Was Nick Hanauer’s TED Talk on Income Inequality Too Rich for Rich People?

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Multi-millionaire Nick Hanauer delivers a speech at TED Talks.

Their slogan is “ideas worth spreading.” But the folks at TED – the Technology Entertainment and Design nonprofit behind the TED Talks, beloved by geeks and others interested in novel new ideas – evidently think that some ideas are better left unspread. At least when the ideas in question challenge the conventional wisdom that rich enterpreneurs are the number one job creators.

This past March, millionaire tech investor and entrepreneur Nick Hanauer – one of the early backers of Amazon.com – gave a talk at a TED conference in which, among other things, suggested that middle-class consumers, not rich people, are the real job creators – and that because of this rich people should be paying more in taxes. Though the talk drew applause from conference attendees at the time, TED Talk curator Chris Anderson decided it wasn’t worth sharing with the wider world, and refused to post it on TED’s website.

His explanation? The talk was “too political” to be posted during an election year, and that “a lot of business managers and entrepreneurs would feel insulted” by some of Hanauer’s arguments. This seems more than a tad disingenuous, since TED generally doesn’t shy away from controversial ideas, and is sometimes so “political” that it invites actual politicians to talk at its conferences.

Naturally, the news that TED wouldn’t be posting this talk — and why — ignited a bit of a firestorm on the web after the National Journal reported it on Wednesday, inspiring posts on sites ranging from Geekwire to the International Business Times to the Daily Kos. Someone even set up a petition on Change.org to demand that TED post the talk.

But there was really no need for any petition. This being the age of the Internet, Hanauer’s “banned” talk didn’t remain banned for long. The Atlantic published the entire text of the short talk, complete with slides, on its website, and Anderson himself relented, sort of, and posted the video of the talk — though on YouTube, not on the TED site, where it will no doubt get many times the numbers of views that it would have if it had simply been posted on the TED site in the first place, as Anderson himself acknowledges in a blog post explaining his side of the controversy.

[youtube http://www.youtube.com/watch?v=bBx2Y5HhplI&w=640&h=360%5D

Watching the talk, the first thing one notices is just how un-incendiary it all is. Hanauer’s basic thesis – that economic growth is driven to a large extent by consumer demand – is familiar to everyone who’s ever taken Econ 101, or regularly watched business news. Here’s Hanauer’s basic thesis:

I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all have failed and all those jobs would have evaporated.

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is a “circle of life” like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me.

Indeed, as Hanauer goes on to point out, even when businesses do well, they try their best to not create new jobs – because more jobs means higher labor costs and lower profits.

Anyone who’s ever run a business knows that hiring more people is a capitalist’s course of last resort, something we do only when increasing customer demand requires it. In this sense, calling ourselves job creators isn’t just inaccurate, it’s disingenuous.

Again, this isn’t a shocking notion. It’s a central fact of the economy. Indeed, the refusal of profitable businesses to start hiring again in earnest is one of the reasons job creation has been so anemic over the past several years.

Of course, Hanauer moves from these less-than-earthshattering theses to draw a conclusion that might offend some rich people and/or Republicans.

[O]ur current policies are … upside down. When you have a tax system in which most of the exemptions and the lowest rates benefit the richest, all in the name of job creation, all that happens is that the rich get richer.

Since 1980, the share of income for the richest Americans has more than tripled while effective tax rates have declined by close to 50%.

If it were true that lower tax rates and more wealth for the wealthy would lead to more job creation, then today we would be drowning in jobs. And yet unemployment and under-employment is at record highs.

Whatever your stand on the issue, this is certainly a topic worth debating. You would think that TED would want to be part of the conversation.