It’s an oft-repeated adage: The rich are getting richer, and the poor are getting poorer.
Markedly so, in fact. According to a government agency, nearly all the gains in household income in the United States since 1975 have gone to the top 20 percent of households.
But income inequality is a good thing — at least according to John Tamny, an editor for Forbes, editor of RealClearMarkets and adviser to the company Toreador Research & Trading. In fact, Tamny said Tuesday night in New Orleans, the key to making the poor less impoverished is actually to increase the wealth of the rich.
“It’s a beautiful thing,” Tamny said, adding that income inequality in a capitalist system provides incentive for people to pursue what they’re good at, come up with new ideas and turn what used to be luxury items into common goods. “Inequality is the process by which disparity of the living standard shrinks.”
Tamny’s theory is laid out in his latest book, “Popular Economics: What the Rolling Stones, Downton Abbey and LeBron James Can Teach You About Economics.” On Tuesday night, he appeared at Isidore Newman School to discuss his ideas in a lecture titled “Income Inequality: Problem or Benefit?”
The discussion was part of Free Market, a lecture series being presented at Newman and Metairie Park Country Day School thanks to Country Day supporter Jay Lapeyre and Greg Rusovich, who serves on Newman’s board.
Now in its fifth year, the series brings speakers to both schools to offer a free-market and free-enterprise perspective.
“When I was in high school, we had a class on free enterprise, and we understood what the basics of capitalism were. We’ve gotten away from that,” Rusovich said. “We want to make sure that philosophical bent is considered.”
On Tuesday, Tamny didn’t disappoint.
“It’s a tragedy that we’re the richest nation on Earth, and what I mean by that is we should be exponentially wealthier,” Tamny said in an interview before his lecture. “We could be so much more prosperous. But economists have confused what is simple.”
According to Tamny, the basic idea is that as inequality rises, the basic living standard for everyone skyrockets. Thanks to wealth, he said, Americans now are able to cure many forms of cancer, ride around in cars, use computers and talk on cellphones.
Even the poor are better off in America than in most other countries, he said.
“Judging by the obesity problem in the U.S., everyone gets to eat,” Tamny told an audience member.
But the United States could be wealthier, he added, if a few things were changed: The income tax would have to be as low as possible, the capital gains tax would have to be zero, companies would have to be able to trade freely and monetary values would have to be stabilized.
If those things were changed, he said, “You’d never have slow economic growth.”
In his book, he says that when American companies outsource work to China, for example, it means more disposable income for Americans, who in turn can spend it doing what they’re good at and bolstering the local economy.
The same goes for individuals, he said, such as basketball star LeBron James or businessman Michael Dell, who got rich because he made it possible for anyone to get what previously only the rich could afford: a computer. Apple products are now widely accessible because Steve Jobs was able to do what he was best at, he said, and 50-inch plasma televisions are so widely available that in 15 years they have dropped in price from $20,000 to $550.
“Look at what capitalism has done,” Tamny added. “Look at what pursuing that which makes people unequal does.”
Not everyone agrees with Tamny’s ideas, of course. The Institute for Policy Studies has devoted a whole website to how “income inequality endangers our society, on a variety of fronts.”
On the website, called Inequality.org, the institute points to census data showing that between 1979 and 2012, the top 5 percent of American families saw their real incomes increase by 74.9 percent. Over the same period, the lowest-income 20 percent of families saw a decrease in real income of 12.1 percent.
Tamny acknowledged that some balk at his ideas, including some Newman students he spoke to earlier in the day.
Rusovich also said there are many who don’t agree that an unrestricted free market is the ideal condition.
But he said fostering debate is part of the goal of the Free Market lecture series.
“That’s what we should all want, particularly for kids,” Rusovich said. “Let’s give them all sides of an issue and let them determine where they want to go from there.”