The Upside of Inequality: How Good Intentions Undermine the Middle Class

The Upside of Inequality: How Good Intentions Undermine the Middle Class

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by Edward Conard
     
 

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The scourge of America’s economy isn't the success of the 1 percent—quite the opposite. The real problem is the government’s well-meaning but misguided attempt to reduce the payoffs for success.
 
Four years ago, Edward Conard wrote a controversial bestseller, Unintended Consequences, which set the record straight on the

Overview

The scourge of America’s economy isn't the success of the 1 percent—quite the opposite. The real problem is the government’s well-meaning but misguided attempt to reduce the payoffs for success.
 
Four years ago, Edward Conard wrote a controversial bestseller, Unintended Consequences, which set the record straight on the financial crisis of 2008 and explained why U.S. growth was accelerating relative to other high-wage economies. He warned that loose monetary policy would produce neither growth nor inflation, that expansionary fiscal policy would have no lasting benefit on growth in the aftermath of the crisis, and that ill-advised attempts to rein in banking based on misplaced blame would slow an already weak recovery. Unfortunately, he was right.
 
Now he’s back with another provocative argument: that our current obsession with income inequality is misguided and will only slow growth further.
 
Using fact-based logic, Conard tracks the implications of an economy now constrained by both its capacity for risk-taking and by a shortage of properly trained talent—rather than by labor or capital, as was the case historically. He uses this fresh perspective to challenge the conclusions of liberal economists like Larry Summers and Joseph Stiglitz and the myths of “crony capitalism” more broadly.
 
Instead, he argues that the growing wealth of most successful Americans is not to blame for the stagnating incomes of the middle and working classes. If anything, the success of the 1 percent has put upward pressure on employment and wages.
 
Conard argues that high payoffs for success motivate talent to get the training and take the risks that gradually loosen the constraints to growth. Well-meaning attempts to decrease inequality through redistribution dull these incentives, gradually hurting not just the 1 percent but everyone else as well.
 
Conard outlines a plan for growing middle- and working-class wages in an economy with a near infinite supply of labor that is shifting from capital-intensive manufacturing to knowledge-intensive, innovation-driven fields. He urges us to stop blaming the success of the 1 percent for slow wage growth and embrace the upside of inequality: faster growth and greater prosperity for everyone.

Editorial Reviews

From the Publisher
“Ed Conard challenges misconceptions that distort our economic debates. He debunks the myth that inequality is a conspiracy perpetuated by robber barons and sheds light on the complex economic phenomena that shape America’s success. Readers of all political persuasions will benefit from this highly-informative book.”

—Arthur Brooks, president of the American Enterprise Institute

“This provocative new book by Ed Conard is a must-read for serious students of economic policy. Conard’s core thesis—that advancement in living standards is constrained by risk capital and properly trained talent—suggests an inequality borne of returns from innovation. His solutions are sensible and all the more compelling in the context of this paean to risk-taking.”

—Glenn Hubbard, dean of Columbia Business School and former chairman of the Council of Economic Advisers
 
“Conard makes a fresh argument for the productive value of inequality, which is that scarce entrepreneurial effort and risk-tolerant capital are the resources that are both most central to economic growth and most sensitive to the potential distortions imposed by taxation and regulation. Whether or not one accepts this argument, it’s an argument well worth having.”

—David Autor, professor of economics, Massachusetts Institute of Technology
 
“I profoundly disagree with much of what is in Conard’s book but respect the clarity with which he makes his case.  Agree or disagree, this book can sharpen your thinking on critical economic issues, making it a very valuable contribution.”

—Larry Summers, former Secretary of the Treasury and Director of the National Economic Council, President Emeritus, Harvard University
 
“Ed Conard puts forward a comprehensive explanation of the modern economy. Critics may dismiss it as a defense of the 1 percent, but it’s much, much more than that. I rarely see economic analysis as insightful as this.”

—Julian Robertson, founder of Tiger Management
 
“Page after page, Ed Conard challenges conventional wisdom about the causes of growing inequality, the constraints to growth, and the feasibility of commonly proposed solutions to advance a thought-provoking blueprint for growing middle- and working-class incomes in a world with an abundance of workers. Whether you agree or not, this is serious thinking for serious thinkers.”

—Mitt Romney, former Governor of Massachusetts

Kirkus Reviews
2016-07-19
Tax the rich? Even out the playing field? Bad idea, writes a famously contrarian financier.It stands to reason that someone affiliated with the American Enterprise Institute would be inclined to mount a stout defense of the 1 percent, and Conard (Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong, 2012) does not disappoint. Add to this his one-time role at Bain Capital, which he co-founded with Mitt Romney, and the package would seem to be complete. However, the author’s argument, calmly presented, has merits: it is true that, in general, the rich pay more taxes than they consume in government services and that a diverse knowledge economy offers more opportunities for wealth than a low-skilled one—and almost by definition produces inequalities. From these premises, Conard’s policy recommendations do not necessarily follow, and some of them are politically toxic, such as the thought that giving the middle class a tax break is ill-advised. “Successful risk-taking that produces innovation and gradually builds institutional capabilities accelerates growth,” he writes. “A middle-class tax cut will have no such effect.” Some of the author’s suggestions, if impractical, are intriguing—e.g., why not have the rich shoulder the burden of defense spending, since they’re the ones who have the most to defend? The weakest sections of the book are the most formulaic, such as the tired mantra that students should not be rewarded for studying English but should instead be induced to study something “useful,” never mind that many iconic business leaders (Steve Jobs, Bill Gates) have studies in philosophy and the humanities in their quivers. Conard also comes up short on specifics for the education reform that he argues is needed to produce a robust economy, noting weakly instead that “we should be running a multitude of experiments to find solutions that work.” Unlikely to sway those for whom the idea of economic inequality is anathema, but a set of arguments worth considering.

Product Details

ISBN-13:
9781595231239
Publisher:
Penguin Publishing Group
Publication date:
09/13/2016
Pages:
320
Sales rank:
1,114
Product dimensions:
6.10(w) x 9.00(h) x 1.30(d)

Meet the Author

Edward Conard is the author of the New York Times bestseller Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong. He is a visiting scholar at the American Enterprise Institute. Previously, he was a founding partner at Bain Capital, where he worked closely with former presidential candidate Mitt Romney.

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The Upside of Inequality: How Good Intentions Undermine the Middle Class 5 out of 5 based on 0 ratings. 1 reviews.
Anonymous 9 days ago
I primarily read fiction but with all of the discussions about income inequality in the media I thought I’d give this new book a try. I found it packed with counterintuitive arguments about the causes of income inequality and how it actually helps the American economy grow. The author accomplishes this by explaining common myths about income inequality and presenting data showing why they’re wrong. The book also provides a helpful explanation of how the way the economy works has changed, yet most economists still analyze it using the old model, ie. 21st Century knowledge-based versus 1950s style manufacturing. The author concludes the book by offering recommendations for how America can compete in this new economy. I enjoyed Upside of Inequality and recommend it to anyone who wants a better understanding of both sides of the income inequality debate.