You just don't appreciate the super-rich

[cthulu2016]

...I recently met Edward Conard on 57th Street and Madison Avenue, just outside his office at Bain Capital, the private-equity firm he helped build into a multibillion-dollar business by buying, fixing up and selling off companies at a profit. Conard, who retired a few years ago at 51, is not merely a member of the 1 percent. He’s a member of the 0.1 percent. His wealth is most likely in the hundreds of millions; he lives in an Upper East Side town house just off Fifth Avenue; and he is one of the largest donors to his old boss and friend, Mitt Romney.

Unlike his former colleagues, Conard wants to have an open conversation about wealth. He has spent the last four years writing a book that he hopes will forever change the way we view the superrich’s role in our society. “Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong,” to be published in hardcover next month by Portfolio, aggressively argues that the enormous and growing income inequality in the United States is not a sign that the system is rigged. On the contrary, Conard writes, it is a sign that our economy is working. And if we had a little more of it, then everyone, particularly the 99 percent, would be better off. This could be the most hated book of the year.

Conard understands that many believe that the U.S. economy currently serves the rich at the expense of everyone else. He contends that this is largely because most Americans don’t know how the economy really works — that the superrich spend only a small portion of their wealth on personal comforts; most of their money is invested in productive businesses that make life better for everyone. “Most citizens are consumers, not investors,” he told me during one of our long, occasionally contentious conversations. “They don’t recognize the benefits to consumers that come from investment.” ...

http://www.nytimes.com/2012/05/06/magazine/romneys-former-bain-partner-makes-a-case-for-inequality.html

Paul Krugman comments:

...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...

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

[JHB]

1. "the superrich spend only a small portion of their wealth on...

...personal comforts; most of their money is invested in productive businesses that make life better for everyone."

Actually, if you look at it that way, most of it is invested in means of garnering more: gambling on rises in stock value (i.e., trading stock shares that already exist, rather than investing in the company itself by buying new shares), buying government bonds (local, state, federal, non-US) secured against future tax revenue, etc. Not to mention ventures where investors profit by finding ways to redirect the wealth that other people have already created into their own pockets (the leveraged buy-outs & liquidation of the type that made Rmoney rich, predatory lending, foreclosure fraud, etc.).

If the super-rich really want to make life better for everyone while they make profit, how about they accept lower profit margins of the companies they own, thanks to those companies paying their employees more.

"Mak(ing) life better for everyone" depends on enough wealth circulating at lower levels that everyone can meet basic needs and devote spare resources to getting ahead. Yet the imperative to maximize profit works against that requirement by "efficiently" preventing as much circulation at low levels as possible by sending as much wealth as possible upward.

But Conard's bank accounts get bigger by ignoring that discrepancy, so he'll live with it, very damn well. the rest of us, not so much.

[cthulu2016]

2. good post