reprinted from cluborlov.blogspot.com
Poverty is a major problem around the world, but it is not evenly distributed. Some countries, such as China and Russia, have in recent decades succeeded in raising many of their citizens out of poverty. For example, the real incomes of a majority of Russians have doubled more than once since the beginning of the century, while in China the explosive growth of cities and of manufacturing has improved the fortunes of many millions of former peasants. The result, readily observable, is enviable political stability and widespread optimism and confidence (if not satisfaction) with the overall direction.
In the meantime, in the formerly wealthy but now virtually bankrupt countries of the West, and in the United States especially, homelessness has been steadily increasing, the number of people on public assistance has been setting new records, the opioid epidemic is claiming more victims every day and major cities, such as Chicago and Baltimore, have turned into shooting galleries to such an extent that some obscure local official (not, mind you, Chicago's Mayor Rahm Emanuel, as has been widely reported) has recently asked the UN to send in peacekeepers to stop what he has called "a genocide." The result, again readily observable, is political instability and widespread dissatisfaction with the overall direction, as evidenced by such phenomena as Trump, Brexit, the electoral failure of major political parties in France, Germany, Austria and elsewhere, separatist rumblings in Spain and Italy and the manifest fecklessness of both elected national officials and the unlected EU ones in Brussels.
Just going by the numbers, it is now possible to speak of the manifest failure of capitalism, as has been proclaimed loudly by Thomas Piketty et alia. As reported by World Inequality Lab, since 1980 income inequality has increased in practically all countries in the world. Over the intervening period the top 1% has received more income than the bottom 50% and now controls more than half of all the wealth on the planet. The largest increases in income inequality were seen in North America, China, India and Russia, although the effects differed in each case because income inequality had already been very high in North America and India while it had previously been among the lowest in the world in China and Russia.
The function of a society is to improve the well-being of its members. It is not the function of a society to make it easy for a tiny minority to prey upon the vast majority and drive it into destitution. Capitalism fails this basic test. When societies fail this basic test, they fall apart and the tiny minority get subjected to experiments such as the guillotine. How far away any given society is from such an event, and whether it is heading away from it or toward it, can be observed by watching the politics. Observe that Putin, during his recent national Q&A, announced that the prime objective of his next term as president will be to raise the incomes of the general population. Observe that Trump, with his tax reform package, is seeking to cut corporate taxes, eliminate estate taxes, increase federal budget deficits and generally shift the burden for all the previous economic policy failures from the very rich and onto the general population.
But the numbers churned out by economists, amusing though they may be, are, to my mind, borderline meaningless. To me, it makes sense to measure physical quantities--flows of matter and energy, information flows--but to measure the flows of money is to engage in group hallucination. The problem is that money doesn't feel like anything--it's just digits, as sexy and fulfilling as a train schedule. (Yes, there are a few nerds who love train schedules, but leaving them aside") To make money feel like something, it has to be used, and there are two main ways to use it: to give pleasure through its surplus and to cause pain through its deficit.
Look at what the rich do: they are constantly jostling for the best way to make themselves look as rich as possible while remaining within the bounds of what they consider "good taste." Just floundering about with naked women in a bathtub full of gems and gold bullion is not considered in "good taste." The manifestations of massive wealth have to be understated and fashionable yet unmistakably signal that money is no object. Those new to money signal their wealth through multimillion-dollar weddings for their daughters or by buying megayachts, while those a bit further along the aristocratic continuum from nouveaux-riches to guillotine's achieve the same good feeling through sponsorship or through public shows of charity and largess. But the amount they spend on wealth signaling is tiny in proportion to their overall net worth. Most of it is bound up in what will in due course become stranded assets. We'll return to that point in a moment.
Meanwhile look at what the poor do. Most of them languish in misery. A few of them attempt to beat the long odds by working hard, self-educating, educating and tightly disciplining and controlling their children. But even fewer succeed at this because there is a structural feature in their way: a wide moat that separates the rich from the poor. In that moat, tax donkeys are drowned in red ink--be they the poor struggling to rise out of poverty or the former middle class that has lapsed into poverty. One of the best ways to make it past this moat is to break the law, and that is hard to do alone. Thus, the best, and traditional, way to do it is to form a mafia, and become a law unto yourselves--very rough and violent at first, and progressively more legalized and legitimized. This is the basic methodology of aristocratic succession, and it has been practiced for millennia now. Scratch through the aristocratic veneer and you will find a former gangster, or a descendant of one.
But virtually all of them, both rich and poor, are seduced--not by wealth, for wealth itself is ephemeral and cannot be directly experienced--but by the displays of wealth employed by the rich, who are forever looking for new ways to flaunt their wealth. And virtually all of them are made miserable by this experience, because all of them, with the possible exception of Jeff Bezos, are not rich "enough." Since wealth is just a number, and numbers only function in comparison with other numbers, "enough" can only mean one thing: richer than anyone else, and that leaves us with just Jeff Bezos, the happiest bozo on this bus to nowhere.
Why is the bus going nowhere, and why does it make sense to measure the flows of matter and energy (and perhaps information) but not of money? Because money is denominated in future ability perform work. Most of that work is, by now, not physical labor but machine labor. And the vast majority of that machine labor (silly windmills and solar panels aside) comes from fossil fuels. Now go look at the balance sheets of all the major Western energy companies. Are they still profitable. No. Are they vastly indebted. Yes. Once it becomes impossible to run the machines whose output underpins the net worth of the high-net-worth individuals, they become stranded assets: they still cost money to maintain but they are no longer useful. The obvious next step is to forgo their maintenance. But shortly thereafter it turns out that they are no longer worth much beyond their value as salvage and scrap.
Thus, the final condemnation of capitalism is not that it is unjust or wasteful; it is that it is downright stupid. It is an insipid, misguided struggle over wealth signaling that ends in poverty, or worse, for all those involved. In the meantime, the rich are on an endless quest for more endorphins, to be gained, temporarily, from displaying the latest gadget or fashionable rag, or from occupying a swank bit of real estate, while the poor feel pain from being unable to heat their homes or feed their children properly and suffer endless indignities in trying to scrape by. But in the end they will be the same, for there is a great equalizer at work, called Nonrenewable Natural Resource Depletion (NNRD). And in most parts of the world it is very far along already.
How can you escape from this ridiculous cycle of stupidity that ends in poverty? I have plenty of direct experience with both wealth and poverty, and I believe I have found an answer. You see, being poor feels very different in different places. There is too much to explain in terms of what goes into creating that feeling, and each place is a little bit different. But one bold conjecture I would dare to make is that while all the rich are the same everywhere, all the poor are different. Since a lot of places will cease to be viable once wealth turns to stranded assets, it makes sense to look for ones that won't be. And my theory, though it is entirely unsupported by any economic analysis, is that the best places will be those where the poor people feel the best and the rich people, relatively speaking, feel the worst.