This Global Scale Game of Monopoly Isn't Much Fun

^{I started this conversation with a summary of how wealth inequality is increasing at a rapid rate, although I'm not sure if nearly 1500 words can be classed as a summary. I got more responses than I expected, but not along the lines I expected, demonstrating that economics have much more to do with human experiences than mathematical equations and application. So if you really want to know how the economy is going just talk to the working classes experiencing it at ground zero where, unfortunately, many economists aren't looking.}

I generally take the position that you can't control things outside of yourself you can only control your own response to them and what you personally do about them. Most of the time this holds up, but there can come times where interference from from others limits what you can do to such an extent that no matter how hard you try you can't control much at all. I believe we've reached that point with the economic and political climate today.

There are so many restrictions in our legal systems that prevent the average person from getting ahead that I can understand the reasonings behind anarchism. However, I'm not sure that true anarchism can actually work on the broader country scale that we have today. In fact most social systems seem to struggle to work on their own on anything but a small scale, because you will always have those who will be failed by it and those who will take more by force or by playing the system and use that to exert power over others to further benefit themselves unless measures are put in place. There's a well known saying that 'power corrupts and ultimate power corrupts ultimately.' On a small scale there is a limit to how much power can be gained and it's easier to act as a community or tribe to stop it becoming detrimental to the majority. However, many of the people who hold wealth and power today are able to influence the media and political parties in multiple countries. For Example, Rupert Murdoch owns media corporations in the US, Europe, Asia and the Oceana region. That extent of power hasn't happened often in history and it may even be on a larger scale now than many of the empires of the past.

When the balance of power tips too much in one direction we reach a point where there is only so much we can do within that system before we have little power to do much alone to improve our lot other than accept our fate and try to put a positive spin on it. This is the point where movements start and even when revolutions happen to force change on others perceived to be causing the worst of the problems. Revolutions usually change things for a bit, but in the long run it just ends up being a transfer of power from one group of people to another and then the cycle repeats. People have been trying to put methods in place for thousands of years to try and prevent power accumulating with one person or group of people for any length of time, but we have yet to come up with a foolproof method.

Putting things in perspective

Wealth and power are correlated. It can be hard to conceptualise the implications of what certain wealth levels have. If you can imagine having 1 million in your currency to invest, at a conservative growth rate of 5% per annum that would give you an income of roughly 960 per week. I don't know about you, but that's more than I earn at minimum wage. That would be enough for me and my husband to retire on, but not to do much more. If we add a zero that would be 10 million bringing us to 9,600 per week. Now things are getting very comfortable with luxuries becoming easily affordable and we could maybe pay someone else to take on some things we don't want to do, like cooking and cleaning. 100 million gets us 96,000 per week and at this point you might start to get so much left over that reinvesting it is the only other way to spend it, especially once you've got most of the things you want. You can afford the best healthcare and afford good lawyers if you upset anyone. Let's jump to the poorest of the billionaires at 1 billion. They would have an income of at least 960,000 per week. That's basically 1 million per week! Remember 5% is a conservative estimate, most will be earning 7-15%. Imagine who you could influence with that level of wealth and what you could buy.

The implications of this are that wealth expands much more rapidly the wealthier you get and in a shrinking economy that expansion needs to come from somewhere, so it begins to come from the rest of the population. This graph is a good visual example of just how big the divide becomes when the wealthiest expand their wealth unhindered.

^{Image source}

It's interesting to see how the rise in top end wealth really starts to shoot up after tax systems were changed in the 1980s, something that happened in multiple western countries around the same time. A lot of people note that the 80s was when they started to see their standard of living drop and it has been suggested by some economists that it was these policy changes which decreased taxes, particularly at the top end, that were pivotal in opening the floodgates for wealth to surge into the top 1%. With more wealth comes more power and that power was used to influence government policy and public opinion all the more to gain even more power.

Whether you believe this was the pivotal period or not, the fact remains that in this period government wealth moved to the private sector and we converted to a debt based system to run the welfare system which relied on taxes to continually pay back that debt. A lot of government housing was sold off and now we have huge waiting lists for affordable trust/council housing.

Misleading arguments

With the call for wealth taxes growing louder it's interesting to see how it's argued against and it's easy to do especially at an emotional level because nobody likes taxes especially if they aren't seeing anything in return. Ironically I never thought I would agree with any arguments for more taxes, but I'm finding many of the arguments against wealth taxes are struggling to hold water. It's been suggested that if we didn't have to pay taxes we could afford to budget for things like healthcare and make our own financial safety nets. At one point I would have agreed with this assesment, but now there is no way I could make enough money to do this even untaxed.

Arguments I've seen against wealth taxes are that the wealthy can't pay them because their wealth isn't liquid, it's tied up in assets. A comparison I read is that it's like us being valued as a millionaire because the house and furniture we own has appreciated despite our income not being anywhere near that level of wealth. This misses out quite a few facts, like the fact that we pay income tax so any neccesary assets we own for day to day living come from purchases made after tax. Billionaires can structure their wealth in such a way as to not have an income and therefore not pay income tax. So from the start their assets are bought without having paid any tax. Also they still have to live and have funds ready to go for their next venture, so it's not as if they have no money outside of assets. They merely structure it in a way where it isn't in their name, it's in either a business name or as a loan. Incidentally the wealthier you are the lower the rate of interest rate you can get on loans because you aren't considered high risk. So it is far cheaper for them to live off loans than pay income tax.

A lot of other fear that comes to the general public when discussing potential ways to tax wealth is that it could also be applied to them and their own properties, which it theoretically could, but in reality it doesn't. For example it was being said here in Australia that if they implemented a capital gains tax then you would be taxed on the value of the property you live in if it had gone up in value when you went to sell it in order to move house. Fears even that inflation and running and maintenence costs wouldn't be taken into account are circulating. The fact is that we have always had capital gains taxes, it's just that if you held an asset for a long enough period you got a 50% reduction on the tax. This reduction has been dropped so you pay the full rate no matter when you sell. It's basically an income tax and it actually does take inflation into account. However, the properties it applies to are only investment properties, not people's homes, but don't worry, if the wealthy continue to outbid us on houses the younger generations won't be able to own their own homes anyway. The issue I see with capital gains tax is more that it only really applies to those who need to sell assets occasionally for an income, so this won't affect the super wealthy who never actually need to sell assets, they just buy and hold them.

Many argue that billionaires should be able to get away with not being taxed because they contribute by creating jobs, then those workers pay tax. This assumes that all billionaires have their wealth through businesses and not merely investing, but let's take a quick look at a couple of the most well known billionaires. Jeff Bezos, the creator of Amazon, is pretty well known for under paying his workers, to such an extent that many have to supplement with welfare payments. So technically doesn't that mean tax payers help to fund his business with cheap labour? Also delivery jobs are being replaced by drones in some areas and I'm guessing he's hoping to expand on this. I'm not sure how well Elon Musk pays his workers, but part of his business model is the creation of AI and robots to replace workers, so I'm not sure how well he'll be increasing employment in the future. He seems to be laying more people off than anything at the moment.

What, are you some sort of commie leftist?

Recently someone who has lived under communism was asked why she says good and bad things about both communism and capitalism and which one does she think is better. Her response was that while she believes that there can be good in both, when it comes down to it in communism we give all the power to the government while in capitalism we give all the power to billionaires. So really you may as well ask which flavour of dictatorship you prefer. I can't really disagree with that.

Many European countries demonstrated that you can have a mix of socialism and capitalism which works well. It allows for freedom and a safety net for the majority of the population rather than just a select few. Growing up in one of these countries I used to see so much opportunity ahead of me, but many of those doors were closing before I reached them. Even those I had the chance to go through soon closed behind me for subsequent generations.

I never really thought of myself as poor, but realising that with all the talk that billiinaires should be paying the same 50-60% in taxes as the rest of us, then realising that we never even earnt enough to move out of the bottom 25/30% tax bracket has actually been quite confronting, particularly knowing just how many more people a vastly worse off than us.

As much as we like to say that if you work hard you can do as well as anyone else, the reality is that we live in hierarchical societies where you are limited by the class you're born into. You can improve your status within that class and maybe even move up into the low end of the next class, but unless you have an amazing stroke of luck, the chances are that this is the furthest you'll get. To get ahead in any given class you need the connections and knowledge within that class, which few in the lower classes will ever be privy to.

Who will ultimately be the winners in this global game of Monopoly, or do you think the board will be flipped before a winner can be announced?