavage was in the heart — those who care and those who don't —
This Henry George who wrote "Progress and Poverty."
He stood for Men —
And was he wrong to yield no tithe to classes?
What has now become of all the appeals
To class interest, class consciousness, class solidarity?
The human heart will not respond to them — in every class are tyrants.
The human mass forgets its every interest,
Flings to the wind all self and class advantage
And goes out to die for a word.
He stood for Men —
And showed the world how to unshackle the chains that bind men.
He showed how poverty begins,
Where modern slavery has its roots,
And how to tear them up.
The earth is for all men, he said —
And his word has gone around the world —
And now it's time to act!
He stood for Men —
Not creeds and doctrines, nor all the lesser details of future contingencies.
He bared the earth to man.
It is for us to take it.
He tried to gain it, and was beaten back to his death.
Now we will gain it —
At whatever cost!
Check out this fine book of poetry -- and if you know of a songwriter looking for inspiration, send them to this starting page.
It is ironic that Henry George's name became associated with cigars. He smoked, and that likely contributed to his premature death at age 58. He wrote about cigar-making and taxation as follows, in Chapter 8 of "Protection or Free Trade?"
It is no wonder that princes and ministers anxious to make their revenues as large as possible should prefer a method that enables them to "pluck the goose without making it cry," nor is it wonderful that this preference should be shared by those who get control of popular governments; but the reason which renders indirect taxes so agreeable to those who levy taxes is a sufficient reason why a people jealous of their liberties should insist that taxes levied for revenue only should be direct, not indirect.
It is not merely the ease with which indirect taxes can be collected that urges to their adoption. Indirect taxes always enlist active private interests in their favor. The first rude device for making the collection of taxes easier to the governing power is to let them out to farm. Under this system, which existed in France up to the Revolution, and still exists in such countries as Turkey, persons called farmers of the revenue buy the privilege of collecting certain taxes and make their profits, frequently very large, out of the greater amount which their vigilance and extortion enable them to collect. The system of indirect taxation is essentially of the same nature.
The tendency of the restrictions and regulations necessary for the collection of indirect taxes is to concentrate business and give large capital an advantage. For instance, with a board, a knife, a kettle of paste and a few dollars' worth of tobacco, a competent cigar maker could set up in business for himself, were it not for the revenue regulations. As it is, in the United States, the stock of tobacco which he must procure is not only increased in value some two or three times by a tax upon it; but before the cigar maker can go to work he must buy a manufacturer's license and find bonds in the sum of five hundred dollars. Before he can sell the cigars he has made, he must furthermore pay a tax on them, and even then if he would sell cigars in less quantities than by the box he must buy a second license. The effect of all this is to give capital a great advantage, and to concentrate in the hands of large manufacturers a business in which, if free, workmen could easily set up for themselves.
But even in the absence of such regulations indirect taxation tends to concentration. Indirect taxes add to the price of goods not only the tax itself but also the profit upon the tax. If on goods costing a dollar a manufacturer or merchant has paid fifty cents in taxation, he will now expect profit on a dollar and fifty cents instead of upon a dollar. As, in the course of trade, these taxed goods pass from hand to hand, the amount which each successive purchaser pays on account of the tax is constantly augmenting. It is not merely inevitable that consumers have to pay considerably more than a dollar for every dollar the government receives, but larger capital is required by dealers. The need of larger capital for dealing in goods that have been enhanced in cost by taxation, the restrictions imposed on trade to secure the collection of the tax, and the better opportunities which those who do business on a large scale have of managing the payment or evading the tax, tend to concentrate business, and, by checking competition, to permit large profits, which must ultimately be paid by consumers. Thus the first payers of indirect taxes are generally not merely indifferent to the tax, but regard it with favor.
The other passage about cigars which I recalled turned out to be not from Henry George, but from his friend Louis F. Post, who went on to be President Wilson's Secretary of Labor:
Though land value has no effect upon the price of good, it is easier to sell goods in some locations than in others. Therefore, though the price and the profit of each sale be the same, or even less, in good locations than in poorer ones, aggregate receipts and aggregate profits are much greater at the good location. And it is out of his aggregate, and not out of each profit, that rent is paid, For example: A cigar store on a thoroughfare supplies a certain quality of cigar for fifteen cents. On a side street the same quality of cigar can be bought no cheaper. Indeed, the cigars there are likely to be poorer, and therefore really dearer. Yet ground rent on the thoroughfare is very high compared with ground rent on the sidestreet. How, then, can the first dealer, he who pays the high ground rent, afford to sell as good or better cigars for fifteen cents than his competitor of the low priced location? Simply because he is able to make so many more sales with a given outlay of labor and capital in a given time that his aggregate profit is greater. This is due to the advantage of his location, and for that advantage he pays a premium in higher ground rent. But that premium is not charged to smokers; the competing dealer of the side street protects them. It represents the greater ease, the lower cost, of doing a given volume of business upon the site for which it is paid; and if the state should take any of it, even the whole of it, in taxation, the loss would be finally borne by the owner of the advantage which attaches to that site — by the landlord. Any attempt to shift it to tenant or buyer would be promptly checked by the competition of neighboring but cheaper land.
Location, location, location! Or, as a friend in the advertising business put it when I told him about George's ideas, Location, Location, Taxation!
Posted on February 03, 2010 at 07:32 PM in absentee ownership, charity and justice, classical economists, common good, commons, connect the dots, cui bono?, ending poverty, equality, FIRE sector, free lunch, Henry George, income concentration, land appreciates buildings depreciate, land speculation, land value taxation, land, labor and capital, landed gentry, landlordism, location, location, location, natural resource revenues, natural resources, one solution for many problems, playing by the rules, poverty, poverty machine, poverty's cause, privilege, sharecropping, tax reform, taxation, teach your children well, user fees, wealth distribution or concentration, wealthandwant | Permalink | Comments (1)
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As I read and listen to and watch the news -- earthquake, ice storms -- and think about the past year -- floods, fires, mudslides, hurricanes, nor'easters, more earthquakes -- it seems to me that nature provides us plenty of opportunities to exercise our compassion and charity, individually and as a nation, and plenty of spending opportunities for maintaining necessary infrastructure.
We don't need to maintain economic structures which create additional human misery. There is enough without them.
We can't control nature. But we CAN correct man-made structures which victimize our fellow human beings.
We don't need poverty in the world. We could manage just fine without it.
It is time to delve into those structures, and get to the root of them.
When we get to the root, we'll recognize it and know what to do about it.
When we've done that, our safety nets will be there for those who have health problems, or accidents, or are victims of nature's whims. We'll be able to devote our energies and funds to things which can't be avoided -- acts of nature -- instead of trying to patch up the victims of our economic system.
Here and abroad.
Go to the root of the problem.
Where do you start? Read Henry George. Start with the speeches linked from the front page of http://www.wealthandwant.com/, and then, if something in his thought resonates, move on to Social Problems (ditto) and then "Progress & Poverty, at http://www.progressandpoverty.org
The good news is that economics need not be a dismal science. When viewed through the lenses of the classical economists, a lot more things look a lot more fixable.
Poverty is a structural problem. Nothing we try to do for or with individuals is going to make the least bit of difference in the structures which are producing poverty. While I applaud the hearts and efforts of those who seek to improve the lives of individuals afflicted with poverty through charity, through education, through aid, even through job creation, none of these things is going to end poverty until we correct the structures which take for some that which others create. You might move one person from being a sower to being a reaper, but you aren't going to reduce the problem of some being permitted to reap what others sow until you attack the structures which permit it!
And isn't it government's job to create and promote structures which protect all of us from exploitation by others?
Posted on February 01, 2010 at 08:08 PM in absentee ownership, America in the world, better cities, charity and justice, classical economists, common good, connect the dots, cost of living, cui bono?, economic justice, economic rent, ending poverty, government's role, Henry George, land, labor and capital, monopoly -- not the game, playing by the rules, poverty machine, privatization, privilege, prosperity, sharecropping, teach your children well, The End of Poverty?, wealth distribution or concentration | Permalink | Comments (0)
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And who pays?
What a subsidy, often from poor people to rich ones.
And it makes one think of the wisdom of Leona Helmsley.
Urban land is our most valuable resource, and those who occupy it ought to be compensating their neighbors. Universities are large, and often growing, landholders, forcing out tax-paying neighbors, and increasing the share of the burden of supporting municipal services paid by the remaining non-exempts.
Solution? Exempt the buildings, but require such entities to pay their full share of the tax burden based on the value of their land. (Exempt everyone else's buildings, too, of course!)
Posted on January 31, 2010 at 07:34 PM in absentee ownership, better cities, cost of living, cui bono?, ending poverty, financing education, financing infrastructure, free lunch, income concentration, landed gentry, little people pay taxes, playing by the rules, privilege, property tax, property tax reform, tax reform, urban land value, wealth distribution or concentration | Permalink | Comments (0)
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The SCF reports several relevant categories, all mutually exclusive, and then an aggregate called "EQUITY." The individual categories which might include stock or mutual funds are STOCKS; the category NMMF -- non-money-market mutual funds -- which represents holdings of mutual funds (which includes bonds as well as equities) outside of retirement assets; and RETQLIQ represents total holdings of such retirement assets as IRAs, 401(k) accounts, and other similar individually controlled retirement funds, which likely includes stocks, bonds and mutual funds. The SCF also reports an aggregate called EQUITY. Here are the ownership rates, and the distribution of holdings for 2007:
Table 1: Ownership Rates (2007)
|Table 2: Share of Holdings (2007)|
So while it might have been true that the young people sitting in Lowell's classes were likely to be beneficiaries of the corporations as shareholders, I think it is safe to say that the larger society was not, unless the distribution of stock holdings has concentrated even more precipitously than I suspect it has between 1964 and today. The widows and orphans were far more likely to be in the bottom half of the wealth distribution, which, as of 2007 shared 1.5% of the EQUITY value.
Today, it is clear that many corporations are not being managed even for the long-term benefit of their shareholders. It is the top tier of employees whose interests are being served.
But perhaps one other piece of data ought to be considered: the distribution of the owners of holdings. This is the sort of figure which corporate advertising refers to when they talk about stock ownership being broad. The "Total" line matches the first distribution; the others add to that total.
Table 3: Distribution of Holders of Assets (2007)
Do you feel better now? The top 1% folks represent less than 2% of those who own EQUITY! What's the big deal? Look how many more of EQUITY owners are from the bottom 50%! Isn't America wonderful? Does Ben Stein's memory of Lowell's classroom statement sound right now?
One more table. This one looks at the relative holdings across the holders in each wealth quantile. It divides the dollar holdings for each group by the percentage in Table 3. Data is comparable both across columns and up and down each column.
Table 4: Average Dollar Holdings per 1% of Households Who Hold
Notice what percentage of us are "below average." Compare each figure to the average in its column.
Let me throw in one other set of figures: The Table 4 data for BUS -- equity in privately held companies. Average: 1,069. Bottom 50%: 24 Next 40%: 137; Next 5%: 443; Next 4%: 1,507; Top 1%: 10,960. (That's what the Astors and Rockefellers of today own. And much of it is land value and the value of other natural resources, value which we permit them to privatize.) We call much of it "small business" and permit the owners to style themselves as self-made successes.
To return to Ben Stein's questions:
This insight, seemingly rarely taught in today's universities, has enabled me to ask -- for example -- why we as a nation would be angry at the oil companies, when we as a nation and as families own the oil companies, when the oil companies employ our fellow Americans at a decent wage, and when the oil companies pay us Americans as savers and retirees oil company dividends. Why would we hate any company without understanding that -- generally speaking, definitely not always -- its managers are simply trying to do the best for the widows and orphans and retirees who own the company? The companies are not a cancer on the society: they are the society.
The nonrenewable natural resources belong to the people, not exclusively to those who extract them from the soil, or their shareholders, even if 100% of us were shareholders in name. Until our system collects the royalties on those natural resources from those who we currently permit to privatize our COMMON asset, Stein is just plain wrong. Fortune Magazine's subscribers may appreciate his assertions, but the rest of us ought to be very very skeptical.
* Postscript, 1/30/2010:
I came across some data about stock ownership which showed where pension funds fit in the picture, at least in the 1990s. See Pension Fund Capitalism, by G. William Domhoff, at http://sociology.ucsc.edu/whorulesamerica/power/pension_fund_capitalism.html, Table 1, which shows that Corporate Pension Funds held 18% of Corporate Stock, and Public Pension Funds held 8% in 1994, compared to Households, which held 48% and Mutual Funds which held 12%. He sources the data to Margaret M. Blair, Ownership and Control, 1995)
Posted on January 22, 2010 at 01:54 PM in Alaska Permanent Fund, common good, connect the dots, cui bono?, ending poverty, estate taxes, FIRE sector, free lunch, incentives, income concentration, land, labor and capital, landed gentry, little people pay taxes, monopoly -- not the game, natural resources, playing by the rules, poverty machine, poverty's cause, privatization, privilege, prosperity, SCF data, Survey of Consumer Finances data, tax reform, taxation, user fees, wealth distribution or concentration, wealthandwant | Permalink | Comments (2)
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Reverend King gave this speech at the Riverside Church in New York on 4 April 1967, a year before his death. I was intrigued to note how frequently he mentions land reform as important.
Perhaps the most stirring paragraph is this one:
A true revolution of values will soon cause us to question the fairness and justice of many of our past and present policies. On the one hand, we are called to play the Good Samaritan on life's roadside, but that will be only an initial act. One day we must come to see that the whole Jericho Road must be transformed so that men and women will not be constantly beaten and robbed as they make their journey on life's highway. True compassion is more than flinging a coin to a beggar. It comes to see that an edifice which produces beggars needs restructuring.
I think of the wealth distribution within America (2007) or throughout the world. I think of some paragraphs from Henry George's book "Protection or Free Trade" (Chapter 25) which speak of "the robber that takes all that is left." I'll share them at the bottom of this post. I think of some writings on the subject of piracy.
Posted on January 18, 2010 at 06:23 PM in absentee ownership, America in the world, boom-bust cycles, charity and justice, common good, commons, connect the dots, ending poverty, FIRE sector, free lunch, government's role, Henry George, income concentration, landed gentry, landlordism, one solution for many problems, playing by the rules, poverty machine, poverty's cause, privilege, sharecropping, The End of Poverty?, wealth distribution or concentration | Permalink | Comments (0)
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One of my google alerts, for the words "wealth distribution," took me to a blog post about the tragedy which has occurred in Haiti, which referred to America being different because it had a large middle class. Since I'd recently posted on this blog some new data about the distribution of wealth, I took a look at that data with the "middle class" in mind.
Here's the data on the distribution of Net Worth, copied from the post below:
|Next 4%:||26.4%||Top 5%:||61.0%|
|Next 5%:||10.8%||Top 10%:||71.8%|
|Next 10%:||13.3%||Top 20%:||85.1%|
|Next 30%:||12.4%||Top 50%:||97.5%|
Do we define as "middle class" the people who hold the middle third of our wealth? That's the 9% of us who hold 37.2% of our wealth. Those below that cutoff must be "lower middle class" or "poor."
Do we define as "middle class" the people between the 50th and 80th percentiles of the wealth distribution? That 30% has a mere 12.4% of our wealth. The 50% below them only have 2.5% of the net worth.
Do we define as "middle class" the people between the 50th and 90th percentiles? They hold 25.7% of the wealth.
If America's strength is its broad middle class, they certainly aren't reaping much of a reward. The Chartbook for the Survey of Consumer Finances, page 42, shows this:
From the following chart in the Chartbook, Mean Value of Net Worth for Families With Holdings, I calculate the following shares of Net Worth:
Share of Holdings, 1989, 1998 and 2007 -- by Income Quantile
||1989||1998||2007||1989 to 2007|
|Bottom Quintile||(20%)||2.65%||3.38%||3.77%||+ 1.12 percentage points|
|Second Quintile||(20%)||7.07%||6.80%||4.84%||- 2.23 percentage points|
|Middle Quintile||(20%)||10.90%||8.94%||7.54%||- 3.36 percentage points|
|Fourth Quintile||(20%)||14.64%||14.59%||13.48%||- 1.16 percentage points|
||11.53%||10.92%|| - 1.04 percentage points
||54.76%||59.45%||+ 6.67 percentage points|
By this standard, who is our middle class?
What does this suggest to you about how we might tax ourselves?
What does this suggest to you about who we might ask to support the aid to Haiti after its tragedy?
What does this suggest to you about the notion that the strength of America is its large healthy middle class?
What does this suggest to you about the notion that our taxes ought to be based on income?
Does it put Leona Helmsley's comment -- "WE don't pay taxes. The little people pay taxes." -- in a different light?
A caution about the data: This post shows two different distributions of net worth: according to net worth in the first part, and according to income in the second part. Don't confuse them -- it is easy to do. But all the data is based ultimately on the Federal Reserve Board's Survey of Consumer Finances, and I've never heard anyone claim that the SCF overstates the concentration of wealth. If you need help differentiating, post a question, and I'll try to help.
Posted on January 18, 2010 at 12:24 PM in absentee ownership, America in the world, charity and justice, connect the dots, cui bono?, economic justice, economic rent, ending poverty, equality, estate taxes, financing education, financing infrastructure, FIRE sector, free lunch, government's role, income concentration, landed gentry, landlordism, little people pay taxes, monopoly -- not the game, paying twice, playing by the rules, poverty machine, privilege, SCF data, Survey of Consumer Finances data, tax reform, taxation, teach your children well, wealth distribution or concentration, wealthandwant | Permalink | Comments (0)
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I stumbled across a bit of data on wealth concentration which I thought worth sharing. Previously I've reported data from the 2007 Survey of Consumer Finances, which was published just about a year ago. The data on Net Worth as reported shows top 1%, next 4%, next 5%, next 40% and bottom 50%:
|Next 4%:||26.6%||Top 5%:||60.4%|
|Next 5%:||11.1%||Top 10%:||71.5%|
|Next 40%:||26.0%||Top 50%:||97.5%|
Ed Wolff, of NYU, is quoted here as reporting this distribution of Net Worth for 2007:
Since the source is a working paper not yet published online, I don't know the underlying data source, but I'm guessing that Wolff might be working with the SCF 2007 data and following up on the statement in Arthur Kennickell's Ponds & Streams, the Federal Reserve Board paper which published the 2007 SCF, that the wealth holdings of the Forbes 400 are omitted from the SCF data, and that Wolff is adding that data both to the top 1% and the aggregate to come up with these data. (If I'm wrong, I'd welcome correction!) If I'm correct, his 50.5% for the "next 19%" indicates that the distribution of Net Worth is roughly as follows:
Those figures include housing wealth.
The same table which reported that Net Worth data also reports Wolff's findings for Financial Wealth, which he defines as Net Worth minus the [gross] value of one's home:
The same article reports some useful measurements of stock ownership -- that is, ownership of shares in publicly held companies, whether directly, through retirement accounts or mutual funds.
What do you conclude from this data?
Do you conclude that the bottom 80% of us are simply shiftless folks who must not be working very hard, or stupid folks who don't work very well, or invest what little we save very well, or do you think there might be something else going on? What is it that the bottom 80% of us lack?
Does it seem to you that if only we shift some more of our wealth
to the top 1%, benefits will somehow begin to trickle down to the rest of us, perhaps in the form of job creation by wealthy benefactors?
Does it seem to you that increasing homeownership is (or was ever) the solution to these problems, or do you think we might need to dig deeper to find the root of the problem?
We have permitted a wealth-concentrating machine to be created, sustained and, within the adulthood of the boomer generation, strengthened.
Few understand this machine, but I submit that the first step to understanding it is to read a 130 year old bestseller.
Progress & Poverty begins with the questions "why, despite awesome technological progress which has the potential to wipe out poverty, do we still have poverty?" and "why is wealth so concentrated?" It examines the standard answers to those questions (you'll recognize them all) and finds them wanting. It then sets out to find a more satisfactory answer, and to examine its implications. It proposes a remedy -- the remedy -- and explores what that remedy means for the individual and a society with America's ideals.
If you've never read Progress & Poverty or your acquaintance with it goes back a decade or two, take a look at it in light of these issues. You can read a modern abridgment at http://progressandpoverty.org/, listen to it at http://hgchicago.org/audio/, or get more information at http://www.wealthandwant.com/George_P&P.html
Posted on January 11, 2010 at 09:53 PM in America in the world, charity and justice, common good, connect the dots, cui bono?, economic justice, economic rent, equality, free lunch, government's role, Henry George, home equity, income concentration, landed gentry, little people pay taxes, monopoly -- not the game, playing by the rules, poverty, poverty machine, poverty's cause, privatization, privilege, savings rate, SCF data, Survey of Consumer Finances data, wealth distribution or concentration, wealthandwant | Permalink | Comments (0)
Technorati Tags: classical economics, commons, Domhoff, economic justice, healthy economy, income concentration, income distribution, neoclassical economics, privatization, privilege, SCF 2007, Survey of Consumer Finances, wealth concentration, wealth distribution, Wolff
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I stumbled across a webpage, created by William Domhoff of UCSC, which contains some fascinating data on income distribution and wealth distribution, or, if you prefer, income concentration and wealth concentration.
I've posted the wealth concentration data separately; here, I'll focus on the concentration of income. Table 6 draws on work of Edward Wolff, of NYU, not yet published.
|Income Distribution, 1982 and 2006
|| +8.5 points
| Next 19%:
Turning to Capital Income -- by which I assume they mean income derived not from wages but from other sources, which includes that which the classical economists called land, and which the neoclassical economists subsume under "capital" as if they were identical:
||+19.7 percentage points
||-4.4 percentage points
||-2.6 percentage points|
||-2.2 percentage points
||-10.5 percentage points
Is this something we're proud of, or think we ought to be exporting to other countries? Is it consistent with our ideals, about life, liberty and the pursuit of happiness being the right of every American, of every person on earth?
We're permitting the privatization of things which rightly belong to the commons -- to all of us. What things? The value of natural resources flows into whose pockets? The annual value of urban land flows into whose pockets? The value of water rights flows into whose pockets? The value of the airwaves flows into whose pockets? (Hint: look at the distribution of capital income!) The value of 8am landing rights at LaGuardia flows into whose pockets? The value of geosynchronous orbits so necessary to certain businesses and systems flows into whose pockets? The bottom 80% of us? The next 19% of us? The top 1%? The owners of so-called "small" businesses?
These are privileges. Structures which divert to individuals and corporations things which all of us create. They reap what we together sow, and then we are led to respect them as "self-made men" and success stories.
They are not eternal. They are not immutable. Each can be reformed, and each can provide a significant revenue source to meet our communities' need for revenue for common purposes. Collecting this revenue this way will not damage our economy as our current tax structure does. It will, however, lighten the portfolios of some who are used to considering themselves blessed by our current way of doing things -- those born on 3rd base who think they hit a home run. And create some opportunities for those who want to works, and for those who want to be compensated for their work with wages which begin to line up better to the cost of living.
There IS enough to go around. Not enough for all of us to live like the top 1%, perhaps, but certainly enough for many more of us to live at the sort of level we call middle class, and even at the, say, 70th percentile -- without despoiling the earth.
Posted on January 11, 2010 at 09:32 PM in America in the world, charity and justice, classical economists, common good, connect the dots, conservatism, cui bono?, economic justice, economic rent, ending poverty, equality, free lunch, income concentration, land includes, land speculation, landed gentry, landlordism, monopoly -- not the game, neoclassical economists, playing by the rules, poverty, poverty machine, privatization, privilege, prosperity, public spending, sales taxes are wrong, SCF data, Survey of Consumer Finances data, tax reform, taxation, technological advances, unburdening the economy, urban land value, user fees, wage taxes, wages, wealth distribution or concentration | Permalink | Comments (0)
Technorati Tags: classical economics, commons, Domhoff, economic justice, healthy economy, income concentration, income distribution, neoclassical economics, privatization, privilege, SCF 2007, Survey of Consumer Finances, wealth concentration, wealth distribution, Wolff
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As I listen to the discussions about the health care legislation, and the effort to write abortion coverage out of the plans, I am reminded of some data I came across recently. It comes from a series of studies called "Overlooked and Undercounted" which are siblings to the Self-Sufficiency Standard studies I've posted about from time to time.
Most people acknowledge that what the Census Bureau says about the Federal Poverty Guideline is true: it is merely a statistical measure, with no particular relevance to the cost of living anywhere in America, much less in the places where most people live. Places with relatively low cost of living have higher official poverty rates, and places with relatively high cost of living often have lower, even negligible, official poverty rates.
The Self-Sufficiency Standard studies work with a highly reproducible and logical methodology to develop a bare-bones, no-frills, just-getting-by cost of living, in a lifestyle in which all of a family's most basic needs -- including the age-appropriate child-care which permits all the adults to be employed full time -- would be met, but with no room for savings, for debt repayment, for anything but a home-cooked meal, for gifts, or entertainment; with no provision for replacing the necessary clunker every few years. The SSS studies provide this analysis for individual states, by county, for various configurations of families. They are called SSS because they represent the cost of living without depending on anyone for free childcare, or meals, or other necessities. They take into account local tax structures, including tax credits, and are based on all meals prepared at home under the USDA low-cost food plan, which requires careful shopping and a fair amount of food preparation time and allows (October, 2009) about $2.06 per person per meal for a family with two school-age children.
In the least expensive counties in America, the SSS is about 170% of the Federal Poverty Guideline. Relatively few people live in those counties; they're rural, with few jobs and few of the amenities that larger communities offer.
Many more of us live in places where the SSS is 200%, or 300% or even 400% of the FPL. And in the places where the SSS is high, there is still a need in the workplace for people to perform the tasks which aren't very well paid: janitor, child-care, retail, etc.
The Overlooked and Undercounted studies quantify the number of households in a particular state whose income falls below the SSS in their particular county for their particular household configuration, and break out various demographics.
But I think the most important figure of all is one they have failed to provide: the percentage of America's children who are growing up in families with insufficient income to meet everyone's most simply defined needs.
I've calculated this figure for all the studies I could find. Doing so required making a single assumption: the average number of children in a family with 4 or more children (3 or more in Connecticut). I assumed 4.5 (3.5 in CT).
Here's what I found. The percentage of children living in families with less income than the FPL and the local SSS for their configuration of family:
as pct of
|Source: Overlooked and Undercounted Studies
The next question is, what percentage of the children below the SSS are in families with more children?
So we are going to take away the possibility of employer-provided health insurance which provides abortion coverage to women who want it?
Do we really mean to promote policies which make it difficult for American couples to control how many children they bring into the world? Birth control isn't 100% reliable, and despite all best efforts, even married couples often can simply not afford another child.
Here are the statistics, straight from the O&O studies: The percentage of families (not of children) with incomes below their local SSS:
|The Percentage of Families with Various Numbers of Children Whose Incomes
Fall Below Their Local Self-Sufficiency Standard Level
||21%||25%||46% (3+ children)||27%||12%|
|7. New Jersey||22%||24%||39%||63%||27%||14%|
|Source: Overlooked and Undercounted studies
These seven states are widely dispersed geographically, and together represent a significant share of US population. I'm guessing their data is fairly representative of the US as a whole.
Children in larger families are significantly more likely to live in situations without sufficient income to meet their most modestly defined needs. Should we promote policies which lead to more children?
Shouldn't we be looking for the underlying cause of insufficient wages? They aren't inevitable.
And those who have explored this blog will probably know that the underlying cause is a structural one, not an individual one. Or has your town figured out how to get along without school bus drivers, janitors, retail or child care workers, to name just a few categories of low-paid workers we rely on. Are they entitled to have children, to have a life, or are you willing to support policies which ensure that their children will be brought up under straightened circumstances? (I'd always thought that was spelled "straitened" -- as in "dire straits," but just discovered I was wrong.)
Posted on December 26, 2009 at 05:20 PM in charity and justice, connect the dots, conservatism, cost of living, cui bono?, economic justice, ending poverty, equality, financing education, government's role, immigration, little people pay taxes, location, location, location, playing by the rules, population, poverty, poverty machine, poverty's cause, Self-Sufficiency Standard Studies, sprawl, wealth distribution or concentration, wealthandwant | Permalink | Comments (0)
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The Congressional Research Service has recently published "Income and Poverty Among Older Americans in 2008" which I found at http://benefitslink.com/articles/guests/RL32697_Oct_2009.pdf.
It contains some sobering statistics, ones which ought to get most of us thinking about whether the way we've structured our economy and our society is serving the common good, or is designed to meet some other objective.
Many studies find that older people have far more in assets than younger people, and to some extent, that makes a lot of sense; they've worked for a long time to accumulate what they've got, and we might accept that as a sign that hard work is rewarded, and that savings are rewarded. If the older people have a huge amount of assets, and our younger people must mortgage themselves to purchase from their elders a place to live, perhaps this is not so good.
Here are some of the highlights of the CRS study:
1. In 2008, Social Security paid benefits to 86% of individuals aged 65 and older and to 89% of households in which the householder or the householder’s spouse was 65 or older.
2. Social Security is the largest single source of income among the aged.
the 37.8 million Americans aged 65 and older who were living in
households in 2008, 20.4 million (54%) received income from assets,
such as interest, dividends, rent, and royalties. Most received
small amounts of income from the assets they owned.
4. Among individuals aged 65 and older who received income from assets in 2008, half received less than $1,054.
5. Of households with a householder or spouse aged 65 or older, 59% received income from assets in 2008. Among these households, median income from assets in 2008 was $1,542.
6. Median income for individuals over 65 varied by age:
That means that half of each age group receives more, half less. And that takes into account income from all sources.
7. Asset income for individuals over 65:
8. At the household level among households whose head is over 65:
9. Median and Mean Social Security income are not all that different from each other, for elderly individuals:
The proposed $250 one-time payment would be about the equivalent of an extra week's worth of Social Security.
10. At the household level, Median and Mean Social Security income are further apart
And clearly, more than half of these households are "below average" -- so when you hear about "the average household" recognize that only a minority are above average. Lake Wobegon in reverse.
Are we structuring ourselves appropriately? I don't think so. I think Henry George pretty much got it right. We have permitted the creation of a machine which concentrates wealth in a small percentage of our population, leaving the rest to scramble and try to cope -- and blame themselves for not being in the top few percent, above the wedge George called attention to.
but Pakistan is just an example. A standing google alert brought an article at http://www.defence.pk/forums/national-political-issues/31924-who-rules-pakistan.html which includes this paragraph:
What is so special about the landed gentry? Here's what Henry George said:
What largely keeps men from realizing the robbery involved in private property in land is that in the most striking cases the robbery is not of individuals, but of the community. For, as I have before explained, it is impossible for rent in the economic sense — that value which attaches to land by reason of social growth and improvement — to go to the user. It can go only to the owner or to the community. Thus those who pay enormous rents for the use of land in such centers as London or New York are not individually injured. Individually they get a return for what they pay, and must feel that they have no better right to the use of such peculiarly advantageous localities without paying for it than have thousands of others. And so, not thinking or not caring for the interests of the community, they make no objection to the system.
Nothing particularly special about Pakistan in this regard. But perhaps it might lead us to think about America's most landed gentry, and the windfall we grant them, at the expense of the commons and the ordinary working person.
Posted on August 18, 2009 at 08:44 PM in absentee ownership, commons, cui bono?, economic rent, ending poverty, FIRE sector, free lunch, government's role, Henry George, income concentration, land appreciates buildings depreciate, land share of real estate value, land speculation, landed gentry, landlordism, little people pay taxes, location, location, location, monopoly -- not the game, natural resource revenues, paying twice, playing by the rules, poverty machine, poverty's cause, privatization, privilege, public spending, sharecropping, socialize, tax reform, taxation, The End of Poverty?, urban land value, user fees, wealth distribution or concentration | Permalink | Comments (1)
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A May, 2009, paper by Michael LaCour-Little, Eric Rosenblatt and Vincent Yao entitled "Follow the Money: A Close Look at Recent Southern California Foreclosures" provides some interesting data about single-family residential real estate in one part of the US.
Briefly, the paper looks at loans in five southern California counties which went into foreclosure in November in 2006, 2007 and 2008. It traces the collateral and loans from purchase to foreclosure, and provides some useful findings. Here's their abstract:
They do for mortgage foreclosures what Elizabeth Warren (et al)'s, study did for understanding the role which uninsured medical expenses play in personal bankruptcy filings. California may be a more extreme case, for reasons which relate to the perverse incentives involved in the 1978 Proposition 13 property tax limitations. But my interest is not the same as what the authors were driving after.
I took their data and created a small spreadsheet to look at the data from a different point of view.
Their sample is composed of 4,258 properties which went into foreclosure in Novembers of 2006, 2007 and 2008. On average, the properties in each of the three cohorts had been purchased in 2002, and for an average price of $356,200. By November 2006, the properties which went into foreclosure that month had an average value of $519,000 (as calculated by a commercial proprietary Automatic Valuation Model). I made the assumption that the properties which were foreclosed on in November 2007 and November 2008 had the same AVM valuations in November 2006.
My calculations proceed as follows: I compare the average 2002 purchase price of $356,200 (a weighted average of the three cohorts) with the 2006 AVM valuation of $519,000, which provides a 4-year appreciation of $162,800 per property. Assuming that each homeowner's annual property taxes started at 1.25% of their 2002 purchase price, and rose by the Prop 13 maximum of 2% per year, they each paid, on average, $19,578 in property taxes over 4 years.
Houses don't appreciate. They depreciate at about 1.5% per year. They're never worth more than what it would take to reproduce them. Taking 65% as an estimate of the share of the value of single family homes in southern California which can be attributed to land (1998 was 64.9% and 2004 was 78.7% in Los Angeles, according to Davis & Palumbo, May, 2006), 65% of the 2002 purchase price of $356,200 is $231,535. Let's assume that the house doesn't depreciate at all, to account for owner-made improvements. Land value, then, rose from $231,535 on average in 2002 to $394,300 by 2006.
So what produced that rise in land prices?
But let's think, too, of why people were willing to pay more to live in these five counties. It was due to the schools, to jobs, to the roads, the sewers, the water system, the police and other emergency services, buses and trains, airports, the courts, jails and prisons, the universities, the hospitals and libraries, and public health and a myriad of other publicly provided goods. The homeowners as homeowners paid only about $20,000 in taxes, and received, if the AVM is correct and they sold in 2006, $162,800 in appreciation on their land.
The study shows that those who were in the 2006 foreclosure cohort had total average housing-related debt by November, 2006, of $469,000, up from the original loans of about $334,400. So they'd taken out an average of $134,600 by borrowing against their home equity.
Did the services which contributed to raising that land value by over $160,000 over 4 years really only cost $20,000 per property? No. Sales taxes, and wage taxes and other taxes also financed those services. And they were paid not just by landholders -- the roughly half of southern California residents who own their own homes -- but also by the other half, who rent their homes from others.
So homeowners reaped a huge windfall, and those who were not homeowners ended up financing it. And as we attempted to increase the homeownership rate by a few percent by relaxed lending standards, they got to pay another time.
Most people think there is no viable alternative. They're so used to the current structure -- and in California, Proposition 13 is sometimes referred to as the "Third Rail" of California politics" (touch it, and you die!) that few stop to consider that our taxes are at the root of our most serious problems.
So what's the alternative? Sanity would be for all those public goods whose effect is to support and increase property values to be financed by a tax on land value. Justice -- ditto. Efficiency -- ditto.
California is floundering because it can't fund its spending. And yet these 4,258 households stood to collect from buyers, if they sold in 2006 after buying in 2002, an aggregate windfall of $693 million: I've aggregated the data for these November foreclosures and here's the story.
|Aggregate purchase price, approx 2002:||$1,516,735,000|
|Aggregate down payment:||$263,551,350|
|Aggregate value in 2006:||$2,209,902,000|
|Aggregate appreciation 2002 to 2006:
|Aggregate 4-year appreciation as percent of down payment
|Aggregate real estate taxes paid
(@1.25% of purchase price, rising by 2% annually)
|Aggregate appreciation as percent of property taxes paid
Folks who think they and people like them stand to reap a gain of $700 million on an investment of $264 million in 4 years, while paying just $78 million in property taxes may not consider it to be in their best interests to shift taxes off wages, off buildings, off sales.
Had Proposition 13 not been in place, and property owners paid just 1.25% of their properties' market value each year, aggregate property tax would have been $97,500,000, or about 25% more (assuming straight-line increase from 2002 purchase to 2006 average value of $519,000). Still a tiny fraction of the appreciation.
The study's sample was only the November foreclosures. To approximate the figures for all the foreclosed properties in the five counties in those 3 years, one might multiply by 12. And recall that foreclosures are still a tiny fraction of all single-family residential properties in these five counties, and that these are relatively newly purchased properties. Think of how much could be collected in the form of a tax on land value if everyone, no matter what year they bought their property, paid at the same millage rate on their true market value, instead of some paying on values based in the 1970s.
We-the-people created that appreciation. Should homeowners and other landholders get to keep it as if they created it? Does the answer to that question hinge on whether the homeownership rate is 30%, or 50%, or 65%, or 75% in that particular place, or in our country as a whole? Or is the homeownership statistic irrelevant to the justice or logic of this privatization? (Remember that residential real estate is frequently NOT the biggest piece of this: the urban real estate owned by corporations, REITs, foreign investors including airlines and sovereign funds, pension funds, philanthropies, 150-year trusts, private equity funds and other private entities, appreciates far faster. (Remember Leona Helmsley's description: we don't pay taxes; the little people pay taxes.)
On the other hand, when one takes into account the fact that the run-up in prices this situation has led to a situation in which all these people have been foreclosed on, a large and rising proportion of mortgages are "under water" and observers are saying that the "bust" portion of this boom-bust cycle is going to leave something like 50% of mortgage holders "under water" by 2011, perhaps one might reach the conclusion that even if one is not convinced of the justice of revising our system, one might choose it strictly on the basis of avoiding boom-bust cycles being wise.
Posted on August 18, 2009 at 08:16 PM in absentee ownership, better cities, boom-bust cycles, commons, connect the dots, cost of living, cui bono?, economic rent, financing education, financing infrastructure, FIRE sector, government's role, home equity, housing affordability, land appreciates buildings depreciate, land share of real estate value, land speculation, land value taxation, landed gentry, landlordism, little people pay taxes, location, location, location, one solution for many problems, paying twice, playing by the rules, poverty machine, privatization, privilege, property tax, property tax reform, Proposition 13, tax reform, taxation | Permalink | Comments (1)
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"Cardinal Newman says that a conservative is a man who is at the top of the tree, and knows it, and means never to come down."
Quoted in "The Public" October 31, 1903, a few days before election day.
To that might I add that some of today's conservatives aren't at the top of the tree, but have high hopes that they will get there, and want the privilege of being held up should they somehow managed to get there.
I seem to recall reading that 19% of us consider ourselves to be in the top 1%. And if that is so, how many more think that they will actually make it into the top 1%??
Lottery ticket sales and gambling revenues suggest that many of us think our best chance lies in that department, rather than in labor, saving and investment.
It was called the “Homeland Investment Act,” and was sold to Congress as a way to spur investment in America, building plants, increasing research and development and creating jobs. It gave international companies a large one-time tax break on overseas profits, but only if the money was used for specified investments in the United States.
The law specifically said the money could not be used to raise dividends or to repurchase shares.
And who owns our stock? The 2007 Survey of Consumer Finances shows us how concentrated stock ownership is:
What about Mutual Funds? (This might include holdings of bonds as well as equities.)
Posted on June 05, 2009 at 02:28 PM in connect the dots, cui bono?, economic justice, ending poverty, FIRE sector, government's role, income concentration, land, labor and capital, monopoly -- not the game, opportunity, playing by the rules, poverty machine, privilege, Survey of Consumer Finances data, unburdening the economy, wealth distribution or concentration, wealthandwant | Permalink | Comments (0)
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"Thou shalt not steal." That means, of course, that we ourselves must not steal. But does it not also mean that we must not suffer anybody else to steal if we can help it? "Thou shalt not steal." Does it not also mean, "Thou shalt not suffer thyself or anybody else to be stolen from?"
If it does, then we, all of us, rich and poor alike, are responsible for this social crime that produces poverty. Not merely the men who monopolize land — they are not to blame above any one else, but we who permit them to monopolize land are also parties to the theft. The Christianity that ignores this social responsibility has really forgotten the teachings of Christ. Where He in the gospels speaks of the judgment, the question which is put to men is never, "Did you praise me?" "Did you pray to me?" "Did you believe this or did you believe that?" It is only this: "What did you do to relieve distress ; to abolish poverty ?" To those who are condemned, the judge is represented as saying: "I was ahungered and ye gave me not meat, I was athirst and ye gave me not drink, I was sick and in prison and ye visited me not." Then they say, "Lord, Lord, when did we fail to do these things to you?" The answer is, "Inasmuch as ye failed to do it to the least of these, so also did you fail to do it unto me; depart into the place prepared for the devil and his angels." On the other hand, what is said to the blessed is, "I was ahungered and ye gave me meat, I was thirsty and ye gave me drink,'I was naked and ye clothed me, I was sick and in prison and ye visited me." And when they say, "Lord, Lord, when did we do these things to thee ?" the answer is, "Inasmuch as ye have done it unto the least of these ye have done it unto me."
Here is the essential spirit of Christianity. The essence of its teaching is not, "Provide for your own body and save your own soul!" but, "Do what you can to make this a better world for all!" It was a protest against the doctrine of "each for himself and devil take the hindermost I" It was the proclamation of a common fatherhood of God and a common brotherhood of men. This was why the rich and the powerful, the high priests and the rulers, persecuted Christianity with fire and sword. It was not what in