(Originally posted at pvlounge.com)
Rich Lowry, editor of the right-wing cesspool National Review, claims that liberals should like recessions because the latter cause huge wealth losses among the rich. Rich Lowry is someone who really hates reality, but really loves the rich. In his latest article, Lowry 'deftly' asks:
Why complain about the financial crisis? By liberalism’s standards, it has been a swift sword of economic justice, working to equalize wealth more rapidly than any policy short of summary execution of the rich.
Well this can only go downhill from here. Follow me after the fold....
We'll get to the standards of liberalism shortly, but let's choke ourselves with a few more passages before we begin:
America experienced a financial decapitation in 2008. We saw $11 trillion in wealth disappear, an astonishing 18 percent. The destroyed wealth equals the combined annual output of Germany, Japan, and the U.K., according to the Wall Street Journal. And there’s nothing to soak the rich quite like a financial meltdown.
Forbes magazine found only 793 billionaires around the world this year, compared with 1,125 a year ago. The collective net worth of the world’s remaining billionaires is $2.4 trillion, down $2 trillion during the past year. A few more years at that pace and they’d be bust entirely.
Lowry goes on to make a variety of fallacies or false choices, like claiming that liberals can only accept bad economic conditions with high unemployment and low income inequality, not good economic conditions and low income inequality. In other words, we all have to be poor to be equal. That's basically what the right thinks of Obama's economic policies. It shouldn't surprise you, of course, that Lowry and his rightist cronies can't see past their own bullshit.
To destroy these childish arguments, let's start by considering income inequality numbers from the Human Development Report released by the United Nations Development Programme (UNDP) and by considering nominal GDP data from the IMF. We're not doing time evolution here: we're just looking at numbers in 2007 and 2008. We'll look at the evolution of economic conditions over time later.
The UNDP report measured income inequality by looking at the income ratios between the top 10% and the lowest 10%. Norway, for example, stood at 6.1, meaning that the top 10% income earners in Norway make about six times more than the lowest 10%. The United States was at 15.9, so the wealthiest 10% of Americans make 16 times more than the lowest 10%. IMF figures on GDP per capita, the main rubric for measuring living standards, show that Norway had a per capita of roughly $82,000 in 2007. The US? About $46,000. Under these standards, income inequality for communist France was roughly 9.1 and GDP per capita was about $42,000.
Wait a minute. All this crap doesn't make sense! How can socialist, communist, collectivist Norway have such insanely high living standards and such low income inequality? Surely this must be some weird aberration. Actually, it's not. In fact, it's one of the great success stories of modernity: the wealthier we become, the more equal we become. The following graph, which plots GDP per capita vs. Gini index, highlights this fact all too clearly. The Gini index is another measure of income inequality. A Gini index of 0 means that all income is equally distributed (everyone makes the same amount of money) and a Gini index of 100 means that one person gets all the income.
Source: Visualizing Economics
The GDP data here comes from 2003 and 2004, and the Gini numbers come from the late 1980s until the early part of this decade. As you can clearly see, the lower the income inequality, the higher the standard living in general. A major exception is the United States, which has enormous amounts of wealth that are shared very unequally. Have we always been like this? No! Take a look at the following graph. It's a bit cluttered, but focus on the US (yellow line) specifically.
Source: Gini Coefficient - Wikipedia
There used to be a time when the US had a Gini index consistently below 40, and I've seen other data showing it was around 30 for a few decades in the middle of the twentieth century. That started changing in the 1970s and the 1980s. I could speculate on why, but that's not my purpose here. What we want to compare now is GDP growth in periods of low income inequality versus GDP growth now, in periods of relatively high income inequality. The following graph compares GDP growth as a percentage vs. time.
Source: Seeking Alpha
Look at those numbers and be amazed. Even the great economic times under Clinton produced paltry GDP growth rates when compared to the 1940s, the 1950s, and the 1960s. Correlation does not mean causation, of course, and we are not suggesting that high living standards and low income inequality impact each other directly. But the fundamental point is that the two phenomena are not contradictory, like Rich Lowry would have us believe. It is very likely to have both a wealthy society and an increasingly equal society.
Government has a major role to play in this equation. One important reason why American income inequality was so low a few decades ago is because the government taxed the wealthiest like hell. Then we put the plutocrats and the conservonuts in charge, and, of course, they could never stomach a world without some sort of financial hierarchy. Conservatism does not believe in a world where the wealthy do not rule the poor. The current administration can learn a few lessons by looking at its counterparts in the middle of the twentieth century. I'm not shedding a tear because the world has a few less billionaires. The middle class has suffered tremendously in this recession, and, unlike the wealthy, it has been suffering for the past two decades. Income inequality remains a huge problem in this country and around the world. We've definitely made a lot of progress, but liberals, Mr. Lowry, will not rest until poverty is completely eradicated from the face of the planet. We do not accept the false argument that tries to dichotomize between liberty and equality. We can have both, and it's conservonuts like you that stand in the way, trying to prevent the change that would create a new and better world.