Saturday, March 30, 2013

Why Rich People Hate Talking About Inequality

The wealthy don’t like it when we talk about it inequality. Mitt Romney famously labeled President Obama’s critique of inequality “class warfare” motivated by “envy,” and proposed instead that debate about economic inequality be confined to “quiet rooms.” It’s fair to say he’s not alone among the super-wealthy in thinking this isn’t a “proper” subject for open, political debate.

At first blush, their motivation here is straightforward: it could cost them money. But given America’s one percent already has so much, and so little redistribution is on the table, they’d have to be exceptionally greedy to have such a strong reaction to even broaching the inequality discussion. Of course that’s possible, but the history of debates around inequality as surveyed in Branko Milanovic’s wonderfully readable book suggests another explanation. The rich don’t like inequality talk because, by its very nature, it involves making moral judgments about the way the rich live their lives into a topic for public discussion.

In the book’s first essay, “Unequal People,” Milanovic runs down the earliest modern economic theories about whether inequality is good for economic growth. The difference between early theories wasn’t, as we think today, whether or not you thought inequality was something that happened as a consequence of a roaring economy: it was whether, essentially, the rich are good people or not.

On the first view, defended to varying degrees by Max Weber and John Maynard Keynes, the rich were virtuous workers, dutiful, acquisitive folk who accumulated but spent no more on indulgences than the poor. Their massive savings were invested back in the marketplace, which, as Keynes put it, “made possible those vast accumulations of fixed wealth and of capital improvements” which redounded “to the advantage of the whole community.” The virtuous rich were uninterested in selfish consumption, serving principally as what Milanovic calls “saving machines” for the broader capitalist society.

Milanovic’s second view paints a dimmer picture of virtues of the rich. It assumes that the rich are selfish, greedy parasites who hold on to massive hoards and spend on themselves without investing in much of anything socially useful. In democracies, this leads the naturally-angry rest of society to impose punitive tax rates that slow economic growth. By being selfish misers, the rich end up taking money away from everyone.

What’s interesting about both sides of this debate is that they assume a public policy problem (“what grows the economy?”) needs to be discussed in terms of the moral character of the rich. This isn’t because economists have a yen for judging people; rather, it’s that when you have the amount of accumulated capital and power that rich do, the way in which one spend one’s money ends up having an extraordinary impact on everyone else in society. Invariably, assessing the desirability of rich people’s consumption choices will take on a moral cast, as what a person chooses to spend their money on says a lot about the person. Especially when they’re rich enough to spend it on anything.

It’s impossible to imagine that this point escapes wealthy people who follow the news. My guess (and I can’t prove this, but statements like Romney’s are certainly suggestive) is that when they hear that the one percent “should pay its fair share,” they hear the public calling the way they choose to live their lives unfair and unjust. No one likes being judged as a bad person, especially by the world’s most powerful politicians and in the pages of the world’s most-read newspapers. The wealthy, then, react negatively to public debates about inequality for the same reason many meat-eaters don’t like debating vegetarianism.

Uncomfortability, of course, isn’t a defense. The power wielded by America’s wealthy means that, like it or not, the rich can’t and shouldn’t be allowed to escape public scrutiny. Moreover, they often bring on themselves: see the pretty nasty things some wealthier folk say about poor and middle class Americans and the lengths to which others go to sing the praises of the “productive class.” But hypocrisy aside, the moral anxiety of the wealthy is both an interesting psychological fact and a neat window into the little, surprising ways in which the personal can’t be detached from the political.

Read Article one on Inequality Here and Article two Here.

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