A Simple Fix for Our Massive Inequality Problem

Have they not heard of Adam Smith&#x27;s <i>The Wealth of Nations</i>? *<p>IIRC, prior to Smith&#x27;s famous book, the wealth of nations was viewed in terms of gold kept in the coffers of the kings. This was increasingly a source of puzzlement because it was failing to explain why some nations were thriving and others were not. This seminal work has been credited with being single-handedly responsible for transforming our understanding of <i>wealth</i> as &quot;gold in the king&#x27;s coffer&quot; to what we now refer to as GDP. Wealth of a nation is measured by its productivity, not the money in the bank.<p>While I agree we need to do something about the current trend towards concentrating money in the hands of the few, clearly at the expense of the many, this is not the way to do it. This in no way protects the productivity that gives rise to these riches. In fact, it is likely to undermine said productivity.<p>There is no limit to how much people can spend. If you just cut everyone a check, whether you call it Basic Income or American Equity, the money will get pissed away. It will not get invested in a better future.<p>We have to find ways to address the underlying structural problems that are causing the 1 percent to effectively bleed the masses for more. We also must do so without creating perverse incentives. This is a case of &quot;the cure they are recommending is worse than the disease.&quot;<p>* <a href="https:&#x2F;&#x2F;en.m.wikipedia.org&#x2F;wiki&#x2F;The_Wealth_of_Nations" rel="nofollow">https:&#x2F;&#x2F;en.m.wikipedia.org&#x2F;wiki&#x2F;The_Wealth_of_Nations</a>

simple sure but let&#x27;s talk about what it would take to give a meaningful dividend to all americans<p>If we used a conservative 3.5% average return to give $1,000 USD for each American (~325M) you need nearly 10 Trillion dollars in this fund or over half of our yearly GDP.<p>Now keeping in mind this would need to be generated from a tax on some good&#x2F;service&#x2F;capital which obviously has a cost component at it&#x27;s base. Just getting the initial 10Trillion in a fund would be ridiculously hard. Now add to that the fact that 1k is a pittance and figuring out a true basic income -- this is wayyyy more complex.<p>I&#x27;d like to point out a HUGE fallacy in this &quot;simple&quot; plan -- it only works in low population high natural capital resource areas. Alaska and Norway happen to be relatively remote&#x2F;cold places with an abundance natural gas&#x2F;oil. Norway&#x27;s 1T dollar fund would be comical at US scale.

The inequality problem only exists if you look at absolute wealth numbers, and not the level of confort and opportunities that wealth affords.<p>The amount and the quality of goods and service that is available to even the lower income bracket has never been better; most families can afford access to a car, a washing machine, food from around the world, unlimited entertainment, unlimited knowledge, air travel, telephone, etc. etc.<p>Put another way, all the money in the world can&#x27;t buy you a better phone than a 1000$ one, and that phone is only marginally better than a 100$ one, which everybody can afford. And that is how it works for most things nowadays.<p>The reason people are so pissed about inequality, is that despite people having material and service equality like never before, social status remain extremely unequal. But that is human nature, and no amount of money redistribution can change it.

&gt;Wouldn’t the enormous wealth that our increasingly productive society is generating, which now flows into just a few pockets, be a fair source?<p>This has never been done successfully in an economy not based on resource extraction without destroying the engine that produces that &quot;enormous wealth&quot;.<p>The whole thing is both well intentioned and incredibly naive.

Rich people are only rich because poor people aren&#x27;t willing to kill themselves in large numbers.<p>The best thing any individual can do to reduce inequality is to only contribute to institutions that do not exacerbate inequality.<p>Is the median wage at your company less than the wage required to buy the cheapest home within a 2 hour commute of your office? You&#x27;re likely exacerbating inequality every single day.<p>Are one or more people at the top of your company working on buying their next Ferrari or second&#x2F;third home? You&#x27;renliklwy exacerbating inequality every day.<p>If poor people were more willing to die than to contribute to the same companies and people that fuck them over and the middle class was more willing to work for themselves instead of contributing to greedy corporations all for a mediocre home, then we would have much more equal power structures in this country.<p>Every single person in this country is responsible for the way it is. Being at the bottom isn&#x27;t an excuse to fall in line and do exactly what your masters tell you everyday.

I think we already have this -- it&#x27;s called Corporate taxes. Nominally 35% of all of the profits of every U.S. corporation are paid to the federal government. In practice after deductions it&#x27;s about 20%. His analysis of where the money comes from amounts to either diverting money from the federal budget in one way or another, or increasing taxes.<p>It seems to me that the real problems here are this: An increasing share of GDP is going to corporate profits, and away from wages, due to deunionization, globalization, immigration, and automation. Government policies are mostly responsible for the first three. This stagnation of wages has combined with the post war relentlessness of Madison ave, which programs us to increase our consumption, even though there is no new income to support it. The result is decreased savings and increased debt among the bottom 90%.

FTA, &quot;It’s called a social wealth fund, a pool of investment assets in some ways like the giant index or mutual funds already popular with retirement savings accounts or pension funds, but one owned collectively by society as a whole. One that paid dividends not to the few, or even just to the shrinking middle class lucky enough to have their savings invested, but to everyone.&quot;

This sounds pretty much like what Sam Altman proposed the other day[1].<p>Posted on HN here: <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=15789108" rel="nofollow">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=15789108</a><p>1 - <a href="http:&#x2F;&#x2F;blog.samaltman.com&#x2F;american-equity" rel="nofollow">http:&#x2F;&#x2F;blog.samaltman.com&#x2F;american-equity</a>

I&#x27;ve yet to see a diverse <i>company</i> with no inequality, let alone a diverse society.<p>On that note, I wonder how feasible it would be to have a company who uses profit to fund an endowment and then later vows to only pay employees a percentage of the <i>gains</i> from said principal. That&#x27;d be neat (assuming you could find employees to agree to said payment method).<p>Assuming the company has no shareholders, wouldn&#x27;t it exist in perpetuity? If this works, perhaps a similar scheme could work to fix real life inequality -- force rich people to invest their money and give the gains to the poor. Rich people don&#x27;t lose any money (other than the opportunity) and poor people thrive. Win win?

I agree in principle. Alaska&#x27;s state fund has worked phenomenally well. But there&#x27;s a problem -- coincidentally one Alaska has recently faced. A fund with meaningful returns would be measured, quite rapidly, in the trillions of dollars. That is an enormous incentive to &#x27;borrow just a little from&#x27; to solve this issue or that issue.<p>Alaska has been facing a multi billion dollar budget deficit as they recklessly spent during times of high oil prices -- ironically not dissimilar to the events that led to the initial creation of the fund. So what was their solution? The governor unilaterally slashed payments from the fund - a decision that was challenged and then upheld in the state courts. We can write all the sort of legalese we want to try to prevent this from happening, but I think the current state of society illustrates quite clearly that laws are subject to the views of those in power. For instance are the actions of the NSA and CIA the sort of government programs the founding fathers intended to allow when passing the 4th amendments? I doubt many would say yes, yet here we are.<p>And I&#x27;m not even considering the inevitable graft involved in the management of such a monumental fund. Ultimately, I just do not think this sort of idea is possible in the US on a national level. State level initiatives are a very interesting idea, however.

Maybe a simple fix is to make the Federal Reserve aware of the problems they are creating.

&quot;Wouldn’t the enormous wealth that our increasingly productive society is generating, which now flows into just a few pockets, be a fair source [of money to initialize the fund]?&quot;<p>So wealth redistribution was the punchline after all.

&quot;That would never work&quot; protest citizens of country whose military spending surpasses that of the next eight countries combined.

If you enjoy Matt Bruenig&#x27;s writing, check out the [People&#x27;s Policy Project](<a href="https:&#x2F;&#x2F;peoplespolicyproject.org&#x2F;" rel="nofollow">https:&#x2F;&#x2F;peoplespolicyproject.org&#x2F;</a>), which he heads. Matt&#x27;s a fantastic writer in the space of social issues and economic policy.

I am no economics expert but I found this idea to be very promising. Moreover the concept of buying more stocks during a downturn could resolve the boom and bust cycle.<p>Perhaps this national wealth fund could pay out this citizens dividend or ubi as a cryptocurrency?

&gt; Norway uses its fund not to directly pay out dividends but as a source of revenue for its famously generous welfare state.<p>That wouldn&#x27;t work in the good ol USA because the rich would use racisim and sexual panic to turn people against the welfare state and divert the money for more tax cuts for the rich. In this country the only bennefits that stick around are direct benefits that are mostly targeted at the upper middle class, such as the mortgage interest deduction or 529 college saving fund.

The Social Security fund kind of sounds like what is described in the fourth paragraph.

What if I told you there were no &quot;Simple Fixes&quot; for &quot;Massive ____ Problems&quot;