And so what if this staggering wealth caused inequality to grow? If one individual in a group of 100 suddenly becomes extremely rich, this doesn't in itself harm the other 99. If their standard of living is still the same, or perhaps has gone up a bit, then there's no problem. Being rich isn't in itself bad.
As always I think the key in exposing right wing error is to look to the real world facts as opposed to the plausible sounding theories. Can we do that in this case? Maybe to some degree.
Capital flows became much more free after 1971 when Nixon dismantled the Bretton-Woods financial framework, which placed restrictions on capital movement. What might be informative is looking at economic growth before and after that event. I thought I'd try looking at GDP. I know GDP isn't necessarily a great measure. If you build a bridge then blow it up and rebuild it that induces a higher GDP than if you'd just left it alone. But, granting the limitations of this measure I'm not sure of a better measure, so let's look and just see what it tells us.
And maybe I'm just not good with Google, but I was actually having a hard time finding the data and plots that I was looking for. So what I present here are my own plots in Excel which are based on data from here. Below is a plot of Real GDP by year from 1950 to today. You can click all of these graphs to enlarge them by the way.
That's a pretty choppy graph, so I thought I'd make another plot showing the 3 year moving average. So for the data point at 2009 you are looking at the average of 2007-2009. Below is that plot.
Since about the mid-70's we've seen a huge expansion in income and wealth between the rich and poor. Maybe that's acceptable if we also experience a huge economic growth rate. But are we seeing that? I don't see it in these graphs. Let me break out the data into a few different categories. Here it is by presidential administration.
|Before Bretton Woods (1950-1971)
|After Bretton Woods (1972-2010)
|Before Deregulation (1950-1980)
|After Deregulation (1981-2010)
Hedge fund managers are making billions of dollars in a year. That's the price you pay for amazing growth. But as we look at the data it doesn't appear it is panning out. If anything not only are we expanding the gap between rich and poor, in fact we don't even have the growth to show for it. That's pretty astounding. The more regulated world is more egalitarian AND higher growth.
Well OK. The right wing is sometimes recognizing this. The low tax, low regulated, financialized world in fact has reduced growth AND created inequality, but you know what? That's just in the US. Our loss is a gain for poor foreigners in third world countries. Are we to deprive the poor in foreign countries of a decent life for the benefit of a handful of Americans? We're just so good that we can't allow that. We want to pull the poor Chinese up into the middle class. You racist progressives obviously have a problem with the poor in other countries improving their lives. We're doing it for them. We just have such big hearts. That seems to be HP's position as he appeals to this article. Here's an excerpt HP cites approvingly.
The good news—and the bad news—for America is that the nation’s own super-elite is rapidly adjusting to this more global perspective. The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.The overall article is actually not bad. The author talks about the human tendency to rationalize and she points out questions with regards to whether or not these people are in fact pulling the poor up out of misery. For instance here is a citation from the article.
Critiques of the super-elite are becoming more common even at gatherings of the super-elite. At a Wall Street Journal conference in December 2009, Paul Volcker, the legendary former head of the Federal Reserve, argued that Wall Street’s claims of wealth creation were without any real basis. “I wish someone,” he said, “would give me one shred of neutral evidence that financial innovation has led to economic growth—one shred of evidence.”My thoughts exactly. It's not enough to say that many in China are doing better. The world economy is almost always improving. The question is, what is the rate of economic growth. Is this system that we presently have, which creates many billionaires on Wall St and expands the gap between the rich and poor, actually retarding growth that would otherwise be there in a more regulated setup? Because for every China there's a Mexico, Haiti, or even a US, the latter of course not poor, but not growing at the rates they were before and suffering increases in inequality.
Economist Brad DeLong has made efforts to determine world wide production as measured by Gross Word Product. The date he presents is available here. I took that data and made another plot of growth, once again starting at 1950. Here it is.
GDP and GWP does not tell the whole story. But where is the evidence that globalization is better than the alternative? It's true that many in China and India are much better off. But in India for every new millionaire, how many suicides are there? In Mexico NAFTA has helped produce one of the richest humans alive. But also a country that descends into chaos with violence due to poverty.
Some rich are doing the world a service. People like Steve Jobs bring innovations that change many lives. But as far as the Wall St billionaires, I see no evidence that we owe them a debt of gratitude, as some right wingers seem to think.