According to the left, unless action is taken, our ‘democracy’ will be lost to the moneyed elites, or the ‘Oligarchy’. But is wealth inequality something to lose sleep over? Not for me, Silicon Valley, or Wall St. The left likes to believe, incorrectly, that America is a democracy, but it’s actually a constitutional republic founded by land-owning economic stakeholders.
Why would the elite, or as we call the smarties, be scared? The Krugster’s ranting and raving on the NYT since 1999 hasn’t had any effect on policy. You think an impenetrable 700 page book of statistical jargon will be any more effective? According to Tyler Cowen, outside of the leftist enclaves academia, Americans don’t care all that much about inequality.
I see the inequality issue as having high salience for NYT readers, for Democratic Party donors, and for progressive activists. It has very little salience for the American public, especially with say swing voters in southern Ohio or soccer moms. Unlike in Singapore or South Korea, where the major concentrations of wealth are pretty hard to avoid for most people, American income inequalities are well hidden for the most part.
This confers with a Fox News poll that found only 12 percent Americans believe income inequality is the most important economic issue facing the country- a distant third behind jobs and employment at 40 percent, and government spending and the deficit at 36 percent.
Will his book make supply side obsolete or even diminish it ? No, because decades ago economists already accepted more inequality was inevitable but necessary tradeoff for more economic growth. The common retort is that inequality has hurt economic growth. But again, we cannot prove beyond a reasonable doubt that our economy would be better off with less inequality. Wealth inequality is a byproduct, meaning it’s a consequence we have to accept in exchange for a greater good. As quoted by Chris House:
then we are going to have to take stuff away from richer people and channel it to poorer people. This kind of action will most likely have consequences for markets and these consequences will be unsavory
What he is saying is that efforts to mitigate inequality could have negative unintended negative consequences. Nowadays, economic growth may seem sluggish, but this in and of itself is not proof that growth would be faster with less inequality. It could very well be less.
What is wrong with an ‘oligarchy’ if the rich contribute much more to the economy in terms of things like consumer spending, innovation and job creation? As we wrote earlier, the rich have been compensating for middle class weakness because they consume disproportionately more.
There is also data that shows that the Forbes 400 shows MORE self-made wealth versus inherited wealth than a couple decades ago.
With regard to rentiers, crony capitalism could be acceptable if the economic value created from the subsidies represents an optimal transfer/allocation of wealth versus the alternatives. Tesla is presently worth $35 billion…not a bad ROI from a small $500 million federal funds. Same for TARP which only cost $750 billion, was completely re-paid and indirectly created trillions of dollars of wealth in the subsequent stock market, real estate and economic boom -a boom that continues to this very day with no signs of slowing. Even the great libertarian economist Milton Friedman, often considered the epitome of laissez faire capitalism, conceded that the government shouldn’t get involved in private enterprise – except for defense and police – to protect the sovereignty of the state and the individual.
Let’s look at it like this: in 1976, had Ronald Wane not sold his 10% stake in Apple for US $800 he would be worth $50 billion today. But look at all the value Apple has created, like the iphone, ipad, itunes, and app store etc. Apple’s contribution the economy is immense – directly and indirectly through its 3rd party developers. The Apple ecosystem runs all the way through to the component manufactures, the real estate, the workers, and the delivery channels. The employees themselves contribute, spending their income and boosting the local economy. Is it not fair that those who plant the seeds should reap the fruits of their labor? That those, The Creators, whose contributions create disproportionate economic value, receive a commensurate reward?