On Inequality

Larry Summers has a very good piece in the Financial Times about inequality which is worth taking a look at.  What it shows is that the Occupy Wall Street folks, if nothing else, started what will hopefully become a valuable discussion about the harm that comes from inequality.  On the whole, my feelings about OWS are mixed.  On the one hand, the more specific they get, the less coherent anything they say becomes.  The people down there range from those who think giving Manhattan back to Native Americans is a great idea, to those who oppose wearing fur, to those who think we'd be better off with no financial system.  Needless to say, when it comes to solutions to problems, or crafting a coherent message, they come up just a little bit short.  Not to mention some of the protesters' aversion to showers and their love of conspiracy theories turns me off.  On the other hand, broadly speaking, they've touched on a vitally important problem in America, and started a discussion that will hopefully lead to some tangible positive change.  The reality is that we do have some serious problems-- for the last 30 years, the lives of the average American haven't improved-- wages have stagnated, resulting in an explosion in the level of debt, and, while Wall Street titans have pocketed fortunes while bringing the financial system (and the national economy) to its knees, average people have been left behind.

They've succeeded in sparking a counter-movement whose members have succeeded only in inadvertently underscoring the broader point of the OWS people.  Typically, the counter-protestors have countered in two ways: 1) The "dirty hippies" need to go get a job, and 2) Something along the lines of, "Look at me! My life stinks, but I'm not complaining, so you shouldn't either."  Any amount of thought on these responses just underscores two points.  First, we've had unemployment averaging around 9% for 3 years now.  Getting a job is tough, and not because twice as many people suddenly became really really lazy, or all the jobs found really good hiding places in the woods.  Something's wrong, and it's not government suddenly getting in the way and regulating everything.  Second, the people underscoring how bad things are for them, or how hard they had to work to earn modest success just begs a simple question-- do we really want to live in a society where finding a job, any job, is a triumph, and where a whole lot of previously middle class people have to fight day by day to meet their most basic needs?

Opponents of this view argue that it doesn't matter if we have inequality, so long as the possibility to get rich is available to anyone.  Even if that were true (it isn't: studies show "socialist" Europe has more class mobility than the US), do we really want a society where 1% (or, more accurately in the US, 0.1%) of people get fantastically wealthy while the rest struggle?  I think some people have the perplexing idea that what made the US great was the fact that any child could dream of growing up to be wealthy, regardless of their class.  Which, when you think about it, is a really silly proposition.  Sure, Andrew Carnegie grew up a poor immigrant and got rich, and Bill Clinton went from poverty to the presidency.  But Saddam Hussein was born into a family of shepherds and got fantastically rich.  Joseph Stalin was the son of a cobbler who couldn't afford to pay his tuition when he was in seminary.  But we don't dream of being like Ba'athist Iraq or Soviet Russia.  Upward mobility is possible in any society.  What made the US special was that, for awhile, you could be pretty sure that if you finished school and worked hard, you'd be able to find a decent job.  You would be able to afford a home, a car and a television, and you could put your kids through college and retire comfortably to Florida in your sixties.  Plenty would shoot for the stars and most would miss, but, where missing in Soviet Russia, anywhere outside of Moscow and St. Petersburg, meant poverty, in the US, if you fell, instead of crashing to Earth, you could land comfortably on a cloud.  Over the last thirty years, that America has been slipping away.

Summers forcefully argues that, as a society, we need to start doing better.  And I agree wholeheartedly.  I don't claim to know exactly how to solve our problems, but I do know that "Cut taxes--> Shrink Government --> Magic!" formula is a proven failure.  And we have to start looking for a formula that can work.