I’ve barely begun a new book, Secular Cycles by Peter Turchin and Sergey A. Nefedov, both Russian with Ph.D.s, I’m not even done with the freakin’ Introduction, but a report from The New York Times rings an interesting bell in conjunction with it:
The Trump administration is considering bypassing Congress to grant a $100 billion tax cut mainly to the wealthy, a legally tenuous maneuver that would cut capital gains taxation and fulfill a long-held ambition of many investors and conservatives.
Steven Mnuchin, the Treasury secretary, said in an interview on the sidelines of the Group of 20 summit meeting in Argentina this month that his department was studying whether it could use its regulatory powers to allow Americans to account for inflation in determining capital gains tax liabilities. The Treasury Department could change the definition of “cost” for calculating capital gains, allowing taxpayers to adjust the initial value of an asset, such as a home or a share of stock, for inflation when it sells.
“If it can’t get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we’ll consider that,” Mr. Mnuchin said, emphasizing that he had not concluded whether the Treasury Department had the authority to act alone. “We are studying that internally, and we are also studying the economic costs and the impact on growth.”
Add in the lone piece of legislation to be passed by Congress and signed into law during this term, the tax ‘reform’ bill, which, as predicted by independent economists, has resulted in a windfall for the wealthy. Then add the greediness of investors just prior to the Great Recession, as augmented by a couple of recent articles by Professor Pearlstein referenced here, and it all adds up to a feeding frenzy by those who already have more than enough.
And in Turchin and Nefedov’s book?
Such a happy state (for the elites) cannot continue for long. First, expansion of elite numbers means that the amount of resources per elite capita begins to decline. This process would occur even if the total amount of surplus stayed constant. But, second, as general population grows closer to the carrying capacity, surplus production gradually declines. The combination of these two trends results in an accelerating fall of average elite incomes.
The dynamic processes described above also have a sociopsychological aspect. During the good times the elites become accustomed to, and learn to expect, a high level of consumption (this is the growing extravagance of noble households” of Dobb and Sweezy). An additional elements, as pointed out by Sweezy, is the ever-increasing quantity and variety of goods available to the elites as a result of urbanization….Modern studies of consumption level expectations suggest that people generally aim at matching (and if possible exceeding) the consumption levels of their parents. …
The deteriorating economic conditions of the elites during the late stagflation phase of the secular cycle do not affect all aristocrats [elites] equally. While the majority are losing ground, a few lineages, by contrast, are able to increase their wealth. The growing economic inequality results from the operation of what some sociologists call the “Matthew effect”… [pp. 10-11]
(All typos mine.) It’ll be fascinating to see how this book applies to our current era, and to make some guesses concerning our current position in the secular cycle and how we might expect our economy to respond to the growing rapacity of the elite part of our society. A key question will be whether their materialistic urges will surge out of control, or if they’ll heed the moralistic requests that the sinking balance of a very rich, if lopsided, society be saved from utter poverty. While carrying capacity was certainly the most important economic measure of the medieval ages, I don’t know if that still applies to today. We’re not yet at mass “soup kitchen” stage, and it’s not clear to me that this’ll happen, unless climate change destroys substantial portions of our arable land.
But it won’t get read fast. Dense prose will slow me down.
