Income inequality in the Roman Empire

[Viggen]

Income inequality in America is at levels even higher than those in ancient Rome, according to a recent study from two historians, Walter Schiedel and Steven Friesen, cited by Per Square Mile. After analyzing papyri ledgers, biblical passages and other previous scholarly estimates, the researchers found that the top one percent of earners in Ancient Rome controlled 16 percent of the society's wealth. By comparison, the top one percent of American earners control 40 percent of the country's wealth, according to Vanity Fair...

 

...read the full article at HERE

 

 

that article has pretty interesting and insightful comments too,

 

...and please no one cares if you hate or love the USA, this is a potential interesting topic about wealth distribution in pre-industrial societies, so stick to a civil discussion...

 

cheers

viggen

[caesar novus]

That is a very typical article nowdays. I can hardly believe how American ideals of "equal opportunity" are being forgotten in favor of the eurosocialism ideals of "equal outcome". And be careful about how it mixes up concepts of income vs wealth - often implying need for self destructive tax policies. America is on the brink of falling for this due to forgetting it's heritage, and then only Asia will remain a merit-based dynamic economy.

 

Wealth and income extremes are not inherently bad. The process of people getting there may be good or broken. For instance some corporate titan may get an insane income, and even a zillion for being fired. But it is the dumbest possible approach to put gov't limits on this. This income is strictly an issue between the company shareholder owners and the titan. Something is broken if the shareholders overpay because they have no incentive to. Therefore fine tune that feedback loop. A highly paid titan may be providing incredible benefits to the society at large by providing affordable technology that changes life for the better (the hated railroad barons did this).

 

Probably inherited wealth should be taxed more severely than now. But high incomes actually are taxed near the limit to where it becomes destructive to the economy to tax more. That's aside from tax loopholes, which are notorious and unfair, but popular. Think of frugal folks with saved wealth who can choose 1) a comfy life with low additional income and taxes, or 2) a risky life with high returning investments and high taxes. The risky approach helps society fund businesses and factory construction that create jobs. But most new businesses fail, so you have to lightly tax the high returns for the rare winners in #2 strategy. They get demonized, but the broke failures (who could have been them) are overlooked.

 

There are also problems with gov't mandated raising of the low end of income. Before mid 1960's low income urban neighborhoods strived for upward mobility - with all their problems, they were more civil and tidy than today. Then the entitlement fairy came in to turn them into lawless, chaotic, environments with folks often too fat and content to do much work, which now is done for them by desperate immigrants. Not that a darwinian approach is ideal, but the mindless equality of results approach is full of pitfalls. Another example is raising minimum wages. Put yourself in in an employer's shoes with 10 minimum wage employees who are not yet very timely, efficient, or dependable. Force him to raise the wages, and he will need to replace them with 6 more efficient workers at more than minimum wage.

 

Whether it's income or education or job promotion, the focus must stay on equal opportunity and not equal results. Frugality, work ethic, delayed gratification, etc should be allowed to give the almost infinite economic advantage they may naturally confer (to not only that person, but society - remember uncharitable beast that was Steve Jobs). The results-oriented thinking is being misused all around - such as gender success studies etc. Focus on the fairness of the process, and don't jump to conclusions about the results implying unfairness. Utopian thinking usually spawns perverse incentives with horrible side effects because life is complex.

[Ludovicus]

Income inequality has been a feature of our US society from the beginning. It would be utopian in the extreme and even harmful to eliminate it. Greater productivity should receive greater compensation.

The phenonom that we see developing now in the US is extreme income inequality. Those receiving the greater compensation--bankers and investment managers--are the very ones destroying wealth, yet their salaries and bonus are sacrosanct.

[caesar novus]

The phenonom that we see developing now in the US is extreme income inequality. Those receiving the greater compensation--bankers and investment managers--are the very ones destroying wealth, yet their salaries and bonus are sacrosanct.

This reality check approach should not go excessively astray to grand philosophical generalizations. Competitive capitalism will automatically adjust and correct compensations based on how pleased the paying customers are, unless there is something sticky and flawed. Many sticky parts are well known, long decried by capitalists themselves, but nobody wants to address the boring root causes.

 

Huge incomes can be very worthwhile. For instance there are maybe 4 people on earth who have a track record restoring utterly broken big companies to health. After the financial crash, populist pressures prevented paying premium salaries to them to save jobs and companies (you pay them a lot because tough decisions make enemies and get them fired soon). It should be like hiring a plumber - it's your own business if you choose to pay a lot for a high value service, and not society's business.

 

For examples of flaws, the majority of businesses incorporate in Delaware state. Carl Icahn portrays this like the way ships used to all be registered in Liberia - sort a way to escape responsible laws. This shields high executives from being responsible to the shareholders who pay them, due to sweetheart state law. There is no reason gov't should mandate income caps - just get out of the way so the payers can use their natural frugality to do this. Another flaw is letting people to use high financial leverage, but that was allowed for investment bankers as well as everyday homebuyers with low down payment (US politicians caused much of the problem pushing gov't backed mortgages to favored deadbeat demographics).

 

This top down populist outrage is so mistaken when you look at the details. Take the example of the day "occupiers" advocated everybody switch from banks to credit unions due to "greedy" bank fees. Well, those fees were just caused by irresponsible populist regulators. They recently forced the banks to not charge fees for dumb things like overdrafts or whatever - I could hardly believe it at the time. Of course, then banks had to stick the fees to everyone for services previously free to anyone with reasonable track records.

 

I think the structural problem is not with the rich as in Roman times, but the freeloaders who actually hold disproportionate voting power thru perverse common interests. Especially by 2014 over half US voters will pay no income tax, and actually reap tax credits for pleasantries I would never dream of buying for myself. They have no voting incentive at all to wisely conserve or allocate gov't expenditures. Similarly the huge gov't employee sector is a voting block for squandering expenditures and benefits (think of the famous Spanish air controllers earning over a million). Same for state level - I have posted articles about the widespread police "chief's disease" where they can double and triple dip in a pension very young.

 

This imbalance is mostly what is behind Europe's (sovereign) debt problem, but the populist bandwagon beats on the banks. Banks are on on the mend (when not forced to hold "piig" debt) and financial salaries are dropping to earth to the point where NY, CA, and London have to worry about gaps in tax revenue. The real problems seems to be how public workers or non-taxpayers gain subversive voting power due to the intensity of their special interest which overwhelms the diffuse citizen interest which is really more important. As for the power of the rich, the 1% highest incomers pay 40% of the income tax and have been spending their political contributions on the party which least represents their interests (to hope for favors from winners).

[GhostOfClayton]

Competitive capitalism will automatically adjust and correct compensations based on how pleased the paying customers are, unless there is something sticky and flawed. Many sticky parts are well known, long decried by capitalists themselves, but nobody wants to address the boring root causes.

 

 

The belief in market forces to provide checks and balances is based on oversimplified logic. Remember, the whole raison d'

Edited December 23, 2011 by GhostOfClayton

[caesar novus]

This behaviour was a significant causal factor in the banking crisis. Banks had to resort to practices we'd have prefered them not to, in order to stay competitive with the other banks, who also felt they had to to stay competitive. They had little choice but to sell inappropriate policies to people who didn't need and couldn't afford them, or else their market position would suffer and there would be a smaller increase in 'shareholder value'. Banks prepared to do this would take advantage in this highly Darwinian environment.

This is the premise of a multi billion penalty applied to a major US bank yesterday I believe. But the background story is that was mainly in response to extreme threats and intimidation to lenders from regulators trying to push low income folks into home ownership (bipartisan effort). I think most banks responded with their heads in their hands knowing they would have to throw away money. A few reckless cowboys (B players, shunted to this doomed sideshow) thought they could make the best of an unavoidable situation, and decided little real harm would be done because the unaffordable houses would continue gaining value like it had for decades and leave a profit in the change in ownership.

 

Capitalist darwinism doesn't become that desperate on it's own, or we would have restaurants sneaking poison into their competitors dishes, like they have historically done in China. Maybe, like democracy, free markets are the worst solution except everything else that has been tried. Have you some suggested curbs that wouldn't be worse than the disease? I think financial regulators should have the doctors oath of "first, do no harm" and avoid crippling unintended consequences.

 

One last anecdote that proves I don't know what. I believe a German Landesbank was so conservatively regulated that it couldn't survive according to Economist magazine. Instead of asking for relief it went to a satellite office of US AIG for their high yield mortgage repackages, because they were too new to regulate against. When these went bad, a modest haircut was being negotiated. But the US decided for some reason to fully bail out AIG and sent a staggering amount of cash to overregulated Germans who were berating the US for underregulation.

[Ludovicus]

The financial industry, in securitizing (making stocks out of) debt, produces nothing except huge profits for those willing to gamble. And they have even riskier games than most people can begin to understand. Then, when the banks lose their shirts in the Casino of Risky Financial Instruments, as in 2008, the public is made to bail them out. At least the robber barons of the 19th Century, corrupt and ruthless as they were, created great wealth for the country: railroads, industries, commerce, innovations, and infrastructure. This new bunch of 21st Century capitalists are endangering capitalism as a productive system. I, for one, would like to see enough regulations to prevent another 2008 bank rescue.

Edited December 23, 2011 by Ludovicus