Skip to main content

View Diary: Warren Buffett's latest op-ed will bring mutters of 'class traitor.' But he doesn't go far enough (117 comments)

Comment Preferences

  •  We have to start making the case (3+ / 0-)

    that high tax rates on the rich are required to prevent the emergence of oligarchy. I've already provided the historical background of how the Founders had a specific idea of how large inequalities in wealth are due entirely to aristocrats corrupting the political process.

    But more importantly, we need to articulate a theory of political economy of oligarchy that explains why and how letting the rich keep too much of their wealth dooms an economy to collapse. I'm thinking of something well past Pickett and Wilkinson's vital 2011 book, The Spirit Level: Why Greater Equality Makes Societies Stronger.

    Large concentrations of wealth are innately conservative, in that they seek to protect what they are invested in, and to maximize the return of that investment. This is entirely understandable, basic human nature. But this creates a huge, dangerous problem for society, which can actually threaten the survival of society. To understand this, you must discard the definitions of economics, and of wealth, found in all economics textbooks.

    First, economics is how a society organizes itself to gather and/or extract, process and/or manipulate, and distribute what is needed to sustain and reproduce human life at ever higher material and cultural levels. Water, food, clothing, and shelter are the three irreducible basics; but modern industrial economies can easily meet these basics. Where they fail to, the problem is almost always one of distribution, not production. This escape from the economics of scarcity is humanity's great achievement of the Industrial Revolution. But water, food, clothing, and shelter, of course, are really a very small part of a modern economy. The point is, not to lose sight of what an economy is. This gives us the proper basis on which to understand what wealth is.

    Wealth is not money. Or stocks, or bonds. Wealth is not even material possessions. To help you understand this, (continued below)

    A conservative is a scab for the oligarchy.

    by NBBooks on Mon Nov 26, 2012 at 08:35:34 PM PST

    •  Wealth is not even material possessions. (0+ / 0-)

      Wealth is not even material possessions. To help you understand this, assume that you are proud owner of a hundred square miles of wilderness land that contains motherlodes of gold, silver, petroleum, whatever gems or ores, or minerals you hold most dear. But you are not allowed to bring any tools or machinery onto this land. No bulldozers, no drills, not even a shovel and pickaxe. Are you wealthy?

      No, you are not. You might be sitting on millions of ounces of gold, but without the physical means of extracting the gold ore from the ground, and applying the proper chemicals and amounts of heat, you can never actually extract, let alone use, any of that gold (or whatever gems or ores, or minerals you think valuable).

      The point is, what wealth really is, is the ability to transform some natural resource into some useful form. What if you were allowed to bring equipment and tools onto that land - but were not allowed to bring people with the skills and knowledge to operate and use that equipment and tools? You may be sitting on the potential for massive wealth, but you don't really have any wealth until you can actually apply human ingenuity and know-how to your land. The ingenuity of design of a bulldozer, and the know-how of operating it safely, correctly, and efficiently.

      So, wealth is society's accumulated human genius and ingenuity applied to the problem of economy (refer above to our definition of economics). We call this technology, and the act of creating technology, we call science.

      However, there is a huge problem. Because the natural resources available to a society are strictly limited within the modes of technology extant within a certain period of time. These are the physical limits Jared Diamond writes about in his book, Collapse: How Societies Choose to Fail or Succeed.

      For society to survive, it must breakthrough the limitations of its natural environment, by using science to create new technology. This allows us to create new resources (what was oil before the development of the internal combustion engine?), find new ways to extract resources (we can go back to old, played out oil fields and get more oil out - that's what fracking is all amount) and to make more efficient use of resources (we can increase the mileage our cars and trucks get).

      I've argued this in the past: the most important economic activity a society undertakes is science.

      Now, what happens when rich people have too much political power? What happens when rich people have too much political power, meaning they have become an oligarchy? They tend to try to protect their investment in the prevailing mode of technology. And that hampers or even stops society's fundamental need for scientific and technological progress. No more clear example can be imagined that the Koch family interest pouring hundreds of millions and billions of dollars into conservative think tanks and political lobbies that not only deny global climate change, but also actively oppose the development of clean energy technologies. (continued below)

      A conservative is a scab for the oligarchy.

      by NBBooks on Mon Nov 26, 2012 at 09:02:27 PM PST

      [ Parent ]

      •  The problem of oligarchy, continued (2+ / 0-)
        Recommended by:
        Eric Nelson, howd

        In fact, certain economic statistics show the effect of the transformation, since the Reagan regime, from a republic to an oligarchy. As Paul Buchheit reported last week,

        According to both Marketwatch and economist Edward Wolff, over 90 percent of the assets owned by millionaires are held in a combination of low-risk investments (bonds and cash), personal business accounts, the stock market, and real estate. Only 3.6 percent of taxpayers in the top .1% were classified as entrepreneurs based on 2004 tax returns. A 2009 Kauffman Foundation study found that the great majority of entrepreneurs come from middle-class backgrounds, with less than 1 percent of all entrepreneurs coming from very rich or very poor backgrounds.
        Now, we began this by talking about the problem of a large inequality of wealth. We were using the word "wealth" incorrectly, because, if my argument is correct, money, stocks, bonds, and other investments are really not wealth. Well, then, what are they?

        They are legal fictions that society provides a structure for the creation of. That structure is a banking and financial system, with a legal system to provide some semblance of order. These legal fictions simply make it easier to make the real wealth of human ingenuity, of technology, less abstract, and allow it to be traded and exchanged more readily. So, what we really have is a vast inequality in the legal fictions that we usually fall into thinking of wealth. So, when someone agglomerates too much of those legal fictions, and are using them in ways that don't actually help society create real wealth, society, in its own interest of self-preservation, MUST take those legal fictions away, somehow, someway. Voila! Taxes!  

        This, then, is what statesmanship is all about. Political leaders must be knowledgeable enough about the frontier of science, and the present state of technology, to be able to judge when the inherent conservatism of accumulated, concentrated wealth, becomes a danger to, or drag on, the most important economic activity society engages in - science.

        And just look at the dismal record of America since the emergence of the new American oligarchy. Moon colonization mission canceled. Manned space exploration curtailed. Space station "down-sized" to fit "budget constraints." Complete lack of replacement for the space shuttle. The decision not to build the large particle collider. Human stem cell research banned on specious moral grounds. I'm sure there's more such indicators of which way the wind blows, and I invite you add them in comments.  

        A conservative is a scab for the oligarchy.

        by NBBooks on Mon Nov 26, 2012 at 09:23:22 PM PST

        [ Parent ]

        •  More.... (0+ / 0-)

          Let the rich flee. We would be better off without them. They are not entrepreneurs or wealth creators or job creators. According to both Marketwatch and economist Edward Wolff, over 90 percent of the assets owned by millionaires are held in a combination of low-risk investments (bonds and cash), personal business accounts, the stock market, and real estate. Only 3.6 percent of taxpayers in the top .1% were classified as entrepreneurs based on 2004 tax returns. A 2009 Kauffman Foundation study found that the great majority of entrepreneurs come from middle-class backgrounds, with less than 1 percent of all entrepreneurs coming from very rich backgrounds.

          This is fully in accord with the Patriots' belief at the time of the American Revolution that most rich people were merely royal courtiers, who rose because of their brown nosing of the British oligarchy, and not through actual business or commercial acumen. The problem with most rich people is that they become more interested in preserving the value of the investments they have already made, and oppose new economic potentials and capabilities that might supplant those investments. Thus, "old money" actually very rarely assists in economic growth and job creation. Economists have a term for this behavior of old money - rent seeking.

          So, the U.S. financial sector does not generate new wealth for the nation, but only monetizes and extracts already existing wealth. This is what Romney, Bain, and private equity in general do under what they call "restructuring" a company. This is why after the past four decades of tax cuts by Reagan and Bush Jr., the U.S. economy and industrial sector especially is even less competitive than ever, with many countries having surpassed the U.S. in technological capabilities. The U.S. does not even rank in the top 20 worldwide for internet broadband deployment and access. We no longer have the capacity to do cutting edge research in particle physics - U.S. scientists go to CERN in Europe for that. We have allowed the Space Shuttle to become obsolete with coming up with a replacement. Advances in jet propulsion applied to space research are coming out of Europe, not the U.S.

          Get rid of the stupid rich people that are funding groups like American Enterprise Institute and Heritage Foundation, and fighting to preserve the fossil fuel economy, and we'll start moving forward as a nation again!

          A conservative is a scab for the oligarchy.

          by NBBooks on Thu Nov 29, 2012 at 09:35:19 AM PST

          [ Parent ]

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site