Conservatives and Liberals Agree: Unparalleled Levels of Inequality Is Killing Our Economy and Society

Leading economists agree that rampant inequality leads to unstable economies and depressions, and makes the middle and lower classes poorer.

While the stereotype is that liberals care about inequality and conservatives don’t, that is actually a myth.

As Canada’s conservative National Post – Canada’s 9th biggest newspaper – noted Wednesday:

According to the voice of Canada’s business establishment: “High inequality can diminish economic growth if it means that the country is not fully using the skills and capabilities of all its citizens or if it undermines social cohesion, leading to increased social tensions. .

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A mounting body of research shows that, left unchecked, a growing income gap affects the rich, the poor and everyone in between.

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No matter your political leanings, most people understand that endless concentration of income, wealth and power is bad for the economy. After all, businesses rely on rising purchasing power of the many, not the few, to deliver growth and profits.

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No one knows the tipping point, but lock enough people out of the promise of gains and at some point, instead of stability and growth, you get social unrest.

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History has shown us, time and again: When too much is controlled by too few, something has to give. Continuously rising inequality is unsustainable.

Everyone has a stake in fixing this. And the fix has no political colour.

(The Post is correct about the potential for social unrest.)

Moreover, IMF economists have demonstrated that inequality increases a nation’s debt. Because conservatives are passionate about reducing debt, reducing inequality is a conservative value.

And as I noted in February:

Renowned behavioral economist Dan Ariely (Duke University) and Michael I. Norton (Harvard Business School) recently demonstrated that everyone – including conservatives – thinks there should be more equality.

Their study found:

Respondents constructed ideal wealth distributions that were far more equitable than even their erroneously low estimates of the actual distribution. Most important from a policy perspective, we observed a surprising level of consensus: all demographic groups—even those not usually associated with wealth redistribution such as Republicans and the wealthy—desired a more equal distribution of wealth than the status quo.

Ariely comments:

Taken as a whole, the results suggest to us that there is much more agreement than disagreement about wealth inequality. Across differences in wealth, income, education, political affiliation and fiscal conservatism, the vast majority of people (89%) preferred distributions of wealth significantly more equal than the current wealth spread in the United States. In fact, only 12 people out of 849 favored the US distribution. The media portrays huge policy divisions about redistribution and inequality – no doubt differences in ideology exist, but we think there may be more of a consensus on what’s fair than people realize.

How could the media portrayal regarding this issue be so wrong?

Well, for one thing, as a study the Pew Research Center found, the corporate media tends to take Wall Street’s view on economics. Indeed, the media is largely set up to spout propaganda which supports the view of the powers-that-be. The financial sector has been by far the biggest beneficiary of government policies over the past 10 years or so. So the media tends to defer to Wall Street’s own arguments against equality.

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Everyone agrees that a system which uses the power of the state to reward the fraud and gambling of the largest banks and biggest corporations through socialism for the rich and capitalism for everyone else is not free market capitalism, and is downright anti-American.

As I noted last November:

Conservatives tend to view big government with suspicion, and think that government should be held accountable and reined in.

Liberals tend to view big corporations with suspicion, and think that they should be held accountable and reined in.

Irreconcilable difference?

Not really.

Specifically, a Rassmussen poll conducted in February found:

70% [of all voters] believe that the government and big business typically work together in ways that hurt consumers and investors.

(and see this).

Remember that the government helped and encouraged the giant banks to get even bigger, and then has hidden their insolvency and shielded them from the free market, and helped them grow even during the severe downturn.

In return, the big banks and giant corporations have literally bought and paid for the politicians.

Conservatives might call it “socialism” and liberals might call it “fascism” – they are the same thing economically.

But all Americans – conservatives and liberals alike – can agree that it is not capitalism, and it is not American.

As I pointed out in December:

Conservatives hate big unfettered government and liberals hate big unchecked corporations, so both hate legislation which encourages the federal government to reward big corporations at the expense of small businesses.

As an example, both liberals and conservatives are angry that the feds are propping up the giant banks – while letting small banks fail by the hundreds – even though that is horrible for the economy and Main Street.

The Dodd-Frank financial legislation … enshrines big government propping up the big banks … more ore less permanently.

Many liberals and conservatives look at the government’s approach to the financial crisis as socialism for the rich and free market capitalism for the little guy. No wonder both liberals and conservatives hate it.

And it’s not just the big banks. Americans are angry that the federal government under both Bush and Obama have handed giant defense contractors like Blackwater and Halliburton no-bid contracts. They are mad that – instead of cracking down on BP – the government has acted like BP’s p.r. spokesman-in-chief and sugar daddy.

They are peeved that companies like Monsanto are able to sell genetically modified foods without any disclosure, and that small farmers are getting sued when Monsanto crops drift onto their fields.

They are mad that Obama promised “change” – i.e. standing up to Wall Street and the other powers-that-be – but is just delivering more of the same.

They are furious that there is no separation between government and a handful of favored giant corporations. In other words, Americans are angry that we’ve gone from capitalism to oligarchy.

So if both liberals and conservatives hate something, it doesn’t necessarily mean it’s a compromise. It may mean that they feel disenfranchised from a government that is of the powerful and for the powerful.

In other words, while many conservatives are against raising taxes on the wealthy, they are overwhelmingly for stopping the use of the power of the state to increase inequality. See this, this and this.

This is an area of agreement between people of good faith on the left and on the right. As Robert Shiller said in 2009:

And it’s not like we want to level income. I’m not saying spread the wealth around, which got Obama in trouble. But I think, I would hope that this would be a time for a national consideration about policies that would focus on restraining any possible further increases in inequality.

If we stop bailing out the fraudsters and financial gamblers, the big banks would focus more on traditional lending and less on speculative plays which only make the rich richer and the poor poorer, and which guarantee future economic crises (which hurt the poor more than the rich).

Indeed, if we break up the big banks, it will increase the ability of smaller banks to make loans to Main Street, which will level the playing field.

Moreover, both conservatives and liberals agree that we need to prosecute financial fraud. As I’ve previously noted, fraud disproportionally benefits the big players, makes boom-bust cycles more severe, and otherwise harms the economy – all of which increase inequality and warp the market.

And as I noted last April, prosecutors could claw back ill-gotten gains from the criminals and use that money to help the economy:

The government could use existing laws to force ill-gotten gains to be disgorged (see this and this) [and] fraudulent transfers to be voided …

The bottom line – as conservative blogger Michael Rivero writes – is that too much inequality kills the market:

For an economic system to be a system, money must flow freely at all levels and in all corners. When those in charge of the system decide to so order the mechanisms of the financial sector to drive the money into a single huge pile, the system cease to be a system and a crash becomes inevitable. One might as well force all the blood in your body to stay in the brain. The end result is the same; death for the body.

He’s right.

Category: Philosophy, Think Tank, Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “Conservative Concern: Runaway Inequality Will Destroy Economy”

  1. MikeG says:

    While the stereotype is that liberals care about inequality and conservatives don’t, that is actually a myth.
    As Canada’s conservative National Post…noted…

    Canadian conservatives hardly count as the same species as the Tea Party.

  2. arogersb says:

    It is myth that inequality increases social cohesion and stability. As I explain in my blog (http://bit.ly/pHDs5S):

    “Inequality is often charged of being a threat to democracy and capitalism because it creates social unrest. But reality points precisely to the contrary. Let us recall the evens of 2005 in France. This is the country of “egalite and fraternite” ranked the 13th most equal country in the world. France witnessed weeks of riots with 8000 cars burned, 200 million Euros in damages and nearly 3000 people arrested. Greece, another country ranked among the most equal in the world, witnessed almost one month of riots seasoned by frequent Molotov cocktails in dozens of cities.

    Moreover, during the past year and as a result of the economic crisis, governments from six countries have fallen in part as a result of social unrest: Iceland, Belgium, Hungary, Latvia, Czech Republic, Madagascar and more recently Nepal. A quick look at the ranking of Gini Coefficients reveals that most of these countries were among the most equal in the world. Iceland is ranked fourth, Czech Republic is ranked sixth, Belgium is ranked twelve and Hungary is ranked fifteen. By comparison, the United States is ranked 95. In summary, the claim that income inequality creates social unrest and thus is a threat to Capitalism and Democracy has no basis whatsoever. “

  3. DeDude says:

    I am not surprised that everybody wants more equality. The difference comes in how to get there. Liberals want government to fix it, conservatives want the equality fairy to fix it (and government to drop dead). But there may be a convergence somewhere in the distant future as corporations more blatantly takes over government. The liberals may eventually take the traditional conservative attitude of “its so broken we will have to destroy it to fix it”.

    @arogersb; different countries have different cultures and “acceptable” levels of inequity. US is probably the country with the highest level of general acceptance of inequity, and the least tradition for street riots. The question of riots is not how equal a country is, but how much inequity the population is willing to accept – and how common and culturally accepted it is for the people to riot in the streets when they get fed up.

  4. bmz says:

    Conservatives may talk equality, but practice inequality. E.g.: everything you hear about not raising taxes or limiting expenses is really about stealing workers retirement funds. The CBO projected that the surpluses Clinton left for Bush were enough to pay off the entire US debt by the time that the Social Security/Medicare trust funds would have to be amortized for beneficiary payments, all without having to raise taxes to pay for the amortization of those trust funds. These “surpluses” were made up entirely of excess payroll taxes building up the trust funds. Bush took those excess payroll tax receipts and gave them “back” as income tax reductions, heavily weighted to the wealthy–who didn’t create those surpluses in the first place. By doing this, Bush guaranteed that taxes would have to be raised in order to amortize the trust funds. The failure to do so simply permits the conservatives to steal the money contributed by workers for their retirement. Everything about not raising taxes or limiting expenses, is about stealing our money.

  5. Greg0658 says:

    “Inequality is often charged of being a threat to democracy and capitalism because it creates” .. I was onboard for a bit .. bmz cooled my kick .. and since I’m signed in …

    your list of governments/countries and the Russian experience of my lifetime (Ron / Gorbie and Steppins John Kay) .. this week the buff old man taking the reins again from the new guy to head the war that never ends .. cash attraction and keeping the hoards at bay
    http://www.youtube.com/watch?v=ZY7haEFQhps

    muscle brawn & mind brains .. and that proper allocation to get the kids who can – to dream big & build that next big thing that the capitalist can grab ahold of and make a B (buck or a billion)

    life is really work with some recreation to make it worth it / study’g is hard and science is hard to study

    I’m going on about balance to instill growth in all levels of the IQ diamond in the capitalism structure* .. now days (imo) a wacked out structure to allocate AIRcashAIR to all levels … sooo the intricate systems do not self destruct .. we humans have invented some s-it .. sooo be scared be very scared (not MIC scared)

    original most open & inclusive (imo)** “I pledge allegiance to my flag and the republic for which it stands: one nation indivisible with liberty and justice for all.”

    * – I think corporatations should start paying for training past 12th grade (get some skin in the game) that 21st century education that is rack full of trade & business secrets of success

    ** – everybody needs a mission in a life – lets build some pryamids (-; get your mind off WS)

    more music less game (I guess I’m happy we have both)

    last line .. the middle needs to play – the top doesn’t know what to do with the AIR (but hoard from fear) – and the bottom may be lazy or uneducated or disenfranchised but they are not garbage

  6. sangfroid says:

    Inequality is just a by-product of capitalism. To have money and assets valuable you have to make it scarce which means some will have less than others. You can’t mandate and legislate equality, it doesn’t work. What you can do is make the playing field even by get rid of special interests, old-boy’s network, connections that normal business people can’t get.

  7. [...] an interesting post on inequality over at The Big Picture that echoes my sentiments on inequality–that regardless of your [...]

  8. victor says:

    Very good piece especially the repetition: socialism for the rich and capitalism for everyone else. I would change this theme to: socialism for the rich and discipline for the masses.

    Nassim Taleb: “Don’t ask why is he/she poor or rich; ask instead why is he/she not poorer or richer?”

    The poor want to be rich; the rich want to be richer.

    Examine the cause of inequality: it is discrimination (racial, religious, sex, nationality)? Or is it inherited wealth that created it? Or is it “rigging the system”, just look at Bob Nardelli or Richard Grasso or Bob Rubin (legal crimes). Or is it criminal criminal: Madoff and today’s Al Capone’s. Or, finally is it differences in abilities, risk taking, health, genetics, luck, work ethic, geography, history, family issues, drugs, religion (monks don’t mind inequality) an a myriad of other issues/traits that make us different? Not everybody can be Sergey Brin or Bill Gates or Payton Manning not to mention Steve Jobs.

    Interesting fact: most private wealth in the US was created in the last 25 years, even Soros’ and Buffett’s and Gates’. Most of it will be given away one way or another; if not chances are the descendants will squander it. There will be brand new rich actors; there will always be inequality. Vanitas vanitatum omnia vanitas.

    Conservative dislike Big Government and like Corporations. But big Corporations are like small Governments.

  9. Defining Quality says:

    The Trust of the Ignorant is the Liar’s most Powerful Tool!
    We are living in the age of Unreason. Arguing for one purpose and one purpose only – to win. Governments world wide are only listening to the corporate persons. Spinning observed reality to control the masses. Control fraud permeates all institutions who artfully and fraudulently use the fiction of accounting to steal from the consumer / taxpayers – who blindly and ignorantly “TRUST” a global racketeering scheme to use the people to gain personal wealth and power.
    Social Security is not the problem – the real problem is control fraud – and Joe Six Pack could give a damn – and the fraudsters know that to be a fact.
    The real job creators were the consumers – and their ability to consume has been destroyed by the greed and corruption of the government’s sponsored and unregulated – criminal activity – in the global market place. Stealing from and taxing the poor to gain power and money.
    What’s wrong could be fixed but those with the money and the power are just like Joe Six Pack – they really don’t care. The system of corruption and control fraud is working for them -why would they care?