Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Western Politics at a Point of Disjunction
Politics in the West -- in Europe and the United States -- it at a break point. A phase shift. If as currently appears the British have chosen Brexit, one might say that the moment of disjunction is upon us. What does it mean, and where is it going?
For more than half a century, the dominant political battle in the US and in much of Europe has been between economic and cultural left and right -- a fight principally over the degree to which governments will regulate, and the extent to which governments will tax and redistribute, and secondarily over secular versus traditional values. Major parties of the left and right have been relatively united in pursuit of globalism -- free movement of people, goods, and capital. With the strong vote for Brexit, the political toxicity of TPP and TTIP, and the strong performance of Trump and Sanders in US primaries, that epoch may be ending. The new lines of conflict are between nationalists of the left and right and globalists of the left and right.
Europe, threatened with fragmentation, may yet find the way to a new and more effective synthesis. What is called for is a continental nationalism akin to the nationalism that draws Californians, Alaskans, New Yorkers, and Texans together in the United States. And one that moves effectively to address the critical challenges faced -- defending the great good at the core of the enlightenment project Europe, the UK, and the United States share against both the narrow temptations of nativist nationalism and the dangerous naiveté of globalists who think that a world of perpetual and democratic peace will follow if only they shut their eyes to the folly, short-sightedness, and counter-productivity of their own policies, and the enemies of liberal democracy and the enlightenment on the march abroad.
Inequalities of Wealth and Income Are Poorly Measured and Grossly Overstated
One hears a lot about the inequalities of wealth and income and how immoral and obscene they are. But wealth and income are rewards for what individuals contribute to the economy. The contributions of individuals to the society are grossly unequal. So the rewards should be expected to be unequal. But although they are unequal, they are not nearly as unequal as people believe. In the first place, the inequality of wealth is measured improperly by excluding many forms of wealth such as the value of accumulated social security, annuities, insurance, and pensions. These are largely owned by the middle and working classes. So those who measure wealth inequality are overstating the proportion of wealth owned by the most wealthy. Second, inequality of wealth varies substantially with business fluctuations and interest rates. Inequality of wealth is as great currently as it has ever been but that’s the fault of the Federal Reserve Policy of low interest rates as we shall show below. Third, government taxes wealth at death in the form of estate, gift, and inheritance taxes and this induces the wealthy, in the U.S. at least, to give much of their wealth away, to universities, hospitals, non-profits, and charities during their lifetimes. As for income inequality, it is usually measured before income tax. After tax income is much more equal and a lot income is not counted at all, things like free school, librairies, food stamps, Medicaid, and much else. And those who talk about inequality of wealth and income seldom talk about the relative equality of consumption, or the fact that Americans enjoy the highest standard of living in the world.
Consumption is what individuals take out of the economy. While the rich consume more that the poor and lower middle class, measures of inequality of consumption fail to include not only welfare benefits such as welfare payments, Medicaid, public housing, and food stamps but social security payments, public parks, free schools, public libraries, and much else. Wealth and income are measures of the value that households contributed to the economy whereas consumption measures what households take out of the economy. Inequality of consumption is therefore the only inequality that should be of concern and in the U.S. inequality of consumption is not a problem. The problem that poor are rightly concerned about is their inability to find and hold a job. ...
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