Froth And Fortune

Via Glenn, an interesting Right Coast piece on academics with anger management issues.

Schama and Sachs are not isolated cases, of course.  This sort of talk has become commonplace among people who used to be liberal but serious, sophisticated, and certainly not hysterical.  You hear it from public figures like Schama and Sachs, and you hear it very commonly in private, from left-of-centre (or once left of centre, but now seethingly leftist) friends and acquaintances.

In any case, Schama is very obviously wrong, which perhaps explains why he's frothing, rage being a common, if deficient, substitute for reason. Income inequality that is not created by some use of force (such as we see in tinpot dictatorships -- even the Communist ones) or windfall resource wealth can only come about by one means: increasingly efficient production of increasingly desirable goods and services. 

It's fatuous to assert growing income inequality is intrinsically a "problem." Look at the living standards of the bottom quartile in the U.S. today versus 1950 -- they not only enjoy far better access to food, they generally have air conditioning, major appliances, computers, Internet, cell phones, microwaves etc, not to mention vastly superior medical care and the ability to place a phone call to anyone else in country for almost nothing. While it's true income inequality has grown since that time, that's largely because people got rich making those cell phones, microchips, Amazon, Google, the router, fiber-optic trunks. etc. Other people got rich figuring out ways to make a given appliance a bit more efficiently or by inventing a new medical procedure. Others got rich inventing new and better ways to grow corn, wheat, etc.  Sam Walton became a billionaire by creating a brutally efficient supply chain to attract low-income shoppers with low prices.  Those people are why the poor, and everyone else, are better off today.

It's natural, of course, to be jealous when other people are doing better than you (and to feel guilty when others aren't), which is why this tripe has always had an audience. But delicious though he may be, the reality is we're far better off with the goose that lays the golden eggs in the barn than on the dinner plate.

posted by Dave on 01.06.11 at 07:39 AM


So you believe the rich are the goose that lays golden eggs?

I'd say the reverse is true: we are the ones providing wealth to the rich, and at increasing velocity. Your choice of the example of Sam Walton is telling: a good deal of his wealth is derived from having forced people to work off the clock, or face being fired. You may call it efficient, I call it class warfare.

Don   ·  January 6, 2011 9:25 AM

It's not so much a belief as an easily demonstrated fact. No one forces anyone to buy things from the rich, we do so voluntarily because it is in our best interests. It's rather silly to purchase their wares with one hand while shaking your fist at them with the other.

In any case, the non-rich by definition have little or no wealth to transfer, and their income is generally derived from working for the rich. So, whence the nouveau riche? They created wealth. Again, look at the difference in living standards over time -- that's productivity improvements, created by investors and entrepeneurs (a large majority of whom fail, while a few manage to attract enough fickle consumers to become personally wealthy).

The missed lunch/rest breaks at WalMart are picayune (to call them significant to Walton's wealth is rank innumeracy) and have generally been recompensed through legal action, deservedly or not. Anyways, the same thing happens to workers across America, especially at small business that don't have deep enough pockets to face lawsuits, and to most salaried workers.

TallDave   ·  January 6, 2011 10:00 AM

"No one forces anyone to buy things from the rich...." Well, except for the necessities that only the rich are selling, such as fuel, health care, financing for the house, and basic telephone, to name a few off the top of my head. I realize you'll claim that all these are voluntary, and I'm perfectly free to live off nuts and berries and sleep under a bridge.

To be sure, working class people own no significant wealth. What they transfer is the wealth they create through their labor. What you call "productivity improvements" I call "working longer hours for less money."

What happens at WalMart is not missed lunch breaks. It is working people being ordered to punch out at 2 and being ordered to continue working until 3, or else. I do agree this is happening to salaried workers as well, now that employers have figured out how to reclassify virtually all of us as exempt from overtime rules. Rolling back the clock on the 8-hour workday, now that's innovation! I'll try harder to be grateful for it.

Don   ·  January 6, 2011 11:13 AM

So, Don, you would rather that everyone be poorer so that income disparity be smaller, than everyone be richer with the the income disparity larger? Margaret Thatcher can be seen addressing this very issue on YouTube (if I had the link I'd post it)

Fact is, Don, no matter how you try to twist it, "poor" people in the U.S. today in general have obviously, tangibly, measurably greater wealth (more "stuff," more mobility, more access to education) than at any point in the past. You simply cannot refute that.

John S.   ·  January 6, 2011 12:06 PM

I'd like more options than those. How about everybody richer, disparity smaller, an economy that's expanding because working people make a decent wage and have lots of leisure time?

You also seem to be ignoring the significant slide in real wages over the last three decades. Or do you assert that we are simply better off with lower income?

Don   ·  January 6, 2011 1:04 PM

How about everybody richer, disparity smaller, an economy that's expanding because working people make a decent wage and have lots of leisure time?

No one has ever accomplished that by fiat or law. Got any other ideas?

We see it in the animal kingdom all the time. About 20% of a species controls (relative to other members of the species) 80% of the resources.

What we humans do differently is that we have designed a system where that 80% control by the 20% gives great benefits to the rest.

But seriously - tell me why the USSR failed and why China is now a quasi capitalist country? A couple of clues there.

Let me put it to you simply: incentives matter. i.e. if you plan to lower medical costs by restricting doctor compensation will you have enough doctors? Maybe if you reduced the costs of medical schooling. How will the schools feel about that? The school teachers?

And that is true of every sector of the economy: prices are a supply and demand signal. For buyers and sellers. If you plan to short circuit that system what do you propose to do to replace it?

Are you aware of the information problem that F.A. Hayek won a Nobel Prize for elucidating?

M. Simon   ·  January 6, 2011 4:31 PM

Please don't try to make a political argument with biology; it doesn't follow and you don't have the biology facts right in the first place.

Sure incentives matter. What's my incentive to work hard if most of the value I create gets ripped off by the boss? Capitalists always talk about incentivizing the boss, never about incentivizing the workers, because they're always justifying more money for the rich.

Don   ·  January 6, 2011 4:52 PM

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