A “perfect storm” of events has created not only an economic crisis, but also powerful political fodder, which is easily used by some to panic voters and manipulate emotion for political gain. These distortions have produced some modern folklore:
* If not acting illegally, most large and successful corporations are at least unethical.
* Successful businesspeople have gained their wealth at the expense of society.
* As a corollary, the financial pain we feel (gas prices, mortgage problems) is a direct result of unethical or illegal corporate behavior. For example, it’s axiomatic that the major oil companies have singularly created $4-per-gallon gas prices.
* Our economic problems must be caused greedy corporate interests and not by our own excesses.
Recommended Stories
It is imperative that we correctly diagnose the challenges facing our society, their causes and the solutions. Economic hard times are Russian roulette; they can give a nation a revolutionary like Lenin, a demagogue like Huey Long or a nation-saving Franklin Delano Roosevelt. These times properly demand that we check and recheck our basic American principles and foundations.
One of those principles has been economic mobility. America has always been a middle-class nation. Sometimes it has been hard to recognize, as with the robber barons of the late 1800s, and it has never been without its excesses and faults. But bottom line, wealth in America has always been in flux. No permanent aristocracy controls America. Social mobility has always been America’s secret weapon.
At any given point in U.S. history, certain poor people were in the process of succeeding brilliantly and becoming the new wealthy, and old fortunes were in the process of being dissipated. America is largely run, economically and politically, by people who are one generation away from poverty. (Or near poverty).
Most Americans believe they are as good as the most successful and if they themselves won’t achieve wealth, their children will. Talent percolates up in America, and a talented but poor individual can build great wealth, which is then often dissipated by overindulged children and grandchildren in three generations. America’s wealth is always in flux. That’s good news!
What power and energy this releases for the good of society! The promise of wealth, success and status is the psychological fuel that has motivated generations of American entrepreneurs and created inestimable wealth for America.
It is new hungry talent, not old families, who rise to positions of economic and social success. It can create temporary inequity, true, but these inequities are ephemeral as a new generation of smart, motivated and talented people make their moves and make themselves rich.
The whole system of hard work, talent and social mobility creates a synergism and energy that makes the entire society richer. Profit is not a social sin but an economic necessity.
It is true that things have gotten significantly out of balance. In the last 30 years, the median household income has risen by only $6,400 while those in the top 25 percent have seen their household income increase by $58,000, and the top 1 percent of households has achieved a vastly disproportionate share of national income.
“In 2005, the top one-tenth of 1 percent reported an average income of $5.6 million, up $908,000 in one year, and the top one-hundredth of 1 percent reported annual income averages of $25.7 million, up $4.4 million on one year.”
These income disparities are worth arguing about in public policy (even overdue) and I believe should be mitigated by even more progressive taxation. Bill Gates writes a whole book on how big corporations can and should do more for the world’s poor.
Warren Buffett and Bill Gates Sr. have recognized how important the estate tax is to limiting inherited wealth. But let us proceed cautiously. No nation has ever redistributed itself to greatness. It is the private, not the public sector, that creates a nation’s wealth.
The last century has, to my mind, taught us that no other economic system comes close to creating the national wealth, as does capitalism. The wealth created by capitalism can be better distributed while not interfering with the basic wealth-creating mechanisms.
We should not disparage ambition, profit, hard work or capitalism as we correct the excesses. It is, after all, those traits that created the wealth in the first place.
Whatever its faults, no other system has come close to producing the wealth of American capitalism, nor more advantaging the common person. Let us reform, but let us reform with caution.
Richard D. Lamm is a former governor of Colorado.
