Totallygroovygirlfriday wanted to address (or just put her two cents in) the ongoing national discussion of wealth inequality (which will only get louder).
First, groovygirl acknowledges that we have a huge wealth spread in the United States and most of the world. But some of the discussion of late has blamed centralization, political capture and monopolies for that wealth inequality. Groovygirl is not sure these are the sole reasons. The danger in making these our only assumptions is that if we get the cause wrong, our solution might be a failure (under the best political and fair environment). And we will not solve the main problem, but just create new ones.
So, let’s review Charles Hugh Smith’s latest blog post and the link to the viral video making the rounds. Click on the links to review.
Charles suggests that wealth inequality exists because:
Wealth comes from earned and unearned (rent, dividends, etc.) income and capital appreciation, so it’s no surprise that the income of the wealthiest segment has also far outpaced the lower 95%:
Check out that wonderful chart of the rise of the 5% from 1913 to 2008.
I have long held that the greatest source of wealth inequality is political: those with great wealth have captured the for-sale machinery of governance, and “persuaded” the Central State to carve out quasi-monopolies and cartels that enable artificially high premiums. They also buy subsidies, exceptions and tax breaks for their income streams.
Although, gg agrees with the above, she would add that the types of investments that the top 5% have been disproportionately gaining on are primarily debt-expansion driven.
Groovygirl looks at that 100-year chart and doesn’t see all political cartels (well, maybe one, The Federal Reserve), but she sees a debt creation long-term cycle that is primarily fueled by The Federal Reserve System that has run its final cycle course and popped.
So groovygirl is saying this looks to her like a debt collapse (the Winter Cycle) may take care of the wide income spread. But she will also acknowledge that the top 5% has a political pull on where new debt creation goes now, and especially in the last two decades.
But see how the top five-percent’s wealth has risen and fallen with the debt crisis of the last decade? We can fully expect it to fall again when debt completely collapses.
Is gg just seeing long cycles everywhere? Probably, that is what she does best. It is her main perspective. Keep that in mind.
Later in Charles’ post, in which he does a wonderful job of explaining how technology will not solve the unemployment problem, he says that the best solution for inequality is:
An economy in which surplus is distributed to decentralized communities rather than being concentrated in the Central State and its financial Elites, where the spoils are divided up according to bought-and-paid-for political favoritism, is perhaps the most efficient, practical, sustainable and fair distribution system possible in an era of structural labor surplus.
Charles is firmly in the camp that decentralization will help solve the wealth gap. groovygirl is not so sure. (Having said that, groovygirl is in favor of more decentralization than we have now for other reasons.) But she is not so sure that we can decentralize the system in a fair manner in the middle of a collapsing debt crisis. The time to decentralize, gg’s opinion, was during the massive debt expansion of the late 80′s and 90′s.
GG contends that a debt collapse will force decentralization anyway. And if we move to create laws and taxes that equalize wealth during the debt collapse, this might force a chaotic decentralization or decentralize things that are better done on a centralized level for the health and benefit of society. GG is sure everyone has their own opinion on what those things might be.
It is entirely possible that laws equalizing wealth during a debt collapse will stifle capital creation and economic activity at a de-central and central level after the collapse, causing the poor and middle class to be poorer and the wealthy to hoard assets and capital for a longer period of time and thus, the economy to lag longer than necessary.
Throw into the mix that government (at any level) creates new laws that are a reaction to the past or present, rarely in anticipation of a fast-changing future that helps all locales.
So, groovygirl is suggesting that we look for a systemic change that will address as smooth a transition as possible from expanding debt to no debt and make local vs. central a secondary discussion under that umbrella. Local government can be just as corrupt, political, reactionary, and debt driven as a central one. But they can also be better than central government at quickly addressing key issues and organizing efficient plans during a crisis.
Right now we have an unfair distribution of debt that creates ongoing income and resources inequality. When the debt collapses, we may have no assets, no income, and/or no resources to distribute to anyone equally or unequally, while having laws on the books that hinders use of the capital and assets that are left standing.
It is groovygirl’s opinion that what we have now is not working and will not work in a debt collapse, it is crony capitalism and give free markets a bad name. But she is cautious that we should choose our next system and its accompanying laws in a proactive way, not a reactionary way. If we do not, and gg is not confident that we will, be prepared for a protracted and long economic depression.
Just some thoughts…..feel free to share yours in the comment section. Thanks for reading.