Economist Yanis Varoufakis (Greece) and Wealth Inequality!

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Economist Yanis Varoufakis (Greece) and Wealth Inequality!

by T.E.C. - Iowa

Jun 19, 2017

Wealth inequality is a problem, because the rich save and the poor spend. When the rich have too much, savings increase and the demand (aggregate demand) for goods and services drop causing unemployment to increase. Yet, we are cutting funding to education while we hear people say that young people should get a good education if they want a job.

(Quote from Economist Yanis Varoufakis)

I am appalled by statistics that in Germany, the most successful European State, we have the highest level of savings in the history of Germany and the lowest level of investment since 1945. So, unless you have together - an aggregate investment policy and an education setting and a training setting that are in sink with investment, you are going to fail as a society.

(End quote)

To give you a since of this problem world wide, another quote from Prof. Varoufakis

(Quote)

Allow me to point out an interesting paradox that threatens our economy. I call it ...See More

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T.E.C. - Iowa If you are going to disagree with someone with a PhD in economics from the University of Essex in England, you should find a similar economist that is saying what you are saying, because you have zero expertise. (Good luck with that!)

Otherwise, you are that patient telling the doctor. Worse, even though a mechanic does not have a PhD, you...See More

Jun 19, 2017

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Long Time Lurker frijole, money parked is not circulated. It is stagnant and does not feed the economy, just takes from it, while the left-overs, shared by the 80% are left to stir the economy. It is not a matter of jealousy. I envy people's vacations, experiences, and some times, things they have that are unique in their usefulness. In the case of wealth hoarders,...See More

Jun 19, 2017

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T.E.C. - Iowa I often point out that a question is not an argument. It is just a question! Referring to the mountain of idle cash belonging to the rich, "Frijole wrote, "Why is that a problem?"

This is just not that hard. I will turn to the Nobel Prize winning economist Joseph Stiglitz and his article "The 1 Percent's Problem."

(Quote)

...See MoreI often point out that a question is not an argument. It is just a question! Referring to the mountain of idle cash belonging to the rich, "Frijole wrote, "Why is that a problem?"

This is just not that hard. I will turn to the Nobel Prize winning economist Joseph Stiglitz and his article "The 1 Percent's Problem."

(Quote)

Put sentiment aside. There are good reasons why plutocrats should care about inequality anyway—even if they're thinking only about themselves. The rich do not exist in a vacuum. They need a functioning society around them to sustain their position. Widely unequal societies do not function efficiently and their economies are neither stable nor sustainable. The evidence from history and from around the modern world is unequivocal: there comes a point when inequality spirals into economic dysfunction for the whole society, and when it does, even the rich pay a steep price.

Let me run through a few reasons why. (I have edited the following and added list form)

1. when inequality has been reduced, partly as a result of progressive taxation—have been the periods in which the U.S. economy has grown the fastest. It is likewise no accident that the current recession, like the Great Depression, was preceded by large increases in inequality.

2. The relationship is straightforward and ironclad: as more money becomes concentrated at the top, aggregate demand goes into a decline. Unless something else happens by way of intervention, total demand in the economy will be less than what the economy is capable of supplying—and that means that there will be growing unemployment, which will dampen demand even further.

3. In recent years, the financial sector has accounted for some 40 percent of all corporate profits. This does not mean that its social contribution sneaks into the plus column, or comes even close. The crisis showed how it could wreak havoc on the economy. In a rent-seeking economy such as ours has become, private returns and social returns are badly out of whack.

4. The widespread sense by workers in the Soviet Union that they were being mistreated in exactly this way—exploited by managers who lived high on the hog—played a major role in the hollowing out of the Soviet economy, and in its ultimate collapse. As the old Soviet joke had it, "They pretend to pay us, and we pretend to work."

In a society in which inequality is widening, fairness is not just about wages and income, or wealth. It's a far more generalized perception. Do I seem to have a stake in the direction society is going, or not? Do I share in the benefits of collective action, or not? If the answer is a loud "no," then brace for a decline in motivation whose repercussions will be felt economically and in all aspects of civic life.

(End quote)

So there are numerous reasons to be concerned about inequality, and we are hearing this from one of the best economic minds of our era.

Jun 20, 2017

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