Thursday, January 23, 2014

The 3 Types of "Income Inequality" Religious Extremists

Guest post by Biff Spackle

With disturbing regularity, pundits great and meager decry a familiar and reviled foe of progress known as "income inequality."

Under the rubric that income inequality is inherently evil, unfair, or overly capitalistic, three distinct sub-sects of this odd religion have emerged.

The "Wall Street Needs More Regulation" Tribe: Tyler Cowan of George Mason University is emblematic of this group. Cowan is concerned with the growing disparity of wealth between the top one percent and the remainder of society. He believes it is linked to structural problems with our society -- especially Wall Street's ne'er-do-well financial engineers -- that can only be solved by big government.

In 2011, for instance, Cowan wrote that he was unsure whether "the new financial regulation bill [Dodd-Frank] will help" and offered several endorsements of its key features. Cowan seems to have missed the century-long tidal wave of regulation already levied upon the financial industry with government inevitably destroying that which it claims to protect (housing, student loans, etc.).

The thousand-page Dodd-Frank bill -- which was never read by lawmakers -- confers immense and unconstitutional powers on an unelected bureaucrat (Richard Cordray, the head of the CPFB). The law, in fact, nationalizes even greater swaths of the financial industry, hamstrings the free market, and creates yet another massive, authoritarian, Politburo-like policy-maker.

It is but one more complex spiderweb of regulatory edict that is certain to fail just as surely as Fannie Mae imploded in 2008.

Never does Cowan publicly list America's richest people. Of the top 10 wealthiest individuals in America, three are self-made (Gates, Ellison, and Bloomberg). Of the next 10, four are self-made (Bezos, Page, Brin and Zuckerberg, who is 29 years old). In fact, if you descend down the Forbes 400 list, you will find self-made billionaire after self-made billionaire and few of the Wall Street hedge fund operators and bankers Cowan so decries.

In fact, Cowan's vaunted income inequality metric has been driven not by Wall Street but by technological innovation and the network effect.

It has given a bright 23-year old the opportunity to turn down an offer of $3 billion for a company he founded just two years ago.

It has given a bright 17-year old the opportunity to sell a mobile app he developed in high school for $30 million.

In fact, a vast, interconnected, and vibrant fabric of computing machines has and will continue to revolutionize value creation in the United States. And somehow Cowan missed it.

The "Robots Will Steal All Our Jobs" Tribe: Mike Shedlock is the archetype of the robophobes, publishing one fear-mongering article after another, seemingly on a weekly basis. A sampling of his headlines may help offer some perspective into the mindset of this particular brand of Luddite:

Meet "Baxter" the Robot Out to Get Your Minimum-Wage, No Benefits, Part-Time Job, Because He's Still Much Cheaper; Fed Cannot Win a Fight Against Robots
Carl the Robot Bartender Mixes Drinks and Chats With Customers
Future of Medicine: Meet Sedasys - Your New Robot Anesthesiologist
Robotic Outsourcing; Food Preparation Robots Invade China, Japan, US; Who is to Blame, and What Can be Done About It?
$210,000 Cow Milking Robot; Presenting the "Astronaut A4 - A Natural Way of Milking"; How Far Off is the Completely Robotic Farm?

There are more. But the last one is particularly striking: since the dawn of human history, increased automation has marked the cultivation of food. From men tilling fields and picking crops to massive farm machinery and crop-dusters, mechanization of farming has improved the lives of billions of people.

And somehow "robots" will disrupt that trend?

Each new innovation -- a robot is but one example -- creates entire new ecosystems to plan, design, build, and service.

The 1730 invention of the flying shuttle dramatically accelerated the process of weaving and production of cloth. This innovation in turn led to incredible new opportunities for entrepreneurs to supply raw materials, service machinery, create new families of finished products, and the like.

You may know it as the Industrial Revolution.

And always the Luddites like Shedlock predict the demise of good-paying jobs, whether on the farm or at the loom. Never do they seem to contemplate that the process of creative destruction renders obsolete certain roles while simultaneously creating vast and unpredictable opportunities.

Whereas the blacksmith and the elevator operator no longer appear in our society, tens of thousands of new types of jobs have more than supplanted them.

Even the lowly pencil defies the ability of any human to fully comprehend -- let along perform -- its construction.

Automation in the form of ubiquitous robotics is absolutely no different than any other revolutionary improvement in speed, quality and delivery of products and services.

It would seem that Shedlock and his ilk somehow missed the Industrial Revolution and every other transformative period of human history.

The "Statist" Tribe: Paul Krugman, on the other hand, belongs to the dogmatic school of progressive thought. In this case, you can read progressive as Doctrinaire Marxist.

Krugman, whose inane posturing and reflexive hypocrisy have been thorougly exposed as pure, unvarnished idiocy by historian Niall Ferguson, pretends to belong to the Cowan tribe.

But his cheerleading of Communists like Bill DeBlasio gives away the game. Krugman is a Statist; his religion is government; and any of his bleatings -- income inequality or otherwise -- are designed to lobby for increasingly centralized and authoritarian government.

As the French painfully discovered with their one year flirtation with Marxism, collectivism can't work, won't work, and has never worked in all of human history.

And somehow Paul Krugman and his fellow ideologues missed that part of history class.

What's 1,000 times worse than income inequality? Income equality.

In truth, North Korea represents the ideal for those who fight for income equality with its one man at the top worth tens of billions of dollars while the entire civilian population starves, largely impoverished.

In spite of the Democrats' efforts, there is no better society on the planet to simultaneously improve society and to enrich oneself than the United States.

Income inequality -- in fact, wild inequality -- is healthy and desirable.

Perhaps one day the would-be regulators, the Luddites, and the Marxists will pick up some history books and discover the wonders of the free market. But, then again, I'm a dreamer.


10 comments:

JeffersonOh said...

If Baskin-Robbins only sold vanilla ice cream, they'd be out of business.

Enjoyed the article.

Anonymous said...

I'm all for economic inequality..
+ We don't need a law to create it .
No wonder registered democrats do not like it,
though on the average richer than registered republicans...john ☻☺♥

Anonymous said...

The "free market"? Methinks Biff Spackle must have attended the Fed's birthday party. If you don't want more regulation of Wall Street, how about enforcement of the law, and holding actual people culpable for illegal corporate behavior? LIBOR manipulation, FX manipulation, commodity manipulation, THEFT. Not my idea of market activity, but here we are.

R. Right said...

Income inequality is exacerbated by government distortions like taxation and regulation that artificially creates winners and losers. Increase economic freedom and competition and you'll decrease income inequality.

WC Varones said...

Biff is naive. Cowan and Shedlock are right.

Government creates income inequality.

http://www.wcvarones.com/2011/01/robert-shiller-on-rising-inequality-in.htm

Rob in Mass said...

What history books do you refer to? Academia and media fell to the "progressives" /Marxists two generations ago - so one must now go trekking deep into the intellectual wilderness on one's own to find an honest accounting of collectivism's history of failure.

Anonymous said...

The CPFB is doing amazing work. A international wire transfer used to cost $35. Now thanks to their "help" it costs $60.

If you are wiring money for personal use, the banks can no longer do that after 2:00 pm or on Saturdays. (In California, at least.) That must be convenient for all of the consumers, eh?

This is because they now have to tell you how much the amount will be in foreign currency, as if the local bank knows the rate better than the person sending money home.

Oh, and now you also get a 30 minute regret window. Because so many people who plan a trip to a bank to wire money home regret doings so.

I wonder how much of the $60 is going straight to the CFPB's budget. That's a lot of money.

I feel bad for the poor immigrant who wants to wire $1,000 to his mom back in the old country:

He now needs to take time off work. His fees went from 3.5% to 6%. And the form and processing time just got longer.

My bank said that other smaller banks just would stop offering the service at all. Awesome.

Anonymous said...

The CPFB is doing amazing work. A international wire transfer used to cost $35. Now thanks to their "help" it costs $60.

If you are wiring money for personal use, the banks can no longer do that after 2:00 pm or on Saturdays. (In California, at least.) That must be convenient for all of the consumers, eh?

This is because they now have to tell you how much the amount will be in foreign currency, as if the local bank knows the rate better than the person sending money home.

Oh, and now you also get a 30 minute regret window. Because so many people who plan a trip to a bank to wire money home regret doings so.

I wonder how much of the $60 is going straight to the CFPB's budget. That's a lot of money.

I feel bad for the poor immigrant who wants to wire $1,000 to his mom back in the old country:

He now needs to take time off work. His fees went from 3.5% to 6%. And the form and processing time just got longer.

My bank said that other smaller banks just would stop offering the service at all. Awesome.

DFCtomm said...

It's never happened before and I can't imagine it, so it's impossible. I don't think a well reasoned argument can compete with that.

Anonymous said...

I am not sure your interpretation of Shedlock's position is correct. As I read him, he is saying to those who want to increase the minimum wage that their efforts to make labor more expensive will serve to make robots more economical for businesses. This will result in a loss of jobs to robots. I don't think he is a Luddite, just being realistic about the economics of the cost of labor.