My liberal friends tell me that inequality is a grave problem, that our current extreme levels of inequality will destroy our nation. I confess I am mellow about inequality. From my perspective, anyone like Bill Gates or Mark Zuckerberg who creates tens of thousands of jobs and makes a billion dollars in the process has earned his keep. And such a person has certainly demonstrated better stewardship for billions of dollars than any possible combination of Harry Reid, Mitch McConnell, Hillary Clinton, John Boehner, and Nancy Pelosi. After all, when Bill Gates spends 200 million dollars, we get a possible vaccine for malaria. When our favorite politicians spend 200 million dollars, we get ... half an hour of business as usual in Washington with nothing to show for it (Washington spends $400M an hour).
But my liberal friends are so insistent that this is a problem, I suppose I must take it seriously. Fortunately, the inequality statistic that provokes such outrage, the GINI coefficient for household income, is easy to fix. Other problems, like fixing the boom/bust cycle imposed by Keynesian economics or upgrading a decrepit educational system unchanged since the McGuffey reader, are really hard. But inequality is straightforward. We can dispatch it today.
Oh, a fair warning. Yes, the title's reference to Jonathan Swift's original Modest Proposal is intentional. For those unfamiliar with Swift's original ... buckle up.
First let us discard a popular, irrelevant plan. Increasing the tax rate on rich people has little effect on inequality. Rich people's tax attorneys are smarter than politicians. And besides, giving more cash to the government rarely empowers more people to earn more money. It more often empowers bureaucrats to stick their noses deeper into our lives.
To really solve the inequality problem, we must look at the underlying causes of inequality, and remove each of those individual impediments. Let's start with a well-known problem:
Education Gap:
A major source of inequality is education. People with college degrees make more money than people without. This has been true for a long time, but the size of the gap has been growing; unskilled labor just isn't worth what it used to be. The Democratic strategy for fixing this problem is to have the government pay the tuition for most people to go to college. Now, of all the awful politicians' proposals for spending taxpayer money, this is one of the least bad. But it won't make a dent in the inequality problem. Let us be candid with each other. Many people simply don't have the combination of temperament, enthusiasm, patience, and grit needed to go through 4 years of college successfully. So making tuition free can shift some people from the wrong side of the gap to the right side, but the gap will still be there, and the inequality will still be pretty much the same. The weakness of this approach is emphasized by another inequality statistic: when you measure inequality in education using the same GINI coefficient mechanism as is used to measure income inequality, the USA already has one of the lowest inequalities in the world. We won't get a lot of leverage by improving our education equality a little more.
To really eliminate education-based inequality, one must think bigger. One must go beyond the routine. The answer is clear: abolish college. Send in the bulldozers to destroy every university from Harvard to Stanford, being sure to stop on the way to take out Mohave Community College as well -- leave no higher education stone unturned. Within a single generation, education-based inequality would be a thing of the past.
So, we can solve the inequality problem ... but perhaps a few of us may conclude that, just maybe, inequality is not that big a problem after all.
Power Couple Gap:
A less advertised source of growing income inequality is the success of women's lib. What?! I hear you cry. But it's true. As women have become CEOs and company founders, a new phenomenon has arisen: the power couple, where the husband is VP of a bank and the wife is CFO of a software company. Just as Hollywood actresses and actors marry each other with unusual frequency, so do high-power executives. The power couple has twice the inequality compared to a low-income couple as the traditional 50s family unit where the husband ran the business and the wife baked the cookies. We cannot tolerate power couples in the new, more equal America. There are 3 obvious solutions:
- Ozzie and Harriet: We could go back to the 50s strategy for improving income equality. We could bar women from holding high-income jobs.
- Harriet and Ozzie: Alternatively, we could leap into a bolder future, and bar men from holding high-income jobs. Though the quality of the cookies we baked would fall catastrophically.
- Pygmalion: If you object to cutting in half the number of highly competent people available to the economy, as the above strategies do, we can simply impose a law that high-income people -- both men and women -- are required to marry low-income spouses. However, this strategy will require constant vigilance. If the president of CitiCorp marries a welfare mom, who then writes a fantasy book that becomes a bigger seller than Harry Potter, and she becomes one of the ten richest people in America, the benevolent State must enforce a swift divorce.
So, we can solve the inequality problem ... but perhaps a few of us may conclude that, just maybe, inequality is not that big a problem after all.
Network Effects Gap:
So, every small town has its brightest young tech geek, the kid who is so smart everyone picks on him in school. Think of them as one-percenters on the intelligence scale. If this superbright kid stays in the town of his birth, he becomes the town's best car mechanic or house electrician. He runs the town chess club. He does just fine.
But if he moves to a place where the excitement is, like Silicon Valley, and gathers with thousands of other one percenters like himself from other towns just like his home, those kids work together in a synergistic way that multiplies their intelligence and creativity: ten of them working together may have an intellectual capacity a hundred times greater than than the ten of them working alone. As a consequence, from time to time they create astonishing new industries that throw out tons of cash. Instead of making thousands of dollars, our tech geek makes millions. This is a huge blow to equality.
The answer, of course, is to give children a test in high school to find the one percenters. If you are marked as a one percenter, you must wear an ankle bracelet that tracks your location; you are not allowed to leave town for more than a two week vacation. Without the synergy of hanging out with equally geeky people, there is much less risk of breakthrough industries and wealth that cause imbalance in the society.
Of course, that means we would have to live without new products and new services, and without the tens of thousands of jobs they create.
So, we can solve the inequality problem ... but perhaps a few of us may conclude that, just maybe, inequality is not that big a problem after all.
Too Much Wealth Gap:
During the opening days of the Great Recession, we had so many other problems wrecking the country, we lost focus on the more important problem of inequality. People hardly noticed that the recession had a wonderful impact on our inequality stats. Sure, a lot of people lost their jobs, and there was terrible hardship, but the stock market crash wiped out trillions of dollars of value, hammering the rich folk most of all. Wiping out that excess wealth was a great equalizer.
To enforce a permanent recession, in which rich people just aren't so rich any more, one needs to get the unemployment rate up. Currently, the "natural" rate of employment in the USA is somewhere between 4% and 5%. The "natural rate" is the lowest unemployment can be without inciting economy-wrecking levels of inflation. To get a permanent recession, we have to fix the economy so that the natural rate is higher than 6%. 7% would be better.
Three plans have already been proposed to solve the inequality problem by imposing a permanent recession: the Trump plan, the Clinton plan, and the Sanders plan.
- Trump Plan: By ripping up all our trade agreements and slamming down trade barriers with the whole world, Trump plans to effectively re-implement the Smoot-Hawley trade tariffs from the Great Depression. Smoot-Hawley was a brilliant work of inequality-elimination. In the middle of an economic disaster so terrible it was inconceivable that it could get any worse, Smoot-Hawley was in fact able to make it worse. It succeeded so admirably, in fact, that the government moved with unnatural speed to repeal it. Fortunately, even if we dumped Trump after 4 years and recanted his decisions, the effects would linger for years, keeping our inequality numbers down.
- Clinton Plan: Few of the studies on the effects of minimum wage laws give us analyses powerful enough to let us extrapolate to the consequences of a $15 minimum wage. But there are indications that the plan could raise the natural rate of unemployment above 9%, more than adequate to keep our stock market in the waste bin and thus improving our equality numbers. Indeed, the size of the victory could be excessive; a $12 minimum might well create a permanent recession adequate for our inequality needs.
- Sanders Plan: Bernie, of course, wants to do both the Trump Plan and the Clinton Plan, doubling down on this approach to solving inequality. With the kinds of equality this combo could produce, we might be able to get within striking distance of Kazakhstan, a country in the top 10 and world famous for its excellent equality stats.
Whichever plan we use, we cannot let someone like Ben Bernanke try to fix the recession by implementing a strategy that pops the stock market back up. This would defeat the purpose, after all.
So, we can solve the inequality problem ... but perhaps a few of us may conclude that, just maybe, inequality is not that big a problem after all.
Oversize Country Gap:
The GINI coefficient of inequality strongly favors smaller countries. The larger a country is, the more different industries it will have operating, and different industries have different wealth-generation profiles. A software engineer makes a lot more money than a person who sorts chicken eggs, not only because engineering needs more skill, but also because the software industry produces a whole lot more money per person than does chicken farming. So you get a lot of inequality just because you have high-wealth-generating industries side by side with low-wealth-generating industries. If you make the countries smaller, there is less such lumping of industries, and less inequality.
Take Denmark for example -- if Denmark is a good enough example for Bernie Sanders, it is good enough for me. Denmark is a small country with a really low inequality score. It is distinguished by its most prominent industry, which is ... well, actually, there is no prominent industry in Denmark, which is the point. Denmark has achieved equality by importing all its high-revenue-generating products, like web services, from North America, and importing all its low-revenue-generating products, like bananas, from South America. In other words, Denmark has leapt to the forefront of income equality by fully outsourcing all sources of inequality. How can we achieve this happy result here at home?
The obvious solution is to break up the USA along the state boundaries, making each state a separate nation. Each of the resulting 50 nations would be much more equal. But this would impose an enormous amount of overhead to man all those borders with customs patrols. We can achieve our inequality goals with much less trauma. I believe we can win by cutting the country into just 5 distinct nations:
- Siliconia: Encompassing a swath of land from San Francisco to San Jose, Siliconia removes all those excessively high-income-generating software jobs from the nation.
- GoldmanSachsLand: We turn Manhattan Island into a separate nation, removing Wall Street from the inequality equation. GoldmanSachsLand is easy because the national boundary is clearly defined by water; just blow up the bridges and we're good to go.
- Hollywow: Starting with tight borders around all the movie studios, you want to gerrymander Hollywow's boundaries to include the areas where movie stars live, like Beverly Hills.
- Motortopia: The three small nation states above must be carved out because they spew out too much wealth. In contrast Motortopia, centered on core Detroit and spreading southward to encompass the blighted areas, must be removed because Detroit sucks up so much wealth. Puerto Rico, which could never become the 51st state of the USA because adding it would worsen our inequality stats, could be annexed to Motortopia without issue.
- Heartland: Once we'd removed Siliconia, Hollywow, GoldmanSachsLand, and Motortopia, the rest of us can hang out together in joyful equality.
There are some downsides to this plan. Siliconia would immediately have to build a Trump Wall to keep out the illegal immigrants from Heartland seeking a better life. For the same reason, Heartland would have to build a Trump Wall around Motortopia.
Again, vigilance is required to protect against the risk of new industries taking off in Heartland and threatening our serenity. For example, there is considerable risk that the SpaceX spaceport near Brownsville, Texas could become the center of the biggest industry in human history as we launch mankind to the stars. This industry would be replete with high-paying jobs. Once it started growing it would have to be excised from Heartland swiftly and decisively lest unrest spread through the unequal society.
Meanwhile, each resulting nation would be much more equal. I am certain that, in appreciation of their improved equality, all the people in all the individual nations would be happier.
So, we can solve the inequality problem ... but perhaps a few of us may conclude that, just maybe, inequality is not that big a problem after all.
An Even More Radical Solution
Each of these solutions works, but there are some serious downsides that might cause the less insightful people who don't appreciate the importance of inequality to withhold their support. Let's do a little radical brainstorming.
First let's look at the actual statistic that incites such outrage. As noted earlier, it is the GINI coefficient of household income. But this is not the only GINI coefficient: as also noted earlier, there is a GINI coefficient of education, upon which America has one of the best scores in the world. And of course there is the GINI coefficient of individual income rather than household income. On that coefficient, America has ... ahem ... a relatively low income inequality score. France in particular has a higher level of inequality on the individual income GINI coefficient. Whoa. Who'd have expected that?
Could it be that we could solve our inequality problem just by noticing that the upsetting statistic is deeply flawed, and that there is more than one relevant statistic, and that these deeply flawed stats do not even agree that America is in bad shape? Could we just change ourselves, to take a broader and perhaps wiser view of the world, to fix the problem? Perhaps a few of us may conclude that, just maybe, this is the way to solve inequality after all.
I hypothesize that some people confuse inequality with poverty. Poverty is a different issue. Poverty is just a bad thing to have around. Let us discuss ways to reduce it. But inequality has many causes, and many of those causes are features of the evolving American society that we applaud.
In the movie Abyss, the heroine observes when faced with a person who has gone over the edge with fear and rage, "You have to look with better eyes than that."
Yes. We have to look with better eyes, with eyes filled with sanity.
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