Picketty is right about inequality

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By Leith van Onselen

Thomas Picketty’s arguments about massive inequality in the US and Europe has received some support from World Bank researchers, Christoph Lakner and Milanovic Branko, who argue that inequality in rich countries has worsened significantly since 1988; although poorer Asian countries have fared much better. From VOX:

A ‘quasi non-anonymous’ growth incidence curve in Figure 2… shows how the country/deciles that were poor, middle-class, rich, etc. in 1988 performed over the next 20 years…

People around the median almost doubled their real incomes. Not surprisingly, 9 out of 10 such ‘winners’ were from the ‘resurgent Asia’. For example, a person around the middle of the Chinese urban income distribution saw his or her 1988 real income multiplied by a factor of almost 3; someone in the middle of the Indonesian or Thai income distribution by a factor of 2, Indian by a factor of 1.4, etc.

It is perhaps less expected that people who gained the least were almost entirely from the ‘mature economies’ – OECD members that include also a number of former communist countries. But even when the latter are excluded, the overwhelming majority in that group of ‘losers’ are from the ‘old, conventional’ rich world. But not just anyone from the rich world. Rather, the ‘losers’ were predominantly the people who in their countries belong to the lower halves of national income distributions. Those around the median of the German income distribution have gained only 7% in real terms over 20 years; those in the US, 26%. Those in Japan lost out in real terms…

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The striking association of large gains around the median of the global income distribution – received mostly by the Asian populations – and the stagnation of incomes among the poor or lower middle classes in rich countries, naturally opens the question of whether the two are associated…

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While the real income of the US 2nd decile has increased by some 20% in a quarter century, the income of China’s 8th decile has been multiplied by a factor of 6.5. The absolute income gap, still significant five years ago, before the onset of the Great Recession, has narrowed substantially.

…if we take a simplistic, but effective, view that democracy is correlated with a large and vibrant middle class, its continued hollowing-out in the rich world would, combined with growth of incomes at the top, imply a movement away from democracy and towards forms of plutocracy.

Taking a global perspective, the findings in this paper do not constitute a “bad news” story. The rapid growth in Asia that has lifted billions out of poverty has been achieved, in part, at the expense of lower-to-middle income earners in the developed world. But in the process, global inequality has probably decreased, even if has increased significantly in richer nations, as argued by Picketty.

The paper’s argument about the hollowing-out of the middle class in advanced economies, implying a movement away from democracy towards plutocracy, is also apt and is supported by a recent report from Oxfam.  Oxfam found that the richest 1% increased their share of income in 24 out of 26 countries for which data was available between 1980 and 2012, with the wealthiest 1% in the US capturing 95% of post-financial crisis growth since 2009, whereas the bottom 90% became poorer (see below charts).

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Oxfam also supports the notion of plutocracy, as the increasing concentration of economic resources in the hands of fewer people presents a major threat to political and economic systems. In particular, according to Oxfam, people are becoming increasingly separated by economic and political power, leading to heightened social tensions and increasing the risk of societal breakdown. Laws are also increasingly favouring the rich, driven by a “power grab” by wealthy elites, who have co-opted the political process to rig the rules of the economic system in their favour.

As noted previously, inequality in rich nations is likely to worsen before it gets better, as improvements in technology and robotics places at risk a large number of skilled jobs, hollowing-out the middle class and increasing returns to owners of capital at the expense of labour.

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Comments

  1. Technology brings structural change and those who can’t carve a niche lose out. Putting them on welfare is not the answer.

    • slightly_perturbed

      Some people just do not have the ability to skill up, that is why robotics and technology is killing them in the job market. It is not a matter of choice, but a matter of ability (intellectual, social, educational etc). Generalising of course, some people just plainly can’t be bothered.
      So what can they do? Cannon fodder for military conquests? Or shall the modern plutocrats simply calculate the welfare costs into upgrading factories with robotics?
      How about not cutting the funding to educational institutions so that they maybe can upskill? But that would not serve our governments with their short term fiscal views to the next election.
      Really , the deeper you go , the uglier it gets. Entire democratic system with its 2 pony system and oligarchic political lobbying is the root cause of the entire mess, everything else is just a quick fixup, like a paint job over a rotting wall.
      I am afraid that it almost favourable to have a large number of uneducated, poor people. Keeps things on the edge, lots of potential soldiers. Make ton of money from dirty little wars. When the system channels psychopaths to the top, psychopathic leadership is what we get.

      • sbinderMEMBER

        I guess where I get to is that people care less because we are now down to satisfying wants, rather than needs. Absolute motivation levels are less. When I was hungry, renting a one bedroom roach infested room and looking for permanent work, I was extremely motivated. And worked several jobs until this condition was put behind.

        As someone now firmly middle class, I want to know what I would do with my additional wealth in a more equitable society. Buy another flat screen, with surround sound?

        I’m already over-nourished, drunk whenever I like, and my apathy is deeply set.

        This has little to do with the leadership, other than I don’t care who it is, provided they stay out of my life in meaningful ways. I don’t have to pay attention to them, because I don’t watch television, read the paper, or otherwise consume the channels they attempt to communicate with me on.

        This may, or may not be, a full and accurate reflection of myself, but I can find a few elements in many of us.

      • sbinder; don’t underestimate the greed, status seeking and the social disease of Affluenza that the vast majority of the population exhibits in spades.

  2. The rapid growth in Asia that has lifted billions out of poverty has been achieved, in part, at the expense of lower-to-middle income earners in the developed world

    Once again the left is almost entirely to blame. It wasn’t the right wingers spitting in people’s faces if one was against such uninhibited globalisation and mass immigration.

    Also the big government left is mostly responsible for the huge levels of government we have giving too much power to the nimbys.

    It doesn’t matter if you’ve got a lot less money than the elite, what matters is you have the basics like a house, car, full belly etc.

    They tuk errr jerbs, is the left’s catch cry towards the rednecks they spat in the face of when they lost their jobs, and I think they’ll be singing that themselves in the near future.

    • migtronixMEMBER

      No the right were the ones selling you down the river while pumping house prices so you wouldn’t notice the economy getting hollow. Have you really not noticed this is a team effort?!

      Do you have a yacht with helipad and submersible tender like the rich do? FFS dude

      • No the right were the ones selling you down the river while pumping house prices so you wouldn’t notice the economy getting hollow.

        And the left were employed in cushy white collar jobs whilst looking down the noses at the rednecks as the manufacturing jobs left, whilst gagging those rednecks via PC. The left completely destroyed any chance of a truthful narrative via tyrannical levels of PC.

        The right were just doing what they’re supposed to do, get on with business.

      • migtronixMEMBER

        FFS Bluebird who do you think was paying the left to carry on like retards ? It’s not like femicommies can pay themselves 100k p. a. someone had to fund that idiocy…

      • Garbage Mav, the left is as PC as ever. Not just their leaders but the average feral.

        The left loved seeing STEM trashed via mass immigration and 457s and now femicommie jobs get paid more or less the same.

        Now they’re going to get booted out of their unis, their idealogy is facing a full frontal attack and their jobs and self entitled mind sets look very threatened by the very globalisation and mass immigration they imposed on the nerds and the rednecks in manufacturing, and I say you couldn’t have a more deserving victim.

  3. Sorry guys but i must respectfully disagree (with the conclusion only) here.

    In the last 30 or so years, the role of government in developed markets (defined as their spending as a % of GDP) has grown steadily, and inequality has grown, as argued by Picketty and you guys.

    On this there is no argument from me.

    Chart here on govt spending as % of GDP in US
    http://www.forbes.com/sites/joshbarro/2012/04/16/lessons-from-the-decades-long-upward-march-of-government-spending/

    Chart here on how the rich have got richer as this process has unfolded.
    http://www.motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

    In Asia and other developing markets where the trend has been towards more liberal/free economies, inequality has tended to fall. You guys acknowledge this when you say above “The rapid growth in Asia that has lifted billions out of poverty”

    You also, rightly, criticise the ‘rentiers’ and ‘corporate oligarchs’ on this blog – often referring to our super industry, the FIRE sector, the banks and their undue influence in setting public policy.

    Again – no problems there – i think your analysis on most of these problems is close to 100% bang on.

    But to say that this problem will worsen due to robotics and improvements in technology which will “places at risk a large number of skilled jobs, hollowing-out the middle class and increasing returns to owners of capital at the expense of labour.” is wrong IMO

    Companies will look to technology as they always have, to reduce costs, increase product quality or delivery of said product etc.

    This benefits the consumer (and labour is a consumer too). Yes, of course jobs will be lost in this process, but jobs will be gained too.

    If we were to accept the logic that technology benefits capital at the expense of labour, then the internet, mobile phones, email etc are all negatives for labour/people, as they’ve led to job losses and older industries becoming obsolete.

    Indeed were it not for technology one could argue the MB blog wouldn’t exist – and if it didn’t – then there’d be some labour (overpaid and probably useless) still sitting somewhere typing up ‘economic news’ to be published in print tomorrow.

    Your service, which i believe is invaluable, has put people out of work – but that doesn’t make it bad – it is the nature of things to evolve.

    Anyhow – i love this blog and see it as by far the best economics and investing blog in Australia – and read it daily – but to criticise the innovators and entreprenuers of this world, who will create cheaper and better ways of doing things which enrich us society as a whole is barking up the wrong tree.

    Respectfully

    • drsmithyMEMBER

      In the last 30 or so years, the role of government in developed markets (defined as their spending as a % of GDP) […]

      Please justify this definition.

      Chart here on govt spending as % of GDP in US

      What does that graph look like if you take out military spending ?

      In Asia and other developing markets where the trend has been towards more liberal/free economies, inequality has tended to fall. You guys acknowledge this when you say above “The rapid growth in Asia that has lifted billions out of poverty”

      Yes, but in “developing markets” (“markets” ? Says a lot that they’re not referred to as countries) just about anything would have improved inequality.

      It’s a lot easier to take a GINI score from 90 to 60 than it is from 25 to 20.

      This benefits the consumer (and labour is a consumer too). Yes, of course jobs will be lost in this process, but jobs will be gained too.

      The jobs lots will far outnumber the jobs gained.

      It’s all very well to say productivity improvements benefit the consumer by making things cheaper, but that’s only true if consumers have something to trade.

      Within a generation, two at the most, probably half the people in the developed world will be literally unemployable because there is nothing they are capable of doing, that needs doing, that a robot cannot do cheaper, faster and better.

      Anyhow – i love this blog and see it as by far the best economics and investing blog in Australia – and read it daily – but to criticise the innovators and entreprenuers of this world, who will create cheaper and better ways of doing things which enrich us society as a whole is barking up the wrong tree.

      No-one is criticising “the innovators and entreprenuers of this world”. They are rarely the ones that end up unfeasibly rich.

      • The definition of Govt Spending as a % of GDP is simple – there are only so many $$ in an economy. The more you and I get to keep as individuals, to make our own choices with, the less that government is intervening. Vice versa is true.

        I dont have a chart without military spending – but im not sure the relevance? Is it that you are critiquing the US Governments military spend? If so im 100% with you – yet another reason to have less government and more freedom.

        re the criticism of innovators and entrepreneurs – i think they are being criticised. The implication is that their work is somehow not in the interests of broader society – but only to benefit the rich/capital.

        Regarding your point that “its only true if consumers have something to trade” – can i ask you to turn that on your head for a moment – how exactly will “capital exploit labour” if labour has nothing to trade.

        You can’t sell things to people if they have nothing to buy it with.

        Trust me i am not coming down on the side of capital here – at least not as it is typically formed today (via rent seeking which MB is fantastic at exposing) – my point is simply that we need more not less government intervention – and that technology and innovation are our friends – not our enemies

        Cheers

      • migtronixMEMBER

        Don’t mind smithy he’s never seen a redistribution he didn’t fall in love with. Dream on your robots replacing the 3rd world fantasy! There’s pretty much no reason to “employ” anyone today to keep the 0.001% going yet here we are…

      • Stephen Morris

        “re the criticism of innovators and entrepreneurs – i think they are being criticised. The implication is that their work is somehow not in the interests of broader society – but only to benefit the rich/capital.”

        Who’s criticising innovators and (genuine) entrepreneurs? They are to be encouraged.

        But they are not the plutocrats!

        It shouldn’t need repeating that huge fortunes do not arise from competitive markets. Competition empowers the consumer and transfers producer surplus into consumer surplus for the benefit of all. Extreme wealth does not arise from innovation and (genuine) entrepreneurship. That sort of wealth would be competed away.

        Extreme wealth necessarily arises from the acquisition and exploitation of market power, from unregulated natural monopolies and near-monopolies, from oligopolies, and from outright anti-competitive practices. It arises from corrupt political favours which actively or passively protect such socially damaging behaviour

        Take the infamous case of Microsoft.

        Microsoft famously did not invent the software which made it rich. It did not invent DOS. It did not invent the concept of Windows. It did not invent word processing and spreadsheet applications.

        Microsoft made its fortune by identifying the opportunity to secure market power over an operating system that would acquire natural near-monopoly status because of the value of having compatibility between computers. Having secured market power, the company milked it for all it was worth, charging customers orders of magnitude more than the cost of production.

        And it didn’t stop there. Using the initial operating system monopoly, Microsoft extended market power into the word processing and spreadsheet markets – again using the natural monopoly value of having compatible systems – to dominate the market.

        Microsoft was in the process of extending this game into internet browsers when the US Justice Department under the Clinton Administration caught up with it in the famous case of United States v Microsoft.

        It is worth recalling what Thomas Penfield Jackson – the trial judge in United States v Microsoft – had to say about the company:

        Most harmful of all is the message that Microsoft’s actions have conveyed to every enterprise with the potential to innovate in the computer industry. Through its conduct toward Netscape, IBM, Compaq, Intel, and others, Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft’s core products. Microsoft’s past success in hurting such companies and stifling innovation deters investment in technologies and businesses that exhibit the potential to threaten Microsoft. The ultimate result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft’s self-interest.

        It is also worth recalling that the findings of fact in United States v Microsoft were never overturned. Microsoft appealed to an appeals court dominated by Republican judges who neutralised the remedies imposed (the break-up of the company to separate out the monopoly components). The newly elected Republican Bush Administration’s Department of Justice then decided to drop any further appeals to the Supreme Court.

        This highlights the other aspect of great wealth. It often relies on the active or passive cooperation of politicians under the corrupt system of elective government. Politicians who look to market-abusing companies for campaign donations. Corrupt politicians who look to market-abusing companies for employment when they leave office.

        We may never know the full extent of harm inflicted – and still being inflicted – on the human race by Microsoft.

        The present value of super-profits transferred from consumers to the company by its exploitation of market power may be estimated from its market capitalisation. But that is only the tip of the iceberg.

        Exploitation of market power doesn’t just transfer wealth. It imposes “deadweight losses”. Fewer people bought computers because of the needlessly high cost of operating system and application software. Innovation that might have occurred earlier was needlessly delayed or prevented (as Thomas Penfield Jackson found).

        The deadweight losses of market abuse are no different from the deadweight losses of taxation.

        The only difference is that when deadweight losses arise from taxation used to fund public services, the wacko laissez-faire fundamentalists jump up and down shouting, “Boo! Boo! Boo! Wicked! Wicked! Wicked!”

        When deadweight losses arise from abuse of market power by private companies owned by billionaires, the wacko laissez-faire fundamentalists jump up and down shouting, “Bravo! Bravo! Bravo! What a wonderful ‘entrepreneur’ this man is! He ought to be congratulated!”

      • drsmithyMEMBER

        The definition of Govt Spending as a % of GDP is simple – there are only so many $$ in an economy. The more you and I get to keep as individuals, to make our own choices with, the less that government is intervening. Vice versa is true.

        My point is that it says nothing about the type, quality or intent of the “intervention”.

        It merely panders to the simplistic right-wing article of faith that more money in Government hands = bad, more money in private hands = good.

        I dont have a chart without military spending – but im not sure the relevance? Is it that you are critiquing the US Governments military spend?

        It is relevant to the previous point. You are asserting an increasing percentage of GDP means Government is destructively intervening more across the board, when it might simply be that significantly more expenditure is being directed into a single area.

        Other areas – let’s say, regulation of financial markets – could be decreasing at the same time, and that may be a far more destructive factor.

        If so im 100% with you – yet another reason to have less government and more freedom.

        This is a false dichotomy fallacy.

        If you think less Government implicitly means more freedom, I suggest you spend some time in places with minimal Government (ie: bugger all police and a dysfunctional legal system) and see how “free” you are.

        re the criticism of innovators and entrepreneurs – i think they are being criticised. The implication is that their work is somehow not in the interests of broader society – but only to benefit the rich/capital.

        Seems to me the criticism is that capital are extracting a disproportionately greater benefit than society.

        Regarding your point that “its only true if consumers have something to trade” – can i ask you to turn that on your head for a moment – how exactly will “capital exploit labour” if labour has nothing to trade.

        They won’t need to anymore. That’s the point.

        You can’t sell things to people if they have nothing to buy it with.

        Indeed. This is a point that some of us try to make to neoliberals intent on driving everyone’s wages into the basement, but they don’t care because they think they’ll be on the winning side.

        Trust me i am not coming down on the side of capital here – at least not as it is typically formed today (via rent seeking which MB is fantastic at exposing) – my point is simply that we need more not less government intervention – and that technology and innovation are our friends – not our enemies

        I assume you meant less intervention not more, and that is not a case you can support with the extremely generic metrics you are using.

        An apropos example to use is workers rights, ie: labour’s ability to bargain with capital. These have been steadily eroded over the last 30-40 years and with that has come the consequent stagnation (if not outright decline) in real incomes. Abandoning full employment policies (ie: Government intervention) in favour of NAIRU has exacerbated the effect by further reducing workers ability to bargain on equal terms with employers.

        Your simplistic argument that more Government intervention = bad, less Government intervention = good, doesn’t stand up to any sort of analysis. You don’t even need to take it to an extreme (ie: no Government, no police, no legal system, etc) to realise that.

      • migtronixMEMBER

        @SM Yup +multiples!

        Thank God someone else gets the M$ scam! Same same for Oracle, Ellison didn’t invent RDBMS’, he found it in a paper at Berkley with work done for DARPA — all he did was claim the patent on it!

      • Stephen Morris

        You can’t sell things to people if they have nothing to buy it with

        That is why plutocrats almost always favour expanding the population.

        As people’s incomes are driven down, there is indeed a limit to how much one can sell in the domestic market.

        If exporting is not an option (and it is not for many of Australia’s protected industries – how do you export absurdly expensive funds management services? Or houses?) then there is only one variable left to play with.

        If profits are to increase the population must be ramped up.

      • drsmithyMEMBER

        And it didn’t stop there. Using the initial operating system monopoly, Microsoft extended market power into the word processing and spreadsheet markets – again using the natural monopoly value of having compatible systems – to dominate the market.

        Microsoft was in the process of extending this game into internet browsers when the US Justice Department under the Clinton Administration caught up with it in the famous case of United States v Microsoft.

        I have to take exception to these two examples.

        Microsoft’s rise to dominance in the word processor and spreadsheet – and particular “office suite” – market was primarily due to technical superiority and customer preference.

        The same is true of the browser market, where Netscape in particular, kicked several own goals with bloated, buggy, poor quality for many years.

      • migtronixMEMBER

        @drsmithy: Really? You’re trying that line again? Ever heard of Visi Calc? Its what M$ stole and crippled by tying in OEMs to their sh!tty O/S — O/S2 for instance was waaaaay better — but nothing ran on it. Because of M$.

      • drsmithyMEMBER

        You’re trying that line again? Ever heard of Visi Calc? Its what M$ stole and crippled by tying in OEMs to their sh!tty O/S — O/S2 for instance was waaaaay better — but nothing ran on it. Because of M$.

        Lotus 1-2-3 killed Visical. Practically overnight. Microsoft wasn’t even a player at the time.

        OS/2 – particularly in the timeframes for which Visicalc might be considered vaguely relevant – was primarily developed by Microsoft.

        IBM – not Microsoft – wanted OS/2 tied to their hardware. Microsoft wanted it spread far and wide, like DOS.

        “Nothing” ran on OS/2 because a) it had major problems with DOS compatibility (thanks to IBM’s insistence it support the 286) and b) the native development tools cost zillions (thanks again to IBM – Microsoft were smart and made their development tools cheap).

      • Stephen Morris

        And even if one were to accept that criticism, it doesn’t alter the essential thesis:

        a) Microsoft did not invent the products from which it made its fortune. At best it modified them. One would need to mount the highly implausible argument that – without Microsoft – no further improvements would have been made or that they would have been much delayed. When a genuine innovation (like spreadsheets or word processing – not invented by Microsoft) occurs it is typical for innovative modification to flow from many competing sources until the technology matures. Those innovations weren’t dependent on Microsoft;

        b) it didn’t make its fortune from those improvements (which in a competitive market would have been copied). It made its fortune through market dominance, either by state-enforced IP protection or by being first-mover in what was a natural monopoly (due to the cost benefits of having a single compatible system); and

        c) to the extent that it overcharged for its products (to make its fortune) it was actually being economically inefficient.

      • migtronixMEMBER

        Lotus killed VisiCal, M$ resurfaced it as Excel and with Microsoft Office down the road, killed Lotus (shudder!!!)

        Yes VB was cheapish compared to Unix style frameworks — because it was CR4P.

        OS/2, while having nothing to do with VisiCalc – that was a demonstration of to buy fall upon an easy prey and use monopoly position to rake billions and billions – was a far better apps OS that DOS6 could ever dream, and windoze booting up from DOS still sends cold sweats through me.

        You’re worship of M$ is bizarre and your assertions incorrect.

        As for Netscape kicking own goals!?!?! In comparison to IE?!?!? ask the guys that M$ tricked into coughing up IE thought of IE4

      • drsmithyMEMBER

        a) Microsoft did not invent the products from which it made its fortune. At best it modified them;

        Well that’s hardly a criticism worth of note. The Japanese didn’t invent cars, but they very quickly became world leaders by building them better than anyone else.

        b) it didn’t make its fortune from those improvements (which in a competitive market would have been copied).

        They were copied, but later and/or not as well.

        I find it odd you criticise Microsoft for copying someone else’s ideas, then argue it would be ok for someone to copy their ideas.

        It made its fortune through market dominance, either by state-enforced IP protection or by being first-mover in what was a natural monopoly (due to the cost benefits of having a single compatible system);

        Well, copyright is a whole other big bag of worms (and FWIW I disagree with almost all Copyright law).

        As for “the cost benefits of having a single compatible system”, it’s hard to see how that “advantage” could be equitably nullified.

        andc) to the extent that it overcharged for its products (to make its fortune) it was actually being economically inefficient.

        Huh ? In most cases – particularly in the early days (say, up to the mid-90s or so) Microsoft’s products were nearly always the *cheaper* option. That’s one of the ways they established their market dominance in the first place.

        Let us not forget that in most cases people don’t buy operating systems, they buy applications and therefore need an appropriate OS to run them on. Applications drive OS adoption, not vice versa.

      • migtronixMEMBER

        Applications drive OS adoption, not vice versa

        bullsh!t again! and again re writing history!

        Look at phone apps and tell me what drives wether you get a droid or an apple?!

        Seriously just stop your non sequitors and being a 3d1k for the convicted monopolist FFS.

      • Stephen Morris

        As explained earlier, when a genuine innovation (like spreadsheets or word processing – not invented by Microsoft) occurs it is typical for innovative modification to flow from many competing sources until the technology matures. One would need to mount the highly implausible argument that – without Microsoft – no further improvements would have been made or that they would have been much delayed.

        There is no evidence to suggest that. Indeed, Jackson’s findings were exactly the opposite! Microsoft’s actions caused innovations to be stifled or delayed.

        in most cases – particularly in the early days (say, up to the mid-90s or so) Microsoft’s products were nearly always the *cheaper* option. That’s one of the ways they established their market dominance in the first place.

        That’s not as odd as it might sound. It is a characteristic of natural monopolies. A continally falling long run cost curve means that a natural monopolist can be the cheapest in the market . . . and still be earning superprofits. Otherwise how did Microsoft get to be so wealthy??

        It is best understood in terms of Game Theory.

        The natural monopolists may be charging in excess of normal returns. You might think – naively – that a competitor would enter the market. But there is no strategy by which a competitor could benefit from that. Entering the market would create an oversupply, pushing down prices to a level at which both firms made a loss. The new entrant might inflict damage on the incumbent but would not benefit itself.

        In theory, the new entrant might negotiate with all (or sufficient of) the potential customers and offer to supply the entire market (or sufficient of it) to ensure that it made a profit. Where compatibility is an issue it would be necessary to be able to offer a critical mass of customers to encourage a switch.

        If that were possible in practice, the threat of new entrants would keep prices to normal levels. Microsoft (and most of the market dominant technology firms) would today be an unspectacular utility company earning utility rates of return.

        In practice, however, the transaction costs of such a negotiation – combined with the Prisoners’ Dilemma of finding someone willing to carry it out (remember there are only normal returns available) – means that it can never happen.

        The monopolist carries on with all or most of the market, the lowest average costs, and prices just low enough to ensure potential competitors can’t make a profit. It still makes supernormal returns! Potential competitors nibbling at the edges have higher average costs and can’t attract market share.

        But Microsoft didn’t stop there. As Thomas Penfield Jackson observed, it actively engaged in practices to deter potential competitors and stifle innovartion which might have threatened its business interests.

      • drsmithyMEMBER

        Lotus killed VisiCal, M$ resurfaced it as Excel and with Microsoft Office down the road, killed Lotus (shudder!!!)

        Yes. They killed it the same way Lotus killed Visicalc, by making it a better product, cheaper.

        Same way Word killed Wordperfect.

        Yes VB was cheapish compared to Unix style frameworks — because it was CR4P.

        This is well before VB, but even so the “it was crap” argument carries no weight at all when thousands of developers flocked to it and wrote millions of applications.

        Developers spoke, and they *by far* preferred to develop applications for Windows than anything else.

        OS/2, while having nothing to do with VisiCalc – that was a demonstration of to buy fall upon an easy prey and use monopoly position to rake billions and billions – was a far better apps OS that DOS6 could ever dream, and windoze booting up from DOS still sends cold sweats through me.

        No, it wasn’t, because it didn’t have any apps.

        You’re worship of M$ is bizarre and your assertions incorrect.

        Your ability to make up random lies about what you think people are saying is boring and predictable.

        As for Netscape kicking own goals!?!?! In comparison to IE?!?!? ask the guys that M$ tricked into coughing up IE thought of IE4

        IE1 was crap. IE2 was tolerable but too late to market (Navigator 3 was already available, and Nav2 was better anyway).

        IE3 was comfortably the match of Navigator 3.

        Navigator 4 was an atrocious piece of software, and 5 wasn’t much better. IE4 was superior functionally and technically, and more standards compliant to boot (Netscape were still pursuing their “let’s tie the browser to the webserver with proprietry extensions and sell more webservers” strategy).

        You can see this quite clearly just from looking at the historical marketshare graphs. IE’s share starts increasing slowly but steadily from the release of IE3, accelerates with the availability of the IE4 betas, and ramps up even more with the final release of IE4. This is still 6-odd months before Windows 98, as well, so cannot be attributed to its integration into the OS (and it’s not like everyone went out the next day and upgraded from Windows 95 to 98, so that argument would be specious anyway).

        You’d struggle to find a better example in the technology world of snatching defeat from the jaws of victory, than Netscape Navigator 4.

        Look at phone apps and tell me what drives wether you get a droid or an apple?!

        Contemporary mobile phones aren’t even vaguely relevant to a discussion about adoption of computer software from the ’80s and ’90s.

      • drsmithyMEMBER

        As explained earlier, when a genuine innovation (like spreadsheets or word processing – not invented by Microsoft) occurs it is typical for innovative modification to flow from many competing sources until the technology matures. One would need to mount the highly implausible argument that – without Microsoft – no further improvements would have been made or that they would have been much delayed.

        I’m confused as to exactly what one would be mounting that highly implausible argument about ?

        Spreadsheets did mature with innovations from multiple sources. They matured into Excel.

        That’s not as odd as it might sound. It is a characteristic of natural monopolies.

        It’s odd when your claim is Microsoft was “overcharging” while not the incumbent.

        The conflation of an OS monopoly and application is also disingenuous.

        We are not talking about a time when Microsoft controlled the office application space.

        We are talking about the time when they were trying to knock out the incumbent products, Lotus 1-2-3 and Wordperfect.

        I’m kind of surprised no-one’s trotted out that absurd “DOS ain’t done ’til Lotus won’t run” urban legend.

        But Microsoft didn’t stop there. As Thomas Penfield Jackson observed, it actively engaged in practices to deter potential competitors and stifle innovartion which might have threatened its business interests.

        Microsoft pulled plenty of dirty tricks to prevent OEMs from bundling alternate OSes on their PCs, I agree.

        But that’s an entirely different situation to the ones surrounding the office and browser markets.

      • migtronixMEMBER

        You can see this quite clearly just from looking at the historical marketshare graphs

        Pfffft that’s what the whole case with the EU was about, the bundling of browser with desktop in 97 onwards. And I’m “making up lies about people”? Like I’d spend 2 seconds even bothering to make up a “lie” you offer so much contradiction!

        Evidence that s/w is better, much much much cheaper, runs on many platforms and my case against M$ is proven!

        As for Netscape? Its now Firefox, I’m currently using it, as opposed to the abomination that is IE that I will never ever touch again and thankfully haven’t had to support for 2 years now since Chrome went corporate.

        For a “lefty” you sure love big blue’s little cousin, the convicted monopolist mega corporation. Breathtaking

      • Stephen Morris

        It is worth going back to the original thesis (or at least my original thesis):

        a) extreme wealth does not arise from innovation and (genuine) entrepreneurship. That sort of wealth would be competed away; and

        b) extreme wealth necessarily arises from the acquisition and exploitation of market power.

        The degree to which Microsoft might have made some innovations, and whether or not those innovations would have arisen anyway, is clearly a matter on which different people have different views. Penfield Jackson concluded that Microsoft had actually stifled innovation, but clearly others disagree.

        The issue of relevance to the inequality debate is that it is not “innovation and entrepreneurship” which create massive wealth.

        There are many innovators. (I myself spend years creating a language for the automatic writing of spreadsheets.) Most innovators do not become billionaires. (Sigh.) Simply being an innovator does not lead to extreme wealth.

        There are many entrepreneurs. Many common-or-garden-variety millionaires are effective entrepreneurs. But the vast majority of entrepreneurs do not become billionaires. Simply being an entrepreneur does not lead to extreme wealth.

        What does lead to extreme wealth is the acquisition and exploitation of market power.

        And the exploitation of market power is economically inefficient. At best the exploiter is overcharging (otherwise how could it accumulate extreme wealth.) At worst, it is actively engaging in socially harmful anti-competitive practices, and seeking political favours from corrupt politicians.

        The proposition that extreme wealth must be tolerated (and even celebrated) because it is necessary for innovation and entrpreneurship is – at best – unsupported by evidence.

        At worst, it is a dangerous falsehood.

      • drsmithyMEMBER

        Pfffft that’s what the whole case with the EU was about, the bundling of browser with desktop in 97 onwards.

        Indeed.

        But the marketshare numbers show the truth. IE marketshare picked up well outside of any influence in bundling.

        Plus there’s the simple fact that it was a clearly better browser from 4.0 onwards.

        And I’m “making up lies about people”? Like I’d spend 2 seconds even bothering to make up a “lie” you offer so much contradiction!

        Well little of what you say beears any resemblance to the truth…

        Evidence that s/w is better, much much much cheaper, runs on many platforms and my case against M$ is proven!

        Yes. Obviously all those businesses and people who chose to use Windows applications were just misguided fools who hadn’t yet Seen The Light.

        For a “lefty” you sure love big blue’s little cousin, the convicted monopolist mega corporation. Breathtaking

        For a guy who doesn’t make up lies, you sure don’t waste many words on the truth.

      • drsmithyMEMBER

        It is worth going back to the original thesis (or at least my original thesis):

        Stephen,

        I don’t disagree with your thesis, though I’d argue there are probably corner cases where it is disproven.

        I was disagreeing with the specific examples. Microsoft gained dominance in the office suite arena by expending a phenomenal amount of development effort on building software (Word and Excel) that not only did what people wanted, but did it so well that they voluntarily switched from other, similar, software.

        Similarly with browsers where, as I said, Netscape could be the textbook example in how to throw away a market-leading advantage (and no-one should shed any tears for Netscape, either, their business plan involved at least as much lock-in as Microsoft’s, if not more).

        There are plenty of places where Microsoft leveraged market dominance to exclude or disadvantage competitors (eg: strongarming OEMs so they had to roll the cost of a DOS and/or Windows license into each PC, regardless of what was installed on it). There’s no need to tar genuine innovations and market improvements with guilt by association.

        There are also plenty of examples where one could look at a solution from an academic perspective and assess it as superior in terms of capabilities and features, but which the market genuinely rejected because of other factors (eg: OS/2 not having any software).

        The proposition that extreme wealth must be tolerated (and even celebrated) because it is necessary for innovation and entrpreneurship is – at best – unsupported by evidence.

        Agreed. Wholeheartedly.

      • migtronixMEMBER

        From the guy who confuses, apparently deliberately, monopolist predatory behaviour for innovative price setting I’ll take that with a grain of salt.

        All those developers have deserted m$ in droves and it’s why their product line hasn’t grown in a decade.

        You’re an…

      • drsmithyMEMBER

        From the guy who confuses, apparently deliberately, monopolist predatory behaviour for innovative price setting I’ll take that with a grain of salt.

        This is what we call lying.

        All those developers have deserted m$ in droves and it’s why their product line hasn’t grown in a decade.

        Which might be a point with some relevance if we were talking about Microsoft today rather than twenty to thirty years ago.

      • migtronixMEMBER

        I don’t know what we you’re creatively amalgamating yourself in but I was paraphrasing you to Bluebird so… Perhaps comprehension and metaphor aren’t your strong suits.

      • migtronixMEMBER

        It’s the whole reason Google went with the don’t be evil line and here you are rewriting well known history and calling me a liar for good measure. Good grief these hypocrite lefties, complete frauds!

      • Stephen Morris

        Microsoft gained dominance in the office suite arena by expending a phenomenal amount of development effort on building software (Word and Excel) that not only did what people wanted, but did it so well that they voluntarily switched from other, similar, software.

        I disagree with that, or at least the interpretation of it.

        From my own experience in the early 1990s I would have been quite happy continuing with Lotus, which we had adopted earlier. But there was a compatability issue. In an investment bank with many users it is important that everyone use the same system. Once one system achieves dominance everyone must fall into line.

        It is a classic first-mover story. Why do people use qwerty keyboards when they are theoretically inferior to dvorak? Why did people use VHS when Beta was theoretically better?

        Because compatibility is everything. These are winner-takes-all races in which the first standard to achieve dominance secures an ongoing monopoly.

        Microsoft knew all about first-mover advantage from its operating system (near-)monopoly. And it used the vast revenues it had available from that existing monopoly to launch an all-out marketing/development/bundling assault to displace the earlier products while there was still time – before they became entrenched – and thereby dominate both the operating system and application markets. (Fifteen years later it attempted the same strategy with gaming, with less success.)

        Had Lotus – instead of Excel – come to dominate the market first, there is little doubt that all of the “innovations” one sees in Excel would have soon been seen in Lotus, or whatever other system achieved dominance.

        The important point is that innovation did not depend on Microsoft achieving market dominance. And market dominance did not arise from the innovation per se; it arose from winning the first-mover battle.

        Microsoft’s vast wealth did not arise from innovation. It arose from securing and exploiting market power.

      • drsmithyMEMBER

        I disagree with that, or at least the interpretation of it. From my own experience in the early 1990s I would have been quite happy continuing with Lotus, which we had adopted earlier. But there was a compatability issue. In an investment bank with many users it is important that everyone use the same system.

        Oh, come on, Stephen. You’re far too intelligent and rational to play the silly anecdote game.

        It is indeed beneficial that everyone use the same system, but this is an issue independent of vendor. Further, even in your own example Microsoft was replacing the incumbent, which meant a) they clearly didn’t have market dominance in your scope and b) there was sufficient justification for expending the (non-trivial, I’m sure you’l lagree) time, expense and risk doing so.

        Once one system achieves dominance everyone must fall into line. It is a classic first-mover story.

        But those first-movers have been displaced in the past. IE had massive marketshare for years after Netscape disappeared and the market stagnated, but it has subsequently been displaced by superior products like Firefox and Chrome, which has since caused IE to improve rapidly in a very short period of time.

        Heck, even in the others examples we are using, both 1-2-3
        and Wordperfect were first movers with huge incumbent inertia that took nearly a decade in each case to fully displace.

        Why do people use qwerty keyboards when they are theoretically inferior to dvorak? Why did people use VHS when Beta was theoretically better? Because compatibility is everything.

        No, because the advantages of switching do not over come the disadvantages. “In theory, there is not difference between theory and practice. In practice, there is.”

        The advantage of qwerty over dvorak outside of a mechanical typewriter is basically nil. The picture quality advantage of beta did not outweigh its shorter runtimes.

        In the case of Excel replacing 1-2-3 and Word replacing Wordperfect, the advantages *did* overcome the disadvantages.

        Also, “compatibility” is not really the right word. “Inertia” is more appropriate, I think.

        Microsoft knew all about first-mover advantage from its operating system (near-)monopoly. And it used the vast revenues it had available from that existing monopoly to launch an all-out marketing/development/bundling assault to displace the earlier products while there was still time – before they became entrenched – and thereby dominate both the operating system and application markets.

        I’m not sure the timeline in your theory works. Microsoft’s OS monopoly didn’t really crystallise until the mid-90s, and we are talking about software that was being developed in the early 90s.

        Had Lotus – instead of Excel – come to dominate the market first, there is little doubt that all of the “innovations” one sees in Excel would have soon been seen in Lotus, or whatever other system achieved dominance.

        Lotus *did* dominate the market for half a decade and was a major player for nearly another half. Heck, back in the day “Lotus” was as synonymous with “spreadsheet” as “Excel” is today.

      • migtronixMEMBER

        Yes of course, like Borland anything that played in m$ land died mysteriously, like Adobe those who played Apple didn’t. You’re full of it

      • migtronixMEMBER

        Apple had agreed to license certain parts of its GUI to Microsoft for use in Windows 1.0, but when Microsoft made changes in Windows 2.0 adding overlapping windows and other features found in the Macintosh GUI, Apple filed suit. Apple added additional claims to the suit when Microsoft released Windows 3.0.[5][6]

        That crippled Apple for a decade
        http://en.wikipedia.org/wiki/Apple_Computer,_Inc._v._Microsoft_Corp.

        In 1993, Microsoft released MS-DOS 6.0, which included a disk compression program called DoubleSpace. Microsoft had previously been in discussions with Stac to license its compression technology, and had discussions with Stac engineers and examined Stac’s code as part of the due diligence process. Stac, in an effort led by attorney Morgan Chu, sued [1]

        More predatory monopoly behaviour
        http://en.wikipedia.org/wiki/Stac_Electronics#Microsoft_lawsuit

        The browser was then modified and released as Internet Explorer. Microsoft originally released Internet Explorer 1.0 in August 1995 in two packages: at retail in Microsoft Plus! add-on for Windows 95 and via the simultaneous OEM release of Windows 95.

        Roh ruh!

        http://en.wikipedia.org/wiki/History_of_Internet_Explorer

      • drsmithyMEMBER

        That crippled Apple for a decade

        Bwhahaha.

        I’m not sure what’s funnier. You, frequent critic of copyright and patent laws in IT, endorsing Apple’s ridiculous “look and feel” lawsuit, or the absurd claim that (rightfully) losing it somehow “crippled Apple for a decade”.

        More predatory monopoly behaviour

        “[…] a California jury ruled the infringement by Microsoft was not willful […]”

        Roh ruh!

        I’m sure you think you have a point here, but I’m not sure what you think it is.

      • Stephen Morris

        No, because the advantages of switching do not over come the disadvantages.

        That’s a circular argument. Or, to put it another way, that is why first-mover advantage exists.

        To put the proposition in reverse: Once there is a dominant incumbent standard, “the disadvantages of switching overcome the benefit of switching”.

        As explained earlier, this is why natural monopolies exist, and why (unregulated) natural monopolists can make super-normal returns in the long run. The disadvantages of “switching” (i.e. of coordinating all users – under conditions of Prisoners’ Dilemma – to move from one system to another system) are vast.

        To take an extreme example, an unregulated private water supply monopoly could – in theory – be overturned by having all people negotiate to sign up to a new supplier who would then proceed to build an entirely new reticulation system. In practice, the “disadvantages of switching” – the vast transaction costs associated with making the change – overwhelm the advantages. This is magnified by the Prisoners’ Dilemma faced by the players. The incumbent (unregulated) private monopolist can carry on over-charging and making supernormal returns indefinitely.

        How else do companies like Microsoft get to have such large market capitalisations? Why do they not simply earn utility rates of return on their shareholders’ funds. The very fact that they make rates of return orders of magnitude greater than normal returns is itself the evidence that they are exploiting market power.

        In the case of Microsoft, the market for applications was rapidly expanding and developing in the early 1990s. Microsoft realised that there was still time to seize first-mover advantage by launching an overwhelming assault on its weaker potential competitors.

        I am reluctant to publicly accuse Microsoft of “predatory pricing” (i.e. selling at less than cost of production for the purpose of wiping out a competitor, in the knowledge that prices can be raised again once market dominance is established) but that could explain its pricing policy at the time and would be consistent with Thomas Penfield Jackson’s findings that Microsoft had engaged in similar illegal practices in the “browser wars”.

        The point I keep coming back to – and the one relevant to the inequality debate – is this:

        for innovation to proceed it is not necessary (as the laissez-faire fundamentalists insist) that firms be allowed to exploit market power and make vast, supernormal profits. There is no evidence that innovation would not occur in an environment where such exploitation and supernormal profits were not allowed.

        That is why my anecdote about Lotus is directly relevant. Had Microsoft not launched – and won – its offensive to seize market dominance (and exploit market power), we would not still be using 1980s quality applications. Time wouldn’t have stood still just because a firm wasn’t able to carrying out a market dominating strategy and earn a vast fortune for itself. Innovation would have continued.

        And to the extent that firms like Microsoft have exploited market power (as evidenced by its market capitalisation), that is economically inefficient.

      • drsmithyMEMBER

        To put the proposition in reverse: Once there is a dominant incumbent standard, “the disadvantages of switching overcome the benefit of switching”.

        Yet it happens.

        It’s happened with browsers, twice (Navigator -> IE -> Firefox). It’s happened with spreadsheets, twice (Visicalc -> Lotus -> Excel). It’s happened with Wordprocessors (WOrdperfect -> Word) and is possibly happening again right with Office to Google Docs.

        The name escapes me, but there used to be a desktop publishing program in the ’80s and ’90s that had complete and utter market dominance, but no longer exists at all. Quark ?

        On the server side, Netware, for all intents and purposes, owned the entire Small-Medium Business fileserver market. Gone.

        Sun Solaris used to be a massive player in the UNIX server market. Today, Sun is dead and Oracle has stuffed the body of Solaris into a coffin and is looking for some nails.

        Geocities, Myspace, Yahoo, Alta Vista. Heck, the example of large incumbents in the online space that have been displaced is probably longer than my arm.

        Nokia, once synonymous with the mobile phone, is all but dead and buried.

        How else do companies like Microsoft get to have such large market capitalisations? Why do they not simply earn utility rates of return on their shareholders’ funds. The very fact that they make rates of return orders of magnitude greater than normal returns is itself the evidence that they are exploiting market power.

        And you accuse me of circular reasoning. 🙂

        (I don’t disagree with you, FWIW.)

        I am reluctant to publicly accuse Microsoft of “predatory pricing” (i.e. selling at less than cost of production for the purpose of wiping out a competitor, in the knowledge that prices can be raised again once market dominance is established) but that could explain its pricing policy at the time and would be consistent with Thomas Penfield Jackson’s findings that Microsoft had engaged in similar illegal practices in the “browser wars”.

        You need to make up your mind, Stephen, were they selling at less than cost or were they overcharging ?

        That is why my anecdote about Lotus is directly relevant. Had Microsoft not launched – and won – its offensive to seize market dominance (and exploit market power), we would not still be using 1980s quality applications.

        If you think we’re still using 1980s quality applications, I suggest you need to fire up some old apps from 1980s and reconsider.

        The argument that innovation has been “stifled” is frequently made, but rarely backed up with anything other than hypotheticals or circular arguments.

      • Stephen Morris

        You need to make up your mind, Stephen, were they selling at less than cost or were they overcharging ?

        Predatory pricing is the strategy of first undercharging in order to eliminate a competitor and achieve market dominance, then overpricing to earn supernormal profits. There is a time dimension involved.

        If you think we’re still using 1980s quality applications, I suggest you need to fire up some old apps from 1980s and reconsider.

        I wasn’t suggesting that. The point was that – even if Microsoft had not come to dominate the market – we would not still be using 1980s quality applications. Innovation would have continued. Innovation does not depend on allowing firms to dominate markets and earn supernormal profits. That is the point I am at pains to make here.

        The very fact that they make rates of return orders of magnitude greater than normal returns is itself the evidence that they are exploiting market power.

        That’s not circular reasoning. It’s simply pointing out the obvious.

        The other examples given are examples where first mover advantange did not exist, or where subsequent technological/legal developments brought it to an end. The fact that first-mover advantage doesn’t exist everywhere – or that it doesn’t always last forever – doesn’t mean that it never exists anywhere.

        (In the browser market, Microsoft’s freedom of action was limited following United States v Microsoft. Its claim that integration of the browser into the operating system was essential was rejected by the Court. The Court’s remedies included requiring Microsoft to allow other browsers to be offered.)

      • drsmithyMEMBER

        Apologies for the slow reply. Been doing performance reviews all day.

        Predatory pricing is the strategy of first undercharging in order to eliminate a competitor and achieve market dominance, then overpricing to earn supernormal profits. There is a time dimension involved.
        Seems like they can’t win no matter what they do, then. 🙂

        wasn’t suggesting that. The point was that – even if Microsoft had not come to dominate the market – we would not still be using 1980s quality applications. Innovation would have continued. Innovation does not depend on allowing firms to dominate markets and earn supernormal profits. That is the point I am at pains to make here.

        We’re in furious agreement then.

        I have never suggested that innovation relied on Microsoft (or anyone else) becoming a massive, market-dominating force.

        I was merely making the point that their rise to dominance in the office product and browser space was very much because they delivered software that was better than the alternatives.

        The other examples given are examples where first mover advantange did not exist, or where subsequent technological/legal developments brought it to an end. The fact that first-mover advantage doesn’t exist everywhere – or that it doesn’t always last forever – doesn’t mean that it never exists anywhere.

        I never suggested it never exists anywhere.

        I argued that your examples were not valid.

        (In the browser market, Microsoft’s freedom of action was limited following United States v Microsoft. Its claim that integration of the browser into the operating system was essential was rejected by the Court. The Court’s remedies included requiring Microsoft to allow other browsers to be offered.)

        There’s two separate issues here.

        The first was the redesign of IE into an OS-level shared component (like, say, a TCP/IP stack or a set of common GUI widgets) so that other applications could leverage it. They then redesigned several aspects of the OS to use that shared component.

        This is perfectly sound software engineering. Indeed, Windows wasn’t the first OS to do it (OS/2 did it a year or so beforehand) and subsequently basically every other OS has proceeded to do the same thing – because it’s a good idea.

        The second was Microsoft (indirectly) preventing OEMs from making alternative browsers prominent by requiring OEMs to not modify the default Windows desktop (which had an “Internet” icon that launched IE.

        The court’s requirement (IIRC, it’s been a while) was that they allow OEMs to install alternative browsers and modify the default desktop. The EU went further and insisted Microsoft themselves present a list of browsers for the users to pick from on first login (IMHO this went too far).

    • With regard to the “more jobs are created as old ones are destroyed”, well, that was true for a long time, but not much longer. Narrow AI and robotic automation are already here. It’s the automated aspect of technology that will replace people, not just “technology” as a broad term. It’s just a pretty easily envisaged extrapolation of current tech. Sure, there will be plenty of different “new” jobs, but does that mean there will be more of them?
      To accept Technological Unemployment as a probable real phenomenon, doesn’t make one neccessarily a critic of technology, just a realist.

    • Ronin8317MEMBER

      The problem is not ‘robots’ per se, but the ‘elite’ will use the law to establish a monopoly on the technology (using patents and such, note that you don’t even have to invent the technology to get a patent, you just need expensive lawyers), so only THEY can have the robots. Everyone else will have an explosive collar attached to their neck like in the movie ‘The Running Man’, as they are not needed anymore as a factor of production.

    • I also have to disagree with the direct link that robotics and technology will lead to job losses overall as that does not reflect the reality on a global level.

      Over the past 2 decades Australia’s unemployment has remained steady (as has most of the developed world) but through technological advances in manufacturing (particularly in China with western technology) we have globally created millions of jobs and lifted millions out of poverty. This doesn’t align with the view the ‘tech and robotics take away jobs’, through the increase in productivity they actually create greater economic value that leads to more jobs through the creation of further demand.

      I wholeheartedly agree with Picketty and most written here but the view on just the increase in $$ (ie GDP) doesn’t tell the whole story, we should be looking at the increase in standards of living as the full picture which is driven by growth and productivity combined.

      • drsmithyMEMBER

        I also have to disagree with the direct link that robotics and technology will lead to job losses overall as that does not reflect the reality on a global level.

        Today’s robots are still primitive and dumb. Highly specialised, relatively expensive to produce, difficult to program.

        Tomorrow’s robots will be vastly more capable, much smarter and much easier to control.

        You say unemployment has remained steady in the developed world, but that’s using unemployment figures that are comically gamed. It also ignores the vast growth in “bullshit jobs” that has been talked about on MB before.

        Now, it’s certainly possible that advances in robotics _could_ be used to herald a new age of prosperity, productivity and egalitarianism, but that would require leadership that wasn’t primarily made up of petty, selfish, greedy psychopaths.

        http://marshallbrain.com/manna1.htm

      • @drsmithy I’m sure the same was said about the combine harvester when it was invented. Technology leads to greater standards of living and a redirection of the most advanced machine on the planet to ever higher skill specialist area. Even with incompetence to date we’ve managed to still increase living standards dramatically on a global level and I expect with continued leadership incompetence into the future we will achieve this too.

        The world is about to undergo a population slowdown due to increased education that will lead to dropping birth rates in the developing world, combined with increased ageing. Technological advances will be key to supporting this demographic spread in the face of a shrinking workforce globally.

      • migtronixMEMBER

        Technological advances will be key to supporting this demographic spread in the face of a shrinking workforce globally

        Bravo!!

  4. Stephen Morris

    Yu might also mention Gilens and Page’s demolition of the fabled Median Voter “Theorem”:

    (http://www.princeton.edu/~mgilens/Gilens%20homepage%20materials/Gilens%20and%20Page/Gilens%20and%20Page%202014-Testing%20Theories%203-7-14.pdf)

    It was amusing to read last week’s tortured Buttonwood column in “The Economist Elitist”. After ignoring Gilens and Page for weeks they eventually buried it in a half page article at the back of the magazine, grudgingly admitting that the US government does in fact govern on behalf of the rich, but that it’s still better than allowing the Filthy Ignorant Stinking Scum to a say in government.

    It is noteworthy because The Economist – back in the 1990s – was a noted supporter of genuine Democracy. Today, as the world’s foremost Mouthpiece of Privilege, it has become a savage critic, reporting on direct democracy only when it sees an opportunity to spin the story as a disaster caused by The Filth casting a direct vote on policy.

    Expect to see more of this.

    As automation and robotics weaken the bargaining position of ordinary people relative to the plutocrats, the plutocrats will become less and less tolerant of allowing The Filth to have any say in government at all.

    We are reverting to Alexander Hamilton’s famous maxim:

    “All communities divide themselves into the few and the many. The first are the rich and the well-born; the other the mass of the people … turbulent and changing, they seldom judge or determine right. Give therefore to the first class a distinct, permanent share in the Government … Nothing but a permanent body can check the imprudence of democracy.”

    Or perhaps even Charles I:

    “A subject and a sovereign are clean different things”

    Hundreds of years of steady progress demolished in a matter of decades.

    • migtronixMEMBER

      Technology may yet turn on the oligarchs Stephen, after all what the f#ck about robotics?

      • Stephen Morris

        The Whiz Kids will be the “Republican Guard” of the new oligarchies.

        That is how dictatorships and oligarchies have worked throughout history.

        You don’t need many supporters to keep down a population. You just need to pick the right ones and make sure they’re sufficiently well-rewarded to keep them loyal to the regime.

        In fact, this process is going on right here in Australia with the deregulation of university fees. As discussed previously, deregulation of universities will create a small number of elite institutions (like Oxbridge or the Ivy League) which admit the children of the privileged (who can pay) plus the brightest and/or most determined (who win scholarships paid out of the fees of the wealthy).

        Wherever they are employed, elite universities allow the children of the privileged to socialise and network with the select few who have been allowed into the “Winners’ Circle”.

        Often one finds that the newcomers – having clawed their way in – are the most loyal to the regime . . . . and the most determined to keep others out.

      • migtronixMEMBER

        OK Stephen you perennial defeatist you, explain Snowden, WikiLeaks, cryptome.org, anonymous, lolzsec etc etc?

        Hell I’m supposedly one of those “paid off” and I’d rather turn the tables on them! Geeks aren’t muscle men they use their brains…

      • Stephen Morris

        The regime simply hasn’t worked out yet how to bring them inside the tent.

        While the technology is still evolving rapidly that may prove difficult. But technological revolutions tend to mature, and once they do the regime will quickly work out how to co-opt it to its own ends.

      • drsmithyMEMBER

        OK Stephen you perennial defeatist you, explain Snowden, WikiLeaks, cryptome.org, anonymous, lolzsec etc etc?

        Outliers.

        For every Snowden, there’s probably a thousand others in the same job who think he’s a traitor and should be thrown in gaol.

      • migtronixMEMBER

        @drsmithy and the outliers are ALWAYS the ones who effect change. After what are the Elites if not, ipso facto, outliers!?

        Its all day long with you it really is.

  5. in 1980 Australia was as egalitarian as Sweden, now just few decades of neoliberal policies and we are close to the top in inequality.