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Allan Meltzer at the Hoover Institute (photo: J. LeSchofs/flickr)
Last week Allan Meltzer had a column in the WSJ telling us that we should stop complaining about inequality and start loving it. His main point is that inequality is increasing everywhere, therefore there is nothing that we can do about it.
Neither part of this story is especially true. As Paul Krugman, Mark Thoma and others have already noted, inequality has not increased anywhere to the same extent as in the United States and in many countries there has been little or no change in most measures of inequality. So clearly different national policies can make a big difference in the extent of inequality.
However even if inequality was increasing everywhere, it does not mean that policy is not a factor. The WSJ may not have heard, but there are international forums like the G-8 and institutions like the WTO where countries coordinate policy.
This means, for example that if they agree on a policy of strong anti-inflation measures that raise unemployment everywhere (as they did), then they have collectively agreed to implement policies that redistribute income upwards. Similarly, if they agree to have stronger patent and copyright protection (as they have), then they have also agreed to policies that redistribute income upward. Unless we think that policies that are decided in international forums should not be subject to political debate, the fact that the same policies of upward redistribution have been imposed in many countries (not just the United States) is hardly an argument that we should not be concerned about them.
The other part of Meltzer’s argument that is just wrong is that because Steve Jobs produced great products we should not be upset about inequality. Most economists are familiar with the concept of “economic rent.” Economic rents occur when people get paid more than is necessary to get them to do their work.
For example, if a firetruck showed up at a burning home with children trapped inside, the parents would gladly pay whatever money they had to have the firefighters rescue them. In Alan Meltzer’s world, if firefighters were making millions of dollars a year showing up at the burning homes of the wealthy we should not complain because saving children from burning buildings is a fantastic service and certainly we are all glad that the firefighters are there.
Of course, the reality is that firefighters are willing to do their work for much less money. They get a relatively good salary, but none of them are making millions of dollars a year.
Arguably the economy has been structured in a way that leads to large rents for those at the top. This is what those complaining about inequality are upset over. The fact that Steve Jobs might have actually made great contributions to society in exchange for his wealth has nothing to do with the time of day and Mr. Meltzer presumably knows this.
38 Comments
Some Indians brag on the concentration of wealth in their country; American compradors have forgotten what empire’s about.
We should not be upset about inequality because Steve Jobs produced great products? God these a**holes are pathetic.
Their snobbery about their undeserved wealth and their indifference to the plight of those who are suffering will form the basis of the next American civil war. FDR already showed us how to create equality and his name seems to be forbidden in the White House and in Congress. Works Progress Administration, CCCC, CETA, Social Security, were all FDR products. They built a new America which benefited everyone equally. Opportunistic, sociopathic hacks are what we currently have for leaders, and those are gentle terms to describe their tragic short sightedness.
If you are interested in learning in detail about the deleterious impacts of income inequality, I highly recommend this book. (It has excellent graphs and is very readable.)
By Richard Wilkinson and Kate Pickett
THE SPIRIT LEVEL: Why Greater Equality Makes Societies Stronger.
for a preview of their work and excellent source materials:
http://www.equalitytrust.org.uk
Why is it that as a person grows richer and richer they become more and more of an asshole?
Rupert Murdoch may not be the source of all evil in the universe, but you can bet that if he’s not, he gives it blowjobs.
like the WTO where countries coordinate policy.
It’s why our government is not responsive to public sentiment.
Yes, indeed. We should all know our stations in life and be content with them. I don’t know how to say “fuck you” sufficiently loudly from a keyboard.
If the first clause of his second sentence is true, it is truly a call to redouble our efforts. And, his nonsequitur second clause deserves yet another “fuck you.” Not only is there something we can do about it, but there is something we will.
The bulk of the wealth in this nation is controlled by people whose life styles would not change were they to lose 90% of it. They indeed have way more wealth than any human could possibly consume.
All that that ever-accumulating wealth gives them is ever-greater power, i.e., ability to fuck over those of us they consider beneath them. THAT NEEDS TO END.
Yessiree, Massa. Weez knows oarz place.
Wage slaves r we. Jest tell us how much weez can haz.
They really don’t even pretend or hide their greed and criminality anymore. I guess that is a good thing as it will bring it all down to the ash heap sooner.
Great post. Thanks. Posted at 9:13 am central time.
Steve Jobs produced “great products”? Really? Where? When? How?
If Meltzer meant Jobs ‘marketed overpriced and overhyped products that he locked-down as much as he could, in true control-freak fashion, against the simplest modification or repair by their nominal owners, trying to push the owners to *his* overpriced modifications and repair, I would agree with him. Otherwise, no way.
Even hearkening back when he first started out, it was Wozniak, not Jobs, who was the one actually “creating” things. Jobs was always first and foremost the promoter and the marketer, not the tech guy.
Jobs legacy and Apple are part and parcel of the problem this economy faces; their preferred business model is essential a rentier one where the nominal owners never actually own or control what is sold them, they merely “rent” them after a fashion, thus delivering a continuing revenue stream to Apple. All while trying to make the users feel “hip” and “cool” for buying Apple.
As paradoxically the result of the economy of Reagan has been a no- or slow-growth one, the rentier model has largely replaced the ownership one. With declining real incomes for everyone else, it’s difficult to sell enough widgets to make money. So you try to figure out ways to rent them (either directly or after a fashion). The revenue rental streams then get traded on Wall Street as esoteric “financial instruments”. For its part, Microsoft has experimented in several countries with the model of renting copies of their products, which they would dearly *love* to do (don’t pay that monthly Windows bill, we cripple or disable your computer, pad, or phone). They haven’t gone that route in developed countries–yet–because of the fear of antitrust action, the fact that there are all these old Windows CDs floating around, and a fear that a large part of their userbase would defect to Linux, which is now already competitive in ease-of-use.
(As an aside, I feel that the Apple-vs-Microsoft “battle” isn’t a battle at all, it’s sham competition. Microsoft needs Apple around as “proof” that they’re not a monopoly, while Apple is perfectly content to leave the desktop and laptop market to Microsoft (hint: even if everyone decided to run out an buy an Apple computer, there’s simply no way that Apple could deliver the capacity). That’s why Bill Gates bailed Apple out in the 1990s.
And, as another aside, I think that both companies make an excellent analogy for Dems-vs-GOP “competition”. The GOP is like Microsoft–corporate, ugly, and difficult to love, but ruthless and darned effective. The Dems are like Apple–they try to posture themselves and their followers as being smarter, more hip, more progressive, and cooler than “the other side” but they don’t really try to upset the hegemony of Reaganomics any more than Apple tries to replace Microsoft as the dominant desktop/laptop OS. Plus if you dig beneath the surface you find a lot of corporate dirty laundry in the Dems just like you find ruthless and unethical practices by Apple).
-stewartm
Jobs and Apple Computer are a big part of the problem.
or not……..
I keep thinking about the guy who invented the forensic tool PCR and got a measly $25,000 bonus for a technology worth billions and used around the world top catch bad guys.
Boy, was HE pissed!
I don’t blame him
Anybody else notice that Allan Meltzer bears a striking resemblance to Mr. Burns?
Good analogy
We are the 99%. Majority needs to rule. Perhaps it never has before but now the 99% actually includes & represents the diversity of race, class, gender(s) and age of humanity. There will be no hypocrisy with an honest economic justice now.
The language of 1% selfishness must be made aberrant in human culture.
Well said, and agree on all points.
The disgusting diefication of Steve Jobs is yet another chapter in the ongoing Kabuki Show saying: bow & scrape to your new Overlords, the “Captains of Not-Industry.”
The arguments for the “kewlness” of Apple products wear thin after a while. Yes, these various gadgets & gizmos have made aspects of our lives “easier,” but we are also *paying through the nose* for them.
And the rentier aspects of them is something that most citizens are entirely ignorant of, even as they keep forking out the bucks for shoddy, ineffective and/or defective products, for which they get the “pleasure” of paying more bucks for to “update” to fix “glitches” and so forth.
Jobs was just good at PR/marketing and played his role to the hilt, esp by his “branding” with his black turtleneck sweathers. Wozniak was the real genius but got pushed to the back of the stage (and perhaps he is glad of that). Jobs outsourced tons of USA jobs making it sound like he had no other option, which is patent bullshit. How frickin’ much money did Jobs need anyway, even given that he probably did pay a pretty penny to get to the head of the queue for his organ transplants. After a while, greed is just plain GREED – as in, you know, one of the 7 Deadly Sins, which these fake “Christiany” types have conveniently excised from the lexicon of values, whilst oppressing women, teh poorz, minorities, etc.
Sadly, a LOT of conservatives will whole-heartedly *agree* with Meltzer, clapping and cheering all the way to the voting booth where they can vote against their own self-interest. Go figure.
Totally unsurprised that Meltzer was, you know, HONEST about this. As the days pass, the MOTU no longer even try to hide their venality, greed, and their many ways to oppress us. Expect more of the same in future, as our sound-asleep populace simply rolls over to take it. If you don’t protest, if you don’t stand up for your rights, then you will be ground under. The end.
ALLAN H. MELTZER,
You write that “while the Occupy Wall Street movement may be waning, the perception of growing income inequality in America is not.”
The OWS movement is only prelude. The a$$holes who twist truth for in your spewings raking in all the profits at the expense of workers and the common good.
And you write this nonsense:
Put down your copy of Atlas Shrugged, assclown, and take a look at the results of a system that, since the Reagan administration, has been increasingly rewarding our economic leaders for working to break the very system that’s been making them so flipping rich.
Considering the average American makes 5 times the average human, we’d have to give up quite a lot for Equality.
Excellent article. Excellent comments.
Whereas many of our filthy rich are indeed entrepeneurs, entertainers, professional athletes and the like, many of the filthier richer are Wall Street scalawags and carpetbaggers. They DO nothing and CREATE nothing. They merely manipulate using other peoples money. P”Private profits, public debt” has put many of these people in the 1%.
I don’t know what you mean by that, but I hope you’re not re-iterating the lie that “America’s poor have it good…”
I have a friend who was a child during the Depression. Her take is that poor people today have it much harder than poor then, or at least the agricultural poor. Why? Because for the rural unemployed at least back then, being unemployed just meant having no money to be able to buy things in town. As they *owned their own home* they weren’t going to be homeless, and as they *owned their own land* they and could grow their own food they weren’t going to be hungry. Not having money meant that you fixed things when they broke or figured out ways to do without or borrowed from neighbors.
The saying one heard when recollecting that time was “we didn’t have much, but we had plenty” (i.e., we couldn’t buy new things but we didn’t starve or go homeless). I’m sure that the urban poor had it tougher, admittedly.
Contrast the situation she describes with that of poor people today. They own NOTHING, in fact negative net worth is more the norm. As they own nothing, they are dependent on a constant stream of income to pay for the barest necessities of life. So much of the “wealth” that conservatives crow about today’s US poor having (in contrast to the past or to developing countries) is eaten up to pay for those necessities that those didn’t have to pay for. A peasant in a developing country might make only $200 a year but if he owns his own home and land he is rich in ways unimaginable to most of today’s US poor.
Worse, conservatives then rush to conclude that said “wealth” (even “wealth” in the form of government relief) then becomes an excuse to cut that very relief. WTF??
-stewartm
http://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate
Looks like USA ranks 14 with no “developing” countries in the top 25.
But now you’re saying that someone sitting on his “own” dirt floor making $200 a year is better off than the “average” American who’s $70,000 in debt?
If you’re correct, then you make a strong arguement that Inequality isn’t about income, and rich aren’t necessarily better off than poor.
To use your arguement, I’m better off than Steve Jobs, I don’t have near the wealth, but I’m not dead.
I agree with your analyis. Basically, inflation has destroyed the money to such an extent that quantifying the amount of money a person makes is no longer relevant when describing the working poor of America (or any other nation). In many of those nations, a semi-barter economy still exists, and prices are still reasonable compared to what they earn. People still have skills and access to subsist on the land. By way of comparison, they very poor in the USA that live in more rural areas but have access to cheaper products and may even own their own land are probably a lot better off than the urban poor who live in the city. Actual “income” is relative. It doesn’t matter if Americans earn $40,000 a year. When HALF the income goes to insurance premiums that don’t pay squat at claim time, and the other half goes to living expenses, you might as well just say the person makes -$20,000 a year (credit card debt just to put food on the table). We talk a lot about “Mean” salaries in this nation, but the real number is POST-TAX, POST-COST OF LIVING AVERAGE salaries. Not MEDIAN. MEDIAN is an artificial number that has no weighted average to account for the 90% who make less than $100,000 to offset the 10% who make more than $500,000. Its just a middle number plucked from the air. I bet the average annual salary of Americans is FAR lower than the MEDIAN.
I bet the MODE of American salaries is also somewhere near $15,000 a year. Minimum Wage.
Inequality is about ACCESS more than its about INCOME. Income can dictate access when you have 100x more income than anybody else. You have the purchasing power of an entire small town. When you can literally drive up or down the prices of a small market, you are a market maker and mover. Then you have access. To city councils, local government, and large investors. You can buy out your competition, or you can take a “tax loss” to price cut your competition, absorb the losses for 3 years while they go broke and bankrupt, and then buy them up for pennies on the dollar. That is the Walmart Strategy to destroy small businesses in America. Then, when monopoly at a local level is established, you can drive up the prices and move the market the way you desire. Same with purchase of real estate. I’ve seen commercial landlords leave entire strip malls empty for the past 2 years because they are demanding rents at absurb rates. They REFUSE to lower the rents. Why? Because they are nationally owned, even multinationally owned (Coldwell Banker), and they can sit on a small town shopping strip that has 20 empty shops in it for a few years. They can move and make the market.
So, yes, poverty and inequality are more than just INCOME based. Income is part of it. But when you start talking about anything less than $100,000 a year, the real equation becomes ACCESS. When 90% of your money, or more, is being engulfed by inflation and you are left with almost nothing to pay for necesseties, then your “income” no longer matters. The top 1% to maybe 10% control the system. They can keep their “INCOME” ahead of the Inflation curve. The rest of the 90-99% are subject to and beholden to the INFLATION curve.
And those top 1% have a lot of control over the inflation curve itself. They have insider information, lobbying power, and access to offshore capital markets. They can use offshore tax havens, hire cheap slave labor, and otherwise pump up stock prices through illegal manipulation, etc. Ironically, that top 1% is predominantly filled with Financial Wizards and their ilk. So, INCOME is what they hoard to prevent ACCESS for the rest of society.
That is another reason people hate the Health care laws that have been passed. Mandatory purchase of an Insurance product (financial product) without any cost-control, coverage control, or other controls is basically a way to break the household budget further. Insurance premiums have been shooting up between 10-40% year over year in the past decade. That is so far beyond the rate of normal inflation, and it is so destructive to the 1% wage increase the average worker has received year over year since 1960 that its disgusting.
When your dollar buys you nothing, then yes, its no longer about INCOME. ITs about your hard effort and labor being devalued to the point of worthlessness. You can work 40 hour a week making NOTHING while some fat cat does NOTHING and makes 4000x what you do. That is not just income inequality. That is outright tyranny and POWER. ACCESS to the levers of our society, access to the printing press itself. They can add zeros to the back of their salary without a hitch, in a blink of an eye, and they can take away zeros from your salary. That’s more than just income. This whole conversation should be about the fundamental breakdown of the entire capital market system. THIS is the one point that Ron Paul types get close to making. Alan Grayson has done a better job of it. As has Bernie Sanders and others. This is the one place where most Americans probably COULD agree if they got past the political rhetoric and the kabuki sham of a two-party system.
I once had a “billionaire type” look me in the eye and say he would not work as hard if the tax rate went up as it would reduce his net income and therefore his “incentive” – the fellow paid himself many 10′s of millions from his companies for his occasional presence at board meetings and having a title – but he had inherited much of that “billion”, and as far as I could tell did no work, and indeed had no skill or intellect that would be paid much without the birth status.
A very high rent.
Society made have gotten something from his companies, but he contributed little.
Uh, look at your own cite. There’s no developing countries in the top 25 because none of the stats sources for that Wikipedia article reference any statistics for them. There are only sources for Europe, the richer Far Eastern countries, and a few other odds and ends.
Simply put–a person who owns his own home which is in livable condition is more secure and in many ways better off than someone who does not. A person who owns the means to produce his food and clothing and other basic needs is better off than someone who does not. Or in short, monetary income (that $200 ) in and of itself is no way to judge not only their wealth, but their income. What you’d have to do is to add the equivalent amounts to purchase the US equivalents for that. Even for a home with a dirt floor, that would be pretty pricey.
And that’s not even to bring up the disparities in pricing for the same goods in both places.
Heck, Jefferson understood the political and economic dangers of the economic dependency of the many on the few in his day. That’s the real reason (not small government per se) why he wanted the nation to be composed of yeoman farmers and small merchants, so that no one would be dependent on others.
-stewartm
now the entire nation is dependent on those who are “too big to fail.”
If you calculated the cost of necessities (gasoline, electric, car, housing, telephone, food, car, health isurance)for living in a typical large American urban area (with housing at a conservative $1,000 a month), for a family of three it comes to easily $40,000 a year.
Sorry, but quality of life is not always about who has the most toys or the best toys – and massive inequality destroys the quality of life for most as they waste too much time thinking evil toward the rich.
Now you can say they should not think evil – and I can say that the rich should not be periodically hung – but “cultural revolutions” and “French Revolutions” seem to keep coming, albeit you can live a lifetime without one.
Exactly. And considering how many people don’t even make $40,000 a year, people can start to see that the actual incomes of most Americans is really a NEGATIVE number.
Last time I checked, having $200 a year to your name was more than having -$2000 per year in debt and still being short on the essentials. Now compound that with the new crimes being rolled out so that private prisons can make their profits. And how the social stigma of being homeless and living in your car, or having to wear clothes that are torn or with patches adds up. Now, we have state governments wanting to require drug screening and other surveillance for people who petition for a temporary assistance to get back on their feet. The degradation of it will further wear away at those who are misaligned for “being poor.”
In many places, human DIGNITY still prevails. Community effort and communal sharing of burdens and joys still prevails. The lesson we forgot from our ancestors is that a SOCIETY was never successful as a bunch of individuals who did nothing for one another. SOCIETY was alway about COMMUNITY.
Nowadays, any word that begins with SOCIE- or SOCIAL- or COMMUN- is a dirty word in the post Ayn Rand America.
Now you’re factoring in what you spend your money on as part of Inequality (insurance premiums that don’t pay squat).
It’s real easy to claim inequality if on the one hand you complain about the inequality of the fat cats who make more money than you, and on the other hand complain about the inequality of a peasant who makes less money than you but is rich in ways unimaginable to you, and then on the other hand complain that it’s not how much you make that counts, but how much you spend.
That’s quite a spectrum for inequality.
Conservatives will then argue “but you don’t *need* all that!”
It’s a dishonest, catch-22 argument they use.
Go to college and go massively in debt, then you’re at-fault for going to debt. Don’t go to college and don’t go into debt, then you’re a shiftless deadbeat who obviously has no desire to improve himself/herself.
Any other of those items (transportation, home, phone, insurance, etc) also fall in said category. No personal transportation in most places in the US, no job. (And of course they’re against making public mass transit cheap and affordable!). Personal transporation (a car) also requires that you have enough income to also buy auto insurance else there too you’re “irresponsible”. I bicycle commute most days to and from work but even then I still need a car not only for inclement weather but also to pick up things (like groceries). And even bicycles require money for maintenance.
Fact is, in the US today, without a constant stream of substantial income in you can’t be even lower class, let alone middle-class. That is the difference between the situation now and in the past here, and between here today and in places in the developing world. The lie told by conservatives that the “US poor have it good” is laid bare by the simple fact that a person in the US couldn’t even afford to eat on $200 a year, let alone own/maintain a home. But they do exactly that in other places in the world, because most of their “income” isn’t in the form of money.
-stewartm
Are those peasants *legally mandated* to purchase insurance? In the US you are for auto in many (most?) states and it soon will be for health.
As for the US rich, they live in the same socioeconomic environs as the US middle-class and poor, and therefore a direct comparison is much more valid.
The real lie is that those second homes, private jets, private schools, and vacation resorts for the rich are “necessities”. Yet the same people who castigate the US poor and tell them that they are “rich” because they have a secondhand color TV or computer tell us that they “need” all that other crap.
-stewartm
Well, we can agree that government mandated insurance is crap.
Meltzer’s article fullfill’s Phiip Age’s prediction from last decade:
“Modern-day liberals often theorize that conservatives use “social issues” as a way to mask economic objectives, but this is almost backward: the true goal of conservatism is to establish an aristocracy, which is a social and psychological condition of inequality. Economic inequality and regressive taxation, while certainly welcomed by the aristocracy, are best understood as a means to their actual goal, which is simply to be aristocrats.
“More generally, it is crucial to conservatism that the people must literally love the order that dominates them. Of course this notion sounds bizarre to modern ears, but it is perfectly overt in the writings of leading conservative theorists such as Burke. Democracy, for them, is not about the mechanisms of voting and office-holding. In fact conservatives hold a wide variety of opinions about such secondary formal matters. For conservatives, rather, democracy is a psychological condition. People who believe that the aristocracy rightfully dominates society because of its intrinsic superiority are conservatives; democrats, by contrast, believe that they are of equal social worth. Conservatism is the antithesis of democracy. This has been true for thousands of years.
“The defenders of aristocracy represent aristocracy as a natural phenomenon, but in reality it is the most artificial thing on earth. Although one of the goals of every aristocracy is to make its preferred social order seem permanent and timeless, in reality conservatism must be reinvented in every generation. This is true for many reasons, including internal conflicts among the aristocrats; institutional shifts due to climate, markets, or warfare; and ideological gains and losses in the perpetual struggle against democracy.
“In some societies the aristocracy is rigid, closed, and stratified, while in others it is more of an aspiration among various fluid and factionalized groups. The situation in the United States right now is toward the latter end of the spectrum. A main goal in life of all aristocrats, however, is to pass on their positions of privilege to their children, and many of the aspiring aristocrats of the United States are appointing their children to positions in government and in the archipelago of think tanks that promote conservative theories.”
http://polaris.gseis.ucla.edu/pagre/conservatism.html
Central, in the sense that a large majority must acquiesce, but central, in the sense of control, is contempt.
What I always like is how the solutions to this problem are always “how can we tear down the big guy,” and never “how can we lift up the little guy.”
There is always this underlying basic datum that there is only a fixed amount of money in the economy. With that false datum to work from, of course, the only way to help the little guy is to take from the big guy.
But, how about a solution that lifts the little guy up that doesn’t involve simply giving him something for nothing in return?
mandated private insurance is crap
mandated public insurance with a dedicated tax to fund it is great – see Social Security,
indeed see the health care system in every other developed country.
we are out of step because: A. We are stupid, or B. the rich and corporate are willing to destroy the life of the 99% as long as they can take their 30% “middle” for doing what should be a 5% overhead service, C. All of the above.
Income inequality is a symptom of how the game is rigged and how the crooks are winning.
What happens when everybody decides it’s best to be a crook?
One of the best comments evah.