Let Us Praise Famous Superrich Men

Bugatti

The New York Times ran a highly provocative story, reporting on a book by Edward Conard (rhymes with canard) about to hit the streets. Conard was a partner in Bain Capital before he retired. He’s right up there in the wealth stratosphere along with his old chum, Mitt Romney. The Times article identifies him as “a member of the 0.1 percent. His wealth is most likely in the hundreds of millions; he lives in an Upper East Side town house just off Fifth Avenue; and he is one of the largest donors to his old boss and friend, Mitt Romney.”

Conard makes no apologies about being superrich. He argues conversely that it is the superrich to whom we owe the efficacy of our economy. Maybe, but we also owe them a major hand in bringing down the system a few years ago. Conrad admits to a mistake or two in the system. Because of this stigma, many of the wealthy are hiding in gated communities and exerting their wills on the rest of us through the anonymous channels being used to corrupt fund the democratic political process. Conard is different, the Times reports.

Unlike his former colleagues, Conard wants to have an open conversation about wealth. He has spent the last four years writing a book that he hopes will forever change the way we view the superrich’s role in our society. “Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong,” to be published in hardcover next month by Portfolio, aggressively argues that the enormous and growing income inequality in the United States is not a sign that the system is rigged. On the contrary, Conard writes, it is a sign that our economy is working. And if we had a little more of it, then everyone, particularly the 99 percent, would be better off. This could be the most hated book of the year.

Conard contends that nobody really understands the economy. All those Nobelists that study the impacts that both consumption and investment spending are wrong. The Times article continues.

Conard understands that many believe that the U.S. economy currently serves the rich at the expense of everyone else. He contends that this is largely because most Americans don’t know how the economy really works — that the superrich spend only a small portion of their wealth on personal comforts; most of their money is invested in productive businesses that make life better for everyone. “Most citizens are consumers, not investors,” he told me during one of our long, occasionally contentious conversations. “They don’t recognize the benefits to consumers that come from investment.”

I won’t repeat the economic arguments for or against his “counterintuitive” model; you will have to read the whole story. (For me, as I have written, most of economics is not intuitive or counterintuitive, it is a misguided quasi-science that has caused at least as much mischief as good.) I will take a shot at his statement that inequality is good for us, however. I have reported in the past on the work of Wilkinson and Pickett, in their book, The Spirit Level. The two authors present a series of graphs each displaying a measure of some social bad against a standard measure of income inequality for a variety of relatively affluent industrialized countries. The US is the worst performer in every case, often lying well beyond the position of others on the graphs. We have both the highest inequality and the worst record. The measures of social bads include teenage pregnancies, life expectancy, a general combined health index, crime, social mobility and so on. I show one case below. All look pretty much the same.

His conclusions are the same as all results gotten by looking at the world through a soda straw. Maybe the numbers alone show the relationships he claims. It is strange in this case that with thousands of economists churning the same data, he comes up with such different results. The data that Wilkinson and Pickett present are “counterintuitive, I am sure in his view. They show that inequality does just the opposite. It all depends on what measures you are using. I will take indices of human well-being over money every day.

ps. The Times also wrote, “Romney has also said that rising inequality is not a problem and that the attention paid to the issue is ‘about envy. I think it’s about class warfare.’” He didn’t read The Spirit Level either.

pps. The Bugatti Veyron in the photo goes for a mere $1,700,000.

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