THE UPSIDE OF INEQUALITY

Tax the rich? Even out the playing field? Bad idea, writes a famously contrarian financier.

It stands to reason that someone affiliated with the American Enterprise Institute would be inclined to mount a stout defense of the 1 percent, and Conard (Unintended Consequences: Why Everything You’ve Been Told About the Economy Is Wrong, 2012) does not disappoint. Add to this his one-time role at Bain Capital, which he co-founded with Mitt Romney, and the package would seem to be complete. However, the author’s argument, calmly presented, has merits: it is true that, in general, the rich pay more taxes than they consume in government services and that a diverse knowledge economy offers more opportunities for wealth than a low-skilled one—and almost by definition produces inequalities. From these premises, Conard’s policy recommendations do not necessarily follow, and some of them are politically toxic, such as the thought that giving the middle class a tax break is ill-advised. “Successful risk-taking that produces innovation and gradually builds institutional capabilities accelerates growth,” he writes. “A middle-class tax cut will have no such effect.” Some of the author’s suggestions, if impractical, are intriguing—e.g., why not have the rich shoulder the burden of defense spending, since they’re the ones who have the most to defend? The weakest sections of the book are the most formulaic, such as the tired mantra that students should not be rewarded for studying English but should instead be induced to study something “useful,” never mind that many iconic business leaders (Steve Jobs, Bill Gates) have studies in philosophy and the humanities in their quivers. Conard also comes up short on specifics for the education reform that he argues is needed to produce a robust economy, noting weakly instead that “we should be running a multitude of experiments to find solutions that work.”

Unlikely to sway those for whom the idea of economic inequality is anathema, but a set of arguments worth considering.