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On The Path To Socialist Prosperity: Charting The Distribution Of Income Within Countries
With the US well on its path to an increasingly socialist (if not worse) system, yet still home to one of the world's highest GDP per capita metrics in the world, Goldman's Erik Nielsen presents an interesting matrix in which he plots GDP per capita versus the Gini coefficient - a measure of income inequality. Countries that have the lowest Gini are those in which incomes are more or less flat across the board. The US, on the other hand, has the highest income inequality per its Gini of 0.38, a phenomenon about to be blatantly abused by changes in the US tax code. A relevant question here would be whether greater income inequality leads to a higher GDP? As Nielsen points out, "correlation does not imply causation" (a fact long-lost on the market dominant HFT market makers), although an important question is whether an attempt to grow US economic output should be predicated by a push toward further income equality, or a world in which the rich get richer. As the regression in the chart below would seem to suggest, the latter is what the Obama administration should be aiming for, and may explain why Obama's advisors have been so hell bent on perpetuating the wealth of those who should have lost everything in the crash of 2008. Of course, the one exception to the rule is socialist Norway, which has a higher GDP/capita than the US, but which however also happens to be one of the most resource rich countries in the world.
Further observations from Erik Nielsen
Next month the European Q2 GDP numbers are set to be released, and given the continued equivocal manner in which markets and risk sentiment have reacted over the past 6 months, this data may provide more calm, after the European bank stress tests.
Today’s Chart of the Day, however, looks at another dimension of GDP: the distribution of income within countries. It plots the Gini coefficient (a measure of income inequality, with a higher number meaning greater inequality) against the level of GDP per capita in several European countries and the US.
Different income distributions may mean that the type of consumption (luxury goods vs. necessity goods) may differ between countries even if they are as wealthy as each other in aggregate. There are also a number of channels through which income dispersion may affect growth, although we would note that correlation is not causation and economic theory is ambiguous about the direction of any relationship.
Although richer on a per capita basis than most European economies, the US has a greater dispersion of income than any country in our sample.
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Very interesting.
Shades of PPP, as applicable in this context.
Will the pyramid be flattened from the top down (peace) or bottom up (strife).
Unfortunately, we all know the answer to that, eh?
ORI
http://aadivaahan.wordpress.com
Let the geni out of the bottle
If you keep importing new, essentially penniless immigrants (keeping the left end of the scale static near zero) than if anyone already here makes a dollar more this year than last - the income inequality gap widens.
In other words, if all existing ciizens' (such an outdated word, sorry) incomes go up 3% every year -a good thing- the dreaded income inequality will widen every year too if the bottom rung of the ladder is always being replenished with new people.
I'm not saying we are exactly in that situation at all but it's worth keeping in mind that income inequality all by itself is not necessarily a bad thing.
Norway, a welfare state to be sure is also a bit of an outlier (as the US is) on this chart...but for somewhat different reasons. I'm guessing that immigration to this non-EU country is much more restricted than the rest of Europe and the US.
Uh - no. Ask all of those Norwegian Arabs.
http://www.eutimes.net/2009/04/norway-threatened-by-islamic-immigration/
Looks like they too have their hands full in this regard but for the purposes of this GDP/income distribution issue the most important thing is the productive potential (education, skills, wealth) of the immigrants in question not their color or cultural background.
Perhaps to best illustrate my point I think I'd like to see where Switzerland would fall on this chart (wealthy, non-EU with tough immigration policies).
Or Saudi Arabia...
Let's make this simple....
What is a socialist government ?
One whereby the size of government is 50% of the economy ?
.............................
Bottom line....
Mandate that the government can not exceed 10% of the economy...
Then let "democracy" play around with the 10% all it wants....
.............................
And in terms of better wealth distribution....this can be remedied by "reward" for work...via company stock....private or public....
Or just return to the old "Hacienda" days...
The Hacienda days have returned to the US in a big way....
"Mandate that the government can not exceed 10% of the economy..."
FYI, there are only 3 countries that obey that rule today. Those are :
Somalia, Turkmenistan, Afghanistan
They must all be libertarian paradizes....
They are, that's what libertopians fail to understand!
http://en.wikipedia.org/wiki/Tax_rates_around_the_world
Above are the tax rates around the world....
Switzerland, Hong Kong, and Singapore have very favorable tax rates....
Singapore is number 1 in millionaires per capita in the world...and have rebuilt themselves in just 40 years....
................................................
This is so simple....
An economy where taxes get out of the way ....become a much smaller % of the prices of goods and services.... WILL be able to compete in pricing its products more favorably....than its peers whereby taxes comprise a much higher portion of the price....
..............................................
If it were that simple I don't understand why there are no countries in the world with 0% tax rate.
I'm all for limiting the size of government, but I don't think limiting it to an arbitrary percentage is the real issue as nobody knows what that percentage should be, nobody knows what is the "optimal size of government". A country with 0% government doesn't work, and a country with 100% government doesn't work either (check former USSR). What's the optimal percentage? No idea.
I think the most critical issue is not to limit the government to an arbitrary size, but to ensure that governments always and solely work for the long term benefits of the people they are supposed to represent, and not just for the benefits of the very few and the lobbies who represent them.
So the real question isn't what should be the government's size but how do we, the people, control our governments? Normally, in a well functioning democracy, that control should be done via the voting booth. But when you get to a situation like in the USA where the two alternatives, republican or democrat, are just two faces of the same coin, the people aren't in control anymore. The lobbies are.
"I think the most critical issue is not to limit the government to an arbitrary size, but to ensure that governments always and solely work for the long term benefits of the people they are supposed to represent, and not just for the benefits of the very few and the lobbies who represent them."
You're kidding right?
Think about it this way....
The US makes a BMW....
Germany makes a BMW....
Japan makes a BMW.....
The BMW's are the same....
Which country will sell more BMW's ?
The one that has a 50% tax rate ...or a 10% tax rate ?
...................
You walk into a showroom....there are three black BMW's.....They are the same....
One is priced 20% less than the others....
Which one would you buy ?
Strange that BMW develops and produces most of its cars in Germany, one of the countries in the world with the highest share of Government...
Germany makes a stellar product....
But if you walked into a showroom that has three BMW's that are the same....
One is 20% less....but is the same overall...
Which one would YOU buy ?
.....................................................
The US needs to solve its economic problems which is simply solved by rebuilding its manufacturing base and increasing the sales of manufactured goods....
This is so simple....
A 10% burden is far lighter than a 20 to 35% burden....
....................................................
What the US has to do is to replace its tax system to a broad based consumption tax which would replace the corporate and individual income taxes.....
In 10 years the economy based on a 10% consumption tax only would be many times the size of the current tax system economy....
Much needed private side employment is the objective....
Simply pay US workers Chinese wages with no benefits. Simple.
shhhhhh. Don't tell them what's coming.
You are focusing on the trees, and not looking at the forest. But while we are at the tree level, whose military protects the Eurozone? Whose biotech R&D provides the medical advances that they give away for "free?"
What other inputs are you missing in the German vs. Amerika equation.
Who's military occupies the Eurozone? US Biotech is a waste of money. It wasn't always, but it is now.
The USA "protects the Eurozone" and gives away its biotech R&D, all for nothing ?
Two possibilities : or the USA is incredibly generous (and stupid), or, more likely, you are incredibly naïve, misinformed and living in a parrallel world.
US Army protection is paid by people who want to be protected from the US. Actually, like any good extortion scheme. US tax payers is irrelevant in this.
Hong Kong is truly in a class of it's own regarding tax rates, total tax rate is around 10% for both individuals and companies. This is without any tax planning, behaving like a normal good member of society.
Actually, if anything, from the graphic we see a slight trend towards wealth and GINI being inversely proportional.
Absent the horrors of war, which make ANY form of government rather shitty, such systems actually work very well. Even in the face of near constant invasions by Ethiopia and the UN, Somalia is doing quite well (http://mises.org/daily/2066). For Afghanistan, I think you jest. You must take the weighted average of the US and Afghanistan, as Afghanistan is a puppet state at best, and you probably don't count spending by the Taliban, which is a rebel government.
I don't know much about Turkmenistan, so I can't comment.
Aint it amazing how libertarians can rationalize anything?
Prosperity attracts looters.
I did find the article about Somalian customary law interesting. I don't think it would allow for a MIC.
point being? Our law should not either.
The (apparently secret) lesson from World War II -- it doesn't matter how high your debt is if you have the most awesome military.
You know what else is amazing? US government spending as a percentage of GDP was also less than 10% prior to 1910 (http://www.usgovernmentspending.com/us_20th_century_chart.html). I don't think even a socialist retard like you could equate the US then with Somalia today.
I'd rather live in "Socialist" USA then in US circa 1910 thanks.
You can dream of utopian sheep, but 1910 was a great year for about 10% of the US Population, the other 90, not so much.
My sister used to work in Somalia as an MD for Doctors without Dorders. I don't think she'd agree that that system "works very well". As a matter of fact Somalia is one of the very few countries where Doctors without borders was forced to shut down its operations because the state of lawlessness and permanent danger was so unbearable.
I find it amusing that someone sitting in a comfartable chair somewhere in the West would use Somalia as an example of a system that "works very well".
As for Afghanistan, that's what happens when the "official government" is so small and peniless : a foreign or a rebel government takes its place.
Somalia is F'd up due to the non-stop destabilization efforst by Western powers, primary being the US. The US does not want a stable government in Somalia backed by the majority of the Somali people. The US wants a compliant puppet government that will allow the US basing rights and access to the huge oil and gas fields off the coast. The fishing off Somalia is some of the richest in the world.
Somalia is the future home of AFRICOM. The charter of AFRICOM is to project US power and block the growth of developing powers like China and India. The size and strategic location of Somalia makes it the perfect location. The pathetic performance by Ethiopean troops has delayed AFRICOM frommoving into Somalia. The US paid for the Ethiopian incursion into Somalia.
Djibouti is the US base in Africa, and currently the only US base in Africa. Though run by the US, it hosts multinational forces. The current tactical purpose is to prevent Somalia and Sudan from becoming Afghanistan. Your view of Somalia's role is not accurate.
This is what TPTB have spoonfed you. Monsters abroad, and not OUR problem.
Our presence has the exact opposite effect of its intended purpose.
Interesting.
"..Germany, one of the countries in the world with the highest share of Government"
"find it amusing that someone sitting in a comfartable chair somewhere in the West would use Somalia as an example of a system that "works very well".
Are you even aware of the duality this represents? Oh is that because one supports your misinformed self, and the other does not. We don't even know what to make of the goings-on in our own capital city. Much less the heresay from relatives half a world away. Let's get informed, and clean up our own backyard, within the rules set forth for us 230ish years ago, shall we?
Are you not sitting in a comfortable chair in the west? You presuppose our system is wrong, not the author. The author clearly has a point, you don't.
"Are you even aware of the duality this represents?"
Nope. Please explain.
95+% of the westerners who go to Somalia do so in blatant violation of Somali tribal law. As such, they are automatically outcasts. Like an illegal alien, or someone driving without insurance. If they worked within their system, they would have a much easier time of it. But they can't be bothered. They would rather throw money at the problem and have some strongman go in and ethnically cleanse people until there is only one tribe left, and their council becomes the new government.
with heavy imperial military intervention, mind you.
I replied to this earlier, but then I looked it up, and found that you are a filthy liar. Turkmenistan's government is greater than 10% of its GDP at 13+%, Afghanistan's is more than 20%, and Somalia simply doesn't have a government.
Of course, if you want a libertarian paradise, move to the fucking United States of America circa 1910 and find US government Spending at 7% of GDP.
I'm not even going to bother comparing quality of life in 1910 compared to today.
Not a liar, here was my source for the above comment :
http://anepigone.blogspot.com/2008/03/government-spending-as-percentage-of.html
Turkmenistan : 9.6%
Afghanistan : 9.2%
As to Somalia, as you well said, it doesn't have a government, so its share is zero.
All three below 10%.
As to moving to the USA circa 1910, no thanks.
Why didn't you invite me to move to the entire fucking planet earth circa 40000 BC. That must have been even better, government spending was at 0% of GDP.
It's the hell bent for leather, no regulation is a good regulation mentality the Reagan and Greenspan gave birth to that got the US in the current mess it is in. I think the US should scrap its form of government, rewrite the constitution, give the states more power to borrow and run deficits and tax the shit out of the rich. I'm in the 44% tax bracket in Canada and it don't bother me none since I'll be retiring next year at 50 knowing I've got free medical till death. Grab a copy of the Canadian constitution, laws and regulations and where it says Canada, white it out and put US, where it says province write in state. We're doing quite well up here with our gentler form of capitalism not the mockery of every man for himself, wealth destroying form of GDP in the US. Back out the differences in medical and legal portions of GDP in the US GDP and you will see the high GDP vanishes.
Good luck with that, dumbass. "Tax the shit out of the rich" and see what happens. They'll be gone in a year, and you'll be just another backwards-ass Soviet Republic.
Fascinating to see the PIIGS + UK + US clustered to the right of this chart.
I have no idea what to make of this yet - it's as if excessively cheap money and a finance-led economy leads to income inequality. Or as Tyler says, maybe the other way round.
I'm just wondering why Iceland's coefficient is pretty low in this chart even though they had cheap money and finance-led economy.
Any clue?
Trav has previously nailed this one. The rise in relative % of the financial industry is a result of the migration of manufacturing... something had to take its place. With outsourcing, companies dramatically dropped input prices, but did not fully pass this savings on to consumers. Instead, it went to corporate principal actors (not necessarily shareholders). As a result (and obviously additional factors), to a large extent, we got the wealth gap.
Once the financial behemoth takes over, cheap money is just a skip away.
Then again none of the above countries save the US keep 1% of their citizens behind bars. Oh and the US used to be a "resource rich" country, but unlike Norway it did not save a share of the proceeds from these resources, instead it built a society predicated on cheap access to the resoucres that now have been used up (especially oil - the only real resource Norway has).
Another resource that Norway has is Norwegians - they have a strong culture where sociopaths are not rewarded. Saudi Arabia has a lot of oil too, but isn't exactly a socialist paradise, closer to a libertarian one.
Many libertarians have had the grace to study statism intently. I would appreciate it if statists like you would spend some time reading about the other side before building strawman arguments.
Saudi Arabia, libertarian? You're being silly now, doctor.
Saudi Arabia is an example of what happens in a Libertarian system when one group has all the money, which is the result of any Libertarian system. You wonder "why dont' we have any libertarian societies" the answer is that we do, we have plenty. The problem is that you don't get to pick and choose what is or isn't libertarian just as socialists don't get to pick and choose what is socialist. If there is limited government, that is a libertarian system... move to Mexico buddy.
+ 100000000000000000000
Somalia has almost no government.
Haiti has almost no government.
Two examples of paradises created by neoliberalism, no?
Haiti has plenty of government. Try opening a business there, and their thugs will be there shaking you down for cash before you can put up the "open" sign.
Wow, you're so far out there, you might not even hear me. Libertarian societies are based on the right of the individual, national defense, roads, and most importantly, a stable and just court system with defended property rights, e.g. Switzerland. You can't say any of those things for Saudi, or mexico, in fact your strawman is a joke. Try reading hayek next time before you throw it in the fire.
"just court system with defended property rights"
Cool. I don't have any property, I'm a wage earner who rents an apartment. So, I have to pay taxes to maintain a "just court system" to defend "property rights" of those who have property (not me).
So when nobody has any private property rights, where will production come form? Who shall produce, to give you a job, to pay those taxes? I agree there are imbalances, but straw-men will not fix them. Remember, justice is to be blind.
And yet production happens, jobs exist, and the world turns. If you don't want to work in our fine country and get taxed at the rate, then move, nothing is keeping you here. There are plenty of capable people willing to do your job, assuming that isn't camping out in your parent's basement until the perfect opportunity arrives.
How exactly does a stable and just court system exist in Mexico? Your Swiss example is a Unicorn.
The statist utiopia is the same Unicorn, Shitting Skittles.
I'm speaking of a society that exists today, not a utopia. I have quite a bit of freedom and no worries about lawlessness today. You seem to be advocating some radical changes that will likely take that away. Sorry, I won't pay for that.
NEWSFLASH: Socialists twits have declared that Switzerland "doesn't exist". News at 11.
"Switzerland" exists because the wealthy put thier money there because it isn't taxed. The people live on the scraps from that money trade. Does Switzerland still produce chocolate or do they import that too (probably imported for the people, exported for the elite...)?
Our support of the Sheiks via force projection would have nothing to do with the conditions anywhere in the M.E. I suppose. Our drug policies would have nothing to do with the conditions in Mexico.
These are certainly examples of where government could be reduced....n'est pas?
What's your point? Do you think if the US stops intervening in foreign countries everyone else will stop too? Time to grow up Peter Pan.
If I may enlighten you: The nordic countries have moved dramatically away from socialism in recent history and more toward a fair and just "Libertarian" model as opposed to the statist model the US is moving towards (left or right) - notably Denmark and Sweden have moved away from socialism to great success.
http://www.econtalk.org/archives/2010/06/sumner_on_growt.html
Yet at 58% (2009) the share of Government Expenditures / GDP in Sweden and Denmark is still one of the highest in the world, and almost twice as large as that of the USA.
again with the armchair quarterbacking.
Yes, a country where men with guns have seized all of the mineral wealth, and now use the limitless force of the American War Machine (tm) to hold on to the reigns of power is a libertarian society.
Take your doublespeak somewhere else, you sniveling twit.
It would be much more interesting to plot the changes in GDP versus changes in income (in)equality over different timeframes. You could also check metrics like HDI on one end and public spending/GDP, or maybe the Heritage Index of Econimic Freedom (http://www.heritage.org/index/) on the other.
I do not see what this is trying to show. The data set is a incomplete group of European countries. If you exclude the US (as it is not in Europe the last I checked). You are going to get a negative correlation coefficient (ie flatter distrbution is good).
If you are going to add in the US the slope may be positive but it is unlikely to be significantly so.
If the point is the US has a higer GINI and higher income, this is true but Namibia has a GINI of 0.7 and an average income of about $4000.
All I can conclude is that this article is not a complete thought. Please try again.
If when the economics profession is completely discredited as a complete joke along with all their GDP per "useless fucking metric" graphs, the Gini coefficient needs to go into the garbage pan of idiotic ideas as well. Feel free to attempt a textbook definition of it and why it's even remotely relevant. And nevermind that Gini is almost always calculated off income and not actual accumulated wealth. "WE MUST HAVE INCOME EQUALITY" the line starts, but you never get the end of it -- "So we can prevent productive people from entering the ranks of the rich". Then add to the confusion by comparing it against GDP per capita (another meaningless statistic) and you get a four quadrant graph which reads to a statist like "(i) Room to tax the living shit out of, (ii) Not a lot of gain to taxing the living shit out of, but do it anyway, (iii) Only Tax the living shit out of your political opponents, (iv) Think of a whole new system of conficating nearly everything anyone does on any level you can imagine"
This analysis should show up in The Economist about 15 thousand times over the next year about how we need to let the Bush tax cuts expire and fill the deficit gap by increasing taxes.
The funny thing about GDP is that $50 spent by the goverment on a contractor changeing a lightbulb, is counted as equal to a private sector employee spending $50 woth of their employers money changeing 10 lightbulbs.
In Sweden we call it "the black hole". All the overpriced crap bureaucrats blow their excess budget funds on at the end of the year, in order to not post a surplus and thereby risk getting their budget cut by the peopole upstairs. Why cut cost when you get nothing for it?
Another funny thing about GDP is if a society chooses to make crap cars that are always breaking down, the cost of repairs increases GDP.
Funnier still,
a society where root canal work costs 1200U$ instead of 50€ (here in France) sees a nice kick to GDP. (Hmm, do dentist's charges go into GDP?).
Not defending the witless gov't spending here in Euroland, but a little balance, plz.
As an American, I'm proud to spend $1200 on a root canal. You can tell those effeminate French wussies to go to hell! Hell, those SOBs actually have unions that get out and protest on the streets! Everyone knows that their standard of living is high because we are out there defending them against terrorists and communists. If it wasn't for us, those little snots would be answering to Putin right now. And you know they've got all them fancy trains and good roads and highways without potholes. Well its our dollar that's paying for all their socialist medical care and short work week, and one month summer vacatiions, and cheap medical care. Damn those French! (Why can't we have what they have, sniff, sniff, sob, sob...It's not fair, I'm tellin ya, it's just not fair!.........It's.....not......sob, sob.....
"Another funny thing about GDP is if a society chooses to make crap cars that are always breaking down, the cost of repairs increases GDP."
True, but only in the short run, or as long as you manage to extend your credit. This also true when goverment does it, but since the electional cycle is only 4 years and since the avarege voter have much less sense about the public fiscal situation then their own, a wasteful politican have much bigger odds for survival than a wasteful car producer.
Sweden and Denmark have better GDP per capita than Italy, Spain and Greece, and slightly better than the UK, Germany and France.
Blaming the sins of US casino capitalism on "socialism" is as laughable as blaming the problems of Weimar Germany on jews. It would be funny, if it wasn't so tragic.
You have a double standard definition of socialism which twists your thoughts into an incoherent mess. "Casino capitalism" is not capitalism, but government intervention at the most basic level of the economy, the distribution of savings.
Fun site to see much more detail, including time series live:
http://www.gapminder.org/
Looking at the results the conclusions are fairly simple, if you have a democracy and open economy, it doesn't really matter whether you are socialist Sweden or relatively free market US, prosperties are very similar and it is difficult to get ahead of this pack unless you have lots of oil or are a very small country with a large financial centre (Luxembourg, various tax shelters).
Historically, in the last 60 years three countries maintained a lead, Switzerland, Sweden and the US. While they have very different flavours of capitalism, what they do have in common was having very good wars. Sweden spent six years selling iron to the Nazis to make their panzers out of. The Swiss were only able to sell transit rites for shipping Nazi soldeirs through their railway tunnels.
More honourably, the US (eventually) joined in, after their economy and armanents industry had been built up with UK gold.
The main advantage all three countries had was not having the majority of their infrastructure destroyed as the rest of Europe and Japan had.
Switzerland fell to earth when the digital revolution destroyed their watch industry. Sweden joined us mortals following a housing boom in the 90's.
Due to the size of the economy, the US maintained a lead, even in recessions, because when America sneezed the world caught a cold, and everybody else marked time until the US picked up again.
This time of course is different. Most of Asia is motoring ahead, they don't need to wait for the US to pick up again. If the US does go into a double dip, and enter a prolonged period of asset write downs, then it may end up being just another 'normal' country like Switzerland and Sweden, or for that matter the UK turned out to be.
And even though the UK's postwar decline was only relative, it was a humbling experience.
Just looking at the chart it would seem that, excluding the outlier Norway, the trend would go down; the higher the Gini coefficient, the lower the per capita GDP.
But, assuming that I am wrong and the trend indeed goes in the opposite direction, the conclusion that I make is that the greater the GDP per capita the more the upper classes benefit; that gives lower, working classes less incentive to be productive. Even if I said the opposite, the greater the Gini coefficient the greater the GDP per capita, the benefits would still be going disproportionately toward the wealthy.
There is something that just strikes me as being wrong with this chart, though I can't put my finger on it.
On the surface, it might look like Norway is doing something "right". Somehow I suspect that would change if one took a look at just what goods/services a dollar will buy there, versus the U.S. When I visited Norway quite a while back, it was remarkable how much stuff cost. Shouldn't the vertical scale be showing purchasing power, rather than the arbitrary "dollar" value?
And what about upward mobility? The idea that income inequality, while it may show a big "GINI" average value, is static for an individual over a lifetime, is quite misleading. I don't speak for other people, but I didn't start out with a damn thing. I worked multiple jobs, got educated, saved, started a business and ended up not too badly off. All because of the fact that I happened to be born in the most free country on earth. Something tells me that would not have happened in a "People's Republic". Or in Norway, either.
Final point. Although it wasn't specifically said in the article, there's always somehow the unstated assumption that "inequality" is the same thing as "injustice".
The US is an outlying data point because it was based in freedom, not because it set out to achieve income inequality. Inequality is simply a natural side effect of freedom, property rights, and the fact that people are not simply clones of one another. We tried this freedom experiment, once upon a time. It worked. In fact, it worked spectacularly.
Treating "equality" as a goal might sound noble, but when it is tried, disaster is the inevitable result. The more "equal", the greater the scope of the disaster. Yet the "equalizers" never seem to give up, until they have finally brought the disaster to their own country, or better yet, to the whole world. That experiment has been tried over and over. It failed. In fact, it failed spectacularly.
And now, it's going to fail here, as well.
None too soon, I might add.
I certainly agree that puting equality before freedom leeds to spectacular failures.
But the typical social democracies of Western Europe (Sweden, Denmark, Norway, Netherlands, Germany, France) aren't what I'd call spectacular failures either. On average, they have a lower level of unemployement than the USA, a lower level of private debt, and a much higher savings rate. And if you look at incomes and take into account higher social benefits and lower health care costs, on average their residents are wealthier than those of the USA. All of this despite even larger governments than that of the USA.
Why the hell do you think equality and freedom are mutually exclusive?
Equality and freedom are complementary.
The motto of the French Revolution had already said: "Liberté, Egalité, Fraternité"
Equality of opportunity, not outcome.
The son of a billionaire and the son of an unemployed man on a Philadelphia ghetto have "equality of opportunity"?
Strawman alert.
Human beings are created equal. Free to pursue "happiness", that is, choose their careers.
What I think you are suggesting is that a poor person in America can't succeed. Rich children are rich because of their parents. In a generation or two, this wealth could be all squandered.
Smart poor kids elevate themselves through hardwork every day, including today. Until such time as private property is completely criminalized and we all work for the government.
Welcome to the real world. Work is a drain on resources. People at the top have already taken into account this little fact and well, are steering to accomodate the reality.
So you want to use a gun to rob that evil billionaire, who has created at least a billion dollars worth of good for society, to give it to someone who does nothing for society?
That is where socialism falls apart. You people can't see the guns in your own hands, and when you do, you go apeshit with the demands, resulting in mass killings on the scale of Stalin's purges.
News flash:
The billionaire doesn't need a billion dollars to live comfortably, so the billionaire gets taxed.
That's life, deal with it.
They're all saving plenty of money by virtue of the US defense budget, I would point out. If that were not the case, things might be quite different. Air force bases don't come cheap.
The best example of what I was trying to say would be what happened in Germany during the postwar period. In one half, the perfect "from each according to ability, to each according to need." In the other half, (relative) personal and economic freedom. Same culture, same language, same history. One half turned into a wreched cesspool of human carnage over the span of a few decades. People died trying to get out. The other half ... Well, you can figure it out.
The reason European "Social democracies" haven't gone the way of East Germany is simply that so far they have failed to practice socialism as fully and as purely as the Communists did. The basic idea is exactly the same, it's just a question of "how much."
Your argument would appear to be that, although a large dose of strychnine is fatal, everyone must be required to drink at least a little. Or, perhaps, when a person comes down with cancer, it's wrong to remove 100 percent of it, so we should remove just enough so the patient doesn't quite die.
This logic does not hold up. Why, when socialism is such an absolute disaster when practiced fully, would you take the position that a "little bit" of it ( where somebody else gets to define what that "little bit" is ) is absolutely necessary, not just for you, but for me as well? I don't buy the argument that even a little bit of socialism is necessary, proper, or moral. You shouldn't be buying it, either.
The socialist states of Europe are a kind of middle ground, somewhere between freedom and tyranny, but it's an unstable and unsustainable situation. Take a look at sovereign debt, for every one of these "social democracies." Sooner or later, European social democracies will finally run out of other people's money. It's looking to be sooner, at this point, isn't it?
Please, let's not imitate them. It will turn out very badly.
And what a shame it would be, to flush away into the socialist commode the one distinguishing characteristic -- Freedom of the individual -- of what was once the finest country on the face of the earth.
If Governments were analogous to a cancerous tumour, we should get rid of them entirely. That means the entire activity of society should be in private hands, 100%.
But as far as I know, even the most ardent libertarians would agree that national defense, law and order, roads and maybe a few other things should be handled by governments.
So it seems the endless argument between libertarians and social-democrats is about what is the optimal share of government, what is the definition of a "public good". Libertarians seem to believe that it shouldn't be higher than 10 to 15% of the entire economic activity of society, whereas social democrats believe it should be around 45 to 50%.
Nobody believes it should be 0% or 100%.
The USA is around 30%, European social democracies are around 45%. Some small succesful Asian tigers (eg Hong Kong and Singapore) are around 15%, but many failed states are also around that percentage.
I just don't know what is the optimum, but I am wary of all absolutist axioms such as "governments are always bad" and all ideologies in general, as I beleive that optimums are achieved through trial and error, through alternance of ideas between libertarian and social-democracies.
As to your sovereign debt argument, I don't think the US one is any less riskier than that of Germany or France. The three have roughly a public debt level at 80% of GDP but in France and Germany Government revenues are around 40% of GDP (ie public debt = 2 years of Government revenues) whereas in the USA Government revenues are only 20% of GDP (public debt = 4 years of Government revenues).
As to the US air force bases in Germany (NB there aren't any in France), I don't think there are many Germans who wouldn't be glad if they'd get rid of them.
The French, German and British military expenditures are far large enough to defend them from would be aggressors (FYI, 3 times as large as that of Russia), so I don't think they require American help.
If Americans keep spending more than 50% of the planet's total military expenditures with only 5% of the world population, they can only blame themselves for it.
I am not advocating anarchy. I am advocating freedom, which implies a government constrained by its constitution to do only those things enumerated in that constitution. At one time, that's what we had.
It isn't about what percent of GDP is the property of government. It's about what a government may, and ought to do, and what a proper government ought not do. If we could just settle on that, paying for it would probably be a whole lot easier for everybody.
Governments that violate the rights of individuals ARE a cancerous tumor. Proper governments are not. There is a difference. But at least get the quote right. I didn't say that government is a cancerous tumor, I said that socialism was. And I stand by that.
Take a look at the founding documents of the US. The powers delegated to the federal government are clearly spelled out. Socialism is nowhere to be found there.
Obvious issues existed at the very beginning, specifically that of slavery. Thankfully, that matter was finally dealt with. Yes, it took way too long, but it got done. Voting rights, same thing. Took too long, but got done.
No, it's about what a government should and should not do, not about "optimal share."
As to the "public good", I would ask this: Under what circumstances is it morally justified for a group of people to do something that would be wrong if done by an individual? If it is wrong for me to steal from you, does it somehow become right when fifty-one senators and 51% of the US House agree to do it on my behalf?
On the military spending thing, I share your sentiments completely. Unfortunately, short of just flat running out of money, I don't see how to stop it. Voting doesn't seem to help much, I'm afraid.
I certainly agree with you that the powers of the government should be constitutionally limited. But I don't think anybody writing a constitution at a certain point in time can foresee the level of complexity of society driven by technological advances, productivity increases and efficiency gains that might prevail hundreds of years later. It seems obvious that these limits are to evolve and adapt with time, whether it's those of a tribe of hunter gatherers 30000 BC, an underpopulated land of yeoman farmers minding their own businesses such as the USA ca.1780, or that of today.
For Example, those who wrote the constitution didn't foresee that private corporations such as Union Carbide or Chisso could cause such environemental disasters as in Bhopal or in Minamata and needed to be regulated and controlled by governments. No, these powers aren't spelled out anywhere in that 230 year old document.
There is no such thing as an absolute code of morals, and even less an absolute constitution, frozen with time, valid forever. Nature evolves, it needs to adapt, so do human societies. Get used to it.
I'd like to see where Canada lies by comparison....I've noticed Canada is often left out of many of ZH economic analyses.
It was a Goldman Sachs' analysis. Lance, are you offering to add Canada to this analysis? That would be great.
CANADA
GDP (PPP) = USD 38000
GINI = 0.30
Just above Germany, next to Iceland
If wealth is power than how is it that an indebted collection of states (ie government) has more power than the wealthy corporations that operate in these states?
The answer is "They can if the rule of law is enforced on corporations" but lets be honest the rule of law went out the window long ago. So now there is nothing stopping large corporations from buying (quite literally) power from the government.
Your not living in a democracy or socialist state. Instead, its rule by the money makers which is similar to being ruled by a few dozen syndicates.
Nobody in this thread has picked up the contradiction of measuring how equal a country is by its average income. Yes, the US has high income and a high GINI coefficient but chop out the top earning 5-10% and its average income will drop substantially. Do the same to Norway and it would drop much less so.
What % of the US population can say they earn anything even close to the average income? Wouldn't it be better to earn 80% of $15K per annum than 20% of 20K per annum?
Income inequality is a tar baby wrapped in a strawman placed on a bear pit.
As my grand daddy used to say, it's not the money you make, it's the money you keep.
Who cares if you make a million, if the top bracket on income tax goes back to 90%?
And please kick Pan-the-ist, or Sexual Harassment Panda, or whatever his name is, off the list. He's not really adding to the conversation. Just setting up strawmen and knocking them down...it's obvious and childish.
Now....Captcha....18 minus neg 56 equals....
Frank Sinatra paid 90% taxes and still lived like a king. How much money do you really need to squat over to satisfy you? All of it?
Once when Loki and Odin and Hoenir were traveling, they came upon a river. On the bank was a large and beautiful otter sunning himself. Loki wanted the coat of the otter and so killed it with a stone and skinned it. Later, they came upon a house and asked to spend the night. The holder saw the otter skin and recognized his son, who often turned himself into an otter and basked on the river bank. He demanded compensation from Loki that he should fill the otter skin with gold and stand it up and cover it. Odin and Hoenir stood as surety while Loki went to find payment. Loki stole the treasure of Andvari, the dwarf, including the enchanted gold ring the dwarf used to make gold with, though the dwarf begged Loki to let him keep that one thing. Loki was adamant and required it of him, and so (dwarves being spiteful beings) Andvari, in fury, put a curse on the ring and all the gold, so that it would be the bane of every man who greedily collects it. Loki returned with the treasure and the gods filled the otter skin with it, then stood it on its feet and covered it over with gold. When they were finished, the grieving father pointed out that a whisker was not covered and so, though Loki planned to withhold the ring, it was demanded of him, though he warned the father that it would be the death of him and his sons. The gods went on their way, as gods generally do after making trouble and causing strife. The father did not long enjoy his gold, as his eldest son, Fafnir, coveting the treasure, killed him in his sleep and refused to share it with his brother, Regin. It was all his and he was rich! Rich! Rich! He became a dragon brooding over a golden hoard, which was of no use to him except that it was his. Regin brooded over the treasure from afar and plotted and schemed to acquire it. Too cowardly to challenge his brother for it himself, he maneuvered the young Sigurd into challenging the worm. Only death at the hands of Sigurd, egged on by Regin, freed Fafnir of the burden of the treasure. Sigurd won the treasure, and started his possession of it by murder, slaying Regin because the birds told him Regin was going to kill him.
Really, how much is enough? Do you need the treasure of the Nibelungs? Would you want it?
You answered your own question. We want to keep what is ours. We only want what we have earned. The "gods" in your tale are like the governments of today, stealing from the people to pay others they have wronged, and perpetuating violence and misery. Only unlike the "gods" in your story, our government never leaves us alone, not even in death.
If the government hadn't stolen the gold from the dwarf, or had refrained from murdering the child, there would have been no violence in this story. Those who had earned what they had earned would have kept it, and society would progress. Instead, "greed" is vilified, even as the infinite hole that is the goldlust and bloodlust of the "gods" shatters the foundations of our society.
As a matter of fact, yes. I earned it.
It's simple really, just ignore the amount that is taxed to begin with and quit crying about it. Time to grow up Adam.
In a world of constrained resources, a lot of what seemed "earned" by some was actually stolen from others. Do you think poverty in Africa is only due to the fact that Africans didn't "earn" the right to become rich?
What does "earn" mean? Does the guy who inherits his daddy's fortune and never had to do any work "earn" more the right to be rich than the poor chinese who works 50 hours a week in a shoe factory?
If everybody on this planet really had equal opportunity at birth, I'd agree that what each one has earned during his living is entirely his. But that's not the world we live in. Very far from it.
Fun link showing US pay inequality exceeds that of the last feudal government in Europe.
http://blogs.wsj.com/economics/2009/02/06/is-inflated-executive-pay-bad-...
"or a world in which the rich get richer. As the regression in the chart below would seem to suggest, the latter is what the Obama administration should be aiming for..."
Looking at the chart does NOT lead me to believe that Obama Admin should be aiming to help the rich get richer (and push the gini index higher). I do not see a regression analysis attached. What I can tell you is that when looking at the other countries that are high on the gini index, Italy, Spain, UK, Ireland, Greece, I see a negative commonality - public debt. So high income inequality might or might not be associted with high future public liabilities.
Two extreme points: one explained by the abundancy of resources, the other should be explained by the military network woven all around the world, for people who deal in reality, that is.
After that, you have a bulk of points, where everything is difficult to systematize.
Italy has the second highest GINI and probably the lowest GDP per capita.
Greece was introduced here on this site as socialist yet see where it lies in terms of GINI.
Half a decent analysis would have excluded de facto Norway and the US for dispersion matter.
But hey, we need to talk and anything will do.
>> The US needs to solve its economic problems which is simply solved by rebuilding its manufacturing base and increasing the sales of manufactured goods.... This is so simple.... << To solve its economic problems, the US must increase the ways it creates value, AND it must reduce the cost of government as well as the number of ways that government destroys private wealth. Making THINGS is just one way to add value. There are others including media, software and intellectual property. For example: In terms of profits, at an estimated $1.6 billion, the movie Titanic made more money than most of the Fortune 500 companies especially those involved in mining, manufacturing or agriculture. For example, Peabody Energy (coal) had a profit of $953.5 million in 2007. Newmont Mining has14,450 employees and is one of the largest gold mining companies in the world. In 2007, it had $853.0 million in profit. The largest processor of agriculture products in the country, Archer Daniels Midland had $1.802 billion in profits. It also has 28,200 employees, compared to the few thousand who worked on Titanic. In terms of intangibles, probably the most valuable single piece of paper in the world is the one on which the formula for Coca-Cola is written. This recipe is the basis, according to Business Week magazine, of the number one brand in the world, a brand they appraised as being worth $66.7 billion. When you buy a Coke, a beverage that has only a few pennies worth of ingredients in each serving, what are you willingly paying for that you could get for much less with some other brand? It turns out that approximately 25% of US exports are in the form of intangibles. Anything that we create, no matter if it is assembling something of value, writing something of value, designing something of value or playing something of value, will increase the amount of value being monetized in the economy.
Drat! I disabled rich-text but it was turned back on when I saved my posting. Sorry!