November 23, 2011
Larry Summers: We Have to do Better on InequalityFiancial Times op-ed, We Have to do Better on Inequality, by Lawrence Summers:
Why has the top 1% of the population done so well relative to the rest? The answer probably lies substantially in changing technology and globalisation. When George Eastman revolutionised photography, he did very well and, because he needed a large number of Americans to carry out his vision, the city of Rochester had a thriving middle class for two generations. By contrast, when Steve Jobs revolutionised personal computing, he and the shareholders in Apple (who are spread all over the world) did very well but a much smaller benefit flowed to middle-class American workers both because production was outsourced and because the production of computers and software was not terribly labour intensive. ...
What then is the right response to rising inequality? There are too few good ideas in current political discourse and the development of better ones is crucial. Here are three.
First, government must be careful that it does not facilitate increases in inequality by rewarding the wealthy with special concessions. ...
Second, there is scope for pro-fairness, pro-growth tax reform. When there are more and more great fortunes being created and the government is in larger and larger deficit, it is hardly a time for the estate tax to be eviscerated. With smaller families and ever more bifurcation in the investment opportunities open to those with wealth, there is a real risk that the old notion of “shirtsleeves to shirtsleeves in three generations” will become obsolete, and those with wealth will endow dynasties.
Third, the public sector must insure that there is greater equity in areas of the most fundamental importance. It will always be the case in a market economy that some will have mansions, art and the ability to travel in lavish fashion. What is more troubling is that the ability of the children of middle-class families to attend college has been seriously compromised by increasing tuition fees and sharp cutbacks at public universities and colleges.
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I agree completely, but where was Larry when he was in government during the stimulus debate? Mostly arguing against infrastructure spending, that's where. Each billion dollars in heavy construction employs roughly 15,000 for a year.
By now we should have had hordes of blue collar workers repairing bridges, replacing rusting, portable school rooms with real school rooms, building new airports and high speed rail projects between the northeast corridor, Atlanta and Charlotte and San Diego to San Francisco. All of this could have been done at rock bottom prices with very little interest expense. These kinds of projects greatly benefit the middle class.
Now we will do it after the economy recovers at higher prices. Thanks, Larry.
Posted by: jim harper | Nov 23, 2011 2:49:57 PM