They claim that capitalism is unfair.
They argue that government must step in to redistribute income. Or guarantee a job. Or provide a basic income for all.
The New York City Democratic Socialists take it so far that they believe that profits should be abolished. They want to abolish prisons and borders while we are at.
The face of the New York Democratic Socialists is 28-year old Alexandria Ocasio-Cortez who had a stunning Democrat primary defeat over establishment Democrat Rep. Joe Crowley in a New York City congressional district two weeks ago.
Therefore, Ocasio-Cortez is now the darling of the mainstream media and has been elevated to oracle status in her supposed knowledge of how the world is supposed to work.
Of course, her view is that socialism is the answer for everything.
Ocasio-Cortez was on Twitter last week highlighting her Economics degree and referencing the "Gini Coefficient" in an attempt to showcase her academic qualifications.
Two observations about her tweet.
Perhaps they should read this blog post for further context.
Keep in mind that this 28-year graduate of Boston University was working as a bartender a year ago. Based on her prior employment history, it does not appear that employers put much value in what she learned with that economics degree.
For those that are not familiar with the "Gini Coefficient, it is an index developed by economists to measure the distribution of income in a country. A score of "0" means there is complete equality whereas a score of "100" means there is total inequality.
Socialists like to point at the Gini Index to show how "unfair' capitalism is.
For example, here is the "chart of the week" from the American Economic Association that seems to suggest that the rising income equality that has occurred in China and Russia since they introduced "market-oriented" economies has been bad.
The chart seems to suggest that the rich got richer and the poor got poorer when these countries turned toward capitalism.
However, let's look at the facts in context. After all, context is everything when assessing anything.
Here is a chart showing the average monthly wage in Russia.
Monthly wages have increased dramatically for the average Russian since those socialist theories were replaced with proven market-based capitalist models.
The increases in average wages have been even more dramatic in China.
Is income inequality greater today in China and Russia than it was under strict socialist economic principles? Yes. There is no doubt about it.
Under the prior system the only ones who prospered were the political party leaders. Everyone else was equally poor.
Do you think that average people in China and Russia want to return to the prior economic system because a few people at the top have made outsized incomes and profits?
President John F. Kennedy once said that "a rising tide raises all boats".
There has been no better example of that in human history than the United States of America.
Many became enormously wealthy due to capitalism and freedom in the United States. John D. Rockefeller. Andrew Carnegie. Cornelius Vanderbilt. Henry Ford. Sam Walton. Steve Jobs. Bill Gates. Larry Page. Sergey Brin. Jeff Bezos.
However, they also raised the incomes and standard of living for everyone else. Their personal reward in profits and income was a mere fraction of the value they provided in return.
There is no question that income inequality has increased in the United States over the last 30 years. However, this has been largely due to the loss of manufacturing jobs and the transition to an information economy that has placed a higher value on education. I have written about this previously here and here.
Illegal immigration has also had a major impact by depressing wages at the lower end of the income scale. The other factor has been the low interest rate environment over the last 15 years that has disproportionately favored those who hold assets---those are those who were wealthy to begin with.
The one person who seems to understand these two factors better than anyone is President Donald J. Trump. Why do you think so much of his focus is on illegal immigration, removing foreign trade barriers and focusing on reinvigorating the American manufacturing base?
My advice to Ms. Ocasio-Cortez, and others who think socialism is the answer, is to open their eyes and broaden their vision. Really think about what Trump is doing. In addition, measure the United States on a global scale of how "unfair" it is. After all, "fairness" is a subjective term. It is also relative to what you are measuring against.
Measured on a global scale, 56% of Americans are considered "high income" and 32% are considered "upper middle income" according to Pew Research. That is 88% of all Americans. Only 7% are considered "middle income", 3% "low income" and 2% "poor" when measured across the entire world.
On a global scale, of all the people in the world, 56% are considered low income and 15% are considered poor. Only 7% meet the high income definition.
In other words, 56% of Americans are considered high income as measured against a global standard in which only 7% are. On the other hand, 71% of the people in the world are considered "low income" or "poor" while only 5% of Americans are in that group.
I also wrote about this subject in 2011 comparing the concentration of wealth of the top 10% in the United States compared to other countries. At that time the United States ranked well down the list (77th out of 139 countries on concentration of wealth. The numbers may have changed some but if things changed for the worse on this measure since 2011 it occurred while Barack Obama was President.
Were those facts left out of the economics curriculum at Boston University?
By the way, it is interesting to note that China actually has a Gini Index that is worse than the United States based on the latest data from the World Bank. Yes, that Communist China. Will that be part of the economics lessons that the new Congresswoman from New York City will teach her fellow Democrats?
Here's one more suggestion for Ms. Ocasio- Cortez and her fellow socialists.
Perhaps they missed reading this in 1st or 2nd grade.
It is a very simple lesson. Don't kill the goose that laid the golden egg.
- She only asked how many other Democrats had Economics degrees. Why did she not ask the question of Republicans as well?
- It is pretty scary that 42,000 people "liked" this tweet.
Perhaps they should read this blog post for further context.
Keep in mind that this 28-year graduate of Boston University was working as a bartender a year ago. Based on her prior employment history, it does not appear that employers put much value in what she learned with that economics degree.
For those that are not familiar with the "Gini Coefficient, it is an index developed by economists to measure the distribution of income in a country. A score of "0" means there is complete equality whereas a score of "100" means there is total inequality.
Socialists like to point at the Gini Index to show how "unfair' capitalism is.
For example, here is the "chart of the week" from the American Economic Association that seems to suggest that the rising income equality that has occurred in China and Russia since they introduced "market-oriented" economies has been bad.
The chart seems to suggest that the rich got richer and the poor got poorer when these countries turned toward capitalism.
However, let's look at the facts in context. After all, context is everything when assessing anything.
Here is a chart showing the average monthly wage in Russia.
Monthly wages have increased dramatically for the average Russian since those socialist theories were replaced with proven market-based capitalist models.
The increases in average wages have been even more dramatic in China.
Is income inequality greater today in China and Russia than it was under strict socialist economic principles? Yes. There is no doubt about it.
Under the prior system the only ones who prospered were the political party leaders. Everyone else was equally poor.
Do you think that average people in China and Russia want to return to the prior economic system because a few people at the top have made outsized incomes and profits?
President John F. Kennedy once said that "a rising tide raises all boats".
There has been no better example of that in human history than the United States of America.
Many became enormously wealthy due to capitalism and freedom in the United States. John D. Rockefeller. Andrew Carnegie. Cornelius Vanderbilt. Henry Ford. Sam Walton. Steve Jobs. Bill Gates. Larry Page. Sergey Brin. Jeff Bezos.
However, they also raised the incomes and standard of living for everyone else. Their personal reward in profits and income was a mere fraction of the value they provided in return.
There is no question that income inequality has increased in the United States over the last 30 years. However, this has been largely due to the loss of manufacturing jobs and the transition to an information economy that has placed a higher value on education. I have written about this previously here and here.
Illegal immigration has also had a major impact by depressing wages at the lower end of the income scale. The other factor has been the low interest rate environment over the last 15 years that has disproportionately favored those who hold assets---those are those who were wealthy to begin with.
The one person who seems to understand these two factors better than anyone is President Donald J. Trump. Why do you think so much of his focus is on illegal immigration, removing foreign trade barriers and focusing on reinvigorating the American manufacturing base?
My advice to Ms. Ocasio-Cortez, and others who think socialism is the answer, is to open their eyes and broaden their vision. Really think about what Trump is doing. In addition, measure the United States on a global scale of how "unfair" it is. After all, "fairness" is a subjective term. It is also relative to what you are measuring against.
Measured on a global scale, 56% of Americans are considered "high income" and 32% are considered "upper middle income" according to Pew Research. That is 88% of all Americans. Only 7% are considered "middle income", 3% "low income" and 2% "poor" when measured across the entire world.
On a global scale, of all the people in the world, 56% are considered low income and 15% are considered poor. Only 7% meet the high income definition.
In other words, 56% of Americans are considered high income as measured against a global standard in which only 7% are. On the other hand, 71% of the people in the world are considered "low income" or "poor" while only 5% of Americans are in that group.
I also wrote about this subject in 2011 comparing the concentration of wealth of the top 10% in the United States compared to other countries. At that time the United States ranked well down the list (77th out of 139 countries on concentration of wealth. The numbers may have changed some but if things changed for the worse on this measure since 2011 it occurred while Barack Obama was President.
Were those facts left out of the economics curriculum at Boston University?
By the way, it is interesting to note that China actually has a Gini Index that is worse than the United States based on the latest data from the World Bank. Yes, that Communist China. Will that be part of the economics lessons that the new Congresswoman from New York City will teach her fellow Democrats?
Perhaps they missed reading this in 1st or 2nd grade.
It is a very simple lesson. Don't kill the goose that laid the golden egg.
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