Posts Tagged ‘inequality’

Do you believe poverty is worsening?

November 28, 2015

UnknownThe global population living in extreme poverty has risen in the last 20 years – indeed has almost doubled – say two-thirds of Americans in a recent survey. Nearly all the rest guessed poverty has merely stayed the same.

“Rising poverty” is a pessimist idee fixe, so ubiquitous that most folks unthinkingly consider it an obvious truism, to be sanctimoniously deplored. I have actually seen people’s eyes sparkle when talking of “rising poverty;” puffing up one’s moral vanity feels good.

Unknown-1Well, sorry to be a killjoy, but global poverty has in fact plummeted in recent decades. If world poverty were a stock, you’d have lost your shirt on it. The 95% of Americans who believe otherwise are misinformed.

This little known secret was revealed by Nicholas Kristof in a recent New York Times op-ed, citing World Bank figures: since 1993, the proportion of world population living in extreme poverty (defined as earning less than $1.00-$1.25 daily) fell by more than half, from 35% to 14%. Adding insult to injury, Kristof also noted the child death rate, before age five, dropped by more than half since 1990.* And whereas in the ‘80s only half of girls in developing countries completed elementary school, now 80% do. Literacy is rising and disease rates are falling. And so on. (Bill and Melinda Gates similarly argued in the Wall Street Journal in 2014 that pessimists are wrong and global conditions are improving markedly.)

imagesYet still there’s rising inequality, we’ve still got that for moralizing lamentation, no? Well – Kristof’s data refute that “the rich get richer and the poor get poorer.” The rich are getting richer, yes, but so are the poor, though not as fast, which does increase wealth gaps. However, globally, inequality between poor countries and rich ones is indisputably lessening, simply because the former have higher economic growth. (Even with today’s big slowdown, the Asian Development Bank projects 5.8% 2015 growth for the region, minus Japan. For advanced countries, 3% is considered sizzling.)

images-1The left, wedded to a mantra of rising poverty and inequality, is all about wealth and income redistribution to fix it. But part of why developing economies are growing faster than advanced ones, reducing the gap between them, is because wealth is in fact being redistributed from the latter to the former. This is what Trump yaps about with his China bashing. And, ironically, the left hates it too – all the whining about “shipping jobs overseas.” That redistributes wealth from richer to poorer people. Shouldn’t the left love it?

Unknown-2But of course poorer countries aren’t simply sucking our wealth away. To the contrary, a more integrated global economy with fewer artificial barriers enables goods and services to be produced where it is cheapest and most efficient, and this makes the whole world richer – including us. Cheaper production in China or India or Vietnam reduces prices for U.S. consumers (to the tune of trillions of dollars in fact), enabling more spending on other things, which stimulates job creation, making up for jobs lost. Everybody wins.

Further illuminating what is happening and why, author Ronald Bailey provided a commentary (on Reason.comon Kristof’s piece. What has enabled many developing countries to improve by taking advantage of global trade opportunities is better economic policies – in a nutshell, more economic freedom for their people to do so – phasing out dysfunctional old socialist nostrums (this is the “neoliberalism” lefties condemn). Bailey cites a 2015 Fraser Institute report giving countries economic freedom ratings, based on various measures. The 102 countries continuously rated averaged 5.31 in 1980, rising to 5.77 in 1990, 6.74 in 2000, and 6.86 in 2013.

Bailey notes that such economic freedom, and its handmaid, rule of law, tend to flourish in politically and economically stable countries. And it should be no surprise that all those conditions combine to unleash human ingenuity and enterprise, creating wealth and reducing poverty. Bailey also cited data showing that such nations tend to have markedly reduced fertility rates (thus controlling population growth), better environmental stewardship, and higher life expectancies than in more repressive and misgoverned lands.

Bailey concludes by saying that it is in “democratic capitalist countries that the air and water are becoming cleaner, forests are expanding, food is abundant, education is universal, and women’s rights respected.”

images-2Free market capitalism admittedly produces uneven results – as will any economic system – but is far better than any alternative for giving the greatest number of people the best opportunities and quality of life. The gigantic poverty reduction and welfare improvement of recent decades was not the product of socialism, but of getting away from such economic folly. And a market economy is also ethically superior because it works by increasing freedom rather than restricting it. That’s what I call social justice.

(All of this was already covered in my own very excellent 2009 book, The Case for Rational Optimism. I thank Scott Perlman for pointing me to the cited articles.)

*Meantime, Bernie Sanders saying America has the world’s highest child poverty rate is ridiculous. We measure it in relation to average U.S. incomes – which top worldwide scales. Of course child poverty is much worse in many countries that still are much poorer.

What Is a Business For? Is Profit a Dirty Word?

July 15, 2015

UnknownAt a recent social event, most guests sanctimoniously agreed it was somehow disgusting that anyone should make a profit providing health care. One woman said she had no problem with a store profiting from selling sweaters; but no one should profit from people’s hardship or suffering. I frankly thought that bizarre. Isn’t the relief of suffering a greater boon, more worthy of compensation, and incentivizing, than merely supplying sweaters? I sure as heck didn’t begrudge the profit of the dentist who cured my tooth ache; that’s what motivates people to go to dental school, invest in offices and equipment, hire staff, etc., to provide such service. Nor do I resent the profits of the pharmaceutical company producing the medicine that makes my wife’s life livable.

Unknown-1Calvin Coolidge said, “The business of America is business.” But what is a business for? There are two schools of thought. One says a business’s only purpose is to make money for shareholders (the owners) and anything detracting from that is indeed a dereliction of its primary duty. The other side says a business should serve the interests of all “stakeholders” affected by its doings – including employees, customers, and the broader public. They note that in olden times a business seeking a corporate charter from the state (allowing limited liability for shareholders) was required in exchange to have a public benefit purpose. But that model was dropped in the 19th century in Britain and America, allowing corporations to be chartered just to do business.

Thus critics of capitalism talk as though the first side won the argument and businesses do exist solely for profit – in disregard of any other consideration – and hence are ipso facto a menace. For example, Naomi Klein, whose recent book I reviewed, seemingly thinks profit is the sole reason energy companies extract fossil fuels – the fact that society uses, needs, fossil fuels doesn’t enter into it. As if, remove the profits, and no extraction would occur.

imagesThis tells us there’s something incomplete in the view of businesses as solely profit maximizing creatures. It leaves out the way they do that – by supplying something beneficial to customers*, creating value greater than what is paid (of course some predatory businesses do the opposite, but that’s cheating). The point is epitomized by Steve Jobs. He made tons of money, but that wasn’t his ultimate objective – rather, the profits were what enabled him to perfect products useful to purchasers. That was his true motivation.

People who bought his products valued them more than the money spent. That difference, or surplus value, created by Jobs, increased societal wealth. Had he never existed, all those people would have been worse off. His wealth would not have been somehow distributed among them; it would never have existed either. This is what the 99%-vs.-1% mentality misses.

Today it’s more true than ever that business is really all about customer value, with the internet leveling the competitive playing field, giving consumers far more choices and access to information. A business whose products aren’t great, that doesn’t satisfy customers, will not survive.

Anyhow, it’s too simplistic to say (legitimate) businesses are only concerned with profit. The real world isn’t like that. It’s certainly untrue to say they care only about shareholder returns. Shareholder ownership is merely notional; in reality a corporation owns itself, buying shares merely entitles one to certain rights, while management isn’t meaningfully beholden or accountable to shareholders, instead running the company for its own purposes. And while a firm’s profitability does benefit managers, mainly they care about profits because profits advance their other agendas (a la Steve Jobs).

Unknown-2Also, speaking of the real world, corporate denizens are human beings, and while money is surely a big motivator, nobody is exclusively mercenary. Another big motivator is how one appears to other people – and in the mirror. Most of us want to be seen as doing good, and even to actually do it. Back in the ‘70s I was a regulatory lawyer battling Con Edison over its rates. The company was in financial trouble; and I actually felt management was betraying shareholder interests to bend over backward for consumers.

images-2Corporate greed? It’s not so simple.

At the end of the day, the most successful and profitable businesses are those that are best at creating customer value – which of course means societal value. Adam Smith wrote of the market’s “invisible hand” thusly benefiting society. I heard a radio commentator say Smith might have been right in his simpler time (1700s) but not in today’s world rife with inequality. Really? In Smith’s day, the great mass of humanity everywhere lived in squalid poverty – whereas in the last century, worldwide average real dollar incomes quintupled. That colossal fact is not negated by the inequality of the few with great wealth. They haven’t stopped billions of people from seeing a quantum leap in living standards in modern times. And that vast enrichment is nothing other than the cumulation of customer value created by businesses seeking to profit thereby – i.e., free market capitalism. A stunning vindication of Adam Smith and his invisible hand.images-1

* To quote management guru Peter Drucker, “There is only one valid definition of a business purpose: to create a customer.”

The End of (Working Class) Men*

June 23, 2015

UnknownAmerican women earn only 78% of what men do. We’ve all heard this cause celebre. It’s utterly bogus. Women’s pay averages less than men’s because they do different jobs. But for comparable jobs, women who work as long as men earn virtually the same. And women tend to have different careers not because of discrimination but mainly because they’re different from men, with different temperaments, proclivities, talents, and goals. (If businesses really could hire equally qualified women cheaper than men, why would they employ any men?)

Meantime, all the nonsense about underpaid women misses something very important happening to men: their elimination from working class families.

imagesAnother cause celebre is inequality. But resentment against the 1% similarly misses the real problem, the growing societal divide between the well educated and the less educated. The former group tends to be affluent, and married, with stable families whose children repeat this. The less educated do not.** There’s your real inequality.

This story is complex. The pill, and entering the workforce, freed women from a lot of social and economic constraints toward getting and staying married. Unwed motherhood lost its stigma. Divorce got easier. And, while among the educated affluent, men remained attractive marriage partners, working class men did not. Indeed, lower income women can lose government benefits if they marry.

Unknown-1More: with educational opportunities equalized, females are proving better than males at school. That difference of temperament again. And a recent piece in The Economist showed how misleading is the idea of a pro-male pay gap, when it comes to the blue collar world. It profiled a Louisiana town where a lot of conventional “man jobs” have disappeared, leaving many males as unemployed layabouts. Yet, The Economist observes, plenty of the town’s women are working (and getting by, with no help from men): in motels, restaurants, shops, clinics, hair salons, government offices, etc. Unskilled, poorly educated men are unlikely to get, or even seek, many such jobs; less apt to be punctual, or pleasant to customers.

images-2This drains the pool of marriageable blue collar men. Jail drains it further (especially among blacks). And that marriage market imbalance between the sexes gets magnified because “when women outnumber men, men become cads” (according to a study quoted by The Economist). That is, men in this social milieu, in a seller’s market, sensing they have the upper hand and access to sex, tend to treat women more abusively and less faithfully.

Further, whereas educated affluent males have gotten with the program of gender equality, helping with housework and child care, typical blue collar guys haven’t received this memo.

images-3All this makes working class women get fed up with them (recalling Gloria Steinem’s line, “A woman without a man is like a fish without a bicycle”). Even when they do marry, they report significantly less marital happiness than better educated and affluent couples, hence they’re more likely to split.

So it becomes a vicious circle in which mothers without husbands raise sons to predictably repeat the syndrome: no education, no job, no wife, no family, no nothin’. A much bigger societal problem than that phony 78% pay gap.

What can be done? The Economist suggests making school more boy-friendly. Certainly it’s criminal how many don’t even finish high school. For those, all other public policy ideas are probably futile. I’ve noted, too, how kids can be educated to pass the marshmallow test – imbuing a personality trait shown to be critical for life success. And, of course, we could at least correct the daft welfare and tax policies that, to this day, still penalize marriage.

But in the long run, men are probably doomed, with science enabling women to procreate without them.

Unknown-2* Hanna Rosin has authored a book called The End of Men. This recalls a riff in David Brooks’s Bobos in Paradise, chronicling the rise of an imagined public intellectual, whose first book is always titled “The End of” something. It’s indeed remarkable how many there are: The End of History; Faith; Blackness; Plenty; College; Poverty; Self-Help; Stress; America; Nature; Fashion; Socialism; The Suburbs; Normal; Science; War; Dieting; Illness; Everything. That’s just a sampling.

** A recent news story reported data showing marriage raises incomes, with married men earning much more than bachelors. Surely this has causation backwards: higher earning men are the more likely to be married.

Thomas More’s Utopia: The First Communist Manifesto?

September 12, 2014

UnknownSaint Thomas More (1477-1535) wrote Utopia in 1516.* Not only the first in the utopian fiction genre, it’s also been called the first communist book.

In the imaginary country Utopia (the name means “noplace”), there is no money or private property. Everyone has a job, working for the commonwealth, and productivity is such that all needs are met (food, clothing, shelter, etc.) while also leaving ample leisure time. Needless to say, everyone is happy, there’s no cause for dissatisfaction, hence practically no cheating or crime or grasping for power.

Communist” or not, this might seem attractive (albeit kind of boring). imagesBut of course it’s a vain dream, because actual human beings resist such regimentation, and mainly because there’s a powerful drive for status (biologically installed by evolution since higher status means more mating opportunities). That’s the ultimate reason why utopian experiments (many in 19th century America) invariably collapsed. Moreover, while More depicts everyone performing diligently at their jobs, no reason appears why they should, since benefits are unrelated to how hard they work. In the real world, failure to reward effort elicits less of it, resulting in a poorer living standard (as places like East Germany have proven).

Still, the book is nicely imagined, and contains some very advanced thinking. images-1It came mainly out of More’s concern over inequality, an unusual view in the 1500s (far less equal than today); some passages sound like “Occupy” movement stuff. More says no existing social system is “anything but a conspiracy of the rich to advance their own interests.” He’s particularly troubled by the vast numbers of thieves hanged, seeing them driven to crime by unemployment. That’s what he envisioned Utopia to remedy.

Also unusually for his time, More was a pacifist, disparaging military aggression as rarely worth the cost in lives and money. images-2I enjoyed Utopia’s game-book for war: start with secret agents plastering enemy lands with posters offering huge rewards for anyone killing (or delivering alive) their king and other named functionaries. This sows enough distrust and dissension that Utopia can usually triumph without firing a shot.

So the book makes More seem a good man with his heart in the right place. As did the popular 1966 biopic, A Man For All Seasons. More became a high public official under Henry VIII, and the film casts him as a moral hero for refusing on principle to endorse Henry’s making himself head of the English church in order to divorce his first wife. For that refusal, More wound up beheaded.

images-3However, a rather different (and historically more accurate) picture emerges from Hilary Mantel’s novelization Wolf Hall (centered on Thomas Cromwell), showing More as a remorseless religious hard-ass responsible for the horrific torture and burning alive of numerous (so-called) heretics. And this man was declared a saint by Catholicism! By the end, one was glad to read of More’s own execution.

It’s hard to believe the same Thomas More wrote Utopia. Indeed, only late in Utopia is God even mentioned, with Christianity introduced to (and gladly received by) the islanders. But they maintain a principle of religious tolerance. In fact, punishment is prescribed not for “heresy” but, rather, “for being too aggressive in religious controversy.” And More even suggests “that God made different people believe different things, because He wanted to be worshipped in many different ways.”

And then More himself turned into exactly the sort of religious persecutor he’d once decried. People do change.

Meantime, though Utopia vaunted religious tolerance, even there, on one point More drew the line: disbelief in an afterlife incurred harsh condemnation and punishment. He thought anyone unconcerned about eternal penalty or reward would have no reason to behave decently in this life. Nonsense of course (but in those days nobody ever met an actual nonbeliever). Anyhow, it seemed bizarre that More worried so much about maintaining posthumous incentives, yet not at all about a lack of incentives on Earth.

images-4I was also quite surprised at More’s denouncing the illogic of religious zealots who advocate asceticism, self-denial and even mortifying the flesh, yet urge devoting oneself to relieving the suffering of others. If happiness (or at least freedom from pain) is a good thing for others, why not for oneself? (Garrison Keillor has quipped, if the purpose of life is to serve others, what purpose is served by the existence of those others?) Charity begins at home, More wrote; and “The Utopians themselves therefore regard the enjoyment of life – that is, pleasure – as the natural object of all human efforts, and natural, as they define it, is synonymous with virtuous.” Yet on this point too More apparently changed his mind; he was later known to wear, under his clothes, a literal hair-shirt, whose purpose is to inflict not only discomfort but actual pain (it drew blood). And his refusal of any compromise, to save himself in the controversy with King Henry, may well have reflected something of a martyr complex.

Some people improve with age, and grow wiser. Thomas More, it seems, went the other way. What a pity he didn’t die promptly after writing his book. Then maybe he’d have deserved sainthood.

*I read a plain English translation (from Latin) by Paul Turner.

Piketty Poo

May 20, 2014

                  For to everyone who has, will more be given, and he will have an abundance. But from the one who has not, even what he has will be taken away. — Matthew 25:29



French economist Thomas Piketty’s Capital in the 21st Century is the latest book sensation. Confession: I haven’t actually read it. But I’ve read plenty about it (both pro and con) — hardly avoidable lately. “Progressives” are gaga over it*, a confirmation bias feeding frenzy. People love having their pre-existing beliefs flattered. Piketty strokes the left’s inequality obsession: he predicts the gap worsening, saying returns on capital tend to outpace economic growth, so wealth tends to concentrate; and to combat this he proposes a worldwide wealth tax and punitively high (80%) income tax rates for the rich.

images-1Piketty’s predictions of slow growth and consequently increasing inequality have been challenged for faulty economic assumptions and analysis. The Left imagines a coming dystopia where a corporate 1% hogs all the wealth and the 99% have nothing. The absurdity is: who would buy all the products and services that make the 1% rich?

Meantime, Piketty’s fans also strangely overlook a glaring political correctness no-no. The book is Western-centric, focusing on the “First World” and pretty much ignoring the rest. But this is no mere cosmetic flaw — it goes to the heart of Piketty’s presentation. Wealth and equality are global matters, and if you only look at part of the globe, you can’t get it right. The big story is that while inequality may indeed be rising in Pikettyland, it’s not rising, in fact it’s falling, globally.

That’s unarguable fact, because for some time, Western economic growth rates have been materially exceeded in the poorer countries, notably India and especially China (together comprising over a third of world population). That means the global gap between rich and poor must be narrowing (even if within countries it’s not).

Moreover (fatal to Piketty), trends in rich nations and poor ones are not unrelated. As we know well in America, a big reason for rising inequality is the disappearance of high-paying factory jobs that used to raise up the less affluent. images-2Many of those jobs have gone to poorer countries — raising up their lower classes. In other words, global inequality is shrinking because wealth is shifting from richer countries to poorer ones; though it’s flowing from the less wealthy people in the rich countries which thus become more internally unequal. So the U.S. lower and middle classes are being hurt more by poor foreigners than rich Americans.

Piketty calls rising inequality “terrifying.” It would be, if the poor were getting poorer; yet they’re not. While the rich are getting richer, so are the world’s poor, albeit not as fast, but with hundreds of millions rising out of poverty in recent decades. Even in advanced countries, the poor are not falling, what with all the social safety nets. (Entitlements to Social Security, Medicare, and other government benefits are a form of wealth Piketty seems to ignore.) And poverty ain’t what it used to be: the living standard of Americans now classed as “poor” would have been considered solidly middle class a few decades ago (and would be considered rich in much of the world today).

But inequality is really the wrong concern, because the problem of the poor is not that others are rich. The problem of the poor is instead their poverty, which cutting down the rich won’t solve. images-2The left’s big error is thinking the rich “extract” their wealth from the rest; that there’s a lump of wealth to be divided up. Not so; wealth is created by productive effort. Steve Jobs got rich because people gladly paid more for his products than they cost to make. That added value made everyone richer. Had Jobs and his products never existed, his wealth would not have been spread among everyone else; it would not have existed either!

True, if you simply grab money from the rich and hand it to the poor, they’d be less poor and unequal — for the moment. But it won’t solve why they’re poor in the first place. What’s needed is not redistribution of wealth, but of the ability to earn wealth. That would be good for everyone, and without taking anything away from anyone; but it’s a much tougher problem. (Piketty does acknowledge that expanding education must be part of the answer.)

UnknownYet the left’s inequality obsession is not truly a social conscience thing. It’s not so much compassion for the poor as envy and hatred for the rich. It’s wealth and the power it brings that they find so intolerable (because they lack it), and are so rabid to tear down. Thus their swoon for Piketty’s global wealth tax proposal (how innovative). How to use the tax revenues, to raise incomes at the bottom, is barely a concern; it’s mainly to make the rich less rich.** And of course Piketty and his fans ignore how their vendetta against the rich, if enacted, would gum up the economic growth machine. Now that would really be terrifying — for rich and poor alike.

But in a commentary on Piketty, in Salon, Jesse Myerson says the solution to inequality is really simple. Instead of letting the returns on capital assets flow to their owners, we can just have the returns flow “democratically” to, well, everybody! imagesAs Red Green would say, “It’s just that easy!” Why didn’t Piketty think of that?

If you don’t find Myerson enlightening, you might try more of Robinson: here, and here.

* Visiting SF’s famed City Lights bookstore last week, the guy ahead of me was buying their last copy.

**This was demonstrated by the string of hostile comments to a version of this review on Amazon. It was all “the rich this” and “the rich that” and why they should be made less rich, with nary a word about making anyone less poor. Will there be similar comments here?

The Feckless Poor Versus the Selfish Hogs

June 10, 2013

images-2A 2012 worldwide Pew survey asked whether success is due to hard work or forces beyond one’s control. Most Brits, Germans, and Czechs agreed that success can be achieved through your own efforts. Guess who disagreed? The French, Greeks, Italians.

This is important to economic policy debates. We’ve been hearing much about inequality. Now, if you believe prosperity and hard work are correlated, you’re apt to think the best answer for inequality lies in broadening opportunities for people to be productive. images-3But if you’re in the other camp, believing success and wealth are matters of mere luck and not merit or effort, then you may favor just taking from those with more to give to those with less. (Especially if you yourself have less.)

This is indeed the mindset in countries like France, Greece, and Italy. They have simply lost sight of the connection between what’s in their wallets and someone, somewhere, somehow producing something. They march in the streets demanding to be maintained in their lifestyles, regardless.

What about the U.S.? Now here’s real American exceptionalism. Whereas Brits, at 57%, topped Europeans in linking work with success, in America it’s a whopping 77%. This strong consensus cuts across wealth classes and both political parties.

UnknownThis doesn’t mean Americans are social Darwinists who believe the poor should be left to their fate. Nor even, for that matter, do Republicans, despite insistence to the contrary by President Obama and his party. No; Americans of all stripes strongly back the social solidarity of a safety net for those less fortunate (and do recognize that Dame Fortune plays some role). But what Americans mostly do not buy into is the left’s idea of social justice a la Robin Hood, plundering the rich to benefit the poor. Americans don’t think robbery serves justice.

The Pew poll was discussed recently by The Economist’s “Lexington” columnist (who covers America and its politics). Unknown-1Comparing against Europe, Lexington opined that the heart of the Euro problem, with all the bailouts of grasshoppers by ants, is that they don’t like each other enough to make their economic union work. And, Lexington says, “America should fear the spread of the crudest poison paralyzing Europe: mutual dislike between citizens.”

In Europe, it’s regional. The Germans don’t like the Greeks and resent having to bail them out, and the Greeks resent the Germans for bailing them out. images-5In America, it’s ideological; hardened zealots demonizing opponents as motivated by evil, stymieing any compromises to address the nation’s problems.

Both parties are at fault. Republican sin is exemplified by Romney’s “47%” comment, branding almost half of Americans as unwilling to be responsible for themselves. (This in a nation where 77% believes success and hard work are linked!) images-6But Lexington considers Obama and Democrats equally guilty, stirring up division and resentment against richer people cast as selfish hogs.

You don’t have to believe wealth is ill-gotten, and should be equalized, to justify taxing the rich more than the poor and helping the less fortunate. images-1Nor must you deem them feckless and irresponsible, to justify believing that a society where the successful can enjoy wealth is a better society for everyone.

Inequality, and a True Progressivism

October 23, 2012

I have discussed inequality before, but apparently haven’t succeeded in ending debate. The Economist (10/13) has published an analysis by its economics editor, Zanny Minton Beddoes, which I recommend highly. (Click here; and here for a related editorial). Beddoes addresses inequality in depth and concludes by calling for a true progressivism – not mindless capitalism-bashing (nor government-bashing) but a program for reforming government’s role to better spread capitalism’s benefits.*

I have argued that fixating on inequality per se is misguided (and reflects, frankly, a big dollop of envy). What counts most is your absolute quality of life, not how it compares to others’. The problem of the poor is not plutocrats. Wealth is earned not at the expense of the poor but, by and large, by profiting from contributions toward the betterment of all. And the poor can be raised up – by boosting their ability to so contribute – without dragging down the rich.

A lot of inequality is merely the difference between mature people in the prime of their working lives, with accumulated assets, and young whippersnappers just starting out. Yet classic rich-versus-poor inequality of course exists too. It’s mitigated if the poor have reasonable opportunities to rise – the American ideal. But such social mobility isn’t what it once was. We’ll return to this.

Beddoes elucidates that while inequality is indeed growing in many countries (ours included), worldwide it is falling. That’s not contradictory. Global inequality is indisputably falling simply because less developed (and poorer) nations (mainly China and India) have much higher economic growth than advanced nations. Within those fast growing countries, the rich outrace the poor, increasing intra-country inequality, yet still those poor are outracing rich country populations.

Less affluent Americans are falling behind, in part, because some wealth is now being redirected from them to poorer people in Asia. Bad for us; good for them (at least equally deserving human beings). Thus, again, rising local inequality actually translates into falling global inequality.

Some Americans are losing out because they are becoming less competitive not only in what is more and more a global labor market, but even within America, where economic rewards increasingly go to the more skilled and educated.** Wealth is unequal not chiefly because the rich are hogs, or the game is rigged, but primarily because educational attainment is unequal, and its importance is growing. Once, anyone could earn good pay in factories without a college degree; but that’s sooo twentieth-century, an inexorably shrinking part of the economic landscape. (The President’s “manufacturing” obsession as a jobs panacea is retrograde.)

Drop out of high school, or even college, and you’re likely to have a low-wage job, or none, with your situation often aggravated by lack of marriage, and single-parent children, who grow up to repeat the syndrome. Whereas better educated people are likely to have better jobs, marriages with equally educated partners, and two-parent children who go on to repeat that model.

This is the nub of America’s inequality and declining social mobility.

Government isn’t helping. Our first battleground is in the schools, where entrenched teacher unions fight real reform of a system disgracefully disserving the disadvantaged, trapping them in their plight. And as for wealth redistribution, Beddoes highlights that it’s largely from the affluent to the affluent, especially the affluent elderly (through programs like Medicare, Social Security, and a host of tax preferences like the mortgage deduction). Such welfare for the rich dwarfs any redistribution to the needy.

And government’s interventions in the economy aren’t helping either. I recently listened to anti-capitalist crusader Arundhati Roy rail against a litany of alleged evils of free market economics in India. I kept thinking: she’s missing it completely. Nothing she denounced is actually free market economics; to the contrary, it’s non-free market economics, it’s India’s culture of cronyism, corruption, and over-regulation that stifles competition and economic opportunity; it’s government perverting the free market. So fixated was Roy on demonizing “capitalism” that she couldn’t see this Indian elephant in the room.

This is a key element in the “true progressivism” Beddoes argues for. She says governments can narrow inequality without large-scale redistribution or an engorged state. Beddoes invokes Teddy Roosevelt’s trust-busting – instead of helping favored businesses, which often means hobbling their competitors, government should be removing barriers to competition (many of them erected by government itself). That expands economic opportunity and the size of the pie for everyone. While such an assault on cronyism and corruption is particularly vital for countries like India and China (where the state itself is directly in business), Beddoes says rich nations “also need more competition in traditionally mollycoddled sectors such as education.”

Health care too, in America. And (sorry, Lefties) we are increasingly over-regulated. Reviewing the regulatory picture, the same Economist issue quips that “If banks once did banking, now they practice law.” Fine for the biggest ones (maybe), but ruinously costly for all other businesses, again undermining competition, economic dynamism, and equality of opportunity. (A friend yesterday alerted me to a 1992 Wall Street Journal op-ed by a hotel owner telling how government regulation contributed to destroying his business. The author: George McGovern!)

Beddoes’s second point is to recognize that the gigantic edifice of state social spending has gotten grossly out of whack, directing the lion’s share of subsidies to the affluent and elderly, rather than toward investing in the young and the disadvantaged, to boost their contributions to future economic progress. Not to mention that out-of-control entitlement spending threatens to wreck our economy altogether.

Beddoes’s third priority is to reform taxes, to improve efficiency and fairness. While the rich do already pay a disproportionately high share of income taxes, our crazy-quilt of loopholes and special interest giveaways is loaded with unfairness and distortions of economic activity that seriously harm the nation’s welfare. Just the sheer cost in man-hours of coping with tax complexity is a huge economic liability.

All these policies would help reduce inequality and broaden economic opportunity; but of course they are good not just for the disadvantaged, but for society as a whole.

Beddoes concludes by noting that some rising countries are progressing on parts of this agenda (one reason why they are rising); but not the richer nations, and “the most shocking shortcomings are in America, the rich country where income gaps are biggest and have increased fastest.”

America’s to-do list should also include fixing immigration, particularly our suicidal near lock-out of the world’s best-and-brightest. This exemplifies today’s American Disease: people’s narrow idea of self-interest short-sightedly undermining their true long-term good. The same applies to all the government subsidies everyone stubbornly clings to, which will ultimately sink our whole ship.

I remain a great optimist about the future for humanity as a whole. But while America is still blessed with a vast reservoir of human creative energy, God has not somehow decreed that we will maintain our privileged status even while refusing to adapt to a changing world. I’m not optimistic about America biting Beddoes’s bullets.

It surely will never happen in a second Obama term. With Romney, and a fresh shuffle of the political cards, maybe there’s at least a chance.

* The blogosphere’s Lefties have mounted the predictable shrill attacks on The Economist for daring to call its prescriptions “progressive.”

** Broadened educational opportunity was probably the key reason why American inequality fell significantly in the last century.


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