very high income

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pages: 221 words: 55,901

The Globalization of Inequality by François Bourguignon

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Berlin Wall, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Credit Default Swap, deglobalization, deindustrialization, Doha Development Round, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, financial intermediation, gender pay gap, Gini coefficient, income inequality, income per capita, labor-force participation, minimum wage unemployment, offshore financial centre, open economy, purchasing power parity, race to the bottom, Robert Gordon, Simon Kuznets, structural adjustment programs, The Spirit Level, too big to fail, very high income, Washington Consensus

The existence of substantial rents and the nature of the financial sector’s activities have made 13  For a review of the ties between the development of finance and income distribution, see Asli Demirguc-­Kunt and Robert Levine, “Finance and Inequality: Theory and Evidence,” Annual Review of Financial Economics 1 (2009): 287–318. The Forces behind R ising Inequality 97 possible the very high incomes of certain operators and executive officers, via the microeconomic mechanisms described earlier. And, in fact, the overrepresentation of the financial sector among very high incomes is remarkable. In the United States, 13% of very high incomes are connected to the financial sector, this number being 18% in France and the UK, even though this sector represents only 5% of total jobs.14 The rise in CEOs’ and top executives’ compensation is also linked to the development of the financial sector. The increasing “financialization” of economies has made them more sensitive to the annual performance of companies.

The number of people willing to pay any sum in order to catch a glimpse of these stars, and the vast amounts of money that companies will offer them to advertise their goods and thus reach out to their huge fan bases, are also significant sources of income. These superstars represent a significant segment of the very high income bracket. They have technological advances to thank for their superstar status, as these have allowed them to reach a truly global audience. Technical progress and globalization also explain the development of “winner-­take-­ all” dynamics.8 The same phenomena of scale explain the recent emergence of other “very high incomes.” In the financial sector, skilled financial operators are awarded bonuses at the end 8  Robert H. Frank, The Winner-­Take-­All Society: Why the Few at the Top Get So Much More Than the Rest of Us (New York: Penguin Books, 1995). 88 Chapter 3 of the year that are more or less proportional to the profits they generated for their company.

Overall, globalization has thus most likely played a role in increasing inequality in most countries over the recent decades, although its impact will have varied depending on the country considered and each one’s specific context or policies. Yet, there are still other forces that have played a part in modifying the distribution of income, which we turn to now. Technological Progress, Superstars, Bosses, and Very High Incomes The vertiginous development of communication and information science and technology has profoundly transformed the modes of production of goods and services, while creating an increased demand for workers who know how to use these new technologies. As with the increased specialization in capital-­and skill-­intensive goods brought about by globalization, this transformation has contrib- 86 Chapter 3 uted to a rise in the relative remuneration of skilled labor in developed countries.7 But the very facts of globalization and of the spontaneous international spread of innovations have meant that this same phenomenon has been at work in developing economies too and represents another possible explanation for rising inequalities in these countries.


pages: 935 words: 267,358

Capital in the Twenty-First Century by Thomas Piketty

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accounting loophole / creative accounting, Asian financial crisis, banking crisis, banks create money, Berlin Wall, Branko Milanovic, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation coefficient, David Ricardo: comparative advantage, demographic transition, distributed generation, diversification, diversified portfolio, European colonialism, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, German hyperinflation, Gini coefficient, high net worth, Honoré de Balzac, immigration reform, income inequality, income per capita, index card, inflation targeting, informal economy, invention of the steam engine, invisible hand, joint-stock company, Joseph Schumpeter, market bubble, means of production, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, open economy, pension reform, purchasing power parity, race to the bottom, randomized controlled trial, refrigerator car, regulatory arbitrage, rent control, rent-seeking, Robert Gordon, Ronald Reagan, Simon Kuznets, sovereign wealth fund, Steve Jobs, The Nature of the Firm, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade liberalization, very high income, We are the 99%

Again, this collapse was due solely to the decrease of very high incomes from capital (or, crudely put, the fall of the rentier). If we look only at wages, we find that the upper centile’s share remains almost totally stable over the long run at around 6 or 7 percent of total wages. On the eve of World War I, income inequality (as measured by the share of the upper centile) was nearly three times greater than wage inequality. Today it is a nearly a third higher and largely identical with wage inequality, to the point where one might imagine—incorrectly—that top incomes from capital have virtually disappeared (see Figure 8.2). To sum up: the reduction of inequality in France during the twentieth century is largely explained by the fall of the rentier and the collapse of very high incomes from capital. No generalized structural process of inequality compression (and particularly wage inequality compression) seems to have operated over the long run, contrary to the optimistic predictions of Kuznets’s theory.

Indeed, in the United States, as in France and Europe, today as in the past, income from capital always becomes more important as one climbs the rungs of the income hierarchy. Temporal and spatial differences are differences of degree: though large, the general principle remains. As Edward Wolff and Ajit Zacharias have pointed out, the upper centile always consists of several different social groups, some with very high incomes from capital and others with very high incomes from labor; the latter do not supplant the former.39 FIGURE 8.9. The composition of top incomes in the United States in 1929 Labor income becomes less and less important as one moves up within the top income decile. Sources and series: see piketty.pse.ens.fr/capital21c. In the US case, as in France but to an even greater degree, the difference today is that one has to climb much further up the income hierarchy before income from capital takes the upper hand.

If we break this down even further and looked at the top thousandth (the best paid 0.1 percent) in the top centile, we find individuals earning tens of thousands of euros a month and a few earning hundreds of thousands, even in the Scandinavian countries in the 1970s and 1980s. Of course there would not be many such people, so their weight in the sum total of all wages would be relatively small. Thus to judge the inequality of a society, it is not enough to observe that some individuals earn very high incomes. For example, to say that the “income scale goes from 1 to 10” or even “1 to 100” does not actually tell us very much. We also need to know how many people earn the incomes at each level. The share of income (or wealth) going to the top decile or centile is a useful index for judging how unequal a society is, because it reflects not just the existence of extremely high incomes or extremely large fortunes but also the number of individuals who enjoy such rewards.


pages: 452 words: 150,785

Business Adventures: Twelve Classic Tales From the World of Wall Street by John Brooks

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banking crisis, Bretton Woods, business climate, cuban missile crisis, Ford paid five dollars a day, invention of the wheel, large denomination, margin call, Marshall McLuhan, Plutocrats, plutocrats, short selling, special drawing rights, tulip mania, upwardly mobile, very high income

* For details on this product of the national creativity, see Chapter 3. 3 The Federal Income Tax I BEYOND A DOUBT, many prosperous and ostensibly intelligent Americans have in recent years done things that to a naïve observer might appear outlandish, if not actually lunatic. Men of inherited wealth, some of them given to the denunciation of government in all its forms and manifestations, have shown themselves to be passionately interested in the financing of state and municipal governments, and have contributed huge sums to this end. Weddings between persons with very high incomes and persons with not so high incomes have tended to take place most often near the end of December and least often during January. Some exceptionally successful people, especially in the arts, have been abruptly and urgently instructed by their financial advisers to do no more gainful work under any circumstances for the rest of the current calendar year, and have followed this advice, even though it sometimes came as early as May or June.

Particular subcategories of the rich and the well-paid can avail themselves of various other avenues of escape, including corporate pension plans, which, like stock options, contribute to the solution of the tax problems of executives; tax-free foundations set up ostensibly for charitable and educational purposes, of which over fifteen thousand help to ease the tax burdens of their benefactors, though the charitable and educational activities of some of them are more or less invisible; and personal holding companies, which, subject to rather strict regulations, enable persons with very high incomes from personal services like writing and acting to reduce their taxes by what amounts to incorporating themselves. Of the whole array of loopholes in the Code, however, probably the most widely loathed is the percentage depletion allowance on oil. As the word “depletion” is used in the Code, it refers to the progressive exhaustion of irreplaceable natural resources, but as used on oilmen’s tax returns, it proves to mean a miraculously glorified form of what is ordinarily called depreciation.

The low cost of high-income people’s charitable contributions, whether in the form of works of art or simply in the form of money and other property, is one of the oddest fruits of the Code. Of approximately five billion dollars claimed annually as deductible contributions on personal income-tax returns, by far the greater part is in the form of assets of one sort or another that have appreciated in value, and comes from persons with very high incomes. The reasons can be made clear by a simple example: A man with a top bracket of 20 per cent who gives away $1,000 in cash incurs a net cost of $800. A man with a top bracket of 60 per cent who gives away the same sum in cash incurs a net cost of $400. If, instead, this same high-bracket man gives $1,000 in the form of stock that he originally bought for $200, he incurs a net cost of only $200.


pages: 162 words: 51,473

The Accidental Theorist: And Other Dispatches From the Dismal Science by Paul Krugman

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Bonfire of the Vanities, Bretton Woods, clean water, collective bargaining, declining real wages, floating exchange rates, full employment, George Akerlof, George Gilder, Home mortgage interest deduction, income inequality, indoor plumbing, informal economy, invisible hand, knowledge economy, life extension, lump of labour, new economy, Nick Leeson, paradox of thrift, Plutocrats, plutocrats, price stability, rent control, Ronald Reagan, Silicon Valley, trade route, very high income, working poor

The important contribution of Wolff’s book is that it reinforces the evidence that much of the important action in American inequality has taken place way up the scale, among the extremely well-off. Wolff focuses on wealth rather than income—on assets rather than cash flow. This has some advantages over annual income as an indicator of a family’s economic position, especially among the rich. Someone with a very high income may be having an unusually good year, while it is not unheard of for wealthy families to have negative income if they make a bad investment; in each case their assets will be a better clue to where they really fit in the rankings. More important, however, wealth is in some ways a better indicator than income data of what is happening to the very successful—simply because it is so narrowly held: In 1989, the top 1 percent of families owned 39 percent of the wealth but received only (a still impressive) 16 percent of the income.


pages: 165 words: 45,129

The Economics of Inequality by Thomas Piketty, Arthur Goldhammer

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affirmative action, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, conceptual framework, deindustrialization, Gini coefficient, income inequality, low skilled workers, means of production, moral hazard, purchasing power parity, Simon Kuznets, The Bell Curve by Richard Herrnstein and Charles Murray, very high income, working-age population

QJE 111 (2): 605–637. Erickson, C. and A. Ichino. 1995. “Wage differentials in Italy.” In R. Freeman and L. Katz, eds., Differences and Changes in Wage Structure, pp. 265–306. Chicago: University of Chicago Press. Erikson, R. and J. Goldthorpe. 1992. The Constant Flux: A Study of Class Mobility in Industrial Societies. Oxford: Clarendon Press. Feenberg, D. and J. Poterba. 2000. “The income and tax share of very high income households.” AER 90 (2): 264–270. Feldstein, M. 1995. “The effect of marginal tax rates on taxable income: A panel study of the 1986 Tax Reform Act.” JPE 103 (3): 551–572. Fleurbaey, M. 1996. Théories économiques de la justice. Paris: Economica. Freeman, R. 1973. “Changes in the labor market status of Black Americans, 1948–1972.” Brookings Papers on Economic Activity, no. 1, pp. 67–120. ______ 1995.


pages: 219 words: 65,532

The Numbers Game: The Commonsense Guide to Understanding Numbers in the News, in Politics, and inLife by Michael Blastland; Andrew Dilnot

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Atul Gawande, business climate, correlation does not imply causation, credit crunch, happiness index / gross national happiness, pension reform, pensions crisis, randomized controlled trial, school choice, very high income

It might surprise us to find that a teacher and a firefighter living together are relatively rich, but only if we do not know how they compare with everyone else, don’t know where they are in the distribution, and have ignored the colors of the income rainbow. The next chart shows the distribution of income in the UK for childless couples—two people living together, their incomes combined. Half have net incomes (after tax and benefits) of less than £18,800 (about $38,000) (marked as the median), but the average for the group is around £23,000 (about $46,000), pulled up by the relatively small numbers of very high incomes. That is, most are at least 18 percent below average. The highest incomes are far too high to fit on the chart, which would need to stretch yards to the right of the edge of the page to accommodate them. The most common income is around £14,000 (about $28,000), roughly 40 percent below average. More people in this category have incomes at this level than any other. It was intriguing to tell these numbers to colleagues in the BBC, on what for them was a modest income of about £50,000 ($100,000) a year, and watch their jaws hit the floor.


pages: 225 words: 11,355

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis by Kevin Mellyn

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asset-backed security, bank run, banking crisis, Bernie Madoff, bonus culture, Bretton Woods, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, disintermediation, diversification, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Francis Fukuyama: the end of history, global reserve currency, Home mortgage interest deduction, Isaac Newton, joint-stock company, liquidity trap, London Interbank Offered Rate, margin call, market clearing, moral hazard, mortgage tax deduction, Northern Rock, offshore financial centre, paradox of thrift, pattern recognition, pension reform, pets.com, Plutocrats, plutocrats, Ponzi scheme, profit maximization, pushing on a string, reserve currency, risk tolerance, risk-adjusted returns, road to serfdom, Ronald Reagan, shareholder value, Silicon Valley, South Sea Bubble, statistical model, The Great Moderation, the payments system, too big to fail, value at risk, very high income, War on Poverty, Y2K, yield curve

Try not paying your income taxes to see how effective resistance to the engine of confiscation really is. Until the Sixteenth Amendment was passed in 1913, the Constitution effectively limited Congress’s ability to impose a national tax on income. In fact, until about a century ago, taxation was almost entirely limited to consumption taxes and customs revenues. Governments everywhere only presumed to tax people’s income in time of war and then only people with very high incomes and for limited periods of time. THE GREAT TEMPTATION Now it is common for people in places like New York to work half the year and more just to pay taxes. The sovereign moral excuse for this forced taking of people’s labor and human capital is a notion of fairness that ignores the skill, effort, and sacrifice required to create wealth. Wealth is just assumed to exist and the government has not only the right but the duty to redistribute it as it sees fit.

The Haves and the Have-Nots by Branko Milanovic

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Berlin Wall, Branko Milanovic, colonial rule, crony capitalism, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, full employment, Gini coefficient, high net worth, illegal immigration, income inequality, income per capita, Joseph Schumpeter, means of production, open borders, Plutocrats, plutocrats, purchasing power parity, Simon Kuznets, very high income, Washington Consensus

Consider the starting point of the heroine in both novels: She lives in a very rich, comfortable, and respectable household. In one case, she is married, in the other single. But then in both cases, the next step, love or marriage, is to take her to a much higher level of wealth. Mr. Karenin’s income is not mentioned anywhere in the book. However, from his conversation with Anna’s brother, Stepan Oblonsky, we find out that he considers 10,000 rubles a very high income, an income, as we find elsewhere in the book, earned by bank directors.2 We also know that a high government salary amounts to 3,000 rubles and that Stepan Oblonsky, also in the employ of the government, but at a lower level than Mr. Karenin, is making 6,000 rubles.3 So we can surmise, given Mr. Karenin’s very prominent governmental position, that his income is along the order of 8,000-9,000 rubles per year.


pages: 262 words: 66,800

Progress: Ten Reasons to Look Forward to the Future by Johan Norberg

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agricultural Revolution, anti-communist, availability heuristic, Bartolomé de las Casas, Berlin Wall, British Empire, business climate, clean water, Daniel Kahneman / Amos Tversky, demographic transition, desegregation, Donald Trump, Flynn Effect, germ theory of disease, Gini coefficient, Haber-Bosch Process, Hans Island, Hans Rosling, Ignaz Semmelweis: hand washing, income inequality, income per capita, indoor plumbing, Isaac Newton, Jane Jacobs, John Snow's cholera map, Kibera, Louis Pasteur, Mahatma Gandhi, meta analysis, meta-analysis, Mikhail Gorbachev, more computing power than Apollo, moveable type in China, Naomi Klein, open economy, place-making, Rosa Parks, special economic zone, Steven Pinker, telerobotics, The Wealth of Nations by Adam Smith, transatlantic slave trade, very high income, working poor, Xiaogang Anhui farmers

A recent review of 878 observations from 103 empirical studies between 1992 and 2009 concluded that there are several such income turning points: ‘Results indicate the presence of an EKC-type relationship for landscape degradation, water pollution, agricultural wastes, municipal-related wastes and several air pollution measures.’25 This gives us hope for many poor countries that are rapidly approaching such incomes. However, there is one important exception: the emissions of carbon dioxide from fossil fuels, which does not begin to decline until very high income levels are attained. This is worrying, since more CO2 and other so-called greenhouse gases in the atmosphere make the global climate warmer and more unstable than would otherwise be the case. What this will result in is hotly debated. There is a broad spectrum of possible outcomes, from minor and even beneficial changes all the way to global disaster, and a lot of it depends on how much temperatures will rise.


pages: 305 words: 69,216

A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression by Richard A. Posner

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Andrei Shleifer, banking crisis, Bernie Madoff, collateralized debt obligation, collective bargaining, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, diversified portfolio, equity premium, financial deregulation, financial intermediation, Home mortgage interest deduction, illegal immigration, laissez-faire capitalism, Long Term Capital Management, market bubble, moral hazard, mortgage debt, oil shock, Ponzi scheme, price stability, profit maximization, race to the bottom, reserve currency, risk tolerance, risk/return, Robert Shiller, Robert Shiller, savings glut, shareholder value, short selling, statistical model, too big to fail, transaction costs, very high income

An alternative that is receiving increasing attention, probably rightly so, is "claw back": part of the employee's bonus is placed in an account, and if he has a bad year the account is reduced. This is an effective method of fitting pay to performance if the employee is solely or primarily responsible for specific transactions involving measurable profits or losses. Consideration should perhaps be given to increasing the marginal income tax rate of persons who have very high incomes, in order to reduce their appetite for risk-taking. Such incomes typically contain a good deal of economic rent. Think of the boxing champion who makes millions but whose next best job would be as a bouncer in a strip joint, paid the minimum wage. Taxing economic rents is efficient because it has, by definition (and in my example), minimal substitution effects. It will not deflect the taxpayer to a different occupation just because it taxes the income available to him only in his present one.


pages: 237 words: 72,716

The Inequality Puzzle: European and US Leaders Discuss Rising Income Inequality by Roland Berger, David Grusky, Tobias Raffel, Geoffrey Samuels, Chris Wimer

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Branko Milanovic, Celtic Tiger, collective bargaining, corporate governance, corporate social responsibility, double entry bookkeeping, equal pay for equal work, fear of failure, financial innovation, full employment, Gini coefficient, hiring and firing, illegal immigration, income inequality, invisible hand, labour market flexibility, labour mobility, Long Term Capital Management, microcredit, offshore financial centre, principal–agent problem, profit maximization, rent-seeking, shareholder value, Silicon Valley, Silicon Valley startup, time value of money, very high income

I think on a globally competitive basis it should probably be around 25%, and my guess is that receipts from corporate taxation would actually go up. I think that capital equipment and software should be expensed on day one, again not buildings because building can appreciate in value, but equipment that is wearing out from the minute you put it into service. If you want to deal with the issue of very high incomes, then just graduate the income tax rate up. I think what you would find is that people will have much more propensity to invest. By the way, I think that capital gains is a big part of this. You can’t go back on capital gains. If people aren’t going to take their income in these huge compensation packages, you’ve got to Part 2: Interviews 111 give them some incentive to put their capital to work.


pages: 309 words: 91,581

The Great Divergence: America's Growing Inequality Crisis and What We Can Do About It by Timothy Noah

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autonomous vehicles, blue-collar work, Bonfire of the Vanities, Branko Milanovic, call centre, collective bargaining, computer age, corporate governance, Credit Default Swap, David Ricardo: comparative advantage, Deng Xiaoping, Erik Brynjolfsson, feminist movement, Frank Levy and Richard Murnane: The New Division of Labor, Gini coefficient, income inequality, industrial robot, invisible hand, job automation, Joseph Schumpeter, low skilled workers, lump of labour, manufacturing employment, moral hazard, oil shock, pattern recognition, performance metric, positional goods, post-industrial society, postindustrial economy, purchasing power parity, refrigerator car, rent control, Richard Feynman, Richard Feynman, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, Stephen Hawking, Steve Jobs, The Spirit Level, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, union organizing, upwardly mobile, very high income, War on Poverty, We are the 99%, women in the workforce, Works Progress Administration, Yom Kippur War

George Bailey: Comes in pretty handy down here, bub. —Frank Capra’s It’s a Wonderful Life (1946) THE DECLARATION OF INDEPENDENCE says that all men are created equal, but we know that isn’t true. George Clooney was created better-looking than me. Stephen Hawking was born smarter, Evander Holyfield stronger, Jon Stewart funnier, and Warren Buffett savvier at playing the market. All these people have parlayed their exceptional gifts into very high incomes—much higher than mine. Is that so odd? Odder would be if Buffett or Clooney were forced to live on my income, adequate though it might be to a petit bourgeois journalist. Lest you conclude my equanimity is some sort of affectation, Barbara Ehrenreich, in her 2001 book Nickel and Dimed, quotes a woman named Colleen, a single mother of two, saying much the same thing about the wealthy families whose floors she scrubs on hands and knees.


pages: 484 words: 104,873

Rise of the Robots: Technology and the Threat of a Jobless Future by Martin Ford

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3D printing, additive manufacturing, Affordable Care Act / Obamacare, AI winter, algorithmic trading, Amazon Mechanical Turk, artificial general intelligence, autonomous vehicles, banking crisis, Baxter: Rethink Robotics, Bernie Madoff, Bill Joy: nanobots, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chris Urmson, Clayton Christensen, clean water, cloud computing, collateralized debt obligation, computer age, debt deflation, deskilling, diversified portfolio, Erik Brynjolfsson, factory automation, financial innovation, Flash crash, Fractional reserve banking, Freestyle chess, full employment, Goldman Sachs: Vampire Squid, High speed trading, income inequality, indoor plumbing, industrial robot, informal economy, iterative process, Jaron Lanier, job automation, John Maynard Keynes: technological unemployment, John von Neumann, Khan Academy, knowledge worker, labor-force participation, labour mobility, liquidity trap, low skilled workers, low-wage service sector, Lyft, manufacturing employment, McJob, moral hazard, Narrative Science, Network effects, new economy, Nicholas Carr, Norbert Wiener, obamacare, optical character recognition, passive income, performance metric, Peter Thiel, Plutocrats, plutocrats, post scarcity, precision agriculture, price mechanism, Ray Kurzweil, rent control, rent-seeking, reshoring, RFID, Richard Feynman, Richard Feynman, Rodney Brooks, secular stagnation, self-driving car, Silicon Valley, Silicon Valley startup, single-payer health, software is eating the world, sovereign wealth fund, speech recognition, Spread Networks laid a new fibre optics cable between New York and Chicago, stealth mode startup, stem cell, Stephen Hawking, Steve Jobs, Steven Levy, Steven Pinker, strong AI, Stuxnet, technological singularity, telepresence, telepresence robot, The Bell Curve by Richard Herrnstein and Charles Murray, The Coming Technological Singularity, Thomas L Friedman, too big to fail, Tyler Cowen: Great Stagnation, union organizing, Vernor Vinge, very high income, Watson beat the top human players on Jeopardy!, women in the workforce

One of the implications of increasing inequality is that ever more taxable income is rising to the very top. Our taxation scheme should be restructured to mirror the income distribution. Rather than simply raising taxes across the board or on the highest existing tax bracket, a better strategy would be to introduce several new higher tax brackets designed to capture more revenue from those taxpayers with very high incomes—perhaps a million or more dollars per year. Everyone a Capitalist While I believe that some form of guaranteed income is probably the best overall solution to the rise of automation technology, there are certainly other viable ideas. One of the most common proposals is to focus on wealth, rather than income. In a future world where nearly all the income is captured by capital, and human labor is worth very little, why not simply make sure that everyone owns enough capital to be economically secure?


pages: 297 words: 89,206

Social Class in the 21st Century by Mike Savage

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call centre, Capital in the Twenty-First Century by Thomas Piketty, Clapham omnibus, Corn Laws, deindustrialization, deskilling, Downton Abbey, financial independence, gender pay gap, Gini coefficient, income inequality, Mark Zuckerberg, megacity, New Urbanism, Occupy movement, precariat, psychological pricing, The Spirit Level, unpaid internship, upwardly mobile, very high income, winner-take-all economy, young professional

But it also has distinctive social and cultural characteristics. The strange GBCS sample skew The imprint of this ordinary wealth elite takes strange and surprising forms. We can return to reflect on the strange GBCS sample skew which we first discussed in the Introduction. There is a fascinating and hugely revealing finding here. The more that people belonged to some kind of ‘elite’ category, in any of the dimensions we might measure – e.g. earning very high incomes, attending elite universities, living in the most wealthy areas – the more likely they were to do the GBCS. Furthermore, this is not an incremental addition, but an exponential one. The most elite were much more likely to do the GBCS compared to those who were simply moderately wealthy. For instance, graduates from Oxbridge were twice as likely to do the GBCS as graduates from any other university.10 CEOs were twice as likely to do the GBCS compared to any other professional or managerial group (though we can also see another striking spike among journalists and some cultural professions).


pages: 267 words: 79,905

Creating Unequal Futures?: Rethinking Poverty, Inequality and Disadvantage by Ruth Fincher, Peter Saunders

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barriers to entry, ending welfare as we know it, financial independence, full employment, Gini coefficient, income inequality, income per capita, labour market flexibility, labour mobility, low skilled workers, low-wage service sector, marginal employment, minimum wage unemployment, New Urbanism, open economy, pink-collar, positional goods, purchasing power parity, shareholder value, The Bell Curve by Richard Herrnstein and Charles Murray, urban planning, urban renewal, very high income, women in the workforce, working poor, working-age population

As a first step, the NATSIS indicators of poverty and correlates of poverty are calculated for households ranked by the overall distribution of equivalent income using the Income Distribution Survey. Despite the relatively small number of indigenous households and families in the top quintile of Australian incomes, the broad results indicated above remain unchanged. That is, over one-quarter of very high-income indigenous households and families have members with long-term health problems and about 10 per cent of members have been arrested. BENCHMARKING INDIGENOUS ARREST RATES AND CHRONIC HEALTH PROBLEMS AGAINST THE WIDER COMMUNITY The NATSIS is an extraordinarily rich survey of the multidimensional nature of indigenous poverty. The lack of readily available comparable data on non-indigenous Australians makes it difficult to identify the analogous outcomes in the rest of the Australian community.


pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

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3D printing, balance sheet recession, banking crisis, Bernie Sanders, Bretton Woods, business climate, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, trickle-down economics, universal basic income, very high income

They use a macroeconomic model to compare their investment package to ‘business as usual’: they find that not only would it increase European growth rates and employment, it would also reduce public deficits more rapidly. The chapters by Joseph Stiglitz and Colin Crouch look at two of the major gaps between orthodox economic theory and the reality of modern capitalism. Stiglitz addresses the growth of inequality over the past thirty years. He takes on the neoclassical view that wages and salaries reflect the marginal productivity of workers, showing that the very high incomes of corporate executives in fact reveal a form of ‘rent-seeking’, in which rewards are extracted without relation to productivity or economic desert. Moreover he points out—again contrary to the orthodox view—that such inequality is not the price that has to be paid for greater economic prosperity, but actually retards growth. Stiglitz offers a range of policy measures which would reverse recent trends, including changes to executive compensation schemes, macroeconomic policies to reduce unemployment, greater investment in education and the reform of capital taxation.


pages: 323 words: 90,868

The Wealth of Humans: Work, Power, and Status in the Twenty-First Century by Ryan Avent

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3D printing, Airbnb, American energy revolution, autonomous vehicles, Bakken shale, barriers to entry, Bernie Sanders, BRICs, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collective bargaining, computer age, dark matter, David Ricardo: comparative advantage, deindustrialization, dematerialisation, Deng Xiaoping, deskilling, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, Edward Glaeser, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, falling living standards, first square of the chessboard, first square of the chessboard / second half of the chessboard, Ford paid five dollars a day, Francis Fukuyama: the end of history, future of work, gig economy, global supply chain, global value chain, hydraulic fracturing, income inequality, indoor plumbing, industrial robot, interchangeable parts, Internet of things, inventory management, invisible hand, Jacquard loom, James Watt: steam engine, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph-Marie Jacquard, knowledge economy, low skilled workers, lump of labour, Lyft, manufacturing employment, means of production, new economy, performance metric, pets.com, price mechanism, quantitative easing, Ray Kurzweil, rent-seeking, reshoring, rising living standards, Robert Gordon, Ronald Coase, savings glut, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, single-payer health, software is eating the world, supply-chain management, supply-chain management software, TaskRabbit, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, transaction costs, Tyler Cowen: Great Stagnation, Uber and Lyft, Uber for X, very high income, working-age population

Prior to the 2000s, global income followed a bimodal, or two-peaked, distribution, with lots of people in the rich world clumped together around high incomes and lots (and lots) of people in the developing world clumped together around low incomes. Now there is something like a global middle class, and a graph of the global income distribution is just one big hump, with many people earning moderate incomes while a small share of the global population earns very high incomes. THE DIGITAL DIVERGENCE The great emerging-market boom is now over. In 2015, emerging markets grew at their slowest pace since 2001 (excepting the global-recession year of 2009). The pace of catch-up with American income levels, in terms of GDP per person, has slowed to practically nothing. The proximate cause is the inevitable slowing of the Chinese economy. China’s boom peaked in 2007, when the economy notched up an extraordinary GDP growth rate of more than 14 per cent.


words: 49,604

The Weightless World: Strategies for Managing the Digital Economy by Diane Coyle

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barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, blue-collar work, Bretton Woods, clean water, computer age, Corn Laws, cross-subsidies, David Ricardo: comparative advantage, dematerialisation, Diane Coyle, Edward Glaeser, everywhere but in the productivity statistics, financial deregulation, full employment, global village, hiring and firing, Howard Rheingold, income inequality, informal economy, invisible hand, Jane Jacobs, Joseph Schumpeter, knowledge economy, labour market flexibility, laissez-faire capitalism, lump of labour, Marshall McLuhan, McJob, microcredit, Network effects, new economy, Nick Leeson, night-watchman state, North Sea oil, offshore financial centre, pension reform, pensions crisis, Ronald Reagan, Silicon Valley, spinning jenny, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tobin tax, two tier labour market, very high income, War on Poverty, winner-take-all economy, working-age population

And all those failed candidates would contribute more to the economy if they had decided to be teachers in the first place rather than competing to get a job on Wall Street. The analogy is false, of course. Land is in fixed supply; the supply of M&A jobs — or demand for lawyers — is growing. The fact that not all of them become stars does not imply that there is an inefficiently large number of lawyers. If there were, pay for lawyers at the bottom of the heap would decline. Fear of Flexibility 117 The book’s conclusion — that very high incomes should be very heavily taxed — plays well in some political circles. It would be an interesting proposition to put to the voters — should incomes over, say £100,000 a year, be taxed at 75 per cent or some equally punitive rate? Governments that tried it would probably find many of their superstars emigrating, as pop stars have long done. The US Labor Secretary Robert Reich, in his influential book The Work of Nations, noted the development of an internationally mobile elite class of highly paid professionals.


pages: 602 words: 120,848

Winner-Take-All Politics: How Washington Made the Rich Richer-And Turned Its Back on the Middle Class by Paul Pierson, Jacob S. Hacker

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accounting loophole / creative accounting, affirmative action, asset allocation, barriers to entry, Bonfire of the Vanities, business climate, carried interest, Cass Sunstein, clean water, collective bargaining, corporate governance, Credit Default Swap, David Brooks, desegregation, employer provided health coverage, financial deregulation, financial innovation, financial intermediation, full employment, Home mortgage interest deduction, Howard Zinn, income inequality, invisible hand, knowledge economy, laissez-faire capitalism, Martin Wolf, medical bankruptcy, moral hazard, Nate Silver, new economy, night-watchman state, offshore financial centre, oil shock, Ralph Nader, Ronald Reagan, shareholder value, Silicon Valley, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, union organizing, very high income, War on Poverty, winner-take-all economy, women in the workforce

pid=20601087&sid= aLphvT.qIqZI&refer=home. 38 Jon Bakija and Bradley T. Heim, “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data,” working paper, Williams College, Office of Tax Analysis (March 17, 2009). 39 There is a connection between the previous discussion of tax policy and the current discussion of executive compensation. The sharp fall in true tax rates on very high incomes may have stimulated the rise in executive pay, since the recipients capture so much more of any rise in compensation. Carola Frydman and Raven Saks estimate that “had tax rates been at their year 2000 level for the entire sample period, the level of executive compensation would have been 35 percent higher in the 1950s and 1960s.” Frydman and Saks, “Historical Trends in Executive Compensation,” Sloan School of Management, MIT, working paper (2005), 31. 40 Carola Frydman and Raven E.


pages: 374 words: 114,660

The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton

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Admiral Zheng, agricultural Revolution, Branko Milanovic, BRICs, British Empire, call centre, clean water, colonial exploitation, Columbian Exchange, declining real wages, Downton Abbey, financial innovation, germ theory of disease, Gini coefficient, illegal immigration, income inequality, invention of agriculture, invisible hand, John Snow's cholera map, knowledge economy, Louis Pasteur, low skilled workers, new economy, purchasing power parity, randomized controlled trial, rent-seeking, rising living standards, Ronald Reagan, Simon Kuznets, Steve Jobs, Steven Pinker, structural adjustment programs, The Spirit Level, too big to fail, trade route, very high income, War on Poverty

However, the most successful group, both in the market and in politics, is the group at the very top of the income and earnings distribution, and it is to them that I turn next. Top Incomes in the United States The study of income inequality was transformed by a 2003 study by two economists, Thomas Piketty, now of the Paris School of Economics, and Emmanuel Saez of the University of California at Berkeley.24 It had long been known that the data on incomes from household surveys were not very useful for looking at very high incomes; there are too few such people to show up regularly in nationally representative surveys. (Even if approached at random, they might also be less likely to answer.) Piketty and Saez greatly extended a method that had been originally used in 1953 by Nobel laureate economist Simon Kuznets, who worked with data from income-tax records.25 The rich, like everyone else, have no choice but to file tax returns, and so they are fully represented in the income-tax data.


pages: 524 words: 143,993

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

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air freight, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, Bretton Woods, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, forward guidance, Fractional reserve banking, full employment, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen: Great Stagnation, very high income, winner-take-all economy

They would also reduce the need for foreclosures. The fifth area is income redistribution. Rapidly rising inequality is one reason why rapid credit growth is needed to generate adequate demand in high-income countries. If so, income could be redistributed through the tax system to people who would actually spend it. The French economist, Thomas Piketty, recommends substantially higher taxes on very high incomes as well as a global wealth tax, beyond the land tax alone. This is unquestionably too ambitious. But movement in these directions is desirable and should even be possible.18 Not least, that would be a way to force the winners from globalization and technological innovation to provide some compensation to the losers. The final area consists of policies aimed at raising the longer-term rate of economic growth.


pages: 1,205 words: 308,891

Bourgeois Dignity: Why Economics Can't Explain the Modern World by Deirdre N. McCloskey

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Admiral Zheng, agricultural Revolution, Albert Einstein, BRICs, British Empire, butterfly effect, Carmen Reinhart, clockwork universe, computer age, Corn Laws, dark matter, David Ricardo: comparative advantage, Donald Trump, Edward Lorenz: Chaos theory, European colonialism, experimental economics, financial innovation, Fractional reserve banking, full employment, George Akerlof, germ theory of disease, Gini coefficient, greed is good, Howard Zinn, income per capita, interchangeable parts, invention of agriculture, invention of air conditioning, invention of writing, invisible hand, Isaac Newton, James Watt: steam engine, John Maynard Keynes: technological unemployment, John Snow's cholera map, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, means of production, Naomi Klein, New Economic Geography, New Urbanism, purchasing power parity, rent-seeking, road to serfdom, Robert Gordon, Ronald Coase, Ronald Reagan, Scientific racism, Scramble for Africa, Shenzhen was a fishing village, Simon Kuznets, Slavoj Žižek, spinning jenny, Steven Pinker, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, tulip mania, union organizing, Upton Sinclair, urban renewal, V2 rocket, very high income, working poor, World Values Survey, Yogi Berra

Domestic efficiency is what gets us out to the production possibility curve, as economists put it (as innovation pushes it out). Your nation, or town, or even in the extreme your own household, does not have to trade with outsiders to live. Each can be an innovative and alert Crusoe on his island and survive without exporting or importing. The point is obvious for big, innovative countries like France or the United States, which can do much better than “survive” without foreign trade. They can achieve very high incomes by attending to innovation, trading merely with other Americans or Frenchmen within their borders, if persuaded by protectionists to do so (as both were to a greater or lesser degree in earlier eras). In other words, the primitive conviction most non-economists have that foreign trade is the only source of wealth, that money must somehow come from outside to puff up the economy and make us rich, is wrong.


pages: 331 words: 60,536

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, Rees Mogg

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affirmative action, agricultural Revolution, bank run, barriers to entry, Berlin Wall, borderless world, British Empire, California gold rush, clean water, colonial rule, Columbine, compound rate of return, Danny Hillis, debt deflation, ending welfare as we know it, epigenetics, Fall of the Berlin Wall, falling living standards, feminist movement, financial independence, Francis Fukuyama: the end of history, full employment, George Gilder, Hernando de Soto, illegal immigration, income inequality, informal economy, information retrieval, Isaac Newton, Kevin Kelly, market clearing, Martin Wolf, Menlo Park, money: store of value / unit of account / medium of exchange, new economy, New Urbanism, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, school vouchers, seigniorage, Silicon Valley, spice trade, statistical model, telepresence, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Turing machine, union organizing, very high income

There is indeed no lack of social and political evidence that this shift is taking place in all advanced industrial societies, that its pace is accelerating, and that the movement is already a big one. The rewards for rare skills have increased and are increasing. This has been noted with displeasure by conventional thinkers. Consider, for example, The Winner-Take-All Society, by Robert H. Frank and Philip J. Cook.7 It documents the growing tendency for the most talented competitors in many fields in the United States to earn very high incomes. Equally, the opportunities for middle skills are falling; a substantial number of low skills now fall outside the range that is rewarded with a comfortable living, though they may still find a place in small-scale services. If the Information Age demands higher skills both at the top and bottom end, everyone except for the top 5 percent will be relatively at a disadvantage, but the top 5 percent will gain tremendously.


pages: 580 words: 168,476

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

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affirmative action, Affordable Care Act / Obamacare, airline deregulation, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, income inequality, income per capita, indoor plumbing, inflation targeting, invisible hand, John Harrison: Longitude, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, London Interbank Offered Rate, lone genius, low skilled workers, Mark Zuckerberg, market bubble, market fundamentalism, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, obamacare, offshore financial centre, paper trading, patent troll, payday loans, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, women in the workforce

In chapter 4, I explained that, contrary to the assertion of the Right, we could have a more efficient tax system that is, in fact, more progressive. Earlier I cited studies that showed, on the basis of the response of savings and labor supply, that the top tax rate should be well in excess of 50 percent, and plausibly in excess of 70 percent.6 And these studies have not fully taken into account the extent to which very high incomes arise from rents.7 Create a more effective, and effectively enforced estate tax system, to prevent the creation of a new oligarchy. The restoration of a meaningful estate tax would help in the prevention of a new American oligarchy or plutocracy, and so would the elimination of the preferential treatment of capital gains. The adverse effects are likely to be minimal: most of those who accumulate these large estates do so as a result of luck or the exercise of monopoly power, or are motivated by nonpecuniary incentives.8 Helping the Rest We can judge our system by its results, and if we do so, we have to give it a failing grade: a little while ago those at the bottom and in the middle got a glimpse of the American dream, but today’s reality is that for a large segment of the population that dream has now vanished.


pages: 518 words: 170,126

City for Sale: The Transformation of San Francisco by Chester W. Hartman, Sarah Carnochan

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affirmative action, Albert Einstein, Bay Area Rapid Transit, big-box store, business climate, Golden Gate Park, Haight Ashbury, housing crisis, illegal immigration, Loma Prieta earthquake, manufacturing employment, new economy, New Urbanism, profit motive, Ralph Nader, rent control, Ronald Reagan, Silicon Valley, South of Market, San Francisco, strikebreaker, union organizing, urban planning, urban renewal, very high income, young professional

It’s a Bust; to the Artist It’s Finished,” San Francisco Examiner, 4 December 1981. 22. The tax-exempt feature of such bonds, while resulting in considerable savings to the agency in terms of the lower interest rates they produce, at the 430 / Notes to Pages 197–199 same time creates one of the income tax system’s greatest loopholes. The recipients of state and local bond interest income (and hence of the tax shelter they provide) are persons in very high income brackets. See David J. Ott and Attiat F. Ott, “The Tax Subsidy through Exemption of State and Local Bond Interest” in The Economics of Federal Subsidy Programs, A Compendium of Papers Submitted to the Joint Economic Committee, Congress of the United States, Pt. 3, “Tax Subsidies,” 15 July 1972, 305 – 16. 23. “Report on Yerba Buena Convention and Exhibition Center,” submitted by Roger Boas, chief administrative officer, 9 May 1978, 28. 24.


pages: 823 words: 206,070

The Making of Global Capitalism by Leo Panitch, Sam Gindin

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accounting loophole / creative accounting, airline deregulation, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Big bang: deregulation of the City of London, bilateral investment treaty, Branko Milanovic, Bretton Woods, BRICs, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collective bargaining, continuous integration, corporate governance, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, full employment, Gini coefficient, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, land reform, late capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, very high income, Washington Consensus, Works Progress Administration, zero-coupon bond

The growth in the volume of US exports in the two decades up to 2007—even as the trade deficit accumulated—averaged a very robust 6.6 percent, leaving it only marginally behind Germany and China, the world’s largest exporters; it was the relative expansion of US imports that was the source of the growing deficit.66 The deficit, in other words, primarily came from increased US consumption, which grew faster than in other advanced capitalist countries. This was partly linked to the very high income growth and conspicuous consumption of the most well-off segments of the US population, but it was also due to much faster population growth than in Europe and Japan, the longer hours worked by much of the US population, and, very significantly, their increased consumer debt. This was supported by the international flow of funds into the US despite the size of the trade deficit. It was in good part US consumer spending that maintained effective global demand into the first years of the twenty-first century.


pages: 913 words: 299,770

A People's History of the United States by Howard Zinn

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affirmative action, agricultural Revolution, Albert Einstein, anti-communist, Bartolomé de las Casas, Bernie Sanders, British Empire, clean water, colonial rule, death of newspapers, desegregation, equal pay for equal work, feminist movement, friendly fire, full employment, Howard Zinn, illegal immigration, land reform, Mercator projection, Mikhail Gorbachev, minimum wage unemployment, Monroe Doctrine, new economy, New Urbanism, offshore financial centre, Plutocrats, plutocrats, profit motive, Ralph Nader, Ralph Waldo Emerson, RAND corporation, Ronald Reagan, Rosa Parks, Silicon Valley, strikebreaker, Telecommunications Act of 1996, The Wealth of Nations by Adam Smith, transcontinental railway, union organizing, Upton Sinclair, very high income, War on Poverty, Works Progress Administration

The richest 1 percent of the country had gained over $1 trillion in the eighties and nineties as a result of tax breaks. A “wealth tax”—something not yet done as national policy, but perfectly feasible—could retrieve that trillion dollars, for instance, at $100 billion dollars a year for ten years, and still leave that 1 percent very, very rich. In addition, a truly progressive income tax—going back to the post–World War II levels of 70–90 percent on very high incomes—could yield another $100 billion a year. Clinton did raise taxes on the super-rich, by a few percentage points, changing the top rate from 31 percent to 37 percent, and corporate taxes from 34 percent to 35 percent. But this was a pitifully small step in view of the need. With the four or five hundred billion dollars gained each year by progressive taxation and demilitarization, there would be funds available to pay for a universal health-care system funded by the government as Medicare is administered, as the health-care system in Canada is handled, without the profit-taking by insurance companies.