Wheels within wheels.

[Mikebert]

(12-15-2018, 07:32 AM)David Horn Wrote: This is real meat!  I agree on the time frame and focus, yet again, on finance.  The question lingering in the background: is this the first death knell of capitalism?  Is THAT model still viable?  Will AI finally eliminate the need for labor (it's already on the downward spiral), and trigger a real response?  I can't see a purely capitalistic response that doesn't make inequality much worse, and the opposing forces are about as organized as a kindergarten picnic.  

Well last cycle we dealt with similar problems while keeping capitalism intact. Capitalism doe snot *have* to generate high inequality. From 1946 to 1978 inequality fell dramatically, yet our economy was still capitalist throughout that period. You lived through most of it.


Considering how much WORK still needs to be done, I don't see why an SC capitalism won't find lots of things for workers to do.

Economics is part of culture. When you have very high taxes, it does not make sense of pay executive huge compensation, so they don't. But if your compensation is limited by externally opposed taxes rather than the financial return you provide shareholders why would you continue to bust your ass maximizing financial return for shareholders? You won't. Rather you would aim to achieve greatness in the eyes of your peers by building the great business empire. In a work in which the stock market is not central, you cannot use your high-priced stock to BUY growth created by others, rather your will have to conquer new markets by hiring the sales force and the development and production people needed to succeed. So your bring bodies on board and keep some slack during downtimes so when opportunities arise you can jump on them right away instead of wasting time staffing up.

Folks who do this are exponents of "stakeholder capitalism" (SC) those who focus on financial return for shareholders are holders of "shareholder primacy" (SP) culture. These concepts date from a debate in 1931-32.  SC was more common in the pre-1980 world. SP has been dominant over the past 2-3 decades. I wrote a paper in which I model the trends in inequality over 1913-2017 using a cultural evolution model using these two kinds of capitalism. I found that the key parameters that correlated with these trends was labor activity (measure by strike frequency) and top tax rate  with r-squared = 0.84.

So a good approach would be to raise taxes to the roof and bias federal government policy towards labor. However this only works if you can hang on to power. SO first you need the economy to collapse after a financial crisis, so you can come in with a massive stimulus to get people working (this will give you short-term support). This should raise real fear on the Right of inflation, which you address with the high taxes. You also have to neutralize the Fed, to prevent them from fighting inflation (Presidential jawboning in the face of crisis should work)


David Horn: For argument's sake, let's agree that the terminal transition phase is still a long way off.  The history of elites shows no reason to suspect that they will relinquish their favored position willingly, so this next crisis will only indicate the path that will be followed later.  

Um, Republicans were heavily defeated in 2008 and the depression was averted.  Why not let the American people feel the full effects of Republican policy without any Democratic intervention to soften the blow?