Back to the Future: Further Thoughts on the State of the Union

Back to the Future: Further Thoughts on the State of the Union
January 26, 2011 by Art Carden

My new Forbes article asks " If We Win the Future, Who Loses?" While we're talking about it, here are a few other comments that correct some popular misconceptions:

Misconception 1: The rich get richer while the poor get poorer, and the wealth of the wealthy is caused by the poverty of the poor. In today's Philadelphia Inquirer, Steven Horwitz explains that " The poor are not getting poorer." When we focus on flesh-and-blood human beings and drop the assumption that someone stays in the same quintile of the income distribution across his or her entire lifetime, the "rich richer, poor poorer" falls apart.

Misconception 2: Biofuel is a good idea. Here's William Anderson's latest column for The Freeman Online.

Misconception 3: Businesses have too much "power," and governments don't have enough. I can do no better than this passage from Deirdre McCloskey's excellent The Bourgeois Virtues, which should be on every shelf and/or e-reader. It's a book I assign in my "Classical & Marxian Political Economy" course. From page 35:

A bright future for human freedom therefore requires curbing our present lords. These are not the corporations, which after all control only our consumption of hamburgers and athletic shoes, and, in view of their competition, "control" even those feebly, McDonald's against Burger King or Nike against New Balance. Observe that the terrible corporate trusts of earlier times, such as the great and imposing United States Steel, the horrific Amalgamated Copper Company, the appalling American Telephone and Telegraph Company, the gouging Erie and New York Central railway pools, are one with Nineveh and Tyre.

A farmer-captured Department of Agriculture, though, and a corrupt United States Congress live on and on and on. At the end of 2004 the growers of taste-free little machine-harvested tomatoes in Florida were able to block the exportation from the state of ugly but delicious handpicked varieties by using the governmental system of "marketing orders" first promulgated as a New Deal measure in 1937. When American steel producers get tariffs or when sugar beet growers get import quotas it is not because of their market power but because of their political power, their access to an all-powerful state.

Misconception 4: The state helps the poor. Here's McCloskey again, from page 51:

Unions raised wages for plumbers and autoworkers but reduced wages for the nonunionized. Minimum wages protected union jobs but made the poor unemployable. Building codes sometimes kept buildings from falling or burning down but always gave steady work to well-connected carpenters and electricians. Zoning and planning permission has protected rich landlords rather than helping the poor. Rent control makes the poor and the mentally ill unhousable, because no one will build inexpensive housing when it is forced by law to be expensive. The sane and the already-rich get the rent-controlled apartments and the fancy townhouses in once-poor neighborhoods.

Misconception 5: Those in the top 5% or top 2% of the income distribution are blue-blooded plutocrats. Scott Sumner makes an important point: a family with two working adults each earning $75,000 per year is in the top 5% of the US income distribution:

In Boston, cops make about $110,000. I'm sure some of them are married to nurses making around $80,000, putting them well up into the top 5 percent. I don't regard this sort of family as rich, but many people I talk to insist the top 5% are rich. If so, there are far more rich families that are a cop/nurse, or accountant/teacher, or engineer/secretary, then there are Donald Trumps.