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a handout can be seen as unearned money, it carries a negative connotation. this is money going to people for support of their lives, since things are very bad for them right now.
What did they do to earn this money?
A: Being alive, being part of the economy and social structures, etc.
You know, humans.
Nobody needs to earn money. That by default means those who cannot earn money by current local financial sentiments, are worthless. Yet everyone is worthless if there is nobody spending "earned" money.
The 'poor' spend relatively more money than the rich, and they tend to do that locally, they pay more taxes, produce labour, etc.
Ie all the money gets recirculated into the local economy, which (the local companies) can then invest or compete better.
Rich don't do any that or at a fraction of the poor. And additionally it's easier to stash money offshore, invest & support companies doing shady stuff etc.
Giving money to big private corps literally never worked better that giving money to all local companies and/or citizens.
The former is just a transfer from citizens who earned money to a few private citizens.
But, for example, what do investors do to earn our money?
I just pace money I have in excess somewhere & demand from their CEOs to cut costs by 14,3% or they are fired.
That ads financial value, but at what actual cost?
However, investors take advantage of/rely on the poor spending their money by taking it and concentrating it, which makes that money a lot more dead compared to it being spent.
Investors do provide an important role by taking on risk and enabling growth that otherwise wouldn’t occur. The concept of an economy that constantly grows is that, through investment and work, value greater than the sum of the parts put in can be generated.
If Bob pays Frank to build a house and buys all the supplies, Frank does the actual labor, and Laura buys it then Bob and Frank are left with more money than they started with and Laura is left with an asset worth to her what she paid for it. Her net worth is unchanged and she can borrow against the house or sell it some day. All three people have gained from the situation.
If Bob and Frank can’t sell the house though or the price of houses drops while it’s being built Frank still gets his salary, Laura’s life is unchanged or she got a good deal, but Bob just lost everything he put in.
The problem is our society is wildly imbalanced towards Bob, so Frank is going to earn pennies for actually doing the work to build a house and Bob is going to rake in most of the profits. Taking the risk and enabling something to be built is obviously important and a valuable service, but it’s deeply overvalued in our current system as compared to actual labor
That’s how an economy can be doing well (generating lots of value) but for regular humans almost none of the value gets passed to us and instead gets concentrated in the hands of Bobs and Lauras who contribute money instead of labor.
Ensuring us Franks have enough money to spend is critical because, as you pointed out, a far larger share of my money is recirculating into the economy than a billionaire who spends tiny percentages of their net worth. Conversely, someone living paycheck to paycheck is by definition recirculating essentially 100% of their net worth back into the economy every pay cycle.
Lastly being poor is expensive, and has large costs associated. Not having savings to cover unexpected expenses often leads to debt, not being able to afford a large one time purchase often leads to many smaller expenses that add up much higher in total, etc. Enabling people to break out of those cycles is massively beneficial to economies and obviously (and more importantly imo) to individuals and communities
I worked in financial conglomerates all my career, I understand what you are saying very well.
But I think you missed the point about (intrinsic) value of the GDP components I was trying to make, and what brings the added value (if that makes sense, if it is actually value added, or did the agreed upon financial number go up for other reasons).
Why is house/housing an asset (in the sense of investment) to Laura? An asset that she did or had to pay more than it would cost her to hire the workers herself a day before (and risking the investment ... about as much or even less as she is risking now that she bought it at a higher price)?
I agree with you, technically and practically, but my point is that the (economy) "generating lots of value" is bs when not taking extremely locally (like within a village).
In arguing that there needs to be a system where not only one single metric (capital) is important. That's why 'the system is heavily favouring Bob', its by default, it's the only logical way and the only end goal (we are taught and experience in short term that "if Bob doesn't profit the most and most easily, the system/economy isn't doing good bcs the profits aren't high"). It's obviously completely unsustainable within a closed environment, but with a variable timescale, where it can and does exist.
Eg if you are born in a world where you must buy a car to survive, that's is a "must" for all intents and purposes. But the "value added" comes from misguided production which itself isn't needed.
Or eg - developing products that last just isn't and won't be sensible in a capitalist free market, it says so itself. It's stupid to produce eg light bulbs that last hundreds of years, the investors would divest from you immediately.
Now imagine we had a balancing power to financial power.
Something magical, like "the good of humanity" or something. Something that would be as powerful and desirable to offset even financial ruin. A meritocracy of sorts, but but exactly/just that (I dont see the mechanics of it for us atm, basically what Star Trek is without money, but with and abundant production of everything through basically unlimited energy).
Eg if someone creates a good product (for example those everlasting light bulbs), but covers the whole world with no customers left.
That guy/team due to their merits/contributions/career should still be able to indulge in some of the finite stuff (just like it would have been with money in the financial sense).
I dont mean basic stuff like food, but naturally limited and/or unique stuff like an apartment with a specific view (no two have it exactly the same, but the light bulb guy should be able to "afford" it/get it easier than someone who worked a lifetime in a library and much much easier that an average student or kid).
Tl;dr: Only with a balancing power to keep pure financial interests in check can we advanced society, otherwise it's mostly (and especially "eventually") not in anyone's financial interest to do so.
And we want to advance, right?
Think of the good all the geniuses being able and having the option to pursue what they are good at instead of what is immediately in some powers financial interest (eg flipping burgers - it's great for those who like it, and bad for those who don't, the other way around too, nobody with a good salary won't go flipping burgers even if that is their calling, would enjoy it, and produce a better product and a more pleasant society).
The house is an asset to Laura because she values it and it acts as an investment because it has value to others and their evaluation may change. If she buys it then she is assuming the risk from Bob that people’s valuation of it may go down or that something might happen to it. If she buys it primarily because she needs a place to live then that risk vs reward is likely less important to her than having a home.
Not involving Bob would be very beneficial in many ways for both Laura and Frank if that can be arranged, any middle man will add cost and without him Laura will pay less and Frank will earn more. The problem is Laura may be busy and not have time to find Frank, buy all the building supplies, and wait for the house to be built. She also avoids the risks involved with the building of the house (e.g. it turns out different than the plan and she hates it, it takes longer/ requires more parts and the cost goes way up, etc.) By having Bob involved her experience becomes vastly smoother, she gets to show up, see the finished product, say “I like it and I’m willing to spend this much on it”, and start moving in the next day.
If you can manufacture a lightbulb that lasts 100 years and price it reasonably you can absolutely start competing with light bulb companies. You may not make as much per customer over 100 years time, but if you convince enough of their customers they’ll save money with you then you’ll make a killing. Some types of investors are very willing to gamble on potentially disruptive ideas like that. The existing lightbulbs companies and their shareholders do have the exact lack of incentive to innovate you talked about but that doesn’t necessarily stop a new actor.
I completely agree that an unregulated market will tend towards greed and cause immense suffering. Ideally that’s one of the primary purposes of government, (unfortunately mine hasn’t functioned that way at all for my whole lifetime) but an entity that is “for the people by the people” which can intervene when greed could cause harm, ensure human rights and needs are provided for, and pull the correct levers to ensure the economy has both enough investment and healthy labor compensation to keep generating value (and to ensure the value generated actually ends up in the hands of the people) is absolutely critical.
I also totally agree with the fact that it’s critical to have other value systems besides money. In a small way I believe what we as individuals place value on and encourage in our communities has an impact. Obviously it won’t solve the issue or make society pivot in a dime, but it’s important nonetheless. Glorifying wealth and those who have it, entertainment factor, and fame/ infamy and losing sight of concepts like civic duty and an obligation to your community, society, or polis has consequences. I understand feelings on patriotism being complex as it’s been co-opted as a hateful concept by nationalists in many places but embracing more collectivist and less individualist attitudes at all levels of society help reinforce other value systems besides late stage capitalism
Hehe, I know what a house is, the issue I was bringing up was why is it an investment, if the person absolutely needs it (assuming it's the house to live in).
And no, that's false analogy, not Bob the builder or Bob the manager, that's just another employee payed the same as other workers - Bob the shareholder is the party benefiting here (capital as a production factor).
Perhaps more illustrative: "Bob the me" who just clicks and buys an xtrackers or ishares etf funding hundreds of Bobs the worker ("CEO") and demanding profit growth from them or we will find someone who will. All without me knowing anyone's names.
That's why I ask why is her house an investment in the first place.
Ah, the fabled disruption tactic - which doesn't add value, but with sheer force of capital transforms the free market into a monopoly. Investors love that shit.
Eg it's not like Uber was a new idea that would ever be profitable, investors dumped insane amounts of money into a company hemorrhaging even more money all in the promise that at some point other market players (regular Taxi folk) will go bankrupt & Uber can start charging profitable prices. Which happened where local lawmakers didn't block it (also because they basically funded themselves on not paying their "employees" any benefits). And now Uber costs more than the Taxies ever did.
And no, 100 year light bulbs cannot be done, and that's not due to lack of materials or knowhow.
Just BTW, not an example or claim for the above, tho documents show companies decided to shorten lightbulb lifespans. \
And I also think that "voting with your money" isn't democratic unless on a very small scale ("village"), because in a lot is things you simply don't have a choice if you want a normal life.