The Right to be Unequal
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In order to succeed … the poor need, most of all, the spur of their poverty.
—
George Gilder (1939), Wealth and Poverty, 1981.
Everything that is economically efficient is morally justified.
— Yegor Gaidar (1956 – 2009)
Margaret Thatcher (1925 – 2013):
[The] pursuit of equality itself is a mirage.
What's more desireable and more practicable than the pursuit of equality is the pursuit of equality of opportunity.
And opportunity means nothing unless it includes the right to be unequal and the freedom to be different. …
I would say, let our children grow tall and some taller than others if they have the ability in them to do so.
Because we must build a society in which each citizen can develop his full potential, both for his own benefit and for the community as a whole …
(Let Our Children Grow Tall, Institute of SocioEconomic Studies, 15 September 1975)
Ronald Reagan (1911 – 2004):
The minimum wage has caused more misery and unemployment than anything since the Great Depression.
(1980)
Thomas Piketty, Emmanuel Saez, and Gabriel Zucman:
The bottom half of the adult population has thus been shut off from economic growth for over 40 years, and the modest increase in their post-tax income has been absorbed by increased health spending. …
[The] stagnation of bottom 50% incomes and the upsurge in the top 1% coincided with:
- reduced progressive taxation,
- widespread deregulation (particularly in the financial sector),
- weakened unions, and
- an erosion of the federal minimum wage.
(Distributional National Accounts: Methods and Estimates for the United States, The Quarterly Journal of Economics 133, no. 2:553–609, May 2018)
|
| Percentile | Net Worth |
|---|
| P99-100 | $18,623,400 |
| P90-99 | $2,266,400 |
| P40-90 | $242,800 |
| P0-40 | −$10,800 |
Income in the United States (1970)
(US Department of Commerce, Statistical Abstract of the United States, 1972, p 324) |
| Percentile | | % of Total Income | |
|---|
| P50-100 (50%) | | 77 | |
| P0-50 (50%) | | 23 | |
Income in the United States (2012) |
|---|
| Percentile | # per 100,000 Taxpayers | % of Total Income | % of Total Income Tax |
|---|
| P99-100 (1%) | 1,000 | 21.9 | 38.1 |
| P99.999-100 (0.001%) | 1 | 2.4 | 3.3 |
| P99.99-99.999 (0.009%) | 9 | 3.1 | 8.3 |
| P99.9-99.99 (0.09%) | 90 | 5.5 | 10.3 |
| P99-99.9 (0.9%) | 900 | 10.9 | 19.5 |
| P50-99 (49%) | 49,000 | 67.0 | 59.1 |
| P0-50 (50%) | 50,000 | 11.1 | 2.8 |
peaceandlonglife:
The share of total US income going to the bottom 50% fell by more than half between 1970 and 2012 (from 23% to 11%).
(Looked at the other way, the income share of the top 50% rose from 77% to 89%.)
For a doubling of the income pie (equivalent to 2% annual growth in national income for 35 years) this amounts to:
- a 131% rise in income for the top 50%, and
- a 4% fall in income for the bottom 50%.
A rising tide does you no good if your boat is sinking faster than the water is rising.
Anna Stansbury & Lawrence Summers (1954):
[Since 1973 there has been] a 75% increase in labor productivity.
(Working Paper 24165, National Bureau of Economic Research, December 2017, p 2)
Over the four decades between 1974 and 2014, inflation-adjusted annual market income
- fell $320 for households at the 10th percentile (the bottom tenth),
- rose $388 for those at the 20th percentile (the bottom fifth),
- rose $5,232 for those at the national median,
- rose $75,053 for households in the top 5 percent,
- rose $929,108 for those in the top 1 percent, and
- rose $4,846,718 for those in the top 0.1 percent. …
If today’s income were distributed in the same way that 1970 income was distributed, it is estimated,
- the bottom 99 percent would get roughly $1 trillion more annually, and
- the top 1 percent would get roughly $1 trillion less. …
On issue after issue [since 1975, the Democrats have] remained mostly on the center-left, [while] the Republican center of gravity moved further and further to the right …
In other words, bipartisanship has disappeared from American politics over the last half century largely because the Republican Party has become steadily more extreme.
At least part of the explanation for this rightward shift is the investment by wealthy, highly
conservative business elites in a sustained effort to shift American politics rightward, an effort signaled, symbolically at least, in a memo by Lewis F Powell, Jr in 1971, articulating a coordinated, long-term political strategy. …
[One] of the most robust findings of the ensuing half century of research is that most ordinary voters are ill-informed about the details of public issues, so much so that they entirely lack views on many issues of the day.
Most people have more urgent everyday things to worry about than policy debates. …
Partisan identification is more a tribal affiliation than an ideological commitment …
Shanto Iyengar, Tobias Konitzer, & Kent Tedin:
[The] most significant fault line in the second decade of the twenty-first century [in America] is not race, religion, or economic status but political party affiliation.
(The Home as a Political Fortress: Family Agreement in an Era of Polarization, The Journal of Politics 80, 4:1326–38, October 2018)
[People] are increasingly choosing their partners on the basis of political affiliation, even more than on the basis of education or religious orientation.
Over the last half century:
- marriage across racial and religious lines has become much more common than either used to be, whereas
- marriage across party lines has become much less common. …
This increasing agreement between husband and wife about politics in turn strengthens the inheritance of party identity by the next generation, since we know that children are more likely to inherit party identity when both parents agree politically.
In this very intimate way, over the last half century partisanship has gradually replaced religion as the main basis of “tribal” affiliation in America. …
In 1960, [George Romney's salary as CEO of American Motors peaked at] just over $661,000 (roughly $5.5 million today). …
In 1960 … he refused a $100,000 bonus, and in a five-year period he turned down a total of $268,000 (roughly 20 percent of his total earnings during the period). …
Moreover, he paid over a third of his income in taxes.
Fifty years later, his son Mitt pulled in $21.7 million in 2010, roughly four times his father’s peak income.
Of this, he paid an effective tax rate of 13.9 percent, roughly one third the rate his father had paid.
We know of no evidence Mitt has ever voluntarily returned any of his compensation, though he and his wife gave away $3 million in charitable donations in 2010, including $1.5 million to the Mormon Church. …
[George Romney, as Nixon's] first secretary of housing and urban development (HUD) … exemplified the last gasp of progressive Republicanism.
Romney’s Republicanism didn’t see the world as a zero-sum contest between:
- capital and labor,
- white and black,
- friend and enemy,
- us and them.
As secretary of HUD, he was implacable that minorities deserved access to quality housing in affluent white suburbs.
But in the new Republican Party he had become a political liability, a fossil from earlier in the century, and he was forced from his position by Nixon in 1972.
(
The Upswing: How America Came Together a Century Ago and How We Can Do It Again, 2020)
Mitt Romney (1947) [US Senator
from Utah]:
There are 47% of the people
- who will vote for [President Obama] no matter what …
- who are dependent upon government,
- who believe that they are victims …
- who believe the government has a responsibility to care for them …
- who believe they are entitled to health care, to food, to housing, [and that] the government should give it to them. …
These are people who pay no income tax. …
[My] job is not to worry about those people.
I’ll never convince them that they should take personal responsibility and care for their lives.
(David Corn, Romney Tells Millionaire Donors What He Really Thinks of Obama Voters, Mother Jones, 17 September 2012)
Tom Bergin
Financial Journalist, Reuters
In 1990, the average CEO of a company in the S&P 500 index of major firms earned around $3.7 million in 2018 prices.
In 2000, they received $22 million. …
One study calculated that the aggregate compensation paid by public companies to their top-five executives between 2001 and 2003 amounted to 10.3% of the aggregate earnings of these firms during the period.
In 1992 the average boss of a company in the FTSE 100 index of the biggest UK firms earned £450,000. …
By 2010, FTSE CEOs were earning an average £4.5 million.
In the more than a hundred economic studies of executive pay I have studied, I have not found one that explains how aligning the interests of shareholders and managers could help the managers make smarter choices.
As one former CEO who went on to teach at Harvard Business School said,
All the financial incentives in the world won’t transform CEOs into better decision makers. …
Efficient Markets Theory [EMT], which years later would win [Eugene] Fama a Nobel memorial prize, argued that stock markets were perfectly efficient and rational.
This meant that if share prices were languishing, it reflected the fact that investors had carefully considered all the evidence and concluded firms’ management was bad. …
By reframing the employment contract to make a manager’s experience reflect that of investors, [it was] argued that managers would, in working for their own benefit, simultaneously and almost incidentally perfectly serve shareholders’ interests.
The key to everything was to link pay to share prices.
[According to EMT] the stock market prices all relevant information about the performance of a company into its share price immediately.
This meant that one didn’t have to think about how to measure whether a manager did a good job: if they did, the share price would go up. …
Robert Shiller, who mapped the relationship between earnings and share prices across many decades and concluded markets were fundamentally irrational … ironically won the Nobel prize jointly with Eugene Fama in 2013 …
The Nobel prize committee tried to justify their decision to honour two men with diametrically opposed views by arguing that Fama was talking about the short term and Shiller about the long term, a distinction Shiller didn’t entertain.
(
Free Lunch Thinking: How Economics Ruins the Economy, 2021)
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