Quoting Alstein, reply 82If you look at standard economic theories, the net result would be that the US would go down to the global mean, maybe slightly above, but it would be a drastic reduction in our living standards-
Only in the very short term. In the long term it would mean a higher standard of living.
Not RELATIVE quality of life, but absolute. The gap wouldn't be as big between an american and an african but both would be better off (the same way a middle class person today is better off than a king in the middle ages).
And your proposed solution of redistribution merely WORSEN things for the americans because it drives out the top produces... Or forces it to become a prison state to prevent that.
Quoting Alstein, reply 82My argument is that handouts aren't necessarily a good thing, but they may be a necessary thing
And this argument is simply wrong as I have repeatedly pointed out. Prison states, relocation of producers, etc etc.
Massive wealth inequality is always one of the first steps towards a national decline: This has been true from Rome to Constantinople to Versailles to Berlin to modern times.
Your examples are simply not true.
The only way "wealth inequality" could possibly relate to national decline is by being used as ammunition by demagogues extolling wealth redistribution programs.
The term wealth inequality in of itself is stupid as I have repeatedly pointed out, dollar differences and quality of life are not the same. And furthermore, there are various CAUSES of said gaps. Cronyism absolutely causes national decline and cronyism also causes great "wealth inequality"... By using the term "wealth inequality" you lump together the cronies who HARM the nation and the economy and the PRODUCERS who HELP the nation and the economy.
Then as a result those who brandish about the term "wealth inequality" start putting in place programs to ensure fairness and equality which drive out or stamp out the producers while vastly increasing the amount of cronyism.
You're right in the long term it would mean a higher standard of living. That said, there's a long way to go to the bottom, and I don't think the American people would stomach 100-200 years of mostly decline. (this is assuming little technological advancement, and reasonable political openness over the next 200 years, huge assumptions)
You're right that dollar difference and quality of life are not the same- however, they are correlated, and the correlation is obvious. That said, I don't remember the exact study, but declining marginal utility of money kicks in at around $50,000 for an average family in an average living area in the US. (it would be higher in NY and lower in the South for obvious reasons)
To answer Mistwraithe's question: Since money over a certain value has declining marginal utility , and there is an easily assumed correlation between wealth and utility (happiness) of an individual/family, redistribution can be proven to have a positive net social benefit to society. There is also a negative social benefit in inefficiency (which is the other side of the argument). The things I have read economically (admittedly I'm a weatherman with a ton of econ classes, I've had a bit of a weird career/schooling path), have stated that the Laffer curve (which is the foundation of supply-side economics) only tends to really kick in when marginal tax rates exceed 70%. I'm not sure I buy that number, but I do believe it is higher than what the effective tax rates are today for many businesses. (though as Brad states, businesses can evade taxes easily, especially the larger ones, and companies can do tax rate shopping- look at Beloved Valve's European office being just a post office box in a Luxembourg tax haven).
Economic policy is not an easy thing, especially when the players have different motivations than the planners.
Note: by wealth distibution I don't mean Leninist-style communism, stuff like Medicare/Social Security- that is effectively wealth redistribution. Many other government programs are effectively that as well, to the point where many folks who get benefits from the government don't believe they actually are getting benefits- which causes some folks to vote against their class interest (religion is the other factor in this).
I do think overall, cronyism in large public multinational private industry > cronyism in government these days. When you have companies like Time Warner Cable openly admit it's easier to buy influence to cut down innovation over actually innovating, there's a problem. (See the North Carolina ban on municipal broadband, something I rail about repeatedly- what Google is doing in Kansas City would be illegal in Raleigh, largely due to AT&T, Time Warner Cable and the Tea Party Groups)