Arnold Kling  

A Pithy Sentence

European Banks... Final Points on ZMP...

from Larry Summers.

A general posture for government of standing up for capitalism rather than particular well-connected capitalists would also serve to mitigate inequality.

Pointer from Mark Thoma.

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CATEGORIES: Income Distribution

COMMENTS (10 to date)
Shangwen writes:

This is why I am somewhat on side with the OWS people (to the extent that they are actually saying anything, which is limited). If you follow the standard libertarian-idealist line of people like Don Boudreaux that inequality is not a problem because all those rich people are Steve Jobs clones, then fine. But they aren't. The class of high income earners is loaded with those who make a living off the taxpayer, either directly in the form of salaries, contract payments, or sales, or indirectly through unfair regulatory advantage. That includes health care professionals, most lawyers, defense contractors, lobbyists, etc.

No, I am not saying they are necessarily awful people. You can't blame people for taking a good deal. The problem is the deal-maker.

Richard S writes:

@ Shangwen:

To move from agreement with Summers to sympathy for Occupy Wall Street is a non sequitur. None of the policies advocated by Occupy folk (higher taxes, more redistribution of wealth, more regulation) would correct the problem of crony capitalism. To the contrary, they'd exacerbate it. If you want to reduce crony capitalism, you should support an aggressively libertarian economic policy: vast reductions in the size and scope of government, lower and flatter taxes, removal of professional barriers to entry (especially in the legal profession), and so on. It is in a true free market that the only rich people are productive individuals like Steve Jobs (and possibly, if the productive people make this choice, their heirs).

Shangwen writes:

@ Richard:

I get that, and I am on side with that; indeed I am a minarchist. Also, as I said, I don't think OWS are saying much of anything, so there is little to deny or affirm. But I don't think that complaints about income inequality (and wealth inequality, and consumption inequality), should be met with "no, it's OK, it's all creativity". I have read plenty of commentary on OWS and inequality, and seen almost nothing about the massive role that the state-backed enrichment of licensed occupations and government contractors has played in that. Crony capitalism and bailouts are just part of the story. Some rich people are rock-star innovators and entrepreneurs, or just clever investors; but many others are physicians, DOD contractors, or K-street types.

I have a neighbor who is a military officer (and never shuts about it--he is a "hero" even though he either sits at a desk or flies to conferences). When he hired a landscaper to do his yard this yesterday, he badgered the guy into giving him a "military discount" of 15%. The landscaper works long hours, is constantly knocking on doors for business, and with weather and labor problems probably has a razor-thin margin. My neighbor has a job for life, a big salary, and eye-watering health and retirement benefits. That's what I'm talking about.

Becky Hargrove writes:

I agree with you in the sense that the lower productivity efficiency of the taxpayer-paid employee continually gets lumped together with the higher productivity economy, and then people wonder why somehow budgets cannot be balanced, and finally, why nations fall. Of course, this is only part of the picture. The other side is the fact that even though austerity proponents want housing values to decline, the consumer is still tied to the original debt valuation, and consequently has no money for the kinds of financial instruments now losing their value in so many parts of the world.

AJ writes:

That comment from Larry Summers!!!!!!!!! The pot calling the kettle black...

UnlearningEcon writes:

What I don't get is why libertarians think pointing out how corrupt capitalism is is somehow an argument in favour of it. I see no reason that shrinking the state would make it less corrupt if capitalist institutions are still in place. Historically, the least corrupt capitalist economies have had active states.

mark writes:

So we'll eliminate the not for profit status of Harvard University.

And institute a flat tax. And applaud when one person in a thousand becomes really, really wealthy.

Somehow I don't think he really, truly means what he says. He spent too much time in DC, bailing out somebody every time. He's acquired the politician's habit of saying one thing, doing another.

Les writes:

1. A pithy comment indeed! Similar to the antitrust objective to protect competition, not competitors. (A noble objective, alas honored as much in the breach as in the performance).

2. @ "What I don't get is why libertarians think pointing out how corrupt capitalism is is somehow an argument in favour of it. I see no reason that shrinking the state would make it less corrupt if capitalist institutions are still in place."

Answer: No doubt that capitalism may include some corruption, but no doubt that corruption in government is much greater than in capitalism.

UnlearningEcon writes:

Les you speak as if capitalism is not a creation of the state and capitalist firms and the government have not become effectively the same thing.

Corruption = corporations getting government to work in their interests. This doesn't automatically make it 'not real capitalism' just because it doesn't make sense in a neoclassical markets versus governments framework. It's how capitalism works in the real world.

Tom writes:

Too bad Larry was not in favor of capitalism, and bankruptcy for firms which had excessively mis-invested (speculated and lost), when there was TARP bailouts being discussed.

With the housing bubble pop, some $6 tril or so of "financial wealth" disappeared. With such huge losses, there was no longer any need for so many financial firms, and especially no need for the huge banks which had made huge losses.

The "capitalist" way of dealing with corporations who fail to fulfill their financial obligations, like Lehman, is bankruptcy.

Corruption= gov't worker decision makers making decisions that benefit themselves, more than the "general welfare". Many corporations are willing to provide bribes to gov't workers to get the desired gov't decision.

No "government" makes any approvals, only a human being. A human who can usually be bought. The only way to reduce such corruption is to reduce gov't power to make approvals.

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