Fanfare for the Common Man? Screw That!

Blessed are the poor.  Or not.  Screw the lazy bastards.  The indolent and slothful get what they deserve.  So believes Edward Conrad, a former high-flyer at Bain Capital, the private-equity firm, and author of the forthcoming book, Unintended Consequences: Why Everything You’ve Been Told About the Economy is Wrong.  Conrad doesn’t explicitly blame the meek for their plight, but he comes close.

In a recent cover story in The New York Times Magazine, Conrad lays out his noxious worldview, which evokes the “maker” versus “taker” reductionism of Ayn Rand.  According to this conceit, society is heroically propelled forward by the vim and pluck of “makers,” or entrepreneurial elite that Conrad counts himself among, whose productive investments create wealth for all.  Think of Steve Jobs.  Or Warren Buffett.  Or Bernie Madoff.  Well, not Madoff.   But you get the point.

If the industrial savvy of the Übermenschen creates widely shared abundance, then their extreme wealth is a salubrious sign.  To paraphrase what the CEO of General Motors once said of his company, what’s good for the rich is good for America.  Accordingly, Conrad believes that wealth should be twice as concentrated as it is now.  That way, the feckless “takers,” or “art history majors” in Conrad’s parlance, would have their now-dormant profit motive awakened.  What’s more, he wants the government to guarantee bailouts of the same large banks that helped precipitate the greatest economic crisis since the Great Depression, because the same institutions channel capital productively and therefore are key to wealth creation.

Conrad’s book arrives against the backdrop of economic inequality that’s at Gilded Age levels.  The richest 400 Americans command more wealth than the bottom 150 million.  That gap may even be accelerating: Economist Emmanuel Saez reports that, in 2010, the first year of the economic recovery, the top one percent of income earners captured 93 percent of aggregate income gains.

Though Conrad celebrates such disparities, Jacob Hacker and Paul Pierson, authors of Winner-Take-All Politics: How Washington Made the Rich Richer – and Turned Its Back on the Middle Class, cast them in a very different light.  According to the two, adjusted for inflation, the earnings of most Americans are lower than they were in 1973, roughly the same period when wealth began to concentrate sharply.  In other words, a rising tide isn’t lifting all boats.  The makers, it turns out, are also the takers.

Why does this matter?

Former Labor Secretary Robert Reich points out that income inequality leads to speculative bubbles as the monied few seek to “invest their wealth in whatever assets seem most likely to attract other big investors.”  When the bubble bursts, “mountains of near-worthless collateral” are left behind, requiring a taxpayer rescue.  Wealth concentration also implies that the fruits of prosperity are not widely shared, trapping many in a vicious cycle of debt.

Many Founding Fathers had even more grave concerns about income inequality, seeing it as a grave threat to democracy.  John Adams spoke for many Founders when he observed that when “economic power became concentrated in a few hands, then political power flowed to those possessors and away from the citizens, ultimately resulting in an oligarchy or tyranny.”  Such worries, for example, explain why many Founders favored a steep inheritance tax.  Conrad, by contrast, pooh-poohs the possibility that wealth begets political power.  When asked about “rent seeking,” or when the haves conspire to acquire preferential benefits from the government, Conrad is categorical.  “I don’t want to talk about rent-seeking,” he tells the Times.

Conrad might be dismissed as a modern-day Marie Antoinette crassly justifying naked greed, but his views are GOP orthodoxy.  Nearly all elected Republicans in Washington as well as Mitt Romney, Conrad’s friend and old boss at Bain, have endorsed a shockingly regressive fiscal policy.   Crafted by Congressman Paul Ryan, a devotee of Ayn Rand who gives all his interns copies of her books, the plan would radically cut social programs like Medicaid while lowering high marginal and corporate tax rates.  Jonathan Chait, in a take-down of Ryan in New York Magazine, quotes Robert Greenstein, a liberal budget analyst, who says the congressman’s plan would constitute “the largest redistribution of income from the bottom to the top in modern US history.”

Ryan’s proposal may threaten the American Dream, but that’s only as the mythic aspiration is commonly understood.  Alexis Goldstein, a former investment banker, spelled out Wall Street’s take on the Dream: “To earn enough money so that you can behave in a way that makes the very existence of other people irrelevant.”  Replace “earn” with “inherit” or “steal” and you’ve got a good summation of the GOP’s ethos.  Conrad couldn’t have said it better.

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