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

by Edward Conard

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.

Product Details

ISBN-13:	9781595231239
Publisher:	Penguin Publishing Group
Publication date:	09/13/2016
Pages:	320
Sales rank:	1,058,620
Product dimensions:	6.10(w) x 9.00(h) x 1.30(d)

About the Author

Ed Conard is the author of two top ten New York Times bestselling books: The Upside of Inequality: How Good Intentions Undermine the Middle Class and 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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Chapter 1
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Excerpted from "The Upside of Inequality"
by .
Copyright © 2016 Edward Conard.
Excerpted by permission of Penguin Publishing Group.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Introduction 1

Part I The World as We Find It 7

Chapter 1 The Causes of Growing Inequality 9

Chapter 2 The Reasons for Slowing Wage Growth 37

Part II Debunking Myths: Why Mitigating Inequality Is Not the Solution 63

Chapter 3 The Myth Thai Incentives Don't Matter 65

Chapter 4 The Myth That Success Is Largely Unearned 87

Chapter 5 The Myth That Investment Opportunities Are in Short Supply 115

Chapter 6 The Myth That Progress Hollows Out the Middle Class 155

Chapter 7 The Myth That Mobility Has Declined 177

Part III The Way Forward 193

Chapter 8 Our Moral Obligation to Help Those Less Fortunate 195

Chapter 9 The Limitations of Education 217

Chapter 10 Real Solutions 243

Acknowledgments 267

Notes 269

Illustration Sources 301

Index 305

Editorial Reviews

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

From the Publisher

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.

Kirkus Reviews