May 2, 2012 at 2:33 PM ET
Maybe economic inequality isn’t such a bad thing after all.
At least that’s what a new book written by a rich, former Bain Capital managing director espouses. Even though the economic manifesto about how the 1 percent benefits the 99 percent hasn’t hit bookstores yet, it’s already getting heat from the 99-percent crowd and beyond.
“Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong,” by Edward Conard, 51, comes out next week. According to his publicist the book offers: “A contrarian analysis of the recent economic crisis by a close associate of Mitt Romney. (It) promises to be one of the year's most talked-about books on the subject.”
Indeed, social media is already lighting up over the book, prompted mainly by an article in the New York Times Magazine, published online Tuesday, titled: “The Purpose of Spectacular Wealth, According to a Spectacularly Wealthy Guy.”
The writer of the magazine piece, Adam Davidson, founder of NPR’s Planet Money blog and podcast, surmised: “This could be the most hated book of the year.”
This from his article:
Conard understands that many believe that the U.S. economy currently serves the rich at the expense of everyone else. He contends that this is largely because most Americans don’t know how the economy really works — that the superrich spend only a small portion of their wealth on personal comforts; most of their money is invested in productive businesses that make life better for everyone. “Most citizens are consumers, not investors,” he told me during one of our long, occasionally contentious conversations. “They don’t recognize the benefits to consumers that come from investment.”
As for the argument that spreading the wealth helps society, Conard's book turns that on its ear, taking positions that would make even Tea Party members bristle, Davidson writes.
It’s a fresh take on the “defense of the rich,” said Paul Krugman in a New York Times op-ed Wednesday.
“Until now, the official line has been that what we need are incentives — that jaawwb creeaytohrs (sic) won’t do their thing unless we dangle the carrot of immense wealth in front of them," said Krugman, who has been hawking his own latest book, “End This Depression NOW!” "But now we’re supposed to think that it’s not the prospect of future wealth, but wealth in being, that’s what is really so wonderful.”
Income inequality has vexed many economists, especially with the growing disparity in wages. Chief executives of the biggest public companies now make 231 times more than typical workers, according to a study released Wednesday by the left-leaning Economic Policy Institute.
“CEOs have fared far better than the typical worker, the stock market and the U.S. economy as a whole since the late-1970s,” said Lawrence Mishel, the institute’s president, in the report. “Compensation growth for executives and for top-tier financial-sector workers has fueled the enormous growth of incomes at the top.”
While it’s unclear how influential Conard’s book will be on economic thought when it comes to income inequality, those who’ve long argued for a more balanced economic playing field will probably be less than enthused.
Robert B. Reich, author of “Aftershock: The Next Economy and America's Future,” said he hasn’t read Conard’s book but was curious about why Conard thought wealth concentrated in the hands of a few was “a good thing.”
“Undoubtedly some degree of income inequality is necessary and good to provide appropriate incentives, but at some point – and I believe we’ve hit that point – it harms an economy by robbing the vast middle class of the purchasing power it needs to keep an economy going, and it generates social and political upheaval,” said Reich, former labor secretary under President Clinton and currently Chancellor’s Professor of Public Policy at the University of California at Berkeley.
Conard’s forthcoming book also argues that banks weren’t to blame for the economic implosion that led to the Great Recession.
This from the Times article:
The financial crisis, he writes, was not the result of corrupt bankers selling dodgy financial products. It was a simple, old-fashioned run on the banks, whom, he says, were just doing their job.
Another focus of the book, according to Davidson, is on risk-takers and how they deserve large amounts of wealth because they take the risks.
Exactly who are the risk-takers? Technology innovators and financial wizards who come up with new investment vehicles that people use, Conard argues.
Who are the non risk-takers? Art-history majors, whom Conard mocked in his interviews with Davidson.
He doesn’t think lawyers are risk-takers either because they “opt for stable professions that don’t maximize their wealth-creating potential,” the article states.
It’s unclear if Conard counts himself a risk-taker. His publicist Rimjhim Dey said the author would not comment until after the book comes out next week.
Conard’s LinkedIn page, which includes no connections, lists only three employers in his career, Bain (Romney's former firm), Ford Motor Co. and the investment banking firm Wasserstein Perella.
The page also has a description of his book, including this conclusion:
Whether you agree with the book’s provocative and counterintuitive conclusions or not, Unintended Consequences will reward you with a sophisticated understanding of the contemporary economy, one no other book has yet provided.