Debating Your Conservative Relatives at the July 4 Picnic—6 Popular Inequality Myths Debunked
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Much like the threat posed by climate change, the corrosive effects of inequality are often ignored or downplayed by those who benefit from our system of winner-take-all capitalism. Therefore, I present a citizen's guide to debunking the absurdities and myths swirling around the inequality debate.
1) We Need Inequality to Drive Innovation
Example: Gregory Mankiw
Imagine a society with perfect economic equality. Then, one day, this egalitarian utopia is disturbed by an entrepreneur with an idea for a new product. Think of the entrepreneur as Steve Jobs as he develops the iPod, J.K. Rowling as she writes her Harry Potter books or Steven Spielberg as he directs his blockbuster movies. When the entrepreneur’s product is introduced, everyone in society wants to buy it. They each part with, say, $100. The transaction is a voluntary exchange, so it must make both the buyer and the seller better off. But because there are many buyers and only one seller, the distribution of economic well-being is now vastly unequal. The new product makes the entrepreneur much richer than everyone else.
How to Respond
Mankiw’s argument relies upon what Mark Lemley calls the “Hero Inventor” mythos, the idea that one man or woman upends the current consensus, driving innovation forward. But that’s not how innovation happens. Innovation, according to Mark Lemley, occurs by way “incremental improvements generally made by a number of different inventors at roughly the same time.” Mankiw, in many ways, undermines his own argument; after all, Spielberg started making movies under the radically higher tax rates of the 1970s. Take CEOs like Steve Jobs as an example; CEO pay has risen dramatically and yet most CEOs add little value to companies. Recent research shows that the higher a CEO is paid, the worse a stock performs. Further, if pay really correlated to how important an individual’s contribution to society is, why do CEOs make more than Nobel Prize winners? And why does Justin Bieber make more than Norman Borlaug, who saved 1 billion lives? And what of Rowling? Alan Krueger argues that for musicians and artists, luck influences earnings far more than skill.
2) Rich People Work Harder, They Deserve What They’ve Earned
Example: David Brooks
For the first time in human history, the rich work longer hours than the proletariat. Today's super-wealthy no longer go off on four-month grand tours of Europe, play gin-soaked Gatsbyesque croquet tournaments or spend hours doing needlepoint while thinking in full paragraphs like the heroines of Jane Austen novels. Instead, their lives are marked by sleep deprivation and conference calls, and their idea of leisure is jetting off to Aspen to hear Zbigniew Brzezinski lead panels titled ''Beyond Unipolarity.'' Meanwhile, down the income ladder, the percentage of middle-aged men who have dropped out of the labor force has doubled over the past 40 years, to over 12 percent.
How to Respond
Really? Jamie Dimon works harder than a single mom with two jobs trying to make ends meet? Gar Alperovitz argues that, in reality, the wealthy live off luck, not skill. As Bruce Bartlett, a former conservative, notes, “Only 61.8 percent of national income went to compensation of employees in 2012, compared with 65.1 percent in 2001." Middle- and lower-income blue-collar workers are actually creating more, but getting less. While productivity has steadily increased by a total of 85 percent between 1979 and 2012, the inflation adjusted wage of the median worker rose by a paltry 6 percent and the value of the federal minimum wage fell by 21 percent. Richard Branson has said, “Yes, entrepreneurs may work hard, but I don’t think they actually work any harder than, say, doctors, nurses or other people in society....” The right promotes the idea that poor people are lazy, rather than hardworking people who never get a fair shake. Worse, they say they are “dependent” on government, when it’s really the right and their cronies who rely on public financing. The middle class that decries poor “welfare queens,” is more and more reliant on government largesse. Gore Vidal observed that the American free market system is, “capitalism for the poor and socialism for the rich.”