The United States gives more generous tax deductions when individuals set up charitable trusts than do many other countries in Europe, Latin America, and elsewhere. This, along with the long-noticed generosity of Americans, helps explain why private donations are far more important to American universities, even public universities, hospitals, religious organizations, museums, symphonies, and other American cultural and health activities than they are elsewhere. For example, American individual giving as a percentage of gross domestic product has been about 2%, while charitable giving is under 1% of GDP in the United Kingdom.
The main case for giving tax breaks to individuals who set up foundations, and for exempting from most taxes the incomes that foundations earn, is to encourage decentralized private support of universities, health care, and many other activities, as opposed to relying only on centralized government support of these activities. Universities and other recipients in turn have to compete against each other for funds from the many foundations. I believe that such competition and decentralization of support encourages a more efficient use of resources by recipients, and makes it easier to finance unpopular art, music, or other activities that have difficulty getting support when governments are the dominant source of support.
The Bill and Melinda Gates Foundation is by far the largest private foundation in the world, especially with its gift from Warren Buffet of stock in Berkshire Hathaway. That gift will be spread out over time, and is worth in present value between $20 and $25 billion. Since the Gates foundation had assets prior to this gift of close to $30 billion, the total assets now amount to more than $50 billion. The 20 largest American foundations have combined assets of well over $150 billion, with the Gates foundation having about one-third of this total. All twenty had assets over $1billion, including more than $15 billion for the Hughes Medical Institute, over $11 billion each for the Lilly endowment and Ford Foundation, and in excess of $5 billion for the Packard and Hewitt foundations. The Buffet gift will create an outlier in the Gates foundation, but basically foundation assets overall are not highly concentrated in the United States.
American foundations do many things, and have very different orientations that range from pretty far right to pretty far left. Perhaps there is an overall tendency for larger foundations to be set up by businessmen with relatively conservative views, although neither the Gates nor Buffet foundations fall into that category. There is surely a tendency for foundations to become more liberal over time. Examples of foundations that started out conservative and became much more liberal with time include the Ford, Pew, and Packard Foundations--the Packard Foundation shifted rapidly after the death of its conservative founder David Packard. I do not know of any large foundations that moved from being very liberal to becoming conservative.
The two main reasons for this shift in philosophy are 1) that the children of successful conservative self-made businessmen tend to be more liberal than their parents. There are several reasons for this, but one is simply "regression to the mean": conservative parents have less conservative children, although one might expect this to produce some foundations that go from liberal to conservative. 2) Over time foundations come under the management of professional foundation personnel instead of the founders and people they trust. Professional managers tend to be highly educated and liberal, just like the majority of journalists at major newspapers. In order to combat this shift and other shifts over time in the focus of giving, some foundations are set up with sunset provisions which require that they give away all their assets within a given time period.
The largest foundation that I know of which succeeded in doing this was the Olin foundation under the guidance of the late William Simon. The Olin had a few goals, such as encouraging centers for the study of law and economics, and generally succeeded very well in achieving these goals. Bill Gates recently announced that his endowment would be spent within 50 years of the death of the last of its three trustees. Perhaps all foundations with tax benefits should be required to spend all their assets within 30 years or so of their creation--50 years seems too long to me.
How well have foundations done in disbursing their wealth? As I mentioned earlier, private foundations are under pressure to do better by the competition among them to support different causes. On the whole, they seem to do a pretty good job, although I may be biased since many private foundations have over the years supported my research. However, I do believe that foundations are much too prone to spend their resources on the latest popular causes and fads.
The Gates foundation deserves special mention because it is so big, and has the active management of Bill and Melinda Gates. Its emphasis on diseases of the third world seems like a good one since pharmaceutical companies are not likely on their own to invest in research on these diseases because poor countries are unable to pay much for new drugs. Hence, companies shy away from working on diseases prevalent in poor countries because they anticipate they will have to highly subsidize any drugs that they develop. Similarly, governments of rich countries generally spend their medical research support on diseases that strike their populations, which are increasingly associated with old age, while poor countries need help in fighting diseases like malaria, tuberculosis, and AIDS that strike young persons. But it is still too early to tell whether the Gates foundation will be effective. I do not believe it will be easy for a foundation that is giving away each year more money than many governments do to be highly efficient and nimble.
Much is being made of the business-like approach to giving by some new foundations, including the Gates foundation. Maybe it will be better than the old approaches, but given the sharp division of labor in advanced societies, it is not surprising that successful businessmen are usually much better at making their money than spending their money on charities. Still, I do believe that the new approach can help if it does not frown on cooperation with commercial enterprises that are looking to make profits, sometimes while trying to do "good." A significant development is that Sergey Brin and Larry Page, the immensely wealthy founders of Google, decided not to take a non-profit status for their new charitable arm Google.org in order to be able to support commercial ventures that have a social purpose.
(reposted from the other comment, where it was accidentally first written)
It's interesting to consider what the Gates Foundation declares to be the "other half" of its mission: improving American education. Perhaps it's just my overextended utilitarian neuroses, but I've always found this a little suspect. How are educational ventures of questionable efficacy even comparable to life-saving medicines for impoverished children?
My impression is that this may be the work the Foundation undertakes for show, in the kind of public-relations move you suggest in your post. An exclusive focus on global health would seem vaguely wonkish and elitist to the average American -- so to secure the reputations of Microsoft and the Foundation, Gates made the awkward bipartite arrangement we see today.
Ironically, an ideal tax policy for the Gates Foundation would be opposite Posner's suggestion: the public health work seems unambiguously worthy of tax breaks, but the education component is PR-related and a reasonable inclusion in the tax base.
The hard question, however, is how we could possibly quantify all these impressions and come up with an effective tax policy for nonprofits. I'm afraid that it probably can't be done; we either have to tax everything or tax nothing.
(But I'm open to suggestions!)
Posted by: Matt Rognlie | 01/01/2007 at 03:31 PM
Liberalism is based on guilt.
Poor people generally don't feel much guilt about being rich, but then their kids are born rich and feel guilty because they are rich.
Posted by: Half Sigma | 01/02/2007 at 09:45 AM
How would a Foundation move from 'liberal' to 'conservative'? Go out of existence?
Posted by: john | 01/02/2007 at 10:31 AM
Matt: I've long heard this one: "Liberalism is based on guilt." among the cliches of today's "conservatives" but have a few questions:
Do you kinda impute the mythology from "liberals" addressing the obvious issues of the poor and trying to do something about the situation? Do you KNOW their state of mind?
Do you then impute that "conservative" (sorry quotes are up until I notice a resurgence of principled conservatives not hooked up with massive spending and Bushism) trust funders feel no "guilt?" Because? they do nothing to help those in dire straits?
And lastly, if you think an inheritance is likely to create guilt why would you favor getting rid of the (newspeak) "death tax" thus bestowing even more on the helpless trust funder?
Thanks, Jack
Posted by: Jack | 01/02/2007 at 03:56 PM
I think businessmen also have a huge advantage in making daily/ weekly decisions -- profit. If the decision is unlikely to increase profit as much as an alternative, it is unlikely to be a better decision than the alternative.
In most charity decision making, there is no such measurable metric.
So I propose one: jobs. If anti-poverty charities were judged on a single criteria, they should be judged on the number of jobs created. So 1000 low paying jobs is better than 500 higher paying jobs. I even think there should be a social corporation set up, which I would call an Employment Maximizing corporation, which would hire managers who would have incentives to have higher head count.
Production at market prices would be needed in order to fund the increased workers. 'Profit' would be, as Marx advocated, paid out in ever larger amounts of generally low wages. Losing money would be bad for jobs, and managers.
Limiting the life of charities is a good idea in any case.
Posted by: Tom Grey - Liberty Dad | 01/03/2007 at 01:09 AM
In this context, see this interesting article in Foreign Affairs this month:
http://www.foreignaffairs.org/20070101faessay86103/laurie-garrett/the-challenge-of-global-health.html
The Challenge of Global Health
Laurie Garrett
Thanks to a recent extraordinary rise in public and private giving, today more money is being directed toward the world's poor and sick than ever before. But unless these efforts start tackling public health in general instead of narrow, disease-specific problems -- and unless the brain drain from the developing world can be stopped -- poor countries could be pushed even further into trouble, in yet another tale of well-intended foreign meddling gone awry.
Posted by: Narasimha Chari | 01/03/2007 at 01:04 PM
A few years ago when the story of the Gates Foundation was in Time,I was contributing an amount to a nursing student's education.I'm certainly not wealthy,but on reading of the amounts of time and money the Gates were giving,I increased the gift 10 fold .One of the best things I ever did.She had time to study and did tremendously well.I wouldnn't have done it had I not read of the mega rich philanthropists
donations..Essentially,it shamed me.
Posted by: corwin | 01/03/2007 at 04:08 PM
Interesting posts:
Tom..... I can't tell if your suggestions are tongue in cheek or not.
Often charities fund unprofitable cures or treatment of disease, such as AIDs in areas too poor to pay, or for diseases too rare to be profitable.
I guess your gist is that of providing jobs for the unemployed or working poor? Still an incentive to just hire to be hiring, ie "featherbedding" for the most part just lowers productivity and overall wealth, though during a "basket case" as our own Depression we made good use of public works in building Hoover Dam or the Alaska Highway and many other projects as depression era wages.
But the essence of a functioning capitalism is that of doing more with less and incenting the use of highly productive machinery. Where WE are screwed up is in not allowing the benefits of such productivity gains to trickle down and sprinkle over ALL of our citizens.
In short an efficient, productive and wealthy economy combined with a decent democracy and peopled with charitable citizens would have it all over one with a make work policy.
BTW we probably should discuss our religion based heritage of work for work's sake an "idle hands" doing the Devil's work as we DO hang on to tons of make work jobs that interfere with being just as wealthy with a FAR shorter work week. Did you know that adjusted for time on the job, that workers in a worn out country of few natural resources such as France are more productive per hour than are US workers? Considering our tremendous advantages of natural wealth this is ludicrous and points up a failure in the US.
I do not see why Posner or you favor limiting the life of foundations. I say this with full knowledge that the Ford Foundation has at times shored up the Ford Motors stock and that family members appointed to foundation boards inherit immediate and personally beneficial entree to upper strata of "society". But as government power grows, I'll take my chances that the "professional" boards will provide a beneficial diversity much as PBS or Public Radio fills a niche that would never be filled by profit-media.
Corwin Kudos for your charitable project! But don't be cowed or shamed by the rich philantropists as lower income folks give a far higher percentage of their income than to upper income or the super-wealthy. Given that the givings from lower income folk represents a sacrifice of lifestyle and a major fraction of discretionary income while at the top it's typically surplus that could not be spent on personal consumption, it is the rich who should reviewing their giving and/or shame.
Goldman Sachs just kicked out $16 BILLION yes billion! in "bonuses" how many scholarships should we expect to see from those dudes? Jack
Posted by: Jack | 01/04/2007 at 02:55 PM
Jack, I'm quite serious about Employment Maximizing companies, as an alternative to most anti-poverty charities, NOT as a replacement for profit-oriented companies.
Last year I was in Kenya for a week in support of a Slovak University-gov't Health Care center to reduce AIDS transmission from + mothers to their newborns. What Kenya needs is "more jobs" -- in other words, more entrepreneurs. Grameen Bank type micro-loans are primarily for self-owned businesses. But most folk would be happier if somebody else was the manager and told them what to do (and usually how, at first), and they just "did their work" and get paid.
Capitalism is successful at increasing wealth, capital, because it focuses the manager decision makers on increasing profit -- Return on Capital (or Return on Equity). I think charity decision makers would reduce poverty faster if they focused on increasing jobs.
NOT "make work", but low paid yet value adding work. Like a profit-company but with manager bonuses/ wage incentives based on hiring more people and keeping them employed over time -- so they must create something of salable value. Wealth creation by the poor, for the poor.
I'm increasingly in favor of term limits for all politicians AND bureacrats, like at the UN. Big foundations, too.
Posted by: Tom Grey - Liberty Dad | 01/04/2007 at 06:27 PM
It is a symptom of the rabid anti-capitalist mentality of our age that successful entrepeneurs feel compelled to finance socially popular causes, as if the services they provide society with in their regular business were somehow condemnable.
But on the contrary, if a business makes a profit, that means that it provides the people with things which they deem valuable, and what's more: for a price which the same people considers to be less than the value of what is being provided (or else they wouldn't buy the good or service in question).
It is not the foundations of businessmen that need a tax break. It is business themselves; profit is a very positive thing for society. To impose a tax on profits, or on income in general, is to punish exactly those things which most benefit society: the provision of valuable services to the rest of the people.
The legislation should be such that there be no legal distinction between a "for profit" and a "non-for profit" organization.
Posted by: Joel Pinheiro | 01/05/2007 at 12:28 PM
If you would limit the life of foundations to 30 years, would you require that university endowments be completely spent within 30 years?
What is the relevant distinction between the two types of institution -- between, say, Harvard and the Ford Foundation?
Posted by: John Kunze | 01/05/2007 at 04:52 PM
Jack, if you're still around, I think that you addressed a question to my name that was meant to reference a statement by half sigma ("liberalism is based on guilt") instead. As it happens, I'm a strong liberal who recoils at the notion that my philosophy is a symptom of irrational guilt.
Joel, I understand what you're saying, and I recognize that many "charitable" ventures are really ego-strokes with questionable societal value. I am especially critical of "high culture" and its big-money benefactors: I frankly don't care whether fancy, money-losing operas die, and I think that alarmism over such issues betrays a certain classist blindness.
But at the same time, I disagree with the market-fundamentalist assertion that profitability equals value. In my opinion, the flaw is simple: individuals don't always have money to spend, even for goods that are enormously important to their welfare. When a poor African struggles to earn 50 cents a day, unable to purchase anti-malarial drugs that would boost his productivity and possibly save his life, is his predicament an efficient outcome? No.
Posted by: Matt Rognlie | 01/05/2007 at 08:47 PM
Joel, I very much doubt that "successful entrepreneurs feel compelled to finance socially popular causes". At the very best, there might be an upward influence as a result of donation rankings, but this would still be one among many other factors explaining philantropism, not necessarily the most significant one.
Whether businesses' activities are "condemnable" is irrelevant, i think, clearly the deadweight loss of taxation and the cost it imposes to businesses should be compared to the benefits of redistribution, provision of public goods, etc.
Posted by: tim | 01/05/2007 at 08:50 PM
Tom Thanks for the explanation and your good works there. It makes more sense to me with the explanation and you've an ally in agreeing that capitalism and "The Market" are not the only tools for a functioning democracy and "protection of the tribe".
In the mid-sixties college was interuppted by my being drafted and spending a year in Korea, then just emerging or healing from being utterly destroyed by the war and the partitioning which left only ag in the south and industry in the north.
I puzzled a lot about how they could kickstart an economy, as they had no "gold" to buy machine equipment, no profits, and moratoriums on importing "luxury" consumer goods.
Just after the war one woman began a paper flower making cottage industry, and as you say, it was likely not "economic" but provided something allowed the people to participate when unemployment was 30% or 50% or whatever... who knows?
We did something of the same with WPA projects of the 30's and "make work" or subsidized projects like Hoover Dam or the AK Highway have since paid great and perhaps unexpected dividends.
I see now what you're getting at, with the philantropist making the difference for a sub-marginal start up or business. Say a small farmer who can't make it (in part due to our and other nation's massively subsidized products) but better to enable farming at less than breakeven that sit around waiting for a food allotment to show up.
It seems to me that we've a ton of the same concept tucked away under different names; such as ethanol production (big loser on its own) or that "The Market" does not cover such as the tremendous cost of caring for the aged or Alzheimers patients.
Ahhh, yes, it does "Take a Village" a bit of wisdom which I understand came from Africa. Keep up the good work! Jack
Posted by: Jack | 01/05/2007 at 08:52 PM
Matt apologies for mixing you up with half sigma! You're right.
But while I have you, perhaps we'll talk a bit about arts and values. The paper today mentioned Celine Dion finishing up a three year $100 million "gig" in a $95 million theatre built to house it in Las Vegas. At the other end of the spectrum my boy who's a talented classical and jazz pianist could find few places to play until he was 21 and could play where alcohol pays the entertainment. I suppose this is "The Market" working just the way it should.
But the arts have been subsidized by the wealthy since the Medici banking family financed Michaelangelo and others and long before. I'm sure our culture is much richer for these subsidies and that many of lower incomes benefit from opera and theater works being sponsored by business and subsidized by the wealthy. Viva la diversity and individual choice?
Joel: You seem to be making a religion of your extreme partisanship. It shows in such over-the-top "Rushisms" as setting up a straw man of "rabid anti-capitalist mentality of our age" of which you'd find VERY few.
IF you feel a certain "pushing back" it would be due precisely to the pendulum having swung MUCH too far in favor of "our?" nationless corporations and their having purchased Congress as something of a wholly owned subsidiary. Want an recent example? Walmart, not yet content with taxpayers subsidizing its work force with $1.5 billion of benefits meant for the poor by targeting 28 hour weeks and other "part time" games has come up with a new "genius" idea. That is the use of their might computers to figure out just when they need staff on site so there'll be a system of split shifts and more "part timers".
A devout "corpie" is sure to say "Grand! more "efficient use" of their $9.65 per hour wage earners. But what the hlll IS this in terms of living standards for those already laboring at les than a living wage? Two hours between "shifts?" does one drive home for an hour? Sit in a cafe? And if they do get in in 8 hours spread from 9 am to 9 pm who takes care of the kids? Or picks them up from school?
For those bereft of history they tried this hrsht in the sweat shop era of the industrial revolution and it took a lot of sacrifice from labor organizers and the work rules of the New Deal to rid ourselves of such practices. You'll please note that Walmart is hardly some barely marginal small business but has the fattest bottom line in the history of the world. And you don't want to tax their ill-gotten profits?
BTW what does your set have to say about corporate profits being the highest ever, but zipnada or less for wage increases most Americans? "Trickle down" from tremendous productivity gains dries up entirely at about $70k level. "It's THE Market?"
As for no diff between profit and non-profit concerns? Simple run your "for profit" at no profit and voila! they are the same.
Lastly if you don't want to tax corps and think income taxes are "punishment" do you have some idea how to fund our warmongering costs? the massive interest costs on "our" soaring federal D E B T?
(Puhleeze do NOT come back with "cutthabudget" unless you show where, and especially not as "conservatives" have run themselves out of office by expanding the federal goverment by over 50% in less than 5 years.) Thanks, Jack
Posted by: Jack | 01/05/2007 at 09:42 PM
Tim, you do make a valid critcism: misplaced guilt is not the only reason for businessmen to make their charitable funds. It was my mistake assuming this is their driving force.
However, when you say that the loss to the businessman must be weighed against the gains of public goods provision or other State services, then you are forgetting the most important factor of the equation: by taking resources away from businesses, we take away from society the goods and services that would be provided if the taxes had not been charged.
A business only profits because it has provided society with a valuable service. In fact, the mechanism of profits and loss is the great indicator of whether expenses are or not worth making.
The mechanism of profits and losses is forever inaccessible to government managers. Their revenue does not depend on them providing a good service to the people: taxes will be charged no matter how bad the services are.
To punish those who profit in order to give to someone who cannot know whether their expenses are worthwile or not is not for the public good. On the contrary, it is a most harmful thing for society.
Posted by: Joel Pinheiro | 01/06/2007 at 02:48 PM
Matt:
You are right, individuals not always have money.
And what is the cause of their not having money? In the free market, where there are only voluntary transactions, one who doesn't have money (income, I mean) is someone who has not been able to offer to other people something that they value.
This is the only way to get what one wants in the market: to help other people achieve what they want.
The market is the system of social cooperation: every participant helps the other in achieving their ends.
The greatest enemy of social cooperation are those barriers to voluntary transaction: taxes, which takes away from people what they have produced, and regulations, which prohibit people from entering into agreements which would be mutually beneficial.
Someone with no income is someone who is unemployed. And what is the major cause of unemployment? Labour laws.
There is no two ways around this. As much as defenders of State intervention would like to create wealth out of sheer political will (imposing by law higher wages and work benefits), that simply does not happen.
If we want to reduce poverty, we must favour the market, which is the system of social cooperation.
Every penny the government takes away as taxes is one less oportunity of social cooperation left in the market.
Going back to the subject of charitable institutions: I have absolutely nothing against them. In fact, helping to maintain an opera or providing computer classes for poor people (popular in my country, at least) seem to me noble goals. But if they are done with taxes, then they are not worth what they cost, on the public estimation of society itself.
Posted by: Joel Pinheiro | 01/06/2007 at 03:17 PM
Whew! Joel! You've really overlearned the mantra of market perfection!
Let's take a look:
(the unemployed or working poor) is someone who has not been able to offer to other people something that they value.
Jk and perhaps we'll finish that sentence? with "at a wage which constitutes a living wage." Something that IS the case for some 38 million folk in "the richest capitalist democracy the world has ever seen".
Even WORSE capitalism can NOT function at zero percent unemployment. Indeed if you look around today you'll see this exact picture: Corporate profits and the wages of CEO and upper income folk at record highs. Income for lower income folk? Flat and even down putting yet more under the poverty level. AND you can pick up the WSJ or other "business" journal and find lots of handwringing over their being the smallest uptick in low end wages. "Good lord Mr. Fed Chairman, slam down those brakes you've been standing on a bit harder?" Ah yes, and, admitted, unemployment rate of 5% (and who knows the real figure) and it's cause to "slow the economy" so to at least have 7,000,000 unemployed and another 30 million desperately grabbing for whatever job they can find, regardless of whether the pay comes close to a living wage. Ahh..... theories are SO nice in the classroom and ivory towers but not so pretty in the real world.
Income taxes? Well I'll agree with you that the income tax is friction in terms of hiring people. But! The worst of it is for the consumer and homeowner who takes after tax savings to pay for a plumber, while a company pays him and everyone else they hire with pre-tax earnings and deducts the cost against gross profits. But isn't it bit late to lament taxes now that those claiming "conservatism" have spent us into bottomless debt and expanded the size and cost of government by over 50% in their first term? Just about every second buck of federal expenditure is now headed toward the military budget or payment on our massive and soaring D E B T. Handwringing is cheap recreation, but do you propose a rational solution?
"Labor laws?" Let's see "we've" just finished up an experiment with not indexing the minimum wage, and sure enough your perfect "market" has "worked" to bid wages right on down to the $5.15 which is but a third of a living wage. If many are working at these wage levels, might you give us an idea who fills the gap between the token wage and the cost of maintaining the most basic existence? (Also..... would you offer the same deal to the employer who'd like the use of a delivery van but only "feels" like paying one third of its cost of operation?)
BTW the welfare or charitable aspects of US taxes are not high, and you'll perhaps recall that food stamps were also a means of sopping up surplus farm commodities, unemployment INSURANCE, does a lot to prevent new car lots from filling up with repos, and welfare also creates a market for goods as well as keeping us from having desperadoes on our streets begging or engaging in crime and further filling up our very expensive prisons.
And perhaps in the excitement of learning neo-econ that every society and village has always had those who were blind, lame, or down on their luck to care for? Jack
Posted by: Jack | 01/06/2007 at 09:47 PM
Jack, we get it. Corpies bad. Capitalism bad. Government good. Enough already.
Your last post. Almost none of it has anything to do with what Joel wrote. It is chock full of non sequitur. Again: CEO pay has nothing to do with anything anyone has written on this thread (how many times must this be pointed out?)
Posted by: ben | 01/07/2007 at 12:59 AM
Jack
I was intrigued by your claim that:
"...lower income folks give a far higher percentage of their income than to upper income or the super-wealthy."
That surprised me, so I did a little look around the research and it turns out you've got this point exactly backwards.
From "Charity, Publicity, and the Donation Registry," Cooter and Broughman (2006):
"According to Figure 1, low-income itemizers donate a significantly higher proportion of income than high-income itemizers, but this fact is misleading. Unlike high-income taxpayers, most low-income taxpayers do not itemize and those who do have exceptionally large contributions. This fact presumably explains away the regressivity in Figure 1. When non-itemizers are included, a flat contribution ratio of approximately two percent is a reasonable estimate for all but the wealthiest Americans. Very wealthy households, those with income over $10 million, contribute a significantly higher ratio."
Source: http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1190&context=blewp
Posted by: ben | 01/07/2007 at 01:10 AM
Ben, thanks for the response but you don't "get it".
It is not corporations that are "bad" or at fault as they, by their nature and charter are bound to act primarily upon unalloyed greed (often termed "maximizing profits on behalf of shareholders"). In so doing, they tend to serve us well,
Though I often use Walmart as a whipping boy for its wretched manner of employing labor, working the welfare system to its shameless advantage, and NOT allowing even dribblets of their phenonmenal productivity based profits to "trickle down" to those doing the work, I've a great admiration for what they've achieved in distribution and their use of computers et al. It's just that my economics and politics are in alignment with those of JFK when he said "a rising tide raises all the boats". Doesn't that seem better than a few rising while the rest sink?
And so it should be; we've doubled productivity over 25 years, and that should, at minimum be reflected in low end wages also doubling in real purchasing power, instead of seeing Congressional hand wringing over the "dire effects" of even restoring the min wage to what it was a decade ago. What's that about???
But perhaps you've a theory? or politic of just why it's such a great thing that ALL of the new wealth of OUR productivity increases are retained in corporate profits and by those earning over $75,000? Even though such constipation at the top restricts our own economy by strangling consumer demand, and as you see, (I hope?) leaving us with over-capacity, mediocre job growth and increasing poverty.
Likewise, what you should "get" is that capitalism is very much like a gasoline engine, ie. it works very well through some of its power curve and not very well at all at the bottom and top ends,along with a few in between like medical care.
At the bottom it's simply an accepted economic principle that farm commodities and generic labor have too little market power and that capital, and "few buyers" hold sway over the "many sellers" and those with little market power, and will mercilessly pound them down below the costs of production. You've read the chapter?
If you'd rather not use accepted econ principles? you CAN hear the effect just by listening to what folks say when one ASKS, "What are THEY paying?" as compared to STATING "We sat down and hammered out a compensation package." You can guess the pay scales, eh?
CEO pay IS of course highly relevant to any discussion of the flaws and failures of capitalism. To be fair though, perhaps the soaring pay of CEOs (while other hard working folk's wages are stagnant or even falling) is not an inherent flaw in capitalism but simply that they've managed to insulate themselves from "the market" in favor of an all too cozy "old boyism" with board members of their same "class" and often from their same class....... at Yale, Harvard or Wharton. How else might one explain it taking $200 million to send Home Depot's mediocre (at best) CEO packing? While their shelf stockers would simply be told "Pick up your check on the way out."
Perhaps "stockholders" "should" have a stronger voice in such matters as the CEO and a few at the top skimming the cream? But.... then the "stockholders" themselves are mutual funds, hedge funds and retirement programs who are also captained by the same class as the CEO's and board members. So not much hope there.
But? Perhaps you think today's CEO's are 400% brighter than they were in 1980? or that such genius has become very, very scarce in the last 25 years?? BTW since the mere mention of CEO pay excesses sets you off is there perhaps an emotional explanation for your defense of them?
I look forward to hearing your views and hope they are a bit more detailed and supported than your vaguely worded lament above. Jack
Posted by: Jack | 01/07/2007 at 02:02 AM
Ben: Here's another explanation. Also, it would be well to consider wealth, those at the top have a lot, while the dirt poor MS folk mentioned have little.
Also, which do you think is tougher? Giving 2% or tithing 10% out of median income or below or using the same percentages @ $100k or a million? or $100 million?
http://www.csmonitor.com/2004/1222/p15s01-ussc.html
Posted by: Jack | 01/07/2007 at 02:30 AM
Jack
Sorry for being vague, let me try to be clear.
Nobody cares that capitalism has aspects that Jack doesn’t like.
Facts do not speak for themselves. You need a theory. You don’t have one (still waiting to hear how a trade deficit causes harm). That makes you the fundamentalist.
Almost nothing you write is on-topic.
Over half the word count in these comments is attributable to you, and nobody likes a monopolist.
Clear enough?
Posted by: ben | 01/07/2007 at 03:19 PM
Ben, again, thanks for your vaguely worded and unsupported claims; a few suggestions:
Jack
Sorry for being vague, let me try to be clear.
Nobody cares that capitalism has aspects that Jack doesn’t like.
JK..... Suggest swapping "nobody" for "ben". Many of the grown ups have been trying to deal with the inherent flaws in capitalism since it emerged; we'll keep trying, whether or not you mind.
Facts do not speak for themselves.
JK Indeed! But it is good to begin with facts. Your claim of "you've got this point exactly backwards." in regard to to low income folk giving far more of their overall wealth to charity, is..... let's agree vastly overstated. With wriggling and spin the BEST you've offerred in support is that perhaps all income groups give a somewhat similar percentage of their, identifiable, taxable "income". Those less naive or partisan?? know what a charade THAT is.
You need a theory. You don’t have one (still waiting to hear how a trade deficit causes harm). That makes you the fundamentalist.
JK.... suggest opening your econ text and coming to the forum better prepared. Bone up on the chapters and then tell us how massive dollar tanking trade deficits are "beneficial?" or neutral? I'm very intersted in the theories of the whack right and Bush/coporate apologists.
Almost nothing you write is on-topic.
JK Oh? And would you rather I not answer your laments?
Over half the word count in these comments is attributable to you, and nobody likes a monopolist.
JK So? Compete! Post a thought or two of your own. Pixels are cheap and plentiful.
Clear enough?
JK????? Are you kidding? or worse? You said nothing of relevance to the main topic or my answers to your lament. Is hit and run sniping from the cover of the hedgerows your game? Or? might you manage a paragraph or so on the faith-based econ of DEFICITS, D E B T, and Trade Deficit soaring past 7% of GDP all being just hunky-dory? As long as "our" nationless corpies profit and the DOW rises...... on exorbitant oil prices?
Cheers! and give it a try? Jack
Posted by: Jack | 01/07/2007 at 06:23 PM
Let me get this straight. In response to my criticism that you post long, off-topic, theory-less comments full of non-sequitur that don't generally respond to anything posted before, you post a long off-topic post that includes such pearls as "the faith-based econ of DEFICITS, D E B T, and Trade Deficit soaring past 7% of GDP all being just hunky-dory? As long as "our" nationless corpies profit and the DOW rises...... on exorbitant oil prices?"
...which basically repeats everything you've said in each of your last dozen posts and - yet again - has nothing to do with anything. If I were Left I'd be embarrassed by such company.
Charity. Read the quote. "Very wealthy households ...contribute a significantly higher ratio." Which unequivocally contradicts your claim that "lower income folks give a far higher percentage of their income than to upper income or the super-wealthy."
Posted by: ben | 01/07/2007 at 08:47 PM