Classical economics divided income into two types: earned and unearned. Earned income came from productive labor combined with capital investment. Unearned income was considered parasitical and consisted of rent, interest and dividends. It was not considered as adding to GDP but as subtracting from it. It was money made by manipulating money much as feudal landlords made their money in what has been called a rentier economy.
Today, most of the money earned by the 1% driving the income inequality gap is being made in the financialized, rentier economy but is now considered earned income. New methods have been devised to make money not by productive labor and investment but by manipulating financial instruments. One such manipulation consists of stock buybacks. [Read more...]
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