Krugman: Rich Guy Says We Should Be Grateful For His Wealth

[ProSense]

Rich Guy Says We Should Be Grateful For His Wealth

So a former partner of Romney’s at Bain says, in a new book, what Romney probably believes: we should be really grateful to the rich for all the rich things they do. Because, you see, they don’t spend all their wealth building homes as big as the Taj Mahal; some of it they invest in innovation.

This actually represents a break with the previous defense of the rich. Until now, the official line has been that what we need are incentives — that jaawwb creeaytohrs won’t do their thing unless we dangle the carrot of immense wealth in front of them. But now we’re supposed to think that it’s not the prospect of future wealth, but wealth in being, that’s what is really so wonderful.

There are many things you could say about this, but surely high on the list is the degree of historical ignorance it requires. I mean, this argument might have some surface plausibility if the era when America didn’t have such an overweening plutocracy — the 50s and 60s, when the top 0.01% received only about a fifth the share of income that it commands today — were a time of economic stagnation and low innovation. In fact, the postwar generation experienced the best economic growth — and the fastest productivity growth — of any era in the past century.

But this is how it’s going. If the right continues to make political gains, coming next is a reaffirmation of the hereditary principle.

http://krugman.blogs.nytimes.com/2012/05/02/rich-guy-says-we-should-be-grateful-for-his-wealth/

Major Romney Donor, Ex-Bain Exec, Pens Book Defending The 1%
http://www.democraticunderground.com/1002631452

From the NYT Magazine piece:

<...>

Conard’s version of the financial crisis ignores much reporting and analysis — including work I’ve done with NPR’s “Planet Money” team — that shows that some of the nation’s largest banks actively manipulated customers and regulators and, sometimes, their own stockholders to profit from dangerous risk. And for many economists, rising inequality can create exactly the wrong outcomes for society over all. Rather than simply serving as an invitation for everybody to engage in potentially beneficial risk-taking, inequality can allow those with wealth to crush new ideas.

I kept raising these questions with Conard, but he repeatedly waved them off. “I don’t want to talk about rent-seeking,” he told me. “When you go off to a third-world country, there’s a dictator who says, ‘I’m giving the telephone franchise to my brother-in-law.’ It’s pretty hard to do that here.” I countered that many economists see rent-seeking in the United States as a much more subtle but still destructive process. If some rich people are able to get and stay rich by messing around with the rules, then those art-history majors will feel as if they have no chance to break into a well-connected, well-protected elite.

Perhaps concentrated wealth will inspire a nation of innovative problem-solvers. But if the view of many economists is right — that it sometimes discourages innovation — then we should worry. While Conard offers deep and well-argued analyses on almost every issue, on this one he resorted to anecdotes and gut feelings. During his work at Bain, he said, he saw that successful companies had to battle against one another. Nobody was just given a free ride because of their power. “Was a person, like me, excluded from opportunity?” he asked rhetorically. “If so, I wasn’t aware!”

http://www.nytimes.com/2012/05/06/magazine/romneys-former-bain-partner-makes-a-case-for-inequality.html?_r=1&pagewanted=all

These people simply make up the narrative to justify their role as greedy predators.

Ties to Romney ’08 Helped Fuel an Equity Firm (updated)
http://www.democraticunderground.com/1002630962

[MannyGoldstein]

1. Wouldn't it be great if Krugman affected policy?

A boy can dream, can't he?

[ProSense]

2. Yeah, but

I appreciate that he's calling out Republicans for their BS.

http://www.democraticunderground.com/1002596339

http://upload.democraticunderground.com/1002526179

[TomClash]

3. Krugman's response was lame

And Davidson is a virtual cheerleader for this nonsense.

Conrad substitutes cause for effect. The economic crisis was sparked by the enormous mortgage crisis resulting from massive fraud and bubble in the multi trillion mortgage derivatives market, which was basically uninsured, though the players though it was insured. To the extent there was a "run on the banks" - by which I think he really means a severe credit crunch - it was caused by this crisis in which those very same banks were key players.

The rich have made this concentrated wealth argument forever. They used to call it a "shortage of capital" which in part birthed supply-side economics. But the obvious question Conrad was never asked is: if more wealth is concentrated, where will the increased aggregate demand for the innovators' products come from? Crickets.

As for "art history majors," I could write a small book. But consider this: how does getting the opportunity to be fantastically wealthy rather than just plain old, extremely wealthy cajole people into becoming little entrepreneurs? It doesn't. And maybe the art history majors just like art history - what's wrong with that?

[ProSense]

5. The new

"The rich have made this concentrated wealth argument forever."

...argument is more blatant, as TPM puts it: "increasing income inequality is actually a good sign." Sure they've argued that "concentrated wealth" trickles down, but now they're arguing that the disparity is good.

As for the question you posed:

The rich have made this concentrated wealth argument forever. They used to call it a "shortage of capital" which in part birthed supply-side economics. But the obvious question Conrad was never asked is: if more wealth is concentrated, where will the increased aggregate demand for the innovators' products come from? Crickets.

It's a good one, but as the snip from the NYT Magazine piece shows, Conrad cannot even address how inequality spurs innovation.

This argument is moving away from their made-up role as "job creators" to being the "inspiration" for job creators.

What they're doing, in essence, is arguing that they deserve the loopholes and the wealth, and they shouldn't have to pay any or more taxes because wealth concentrated at the top inspires people to want to be like them.

[TomClash]

6. Maybe

Still, Conrad's refrain sounds eerily similar to the "Greed is Great" creed of the 80s. I think your other points are spot on.

I thought the "art history student" rant was foolish, was based on faulty assumptions and made him seem old to me. An acquaintance of mine hangs around at cafes during the day all the time. He's a very successful. Conrad wishes he had 1/10 of this guy's talent.

The problem is this gets blown off and laughed off by progressives like Krugman. Instead, it should be refuted. Otherwise, it will soon become the law of the land. Mark my words; it has happened before.

[Johonny]

4. It's not that I'm not happy for his wealth, it's just that I think they should feel a little shame

for the poverty of his workers that generated that wealth. What man can feels grateful when he's being robbed and what decent man can make millions while cutting the pay and jobs of their workers?