Elite Deserve What They Get – Income Inequality 3

Some say income inequality in the U.S. is neither unjust nor dangerous, but the purest form of American fairness.  Our elite deserve all they get.  This is a follow-on post to our main discussion in Zero Sum Games.

Our Deserving Ultras.
Proposition — The elite top earners are the best and brightest, the job generation class.  Anyone can reach this level because of our renowned upwards mobility.

Such self serving comments are usually made in an unattributable, private form.  The Diane Rehm  show on NPR  (2011 Oct 28) featured David Corn of Mother Jones Magazine, Jeanne Cummings of the Bloomberg News, and Byron York of the The Washington Examiner.  York either works or has worked for The National Review, The Wall St Journal, and The American Spectator.  He is associated with a lot of libertarian thinking, and this ol’ boy came through like a champ.  Listen to the audio broadcast and read the transcript while you listen.   * It is more useful if you do both.

Jump to (transcript) 10:16:55 or (audio) about 17:28. The discussion is about Tea Party activists pushing the Republican agenda about.  Here is the quote.  York: “The Republicans believe that that top 1 percent has a disproportionate amount of talent, smarts and ambition, and more so than the lower 20 percent.”  then “… they also believe, Republicans do, that they [the top 1%] are the job-creating class.”    Emphasis, mine.


Figure 1: Changes during the past 30 years over the preceding 30 stable years

I mostly agree even; well, sort of.  The top 1% have the talent to do whatever is needed to get where they are, the smarts to keep what they have, and ambition to obtain the insider information needed for success.   These are the guys who are too rich to fail, with the financial influence needed to stay on top.

Figure 1 show trends in class share of the total income (Census Bureau data) from our Zero Sum post.  The top 20%, 1/5 of the population, now account for more than half of the total U.S. income. This share has grown 15% over the past 30 years, compared to the baseline stable years.  The top 5% increased their share by well over a quarter during the same period.  If the data were available, Byron York’s top 1% would be seen to have done better yet.  The top-most 0.01% ultras (see the Zero Sum post) increased their cut by +400%.  The negative values show where all those increases came from.

Job creators?   Our elites (and their ultra betters), strip our factories, send them across-border, and create profits for themselves. They create jobs – not here, of course, but in China, India, Mexico, … elsewhere. Compare: David Packard and Bill Hewett were strongly innovative engineers, who retained their technical vision to lead their company to continual successes.  Both were gone by the mid 1980s, and HP was taken over by the managerial class with no understanding of their technology underpinnings.  Most of America’s legacy technology companies have the same sort of history.  Recent example: Apple succeeded with Steve Jobs, floundered when he was gone.

Challenge:  stand on a corner in a large city’s busy shopping district, and take off everything missing a [Made in USA] tag.  Nowadays, you would finish up stark naked;  30 years ago, you would have remained quite modest;  60 years ago, you would have felt silly standing about with nothing to do.   So where are all those jobs the high quality elites generated?  Four of our five quintiles have lost income share and economic opportunity in a big way.  I would suggest doing the same test with the steel parts of your car, but I hate seeing cars drive about naked.

Paul Krugman’s  column in the 2011 Dec 09 New York Times discussed the elite job creators.  He ended up comparing our top income earners with Gekkos, not the lizard type (biology), but the Gordon type (movie). Gordon is the guy who first said “Greed is good!”  Many think Ayn Rand coined that, or maybe at least the Libertarians.  You might want to actually read the column. He discusses Mit Romney, who makes himself out to be one of the great Job Creators …  hhmm.

A couple decades ago, I first made contact with one of these job creators who walked about and created in public.  The company I joined had been purchased by a poor rich guy.  He got into power, saw a huge pot of goodies tied into the employee pension fund and converted it to an Employee Stock Ownership Plan (ESOP).  He proceeded to anger his principal contract, the company lost all viability and disappeared.  His favorite complaint was – why can’t all those bright employees give him at least one home-run?  Several first for me.  First time I heard the word “bright” used as a pejorative and “home-run” as a technical business term. But not the last time for either, though.  The employees were laid off, pension funds lost, and the country lost a player in fusion energy development.  Are financial elites the best and brightest, the super job creators?  no

Upward mobility?   As we turn off the lights in our creative manufacturing sector (not our “assembly” plants but the places where components are actually made), we shut down the paths for creative work.  You cannot generate the next generation stuff if you cannot work with forward products as they are changed from raw material into salable goods. Thirty years ago, upward mobility was the realizable American dream.  Modern spin “We will train the highest level of innovators in classrooms” is to pacify, to make the real social solidification palatable. This is not a vision for success.

End notes
We might get what we deserve for drinking elitist Kool-Aide.  Since the ’70s we have confused the people who make the most with those who are the most creative.  We have been paying for this, we still are, and will probably continue to do so.  The process under discussion is summarized in our page, American Income Pump.

click for our discussions on economic inequality

There are several ways this story could end.  1: It might continue on as a straightforward projection of what has been happening – more of the same ol’ same ol.’  Probably not, though. Chaotic social systems do not remain static.   2: A charismatic leader might rise above self serving politics. We tried this (2008), were fooled.  3: We might go through a chaotic branch jump.  Problem … chaotic changes cannot be predicted (by definition).  The elite might complete its metamorphosis into hereditary aristocracy – as gray darkness descends on our newly feudal society; or, the elite may well get its deservings as did the social elites in France(1790s),  Cuba (1950s), etc.  The last time we were so close to a branch point, Franklin Roosevelt installed measures that disarmed the then-disruptive communist rhetoric. In the end, it’s our choice.

Update: 2011 Dec 11  The same day the above appeared, Henry Blodgett posted  Finally, A Rich American Destroys The Fiction That Rich People Create The Jobs  on Business Insider.   This is a really good discussion of points reinforced here, without the gloom that comes from my sense of dark shadows descending over our country during my working lifetime.


Charles J. Armentrout, Ann Arbor
2011 Dec 10
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About LastTechAge

I am a physicist with years of work in fusion labs, industry labs, and teaching (physics and math). I have watched the tech scene, watched societal trends and am alarmed. My interest is to help us all improve or maintain that which we worked so hard to achieve.
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