Thursday, October 11, 2007

Paul Krugman: Banging the Drum for Communism... Again

Income Inequality is New York Times columnist Paul Krugman's favorite hobby horse. For decades, Krugman has assailed the increasing gap in pay between the wealthiest Americans and the poorest.

In Mother Jones, he complains:

What few people realize is that this vast gap between the affluent few and the bulk of ordinary Americans is a relatively new fixture on our social landscape. People believe these scenes are nothing new, even that it is utopian to imagine it could be otherwise.

Did I forget to mention this article was written more than a decade ago? In 1996? Let's continue reading.

...Why has America ceased to be a middle-class nation? And, more important, what can be done to make it a middle-class nation again?

What, indeed? I know that -- in my city at least -- there are only two types of neighborhood: the first is a crumbling, decaying urban core where the poor live in huddled masses, yearning to be rich. The second are the gated communities of the ultra-wealthy. There is literally no middle class to speak of. I'm sure your city or town is similar.

...America is by far the least heavily taxed of Western nations and could easily find the resources to pay for a major expansion of programs aimed at limiting inequality...

Once you add up federal, state, local, property, sales, and other miscellaneous taxes, it would not be surprising to find most Americans -- middle class Americans, mind you -- pay well more than 50% of their gross wages in taxes.

According to Krugman, that's not nearly enough.

In particular, we also need to apply strategic thinking to the union movement. Union leaders and liberal intellectuals often don't like each other very much, and union victories are often of dubious value to the economy. Nonetheless, if you are worried about the cycle of polarization in this country, you should support policies that make unions stronger, and vociferously oppose those that weaken them... There are some stirrings of life in the union movement -- a new, younger leadership... They must be supported, almost regardless of the merits of their particular case. Unions are one of the few political counterweights to the power of wealth...

Let's recall: this article was written by Krugman in 1996. I'll be kind and just say that he's no Kreskin.

The last decade has demonstrated the utter irrelevance of unions. A plethora of government agencies -- from the EEOC to OSHA to the National Council on Disability -- protect every aspect of America's work-force.

As for the growth in "income inequality", Forbes' Dan Seligman writes:

Given the editorialists’ recurring objections to George Bush’s tax cuts, their implication here was clear: The Bush Administration has been especially awful in creating inequality. That implication is wrong. The reality is that measured inequality has been rising steadily for close to 30 years and hit successive new highs in the Carter, Reagan, elder Bush and Clinton administrations before doing the exact same thing under the younger Bush.

The standard measure of inequality is the Gini coefficient, signifying the extent to which a society deviates from absolute equality. If everybody has the same income, the coefficient is 0; if the entire GDP belongs to one person, the coefficient is 1. In the U.S. the latest reported coefficient is 0.466. In case you are wondering, it rose more under Clinton–from 0.433 to 0.462–than under any of those other chaps. It rose by only 0.004 during George W. Bush’s first four years. In case you are also wondering how many times Times editorialists complained about Clinton’s inequality record, the answer is zero.

…. Recent figures for Japan have been 0.249, for Germany 0.283, for France 0.327. But those countries have paid heavy prices for their relative income equality. Just about all of them have had lower growth rates than the U.S., and most of them (an exception is Japan) have far higher unemployment rates. The reality is that in democratic free-market societies, more inequality tends to mean more growth.

….. And in periods of boundless technological innovation, like the present, brains and talent are suddenly worth a lot more. The demand for mental skills has exploded. The total U.S. labor force has grown by a little more than one-third in the past two decades, but managerial and professional jobs have roughly doubled, from 24 million to more than 48 million.

Damn, Paul -- that sounds like a middle-class to me!

Let's do a little thought experiment to highlight the stupidity of Krugman's mental excretions. Consider Bellevue, Washington in the storied seventies -- the era of pure equality that Krugman so frequently and lovingly recalls. Bellevue was a sleepy little Seattle suburb that was more rural than urban.

The decade of the Eighties and Nineties saw the rise of Microsoft in nearby Redmond. Microsoft's growth spawned tens of thousands of jobs; grew many hundreds of regional businesses; and has transformed the Seattle suburbs into engines of opportunity.

But if Krugman is right, the income inequality represented by the Microsoft billionaire boys club -- Gates, Allen, and Ballmer among them -- is downright horrifying. In Krugman's bizarre world view, Redmond would have been better off had Microsoft never located nearby because the "income equality" of the Seventies would have lived on indefinitely.

And since Kreskin Krugman wrote his ironic 1996 treatise on the disastrous inequality of Palo Alto, California, two students changed the area forever. Larry Page and Sergey Brin created Google -- with a market capitalization approaching $200 billion dollars. They certainly increased "income inequality" greatly (Page and Brin are currently worth about $20 billion apiece), but they ended up creating scores of millionaires, many of whom were straight out of Krugman's missing middle class.

Put simply, Krugman's like a broken record. For decades, he's sung the same off-key tune using raw statistics... but no knowledge. Income inequality is a great thing. Tom Blumer at Bizzyblog writes:

Income inequality is not necessarily a bad thing, as long as it is:

– Primarily the result of economic efforts.
– There is a safety net for people in unfortunate low-income circumstances.
– There is (as is generally true in the US) real opportunity for people to move up the economic ladder through education, hard work, and creativity, with as few as possible barriers to success.

The fact that low-income children have lacked the same educational opportunity as upper-income children is probably the biggest barrier to sustaining future economic mobility, which is why initiatives like No Child Left Behind, charter schools, school vouchers, and the like are so important. Conservatives tend to favor these initiatives; liberals, especially teachers’ organizations [Ed: a nice word for teachers' unions], usually oppose them.

Attempts to reduce income inequality through higher taxes on higher earners have not only failed to reduce income inequality, but have held back economic growth from what it could have been (see: Western Europe). It also should be noted that the standard of living enjoyed by most US citizens in the bottom income quintile is significantly higher than that of most of the rest of the industrialized world.

Remember all of this the next time you hear whining about how “unfair” income inequality is. The very people who bemoan income inequality ignore the remarkable economic mobility in this country, and are the same ones who oppose the educational reforms that would make even more upward mobility possible...

In short, Krugman lobbies for a kinder, gentler Communism. He advocates the simple redistribution of wealth and lauds a centralized command-and-control system to ensure a consistent income for all.

You'd think that one hundred million fatalities -- the result of the world's last major foray into Communism -- would have taught Krugman a powerful lesson. That murderous form of government leveraged political repression, extrajudicial executions, deportations, and man-made famines to slaughter innocents at a record pace.

Oh, I forgot -- Krugman's a liberal with a conscience.

Update: Omri at The Astute Bloggers gangs up on the Washington Post. Watch one intellectual take on a rabid pack of mental midgets on the same topic.

Hat tips: Gateway Pundit and Larwyn

1 comment:

Siraj said...

why did they give this IDIOT the Nobel Prize?.. And that too for Economics!!. Is it a Nobel Prize committee or a Miss Universe prize committee ?