The primary cause of inequality’s threat to capitalism, according to economists surveyed by IGM, is the erosion of faith in the capitalist system that inequality produces.
“It’s a threat to people’s belief in capitalism as an institution of economic governance,” said David Autor, an economics professor at MIT. “Absent shared belief, we are in trouble.”
Other economists tended to agree, such as Barry Eichengreen of UC Berkeley: “Certainly the perception that economic outcomes are unjust is a challenge to the legitimacy of the economic system.”
One economist brought up concerns that extend beyond the popularity of capitalism as a system. Darrell Duffie of Stanford pointed to a paper that found inequality lowers demand and economic output. “Inequality can lead to social instability, low demand, and other threats to successful capitalism,” Duffie said.
However, not all economists were convinced. Among those that were uncertain, there was mention of another system that inequality is likely threatening: democracy.
“It’s certainly a major threat to democracy,” said Maurice Obstfeld of Berkeley.
Robert Shimmer from University of Chicago disagreed with the statement, yet conceded: “The perception that the rich don’t play by the same rules is a major threat, but not their wealth per se.”
What do I know, I’m not an economist. It seems to me this country, this democracy, was created during a time of significant inequality – indentured servants for example.
We have had inequality since have we not?
Todays inequality has largely been built thanks to creation of new technology, new industries, IPOs and the stock market. In the process of all this, millions of new jobs, new businesses were created, new wealth for the masses in many cases.
Now this makes sense: “The perception that the rich don’t play by the same rules is a major threat, but not their wealth per se.”
If they don’t play by the same rules or they have undue influence, that is the fault of our elected leaders who we should be holding accountable. If the super wealthy intentionally block opportunity for others or take overt steps to hold others down, that is a serious problem. Is there evidence of that and if so, why hasn’t it been addressed?
One thing is for sure, the American political left has gone out of its way to convince Americans that our billionaires are the bad guys, greedy and not paying their fair share … without specifics demonstrating any harm they have done and ignoring the positives. And ignoring the reality that all of us make an effort to minimize our taxes within the tax code – written by Congress – or if we cheat we are subject to penalties.