Edward Conard Defends One Percent

This is why we can't have nice things. Former Bain Capital executive Edward Conard--showing that the .01 percent have their finger on the pulse of America--wrote a book declaring that massive income inequality is actually a good thing. Conard

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This is why we can't have nice things. Former Bain Capital executive Edward Conard--showing that the .01 percent have their finger on the pulse of America--wrote a book declaring that massive income inequality is actually a good thing.

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.”

This is the usual defense of the 1 percent. Conard, however, has laid out a tightly argued case for just how much consumers actually benefit from the wealthy. Take computers, for example. A small number of innovators and investors may have earned disproportionate billions as the I.T. industry grew, but they got that money by competing to constantly improve their products and simultaneously lower prices. Their work has helped everyone get a lot more value. Cheap, improved computing helps us do our jobs more effectively and, often, earn more money. Countless other industries (travel, telecom, entertainment) use that computing power to lower their prices and enhance their products. This generally makes life more efficient and helps the economy grow.

The idea that society benefits when investors compete successfully is pretty widely accepted. Dean Baker, a prominent progressive economist with the Center for Economic and Policy Research, says that most economists believe society often benefits from investments by the wealthy. Baker estimates the ratio is 5 to 1, meaning that for every dollar an investor earns, the public receives the equivalent of $5 of value. The Google founder Sergey Brin might be very rich, but the world is far richer than he is because of Google. Conard said Baker was undercounting the social benefits of investment. He looks, in particular, at agriculture, where, since the 1940s, the cost of food has steadily fallen because of a constant stream of innovations. While the businesses that profit from that innovation — like seed companies and fast-food restaurants — have made their owners rich, the average U.S. consumer has benefited far more. Conard concludes that for every dollar an investor gets, the public reaps up to $20 in value. This is crucial to his argument: he thinks it proves that we should all appreciate the vast wealth of others more, because we’re benefiting, proportionally, from it.

Let's hear it for the Chicago School of Economics claptrap. For thirty plus years we've been hearing this and it yet the economy gets worse and worse for not only the 99 percent, but for the country as well. We went to the biggest creditor nation to the biggest debtor nation. The economy isn't driven by innovation and risk, you selfish ass. Let's stop perpetuating this meme once and for all.

The economy is driven by demand. Period. Full stop. All the innovation and risk in the world means nothing if people can't afford to purchase the products.

As Thom Hartmann puts it:

The Republicans got what they wanted from Wanniski's work. They held power for thirty years, made themselves trillions of dollars, cut organized labor's representation in the workplace from around 25 percent when Reagan came into office to around 8 of the non-governmental workforce today, and left such a massive deficit that some misguided "conservative" Democrats are again clamoring to shoot Santa with working-class tax hikes and entitlement program cuts.

I am sick and tired of these wealthy, selfish elites getting a platform to rationalize their avarice when we have demonstrable proof that all this "job creators" and "innovators" driving the economy is nothing but bovine excrement. Where are the damn jobs? Why are wages stagnating? Why is it that in the wealthiest nation in the world 1 in 5 children are going to bed hungry or malnourished?

Tell me, Mr. Conard, what innovation did you provide to the country when you acquired and broke up companies? Yes, some products have reduced in price due to innovation (it's lovely if you can afford a big screen plasma TV for under a grand, or get a laptop for under $500...but the number of American families who can afford that are falling dramatically) but other costs have gone up dramatically, like health care and education. But those facts are inconvenient to Conard:

More to the point, Conard doesn't seem to understand the negative consequences of income inequality, certainly not in any form beyond an abstract red line on a graph. Viewing the economy simply as risk and reward divides the population into rich and not-rich, rather than increasingly wealthy and vastly expanding poor. It collapses the lower and middle classes into a monolith of moral distinction; they're simply "not innovators," a label that occludes everything awful about poverty, from quality of life to its cyclical and self-reinforcing nature. Conard's model also assumes lower prices are a financial salve in and of themselves. But simply because food is cheaper does not mean that someone living below the poverty line can afford enough of it, especially as median incomes decline along with prices. And Timothy Noah points out that while the prices of goods have declined in the past few decades, the prices of other, more important services, like higher education and health care, have gotten drastically more expensive. How a shrinking middle class, having to work longer hours to keep itself healthy and increasingly unable to afford education, creates a greater amount of innovators is something Conard doesn't address. Not only do innovators suffer when an enervated society can't afford to purchase their products, but innovators themselves have to come from somewhere. The income inequality that Conard endorses as the reward for innovators is the very same process that prevents future innovators from coming up. Conard waves many of these concerns away. He came from a solidly middle class family and built up a massive personal fortune, and suffers from the biographical delusions of many self-made men, roughly: I did it, therefore everybody else can, too.

Too bad that Conard's self-serving rationalizations actively prevent that from happening.

About Nicole Belle

Nicole Belle's picture
Mom, Wife, Media Critic/Political Analyst, Blogger, Austen Fanatic, Unapologetic Liberal NicoleBelle@crooksandliars.com

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