LVTFan's Blog

Winston Churchill and Mark Twain

Winston Churchill and Mark Twain share a birthdate.  Mark Twain was born November 30, 1835 (and died 4/21/1910); Winston Churchill was born November 30, 1874 (and died 1/24/1965).

Why am I bringing this up? Twain and Churchill were among the bright and committed people who saw the wisdom of the ideas of Henry George.

Mark Twain wrote two pieces: Slavery and Archimedes.  In 1909, Winston Churchill, married the year before to Clementine, and 9 years after his election to the House of Commons, gave a series of speeches which were collected and digested into a book called The People's Rights as part of a campaign.  I commend all three documents to your attention, and suggest that they are still pithy comments on what we see around us.

And they weren't the only wise ones to see the wisdom of HG's ideas.  See also Quotable Notables.

hear, read, mark, learn, and inwardly digest

This phrase comes from an Anglican prayer book, but it came to my mind when I was writing to a foundation which claims to be in favor of a just society.  Examining their website, I could see no sign of any familiarity with Henry George's ideas, and this phrase, whose origins I could not bring to mind, popped into my head. 

Hear ..., read, mark, learn, and inwardly digest ...  The reference is to scripture, but I think it might apply nearly as well to Henry George's ideas, if you regard any of these as important:

• ending poverty
• improving wages
• sharing nature's bounty more evenly among us
• protecting the environment from despoilment
• reducing, even reversing, sprawl
• making housing affordable
• making cities more vibrant
• creating jobs
• making effective public transportation systems realistic 

(I'd be happy to see any one of those ... and thrilled to see all of them.  Dayenu!)

 Well, Henry George has been called "The Prophet of San Francisco" -- that's where he wrote Progress & Poverty -- and many people consider him to have answers to problems that most people think are completely intractable.

Hear, read, mark, learn and inwardly digest ... and then get to work creating a more just society, for yourself, your neighbors, and all our children and future generations.

Taxes and Tolls Sought in Plan to Save M.T.A. - NYTimes.com

Taxes and Tolls Sought in Plan to Save M.T.A. - NYTimes.com.

The tax on payrolls, expected to be less than one half of 1 percent, would apply to businesses in the 12-county area served by the authority. It would be paid by businesses, not employees. The tax would be designed to raise $1 billion a year or more.

It would be coupled with the new bridge tolls, which would generate about $600 million a year, after the cost of maintaining the bridges and collecting the tolls is accounted for. Drivers would pay a higher rate on the East River bridges than on the Harlem River bridges under the plan.

There would be no toll plazas: Most tolls would be collected through a system of E-ZPass readers. Drivers without E-ZPass would be identified and could be billed using digital cameras that snap a picture of each vehicle’s license plate.

Control of those bridges, which are owned by the city, would be transferred to the authority under the plan, although it was not clear how that would be achieved.

The third main element of the proposal is a more modest increase for next year in fares and existing tolls on the bridges and tunnels already controlled by the authority.

That increase would allow Mr. Ravitch and his supporters to argue that the cost of running the system was being shared by all those who benefit from it.

So we've got a proposal that the way to pay for the shortfalls in providing the public transportation on which the NYC economy is vitally dependent is from taxing employers, imposing tolls on previously free bridges into Manhattan, and raising existing bridge tolls (which fall on those who don't use public transportation [except perhaps bus commuters?]

Most interesting is the final sentence quoted above:

That increase would allow Mr. Ravitch and his supporters to argue that the cost of running the system was being shared by all those who benefit from it.

Ah, but he has omitted from his analysis something vitally important: paying in proportion to the benefit received. One of the biggest -- huge!! -- beneficiaries would pay next to nothing!  To whom am I referring? The landlords of New York. 

Trickle-Up Economics

http://www.youtube.com/watch?v=6ZkfmY1PMng

That's the link to a film which explains rather neatly, in about 7 minutes, how one very significant aspect of trickle-up economics works.

The film is called Ricardo's Law ~ The Great Tax Clawback Scam  and I commend it to your attention.

Dying of Consumption - NYT

Dying of Consumption - NYTimes.com.

The chairman of Morgan Stanley Asia has an op-ed piece in the NYT which calls for measures which will increase savings by the American people, and promote less consumption:

The United States needs a very different set of policies to cope with its post-bubble economy. It would be a serious mistake to enact tax cuts aimed at increasing already excessive consumption. Americans need to save. They don’t need another flat-screen TV made in China.

The Obama administration needs to encourage the sort of saving that will put consumers on sounder financial footing and free up resources that could be directed at long overdue investments in transportation infrastructure, alternative energy, education, worker training and the like. This strategy would not only create jobs but would also cut America’s dependence on foreign saving and imports. That would help reduce the current account deficit and the heavy foreign borrowing such an imbalance entails.

It is difficult, though, to ask people whose income is being eaten up by fixed costs to save.  (See Warren & Tyagi's The Two Income Trap.)  Many of these fixed costs relate to housing, and, for young families, childcare -- and, I might add, this is a vicious circle: many need the childcare because of the high housing costs

Couple this with the fact that taxes weigh heavily on lower-income and middle-income people, and one might be led to seek a better way. 

As we do things now, if one buys a home, one makes a down payment of some size, and finances the rest.  For most of us in urban areas, with the possible exception of those who are buying newly built homes, over half of what we are paying is not for the house (or condo) itself, but for the location, the site.  The seller didn't create the land value, even if he and his ancestors have owned that property for generations.  The community created that land value.  But as we currently do things, the hapless buyer must pay the seller for it.  And then, to add insult to injury, he must pay property taxes on the house itself and on the land value, and taxes on many of his purchases (in Chicago, the sales tax is now over 10%, surpassed only by a few counties in Alabama), and taxes on his wages.

Tom Friedman, NYT 11/26/08 - All Fall Down

Tom Friedman, NYT 11/26/08 - All Fall Down

I spent Sunday afternoon brooding over a great piece of Times reporting by Eric Dash and Julie Creswell about Citigroup. Maybe brooding isn’t the right word. The front-page article, entitled “Citigroup Pays for a Rush to Risk,” actually left me totally disgusted.

Why? Because in searing detail it exposed — using Citigroup as Exhibit A — how some of our country’s best-paid bankers were overrated dopes who had no idea what they were selling, or greedy cynics who did know and turned a blind eye. But it wasn’t only the bankers. This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics. So many people were in on it:

• People who had no business buying a home, with nothing down and nothing to pay for two years;
• people who had no business pushing such mortgages, but made fortunes doing so;
• people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so;
• people who had no business rating those loans as AAA, but made fortunes doing so; and
• people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so.

Citigroup was involved in, and made money from, almost every link in that chain. And the bank’s executives, including, sad to see, the former Treasury Secretary Robert Rubin, were clueless about the reckless financial instruments they were creating, or were so ensnared by the cronyism between the bank’s risk managers and risk takers (and so bought off by their bonuses) that they had no interest in stopping it.

These are the people whom taxpayers bailed out on Monday to the tune of what could be more than $300 billion.

While I don't disagree with anything Friedman has said here, he -- and most others --- have omitted a major group of beneficiaries who made individual fortunes, enabled not just by these lending practices but also by our tax practices.

The beneficiaries to whom I refer are those who reaped a much higher price on the homes and land they sold during this period of relaxed lending rules. 

• They are the people who were enabled, by the relaxed lending practices, to move up from a starter home to a larger, newer, or -- more likely -- better located home. 
• They are the heirs of seniors whose estates sold homes for far more than they would have been worth had there not been lax rules elsewhere in the system. 
• They are the people who borrowed against home equity to finance their children's tuition bills, or to customize their homes, or to travel.
• They are the large builders of housing who were able to sell even distantly located subdivisions at high profits because buyers could put nothing down and borrow large sums relative to their incomes, particularly when commuting costs were taken into account.

Our tax system leaves the windfall in the pockets of those beneficiaries, and even treats them as if they were brilliant tacticians, deserving of their windfalls, which often represent more than one's annual gross earnings from work!

And I doubt that Mr. Friedman would call attention to the fact that houses and other buildings do not appreciate.  They're never worth more than what it would cost to build them today, and they depreciate at 1.5% per year.

What rises in value is land, and it rises in value for reasons which have nothing at all to do with the current holder of the land.  His neighbor and his tenant contribute no more and no less than he does.

Who benefited?  Landholders, large and small -- and most especially large -- and the mortgage lenders.  The FIRE -- finance, insurance and real estate -- crowd made out like bandits, and those most hurt were those who tried to jump on the bandwagon.

The answer, though, is not to increase homeownership so that more of us get to participate on the fringe, but to share all land value among all of us, just as if we held it to be self-evident that we all -- as well as the next child born -- are created equal.  The most valuable land is usually commercial land in our major cities, and its ownership is quite concentrated.  We treat its holders as if their property rights actually rightly included the economic value of the land, and many great fortunes have been made on the assumption that we will never, as a society, recognize the wrongness and widespread effects of this system, or realize how simple it would be to make the necessary correction.      

Should we tax action, or tax inaction?

Joshua Vincent, of the Henry George Foundation in Philadelphia, is a keen observer of the scene, particularly of Philadelphia's scene.  This week he had an article in The Bulletin in that city, and he comes up with what I think is an interesting observation:

... on the revenue side we still depend too much on the taxation of action.

He continues,

The fact is Philadelphia relies on tax revenue from two things - labor and capital - that can be hidden, can vanish or can flee. Both are being whipsawed by forces beyond Philadelphia's control. There are few places to hide, especially from high tax rates on those two things.

Change Needed to End Boom-Bust Cycles

John Fisher wrote an excellent Letter to the Editor, published in the Chatham Daily News, which I think worth sharing:

Sir:
Re: Boom and Bust Cycles.

No matter how many billion-dollar crutches (bailouts, stimulus) are thrown at the current economic downturn, up-and-down cycles will continue until the "experts" get back to Economics 101.

Adam Smith, David Ricardo, Henry George and other classical economists correctly defined land (free gift of nature), labour and capital as the three factors of production. Land or nature, not being created by labour, is not capital. Unlike privately created wealth, nature only gets value from the presence and activity of the community as a whole.

The economy is often compared to a house or a ship, but usually without reference to the lot or water upon which they absolutely depend. All the good things the experts now suggest to improve the house or ship will ultimately determine the value of the underlying natural base, depending of course on human pollution, over and restricted use, etc.

Giving nature a value like we do now for land and then capturing it for the social good would reduce urban sprawl and waste of resources, while rewarding quality and quantity in the production process.

Many classical economists, including Henry George, would shift taxes from private wealth (the house) to public wealth (the land). In other words, pay for what you take from nature and not what you make privately. With little cost to government, this simple tax shift would remove unearned income from resource speculation and enable tax reductions on wages and business.

Until economic justice and reason prevail with a major tax shift from production (jobs, houses, trade) to resource values (raw land, water, oil) the world will continue to suffer from monopolies of nature and economic turmoil.

If you'd like to know more about these subjects, from a Georgist point of view, you might explore these pages:

boom-bust cycles  | Adam Smith |  David Ricardo  |  Henry George | classical economists  | land  | labor |  capital | factors of production | well-provisioned ship  |  all benefits go to the landholder | growing rich in one's sleep  | technological progress | population growth  |  he who produces | pollution  |  pay for what you take |  unearned increment | land speculation  | privatization  | commons  |  enclosure  | sprawl

John packed a lot into a single letter, and I'm glad the editor had the sense to print it.  Now, if only more of us understood what John does.

Leo Tolstoy -- The Last Station -- and Henry George

I'm listening to Diane Rehm interviewing Christopher Plummer on the occasion of the publication of his memoirs.  He mentions that he plays Leo Tolstoy in a film which, according to IMDB, is in post production, due for release in 2009.  (I missed part of the interview, so don't know all details.)  The film title is "The Last Station" and it is based on a novel published in 1990, and in paperback in 2007.

The novel was reviewed this way by Publishers Weekly:

Alternating narrators from Count Leo Tolstoy's household tell of his attempts to balance his philosophy of poverty and his privileged lifestyle by living humbly in his final days. "In the end, it is not the people around him who speak most eloquently for Tolstoy, but the sincerity of his own words--and those of Parini in his kaleidoscopically rich and skillful novel," said PW.

There is also a review in the NYT of 7/17/90, which ends with

As for his portrait of Tolstoy, Mr. Parini plays down the raging conflicts (religious, sexual and philosophical) that animated the latter part of his life, and instead makes him the still center of this book. While the other characters are scheming, arguing and maneuvering, while the press and sychophantic supporters vie noisily for his attention, Tolstoy himself sits alone in his study, quietly contemplating the great questions of faith and justice. We are shown letters he wrote to Gandhi and George Bernard Shaw in which he discusses God and love and evil; and we are given an excerpt from ''What Then Must We Do?'' in which he sets forth his own guilty observations about poverty in Moscow.

In the end, Tolstoy decides to leave the chaos at home, setting off, at the age of 82, to find a purer, more spiritual life. ''My position in this house has become intolerable,'' he writes his wife. ''Along with everything else, I can no longer abide these luxurious conditions. What I am now doing is what old people have commonly done - leave their worldly life behind to spend their last days in peace and solitude.''

Needless to say, he fails to find that peace. Taken ill at a local railroad station, he dies in the stationmaster's house, while family members, followers, reporters and photographers hover about, waiting to record his last words, his final moments.

Why am I bringing this up?  Leo Tolstoy was a great admirer of the ideas of Henry George. He died in 1910, about 13 years after HG.  The following year, Bolton Hall, an American Georgist, published a book called "What Tolstoy Taught," with the approval of Tolstoy, which described things as Tolstoy saw them.  Henry George's most famous book was Progress and Poverty.

For more information, you might see these pages:
http://www.cooperativeindividualism.org/lebrun_victor_on_tolstoy_and_george.html
http://www.wealthandwant.com/auth/Tolstoy.htm which includes this:

Off Topic: AIG mailing

My better half has only made one political contribution, and when he made it, to the re-election campaign of the then-newish governor, a few years ago, someone misspelled our surname in a way we'd not seen before.  So any mailing that comes from rental of that mailing list is immediately identifiable.   Mostly we get solicitations for a political party whose current platform and recent candidates neither of us are enthusiastic about.

Today's mail brought a very glossy die-cut mailing from an entity which has previously not reached out to us: AIG's Private Client Group.  The recto shows a sleek silver two-seater, perhaps a Maserati, with the caption "What Does Your Insurance Company Do For You?"   The verso's headline says

"We're There When You Can't Be"  "A policyholder was en route to the airport for vacation when debris fell from a truck and shattered his windshield.  The vehicle could not be driven and, with a flight to catch, our policyholder could not afford to wait around.  We assured him that everything would be taken care of.  And it was! Later that same day, our claim specialist called our policyholder to update him on the progress we had made.  By the time our policyholder returned from vacation, his fully repaired vehicle was waiting in his driveway."    "What Does Your Insurance Company Do For You?"

Custom Insurance Solutions: Homeowners, Excess Liability, Private Collections, Automobile, Flood, Yacht, And More

You mean to tell me they didn't pick him up at the airport?

Interesting how the party makes money, selling its mailing lists. 

I assume this product line is self supporting for AIG.

On a well-provisioned ship, how is it that 6% of us consume ~25% of the resources?

As we, perhaps, become somewhat more appealing to the other 94% of the globe's residents as a result of the choice the voters made on Tuesday, we still need to consider the question of the rightness and the sustainability of a country which has 6% of the world's people consuming about 25% of the world's resources.

There is the theory of American exceptionalism. A Google search provides the Wikipedia definition of American exceptionalism; The second thing Google brings up is a recent book review from The American magazine:

Understanding American Exceptionalism

By Karlyn Bowman Monday, April 28, 2008

An ambitious new book explains how and why the U.S. is so different from other countries around the world.

“America is indeed exceptional by any plausible definition of the term and actually has grown increasingly exceptional [over] time.” This is the conclusion of the editors of a new volume, Understanding America: The Anatomy of an Exceptional Nation (PublicAffairs, $35). At an American Enterprise Institute conference on April 22, Peter H. Schuck and James Q. Wilson introduced the collection of essays, which is designed to probe Alexis de Tocqueville’s observation that America is “exceptional,” or qualitatively different from other countries. The book, which examines 19 different areas, marshals the best and most current social science evidence to examine America’s unique institutions, culture, and public policies.

During his introductory remarks, AEI president Christopher DeMuth said that no effort to understand the meaning of American exceptionalism had been “more ambitious and far-reaching” than this book. Not only does it describe the ways — both good and bad — in which Americans differ from people in other nations, DeMuth said, it also considers whether American exceptionalism is likely to continue, and how it matters to the world. DeMuth noted that Americans are more individualistic, self-reliant, anti-state, and pro-immigration than people in many other countries. They work harder, are more philanthropic, and participate more in civic activities. On the negative side, America also has a higher murder rate than some other countries. 

Wilson noted that one of the best ways to understand American exceptionalism is to look at polls. Three-quarters of Americans say they are proud to be Americans; only one-third of the people in France, Italy, Germany, and Japan give that response about their own countries. Two-thirds of Americans believe that success in life depends on one’s own efforts; only one-third of Europeans say that. Half of Americans, compared to one-third of Europeans, say belief in God is essential to living a moral life. 

Three-quarters of Americans say they are proud to be Americans; only one-third of the people in France, Italy, Germany, and Japan say that about their own countries.

Negative views of America in polls today have been shaped by the Iraq war and by the response to President Bush, Wilson noted, but criticism of America has a long history, particularly among elites. He quoted Sigmund Freud as saying, “America is a great mistake.” “Anti-Americanism was an elite view,” Wilson continued, “but it has spread deeper to publics here and abroad.” 

Schuck said that Understanding America casts a new light on American exceptionalism by examining it at a micro level. He identified seven overarching themes that connect the essays. 

(1). American culture is different. Its patriotism, individualism, religiosity, and spirit of enterprise make it different. The United States, Schuck said, “is more different from other democracies than they are from one another.” 

(2). American constitutionalism is unique in its emphasis on individual rights, decentralization, and suspicion of government authority. 

(3). Our uniquely competitive, flexible, and decentralized economy has produced a high standard of living for a long time, even though it now generates greater inequality. 

(4). America has been diverse throughout its history. Schuck cited research by historian Jill Lepore, who found that the percentage of non-native English speakers in the United States was actually greater in 1790 than it was in 1990. The thirst for immigration, he said, has transcended economic booms and busts. 

(5). The strengths of civil society here make America qualitatively different. No other country, he said, allocates as much responsibility for social policy to the nonprofit sector. 

(6). The characterizations of the United States as a welfare-state laggard compared to Europe miss an element of American distinctiveness: its reliance on private entities to provide certain benefits. 

(7). We are exceptional demographically with our relatively high fertility rate. 

... The editors of Understanding America, Schuck and Wilson, believe that the “stakes in understanding America could hardly be higher. For better or worse, America is the 800-pound gorilla in every room in the world.” 

Karlyn Bowman is a senior fellow at the American Enterprise Institute and a contributing editor to THE AMERICAN.

Americans are consuming roughly 25% of the world's natural resources, despite representing only 6% of the world's people.  As others  see themselves as our equals -- equally entitled to the world's resources, including the carrying capacity of the environment to handle the pollution we spew out, how are we going to reconcile the notion that all men are created equal with their very reasonable expectation that they are equally entitled -- and further, that future generations are entitled to inherit a world that works and a planet with resources available to meet their needs, too -- not to mention, within the US, the younger generation's very reasonable right to not be paying for our generation's wars and mistakes?

And then remember that within the US, the top 1% of wage-earners are getting 12% of wages; the top 10% are getting nearly 36% of wages.  When we look at all income excluding capital gains, the top 1% of income recipients are receiving nearly 20% of income and the top 10% are receiving 47% of income.  When we look at income including capital gains -- the most inclusive measure -- the top 1% are receiving nearly 23% and the top 10% nearly 50% of income.   [Source: Piketty & Saez, 2006 data]

And when we look at the accumulated net worth of Americans, in 2004 the top 1% of wealthholders had over 33% of the net worth; the top 10% of wealthholders held nearly 70% of America's household wealth. [Source: FRB Survey of Consumer Finances, 2004.]

How much of that wealth is created out of thin air, without the use of natural resources?   We've learned a bit about assets created from thin air, and we may have reason to worry greatly in coming months about the moods and portfolios of those who invested heavily in hedge funds.  But I'm willing to bet that were we to get a new snapshot of the same statistics for, say, October 31, 2008, the wealth concentration would be little a bit higher than 2004's.  (The 2007 data will likely be available in January, if previous publication patterns hold.) 

Natural resources and resources which are rightly common property -- the economic value of land, of broadcast spectrum, of water rights, of landing rights, of many other like things, which the neoclassical economists would recognize as "land," as opposed to "capital"  -- have been privatized -- quite legally -- to produce the wealth and income concentration which America lives with.  They've played by the rules -- but the rules aren't just or right.  It is time to revise the rules and the structures. 

By doing so, we can do something about our excessive use of the world's scarce resources; reduce urban sprawl; shorten commutes; increase urban density; encourage job creation, raise wages, reduce wealth concentration, improve the economy's efficiency, remove much of the deadweight loss, motivate the private sector to provide, at a profit, affordable housing for all.   And reduce our overuse of the world's natural resources significantly, making us an example to the rest of the world of what to do and how to do it, rather than the opposite.

Too much to ask of one reform?  Too much to ask for?  NO!

 

Mason Gaffney: "The Great Crash of 2008" -- and how we can dig out and head off the next one

This is one of several things I've been meaning to post here for weeks.  It was written in July, and has been making the rounds in Georgist circles -- and beyond -- ever since.  Shorter versions of it have been published in some newspapers, but I think it worth sharing here in its entirety.  You can find more of Mase's writings on his website, at http://www.masongaffney.org/, on the Schalkenbach foundation website, and at Wealth and Want.   

Relatedly, take a look at the November issue of Harper's Magazine, in particular the article by Michael Hudson, entitled "Tax the Land."

If you have contacts within the incoming administration, I hope you'll share this piece with them.  It provides a means to get ourselves out of our current economic crisis, and, equally important, prevent it from happening again.

Here beginneth:

THE GREAT CRASH OF 2008
Mason Gaffney

This crash is The Big One; it has signs of becoming a Category 5. How do we know? We’ve “been there and done that” so many times before, roughly every 18 years over the last 800 or more. Major wars and, rarely, plagues have broken the rhythm, along with the little ice age, reformation and counter-reformation, political revolutions and reactions, the rise of nation-states, the enclosure movement, the age of exploration, massive European imports of stolen American gold, the scientific and industrial revolutions, the Crusades, Mongol and Turkish invasions, and other upheavals. Yet, the endogenous cycle keeps returning, as soon as we find peace, and economic life returns to its even tenors. What President Warren Harding famously called “normalcy” soon evolved into another boom and a shocking bust, as so often before. Calm and routine prosperity has never been man’s lot for long: it somehow leads to its own downfall, cycle after cycle.

Homer Hoyt published his classic 100 Years of Land Values in Chicago, 1833-1933, in December, 1933. He covered in fine detail the 5 major cycles that crested and crashed in 1837, 1857, 1873, 1893, and 1926-29. At the end he generalized “The Chicago Real Estate Cycle”, a  regular rhythm of boom and bust with the same features in the same sequence. The boom sets us up for the bust. He could have omitted the limiting word “Chicago”, its cycles were synchronized with national waves recorded by other scholars like Arthur H. Cole, Philip Cornick, Lewis Maverick, Frederick Lewis Allen, Harry Scherman, Carter Goodrich, Ernest Fisher, Homer Vanderblue, Herbert Simpson, and others — surprisingly few others, in fact. Alexander Field has recently reviewed much of this literature, but held back from seeing cycles in the present or future.

It is uncanny how the latest boom tracks the events that Hoyt recorded and generalized. There was “an increase in rents, building ..., and subdivision ..., each of which was carried in turn to speculative excess, and each of which interacted upon the others and upon land values to generate and maintain the boom psychology”. The cycle, Hoyt continued, is “the composite effect ... of a series of forces that ... communicate impulses to each other in a time sequence, ... in a definite order” (p. 369).

How do we reduce the demand for energy?

As I listen to and read about attempts to reduce pollution, reduce reliance on foreign oil, reduce energy usage, I find myself frustrated by the lack of radicalism in the answers people propose.  Their answers aren't wrong, but they don't go to the source of the problem, and so merely nibble around the edges.  Nibbling is fine and admirable, and definitely has its place.  And nibbling will make a bigger difference if they are nibbling at a circumference of 2X instead of X, though a larger percentage difference if we can get to a circumference of X.  

The current Vice President asserted a few years ago that the American way of life was non-negotiable. 

Well, if that means that what is is good -- the ultimate conservatism -- keep things just as they are because we live in the best of all possible worlds -- or -- it works just fine for my and my kind thank you very much -- a case one might reasonably make if one were in the top 1% of the wealth and income spectra, which, as I frequently mention here, receive a very disproportionate share of the productivity in this country:

1. The top 1% of income recipients -- and I'm using income excluding capital gains for the moment -- have received 36% of the aggregate income gains from 2000 to 2006.
2. The next 4% of income recipients have received 17% of the income gains between 2000 and 2006.
3. The next 5% of income recipients have received 14% of the income gains between 2000 and 2006
4. The bottom 90% of income recipients have received 33.1% of the income gains between 2000 and 2006.     

For comparison: in 2000, the top 1% had 16.5% of the income excluding capital gains; the next 9% had 26.6%, and the bottom 90% had 57.8% of the income; by 2006, the corresponding figures are 18.2%, 27.0% and 54.7%.  [Source, my calculations from Tables A1 and A0 of Piketty and Saez's spreadsheet through 2006.]

Is this the non-negotiable American way of life to which the Vice-President was referring?  I suspect that, at bottom, it is.

So why should we change anything, if the machine is working so well for those at the top? 

• So what if this machine uses excessive amounts of the world's natural resources? 
• So what if it produces more than our legitimate use of the world's carrying capacity for dealing with pollution of air and water?
• So what if, in order for us to be rich, others must be poor -- very poor? 
• So what if, in order to us to continue to drive our cars everywhere we need or want to go, we need to import oil drilled in other parts of the world?
• So what if, in order for our powerful to maintain their privileges, we impinge on the rights of our own people, the rights of our contemporaries in other countries, and on the rights of future generations both here and abroad?

  Ah - I've not answered the initial question.  I'll come back to that in a future post, I guess -- because I think there are some very obvious answers to that question -- obvious to Georgists, anyway -- whose widespread understanding could make a big difference. 

High-Income Households ... some additional SCF data, relevant to Obama's SS tax options

A Note: What is the Appropriate Tax-Base for President-Elect Obama's High-Income Household Tax? by David P. Bernstein.

Here's the abstract for a paper recently posted to SSRN at http://ssrn.com/abstract=1296188

President-elect Obama has proposed taxing high-income individuals and using the funds to improve the solvency of the Social Security and Medicare Trust funds. Existing taxes used to fund Social Security and Medicare have only been applied to wages. Current proposals have been vague about what type of tax base might be used in the new tax. This note utilizes data from the Survey of Consumer Finances to compare potential advantages and disadvantages of a wages-only tax base proposal to a broader tax base proposal. Four different tax base options,

• broad income over $250,000,
  
• wages over $250,000,
  
• broad income over $500,000 and
  
• wages over $500,000
  

are considered. The results presented here indicate the tax base (taxable income) on broadly defined household income over $500,000 could be 28 times larger than the tax base on wages over $500,000. ($737 billion compared to $26 billion.) The tax base on broadly defined household income over $250,000 is $1,134 billion compared to a tax base of $460 billion for household wages over $250,000. The broad income tax base allows for lower marginal tax rates, lower reductions in labor force participation among two-income households, and less substitution between wages and other forms of compensation than the wage-only tax base.

Let me lay that out.

• Aggregate household wage income over $250,000 of households with wages over $250,000 is $460 billion.  That is the total of wages if we exempt the first $250,000 of wages.  That's 2.5% of the population
• Aggregate household income wage income over $500,000 of households with wages over $500,000 is $26 billion. That is the total of wages if we exempt the first $500,000 of wages.
• Aggregate broadly defined household income over $250,000 of households with income over $250,000 is $1,134 billion. That is the total of income if we exempt the first $250,000 of income of any kind.
• Aggregate broadly defined household income of households with income over $500,000 is $737 billion. That is the total of income if we exempt the first $500,000 of income of any kind.  That's 0.8% of the population

Wealth Concentration, Income Concentration, and Ups & Downs in Consumer Spending

It occurs to me that if more of us had more money in our pockets and our portfolios, consumer spending might not be so seriously affected when the economy catches a cold.

But then again, if we shared justly among ourselves that which ought to be shared among all of us, the economy might not catch cold so much and would be pretty well inoculated against pneumonia.

Stock Market Gyrations and Gun Purchases

ABC News reported this evening that gun sales had jumped significantly since Tuesday's election, because many people think that the new administration and/or Congress will seek to limit gun sales.

This led me to wonder whether some significant part of the recent gyrations in the stock market might be a function of an expectation that the new administration will raise capital gains taxes from the current low rates.   If it is true that there are significant unrealized capital gains in non-retirement accounts, and not a whole lot of cash in retirement accounts, there may be far more sellers than buyers.

You might open this post in another window:Those Shareholders who are being wiped out ... who are they? - or, "How's it trickling?" and also take a look at Wealth Concentration Tables from 2004 SCF: 50-40-5-4-1

If we look at holdings of Stocks (line 08), Non-Money-Market Mutual Funds (line 09) and Retirement Assets (Line 10), by wealth quantile, here's what we see for 2004: (trillions of dollars)
.................. Stocks ....... NMMMF ..... Retirement Assets   ... Ret Assets as Pct of Holdings
Bottom 50% .       21 ............     23 ..........        226  .................84%
Next 40% .....    382 ............    564 .........      2,587 ................. 73%
Next 5% ......    375 ............    332 .........      1,321 ................. 65%
Next 4% ...... 1,045 ............ 1,016  ........      1,701 ................. 45%
Top 1% ....... 1,888 ...........  1,169 .........         917 ................. 23%
Total ..........3,711 ...........  3,101 .........      6,752 ................. 50%

The folks who have holdings of individual stocks and non-money market mutual funds in retirement accounts don't have enough to buy up all that those who hold their stocks and mutual funds in non-retirement accounts might choose to sell before anticipated increases in capital gains taxes.  They certainly don't have enough cash sitting around to buy up the stock that the top 5%, or even just the top 1%, might put up for sale if they were concerned about a change in tax laws.  [For an estimate of holdings of unrealized capital gains, see "Capital gains and wealth" in the SCF study Currents & Undercurrents: Changes in the Distribution of Wealth, 1989-2004, particularly for the top 1%.] 

Capital gains are taxed at a maximum of 15%, and the next president may raise that to 20%, a 33% increase, for SOME taxpayers.   Some sources say that the rate might be as high as 25% -- a 67% increase.  Might that be enough to cause some who hold stocks and mutual funds in non-retirement accounts to choose to sell?  Possibly. 

Keep in mind, however, that many kinds of capital don't appreciate. Buildings depreciate.  Cars depreciate.  Machines depreciate -- even with the best of maintenance.  What appreciates?  Something that isn't "capital": the classical economists called it LAND.  Not just sites, but also natural resources and many other things not of human production.  And through our laws on residential property appreciation and 1031 exchanges, we exempt much of the appreciation in land from taxation.  To our detriment.  But that's another story.

Ben Franklin, technological progress and moral progress

I heard an interesting quote from Ben Franklin on Bill Moyers NOW program a few minutes ago, which sent me searching because it put the opening passage in one of my favorite books in a different light.  The first thing that turned up on Google was this, at http://www.thenewatlantis.com/publications/the-scientific-mind-of-ben-franklin:

This article appears in the WINTER 2007 issue of The New Atlantis

The Scientific Mind of Ben Franklin 

Jerry Weinberger

Had Benjamin Franklin managed to outwit the Grim Reaper, he would have turned three hundred years old in 2006, and would probably have been making plans for another three hundred. Journalist, scientist, diplomat, and vendor of the virtues, Franklin stands in our imagination as the iconic “First American,” the self-made man and proud inventor of the future. His scientific achievements were indeed interesting and impressive — especially his research on electricity and his invention of the lightning rod. But equally interesting, and far more complicated, was Franklin’s idea of science. He was, you might say, our first home-grown Baconian — seeing scientific ingenuity as the greatest delight and truest redeemer of human life.

In 1780, Franklin complained to his friend and fellow natural philosopher Joseph Priestley of the disparity between scientific and moral progress: so badly constructed were most human beings, said Franklin, that Priestley should have killed boys and girls instead of innocent mice in his experiments with mephitic air. How much better than the bratty kids were the results of these experiments. Scientific progress, Franklin commented,

occasions my regretting sometimes that I was born so soon. It is impossible to imagine the height to which may be carried in a thousand years, the power of man over matter. We may perhaps learn to deprive large masses of their gravity, and give them absolute levity, for the sake of easy transport. Agriculture may diminish its labor and double its produce; all diseases may by sure means be prevented or cured, not excepting even that of old age, and our lives lengthened at pleasure even beyond the antediluvian standard.

Later on, in letters to other friends, Franklin trimmed his timetable by a full nine hundred years, saying that a mere one hundred would see modern science produce discoveries of which he could have “no conception.” And he said again that the “art of physic” would advance so far and so fast that mankind would be able to avoid diseases and live as long as “the Patriarchs in Genesis; to which I suppose we should make little objection.”

A new film: "The End of Poverty?"

A new film entitled The End of Poverty? is making its way around the film festivals. It premiered at Cannes in May, as an Official Selection of the 2008 Cannes Film Festival Critics Week as well as an Official Selection at over a dozen international film festivals.   This week, it was shown at Leeds, in the UK.  Here's the description from the festival's program:

The End of Poverty? + Oxfam Panel Discussion

The End of Poverty? asks a simple question: ‘with so much wealth in the world, why is there still so much poverty?’ Looking beyond the popular ‘solutions’, director Philippe Diaz asks if the true causes of poverty in a modern, globalised world originated in colonial times. From the barrios of Latin America to the slums of Africa, leading economists, politicians and activists warn how the developed nations are plundering the planet at a pace that outstrips its capacity to support life. Followed by a panel discussion event organized by Oxfam.

Contrary to appearances, Oxfam was not involved in the production of the film, but I'd be very interested to hear about the discussion which followed the film's showing. 

The film was financed by the Robert Schalkenbach Foundation, based in NYC, whose mission is to share the ideas of Henry George, known to readers of this blog.   (For those who arrived here by searching on the film's title, welcome!  Have a look around!  And check out this blog's sibling site, http://www.wealthandwant.com/)

Here are comments from two bloggers who saw the film:

http://rolamcclary.blogspot.com/2008/11/end-of-poverty.html

Thursday, 6 November 2008
The End of Poverty?

Once again, reminding me of one of the first posts I ever made, Leeds International Film Festival is upon us, with a catalogue full of films I plan to go and see.

I made a start tonight, with a film from Oxfam: The End of Poverty? I went keeping in mind that perhaps the bias of the people behind the film would hinder its objectivity. However, I was pleased to say that I was presented with a greatly informed account of the events that have led up to the current, torrid global situation. I feel much less ignorant for it, and more able to speculate on the worsening future.

http://www.theendofpoverty.com/
Posted by Laura Stubbs at 14:56
Labels: environment, film, human rights

http://fancy-plants.blogspot.com/2008/11/leeds-film-festival-day-3.html

Fancyplants' Cracked Pot
My little cracked plant pot. Mind the roots.

Thursday, 6 November 2008
Leeds Film Festival - Day 3

The End of Poverty? (US) (site)

Created in partnership with Oxfam, this film deals with the question of why, when there is so much wealth in some parts of the world, there is destitute poverty in so many others. The film works from the time of the Spanish Conquistadores, who were the first western (labelled 'northern' in the film) power to start carving up the African and Asian land to invade, colonise and take over. Of course, Britan, alongside Holland, Portugal, France, Germany, Japan and many others followed and became owners of the lands that were not the property of anyone, and the indigenous peoples became part of the deal also. The capitalist engine thrived upon this influx of cheap slave labour and a culture of individualism (rather than a community sharing its resources) and forced Christianity reaped all it could from the soil and the rock of these countries, leaving the natives with barely anything they could call theirs.

As time passed and slavery was abolished, the western hunger could not stop there, and so in a number of repackaging exercises, slavery was reinvented time and time again, each one requiring a little less work by the owners and more by the slaves themselves. The slavery continues in various forms today, often because the country is mired in heavy debt it can never repay and so is at the mercy of the world bank and the multinationals who have set up industry, extracting raw materials and shipping the result back to the 'mother land'. It is this that leads to the statistic that far more money flows from poor to rich countries than the other way around.

It is a film packed with insights into how we have ended up in the situation we are in now, with some countries enjoying prosperity whilst others cannot seem to progress. It covers such a massive subject very well, almost like a super-documentary to which all others on the subject handle but a subset of the problem, and I would recommend it to anyone remotely curious as to why and how we in the west manage to live so well. 8/10

Again, Oxfam was not involved in the production of the film (though I'm sure RSF would welcome their interest), and I'd be interested in hearing about the discussion which followed the showing at Leeds.  Please post comments!

(I'll be posting more information on the film as time goes on.)

Wealth Concentration and the Corruption of Government

The more corrupt a government the easier wealth can use it. Where legislation is to be bought, the rich make the laws; where justice is to be purchased, the rich have the ear of the courts. And if, for this reason, great wealth does not absolutely prefer corrupt government to pure government, it becomes none the less a corrupting influence. A community composed of very rich and very poor falls an easy prey to whoever can seize power. The very poor have not spirit and intelligence enough to resist; the very rich have too much at stake. -- Henry George, Political Dangers (The second essay in Social Problems, 1883)

I've been rereading this fine book of essays, and decided I needed to put it onto the Wealth and Want website.  Putting it up is, of course, fairly easy, but indexing it into the system of themes there -- something approaching 1000 different themes, last time I looked -- takes time.  But this is so timely that I've posted the essay without waiting to finish the cross-referencing.  (To see what I'm talking about, take a look at the first essay, The Increasing Importance of Social Questions, noticing particularly the sidebar to the right.  You'll see themes like technological progress, infrastructure, conservatism, prosperity, justice, charity and wealth concentration.  If you follow one of those links, you'll find excerpts of various Georgist writings -- Henry George's own writings, or writings of others, which speak to that topic.  And in the right sidebar of each theme, you'll find links to other related themes.  Themes are something like tags, which I wasn't familiar with when I started creating WealthandWant.com.)

The premise of the Wealth and Want website is that a democratic republic alone is not enough to produce widely-shared prosperity.  And I'm pretty sure that no one in either of the two main parties knows what it takes to produce widely-shared prosperity, either.  I believe that a thorough reading of the 25 or so "essential documents" on the Wealth and Want site would put a new administration on the road to knowing. 

And then we circle back to the point that Henry George was making in the paragraph I quoted above. If you need a reminder about the degree of concentration of wealth in America, take a look at this post: Spreading the Wealth and these pages: Wealth Concentration Tables from 2004 SCF: Bottom 90%, Next 9% and Top 1% and Wealth Concentration Tables from 2004 SCF: 50-40-5-4-1

If you want details on concentration of income, read this post:  Spreading the "wealth" -- this time, let's talk about income.

Americans and Mass Transit

An article in Salon last week, entitled Who says Americans won't ride mass transit? contained some interesting factoids:

• Like mass transit systems across the country, BART has experienced record ridership this year. In 2007, Americans took 10.3 billion trips on public transportation, the highest number since the Model T and its progeny took over the nation.
• Back in 1926, Americans each year took 147 transit rides per capita.
• By 1950, Americans took just 113 transit rides per capita, and by 1956 that number had plummeted to just 66. By 2006, Americans took just 33 transit trips a year per capita. In the decades since World War II, it has been only in the dense financial centers, like New York, Chicago and San Francisco, where transit has been able to stubbornly resist the rise of the car, remaining a major way for many residents to get around.
• In 1960, some 12 percent of all U.S. workers used transit to get to work. By 2000, that number was down to 4.7 percent, and in the past couple of years it has just barely ticked up to 4.9 percent.
• Since the early '80s, 15 major American cities, including San Diego, Portland, Ore., Denver, Houston, St. Louis, Salt Lake City and Los Angeles, have built new light-rail systems from the ground up. Dozens of other cities are considering proposals for similar systems, or have them in development, such as Phoenix and Seattle.

So how do we go about making our cities and towns mass-transit-friendly?  Seems to me that measures that lead to increased density will help support mass transit ... and that mass transit will support increased population density.

The best measure I know is shifting taxes onto land value.  Sites well-served by infrastructure (e.g., roads, bridges, highways, airports, public transportation systems, ports, city water and sewer, stormwater runoff and, where needed, levees or hurricane protection, etc.) -- and services (e.g., schools, emergency response for small- and large-scale emergencies, public health, courts, etc.) -- and in places made desirable by nature (e.g., good views, waterfront, access to recreation, an appealing climate, a reliable supply of clean water, etc.) and good laws (e.g., limiting pollution, unpleasant smells, noise, etc.), efficient and uncorrupted government, and a healthy economy (with smart incentives and few disincentives to productivity, good infrastructure, logical and efficient services provided by the government, particularly in natural monopolies) have tremendous value.  For a good example of this, see this post.

When we tax land value lightly, those who own choice sites can choose whether to sit and wait -- without lifting a finger -- for the rise in land value they can reasonably expect to occur, or put the land to good use now.  Putting the land to good use now creates jobs, housing, offices, retail spaces, density.  Sitting and waiting produces nothing on that site, and leads to sprawl at the fringes.  Should our landholders have that choice, or is putting such sites to something approaching their highest and best use sufficiently important to the community as a whole that we ought to have incentives to good land use?  I'd say that reducing and reversing sprawl is sufficiently important that we ought to be taxing land value heavily. 

And there are many other good reasons to do so beyond this one.

That acre in midtown Manhattan: $800 million -- as a teardown!

I don't know how reliable the estimates involved are, but this article from a Pakistan website came across a google alert today.  The property is a 1-acre teardown within a short walk of Manhattan's Grand Central Terminal: 

Roosevelt Hotel to be sold out Naveed Miraj ISLAMABAD: The government has finally decided to sell the famous PIA-owned Roosevelt Hotel in a bid to add some foreign exchange to the national exchequer and has asked the Privatization Commission to arrange open bidding to this end. The commission hopes to get a minimum offer of eight hundred million US dollars as compared to two hindered million dollars the Shaukat Aziz-led government had expected for the hotel located in the busiest commercial area of Manhattan in New York. The previous government was in haste to sell off the hotel apparently to oblige some of its blue-eyed officials but shelved its plan following the Supreme Court's ruling in the Pakistan Steel privatisation case. In the wake of the current economic crunch, the government has decided to sell the hotel in the hope of getting handsome foreign exchange.

If you are one who thinks that land rent -- the value which the land itself would rent for each year -- is not a large enough tax base to provide much in the way of revenue, consider that this single acre, taxed annually at 5% of its proposed selling price, could provide $40 million each year in income to support the spending needs of NYC, NYS and the federal government.   I don't know what NYC is collecting in property taxes on land and buildings, but it isn't much -- which is part of why the asking price can be so high.

Think what it would mean to shift $40 million worth of taxation off wages, off sales, off buildings! 

PIA is the airline of Pakistan.

See previous posts about this site at That block in Manhattan ... and Hotel Roosevelt For Sale at $1 Billion

Fareed Zakaria: How to Spread Democracy

Zakaria: How to Spread Democracy -- Newsweek.com

I just came across this piece, from the September 29th issue of Newsweek, and want to applaud:

How Not to Save the World

Valiant efforts are being made every day to end hunger, reduce poverty, save lives. But if we truly want to solve the world's problems, here are five things we need to do.

Democracy: If You Want to Free Your Country, First Liberate Its Land
By Fareed Zakaria | NEWSWEEK

So you want to spread democracy. By now, it's pretty obvious that this is easier said than done. George W. Bush's stirring rhetoric about freedom has suggested a too-simple path: just rid the country of its tyrant and the people will be free. Bush often asserts that people in every country and culture yearn for democracy and are capable of it. To argue otherwise represents cultural condescension. It's not that President Bush is wrong at the abstract level — if Nazi Germany and fascist Japan could become democratic, it can happen most anywhere — but the argument holds at such an elevated plane that it becomes meaningless when applied on the ground. ...

Spreading the "wealth" -- this time, let's talk about income

The people who are offended by the concept of "spreading the wealth" are offended at the idea that income they might receive might be "redistributed" downwards, and assume that they would be the logical targets, the folks from whom income would be taken in order to provide more income to people below them on the income spectrum -- people they suspect do not work as hard as they do, or display virtues they feel they excel in.  But I suspect that most of those who boo on cue are not in the top 1%, or even the top 10%, who receive a significant share of the wage income and in fact all kinds of income. 

Let's look at income distribution.  The data come from Piketty and Saez's annual spreadsheet, at http://emlab.berkeley.edu/users/saez/TabFig2006.xls.

1. Wages (P&S, Table B2):

2006
Top 1%: 12.00% of wages    Next 9%: 23.82% of wages      Bottom 90%: 64.18% of wages

For comparison, we might look at 1968:
Top 1%: 5.24% of wages     Next 9%: 20.36%                     Bottom 90%: 74.40%

1953:

Top 1%: 5.61% of wages     Next 9%: 18.52%                     Bottom 90%: 75.87%

1928:
Top 1%: 8.87% of wages     Next 9%: 20.24%                     Bottom 90%: 70.89%

2. Income excluding Capital Gains* (P&S, Table A1):

2006:
Top 1%: 18.24% of income excl capgains   Next 9%: 27.04% of income excl capgains  Bottom 90%: 54.70% of income excl capgains

1968:
Top 1%: 8.35% of income excl capgains     Next 9%: 23.63% of income excl capgains  Bottom 90%: 68.02% of income excl capgains

1953:
Top 1%: 9.08% of income excl capgains     Next 9%: 22.30% of income excl capgains   Bottom 90%: 68.62% of income excl capgains

1928:
Top 1%: 19.60% of income excl capgains    Next 9%: 26.49% of income excl capgains  Bottom 90%: 53.91% of income excl capgains
* Note: Capital gains are excluded both from the income and from the rankings.  That is, one can't compare directly the top 1% ranked by income excluding capital gains and the top 1% ranked by income including capital gains.

3. Income including Capital Gains

2006:
Top 1%: 22.90% of income incl capgains   Next 9%: 26.79% of income incl capgains   Bottom 90%: 50.34% of income incl capgains

1968:
Top 1%: 11.21% of income incl capgains   Next 9%: 23.63% of income incl capgains   Bottom 90%: 65.15% of income incl capgains

1953:
Top 1%: 9.90% of income incl capgains    Next 9%: 22.41% of income incl capgains   Bottom 90%: 67.69% of income incl capgains

1928:
Top 1%: 23.94% of income incl capgains   Next 9%: 25.35% of income incl capgains   Bottom 90%: 50.71% of income incl capgains

4. Capital Gains income as a percentage of income excluding capital gains: (calculated from Table A0)

2006:   9.38%
2000: 10.76%
1986: 13.49%
1968:   6.61%
1953:   1.74%
1928:   8.94%

5. Capital Gains Income as a percent of total income, by income fractile, 2006 (P&S, Table A8, panel B -- including capital gains income in defining the fractiles):

• 90th to 100th percentile: 17.3% of income is from capital gains [income above $104,696] -- 10% of us, who get 49.66% of the aggregate income
• 90th to 95th percentile: 3.9% of income is from capital gains [income $104,696 to $148,423]  -- 5% of us, who get 11.27% of the aggregate income
• 95th to 99th percentile: 8.6% of income is from capital gains [income $148,423 to $382,593] -- 4% of us, who get 15.51% of the aggregate income
• 99th to 100th percentile: 29.3% of income is from capital gains [income above $382,593]   -- 1% of us, who get 22.90% of the aggregate income

Looking at that top 1% more closely, we can break it into its bottom half, next 40%, next 9% and top 1%:

• 99th to 99.5th percentile: 12.9% of income is from capital gains [income $382,593 to $597,584] -- 0.5% of us, who get 4.29% of the aggregate income
• 99.5th to 99.9th percentile: 20.9% of income is from capital gains [income $597,584 to $1,898,200] -- 0.4% of us, who get 7.05% of the aggregate income
• 99.9th to 99.99th percentile: 32.9% of income is from capital gains [income $1,898,200 to $10,659,283] -- 0.09% of us, who get 6.13% of the aggregate income
• 99.99th to 100th percentile: 49.6% of income is from capital gains [income above $10,659,283]  -- 0.01% of us, who get 5.46% of the aggregate income

[The income thresholds come from Piketty and Saez's Table A6; the percentages of aggregate income are from Table A3.  Notice that the 17.3% of income in the top decile coming from capital gains does not relate directly to the 9.38% figure for 2006 shown in Section 4, above.  The corresponding figure would be 9.38/109.38, or 8.56%]

Somewhere I read that the one party's derisive references of "spread the wealth" is intended to conjure up thoughts of "welfare queens."  They've found a way to divide working people.  But the unemployed and the working poor and our lower- and middle- middle classes are not the problem here.  Rather, the problem is a system that funnels such a large share of our production into the pockets of so few of us.  We've created a poverty machine.

How do we retool that machine?  Henry George has some good analysis and advice for us.

For more about "spreading the wealth," see also http://lvtfan.typepad.com/lvtfans_blog/2008/10/spreading-the-wealth.html   and http://lvtfan.typepad.com/lvtfans_blog/2008/10/spreading-the-wealth-some-kinds-of-wealth-ought-to-be-spread.html