[PEN-L:191] Re: Re: The Left and Inequality

["Gar W. Lipow" <lipowg@xxxxxxxxxxxxxx>]

There are two sets of points here. One is the point that there are a
lot of indirect effects of inequality -- crime, higher death rates,
social mismanagement, environmental desctruction, tremendous waste.
But the other is that point is wrong to begin with. Just because you
can come up with arguments accepting your opponents premise is no
reason to accept that premise when it is wrong.

The key of course is that redistribution would NOT involve just the
"Super Rich" but the "somewhat rich" and "extremely comfortable" as
well. Such a redistributions would:

A) eliminate poverty
B) make 80% or more of the population A LOT better off even in terms
of narrow personal consumption.

That may not be the most important reason to fight for
redistributionist policies -- but it is not trivial either. And it
strikes me as a damn good selling point.

Nove's point is widely believed -- even on the left. I suspect one
reason for this is that a lot the people who encounter it first hand
do make enough that redistribution would not particularly be
beneficial to them (at least not in the narrow sense of personal
consumption).



Trond Andresen wrote:
>
> At 11:22 6/07/98 -0500, Robert Naiman wrote:
>
> >I have been reading Alec Nove's "Economics of Feasible Socialism Revisited"
> >and came across his argument that the Left is misguided when it puts too
> >much emphasis on the wealth of the super-rich, on the grounds that
> >redistributing the wealth or income of the super-rich will not go very far.
> >I have run across this argument before. What do PEN-Lers think of it? What
> >do folks think about Nove's book?
>
> I haven't read the book, but the argument is quite common, also in Norway.
>
> June Zaccone says:
>
> >Two problems with this argument--even if one accepts Nove's sassessment
> >of the effect of redistribution on incomes:
> >If income and asset distribution were less uneven, the rich would have
> >less political power, which they use to change government policy in
> >their favor.
> >
> >Their consumption shapes not only what is produced but the aspirations
> >and sense of well-being of many of those who have less, so that they
> >consume more than they would in a more egalitarian economy, and yet
> >feel/are deprived. Poorer  people lose out on good public transportation
> >where many people have cars. I am convinced that public telephones will
> >soon be gone or left unfixed as more people have cell phones, so that
> >one will have not much choice about buying one.
>
> I agree with June's points, but if we ignore them for the moment, there
> is an additional important point:
>
> A society polarized between the few very rich and the many poor, is a
> society where debt/asset relationships play a dominant role. The rich
> receive financial income from their financial claims on others. Part of this
> income, or debt service flows, is financially re-invested - to the degree
> the rich have a propensity to save out of financial income - which they
> obviously have. For certain parameter combinations - interest rate,
> propensity to save for the rich, repayment time on loans*
> - aggregate financial asses for the rich will grow persistently, mirrored by
> corresponding debts for the rest of society. From the latter go
> correspondingly increasing debt service flows to the rich - the other way go
> increasing flows from the rich for either their consumption or further
> finacial investment. If these circular flows in the aggregate increase in
> relation to the flows neccessary to for the function of the rest of the
> economy (wages, consumption, real investment), we are heading towards a
> situation where the economy wil be overwhelmed by debt-asset relationships.
>
> Observing today's world, this seems to me to fit in with reality.
>
> Again: Note that this criticism can be made independent of the points that
> June  Zaccone made.
>
> Trond Andresen
>
> --
> * Here is a presentation on conditions for debt/asset polarization:
>
> The _share_ of  a capitalist's financial income flows re-invested (as opposed
> to consumed or spent in other ways) is crucial to whether accumulation takes
> place. If a certain share of expenditure is on the condition that it shall
> yield a future stream of dividends (i.e. re-investment), and these in the
> next round are financially reinvested inthe same proportion, etc., then
> for certain parameter values the aggregate of all
> financial assets (mirrored by corresponding debts) will
> grow exponentially:
>
> Call -
> aggregate net non-money financal assets (debt)   = A(t) [$]
> initial aggregate assets at t = 0 is       A(0) = A0
> average interest (dividend) rate   = i  [% / year]
> the propensity to save out of financial income   = s  [  ]
> average loan repayment rate (incl. perpetuities)   = d  [% / year]
>
> Then accumulation will occur following:
>
> dA/dt = ( -d + s (i +d) ) A(t)                                        (1)
>
> or, with the asset growth factor defined as
>
> g = -d + s (i +d) ,                                                       (2)
>
> dA/dt = g A(t)                                                            (3)
>
> which has the solution
>
> A(t) = A0 exp(gt)                                                      (4)
>
> A(t) will grow, and we have asset/debt polarization, if g > 0.
> In other words, this can be avoided with g <= 0,
> which  may be reformulated in three equivalent ways
>
>             s <=  d / (i+d)                                              (5)
>
> or        (1-s) >=  i / (i+d)                                          (6)
>
> or         is <=  (1-s) d                                               (7)
>
> Note that my prediction of accumulation is not
> inevitable, but parameter-value-dependent. For low nominal interest rates,
> savings rates, short average repayment time (this time = 1/d) on loans
> - the system will not experience growing debt burdens.
>
> One may in theory have a market economy with positive nominal
> (or even positive real) interest rates but _without_  persistent accumulation and
> resulting debt/asset polarization. But I believe it is not an easy task - to put it
> mildly - to convince capitalists that monetary policy should be such that
> persistent financial accumulation was made very difficult.
>
> A paper** can be downloaded in pdf format at
>
> http://www.itk.ntnu.no/ansatte/Andresen_Trond/dwnld/dyn-of-accum.pdf
>
> ** A MODEL OF LONG-RANGE ACCUMULATION AND CRISIS
> (forthcoming, in "Nonlinear Dynamics, Psychology, and Life Sciences",
> Human Sciences Press, New York, 1999)