Mitt Romney no doubt appreciates the million bucks his former Bain Capital protégé Edward Conard has donated to his election SuperPAC. He may not appreciate quite as much the shout-out he gets in the acknowledgements of Conard’s forthcoming book on economic inequality, and why we need more of it — a book that one observer suggests could well become “the most hated book of the year.”
That observer is New York Times Magazine columnist Adan Davidson, whose lengthy profile of Conard for the magazine will hit newsstands this Sunday. But it has already appeared online, and has ignited an all-too-predictable firestorm. In “Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong,” Davidson tells us,
Conard … 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.
Why is that? Well, according to Conard, it’s because rich people, unlike the rest of us, have substantial amounts of money left over after they pay the bills, which they can use to invest, thus creating improved technology, more jobs, and more wealth, for everyone.
As Davidson points out, this in itself is not a controversial notion. The question is how much of a benefit society gets from this investment. Liberal economist Dean Baker tells Davidson that for every dollar an investor earns, society gains five bucks. Conard thinks it’s more like $20 for every invested dollar.
On his New York Times blog, Nobel-prize winning economist and political gadfly Paul Krugman ridicules Conard’s basic argument, which he summarizes as:
[W]e should be really grateful to the rich for all the rich things they do. Because, you see, they don’t spend all their wealth building homes as big as the Taj Mahal; some of it they invest in innovation.
But does inequality always lead so neatly to investment and innovation and all that good stuff? As Krugman points out, some of America’s most robust growth came during the post WW2 years – a time when the country didn’t have such a colossal gap between rich and poor.
Meanwhile, in Forbes, Peter Cohan asks why, if inequality is such a good thing for the economy,
income inequality peaked in the U.S. at two points in its history that preceded the worst economic collapses in the last hundred years — 1928 and 2007.
And speaking of that most recent crash, Conard has some intriguing ideas about that as well. Instead of putting the blame on exotic derivatives and lax regulation, Conard argues that it was little more than an old-fashioned run on the banks. His solution? The government should pledge to bail out the banks in the case of another run, making “too big to fail” official government policy.
We’re likely to be hearing a lot more about Conard’s views in the months to come, not only because his book is guaranteed to annoy even more people when it comes out next month, but also because economist Glenn Hubbard, one of Romney’s go-to guys on economic matters, is a fan of the author. Hubbard told the Times that while he disagrees with Conard on some specific issues – Hubbard, for one thing, is more worried than Conard about the dangers of “crony capitalism” – he and Romney do generally share Conard’s “beliefs about innovation and growth and responsible risk-taking.”
Will that be a plus for the Romney campaign? Given the reception Davidson’s piece has gotten so far, that seems unlikely, but you never know. The biggest winner in all this so far has been, of course, Conard, whose unpopular ideas have garnered him the sort of publicity that money just can’t buy. The sound you hear right now is that of a small army of Democratic strategists preordering the book on Amazon.