Very Wealthy Man Argues that Our Growing Income Inequality Means Our Economy is Working

Unlike his former colleagues, Conard wants to have an open conversation about wealth. He has spent the last four years writing a book that he hopes will forever change the way we view the superrich’s role in our society. “Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong,” to be published in hardcover next month by Portfolio, aggressively argues that the enormous and growing income inequality in the United States is not a sign that the system is rigged. On the contrary, Conard writes, it is a sign that our economy is working. And if we had a little more of it, then everyone, particularly the 99 percent, would be better off. This could be the most hated book of the year.

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.” 

Adam Davidson, a reporter for NPR’s Planet Money, interviewed Edward Conard, a former partner at Bain Capital, the private-equity firm he helped build with Mitt Romney, about his new book which basically argues that America’s growing income inequality is actually a good thing. Davidson is right: I hate this book already. But I will probably read it (from the library!), because it’s necessary to know the other side’s argument, before you form your own. 

Also infuriating:

Conard’s version of the financial crisis ignores much reporting and analysis — including work I’ve done with NPR’s “Planet Money” team — that shows that some of the nation’s largest banks actively manipulated customers and regulators and, sometimes, their own stockholders to profit from dangerous risk. And for many economists, rising inequality can create exactly the wrong outcomes for society over all. Rather than simply serving as an invitation for everybody to engage in potentially beneficial risk-taking, inequality can allow those with wealth to crush new ideas.

I kept raising these questions with Conard, but he repeatedly waved them off. “I don’t want to talk about rent-seeking,” he told me. “When you go off to a third-world country, there’s a dictator who says, ‘I’m giving the telephone franchise to my brother-in-law.’ It’s pretty hard to do that here.” I countered that many economists see rent-seeking in the United States as a much more subtle but still destructive process. If some rich people are able to get and stay rich by messing around with the rules, then those art-history majors will feel as if they have no chance to break into a well-connected, well-protected elite.

If you’re going to argue that income inequality is a good thing, you better have some solid answers prepared when a reporter raises tough questions to you.

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13 Comments / Post A Comment

Dear Billfold – why did you truncate your feed? This makes me sad.

IDK anything about this but i’m inquiring! thanks x

Jenn (#672)

I agree with quadrilaterals. Please change it back!

Mike Dang (#2)

@Jenn No clue what happened, but I’ve been told that this has been fixed.

nerd alert (#436)

It’s also really important to note how it’s basically impossible for the average American to participate in the investment economy. In order to open a portfolio with Bain, you need one million dollars in seed investment. And the point of investment banking is to make money, not jobs- and nearly half of Bain’s businesss launched have gone bankrupt, leaching the original owners assets back to Bain, so it made them money. I would suggest that after you read this book (I will probably spite read it too, we can do a book club!), you should read David Harvey’s Enigma of Capital. It talks about how the modern rentier economy functions from a Marxist perspective.

myrna.minkoff (#272)

@nerd alert aw, come on! In a pinch you can just borrow that capital from your parents! Pick up those bootstraps.

cmcm (#267)

I will be unable to read this without flying into a violent rage.

sony_b (#225)

@cmcm Me too. What a joke. Let them eat bootstraps.

cmcm (#267)

Also – this book! http://amzn.to/KVkmo7 which is full of FACTS and comes to exactly the opposite conclusion of this twat. Ew. I hate him so much. I hate this book for existing.

Where’d this guy get his economics degree, the University of Stupid?

Seriously though, in addition to unforgivably waving off the issue of rent seeking, I don’t see a very good argument here that the distribution of wealth affects the overall level of investment in the economy. Is there’s an argument for why an economy where investment is conducted by sound, well-regulated banks holding the savings of broad swathes of the population somehow less desirable than one where investment is controlled by the whims of a few ultra-rich individuals, I haven’t heard it.

It seems like his argument boils down to: in our country, at this moment, most investment capital is controlled by a few superrich individuals. Ergo, without superrich individuals there would be no investment.

Fig. 1 (#632)

This is relevant to my interests.

mouthalmighty (#165)

Everything I read about/from wealthy economists makes my head hurt. Why so ridiculous?

Other people have given more academic take-downs of this nonsense. I’m just here to say that the economy is not “working” when people routinely stay at bad jobs so they don’t lose their health insurance, when they’re afraid to start a business or freelance due to the lack of a safety net, when 1 in 6 kids deals with hunger, when responsible people are underwater in their mortgages, when credit card companies and student lenders charge usurious rates, when veterans and the mentally ill end up on the streets, and when the majority of bankruptcies are due to medical bills.

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