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February 14, 2008


Kate C.

"Yet the rich devote a smaller percentage of their earnings to buying things than the rest of us because, after all, they’re rich. They already have most of what they want. Instead of buying, and thus stimulating the American economy, the rich are more likely to invest their earnings wherever around the world they can get the highest return."

The problem with this example is that is assumes that the rich were somehow born having all the material goods they'd ever need in the world. Why do they have "most of what they want"? Well, because they'd *bought* those things already. How does that make them uninvolved in the trickle-down economy? The global nature of our economy makes sure that investment in foreign or domestic companies does have a "trickle-down" effect in that invested capital gives businesses world wide the fuel they need to grow and pay employees. And that goes for foreign investment in domestic enterprises as well. I agree that white collar workers are often taken advantage of (in the number of hours worked, lack of good family benefits) and that these things need to be addressed. Also, what solution to the apparent wealth-disparity does the article suggest?



God, I was so scared that I was actually driving people away with my paranoid rantings. Thanks for commenting.

I don't believe that the article was suggesting that they are not participating in the trickle down economy (I certainly wasn't). The way I read the article was that the trickle down effect is simply not as deep as certain policy makers might like to imply.

Also, although I agree that there is the broader trickle down effect as capital flows out to foreign countries (and I am actually probably more in favor of globalization than most Americans), the benefits/detriments of this varies depends on what issue you are addressing. If the question is American strength and economic viability, the benefits are - well - questionable. One of the problems with the outflow of individual wealth is that it is relatively easy to turn these investment into non-taxable transactions. Which means that investment gains that would otherwise be subject to capital gains tax, are not. Furthermore, the same individuals who taxlessly invest abroad (and I'm being unfair, it's not necessarily tax free, just US tax free) are the same individuals who would still expect the full support of the American government if their overseas investments were threatened (ie. by political instability, or by foreign government seizure). You could call this a form of corporate welfare.

As for foreign inflows of capital, I'm not sure where I stand on this yet. History has proven (in the Japanese case) that we have come out ahead when foreigners invest in American companies. But it does frighten me that the foreign investors, rather than buying standard mortar and brick institutions, are buying financial institutions THAT EITHER CONTROL OR ARE DEEPLY EMBEDDED WITH THE INSTITUTIONS THAT CONTROL ALL OF YOUR, MINE, AND YOUR NEXT DOOR NEIGHBORS' 401(K), PENSION PLANS, MUTUAL FUNDS and other institutial investments.

Anyways, this comment is already too long so I'll stop now. :)

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