The Economist’s New Gilded Age

Since The Economist chose not to publish my incredibly cogent response to a recent “Economics Focus” column, I’ll share it with them (and you) here:

The new (improved) Gilded Age

Dec 19th 2007

The very rich are not that different from you and me; or less different, perhaps, than they used to be

The article points out–accurately–that many aspects of life are much better for the poor today, relative to the rich, than they were in the last gilded age of major income inequality. (Having a cheap car compared to an expensive one is much better thanwalking versus driving.)

Their last paragraph gives credit where they believe credit is due: “…those intrepid souls who make vast fortunes turning out ever
higher-quality goods at ever lower prices widen the income gap while reducing the differences that matter most.”

My reply:

sir – Are those “intrepid souls who make vast fortunes” (Economics focus, December 22nd) to be thanked for the differences between this Gilded Age and the last? Those souls haven’t changed: we had ambitious and sometimes-rapacious entrepreneurs then, and we have them now. We had innovation and technological progress then. We had increasing productivity. What’s changed since 1920?

Today we have the whole corpus of national and international institutions that emerged after that Golden Age, and its spectacular demise. (And we have the taxes to pay for them.) Compare GDP growth to the growth of government over the last hundred years: The rocketship of widespread prosperity didn’t take off until A: the New Deal and B: WWII (when U.S. taxes and spending were the highest–45% of GDP–that they’ve ever been, before or since).

Is it possible that those institutions–including central bankers, social welfare programs, international monetary organizations, and a whole raft of despicable regulators and inspectors-general–are in fact requisite to achieving the widespread prosperity that you celebrate? All the world’s stable, prosperous, successful, developed countries–without exception–are rife with those leaky, imperfect, sometimes-corrupt, and often-fumbling institutions.

Your newspaper’s thank-god-for-greed conclusion ignores what’s changed since the twenties (government has grown), and rains predictable and rather tiring adulation on what hasn’t (people–obviously–are still trying to build profitable businesses).

All conscience aside, here’s one less-than-intrepid but very successful entrepreneur who thanks god (and, yes, The Economist) for those institutions, and for the increasingly stable, equitable, and prosperous world that they’ve built over the last seventy-five years–a world that made it possible for me to achieve the success that I did.