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Joseph Stiglitz Says American Inequality Didn’t Just Happen

evonomics.com

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Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#151

Post by Joeri »

ScottBurson wrote: post #108

Something came up yesterday, in the discussion about business schools, that I think is also relevant here. A lot of people — as in, practically everyone — has been persuaded over the last half-century or so that the board of directors of a public corporation have a legal responsibility to maximize shareholder value. The general acceptance of that fiction is resulting in a tremendous amount of wealth transfer from the…

Not that I disagree with what you’re saying, but I just want to point out R&D expenditures have been rising, not falling. It is even rising as percentage of GDP, so companies are investing an ever bigger slice of their revenue in research.

http://www.oecd.org/sdd/08_Science_and_technology.pdf

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#152

Post by 1024core »

Joeri wrote: post #151
ScottBurson wrote: post #108

Something came up yesterday, in the discussion about business schools, that I think is also relevant here. A lot of people — as in, practically everyone — has been persuaded over the last half-century or so that the board of directors of a public corporation have a legal responsibility to maximize shareholder value. The general acceptance of that fiction is resulting in a tremendous amount of wealth transfer from the…

Not that I disagree with what you’re saying, but I just want to point out R&D expenditures have been rising, not falling. It is even rising as percentage of GDP, so companies are investing an ever bigger slice of their revenue in research. http://www.oecd.org/sdd/08_Science_and_technology.pdf

"R&D expenditure" is a very loosely defined term. And companies get a tax benefit from spending on "R&D". Thus, it's not obvious that R&D expenditures are truly rising, or companies are just gaming the system.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#153

Post by WalterBright »

ScottBurson wrote: post #108

Something came up yesterday, in the discussion about business schools, that I think is also relevant here. A lot of people — as in, practically everyone — has been persuaded over the last half-century or so that the board of directors of a public corporation have a legal responsibility to maximize shareholder value. The general acceptance of that fiction is resulting in a tremendous amount of wealth transfer from the…

> as the long-term performance of firms is sacrificed to making the next quarter's numbers.

If that were true, the S&P 500 would have terrible long term performance.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#154

Post by JamesBarney »

mjfl wrote: post #136
ScottBurson wrote: post #124

Earlier quoted context omitted.

Most corporate stock is owned by the wealthy: https://www.investopedia.com/news/stock-ownership-slips-ineq... Furthermore, it is mostly hedge funds that benefit from short-term price gains, as they're frequently leveraged, often with options. Long-term holders like individuals and mutual funds are usually unleveraged.

Even if most corporate stock is owned by the wealthy, in terms of relative wealth changes all that matters is a person's personal percentage investment in the stock market. For example, if you have a middle class person who has 80% of their retirement savings (wealth) in stocks and a rich person who has 50% of their wealth in stock (because of liquidity concerns for example - and this is common) then if the stock mar…

The wealthy tend to have more wealth invested in the stock market. Most middle class wealth is invested in real estate, specifically the house they are living in.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#155

Post by jaredklewis »

ScottBurson wrote: post #108

Something came up yesterday, in the discussion about business schools, that I think is also relevant here. A lot of people — as in, practically everyone — has been persuaded over the last half-century or so that the board of directors of a public corporation have a legal responsibility to maximize shareholder value. The general acceptance of that fiction is resulting in a tremendous amount of wealth transfer from the…

I can’t imagine this belief has changed much of anything.

First of all, as you point out, even if it were a legal standard, the lack of timeframe makes it is such a flimsy concept as to be totally unenforceable. Cut R&D spending? The money could be better allocated elsewhere. Increased R&D spending? Increasing long term share holder value by creating new revenue streams.

Even if we assume every board member is a slave to profit making on a short timeframe with no concern for the environment or human life, I can’t think of any issue before a board that would not have strong, profit oriented arguments on both sides. Buying solar panels? Screw the environment, that was just to reduce reliance on fluctuating local emergy prices. Cutting ties with your sweatshop? Just want to avoid the bad PR. And on and on.

The idea that company board members would be acting in a more environmentally friendly and humane way, except that they think they have to operate under some vague legal standard just doesn’t make sense. Unlike the Internet, board members likely get their legal advice from lawyers.

The answer is far simpler. Board members that act without regard for the environment and human life do so because they have none. Let’s not pretend they would all be Like Mother Theresa but got duped by Internet rumors.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#156

Post by ComradeTaco »

patricius wrote: post #135
ComradeTaco wrote: post #123

Earlier quoted context omitted.

The US has allowed complete unbridled capitalism during the gilded age. Quoting Wikpedia "From 1860 to 1900, the wealthiest 2% of American households owned more than a third of the nation's wealth, while the top 10% owned roughly three fourths of it.[61] The bottom 40% had no wealth at all.[59] In terms of property, the wealthiest 1% owned 51%, while the bottom 44% claimed 1.1%" So pure, unregulated capitalism, lead…

Just remember that inequality per se is not a bad thing. Capitalism seems to me to be the only way to get people out of poverty, which is, of course, what we want.

Right, inequality isn't inherently a bad thing, its when it get so extreme that it impedes class mobility and shrinks the middle class. We have to strike a really careful of regulations and freedom to create a desirable society.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#157

Post by WalterBright »

ScottBurson wrote: post #124
mjfl wrote: post #122

Earlier quoted context omitted.

Why does maximizing shareholder value imply a transfer of wealth from middle class to wealthy? Middle class people can and should be shareholders.

Most corporate stock is owned by the wealthy: https://www.investopedia.com/news/stock-ownership-slips-ineq... Furthermore, it is mostly hedge funds that benefit from short-term price gains, as they're frequently leveraged, often with options. Long-term holders like individuals and mutual funds are usually unleveraged.

Any stockholder can leverage if they want to. Just buy on margin.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#158

Post by FridgeSeal »

mjfl wrote: post #149
laurencerowe wrote: post #144

Earlier quoted context omitted.

Maximizing shareholder value concentrates returns in the hands of shareholders over employees. This has a significant distributional impact as for most income from employment dwarfs income from investments.

again, why do you treat employees as a distinct group from shareholders? At many companies, employees are the shareholders.

Shareholders in that they have some shares, but not nearly on the same scale: shareholders have far more available money to invest and as such, investments pay off in a far larger way than for your average employee.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#159

Post by T2_t2 »

ScottBurson wrote: post #108

Something came up yesterday, in the discussion about business schools, that I think is also relevant here. A lot of people — as in, practically everyone — has been persuaded over the last half-century or so that the board of directors of a public corporation have a legal responsibility to maximize shareholder value. The general acceptance of that fiction is resulting in a tremendous amount of wealth transfer from the…

Isn't the answer far simpler? In a global economy, companies that operate at global scale - Amazon, Toyota, Samsung - will see outsized profits when compared to local only businesses. The vast majority of such companies are located/headquartered/listed in/in/on US bases, leading to a two speed growth rate.

Google makes > 50% of its revenue outside the USA. Here is Apples's percentage: https://www.statista.com/statistics/263435/non-us-share-of-a...

Apple employs 123,000 people, 80,000 in the USA (best stats I could find). Google employs 80,000, and AFAIK over 50% are US based.

So what we have are companies with a growth rate far in excess of US GDP as they create wealth from the world, with the majority going to US based employees and shareholders. Doesn't it just make sense that this leads to inequality? Those that work at global scale - and the locales that house such employees (READ: Bay Area) will have outsized results vs US centric businesses and locales.

Re: Joseph Stiglitz Says American Inequality Didn’t Just Happen

#160

Post by ComradeTaco »

eesha wrote: post #146
pitaj wrote: post #120

Earlier quoted context omitted.

> unregulated capitalism Ah yes, the unbridled laissez-faire capitalist markets throughout the world. It couldn't possibly be that our markets are more regulated than ever before, or that the very regulations and bureaucracy meant to protect us have caused these failures. No no no, it's capitalism's fault. It's certainly not that government power has for decades been exploited by the incumbents to kill competition. T…

Some statists regulate markets into inefficiency, then other statists use the inefficiency as justification for more regulation. Yet other statists use crony capitalism as justification for giving the state more power, as if the problem of crony capitalism was one with capitalism itself rather than the state having too much power already! The statists don't necessarily do this in a coordinated, conscious or intention…

Let me know once you create that perfect stateless society. Marx had that idea of a stateless society as well, but I think both you and I would argue that the idea didn't work out too well.
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