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Romney's former partner makes case for why income inequality is good
The Purpose of Spectacular Wealth, According to a Spectacularly Wealthy Guy
Illustrations by Mat MaitlandPublished: May 1, 2012
Ever since the financial crisis started, we?ve heard plenty from the 1 percent. We?ve heard them giving defensive testimony in Congressional hearings or issuing anodyne statements flanked by lawyers and image consultants. They typically repeat platitudes about investment, risk-taking and job creation with the veiled contempt that the nation doesn?t understand their contribution. You get the sense that they?re afraid to say what they really believe. What do the superrich say when the cameras aren?t there?
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With that in mind, I recently met Edward Conard on 57th Street and Madison Avenue, just outside his office at Bain Capital, the private-equity firm he helped build into a multibillion-dollar business by buying, fixing up and selling off companies at a profit. Conard, who retired a few years ago at 51, is not merely a member of the 1 percent. He?s a member of the 0.1 percent. His wealth is most likely in the hundreds of millions; he lives in an Upper East Side town house just off Fifth Avenue; and he is one of the largest donors to his old boss and friend, Mitt Romney.
Unlike his former colleagues, Conard wants to have an open conversation about wealth. He has spent the last four years writing a book that he hopes will forever change the way we view the superrich?s role in our society. ?Unintended Consequences: Why Everything You?ve Been Told About the Economy Is Wrong,? to be published in hardcover next month by Portfolio, aggressively argues that the enormous and growing income inequality in the United States is not a sign that the system is rigged. On the contrary, Conard writes, it is a sign that our economy is working. And if we had a little more of it, then everyone, particularly the 99 percent, would be better off. This could be the most hated book of the year.
Conard understands that many believe that the U.S. economy currently serves the rich at the expense of everyone else. He contends that this is largely because most Americans don?t know how the economy really works ? that the superrich spend only a small portion of their wealth on personal comforts; most of their money is invested in productive businesses that make life better for everyone. ?Most citizens are consumers, not investors,? he told me during one of our long, occasionally contentious conversations. ?They don?t recognize the benefits to consumers that come from investment.?
This is the usual defense of the 1 percent. Conard, however, has laid out a tightly argued case for just how much consumers actually benefit from the wealthy. Take computers, for example. A small number of innovators and investors may have earned disproportionate billions as the I.T. industry grew, but they got that money by competing to constantly improve their products and simultaneously lower prices. Their work has helped everyone get a lot more value. Cheap, improved computing helps us do our jobs more effectively and, often, earn more money. Countless other industries (travel, telecom, entertainment) use that computing power to lower their prices and enhance their products. This generally makes life more efficient and helps the economy grow.
The idea that society benefits when investors compete successfully is pretty widely accepted. Dean Baker, a prominent progressive economist with the Center for Economic and Policy Research, says that most economists believe society often benefits from investments by the wealthy. Baker estimates the ratio is 5 to 1, meaning that for every dollar an investor earns, the public receives the equivalent of $5 of value. The Google founder Sergey Brin might be very rich, but the world is far richer than he is because of Google. Conard said Baker was undercounting the social benefits of investment. He looks, in particular, at agriculture, where, since the 1940s, the cost of food has steadily fallen because of a constant stream of innovations. While the businesses that profit from that innovation ? like seed companies and fast-food restaurants ? have made their owners rich, the average U.S. consumer has benefited far more. Conard concludes that for every dollar an investor gets, the public reaps up to $20 in value. This is crucial to his argument: he thinks it proves that we should all appreciate the vast wealth of others more, because we?re benefiting, proportionally, from it.
Re: Romney's former partner makes case for why income inequality is good
It is very long. It continues here
http://www.nytimes.com/2012/05/06/magazine/romneys-former-bain-partner-makes-a-case-for-inequality.html?hp
Above Us Only Sky
I only read the part you posted, but I think that this guy is ridiculous for comparing himself to Bill Gates and Sergei Brin. Those people actually created a product. He is selling his restructuring services. I don't think all super-wealthy people are in the same bracket. Someone who created a computer and then invests that money vs. someone who put a bunch of "assets" they knew were crappy, paid someone to say they were good investments, marketed them as if they were good, sold them, bet against them and then made tons of money is not the same.
Also, note that Bill Gates and Warren Buffet do something good with their money (ie, the Bill and Melinda Gates Foundation)... this guy writes a book defending why he should be so rich. Ugh. Seems like Mittens' friends are as tone deaf as he is.
ETA: Have consumers really benefitted so much from fast food? Sure, there was some job creation, but that's also cost society in terms of obesity and what not. This book seems way too self-serving and simplistic.
ETA again - just saw a grammar issue.
Which points are valid?
I think that saying "actually it's GOOD that I have all the money while the rest of you fools struggling to put food on your table" is pretty tone deaf.
That's quite a leap. I have no problem with Bill Gates being super-rich. I don't think we should get rid of the super rich. I do think it matters how you got so rich and whether or not you can claim to be so great for society. Someone who buys a company with borrowed money, restructures it, lays people off, carves the company to pieces, then sells it and keeps a profit...I think perhaps we can live with fewer of those.
This does not mean I am anti-investment, don't see the good that investors do, etc.
He also is a bit d!ick-ish in the way he writes. The super rich only spend a small amount of money on personal comforts?! There is a definite implication that we should be impressed with them showing so much restraint and investing all their extra hard-earned (and taxed at lower rates) money. Don't we all do that?! Don't try to turn it into some unique positive about the super-wealthy.
The mansion I live in on this coast, and the mansion I live in when I'm on the other coast, and the two vacation homes I own, and the yacht, and the private jet, and the luxury cars, and the spa trips, and the designer clothes... that's really only a SMALL ITTY BITTY portion of all of my wealth. Doesn't that make you feel better?
LittleMoxie, I can't quote you on my tablet but don't you think it is (at least somewhat) beneficial when a PE firm does what you describe and in the process takes a company that was losing money and turns it into a productive one?
but the standard operating practices of many of these PE firms is buy them, leverage them to get their money back and then try to make a go or run it into the ground. See e.g. Harry & Davids
Above Us Only Sky
On risk: our system rewards a very small subset of risk--one that fits within a set of rules and norms set by the risk takers themselves (who writes the regs on banks again?) And this system of great risk for enormous reward is really only accessible to a very sma subset of the population.
Income seeking risk taking by the average person is rarely rewarded with riches. The more money, privilege and social capital you have the less risk averse you need to be to survive. When poor people take risks we call that "bad decision making."
That's what I would have said. Their aim isn't to make the companies productive or not - it's to get their money back out ASAP.
Snapplegirl, what you're describing can be done by many other actors (e.g., the government with helping out carmakers).
There is no risk involved by PE investors in these companies. They get their money back immediately upon leveraging.
Above Us Only Sky
Exactly. Especially the bolded.
This guy has some basic good points (investment is good for the economy). But he is overlooking a lot of factors in an effort to make himself look good.
Also, he's totally ignoring the fact that the vast majority of potential "risk-takers" aren't deterred by the higher tax rates of the upper income brackets, but rather by the lack of safety nets if they fail, as even he admits the vast majority will (and the lack of safety nets while they initially build their business, even if it is succesful in the long run).