Inequality paradox for conservatives

[kmoney]

I thought this was an interesting article.

http://www.nationalreview.com/article/453468/economic-inequality-crony-capitalism-conservatives
The Conservative Inequality Paradox

Yes, the game is rigged for the rich. Conservatives have two intellectual commitments that are increasingly incompatible. They believe that the American economy is clogged up with crony-capitalist corruption that hands out special favors and protections to organized interests. They also hold that economic inequality — in particular, the surging share of total income earned by those at the very top — is morally justified by the rights of property and the tendency of free markets to raise living standards overall. These two commitments can no longer be squared. If our economy really is riddled with cronyism, then the beneficiaries must have pocketed large amounts of ill-gotten loot. The existing distribution of income and wealth, therefore, does not deserve the deference it would be due if all gains were derived from spontaneous, unregulated market transactions. Call it the conservative inequality paradox: Either conservatives have overstated the amount of crony capitalism, or their dismissal of the concept of inequality as envy is misplaced. .... If anything, conservatives have been too modest in their assessment of the breadth and scope of crony capitalism. In our book, we focus on four big case studies: financial regulation, patent and copyright law, occupational licensing, and zoning. In all of them, government-caused market distortions have been growing rapidly over recent decades. Between 1980 and 2006, the financial sector as a percentage of GDP grew by almost 70 percent, fed by regulatory subsidies for securitized mortgages and a string of “too big to fail” bailouts. Copyright terms have lengthened from a maximum of 56 years to the current life of the author plus 70 years, while laxer standards for patentability have caused a nearly 400 percent increase in the number of patents awarded annually. This excessive expansion has created a field day for lawyers and inflated profits for Hollywood, big pharma, and Silicon Valley with higher prices and licensing fees. But new innovators faced with traversing this legal minefield are not so fortunate. ... Conservative attitudes on inequality have long been shaped by Robert Nozick’s famous metaphor of the basketball player Wilt Chamberlain. Nozick argued that Chamberlain’s high income was derived from mutually beneficial exchange and was therefore justifiable. Who could say that there was anything unfair about a basketball player trading his skills for the money of fans? And how could a distribution of income produced by that sort of mutual exchange be unfair? But the Wilt Chamberlain metaphor does not apply to an economy characterized by extensive high-end rent-seeking. Even if you believe that market returns are inherently just and therefore worthy of being defended on ethical grounds, how do you justify windfalls that are a function of distorted rules of the game? The answer is you can’t. In the best of all worlds, conservatives would respond to this state of affairs by attacking rent-derived inequality at its source. Their economic agenda would focus on curtailing subsidies for finance, excessive protection of intellectual property, the licensing of high-end professionals, and overly restrictive land-use regulation. Doing so wouldn’t require conservatives to become crusading egalitarians, as these reforms would also unleash economic dynamism, innovation, and growth — familiar conservative priorities. Nevertheless, making regressive regulation a conservative priority would be a distinct change in approach. Too often, conservatives’ idea of a pro-growth policy agenda starts and ends with tax cuts, despite the overwhelming evidence that moderate increases or decreases in the top rate have little effect on growth. When conservatives do turn their attention to regulation, they usually think about providing “regulatory relief” for business by lightening health, safety, environmental, and labor regulations. In our view, though, the regulations with the most pernicious economic effects are the ones that subsidize business by blocking competition or by otherwise distorting markets. ... That leaves a hard question, namely, how conservatives should think about inequality in a fallen, second-best world in which so many of these rents survive. At a minimum, there’s a strong case for reconsidering the conservative obsession with reducing top marginal income-tax rates. For too long, conservatives have overhyped the growth effects of tax cuts, as well as the dubious “starve the beast” theory according to which members of Congress would respond to tax cuts by restraining government spending. Many conservatives did not look carefully at the evidence behind these dodgy empirical claims because they believed that they held the moral trump card: By cutting taxes, they were returning wealth to its rightful owners. But in the “captured economy” we’re currently living in, this belief is due for reexamination. Not only is a significant fraction of the rich’s income morally tainted by government favoritism, but it is also used to fund yet more rounds of regressive rent-seeking. One way to begin solving this problem would be to build a veritable bonfire of the deductions that the wealthy use to shield their income from taxation. The exclusion from taxes of employer-paid health insurance, retirement savings through 401(k)s and IRAs, and education savings accounts could either be scrapped or converted into refundable tax credits. We could also consider a financial-transaction tax, which could raise a lot of revenue while also reducing the incentives for excessive trading of assets. Changes such as these would allow us to claw back some of the rents at the top of the economy without increasing the marginal income-tax rates that conservatives are so concerned with. If conservatives took seriously the presence of ill-gotten gains at the top of the income spectrum, they might also look at immigration policy in a new light. Over the past few decades, the United States has exposed those at the bottom of the economic pile to intense global competition, whether in the form of products from China or workers from Mexico. As Dean Baker has argued, it is high time to expose the wealthy to those same bracing forces of competition by opening up the economy to more high-skilled immigrants, especially in protected professions such as medicine and dentistry. Conservatives need to face and resolve their inequality paradox. They must double down on their principled advocacy of free, competitive markets — while taking a few giant steps back from the assumption that large incomes reflect large contributions to the general welfare. Read more at: http://www.nationalreview.com/article/453468/economic-inequality-crony-capitalism-conservatives

Are conservatives focusing on the wrong things? Is the inequality we see really a result of fair market distribution?

 

[Danoh]

There is always that tension between what one believes one holds to and what one actually holds to.

And the latter of the two tends to over rule, for various reasons.

Such is the obvious case, within the dynamic described in your above article, kmoney.

And where such is the case, there is no reasoning with such.

Water ever...seeks its own level.

 

[rexlunae]

The Republicans have been fighting fire with gasoline for decades.

 

[Danoh]

The Republicans have been fighting fire with gasoline for decades.

Not only that, but knowingly...

 

[aCultureWarrior]

There is always that tension between what one believes one holds to and what one actually holds to.

And the latter of the two tends to over rule, for various reasons.

Plain and simple: the latter of the two lacks character.

 

[jgarden]

..... Are conservatives focusing on the wrong things? Is the inequality we see really a result of fair market distribution?

The ultimate goal of capitalism in any "fair market" is to make it "less fair" for the consumer by eliminating the competition and creating a "monopoly" - ask "Mictosoft!"

 

[Gary K]

I just read the article that was posted. It is based upon two major fallacies.

1. Conservatives and libertarians do not believe that property rights justify inequalities in wealth. That is a blatant fallacy. The position is that people attain to wealth through their aptitudes to earn it, their desire for it that drives them to both study how to aquire it and to work hard to attain it, and that everyone is born with different capabilities. As all people are not born equal in all respects it is therefore not logical to expect equal outcomes. The person born with a 100 IQ can never attain a PHD. It is ouside of their reach. So, what should happen? Should the standards of learning required by a PHD be lowered so that everyone could have the same chance of obtaining a PHD? That would be equality of outcome, and it would also make a PHD absolutely meaningless. But, the person born with the high IQ would still attain it far more easily than the person with the 100 IQ. So, it is impossible to guarantee equality of outcome.

The same goes for wealth. The person who understands economics and the aquisition of wealth will always find the attainment of wealth easier than the person who does not. And if the equality of outcome is mandated? To that I say so? The economically gifted person will always still reach that level easier than the non-economically gifted person. It will always require more effort on the part of the economically challenged person.

2. Conservatives do not support crony capitalism. That is an invention of the left. It is what socialism teaches: the control of the business environment by government. Conservatives say government should never be involved in deciding the outcome of business competition. It goes against their very philosophy.

You take away those two fallacies and the rest of the arguments are meaningless. To me this is more evidence of people liking the sound of something so they gather around and cheer for it not understanding what the real implications are of what is being said. And what is being condemned is the outcome guaranteed by government taking control over business, and government control of business is socialism 101. In other words, socialistic ideas put into practice are solely responsible for the increasing gap in wealth.

 

[kmoney]

I just read the article that was posted. It is based upon two major fallacies.

1. Conservatives and libertarians do not believe that property rights justify inequalities in wealth. That is a blatant fallacy. The position is that people attain to wealth through their aptitudes to earn it, their desire for it that drives them to both study how to aquire it and to work hard to attain it, and that everyone is born with different capabilities. As all people are not born equal in all respects it is therefore not logical to expect equal outcomes. The person born with a 100 IQ can never attain a PHD. It is ouside of their reach. So, what should happen? Should the standards of learning required by a PHD be lowered so that everyone could have the same chance of obtaining a PHD? That would be equality of outcome, and it would also make a PHD absolutely meaningless. But, the person born with the high IQ would still attain it far more easily than the person with the 100 IQ. So, it is impossible to guarantee equality of outcome.

The same goes for wealth. The person who understands economics and the aquisition of wealth will always find the attainment of wealth easier than the person who does not. And if the equality of outcome is mandated? To that I say so? The economically gifted person will always still reach that level easier than the non-economically gifted person. It will always require more effort on the part of the economically challenged person.

2. Conservatives do not support crony capitalism. That is an invention of the left. It is what socialism teaches: the control of the business environment by government. Conservatives say government should never be involved in deciding the outcome of business competition. It goes against their very philosophy.

You take away those two fallacies and the rest of the arguments are meaningless. To me this is more evidence of people liking the sound of something so they gather around and cheer for it not understanding what the real implications are of what is being said. And what is being condemned is the outcome guaranteed by government taking control over business, and government control of business is socialism 101. In other words, socialistic ideas put into practice are solely responsible for the increasing gap in wealth.

The author doesn't say that conservatives support crony capitalism so your #2 doesn't make any sense. He says the exact opposite, that conservatives think the economy is too corrupted by it.

For #1, he mentions property rights at the top but later on he talks about the Wilt Chamberlain idea which seems closer to what you describe. But the point is that when crony capitalism is in play then inequality is not simply a result of some people having more aptitude or desire to be successful. The system is rigged to make it easier on a certain segment.

 

[Gary K]

The author doesn't say that conservatives support crony capitalism so your #2 doesn't make any sense. He says the exact opposite, that conservatives think the economy is too corrupted by it.

For #1, he mentions property rights at the top but later on he talks about the Wilt Chamberlain idea which seems closer to what you describe. But the point is that when crony capitalism is in play then inequality is not simply a result of some people having more aptitude or desire to be successful. The system is rigged to make it easier on a certain segment.

Oh, come on, kmoney. He is blaming conservatives for economic disparities. He is saying it is their fault. That is all through the article and it is a leftist who posted the article in support of their beliefs, and leftists who praised it. And he said flat out that all of this was a problem for conservatives and pointed to the fallacies he repeated. So, don't try to get all disingenuous about the tone and point of the article.

Crony capitalism is only in play because of socialism put into practice. It is government picking winners and losers. It is government funnelling wealth to the friends of politicians. It is government run amok. This is what we saw in the USSR--vast gulfs between the political elite and the common man. It is what we've seen in China throughout the years. Only as they have moved farther away from a government controlled economy has their economy grown in the least and the disparity of wealth between the political elites and the common man been reduced. We see the same thing in North Korea. We see exactly the same thing in Cuba. Conservatives want a less powerful, non-involved government as far as possible because of issues like this. It goes completely against conservative thought. It is completely in line with socialist thought and practice. All of the governments I've listed above were Marxist, and that means socialist.

Power corrupts, and absolute power corrupts absolutely. This is a truism. It has been proven over and over again throughout history. Conservatives are opposed to making government more powerful than it absolutely has to be. You people on the left want a government that is ever more powerful, and thus ever more corrupting and corrupted. It is on your shoulders. It is your responsibility.

This is a problem for the so-called liberal who holds to socialist positions, not the conservative who opposes those positions.

 

[kmoney]

Oh, come on, kmoney. He is blaming conservatives for economic disparities. He is saying it is their fault. That is all through the article and it is a leftist who posted the article in support of their beliefs, and leftists who praised it. And he said flat out that all of this was a problem for conservatives and pointed to the fallacies he repeated. So, don't try to get all disingenuous about the tone and point of the article.

I had never heard of the two authors but since NR is a conservative institution it would be odd for them to be showing pieces by leftists. The footnote says that both authors are associated with the Niskanen Center. I looked that up and according to Wiki they are: "a Washington, D.C.-based think tank that advocates for environmentalism, immigration reform, civil liberties, and a national defense policy based on libertarian principles"

So no, I don't think you're correct that this is a liberal piece by liberals, praised by liberals. Why would NR want to promote that?

I didn't read the article as blaming conservatives for crony capitalism. The 'problem' for them is the paradox they talk about. And in fact they say that many conservatives know that we don't have an economy that runs on free markets: "Progressives may rant about “neoliberal” markets run amok, but many conservatives understand clearly that the U.S. economy is far from a textbook model of free competition and voluntary exchange."

They also talk about conservatives pushing for the wrong type of regulatory reform, so in that respect you're right they're blaming conservatives, but still not in a way that I think your accusations are justified. And on that point I think there is some truth.

"Accordingly, conservatives should redouble their willingness to attack these forms of regulation that — unlike health, safety, and environmental rules, which impose (sometimes necessary, sometimes excessive) costs on business — actually boost corporate profits by creating market distortions, including barriers to entry for new competitors."

"When conservatives do turn their attention to regulation, they usually think about providing “regulatory relief” for business by lightening health, safety, environmental, and labor regulations. In our view, though, the regulations with the most pernicious economic effects are the ones that subsidize business by blocking competition or by otherwise distorting markets. "


I rarely hear about Republicans talk about patent or licensing laws. Environmental, financial, health, and labor are the main ones that I hear about.

Categories aren't black and white so I think you could find market distortions in just about anything but they appear to justify some areas based on the risks that they attempt to prevent, whereas others simply prevent competition with no countervailing purpose.