Issue of the week: A defense of the 1 percent

last updated 8 January 2015

A friend of Mitt Romney has written what could be “the most hated book of the year,” said Adam Davidson in The New York Times Magazine. In Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong, retired Bain Capital executive Edward Conard argues that growing inequality is actually a good thing for the U.S. economy. The rich don’t waste their fortunes on pointless baubles like the rest of us do, Conard says. They invest in businesses “that make life better for everyone.” Tech financiers, for instance, may have earned “disproportionate billions,” but we have all been rewarded with cheaper, better products thanks to their investments. Conard estimates that for every dollar a wealthy investor earns, the public “reaps up to $20 in value.” He says it’s high time the 99 percent stopped complaining about the superrich and started celebrating them instead.

“There can be no reasoning with people this irrational,” said Alex Pareene in Salon.com. Conard obviously believes that the rich are intrinsically more virtuous, hardworking, and intelligent than everybody else—and that they deserve to make even more money than they currently do. All he’s done is taken “a gut feeling among his class and turned it into a philosophy.” What’s shocking, said David Frum in TheDailyBeast.com, is his arrogant claim that people who choose not to pursue business careers—those non-innovators he derides as “art history majors”—are “merely hitching a ride on progress generated by the Edward Conards of the world.” By that logic, the guy who created the no-document subprime loan qualifies as a contributor to society, but judges and teachers don’t.

Conard is actually understating his case, said Tim Worstall in Forbes.com. The general public’s benefit from the investments of the wealthy is really more on the order of $45 or $50 to $1. That’s why “we’re all so howlingly rich” by global and historical standards, and why we should be “careful indeed” about reducing rewards for entrepreneurs. I’ll concede that some über-rich contribute a great deal to society, said Michael Kinsley in Bloomberg.com. But that hardly justifies Conard’s thesis that “incomes should be more unequal, not less.” Does JPMorgan Chase CEO Jamie Dimon really require $23 million a year “to do whatever it is that he does?” Wouldn’t someone do it for a lot less? Whatever Conard and Romney say, “there’s every reason to think we overpay.”