An opinion gap on the wealth gap

April 30, 2014

It was just a few minutes into the discussion when Thomas Piketty nudged his way onto the stage during the panel on “Inequality and Mobility in America.”  Yet the French economist wasn’t actually a participant in the event.

But given the rock star status conferred by Piketty’s 700­-page, data-filled book, “Capital in the 21st Century,” it was natural that the New York Times bestseller would come up in the sometimes heated but always polite debate over the causes and consequences of America’s widening wealth gap. 

The conclusion of Picketty’s book is that the egalitarian promise of Western-style capitalism is a myth, though a powerful one. He argues that the problem is not just inequality of assets and income but opportunity, which makes it much easier for the haves to have more and much harder for the have-nots to move up.

It’s not surprising that those ideas would be controversial at the finance-oriented Global Conference. Panelist Edward Conard, a former executive at Bain Capital, argued that it was intellectually dishonest to compare the more egalitarian economy of postwar America  to today’s, when a confluence of forces – immigration, technological change, the trade imbalance – have put pressure on middle-class and low-income wages. 

In fact, he said the United States has benefited hugely from technology and financial innovation. While the wealthiest Americans have indeed enjoyed an expanded share of the economic pie, he said they have also fueled a technology-driven job creation machine that has grown much faster than those of Germany and Japan.

“I would be careful not to damage the one thing producing growth in the American economy, the outsize success of America’s 1 percent, or America’s .01 percent,” Conard warned.

Jared Bernstein, the former chief economist to Vice President Joe Biden and a Milken Institute fellow, strongly disagreed. He argued that technology and globalization, combined with the “financialization” of the economy, was skewing the benefits to the wealthy to the detriment of everyone else. “I’ve not heard anyone convincingly make this argument that inequality has been good for the middle class,” he said.

Whatever the cause, Chrystia Freeland, a journalist and Canadian member of Parliament, said there is a host of evidence that a growing number of Americans believe their way of life is threatened by what they see as an increasingly unfair system. She cited the popularity of Piketty’s book and the election of populist New York Mayor Bill de Blasio as expressions of this growing unease. In fact, Freeland believes the situation jeopardizes America’s democratic underpinnings.

“People feel less secure about the value of their house and less secure about their jobs and less sure about whether their children will do better than they did,” she said. “And that together is a problem.”

If there was little agreement on the reasons behind worsening inequality, there was even less consensus on solving the problem. There were no advocates of a wealth tax, which Picketty supports. The ideas offered, but not agreed on, included expansion of job programs, a stronger social safety net, an increase in H1B visas for technical workers, and a minimum wage increase.

“If the gap is bigger, it has got to be easier to get from the bottom to the top,” Freeland said.