Wealth distribution, and tragedy of the commons.

[Cnut237]

Money is divided unequally among people causing some to be rich, others in the middle class well-off but not not rich and others in poverty. Due to the richest people now having tens of billions of dollars, compared to the richest ones a century or so ago, the social divide has become so great that people are calling for rich people's money to be broken up, and distributed to the poor. Their assumption is that if everyone has the same amount of money then there will be no more poverty, hunger and homelessness.

It doesn't have to be everyone having the exact same amount of money though, does it? That's just taking it to an extreme to make the idea appear absurd and unworkable. It's like people screaming that Obamacare is communism, when it's clearly not.

A lot of people, especially those in poverty and this includes the poor in third world countries as well, are reckless with money management, due to never learning how to manage money (for they never had any money to manage in the first place), and spend all their money on cigarettes, entertainment, and commodities that drain people's wallets over time.

^{[citation needed]}
This sounds like a baseless accusation and lazy stereotyping.  Of course I am happy to be swayed if you have evidence to support this contention. But as far as I am aware, the available evidence suggests that direct cash transfers to the world's poor is one of the most effective forms of charity. Take the example of Give Directly, which is consistently rated extremely highly by the evaluator Give Well.
https://www.givewell.org/charities/give-directly#Does_it_work
Example study:
https://files.givewell.org/files/DWDA%202009/Interventions/Cash%20Transfers/haushofer_shapiro_uct_2013.11.16.pdf

A lot of rich people's money is just sitting around in banks not being sold, invested or traded with. This removes money from circulation [...] I think a solution to the social divide problem is to make rich people spend their money more, so that it goes back into the world economies.

Agree with the first part, but not the second. There are certainly notable instances of mega-rich individuals giving back hugely to society, the Gates Foundation being perhaps the most visible example. I would argue these are exceptions rather than the rule. We cannot rely on the rich to distribute their own wealth, we cannot rely on them to suddenly alter the values that have driven them to accumulate the wealth in the first place. This is for the same reason that we need laws against cartels and monopolies. It doesn't just police itself. Capitalism is great so long as government has the power to set the limits within which it operates. The best proposed solution I've seen thus far to the entrenched (and ever-growing) inequality is a wealth tax.

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[AniviaBtc]

So I think a solution to the social divide problem is to make rich people spend their money more, so that it goes back into the world economies.

Unfortunately, people don't think like that, they will not spend all of their money if they don't specifically need something. We should understand that if you are in their place, you will not let yourself spend a lot of your money to the things where you will not benefit of.

Some rich people are still wasting their money but still the economy have no improvements. Wealth distribution is not applicable to all types of government, especially if you we are not living in a communist country. People just want to become more richer and wealthier even if they already have it.

That's the mindset of people, that's why the most affected by the economic crisis are those poor people.

[NotATether]

What do you mean by "spend their money more" since it can mean a lot of ways. Like if they just spend their money in more kinds of investments then only the rich businessmen will benefit from such investment as well as the rich people who decided spending their money. But if you mean by "spend their money more" on raising salaries of their employees or something similar this won't really be beneficial for our economy as what will happen is if people will have a higher average wage then their buying power would just decrease as the supply of money has increased to a lot of people. Even the basic law of supply and demand can fuck up your solution.

I was referring to spending their money more in retail. That way at least some extra money trickles down to employees.

A lot of people, especially those in poverty and this includes the poor in third world countries as well, are reckless with money management, due to never learning how to manage money (for they never had any money to manage in the first place), and spend all their money on cigarettes, entertainment, and commodities that drain people's wallets over time.

^{[citation needed]}
This sounds like a baseless accusation and lazy stereotyping.  Of course I am happy to be swayed if you have evidence to support this contention. But as far as I am aware, the available evidence suggests that direct cash transfers to the world's poor is one of the most effective forms of charity. Take the example of Give Directly, which is consistently rated extremely highly by the evaluator Give Well.
https://www.givewell.org/charities/give-directly#Does_it_work
Example study:
https://files.givewell.org/files/DWDA%202009/Interventions/Cash%20Transfers/haushofer_shapiro_uct_2013.11.16.pdf

Note that I said A lot of people, not all people. It's true that many people do not wish to learn any money management whatsoever so they make all these mistakes listed here https://www.providentpersonalcredit.com/money-matters/money-management/five-examples-of-bad-money-management/

I'll list a few:
- Buying more than you earn, now it should be clear that a lot of people in the world do this
- Impulse buying, being unable to resist the temptation of buying several other things in addition to their shopping list.
- Surprise bills because you didn't set money aside for them


You are right when you say that giving cash directly to poor people is effective charity, and I should mention that a lot of poor people felt the effects of poverty for so long that they won't waste the money (they will spend it on things they need or want within their budget). But this is not true for all poor people, there are still a lot of them spend it all in one shot on items that will put them in debt instead of items they can afford. Some even borrow money or take a loan to do this.

Think of it this way:

- Someone poor, who did not study money management, takes a $10,000 loan
- They mortgage a house with it to live in
- Each month mortgage payments are made say $1000, this adds up to $12,000 a year
- Suddenly their loaned money is used up and have no way to pay it back.
- Here's what I think they could do instead: use part of that $10,000 to learn a skill that will get them a job that pays enough yearly to cover the mortgage and then pay off the loan over time.

This is what I meant when I said "A lot of people ... are reckless in money management".

[abhiseshakana]

I've been hearing this theory a lot from a few fellow workers from the most eastern (and poor) countries of the EU, mainly Bulgaria and Romania. In a few of their minds, the whole EU is a mechanism so that their countries become poor and are used as a market by the wealthier nations, of course, every time I ask them how the f word do you plan to sell something to a guy you've bankrupt and has not a penny left I only hear crickets.

In a global order, I think it is almost impossible for this to be done because the top of the pyramid rulers are very few in number but they are solid to maintain wealth and maintain the system so that their wealth is eternal and continues to grow. In the “Top of Pyramid” the upper side of the economic strata, everything is centralized and consolidated.

But in a national and individual order, a consolidated bottom of the pyramid can still be done. We can start through a massive structured and systemic equity crowdfunding platform, with the principle of mutual cooperation. Creating exchanges for the lower middle class, in order to consolidate the lower economy and concentrate money at the bottom. This can reduce the gap between the rich and the poor. Maybe it is a solution and not anti-capitalist but capitalist in retail so that everyone gets a chance.

In addition, the role of an idealistic leader of a country and not getting carried away is very important to protect domestic businesses from foreign threats, for example in China, the state has control over the internet and intervened to block a lot of domains. China intervened to block Facebook, Twitter, and Google until Baidu and Weibo were big.

[DoubleEdgeEX]

US Billionaires gained 637 Billion USD thanks to #COVID19  https://youtube.com/watch?v=aoR5sniTnv4   40 million Americans filed for unemployment. The Matthew effect in all its dubious glory. If you ask yourself why this crisis continues though... And it gets worse! Poorest Americans unlikely to qualify for $400-a-week unemployment checks!  https://bit.ly/3kxmmrh   How much did Jefff Bezos and co invests in lawyers to not pay too much taxes from their recent gains?

[Yatsan]

The series on how people belonging to the lower classes becomes poor people once again and to those people in the middle classes becoming better off and for those people in the upper classes which is becoming getting richer to richest once money was equally distributed relies on how they manage to used up their money. Even if we will continue to do such process of giving everyone a chance to be equally distributed wealth or money but they do not know how to manage or even used up such money for making themselves improve to having a better life, then probably they would just get back from where they have started which results to poor people becoming poor once again, middle classes becoming poor or having better life and rich people making themselves rich once again.

The point is even if you let everyone have such money to be equally distributed to each and every individual but they are lacking of skills and knowledge to make that money grow and just use it up on unnecessary things, it will all be nonsense and the reality would just came back from where it used to be. The division of the classes has not been classified in terms of having a bunch of money, it has been classified on how people wisely uses their resources making them to improve leveling themselves up into a new level of individual capacity in the society.

[Vishnu.Reang]

US Billionaires gained 637 Billion USD thanks to #COVID19  https://youtube.com/watch?v=aoR5sniTnv4   40 million Americans filed for unemployment. The Matthew effect in all its dubious glory. If you ask yourself why this crisis continues though... And it gets worse! Poorest Americans unlikely to qualify for $400-a-week unemployment checks!  https://bit.ly/3kxmmrh   How much did Jefff Bezos and co invests in lawyers to not pay too much taxes from their recent gains?

Billionaires such as Jeff Bezos pay a lower tax because most of their income comes from capital gains and dividends. Ideally there should be no tax on such income because it is already taxed once. But still long term capital gains are taxed at a rate of 20% in the United States. Similarly, there is a 20% tax on dividends. If you increase the taxes on these gains, then the billionaires may opt not to invest and then the economy may get destroyed.

[Cnut237]

Note that I said A lot of people, not all people. It's true that many people do not wish to learn any money management whatsoever so they make all these mistakes listed here https://www.providentpersonalcredit.com/money-matters/money-management/five-examples-of-bad-money-management/

I don't agree with you, but I'm meriting your post because you are interested in a constructive discussion

How about we take the example of poor people blowing all their money on alcohol rather than spending it responsibly? Alcoholism is a severe problem in certain very poor communities. For example, Inuit in Canada, the Native Americans/First Nations in the US, the original settlers of Australia, Maoris in New Zealand... all of these are indigenous peoples in lands colonised by Europeans. Presumably you would never suggest that they are weak/stupid/lazy, you would never ascribe those characteristics as being due to race, and instead agree that the alcohol dependency is a consequence of the situation in which they find themselves? In which case, surely, the bad financial decisions are a consequence of being poor, rather than poverty being a consequence of bad decisions?

I do agree with you that some people are lazy, reckless, and take no responsibility for their actions or their situations... but I don't think we can pretend that our societies are egalitarian, with equal rights and opportunities for all, and that the people at the bottom find themselves there because of their own bad decisions. Imagine if Donald Trump had been born into a penniless family - surely he wouldn't then have managed to become president?

[stompix]

~

But in a national and individual order, a consolidated bottom of the pyramid can still be done. We can start through a massive structured and systemic equity crowdfunding platform, with the principle of mutual cooperation. Creating exchanges for the lower middle class, in order to consolidate the lower economy and concentrate money at the bottom. This can reduce the gap between the rich and the poor. Maybe it is a solution and not anti-capitalist but capitalist in retail so that everyone gets a chance.

We start with money! Wow, you're building your socialist utopia with capital, and of course since this is a poor people project it will be done with other people's money, right?
Glorious collectivization of ' 48, here we go again!

Why do you stick to those ideas, those stupid things never worked, people have tried this a hundred times trying to get the money out of the rich and evil kulaks and every f* time in human history things went wrong and the poor remained poor and the middle class went poor but the rich survived, the gap will always be there, it has always been and no stupid regulations will manage to keep in check the things that trigger these differences.
I don't know why you're such a die-hard socialist and why you hate capitalism that much but trust me, you're fighting a losing battle, you're utopia is a nightmare!

You're concentrating all your energy in the wrong place, you can help the poor even if you don't take the money from the rich class, but it seems that you're focused on the latter rather than the first.

In addition, the role of an idealistic leader of a country and not getting carried away is very important to protect domestic businesses from foreign threats, for example in China, the state has control over the internet and intervened to block a lot of domains. China intervened to block Facebook, Twitter, and Google until Baidu and Weibo were big.

Hmm, so you would love such an idealistic leader.
What if your idealistic leader would block all VPN connections and also block bitcointalk in your country, till your nation develops an alternative, would you still praise him? I have a feeling you will not!

[NotATether]

Note that I said A lot of people, not all people. It's true that many people do not wish to learn any money management whatsoever so they make all these mistakes listed here https://www.providentpersonalcredit.com/money-matters/money-management/five-examples-of-bad-money-management/

I don't agree with you, but I'm meriting your post because you are interested in a constructive discussion

How about we take the example of poor people blowing all their money on alcohol rather than spending it responsibly? Alcoholism is a severe problem in certain very poor communities. For example, Inuit in Canada, the Native Americans/First Nations in the US, the original settlers of Australia, Maoris in New Zealand... all of these are indigenous peoples in lands colonised by Europeans. Presumably you would never suggest that they are weak/stupid/lazy, you would never ascribe those characteristics as being due to race, and instead agree that the alcohol dependency is a consequence of the situation in which they find themselves? In which case, surely, the bad financial decisions are a consequence of being poor, rather than poverty being a consequence of bad decisions?

Right. I would not say it was their fault if they find themselves in the middle of a helpless situation beyond their control. The social environment people live in shapes their behavior. Some people find themselves growing up to these addictions so it isn't constructive to blame them for a problem they can't control It's like blaming a compulsive gambler for losing all his money from his bad habit, he won't receive that nicely.

I do agree with you that some people are lazy, reckless, and take no responsibility for their actions or their situations... but I don't think we can pretend that our societies are egalitarian, with equal rights and opportunities for all, and that the people at the bottom find themselves there because of their own bad decisions. Imagine if Donald Trump had been born into a penniless family - surely he wouldn't then have managed to become president?

We can't, and that is painfully obvious to most people who read the news every day, where stories about layoffs, wage scandals and politicians blocking budget spending on less developed communities make the pages regularly. Pretty much all countries are non-egalitarian and are going to stay like that as long as, one condition at least, there are low effort, low paying jobs around. And this takes us back to the problem described in the OP. Jobs like assembling circuit boards for Foxconn, frying fast food for some megafranchise like McDonalds and stuffing up toys for Walmart can all be automated, and there are machines, and here I mean things like mechanical arms, conveyor belts and the like, that can at least perform a rudimentary set of chores. In other places like car assembly lines, most of the process is done by machines thankfully with minimal human effort, but the other stuff I mentioned above is not automated at all. And that's a really big problem because assembly liners make just $17.20/hour, barely above the $15/hour minimum, the average fast food worker gets paid $8/hour, and a quick google search reveals Foxconn workers get paid an outrageous $2.5/hour.

I'd say, depending on where they live, these salaries determine the living conditions they can afford. In the US you can barely live off of $8/month but you might get a way with it in higher inflation countries, but even $2.5/hour is brutal for those places, it's almost slave labor in my opinion. It's likely not their fault that they ended up with these bad paying jobs that could've been automated because they must've had no other choice.

And most of this could be avoided if large international corporations with a manufacturing arm allotted a bigger budget towards R&D, to developing machines that can automate all this work. At the end to make ends meet those low payed workers would have to be laid off which is painful for them but if they get a modest severance package they won't feel the pain, and will be able to look for better paying jobs. Unfortunately I don't think any company is interested in this idea, not even assigning bigger budgets since it get subtracted from the balance sheet, especially the severance packages although they'll be able to afford it for thousands of workers if the amount is like one year's pay, the workers themselves resist being laid off even from these jobs because they don't know where else to find work.

TL;DR all low paying jobs should be automated to make economies better, it's 2020 FTW.

[jacafbiz]

This  is where financial education comes in, some people think if they have a million Dollar they are set, but most people have millions of dollar and have lost all the money. The difference between a rich and a poor is what they both prioritize.

[mu_enrico]

Money is divided unequally among people causing some to be rich, others in the middle class well-off but not not rich and others in poverty. Due to the richest people now having tens of billions of dollars, compared to the richest ones a century or so ago, the social divide has become so great that people are calling for rich people's money to be broken up, and distributed to the poor. Their assumption is that if everyone has the same amount of money then there will be no more poverty, hunger and homelessness. But here is why this plan won't work for most people.

So I think a solution to the social divide problem is to make rich people spend their money more, so that it goes back into the world economies.

In an ideal free-market economy and democratic country, the one who performs (job) better, earn more than others. They earn it so they can do whatever they want with their hard-earned money. Forcing people to spend is violating rights and people's liberty.

If you mean incentivizing people to spend, then it is partially correct. The question is, what kind of spending is more desirable? I'd say for productive activities like building new factories, shops, etc., so more jobs for the unemployed.

So the key is incentives. If you give incentives for doing nothing like redistributing wealth to the poor, then people will do nothing. Conversely, if you provide incentives for the poor people to work harder so they can get out of their poverty, they will work harder and eventually will get out of poverty by their own effort.

[Cnut237]

~

I agree with most of what you've put

even $2.5/hour is brutal for those places, it's almost slave labor in my opinion. It's likely not their fault that they ended up with these bad paying jobs that could've been automated because they must've had no other choice.

And most of this could be avoided if large international corporations with a manufacturing arm allotted a bigger budget towards R&D, to developing machines that can automate all this work. At the end to make ends meet those low payed workers would have to be laid off which is painful for them but if they get a modest severance package they won't feel the pain, and will be able to look for better paying jobs.

My bold, which I think is a vital point. Automation of jobs has historically led to creation of a new type of job, so workers just need to retrain. Agriculture -> Industry -> Office. However this process can't continue indefinitely. The new wave of automation through AI is removing office jobs. This will be exacerbated by the rise of smart contract crypto platforms such as Ethereum. I would expect there will be fewer jobs available in future. But even if new jobs do arise in a new sphere, we will likely still have some level of unemployment. And if you have unemployment, if there are more people than there are jobs, then this means employers can drive prices down to the lowest level that at least one person will accept. Which is partly what you're talking about with the Foxconn example. In this sort of market, the employers have all the power, and the employees have to be grateful for whatever scraps are thrown to them. I'm not going to sidetrack yet another thread, which is what happens whenever I mention UBI... but something has to happen to enforce a greater degree of wealth distribution. I don't think we can rely on companies and rich individuals to do it all by themselves.

TL;DR all low paying jobs should be automated to make economies better, it's 2020 FTW.

I am in favour of automation where possible. Efficiency makes sense. It's just that we need to do something UBI to ensure that a large chunk of the population is not left behind through no fault of their own.

Forcing people to spend is violating rights and people's liberty. If you mean incentivizing people to spend, then it is partially correct.

It depends, though. Taxation is taking earned money away from people and deciding for them how it should be spent. But you wouldn't argue that taxation is bad? Society is structured, and we are indoctrinated, such that, from a financial perspective, whatever serves our self-interest is good and desirable. Taxation forces limits to this, and forces a balance with what is good for society as a whole. Simply increasing higher level tax, or (better) introducing a wealth tax, increases the quality of society and works towards equality of opportunity. It is in the long-term interest of the ultra-rich to give a small proportion of their wealth to fund a less troubled and more sustainable world.

[mu_enrico]

It depends, though. Taxation is taking earned money away from people and deciding for them how it should be spent. But you wouldn't argue that taxation is bad?

Well, I don't see taxation is mainly for redistributing wealth, but for public services. The rich will still be rich, and nothing changes. So, when a rich guy uses public services, like road, sewage, traffic lights, street lights, etc. he got to pay.

Only when the taxation is not fair, you will see many rich people fleeing from those "socialist countries."

[Cnut237]

It depends, though. Taxation is taking earned money away from people and deciding for them how it should be spent. But you wouldn't argue that taxation is bad?

Well, I don't see taxation is mainly for redistributing wealth, but for public services. The rich will still be rich, and nothing changes. So, when a rich guy uses public services, like road, sewage, traffic lights, street lights, etc. he got to pay.

Only when the taxation is not fair, you will see many rich people fleeing from those "socialist countries."

Income tax is progressive though, it takes proportionally more from people who earn more. Progressive taxation is wealth redistribution, just via a central pot rather than direct to individuals. A billionaire (in theory) pays more for policing and street lights than does someone on minimum wage. And it is still taking money from people in order to spend it for the improvement of the whole society. And it is the government who decides what the priorities are, because (again, in theory) the government is accountable to the whole population. And it depends on what we mean by a public service. Here in the UK, health is a public service. In some other countries, it's not. Anything that people need can become a public service. For example, internet, water, electricity, gas. Or use increased taxation of the rich to remove VAT/Sales tax, which proportionally will benefit the poor.

[jademaxsuy]

This  is where financial education comes in, some people think if they have a million Dollar they are set, but most people have millions of dollar and have lost all the money. The difference between a rich and a poor is what they both prioritize.

This is important part in anybody life how they use money and how do they even invest it. Also, at times luck does play a good role as well like you invest and it can boom, and you make money or other way around. But overall, we all should be able to make millions into billions and not vice versa which have seen people gone even bankrupt due to poor financial literacy.

financial literacy is very important. Most of the college graduate went actually looking for work and does not even trying to make money by doing a small business. It often lead to being always after a boss instead of being a boss itself. In doing business mostly other consider capital.because they wanted to earn big profits in an instant which is wrong.

Getting a job is good and one should know how to save and invest it in the future. The real quick formula to save is salary - savings = expenses. This is how I learn in financial literacy

[mu_enrico]

Income tax is progressive though, it takes proportionally more from people who earn more. Progressive taxation is wealth redistribution, just via a central pot rather than direct to individuals.

Yeah, and not everyone agrees with this view. The rich who hate it and can afford to move to other countries that offer more freedom will do so after weighing cost vs benefit. So the government has to be careful not to kick most of the 1% out. The 1% might tolerate the situation if the taxes are not that "unjust" as a form of charity, but it has a limit before they move out.

There is a more subtle way to tax people (both the rich and the poor) and incentivize people to spend at the same time (with lesser risk to capital flight), that is, inflation. But then, the problem is, people spend to buy assets like gold, stocks, etc., and not to engage in productive activities.

[NotATether]

~

I agree with most of what you've put

even $2.5/hour is brutal for those places, it's almost slave labor in my opinion. It's likely not their fault that they ended up with these bad paying jobs that could've been automated because they must've had no other choice.

And most of this could be avoided if large international corporations with a manufacturing arm allotted a bigger budget towards R&D, to developing machines that can automate all this work. At the end to make ends meet those low payed workers would have to be laid off which is painful for them but if they get a modest severance package they won't feel the pain, and will be able to look for better paying jobs.

My bold, which I think is a vital point. Automation of jobs has historically led to creation of a new type of job, so workers just need to retrain. Agriculture -> Industry -> Office. However this process can't continue indefinitely. The new wave of automation through AI is removing office jobs. This will be exacerbated by the rise of smart contract crypto platforms such as Ethereum. I would expect there will be fewer jobs available in future. But even if new jobs do arise in a new sphere, we will likely still have some level of unemployment. And if you have unemployment, if there are more people than there are jobs, then this means employers can drive prices down to the lowest level that at least one person will accept. Which is partly what you're talking about with the Foxconn example. In this sort of market, the employers have all the power, and the employees have to be grateful for whatever scraps are thrown to them. I'm not going to sidetrack yet another thread, which is what happens whenever I mention UBI... but something has to happen to enforce a greater degree of wealth distribution. I don't think we can rely on companies and rich individuals to do it all by themselves.

TL;DR all low paying jobs should be automated to make economies better, it's 2020 FTW.

I am in favour of automation where possible. Efficiency makes sense. It's just that we need to do something UBI to ensure that a large chunk of the population is not left behind through no fault of their own.

Now I think with automation, less people are needed to control the same responsibility that many more people once had. Ford for example had entire production lines full of people a century ago, today much less people are needed to control the machines that replaced all those workers. So it leads to a little ugly scenario at the end where more and more people get unemployed and can't find a job because there are no more jobs to take. This can be mitigated with UBI (which by the way I made a thread on here if you want to discuss this more) to some extent.

But tell me, you state above the unemployment will be exacerbated by smart contract platforms. How are smart contracts going to automate things or otherwise make more jobs redundant?

[Latviand]

This  is where financial education comes in, some people think if they have a million Dollar they are set, but most people have millions of dollar and have lost all the money. The difference between a rich and a poor is what they both prioritize.

This is important part in anybody life how they use money and how do they even invest it. Also, at times luck does play a good role as well like you invest and it can boom, and you make money or other way around. But overall, we all should be able to make millions into billions and not vice versa which have seen people gone even bankrupt due to poor financial literacy.

The reason why there is a lower, middle, and high class is because not all people are knowledgeable about how to earn and manage money. People also are not knowledgeable about investments and all they want to do is to spend and spend until they have no budget for their necessities. Investments are needed and we need to understand that it will really make our money circulate, grow and become stable. If we have this mindset, being a business-minded person will really make you successful in life. It is really not that easy to have a million dollar but if you are wise, patient, and hardworking, your desired wealth will be yours.

[el kaka22]

I do not think that people flee from those "socialist countries" when they grow up there and it is always like that when they grow up and they start to think that it is quite fairly understanding that people should be helping each other out all their lives. Look at Sweden for example, they may not have a ton of stuff they sell to the world but IKEA is actually such a HUGE company, yet they pay every single cent of tax they owe to Swedish government because they know that their money will be used to help out people who are more in need than they are.

However you can't do that in governments that are corrupt, because people think that if you pay your taxes properly, it will not help out other people it would help out politicians and their families. So I do not think the problem is people who do not want to help out others, it is people who think their taxes do not go to right places.