May 17, 2012

TED and Economic Inequality



The above TED talk, by Richard Wilkinson, is from October 2011, and it's all about economic inequality. There's quite a lot of buzz today about another talk on economic inequality which was recorded, then quashed by TED officials. You can check out the full transcript here, from National Journal.

At first glance, this is quite a strange discrepancy. Both talks are on economic inequality, and they do differ a bit, but if anything the Wilkinson talk is more radical. The gist of his is that once a country has reached "developed" status, wealth doesn't much matter for the health of that society, broadly speaking (including things like longevity, mental illness, crime, prison population, poverty, etc). Instead equality is what matters. More equal societies are better.

The censored talk, given by venture capitalist Nick Hanauer, makes a fairly banal point that starting a successful business depends entirely on having a population of people with the ability to buy your product:
I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all have failed and all those jobs would have evaporated.
That's why I can say with confidence that rich people don't create jobs, nor do businesses, large or small. What does lead to more employment is a "circle of life" like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me.
Listen to his tone, though:
Significant privileges have come to capitalists like me for being perceived as "job creators" at the center of the economic universe, and the language and metaphors we use to defend the fairness of the current social and economic arrangements is telling. For instance, it is a small step from "job creator" to "The Creator". We did not accidentally choose this language. It is only honest to admit that calling oneself a "job creator" is both an assertion about how economics works and the a claim on status and privileges. 
The extraordinary differential between a 15% tax rate on capital gains, dividends, and carried interest for capitalists, and the 35% top marginal rate on work for ordinary Americans is a privilege that is hard to justify without just a touch of deification.
He's not just talking about inequality, he's saying that the title of "job creator" is undeserved. He's being blunt, and rude. We're all familiar with the titanic egos of the plutocrats, and how they react to sharp criticism. Check out this email TED curator Chris Anderson sent Hanauer, fisking his talk:
"Only consumers can set in motion this virtuous cycle." ...except when a company is thinking ahead of what the market wants; exhibit A: Apple ... 
"An ordinary consumer is more of a job creator than a capitalist." ...really? as an ex entrepreneur who agrees with your overall stance, I don't think that statement is literally true. There are numerous jobs that exist because of the imagination, energy and risk-taking of individual capitalists or entrepreneurs such as you... 
"hiring more people is a course of last resort, done if and only if rising consumer demand requires it". ...I launched numerous magazines for each of which, at time of their launch, there was zero consumer demand...I think a lot of business managers and entrepreneurs would feel insulted by that statement as given.
Emphasis mine. Setting Anderson's obviously bogus quibbles aside, it seems that the perceived slight to the status and value of the "entrepreneur" class is what doomed Hanauer's talk.

The interesting thing to me is how Wilkinson's far more radical talk inspired no controversy at all. Looking at the charts, the US is shown as the worst developed country, sometimes by an enormous margin (as in incarceration rates). And check out this section, starting at about 9:58:
The other really important point I want to make on this graph is that, if you look at the bottom, Sweden and Japan, they're very different countries in all sorts of ways. The position of women, how closely they keep to the nuclear family, are on opposite ends of the poles in terms of the rich developed world. But another really important difference is how they get their greater equality. Sweden has huge differences in earnings, and it narrows the gap through taxation, generous welfare state, generous benefits and so on. Japan is rather different though. It starts off with much smaller differences in earnings before tax. It has lower taxes. It has a smaller welfare state. And in our analysis of the American states, we find rather the same contrast. There are some states that do well through redistribution, some states that do well because they have smaller income differences before tax. So we conclude that it doesn't much matter how you get your greater equality, as long as you get there somehow.
The political implications of this are enormous. Taken just to the next logical step, this means that the Republican ideas around incentives for work, and tax incentives for "job creators"--exactly the same thing Hanauer was talking about--are completely mistaken. The evidence is in, according to Wilkinson, and developed countries should forget everything else and pursue equality by any means at hand.

Now, that sounds good to me, but the point is it's rather remarkable how this kind of thing goes over fine with the rich job-creatin' TED attendees, while a more moderate but less polite version gets censored. It's almost like they're sitting in their seats, blissfully unaware of what the speaker is actually talking about, but feeling good about being part of a hip, trendy, high-status event.

UPDATE: They've since released the talk.



Dude isn't that great at giving a speech; it actually reads better in the transcript. But still, relatively moderate point from the view of mainstream American consensus--the middle class is the economic backbone of the country. In any case, good on TED for releasing it, other things equal. Anderson's view here.

6 comments:

  1. I think the operative factor here is their respective backgrounds. Wilkinson is a social researcher and Hanauer is a venture crapitalist. That makes for more of a concern for the elitist classes as he comes off as a 'traitor'. The other important thing to consider here is Hanauer's 'deistic' remarks. Not at all controversial to me, as I have been arguing this for months. The reason why crapitalists ally themselves with the religulous right is for this very reason.It is the ONLY justification they have for their dubious acquisition of wealth and power. This is also why the new atheist movement bothers them and why they have tried to 'head it off' with a resurgence of reinjections of Ayn Rand philosophy and 'pseudo-atheism'.

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  2. Background is surely a factor, but laziness also I reckon.

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  3. While wanting a more equal America, I would be hesitant to sacrifice America's advantages too quickly. America is significantly wealthier than a country like Sweden, so much so that our government spending per capita (PPP $) is only slightly below theirs, and ahead of countries like France and Germany. We are just able to this with lower tax rates (so yes, the Republican model kind of does work). With a shift in priorities, it is not unfeasible for America to enhance the welfare of the poorest 20% of the population beyond that of Sweden's poorest 20% without significantly increasing taxes. Sweden's poor are really not that much better off than ours, the cost of closing the gap might only be a couple of % of GDP.

    So my question is would it really be better to sacrifice the absolute welfare of the poorer members of our population for more equality?

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  4. "America is significantly wealthier than a country like Sweden, so much so that our government spending per capita (PPP $) is only slightly below theirs..." I won't believe this without more evidence. Sweden's economy is like 48% government spending. PPP per capita GDP here is about 48k, compared to 40k in Sweden. And how much of our social spending goes towards the world's most expensive healthcare, which is more than twice as costly as Sweden's?

    "Sweden's poor are really not that much better off than ours..." Really? Here is a partial list of welfare state benefits in Sweden:

    1) Universal healthcare, free at point of access for the poor.
    2) Child income (not just tax) credit.
    3) Generous unemployment benefits.
    4) Minimum income support.
    5) Pension available at 61.
    6) Housing allowance for the poor.
    7) Cheap/free higher education.

    Being poor in the US is awful. In the developed world, it really doesn't get any worse.

    So yes, I say raise taxes (when the Fed has room to ease), bring down the rich, bring up the poor, and institute price controls on education and healthcare.

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  5. The per capita spending data (US$ PPP) you wanted, from the latest OECD factbook. (Data for 2009). Unfortunately probably distorted by different countries responses to the finacial crises. However the US convergance with Sweden has been a long term trend.

    Sweden: 20406
    USA : 19266
    France : 18866
    Germany : 17263
    Canada : 16655
    Japan : 12570

    Also remember in the US data you are averaging wealthier states (New England) with poorer states (the South). In looking at Europe we are not averaging high funtioning areas with low functioning areas to the same degree (Germany with Greece, for example).

    My main point, is that whenever I see US income distribution compared with Eurpean welfare states, the European advantage at the low end, is a fraction of their deficency at the higher end (higher end consisting of over 50% of the population). I am interested in approaches where a dollar lost in the upper half is matched by a dollar gain in the lower half, what I see normally looks more like at least $3 to $4 loss for every 1$ gained.

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  6. A link would be nice. In any case I still don't see why we should be looking at levels of spending, given how much more the US is spending on healthcare and education. Rather it makes more sense to me to look at what kind of services that money buys, and I think it's unquestionably true that Sweden's welfare state is stupendously generous compared to the US's.

    As for your main point, without more study I just don't see what all this extra wealth is buying the society. Save of course for an enormous, tottering financial sector that more resembles a massive tapeworm with every passing moment, and a bloated, extractive healthcare system (and higher education, to a lesser extent).

    Whether your hypothesis about dollars lost and gained is true would need further proof. But kind of the whole point of Wilkinson's talk was that after a certain point, more money really doesn't seem to buy anything tangible for a society. We're quite a bit richer than most of Europe but they're killing us in nearly every one of those "health of society" metrics. Crime, poverty, suicide, incarceration rate, lifespan, and more.

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