I found an article on CNBC.com today in which the author complains heavily about wealth and income inequality and notes that the Fed has taken an interest in the topic. An interesting part of the article states:
What’s more, there is still widespread disagreement among academics and economists on the exact causes of inequality. Is it globalization or tax policy or the decline of labor unions or CEO pay or Wall Street or “winner-take-all” markets? Or some combination of all?
True, the Fed may not be able to directly reduce inequality. But some economists say the Fed has done its part to increase inequality in recent years. Monetary easing has benefited asset prices. And the top 1 percent owns an outsized share of assets—especially stocks.
I find it interesting because none of these things cause what believers in the argument note as inequality, but the answer is certainly right under their noses. I think the reason they can’t pinpoint the cause is because they perhaps believe it is a product of free markets that government hasn’t done enough to tame and are focused on finding the smoking gun while looking in the wrong places.
The problem is not inequality of income or wealth, it is a symptom. It’s a symptom of inequality of opportunity that comes with the consolidation of investment channels to such a degree that more than 50% of the nation’s potentially productive capital is under the control of only a handful of firms. The pool of potential entrants to the market for capital allocation has shrunk considerably from what it was 15 years ago; and I don’t see anyone asking why that has happened or pointing that out as a factor in the perceived distributional problem.
Perhaps the proponents of wealth gap argument are too busy looking for ways government can solve the problem by sticking it to the rich to notice that government has caused the problem. In a capitalist society, no one gets wealthy by working as a wage slave. It doesn’t take a rocket scientist to figure out that it isn’t the principles of capitalism that disrupts distribution; it’s the process that governments institute around capital allocation that shuts out average people from the process that distorts distribution. It arguably makes the net gains much smaller than otherwise could be; so we are also more the poorer as a whole because of it. Yet they stand by and cheer as government passes laws that supposedly get tough on banks while preserving the ‘good ol’ boys’ monopoly on the largest pools of other people’s money ever known to man; productive capital taken from pension plans, 401(k)s and the like; and allows them to continue wield the power that comes with it.
Want to stop the rampant, disgusting displays of greed and wealth by the few who get to join the fat cats club on Wall St.? REAPEAL Sarbanes-Oxley, spread the opportunities for small sum investing far and wide so that average Joe can take some portion of disposable income on a weekly or monthly basis to the corner securities-mart and invest it. Let average Joe wield the power of his own money by providing ample opportunity and incentives to do so. The 401(k), pension plan model of saving and investing must be decentralized and/or die to allow market principles to provide distributional justice.
I know it can be a scary thing thinking that in order for someone to get a leg up we don’t have to rip a leg from someone else if that’s what you’ve believed all your life. But I think letting competition in the investment markets work is a lot less painful than actually tearing legs off some people in order to give them to others. And when it comes down to it, those are the choices we have.
My personal choice is to dilute the power amassed in the financial sector and spread it around through competition for the investments of average people. It is a far more positive experience than simply decrying the behemoth and looking for ways to siphon some off and to hand out, which to me is compromising with a morally bankrupt system in the first place. Government needs to work for everyone in a positive way; not by creating these ugly things and then trying to fudge its way past its existence. That does nothing for the people who will never know anything but getting up every morning to work on the assembly line – and I think everyone deserves a better shot at life than that.