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[...] In the United States in recent years, one frequently has heard this type of justification for the stratospheric pay of supermanagers (50– 100 times average income, if not more). Proponents of such high pay argued that without it, only the heirs of large fortunes would be able to achieve true wealth, which would be unfair. In the end, therefore, the millions or tens of millions of dollars a year paid to supermanagers contribute to greater social justice. This kind of argument could well lay the groundwork for greater and more violent inequality in the future. The world to come may well combine the worst of two past worlds: both very large inequality of inherited wealth and very high wage inequalities justified in terms of merit and productivity (claims with very little factual basis, as noted).
Meritocratic extremism can thus lead to a race between supermanagers and
rentiers, to the detriment of those who are neither.
The problem posed by this use of the word “rent” is very simple: the fact
that capital yields income, which in accordance with the original meaning of
the word we refer to in this book as “annual rent produced by capital,” has
absolutely nothing to do with the problem of imperfect competition or monopoly. If capital plays a useful role in the process of production, it is natural
that it should be paid. When growth is slow, it is almost inevitable that this
return on capital is significantly higher than the growth rate, which automatically bestows outsized importance on inequalities of wealth accumulated
in the past. This logical contradiction cannot be resolved by a dose of additional competition. Rent is not an imperfection in the market: it is rather the
consequence of a “pure and perfect” market for capital, as economists understand it: a capital market in which each owner of capital, including the least
capable of heirs, can obtain the highest possible yield on the most diversified
portfolio that can be assembled in the national or global economy. To be sure,
there is something astonishing about the notion that capital yields rent, or
income that the owner of capital obtains without working. Th ere is some-
thing in this notion that is an affront to common sense and that has in fact
perturbed any number of civilizations, which have responded in various ways, not always benign, ranging from the prohibition of usury to Sovie-style com-
munism. Nevertheless, rent is a reality in any market economy where capital is
privately owned. The fact that landed capital became industrial and financial
capital and real estate left this deeper reality unchanged. Some people think
that the logic of economic development has been to undermine the distinction
between labor and capital. In fact, it is just the opposite: the growing sophisti-
cation of capital markets and financial intermediation tends to separate owners
from managers more and more and thus to sharpen the distinction between pure
capital income and labor income. Economic and technological rationality at
times has nothing to do with democratic rationality. The former stems from
the Enlightenment, and people have all too commonly assumed that the latter
would somehow naturally derive from it, as if by magic. But real democracy
and social justice require specific institutions of their own, not just those of
the market, and not just parliaments and other formal democratic institutions.
If we are to make progress on these issues in the future, it would be good to begin by working toward greater transparency than exists today. In the United States, France, and most other countries, talk about the virtues of the national meritocratic model is seldom based on close examination of the facts. Often the purpose is to justify existing inequalities while ignoring the sometimes patent failures of the current system. In 1872, Emile Boutmy created Sciences Po with a clear mission in mind: “obliged to submit to the rule of the majority, the classes that call themselves the upper classes can preserve their political hegemony only by invoking the rights of the most capable. As traditional upper-class prerogatives crumble, the wave of democracy will encounter a second rampart, built on eminently useful talents, superiority that commands prestige, and abilities of which society cannot sanely deprive itself.” If we take this incredible statement seriously, what it clearly means is that the upper classes instinctively abandoned idleness and invented meritocracy lest universal suffrage deprive them of everything they owned. One can of course chalk this up to the political context: the Paris Commune had just been put down, and universal male suffrage had just been reestablished. Yet Boutmy’s statement has the virtue of reminding us of an essential truth: defining the meaning of inequality and justifying the position of the winners is a matter of vital importance, and one can expect to see all sorts of misrepresentations of the facts in service of the cause.
great quote that ties in nicely with http://bookmarker.dellsystem.me/note/2102
[...] If the tax system is not made more progressive, it should come as no surprise that those who derive the least benefit from free trade may well turn against it. The progressive tax is indispensable for making sure that everyone benefits from globalization, and the increasingly glaring absence of progressive taxation may ultimately undermine support for a globalized economy.
[...] A valuable asset of so-called sharing-economy businesses like Uber or AirBnB is typically their network of committed suppliers--Uber's drivers or AirBnB's hosts. This too is an asset of lasting value that both companies have invested heavily to develop (and which they invest to protect, for example, against legal actions requiring them to treat their suppliers as employees).
pretty straightforward, but an aspect that's often neglected in the discourse. their assets aren't just the algorithms/etc - it's the reputation, brand, community
[...] Google, Microsoft and Facebook need relatively few tangible assets compared to the manufacturing giants of yesteryear. They can scale their intangible-asset bundle or software and reputation and so get very big. This type of scalability is, of course, enhanced by network effects.
also straightforward but maybe useful to cite?
Finally, we should consider the possibility that the true nature of intangible investment has changed. Maybe it conceals rent-seeking activities that superficially look like they increase productivity but actually do nothing of the sort.
trying to explain why corporations are investing less in R&D-type stuff. no shit dudes
[...] the rise of intangibles might be expected to increase inequality both of wealth and income. Increasingly intangible intensive firms will need better staff to create synergy with their other intangible assets: better managers, better movie stars, better sports heroes. Firms will screen them more thoroughly and pay them more handsomely. [...]
so many normative assumptions concealed within the word "better". better at what? at extracting rent? and what the fuck does screening them more "thoroughly" mean? like putting up more and more arbitrary barriers to make managers feel like they're prestigious and selective and only hire the "best"?
This intensifies what policymakers call "tax competition": the idea that businesses and owners of capital will shop around for the most favorable tax policies. This makes it harder for governments to increase taxes and exacerbates the problem that led to lower taxes on capital in the first place.
[...] because it is unusually internationally mobile, intangibles increase tax competition, which makes it harder for governments to reduce inequality by taxing capital more.
on the rise of intangibles being innately linked to rising incidence of shifting tax jurisdictions
A third aspect of finance is the perception that venture capital will be very important for the economies of the future. It is hard to think of a major developed country whose government has not spent taxpayers' money in an attempt to build or grow its VC sector. Most developed countries have put in place coinvestment schemes or tax breaks to try and stimulate a venture capital sector like that of the United States.
to cite for diss - claiming that govts have doubled-down on the VC model because they think it works, TINA?
like Canadian R&D credit - remember all these stupid products that were being funded it ... doubling down on this model because it's the most prominent option w/o considering whether it's structurally fucked, incentivising wasteful creations