Politics & Policy

Two Cheers for Inequality

Amazon CEO Jeff Bezos speaks at a news conference in Seattle, Wash., in 2014. (Jason Redmond/Reuters)
Bringing down the rich would almost certainly hurt poor & middle-class Americans.

But why must the kulaks be liquidated as a class?

Which is to say: Why do progressives believe that enacting economic policies that harm the wealthy will benefit the middle class? Presumably they believe this would help the poor, too, but Democrats do not talk about the interests of the poor very much of late. The Democrats are the party of the bourgeoisie, and Republicans are the party of the proletariat, or at least of the parts of it that do not live within 200 miles of a subway station.

Last week, I noted that Democratic presidential candidate Elizabeth Warren had suggested a new program of confiscating the assets of wealthy Americans on an annual schedule, a “wealth tax” with no constitutional basis and very little to recommend it economically. Representative Alexandria Ocasio-Cortez has recommended a confiscatory income tax. Progressives have taken to describing the class of people they hate in eliminationist terms: Representative Ocasio-Cortez insists that it is “immoral” for “billionaires to exist.” Two influential progressive economic thinkers, Emmanuel Saez and Gabriel Zucman, have written that one of the benefits of confiscatory taxes is that they would cause the class of high-income Americans to “largely disappear.” Marshall Steinbaum, the research director of the progressive Roosevelt Institute, wrote: “It’s increasingly clear that having wealthy people around is a luxury our society can no longer afford.”

(In a social-media post with more than one exclamation point, Steinbaum complains that I “attacked” him. The above quotation is the entirety of what I have written about him. It is not clear to me that the English word “attack” includes within its meaning quotation without further commentary.)

The rhetoric of elimination and the politics of resentment attached to it are dangerous and unworthy. “Okay,” wrote one critic, “but what would you do about inequality?”

Good question.

Nothing.

There are two theories about why hurting the wealthy would help everybody else. The first is the economically illiterate zero-sum proposition that there exists in the world a bucket marked “Income” and that some force in society — some combination of government, Chamber of Commerce, and that little Monopoly guy in the top hat and monocle — goes around ladling out income while the world’s workers and investors gaze up at them pleadingly like so many hatchlings with their beaks agape. That is not how wealth works. Jeff Bezos did not become the world’s wealthiest man by going around and picking people’s pockets a nickel at a time; he and his colleagues created something in Amazon, something that has real value. If they hadn’t done so, the thing that they created simply would not exist. The sum of good things in the world grows greater through economic production; it is not simply a shifting of resources, taking a coin out of one pocket and putting it in another. This is another occasion upon which to be mindful of the paradise of the real. Money is just a record-keeping system only indirectly related to the vast bounty of actual goods and services, which is why a middle-class American in 2019 eats better than Louis XVI and sleeps in more comfortable quarters than did Marie Antoinette or Akbar.

If the rich were radically less rich, the poor and the middle class would, at best, still be where they are. In some ways, they’d almost certainly be worse off: A disproportionate share of U.S. economic growth, wage growth, and employment growth has been driven by a relatively small number of startup companies. As Vivek Wadhwa of Harvard’s Labor and Worklife Program put it: “Without startups, there would be no net job growth in the U.S. economy.” Technology startups are driven by venture capital, and venture capital is a rich man’s game. The “PayPal mafia” — the group of young entrepreneurs who got rich from that startup — went on to form Tesla, LinkedIn, Palantir, SpaceX, Yelp, YouTube, and others. Their investments helped build Facebook, Spotify, Lyft, and Airbnb, among others. Startup-heavy California has 12 percent of the U.S. population but accounts for 16 percent of its job growth and 14.2 percent of its economic output. Nobody wants to hear it, but inequality is part of what makes that happen.

The second argument for liquidating the kulaks as a class is political rather than economic. By acquiring wealth, the billionaire class acquires political power and the means to look after its own interests at the expense of those of the middle class. There is a little something to that, but less than you might think.

The strongest bias in American politics is not toward the interests of the rich; it is toward the status quo. As Martin Gilens shows in his Affluence and Influence, a 75 percent majority in favor of a certain policy gets its way in U.S. politics a little less than 40 percent of the time; a 75 percent consensus against something gets its way about 80 percent of the time.

And the problem for the grand theory of American oligarchy is that there is so much consensus. We talk a great deal about the polarization of our politics, which is real but which is in fact mostly a matter of social identity, not a matter of policy. On matters of policy, there is broad agreement across income groups on many important issues. Gilens — who, I should note, is much more concerned about the effects of inequality on democracy than I am — writes: “Examples of agreement across income groups include opposition to new taxes, government support for higher education, strengthening antidrug efforts (but legalizing marijuana for medical use), and providing welfare recipients with job training and child care.”

While the rich and the poor both are broadly in favor of job-training programs and limitations on welfare benefits, the wealthy are a bit more supportive of welfare restrictions. “In contrast,” he writes, “the affluent and the poor often disagree on issues like stem cell research, gay rights, abortion, the progressivity of the tax system, and market-oriented reforms of Social Security and Medicare.” On many of the so-called social issues — notably gay rights and freedom of speech — the poor have more authoritarian views than do the relatively libertarian wealthy. For example, the poor are considerably more likely to support civil-rights restrictions undertaken as anti-terrorism measures.

As the libertarian economist Bryan Caplan argues, people who care about things such as gay rights and freedom of speech should be grateful that in cases in which the preferences of the rich and poor diverge, the rich tend to prevail politically. That is, he writes, what “makes democracy tolerable.” Gilens, for his part, offers this disclaimer: “I hold no illusion that citizens’ policy preferences are in fact the best policies, or even the policies best suited to advance the interests and values of those citizens.”

That is an important point for two reasons: One is that there are many things that are rightly beyond the reach of plebiscitory democracy: Slavery is wrong whether 1 percent of the population desires it or 100 percent of the population desires it. We have a Bill of Rights and other constitutional protections for precisely that reason. The second reason that should be understood is that though it is the case that the wealthy tend to get their way more often when their preferences diverge from those of the rest of the country, their preferences are not identical with their economic self-interest. Caplan, himself a scholar of voter behavior (he is the author of The Myth of the Rational Voter), clarifies Gilens’s findings      :

When the poor, the middle class, and the rich disagree, American democracy largely ignores the poor and the middle class. To avoid misinterpretation, this does not mean that American democracy has a strong tendency to supply the policies that most materially benefit the rich. It doesn’t. Gilens, like all well-informed political scientists, knows that self-interest has little effect on public opinion.

The disconnect between material interest and political opinion plays out in interesting ways: For example, wealthy African Americans have political views that are very similar to those of low-income African Americans; interestingly, wealthy African Americans support welfare programs and redistributive tax policies more strongly than do low-income African Americans, even though they would be paying those taxes and receiving no personal benefits. The views of high-income Americans on tax increases aren’t even necessarily what you’d think they’d be.

The American political scene does not look the way it does because American politics is dominated by billionaires. If the American political system were dominated by billionaires, Donald J. Trump would not have been the Republican nominee in 2016 and probably would not be president. If the Koch brothers had their way, gay marriage would have been legal a long time before it was, corporate welfare would be a thing of the past, and there would be broad decriminalization of drugs. If Jeff Bezos were king for a day, the results probably would not cheer the hearts of many Americans in red caps.

Everybody has a bogeyman: the Koch brothers, George Soros, take your pick. But that isn’t how the world works. The poor are not poor because the rich are rich, and while it certainly is the case that the wealthy have more political power than the poor — Muppet News Flash — the importance of that fact to the realities of American political life is grossly distorted by people looking — praying — for what every political movement must have: someone to blame.

Elon Musk and Alice Walton didn’t make this mess.

We did.

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