If we want good governments, for all, we must lighten the politician’s redistribution profits… sorry I meant burdens

Sir, Janan Ganesh makes a very good case for a Universal Basic Income with his “Those who shout loudest are not always the worst-off” November 21.

At the end of it all, what Ganesh really discusses is the politicians’ efforts to maximize their own redistribution profiteering margins… something that skews it all.

Were there a UBI, then that would be an all citizen to all citizens affair, and governments would be elected, not based on who offers the most to some, but on the basis of who offers the best in what should be a governments primary responsibilities to all.

To diminish the redistribution role of governments will be no easy affair. That is not only because redistribution profiteers will naturally fight back; but also because after so many years of being brought up on the need to cry for a larger share of the redistribution pot, voters have become somewhat more genetically disposed to be beggars of favors.

Venezuela is a case in point, there its poor have received from the Chavez/Maduro governments, less than 15% of what should have been their per capita share of last 15 years of oil revenues. That is something probably true of most previous governments too.

But today, the most vociferous clamors against the government, come from a middle class that discovers having been placed on a road that’s heading in the wrong direction… its “the rage of dispossession” Ganesh writes about. The Venezuelan poor, well they have no time for anger, they have barely time to survive.

@PerKurowski

When regulators told banks: “Stop chancing on the future and just safeguard the past”, they doomed the middle class

Sir, I refer to Sam Fleming’s and Shawn Donnan’s FT’ Big Read. “America’s Middle-Class Meltdown: Changing fortunes” December 10.

To explain why the middle class and those who aspire to be middle class, those who are doing fine and growing when the economy grows in a balanced way are currently doomed, let me quote two passages from John Kenneth Galbraith’s “Money: Whence it came where it went” 1975.

First: “For the new parts of the country [USA’s West]… there was the right to create banks at will and therewith the notes and deposits that resulted from their loans…[if] the bank failed…someone was left holding the worthless notes… but some borrowers from this bank were now in business...[jobs created]”

Second: “The function of credit in a simple society is, in fact, remarkably egalitarian. It allows the man with energy and no money to participate in the economy more or less on a par with the man who has capital of his own. And the more casual the conditions under which credit is granted and hence the more impecunious those accommodated, the more egalitarian credit is… Bad banks, unlike good, loaned to the poor risk, which is another name for the poor man.”

And so Sir, when bank regulators introduced credit risk weighted capital requirements for banks; which allow banks to leverage more their equity with the net risk adjusted margins provided by those perceived as safe, than with those provided by the “risky”; which allows banks to earn much higher risk adjusted returns on equity when lending to the safe than when lending to the risky; then they effectively instructed banks not to take a chance on the more risky future, but to concentrate on safeguarding the safer past… and that was, and currently is, the beginning of the end of the middle class… and the increase of inequality.

Let us be clear, in the Home of the Brave, the Trojan Horse of the Basel Committee, helped cement a dangerous sissy aversion to credit risks.

​@PerKurowski ©

Distribute the gains but also try to avoid their concentration

Sir, in your “Politicians must focus on middle America” November 3, you identify other causes for the stagnation of their real income than the migrant or foreign worker, such as “the rise of winners take all markets” and for which you should be commanded. You then suggest (to democrats) that we need to be very careful not killing off globalization, as it generates many benefits but also (to republicans) that we need to redistribute the benefits better from winners to losers, through higher taxes. Given that the market value of many public services franchises and of the “winners-take-all-markets” are in some cases so extraordinary high that it proves the absence of a real regulator, may we also suggest that some more efforts are invested in avoiding the concentration of those profits that you suggest to afterward tax.

globalization democrats republicans middle America