George Carty said:

My thinking was that the greater the inequality of wealth, the more likely you are to have too much investment money chasing too few opportunities, thus fuelling the scams.

It’s probably more to do with how much excess money (over what is needed for survival and maybe some luxuries, though which of those categories something is in is always debatable) is in the economy though bubbles tend to involved investment by all social classes with money to invest (i.e. anyone who isn’t living paycheck to paycheck).

True, though military spending does tend to higher during real wars than during hot peace time (though the Soviet union seemed to be spending about as much during the cold war as they would’ve during an all out war which probably isn’t sustainable for decades).

If they don’t have any power it might just be best to ignore them as the cranks that they are.

Not sure what to do about those who do have power (do any of them have any power though?).

        Anon said:

Any time there are people with a bit of extra money they want to invest you’ll get scammers trying to get some for themselves, doesn’t really matter what income inequality is like (of course any scammer would rather lots of rich people than poor people, provided they could get away with it of course).

My thinking was that the greater the inequality of wealth, the more likely you are to have too much investment money chasing too few opportunities, thus fuelling the scams.

I was thinking of the combined spending at all levels of government…

What about the peacetime arms races though, which began with the launching of HMS Dreadnought and became especially costly during the Cold War?

Back to my earlier query — what’s the best way to counter Third-Worldists who claim that Western prosperity is immoral, as the West’s wealth was all stolen from the Third World?

        George Carty said:

That’s how bubbles work, but people are less likely to take a chance on asset price speculation if there were more opportunities to make profit elsewhere.

Possibly, though OTOH more other ways to make a profit might also make people more likely to take the chance (since they could diversify, though given how many people still seem to think putting their life savings in one company is a good idea…).

Any time there are people with a bit of extra money they want to invest you’ll get scammers trying to get some for themselves, doesn’t really matter what income inequality is like (of course any scammer would rather lots of rich people than poor people, provided they could get away with it of course).

With heavy government subsidies of course.

Probably, though even then you’ve got the fact that in many countries the federal government was weaker but state and local governments much stronger (so even if we could find figures for the US federal government they’d be irrelevant without including the state governments).

Although the military expenditures due to the world wars were transient and mostly ended when those wars did.

More to the point, landowners (and fossil fuel profiteers in countries with domestic fossil fuels) are well connected politically (which is more important than just being willing to fight it, university students fight every cut no matter how significant (or not) a government attempts to make to higher education and they usually don’t win).

True, but you’d have to be an idiot to accept such an offer if it were made.

        Anon said:

No, asset bubbles are caused by people thinking something is worth more than it really is (much of it is just the greater fool theory taken to extremes, even people who think the asset they’re buying is overpriced would buy them because they thought they could offload it to someone else who was a greater fool).

That’s how bubbles work, but people are less likely to take a chance on asset price speculation if there were more opportunities to make profit elsewhere. Hannah Arendt noted in The Origins of Totalitarianism that rising inequality up to the 1870s (due to the Industrial Revolution, most of whose benefits originally went to rich industrialists) fuelled a huge quantity of massive scams (national- and even continental-scale) which targeted rich people struggling to find a way to get a return on their wealth (more recently, that’s what Madoff’s Ponzi scheme took advantage of).

It also led to a great upsurge in imperialism (exemplified by the Scramble for Africa) as the rich sought returns abroad that were unachievable at home.

I expect the vast majority of the increase in government spending was in the first two-thirds of the 20th century, as a result of both rising military expenditures incurred due to the World Wars and the Cold War, and due to increasing welfare provisions of various kinds.

Indeed, the biggest problem with land value tax is that landowners will fight it tooth and claw (just as the biggest problem with nuclear energy is that fossil fuel profiteers will fight it tooth and claw).

“Illegal” is only relevant if there was a reasonable chance of convicting them in a court of law. Anyway, here’s my original source — Bonuses, power and inequality. (Or go here for the original journal article…)

        George Carty said:

Do you have a source for that? I find it hard to believe — as Chris from Stumbling and Mumbling argues, Only a buffoon believes the labour theory of value. But only a buffoon thinks it essential to Marxism; why does believing the labour theory of value discredit Marx but not Adam Smith?

It might be nice for a Marxist to believe that no one actually took the labour theory of value seriously but it is pretty clearly false (Marx himself took it seriously, and the idea is one that many people develop on their own).

Also Adam Smith did consider the labour theory of value to be flawed and only applied to pre-capitalist societies (in other words he isn’t discredited by using it because he didn’t really use it very much).

No, asset bubbles are caused by people thinking something is worth more than it really is (much of it is just the greater fool theory taken to extremes, even people who think the asset they’re buying is overpriced would buy them because they thought they could offload it to someone else who was a greater fool).

I wouldn’t be so sure about that, whilst spending patterns have changed I suspect there wouldn’t be an order of magnitude difference (though I’d be surprised if there hasn’t been a big shift in spending priorities).

Only thing remotely relevant I’ve found related to government size is http://economistsview.typepad.com/economistsview/2005/09/the_size_of_gov.html which indicates that the US government has kept roughly constant size for the past few decades.

Good luck getting the property owners to accept that part though (and I’m still somewhat skeptical that it’d help much).

True enough, though it isn’t just knowledge, but also the ability to vote themselves a raise.

Of course the shareholders (for the most part) do want the company to exploit the rest of society for their benefit.

Doubtful, that kind of thing would be pretty illegal (and you’d have to be an idiot to actually employ such a person, how would bank B know they won’t go and do the same thing to them later on?).

OK, though that applies to a lot of other things as well.

        Anon said:

The Marxists believed that the capitalists would sell what was produced based on the labour value that went into producing it instead of what they could sell it for so Marxist theory on why capitalism would collapse very much was based on the labour theory of value.

Do you have a source for that? I find it hard to believe — as Chris from Stumbling and Mumbling argues, Only a buffoon believes the labour theory of value. But only a buffoon thinks it essential to Marxism; why does believing the labour theory of value discredit Marx but not Adam Smith?

Wasn’t the dearth of investment opportunities in the real productive economy a major driver of asset price bubbles though?

Governments are much bigger now than they were in the 19th century, so Land Value Tax on its own probably wouldn’t be enough to fund them. That doesn’t mean that it wouldn’t be a great idea to replace as much existing taxation as possible with Land Value Tax though.

Also, it is often corporate managers who are the real exploiters (due to their inside knowledge), rather than the true owners (the shareholders). For example, the reason why bankers get huge bonuses (even when they do badly) is because if a banker working for Bank A feels underpaid, he can approach Bank B and say “if you promise me a job in the future, then I’ll sell you many millions worth of Bank A’s assets for a fraction of their true value!” Pre-20th century thinkers (whether George, Marx or Adam Smith) wouldn’t have any reasonable points on this.

The resemblance is that both neo-colonialism and dual loyalty are more common in accusation than they are in reality…

        George Carty said:

Yes, that is a big one — I’d missed it because I was thinking specifically about Marxist thinking on the eventual downfall of capitalism due to increasing inequality and falling returns on investment (which seem rather relevant in the current economic climate). I don’t see how this thinking is invalidated by the falsity of the labour theory of value.

The Marxists believed that the capitalists would sell what was produced based on the labour value that went into producing it instead of what they could sell it for so Marxist theory on why capitalism would collapse very much was based on the labour theory of value.

The current problems are more to do with bad regulation (allowing risky investments to be sold as though they were low-risk is the big one there) than any inherent problem with capitalism.

Some truth to that, monopolies do tend to be bad for the rest of society but I’m still not sure whether a full Georgist system is better than what we have now.

I don’t understand.

        Anon said:

Biggest one would be the labour theory of value.

Yes, that is a big one — I’d missed it because I was thinking specifically about Marxist thinking on the eventual downfall of capitalism due to increasing inequality and falling returns on investment (which seem rather relevant in the current economic climate). I don’t see how this thinking is invalidated by the falsity of the labour theory of value.

Personally, I’m attracted to the thinking of Henry George, with his view that it is monopolists (and especially landowners) who exploit the working people, not capitalists in general.

“Neo-colonialism” would be a bit like “dual loyalty” in that regard, although I can name one good example of genuine dual loyalty.

In 1866 French Emperor Napoleon III was utterly unwilling to ally with Austria against Prussia due to his past in the Carbonari (a resistance group in Austrian-occupied Italy). He paid the price for his dual loyalty four years later, when France was defeated in the Franco-Prussian War.

        George Carty said:

I guess so — by the way, what would you suggest the main errors are in Marxist-Leninist theory? (As opposed to the operation of Marxist-Leninist regimes!)

Biggest one would be the labour theory of value.

There seem to be a lot more accusations than actual neo-colonialism (and the term was coined by those who accused others of it).

        Anon said:

It’s a logical step to make actually (even if some of the premises are wrong), a democracy would need to be able to get the support of the majority which would also include the majority of the working class so Leninism would require that the majority of those in capitalist democracies be paid off in that way.

I guess so — by the way, what would you suggest the main errors are in Marxist-Leninist theory? (As opposed to the operation of Marxist-Leninist regimes!)

Are you now talking about accusations of neo-colonialism rather than actual neo-colonialism though?