Wednesday, May 14, 2008

The Wealth Gap: Let's Not Rush to Judgment

If it weren't for the fact that the article is well written, I'd have to describe Thomas Frank's editorial in the Wall Street Journal as more than a little irksome.

I don't deny him his (or actually Steven Greenhouse's) statistics about the growing wealth gap in this country.

[Thanks to for this image.]

What I dislike is his unfounded leap to a conclusion as to its cause.

Both Frank's editorial and Greenhouse's The Big Squeeze are about the impoverishment of the American worker majority and the enrichment of the power class minority; and both works are probably good reads. However, both writers are more journalistic than scientific in their analysis of the causes of this situation. (Too bad we have to use "journalistic" as an antonym of "scientific," but that's just the way it is in many cases including these.)

Frank sees the evil as emanating from classical economic principles as empowered by the Reagan Republicans. Greenhouse points his finger at the same politicians' destruction of the working class's labor movement.

In other words, both writers are probably progressive Democrats and believe in equality of riches, as contrasted to equality of opportunity in the more strict Constitutionist sense.

I don't deny the growing gap and I don't pretend to have the right answer; but before we assume either of these thinkers is correct, here are a few suggestions that might deserve some equal time under the reader's microscope:

1. What about the world central bankers' mismanagement of the monetary units, which mismanagement some believable economists blame for: (a) our current credit and mortgages crises, (b) the huge imbalances in trade and sovereign reserve accounts, and (c) for the erosion of everyone's purchasing power and of the real wages of the majority of working people? These economists believe that our purchasing power should have exploded over the last century, but instead the money mis-managers have siphoned it off to the wealthy speculators and encouraged us all into an unhealthy degree of debt.

2. Going back even further, what about the de-standardization of the currencies? The value of our money used to be established by law to be equal to a specific amount of gold and/or silver but became equal to whatever governments, government agencies, and markets decided they would be worth via fiat. History does not treat this kind of monetary de-standardization kindly. It has always led to dissatisfaction and disruption of social order.

3. Then there's also the increasing centralized government power in this country that has opened up the Pandora's Box of legislative intervention into every sector of our life. (See my "Government Intervention Run Amuck" series of posts over the last few months, which give only a sampling of the damages done.)

Just food for thought, before you jump along with Frank and Greenhouse into a tidal wave of emotionally appealing but premature and illegitimate conclusions.

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Blogger Dave Kunkel said...

There's a huge arbitrage play out there waiting to be exploited. Executives are being paid obscene amounts of money to make multi-billion dollar mistakes. I'm sure people could be hired to make big mistakes for MUCH less money.

10:05 AM  

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