I’m a big fan of John Mauldin. He has a new post about income inequality, here. It’s really good and thorough, with all the relevant graphs. He’s covered almost every important point. But I think he missed a big one. He says:
…the top 1% is getting richer either by (1) allocating capital to the right places (which all right-thinking people want to see happen), or (2) by employing skills that most of the American work force does not have – because production increasingly depends on the hard work of creative workers with hard-earned skills gained through education and experience.
He also notes that while the top 1% is disproportionately receiving both income and wealth, the real beneficiaries are the top 0.01%, demonstrating it with this graph:
But what he did not cite as the main root cause of why the rich are getting richer is crony capitalism. That is, regulatory capture. Too big to jail. You know, Fuld leaving Lehman with over $200M. The fact that Jamie Dimon is not only a free man, but richer than you (and just got a big raise). Laws written just so that the rich will necessarily get richer. QE. You get the idea. It’s not really that the rich are taking from the poor (although they most certainly are), but it’s that they are taking all the gains in the economy before anyone else has a crack at them.
He did include it, almost as an aside, near the end of the post, lumped in with education reform:
What else can we expect as long as we continue to rely on a 20th century education system to equip 21st century workers? When we allow crony capitalism to create an unequal playing field with special benefits for some? When businesses successfully lobby to create barriers to entry for future competition so that they can maintain their profits without having to compete? When we give tax benefits that help a relative few so that we are forced to tax those who are productive at ever higher rates?
And he discussed how the government’s role should be to help everyone gain from change, as it occurs. But I think he is really missing the bigger issue, that government is pretty much broken from the vantage point of the 99.99% (not just the 47%, or the 99%). While some politicians may rail about income inequality, they are, in fact, at that exact same time, implementing policies to exacerbate it. Knowingly.
Anyway, the post isn’t wrong. It’s just a little off the mark. Oh, and despite his best efforts I remain un-offended.