Inequality

Is economic inequality bad or is it good?  Does it even matter?

How Your Brain and Mine Got This Way

How you answer that question depends on what kind of lobotomy you have had. If you have had a left wing lobotomy, inequality is always bad. If you have had a right wing lobotomy, inequality is always good, necessary in fact.

And so it goes in politics. Lobotomized voters on one side or the other already know the answer. There is really no debate. Just vote for the guy who wants more inequality or the guy who wants less.

Problem solved.

Why this is even a question in politics at all is because of the rapidly growing extremes of wealth and poverty in America. There is not much debate about these statistics (a little but not much.) The growing extremes of wealth and poverty are relatively factual. The more interesting question is: is growing inequality a problem or not?

Fortunately, our lobotomies are not totally irreversible. We can (for a few moments) sometimes crank up the damaged parts of the brain and actually think logically about the question for a few minutes if we want to. Naturally, the rabid advocates for both sides of the debate are starting to come out of the wood work to “help” us figure this out.

The lefties were first to emerge because any sign of even a miniscule shred of economic inequality have always been anathema to them. But the righties have a few advocates too. Back in the Regan days, there was Arthur Laffer with his “trickle-down” economic theory.  Most recently, we now have Mitt Romney’s recent boss and mentor at Bain Capital, Edward Conrad. Conrad is a billionaire who is about to publish a new book extolling theories about the benefits of extreme inequality.

Conrad’s book, "Unintended Consequences," has not yet hit the bookstores, but is already generating some heat.  According to pre-publication interviews in the news media, Conrad argues that a society with great inequality of income is the best possible society.  Inequality of wealth is a sign, not of crony capitalism or plutocracy or some other kind of economic or social dysfunction as so many lefties have argued, but of a healthy economy.

The key to his theory is that the poor and middle classes benefit from the vast wealth of the super rich but are too ignorant to realize this fact. “Most citizens are consumers, not investors,” according to Conrad. “They don’t recognize the benefits to consumers that come from investment.” While most of us are spending our measly earnings on drugs, alcohol, survival and entertainment, the super rich spend only a tiny fraction of their money on such things. Most of their money “is invested in productive businesses that make life better for everyone.”  They have the luxury to take business risks that end up benefiting everyone.


Conrad's argument is only one of the big three pro-inequality arguments. For a French socialist perspective on the other two principal arguments, check out the Inequality Watch website article by John Roemer. On the web, it is translated into English from the socialist language it was written in.

On the other side of the fence, left-leaning pundits and economists argue that, while the  arguments for inequality may have some plausibility, once inequality goes too far, the 99% of the world who don’t have spending power anymore will not be able to buy the consumer goods needed to keep the economic machine going. An economy cannot work if the only goods being purchased are high-end bling, yachts, and Maseratis.

On the lefty side of the debate, you always have the usual loud mouths such as Paul Krugman who blasted Conrad in a NY Times article.  More detail is added by Paul Buchheit in his flame out on the subject in Common Dreams. Buchheit lists 5 reasons why the 1 percent are NOT deserving of their huge slice of the economic pie:

1. Productivity tripled in the last 30 years, but the average wage earner’s share did not increase while the 1 percent tripled their share.
2.  American companies have been ruinously mismanaged by the elite (bank failures, bankrupt companies, jobs disappearing) while CEO salaries continue to skyrocket.
3.  Greedy billionaire innovators take tax-payer subsidized research and turn it into products from which they alone benefit.
4. When all taxes (not only income) are counted, the super rich pay only 10% of their income in taxes while the poorest quintile of the population pays 22%.
5.  Many of the super rich are guilty of bribery, fraud, and other crimes against society, the environment, and even each other (e.g. Bernie Madoff, John Paulson, and the owners of Monsanto, Exxon, Koch Industries, Chevron, Blackwater, Walmart, and Halliburton) yet they usually go unpunished.

For the full dose of inequality hatred, studies of executive overcompensation, and a list of all the new books about inequality in the U.S., check out the articles on Too Much.


Taking a different and less hysterical tack on the issue is Richard Wilkinson.[1]

Wilkinson gave a fascinating lecture about inequality on TED. He has conducted studies looking at the overall health, well-being and psycho-social condition of entire societies using measurements of involvement in community life, economic mobility, child health statistics, stress levels, homicide rates, imprisonment rates, education, levels of trust, etc. Wilkinson’s extensive studies seem to show that the quality of human life is better in societies with less inequality than in those with extremes of wealth and poverty.  Rather than inadequately summarizing Wilkinson’s lecture, I recommend that you listen to the real thing here.

Then, get back to your more comfortable lobotomy, and I will too.

This is a certified organic free-range blog.

To comment on this blog,  click on the hyperlink at the bottom that reads “Post a Comment.”

---

[1] Wilkinson is a British professor and the author of the provocative book, The Spirit Level.  For more about his studies click here.