By Michael Schaus
Wednesday, June 04, 2014
The French Economist (is that really a thing?), Thomas
Piketty, has been touring the television circuit promoting his 21st century
reincarnation of Karl Marx’s “Das Kapital”. But, leave it to a Democrat from
the People’s Republic of Massachusetts to one up the Frenchman with a penchant
for progressive fiscal policy. Elizabeth Warren – who also penned an intellectually
bankrupt analysis of income inequality – described Piketty’s book, Capital in
the 21st Century, as an explanation of how capitalism punishes the poor while
rewarding the rich. She then explained, with an obvious abandonment of common
sense, that wealth “trickles up” in the free market.
Being sure to lampoon the economic success of
Reaganomics, Warren explained that we (I can only assume she means everyone on
planet Earth except, apparently, for us right-wing nuts) have learned that
“trickle-down economics” doesn’t work. “Wealth” she explains, “trickles up.”
Trickle up economics… Now that is an economic theory that
only a rich liberal could embrace with any sincerity. Warren’s precarious grasp
of reality must have been hugely influenced by the liberal bubble in which she
seems to be ensconced. Because, unless I am very out of touch with modern
economics, poor people are still not the primary employers in America.
Of course, this is the absurdity of Keynesian philosophy
mixed with European socialism. Warren’s comments are (and, to be fair I’m kinda
guessing here) based on the notion that poor people, and middle-class America,
are the main consumers in the economy – therefore it is their hard earned (and
well spent) dollars that profit the business owners, corporate CEO’s, and Wall
Street investors… Which, really, is about half of the picture:
Consumption certainly does drive the economy to a certain
extent; but all consumption is a function of wealth. Wealth is generally
accumulated through employment, which is a function of a business’s ability to
hire workers to fill a demand… And, in order to hire more workers, businesses
and corporations must make profits. And profits generally correlate to higher
wages for executives and greater value (read: capital gains) for investors. In
other words: Wealth creation and jobs are both symptoms of economic prosperity,
but jobs cannot be created without the wealthy first investing in labor.
After all, the guy making $8.00 an hour to flip burgers
probably doesn’t have the capital to start up a business, or finance a
renovation of his home. But if he has a degree in business management (and,
let’s face it: It’s an Obama economy – so he very well might have a degree in
business management), some capitalist might be willing to invest in his
start-up, or help him renovate his home for a profit on its sale. (Which Warren
probably knows something about, given her history in flipping houses.)
Although, to be fair, Warren’s “trickle up” theory isn’t
really her fault… I mean, she’s a liberal academic hack who has gotten wealthy
primarily off of the backs of taxpayers and exploiting vulnerable low-income
consumers. Her ignorance of economic reality was on full display before she
even mentioned the phrase “trickle up”. With her first utterances of praise for
Piketty’s book, she explained that under capitalism, the rich get richer while
the poor get poorer.
And, basically, that was the thesis of Piketty’s book.
Which is why the French should stick to wine and smoking, and leave the grown
up things (like modern warfare and economic policy) to the rest of us. After
all, it’s easy for a Frenchman to become a socialist. In Europe, the history of
wealth creation has been a history of oppression and exploitation. In Europe,
the aristocracy remained wealthy – from generation to generation – until their
castle was conquered, or the peasants revolted. (Wait… You’ve seen History of
the World Part I, right?) But that is not the history of America, or
Capitalism.
In America, wealth alone does not guarantee a dynasty. In
fact, income mobility is the single greatest facet of free-market capitalism.
What enables innovation and ambition, is the fact that such traits are rewarded
regardless of the economic circumstances that are inherited from generation to
generation. Put simply, being born into a class in America (and most modern
European nations) does not render that individual to a life of servitude. The
son of a mechanic can become a doctor. The daughter of a janitor can become a
software engineer. Likewise, wealthy families can quickly find their riches
dwarfed by innovative entrepreneurs and savvy professionals. True generational
income mobility is only possible in a system that rewards success, and allows
wealth to accumulate faster than the rate of inflation, or economic growth.
But the notion of the “rich getting richer” isn’t nearly
as intellectually bankrupt as the claim that, under capitalism, “the poor get
poorer”. Elizabeth needs to go on a few field trips around the world before she
starts talking about the plundering of the impoverished in America. To say that
capitalism makes the poor poorer is patently absurd when you consider that the
poorest Americans are better off today than they were in – say – 1820. For
example, they have shoes. And a place to live. And, according to the US Census:
a TV, a game console, a car, a cell phone, a stove, running water, a
refrigerator, heat, air-conditioning, cable TV…
The poorest souls in America live far better than almost
all individuals in nations with strong redistributive policies. (Consider Cuba,
North Korea, Venezuela, etc.) If you want to see what real poverty looks like,
visit the “bottom 10 percent” in nations like Russia, or China. (Both of which
have high levels of millionaires as well.) In Piketty’s book, he conflates
capital with income, to skew the numbers in favor of his argument. And liberal
political opportunists – such as Elizabeth Warren – are more than happy to
exploit his narrative for their cause. (For a more in-depth look at the degree
to which Piketty fudged his numbers, I suggest you skim this Forbes article on
the topic, or take a look at this article from the Financial Times.)
Besides the obvious deficit of intellectual honesty in
the liberal complaints against capitalism (well… It’s obvious to some of us),
we should probably ask a pretty basic question: Does redistribution really
solve wealth inequality? Does making someone comfortable in poverty (which is
essentially what unrestricted welfare, food-stamps, and OBAMAPHONES, tend to
do) really help close the gap? Judging by America’s most liberal jurisdictions,
the answer is a resounding “no”.
Income inequality has risen under the economic
stewardship of Barack “Spread the Wealth Around” Obama. New York City, the
progressive haven that just elected a socialist mayor, is one of America’s
leading examples of income inequality. Chicago, LA, and even Detroit show large
gaps between the wealthy and the impoverished… And all of those examples have
been run (in some cases, for generations) by people like Elizabeth Warren.
Milton Friedman once said that “underlying most arguments
against the free market is a lack of belief in freedom itself.” And I will go
one step further: A failure to believe in freedom is, at its core, a lack of
faith in individuals. People like Piketty, or Elizabeth Warren, don’t believe
that the average person is capable of achievement. They believe individuals are
fragile and uninspired drones that allow themselves to be exploited and
victimized by the rich and the powerful. (Although, I do think that explains a
large swath of European socialist.)
Of course, who could blame them? If I was surrounded on a
daily basis by socialists from Massachusetts or France, I’d probably lose faith
in people as well.
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