I have no idea whether inequality is the “defining challenge of our time”. That’s a meaningless trope. But Klein takes the phrase from a speech by President Obama and turns it into a question in order to knock inequality down a few pegs from the economic priority list. He does a very dishonest job of it.
Here’s the worst:
Economist Jared Bernstein has been worrying about inequality since way before worrying about inequality was cool. But in a careful paper released on the same day as Obama’s speech, Bernstein found that there wasn’t strong evidence for the idea that inequality is weakening demand — or for any of the other theories tying inequality to a weaker economy. There “is not enough concrete proof to lead objective observers to unequivocally conclude that inequality has held back growth,” Bernstein wrote.
That doesn’t mean inequality isn’t hurting growth. It just means it’s difficult to find firm proof of it. But if inequality really was the central challenge to growth, would proof really be so hard to come by?
Read Bernstein’s paper. Klein is misrepresenting Bernstein’s views. An intelligent reader would interpret Klein as saying that Bernstein looked for evidence, failed to find it, and concluded it just wasn’t there. In fact, Bernstein reviews the research and finds lots of suggestive connections between inequality and growth. The unfortunate bit that Klein quotes reflects a kind of handwringing on Bernstein’s part — no, the research is not incontrovertible, there are a lot of “moving parts”, the research is young. Bernstein offers a cautious invitation to take seriously evidence of connections between inequality and growth. Klein pulls the caution out of context and misuses it as an excuse to dismiss those connections.
[And "worrying about inequality since way before worrying about inequality was cool"? Excuse me? Way to conflate concern over an ongoing social catastrophe, and a genuine vocation on Bernstein's part, with the latest thing to go viral on Buzzworthy. Not all of us are paid by the click.]
There is no such thing as “the central challenge to growth”. Proof is impossible to come by with respect to all macroeconomic controversies. Klein vapidly handwrings that, “Growth simply isn’t producing enough jobs” without meaningfully addressing the question of how to achieve growth, or addressing the arguments that Bernstein carefully catalogs for why a broader distribution might be growth-supportive. When Klein writes “fixing [unemployment] is necessary, though not sufficient, to making real headway against inequality”, he is making an empirical assertion without evidence, and probably getting causality backwards. We might well move towards economic arrangements in which wages become less central to the income of the middle class, just as labor income is only one of multiple income sources for the wealthy. Broadening the distribution of income may well be prerequisite to full employment going forward, as jobs that cannot be automated or outsourced are largely in personal services, and mass employment in personal services requires a mass of customers with disposable income.
There is little tension between addressing inequality and pursuing the other goals Klein says we should focus on. Klein sets up a straw man when he argues
A world in which inequality is the top concern is a world in which raising taxes on the rich is perhaps the most important policy choice the government can make. A world in which growth and unemployment are top concerns are worlds in which very different policies — from stimulus spending to permitting more inflation — might be the top priorities.
One could make the world more equal just by burning everything down too! But no one advocates this. So obviously inequality doesn’t matter, right?
People concerned with inequality in fact argue not to tear down the rich but to raise up the rest — at the expense of the rich to the degree that is necessary, but not just because. We argue for policies like basic income, wage subsidies, and, yes, more inflation-tolerant macro policy and more fiscal stimulus where those policies help support the poor and middle. A focus on inequality sometimes does create wedges between us and other “progressives”. We might not be so excited, for example, by a fiscal policy that is “expansionary” by virtue of a deficit accounted for in large part by tax expenditures to the rich. We might celebrate less than a Democratic party that treats inflation in the price of real estate and financial assets as unambiguously good news.
A policy apparatus for which inequality is not a “top concern” might content itself with spurring demand by protecting and increasing the wealth of the politically-connected rich, on the theory that anyone’s misfortune hurts at the margin and providing support to the non-rich is politically impossible. But that’s, like, totally science fiction, right?
- 13-Dec-2013, 8:45 p.m. PST: Added context that the phrase “defining challenge of our time” comes from President Obama’s speech, and reworked that sentence. (Rereading, the beginning of the piece was incomprehensible to people who didn’t click through to Klein’s piece.)