Barlow essay on Burning Man and Schwartzenegger

[stuart]

RE: household bankruptcies, I can't see using a measure of personal irresponsibility...

this is a common myth that is refuted in a batch of research recently concluded. I will dig for it. It was summarized in a article. Watch me thrash it in the retelling

the data shows it's people scrambling for a decent education for their children combined with people now meeting their fixed costs on 2 incomes instead of 1 that is throwing folks into poverty. The data shows the best thing you can do to increase your chances of bankruptcy in this economy is have kids, not over indulge in chai lattes and prada.

[Kinetic II]

Testes, you raise valid examples but what about the people who face astronomical medical bills that exceed their insurance, their supplemental coverages and still keep climbing. There's your exception and .01%.

[TestesInSac]

I think that sample is so small as to be meaningless.

If you're looking for a normal distribution, you're unlikely to have experienced it WRT bankruptcy unless you're an accountant or bankruptcy counselor or something. Personally, I think 8 (bankruptcies) for 8 (completely avoidable) is a strong indicator that personal choices play a key role in the experience.

Eh? Fair? Profit is 'unfair.' Is everything SOLD at a fair price? Not by a longshot. People don't amass fortunes off 'fair' business practices (if there is such an animal.)

I'm not sure where that's relevant. I evaluate the price of something naturally as part of the purchasing decision making process. I don't care about the profit margin, so long as the product meets my needs within my budget. BTW, I don't recall having said anything about profit, but making some profit is essential to any business; you'll starve if you can only sell at cost.

It could just as easily be top-down [as bottom-up], or a cycle with mixed responsibility. Frankly, since the institution outlives the individual, I have trouble rationalizing how the next generation begets responsibility dodging in the companies that pre-exist them.

The point was individual (ir)responsibility, and it's aggregate effect in social institutions or business. Institutions and businesses don't make choices, people do. To say otherwise is to leave the door open to abdication of personal responsibility.

What I was suggesting is that we could change some business practices that directly contribute to fiscal irresponsibility and our society would be none the worse for it. There *are* good reasons we don't give knives to toddlers.

Or, we could stop trying to legislate morality and make better, more sustainable personal choices, which in the aggregate would have the same effect, minus the unintended consequences that legislation almost always carries. We don't give credit cards to toddlers either (knives to toddlers was a red herring), we give 'em to people who are supposed to be able to think for themselves.

[TestesInSac]

RE: household bankruptcies, I can't see using a measure of personal irresponsibility...

this is a common myth that is refuted in a batch of research recently concluded. I will dig for it. It was summarized in a article. Watch me thrash it in the retelling

the data shows it's people scrambling for a decent education for their children combined with people now meeting their fixed costs on 2 incomes instead of 1 that is throwing folks into poverty. The data shows the best thing you can do to increase your chances of bankruptcy in this economy is have kids, not over indulge in chai lattes and prada.

I'd be surprised to find that 'myth' refuted by a source with no axe to grind. I take home less than the average 2 income household (remember, I work for the State of CA), but my fixed costs are only half of my paycheck. I could easily put one or two kids through state college, which is where I went. But then, my house isn't filled with consumer goods, I don't drive my '94 Nissan everywhere, my clothes aren't stylish, etc.

[aforceforgood]

8 or so, all small-time, students and a girlfriend, and yes, I think it is representative, the sample size notwithstanding.

It is representative. It's representative of the tendency in YOUNG people to be irresponsible with the new freedom they have before they learn the pain that fiscal irresponsibility brings.

The data shows the best thing you can do to increase your chances of bankruptcy in this economy is have kids, not over indulge in chai lattes and prada.

I calculate my vasectomy has saved me at least 200k.

Re; my three points, I wasn't saying I was in favor of that reality, just that that was the reality, and therefore I foresaw the end result of the recall election way ahead of time. I actually would've liked to have seen McClintock as our next governor, but that just wasn't gonna happen in the political climate of the time.

[PJ]

...Nobody is <u>trying</u> to lose, but losing is built into the system and los<u>ers</u> are inevitable. I am not saying that the individual bears no responsibility within the system, but its not a level playing field from the word go, and again, there *have* to be losers in a capitalist system...

Not true. The modern economy isn't a zero-sum game in which Tom's slice of (economic) pizza necessarily means that somebody else must do without theirs because Tom ate it.

The economy (domestic and global) continues to grow. If that weren't true all six billion of us would be sharing the same wealth that the whole planet had amassed generations ago, and no more. People continue to create wealth by inventing new things and improving the efficiency and productivity of older economic sectors (such as agriculture and mining). Three generations ago nobody owned a car. Two generations ago wealthy people owned one new car, a few middle-class people owned used cars. Today damn near everybody over age sixteen owns at least one car. And that's just one example.

Nobody in your parent's generation made their living in the personal computer trade. Now almost everybody has one at home and at work. New industries are being created daily, we just don't know what they are yet.

[stuart]

I fear the formidable Tom/PJ libertarian tag team but, here goes

I'd be surprised to find that 'myth' refuted by a source with no axe to grind. I take home less than the average 2 income household (remember, I work for the State of CA), but my fixed costs are only half of my paycheck. I could easily put one or two kids through state college, which is where I went. But then, my house isn't filled with consumer goods, I don't drive my '94 Nissan everywhere, my clothes aren't stylish, etc.

First, let me Tom you. Whether or not the source has an axe to grind bears no effect on whether or not the data or the conclusions are accurate. I believe we call that an ad hominem attack.

Lets take your personal scenario and add in a twist; sudden unemployment or underemployment. Where are those kids going to school now? One recurring theme in the data was folks buying houses in neighborhoods with 'good school systems'. This was shown to affect the price of housing quite substantially. We can all probably agree that this concept is not controversial. That increased fixed cost is a bitch when one or both of the household incomes dry up. Another flaw in the scerario you report is that you claim to, in your currrent financial state, be able to put 2 kids through state school. Your current financial state would be in far sorrier shape, assuming all else was equal, had you had the cost of housing, clothing, feeding and maintaining the health of the hypothetical rugrats for the 18 or so years it would have taken to get them to college age. You may have even, gasp, incurred debt.

my aversion to reproduction aside I don't find the following scenario to illustrate a profound lack of personal irresponsibility. 2 people get married and have children. They both work. They buy a house in a neighborhood that they have been led to believe will give their kids a good start in their education. As a result, they have a mortgage. One or both of them loose their jobs and are unable to replace them in the near term. They now can no longer afford the mortage. They are unable to sell the house. Hello bankruptcy court.

[stuart]

Nobody in your parent's generation made their living in the personal computer trade. Now almost everybody has one at home and at work. New industries are being created daily, we just don't know what they are yet.

nobody in my generation is getting rich in the chain mail armor smithing business but I sure know it was a viable trade many generations ago. There are also a hell of a lot less people making a middle class life for themselves, on one salary per household, in the auto manufacturing industry than there were a generation ago. So what's you point?

[gizray]

good points stuart!

[Patience]

The modern economy isn't a zero-sum game in which Tom's slice of (economic) pizza necessarily means that somebody else must do without theirs because Tom ate it.

The economy (domestic and global) continues to grow. If that weren't true all six billion of us would be sharing the same wealth that the whole planet had amassed generations ago, and no more. People continue to create wealth by inventing new things and improving the efficiency and productivity of older economic sectors

But because the distribution of wealth in our economy is so horribly unbalanced, 95% of the "new pizzas" go to 5% of the population, which means that some people are going to go hungry, one way or the other.

Capitalism isn't designed to make this happen, it just happens because people are greedy, and because the more money you have, the easier it is to make more. Further, the easiest way to make more money is by taking advantage of others (buying up or beating down small businesses, etc.) rather than creating something new and innovative.

Tom: In many ways I agree with your assessment about personal responsibility. I have no doubt that many bankruptcy cases are due to poor money management and foolish choices--overspending, getting swept up in the consumer culture, etc. And I am completely in favor of educating people to reverse that culture toward a more sensible and sustainable mindset in which Americans are not convinced that they are less human if they don't have the right car, the right brand of clothes, enough cable stations on their TV, etc. I think that is the only way to truly fix the problem.

The question is, what do you do to patch the hole in the meantime? Do you allow those who have made mistakes to suffer and starve (a la Darwinian economics), or do you use the resources of the wealthiest nation in the world to help them? I say you have to help them. I grant that patching the problem this way is not ideal, and costs taxpayers who are not personally responsible. But when I measure the cost to the taxpayers against the prospect of people starving in poverty without any chance for help, I think it's pretty clear cut.

[gizray]

it seems the word 'capitalism' is continually mentioned as the system in which we operate under. doesn't capitalism imply a 'free' market? cause there sure as hell aint one on this planet right now.

[stuart]

Today's two-income family has 75 percent more earnings, inflation adjusted, than their parents had a generation ago. The reason, of course, is because today's average family has two people in the workforce, instead of one. But this year, more children will live through their parents' bankruptcy than their parents' divorce.

Being a parent is the best predictor that a person will file for bankruptcy. Are parents more profligate than nonparents? What's wrong with this family? Since they're going bankrupt four times more often than their parents did a generation ago, I thought that this would be a story of overconsumption -- too many trips to the mall, too many designer toddler outfits, too many Gameboys.

The data show, however, that today's families are actually spending less on consumption that their parents spent a generation ago: 22 percent less on clothing, 21 percent less on food, including eating out, 44 percent less on appliances, less on furniture, less on floor coverings.

Harvard law professor and author Elizabeth Warren

[TestesInSac]

I fear the formidable Tom/PJ libertarian tag team but, here goes

Keeheehee

I'd be surprised to find that 'myth' refuted by a source with no axe to grind. I take home less than the average 2 income household (remember, I work for the State of CA), but my fixed costs are only half of my paycheck. I could easily put one or two kids through state college, which is where I went. But then, my house isn't filled with consumer goods, I don't drive my '94 Nissan everywhere, my clothes aren't stylish, etc.

First, let me Tom you. Whether or not the source has an axe to grind bears no effect on whether or not the data or the conclusions are accurate. I believe we call that an ad hominem attack.

Sorry, but you don't get the points for that one, though I see the point you're using. Reading my text a bit more carefully (reverse Tom-ing you) you'll note that I leave open the potential, even if it would surprise me, of seeing that 'myth' refuted. I will admit that I should have been more explicit about the axe actually getting ground into the data.

The message must be accepted on its own, regardless of the messenger, and that's a good point. But, the messenger can alter the message, i.e. neglect or mischaractarize data, to suit some personal agenda. This is commonly done on both sides regarding tobacco, gun control, abortion, war.drugs, war.Iraq, etc.

Lets take your personal scenario and add in a twist; sudden unemployment or underemployment. Where are those kids going to school now?

Dunno, I dropped out of the 9th grade due to extreme violence in the one school Nashville's forced desegregation plan permitted me to attend. My education occured in a library, where I hid in a corner for fear of being seen by truant officers.

One recurring theme in the data was folks buying houses in neighborhoods with 'good school systems'. This was shown to affect the price of housing quite substantially.

That is true, and is especially a problem in CA. But, I believe that CA also gives you some latitude in where you can send your kids to school, and home schooling is also an option. I'm willing to bet that foregoing the suburban sprawl home and a little creativity could well solve the bulk of such problems.

We can all probably agree that this concept is not controversial. That increased fixed cost is a bitch when one or both of the household incomes dry up.

Until my father allowed my mother to start waitressing, my household had near-zero income. Fact is, I worked for a few months during my 15th summer, and had the bulk of my paychecks ended up confiscated, as did my mother's tip money. It was tough, but not impossible.

Another flaw in the scerario you report is that you claim to, in your currrent financial state, be able to put 2 kids through state school. Your current financial state would be in far sorrier shape, assuming all else was equal, had you had the cost of housing, clothing, feeding and maintaining the health of the hypothetical rugrats for the 18 or so years it would have taken to get them to college age. You may have even, gasp, incurred debt.

Clothing and feeding them would cost proportionately what it costs to clothe and feed me. I'd brook no whining from them that they didn't have something stylish; they can earn such niceties on their own. As for college, I worked my way through and took out loans which I long ago repaid. I can easily, and probably would, pay their tuition and books, so long as they got good grades. But then, my lifestyle isn't very stylish.

my aversion to reproduction aside I don't find the following scenario to illustrate a profound lack of personal irresponsibility. 2 people get married and have children. They both work. They buy a house in a neighborhood that they have been led to believe will give their kids a good start in their education. As a result, they have a mortgage. One or both of them loose their jobs and are unable to replace them in the near term. They now can no longer afford the mortage. They are unable to sell the house. Hello bankruptcy court.

We share the aversion to reproducing, probably out of the same fear of being stuck with a kid too much like we were. Not to Tom you again, but "profound lack of personal irresponsibility" = "profound personal responsibility", which isn't what I think you meant. And that scenario is a cattle shute I'd certainly avoid, as I think you would, and thus avoid bankruptcy.

[Don Muerto]

If you're looking for a normal distribution, you're unlikely to have experienced it WRT bankruptcy unless you're an accountant or bankruptcy counselor or something. Personally, I think 8 (bankruptcies) for 8 (completely avoidable) is a strong indicator that personal choices play a key role in the experience.

I would amend this final sentence to read "Personally, I think 8 (bankruptcies) for 8 (completely avoidable) is a strong indicator that personal choices play a key role in MY experience."

I'm not sure where that's relevant. I evaluate the price of something naturally as part of the purchasing decision making process. I don't care about the profit margin, so long as the product meets my needs within my budget. BTW, I don't recall having said anything about profit, but making some profit is essential to any business; you'll starve if you can only sell at cost.

Profit is indeed relevant to the consumer transaction argument you posited when you said:

If I consume something, I'm responsible for making sure the trade is fair.

Responsibility in a transaction is a two-way street. Paying for the item is the consumer’s responsibility towards ‘fair,’ and pricing & profit is the seller’s responsibility towards the same. Discussion of profit is relevant in a society where the paradigm is to maximize profits at the expense of the consumer’s resources.

The point was individual (ir)responsibility, and it's aggregate effect in social institutions or business. Institutions and businesses don't make choices, people do. To say otherwise is to leave the door open to abdication of personal responsibility.

Well that is just crazy talk, Tom. Of course institutions and businesses make choices about how they will conduct business, just as consumers and debtors do. To say otherwise is to leave the door open to abdication of corporate responsibility

Or, we could stop trying to legislate morality and make better, more sustainable personal choices, which in the aggregate would have the same effect

Regulating business is not anything near to legislating morality, and I think it is disingenuous of you to conflate the two.

We don't give credit cards to toddlers either (knives to toddlers was a red herring), we give 'em to people who are supposed to be able to think for themselves.

I guess you and I disagree upon the level of responsibility that an 18 year old is capable of. However, could you point out the adverse effects of making it harder for a business to target the vulnerable? Oh wait, I already know the answer: “That would eat into the profit margin.”

Like Patience, I am not an apologist for slackers. People do need to make responsible choices. Similarly, businesses and governments must. We can no longer afford to allow business and government to scratch each other's backs while we fight for the scraps that fall from the table. Educating consumers, and regulating business practices is the only humane way to foster responsibility on both sides of capitalism.

[stuart]

I don't think it is possible to point to any legislation that is not in some way based on someones sense morality. I am shooting from the hip here but I think all you could dig up there is a decent semantic arguement. Whether it be murder or speeding tickets.

>>>>

psychology shows us that the larger the group the greater the diffusion of personal responsibility. When that group is large enough to be 'the shareholders' and they want growth and income out of their stock picks, it's clear to see that personal responsibility has left the building. Left to it's own devices an institution responsible to that mob will whatever it can to satisfy the demand. That's where the law can come in. The law should say, I know you are in the business of making money, but you can't do that by putting your employees or your neighbors in harms way without dealing with the consequences. I would have the law say 'thou shalt not externalize costs'

[stuart]

Americans are not going broke over lattes! Americans are going broke over home mortgages and health insurance. To claim that it is lattes is first to blame the families for something that is not their fault. And secondly, it removes all pressure to focus on political changes that need to be made. In the early 1980s, with no debate, Congress quietly deregulated the home mortgage-lending industry and the credit card industry.

With deregulation, a monster was born, and the monster is sub-prime lending -- that is, lending to a family once they get into financial troubles.

from

The two-income trap: why middle-class mothers and father are going broke

[Flux]

I grant that patching the problem this way is not ideal, and costs taxpayers who are not personally responsible. But when I measure the cost to the taxpayers against the prospect of people starving in poverty without any chance for help, I think it's pretty clear cut.

Actually, the taxpayers don't pay it. The government doesn't pay off a person's debts when he declares bankruptcy; the creditor just doesn't get paid, and has to eat the loss.

So it's not the taxpayers who get stuck holding the bag. It's usually companies like Citibank, one of the largest credit card issuers. You know, this one:

Citigroup Reports Third Quarter Net Income of $4.69 Billion, Up 27%

Revenues Increase 10% to a Record $19.4 Billion

I don't know about you, but I'm not crying many tears for a company that does its best to sucker people into borrowing money at usurious rates and still manages to make record profits during the kind of economic downturn we're experiencing.

[PJ]

nobody in my generation is getting rich in the chain mail armor smithing business but I sure know it was a viable trade many generations ago. There are also a hell of a lot less people making a middle class life for themselves, on one salary per household, in the auto manufacturing industry than there were a generation ago. So what's you point?

One point would be: never plan to earn your living in decling (or even a consolidating) industry. You know up-front that it's a losing game, why join in? It's stupid to compete with Chinese teenagers at assembling simple machines; even a recent Detroit high school graduate should realize that.

Re. obsolete industries, only the very last surviving chain mail or harness or buggy whip maker can earn a comfortable living making props for movies and museum displays. (And he was probably famous for being the best one around back when it was a viable industry.) Quite a few people earn their living caring for horses in one manner or another despite their obsolecence as transportation appliances, but that's only because lots of people love horses and own them as amusements.

Regarding dual-income households, I'm against them on principle if children are desired. The primary macroeconomic effect of their rise has been an increase in real estate values and enormous increases in federal tax receipts. (I won't go into the social and health and quality-of-life effects.) Material-goods-wise, we pretty much live the same way we did before it became expected that both parents in a family will have jobs/careers. Should enough families get fed up with the increased drudgery and stress you'll see housing real estate prices stabilize and decline (in inflation-adjusted dollars). This is beginning but it's too early to say if it's going to be a generalized trend anytime soon.

[TestesInSac]

I would amend this final sentence to read "Personally, I think 8 (bankruptcies) for 8 (completely avoidable) is a strong indicator that personal choices play a key role in MY experience."

I suppose that's fair.

Responsibility in a transaction is a two-way street. Paying for the item is the consumer’s responsibility towards ‘fair,’ and pricing & profit is the seller’s responsibility towards the same. Discussion of profit is relevant in a society where the paradigm is to maximize profits at the expense of the consumer’s resources.

Consumers still get to vote with their dollars in capitalist economies. Don't like M$? Use Linux. Don't like Intel? There's AMD. Don't like US gas-guzzlers? Buy Japanese. The list goes on. In failed centralized/command economies that didn't believe in profits, the trend is towards decentralization, and it's often a bumpy road. Here in the US, demonopolizing the telecom industry has also been bumpy, but it's better today than 20 years ago. Don't believe that? Compare ISDN to DSL. Oh, and don't like DSL? There's wireless and cable in more and more places now.

Well that is just crazy talk, Tom. Of course institutions and businesses make choices about how they will conduct business, just as consumers and debtors do. To say otherwise is to leave the door open to abdication of corporate responsibility

I think you're serious there, and it's a bit jarring. Individuals and collections of individuals make choices. In the context of a business, their decision making process is influenced by fiduciary responsibility, and that can be at odds with the welfare of the whole of the economy, but the decisions are still made by humans, not legal implements.

Regulating business is not anything near to legislating morality, and I think it is disingenuous of you to conflate the two.

Disingenuous conflation, you say?. Pretty strong words, considering CA's decision to force companies to pay 80% of workers health care costs, which is forcing a moral imperative on business. The same is true of forcing business to treat domestic partners as if they were married. Or is there no moral debate regarding the equivalence of same-sex couple and married couples?

I guess you and I disagree upon the level of responsibility that an 18 year old is capable of. However, could you point out the adverse effects of making it harder for a business to target the vulnerable? Oh wait, I already know the answer: “That would eat into the profit margin.”

That last part was definitely and sneeringly pejorative. Writing law to do what you propose is actually tougher and riskier than you give it credit for. What criteria do you use to determine 'vulnerability'? How do you present that criteria in such a way that some 'vulnerable' demographic won't sue you for discrimination when you turn them down for something like credit?

[PJ]

...But because the distribution of wealth in our economy is so horribly unbalanced, 95% of the "new pizzas" go to 5% of the population, which means that some people are going to go hungry, one way or the other.

I have no figures to post, but this ratio seems awfully suspect. It's hardly as though the U.S. has no middle class and isn't regularly minting new millionaires even in the more rational economy of the last three years.

Capitalism isn't designed to make this happen, it just happens because people are greedy, and because the more money you have, the easier it is to make more. Further, the easiest way to make more money is by taking advantage of others (buying up or beating down small businesses, etc.) rather than creating something new and innovative.

Yup, most of us are greedy. (And those that think they're not are probably unimaginably greedy in the eyes of most third-worlders.) Yes, the more you have the easier it is to make more--but only if you don't waste it on foolishly-big houses, lawn ornaments, Burning Man costumes, German-made cars...and investments that don't pan out. There's no amount of money that can't be wasted.

I dispute the "easiest way to make money is by taking unfair advantage of others" argument. Meet some actual people who have succeeded and you'll find that most of them lived very frugally when they were in their 20s and 30s and simply worked hard. 90% of America's millionaires are small business owners. (Per a study performed in 2002; sorry haven't found it on-line.) The high-profile crooks that milked Enron, Tyco, et. al. are comparitvely rare. Not that they shouldn't be humiliated and incarcerated and paupered IMO.

[PJ]

people were tired of politics as usual- what were they going to do, elect another career politician?

I'm wondering: What do most people believe are the qualifications to be a successful Governor?

(sorry for the thread-un-drift)

[Don Muerto]

Consumers still get to vote with their dollars in capitalist economies. Don't like M$? Use Linux. Don't like Intel? There's AMD. Don't like US gas-guzzlers? Buy Japanese. The list goes on. In failed centralized/command economies that didn't believe in profits, the trend is towards decentralization, and it's often a bumpy road. Here in the US, demonopolizing the telecom industry has also been bumpy, but it's better today than 20 years ago. Don't believe that? Compare ISDN to DSL. Oh, and don't like DSL? There's wireless and cable in more and more places now.

Business has a long and storied history of price-fixing and otherwise conferring unfair advantage upon itself in our economic system. The market does not self-regulate. This country is full of pro-business legislation so I don't feel that asking for more on the pro-consumer side is about to bring about the fall of the human race. Buy Japanese? How about lowering those tariffs first?

I think you're serious there, and it's a bit jarring. Individuals and collections of individuals make choices. In the context of a business, their decision making process is influenced by fiduciary responsibility, and that can be at odds with the welfare of the whole of the economy, but the decisions are still made by humans, not legal implements.

I am indeed serious. Businesses are manned by individuals, but they are *not* individuals nor are they subject to the same expectations, limits or laws as individuals. A successful business is full of individuals who seek to maximize their resources by short term gain at the expense of others. Decisions made in the Tyson boardroom may in fact drive chicken prices up, and increase health risks for the chicken consumers. Presumably, these decisions will also drive Tyson's profits higher and thereby directly benefit those individuals involved with this business. Is it really your argument that the decisions made by a Tyson Foods executive and that of a chicken-eater-on-the-street have the same come-from? No? Then businesses make decisions for all purposes but the semantic.

That last part was definitely and sneeringly pejorative. Writing law to do what you propose is actually tougher and riskier than you give it credit for. What criteria do you use to determine 'vulnerability'? How do you present that criteria in such a way that some 'vulnerable' demographic won't sue you for discrimination when you turn them down for something like credit?

Indeed, reversing the trend in business and consumer law *would* be difficult, particularly considering who has money to fund candidates friendly to their agenda. 'Sneeringly perjorative?' Whom am I belittling? I was pointing out that consumer protection and profits are at odds. Protection erodes profits and vice versa. I think that in a system where business dollars do not choke the coffers of candidates the bulk of determining 'vulnerability' could easily be done via consensus. Some thorny territory at the edge would have to be negotiated, but to be honest, most people agree upon what is right for their brethren once you remove the personal profit from the picture.

PJ, I would like to address two points of yours:

1) Yes the economy of the Earth has grown, as has the population. It's also important to note that 'real' wealth, i.e. things with intrinsic value has not increased nearly as much as the population, -hence the uncoupling of our dollar from the Gold standard. Feel free to send trillions in US greenbacks to your grandsires of the Middle-Ages and I think you will understand that our 'wealth' is not exactly what it used to be for many reasons.

2) "90% of America's millionaires are small business owners" A millionaire isn't as rich as you might think. It's a case where the cachet of the term has outlived the glamour that spawned it. A millionaire is not a truly rich person in our society any more, inflation is a real bitch. In 2002, the median salary for CEOs at the top 100 U.S. corporations was $33.4 million. At the average large company in the U.S., the CEO pocketed $5.2 million. I wonder what percentage of America's <u>billionaires</u> are small business owners?

[PJ]

1) Yes the economy of the Earth has grown, as has the population. It's also important to note that 'real' wealth, i.e. things with intrinsic value has not increased nearly as much as the population, -hence the uncoupling of our dollar from the Gold standard. Feel free to send trillions in US greenbacks to your grandsires of the Middle-Ages and I think you will understand that our 'wealth' is not exactly what it used to be for many reasons.

Whereas the tracts of land owned by the elite have continually shrunk since the establishment of agriculture, by any standard the proportion of the general population that lives in splendor has dramatically increased since the middle ages. Who has a better life, Louis-XVI or some schmoe that manages a quick-change oil emporium? IMO it's no contest: Louis can keep his lice-ridden concubines, lack of running water, and the routine death by syphillis and plague of millions of his contemporaries before reaching age 40. (I don't even care for Louis' big house but tastes vary.)

2) "90% of America's millionaires are small business owners" A millionaire isn't as rich as you might think. It's a case where the cachet of the term has outlived the glamour that spawned it. A millionaire is not a truly rich person in our society any more, inflation is a real bitch. In 2002, the median salary for CEOs at the top 100 U.S. corporations was $33.4 million. At the average large company in the U.S., the CEO pocketed $5.2 million.

For the purpose of that study, a "millionaire" was somebody that declared a taxible income of $1,000,000 per year for at least the previous three years. (Which seemed strange to me--I'd always thought of "A Millionaire" as being somebody worth $1M in assets.) Side note: traditionally a Texas oil man's wealth was expressed in "units". Ten $M per "unit." 'Cause as you pointed out, since the '73 A-rab oil embargo a mere $1M won't even keep you in Cadillacs and golf club memberships.

I wonder what percentage of America's <u>billionaires</u> are small business owners?

Excellent question! I've never read a story investigating that. (I'm guessing a more practical measure would be, how many got their start as small business owners as a $1B business surely isn't "small" by anybody's measure.) In any case, billionaires (defined by $1,000,000,000 in total assets) are a stastical non-entity. There are only 244 of them in the whole U.S--.00009% of the population. You could confiscate all their wealth and still only run the US government for a day or two.

[Don Muerto]

Whereas the tracts of land owned by the elite have continually shrunk since the establishment of agriculture, by any standard the proportion of the general population that lives in splendor has dramatically increased since the middle ages. Who has a better life, Louis-XVI or some schmoe that manages a quick-change oil emporium? IMO it's no contest: Louis can keep his lice-ridden concubines, lack of running water, and the routine death by syphillis and plague of millions of his contemporaries before reaching age 40. (I don't even care for Louis' big house but tastes vary.)

I guess the answer to your acreage question depends on what you call 'elite.' I consider corporations such as ADM to be members of the elite. Don't forget too that the elites of the feudal system were beholden to their serfs in many ways. Corporations are only beholden to their major shareholders.

Excellent question! I've never read a story investigating that. (I'm guessing a more practical measure would be, how many got their start as small business owners as a $1B business surely isn't "small" by anybody's measure.)

I would be willing to bet this number is extremely low, particularly if you take businesses started with venture capital out of the mix. It is nigh impossible to earn 1B from scratch in a lifetime.

In any case, billionaires (defined by $1,000,000,000 in total assets) are a stastical non-entity. There are only 244 of them in the whole U.S--.00009% of the population. You could confiscate all their wealth and still only run the US government for a day or two.

1 or 2 days? I don't feel like doing a bunch of tabulation, so I will make it easy on myself. The Forbes 400 wealthiest Americans are together worth 955 billions. To make the Forbes 400 in 2003 you had to be worth 600 million. 244, or 61% of those 400 are billionaires, and the worth in the top half will obviously outweigh that of the bottom half so I am going to call the B club worth 600 billion to be safe. Now, the US Government estimates it will have spent 2,212 billions in 2003. That puts the underestimated worth of the B club as large enough to run the government for about 4 months, -not 1 or 2 days.

To be honest though, I would rather cut 'defense' spending which is over 40% of our burn rate, but I will take it where I can get it!

[PJ]

I guess the answer to your acreage question depends on what you call 'elite.' I consider corporations such as ADM to be members of the elite. Don't forget too that the elites of the feudal system were beholden to their serfs in many ways. Corporations are only beholden to their major shareholders.

Does ADM own much (any?) crop land? Their (and Cargill's) choke hold on the agricultural commodities markets doesn't depend upon their tying up cash on real estate, rather it's their enormous crop purchase contracts.

It's also true that many major corporations' assets consist of comparitively little real estate--at the cutting-edge business schools it's taught that owning real estate is very much frowned upon for most business models. You can rent all the real estate you need for a fixed known cost. I myself disagree to a certain extent, and a significant portion of my net worth is in real estate...upon which I collect rent. Property taxes and building maintenance are predictably constant, and are cheaper than rent for what I'm doing. I can deduct the cost of mortgage interest plus, and since it's commercial property, I can depreciate the construction/acquisition cost. (Over something like 27.5 years, which amount no doubt makes sense to somebody at the IRS.)

It is nigh impossible to earn 1B from scratch in a lifetime.

Not true, especially in modern times: Bill Gates, Sam Walton, Ted Turner, Warren Buffett... They all came from comparatively-modest families. It's not impossible, but yes there's only a handful. Sure, they had help along the way--but also they had to contend with no shortage of competitors and even detractors at every stage in the process.

The Forbes 400 wealthiest Americans are together worth 955 billions. To make the Forbes 400 in 2003 you had to be worth 600 million. 244, or 61% of those 400 are billionaires, and the worth in the top half will obviously outweigh that of the bottom half so I am going to call the B club worth 600 billion to be safe. Now, the US Government estimates it will have spent 2,212 billions in 2003. That puts the underestimated worth of the B club as large enough to run the government for about 4 months, -not 1 or 2 days.

I admit I only mentally estimated the number and have no reason to quibble with your figure. However even four months doesn't amount to much if revolutionizing the way Government is funded is the goal.

To be honest though, I would rather cut 'defense' spending which is over 40% of our burn rate, but I will take it where I can get it!

I wish I could say I've even once read a value for how much in either dollars or portion of the GDP or fraction of Federal outlay is consumed by "defense." Those numbers are all over the page. And there's many pages. My only argument is that defense is one of the core responsibilities of government and thus something should go toward it, and realistically it will always be a large amount. In general I prefer a small, elite force rather than the biggest dumbest force. And I've not yet decided just how far the U.S. should go toward being the world's policeman, and if so what particular places are worth our intervention thereupon. (It'd suck to be President, because then it'd be my job to make those decisions despite being provided only imperfect information--and then to be judged upon my decisions throughout history.)

[blyslv]

Educating consumers, and regulating business practices is the only humane way to foster responsibility on both sides of capitalism.

Just a bugaboo I wanted to get off my chest. I've been involved in telecommunications regulation for the past 12 years and have studied "the network" and how it's regulated as part of my job.

For most of the past century the public, switched, telephone network was considered a public good, vital to the nation's security and economic vitality. As such it was allowed to exist as a regulated monopoly. In the 1950s the first legal brief of what would prove to be a torrent was filed by AT&T (Ma Bell) to preserve their monopoly status.

http://cyber.law.harvard.edu/filter/hush.html

AT&T wanted to prevent the sale of a plastic cup that snapped onto the mouthpiece of a phone, thereby allowing for more private conversations. AT&T while conceding that the cup did not cause technical interference, was worried that the precedent of allowing uncontrolled and unknown third parties to attach things to "their” network would eventually result in degradation of their network.

The assault on the monopoly continued when a small company in Chicago wanted to sell communications services to trucking companies. A small company called Microwave Communications Inc. started suing AT&T, and suing, and suing. Today, MCI is one of the bigger networks in the world and is rebuilding the communications infrastructure in Iraq. Then the U.S. Justice Department started getting involved on anti-trust grounds.

In 1984, AT&T was broken up and we had competition, of sorts, for long distance service. For technical and political reason, competition (of sorts) in the “local market” was not to become a legal reality until passage of the 1996 Telecommunications Act. Seven years later this law keeps entire phalanxes of lawyers involved debating the most arcane and mind numbing minutiae imaginable.

So what’s the point of this short sketch of telecommunications history? There has been a concerted attack on the notion of what constitutes a public good and whether this is something that government should try to assure.
Before 1996, in return for a monopoly, which meant a guaranteed rate of return on investment (profit) the telephone companies attempted to guarantee that all citizens could have access to the network. When you drive in the middle of nowhere and see those wires going hither and yon, realize that they are the result of the social contract between corporations society and government.

That contract has broken down. Just as in broadcasting, where “localism” and the “public interest” are things of the past, the notion that the telephone company owes anything to the community it serves is dead. This attack has come from a variety of sources, from Ronald Reagan, corporations acting in their own self-interest, or apathy on the part of voters. This has happened not only in telecom, but in with electricity as well. The California energy debacle of a few years ago can be traced back to a failure of regulators, who have been under attack for at least the past 20 years. It is happening with water (look at what is happening with La Paz, Bolivia’s water infrastructure).

For me the question is how to reinvigorate this social contract and to assure that corporation’s rational profit seeking behavior does not result in actions detrimental to society such as waste dumping, power outages of failure of the telecom network. I realize that I’m howling at the moon, barking up the wrong tree and pissing in the wind, but I still wonder.

Testes (god I wish you’d come up with a new screen name!), your point about the availability of DSL and cable is well taken. There has been some beneficial effects from deregulation and the assault on the social contract. But just as that 3rd drink is often a mistake, it is possible to go to far, and I think that the deregulation binge of the past 20 years has gone too far.


PJ wrote: if revolutionizing the way Government is funded is the goal.

What is the goal? I’ve become confused again.

[Isotopia]

What do most people believe are the qualifications to be a successful Governor?

Well, he's got to be able to hold his fucking liquor.

[Flux]

Excellent post, blyslv. Thanks!

I would also like to add to the list the deregulation of broadcast media. The airwaves are a public asset, but deregulation has made them into little more than a feeding trough for a few huge media conglomerates.

But the FCC still has time to fuck with micropower radio stations in Black Rock City, of course.

[Alpha]

Consumer slant aside, T-shirts and other items available at http://www.northernsun.com

[TestesInSac]

Great post, Blvslv! Sorry 'bout the name, it was given to me by Precipitate in a Topica post, and now I'm stuck with it here.

I think that maybe there are some fundamentally different concepts that are getting mixed up in this discussion, namely <u>accountability</u> vs. <u>regulation</u>. I think that the latter is often reflexively used to guarantee the former, because business isn't trusted to do the right thing. Even in terms of accounting, some truly perfidious choices have been made by people in business that have resulted in calls for tigher regulation of accounting practices.

The problem with regulation, though, is that it's as likely to be botched as CA's "deregulation" of electricity, which Dianne Feinstein referred to as "half horse, half fish". A case in point was powerplant upgrades. If any power generator wanted to make any improvement to a plant, they had to go through some expensive environmental hoops, even if the improvement desired would inherently result in less pollution and/or more power generated. That acted as a deterrent to improvements in general, which deprives society of a measurable benefit.

The COPA and Communications Decency Act were also attempts to regulate an industry (the Internet), which have both failed so far, fortunately. The reason they both failed is because there was wide recognition of the unintended, and probably disastrous, consequences of the regulation.

My opinion? Clearly, there are examples in some industries (particulary utilities that could exercise monopoly power) where some level of regulation is called for. But those who reflexively call for regulation based on politics or the suspicion of perfidy are exactly the wrong people to write the regulations, and sadly, they're the ones who seem to drive the regulatory process.