Shared publicly  - 
From the same article: "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."

This is true. The rich are, broadly, 'investing' in the economy. But it does not necessarily follow that all 'broad' investment dollars are being spent on 'productive business.'

Conventionally, increased 'broad' investment should result in an increase in 'narrow' investment: purchases of intermediate goods. Things like industrial drill presses, hydroelectric turbines, and pig iron. We can dispatch that quickly: that simply hasn't happened. 'Narrow' investment is down over the past thirty years.

Perhaps those dollar-denominated investments are going overseas. But, no, not that, either. Capital outflows through FDI are smaller than the decline in 'narrow' investment or the increase in 'broad' investment. The money, in other words, isn't simply traveling overseas.

Perhaps he's just wrong, and the increase in inequality is financing extraordinary rates of consumption amongst the rich. Maybe the gold-plated-Hummer industry is taking off. But that's not the case, either: luxury consumption hasn't kept pace with the increase in inequality.

So, if this vast pool of capital isn't buying anything productive, what is it doing? Two things:

First, and most importantly, nothing at all. As the pool of millionth and ten-millionth dollars increases, there's a larger and larger amount of money with a low propensity to be spent on anything at all. Cashlike AAA assets are being hoarded to be spent by children, grandchildren, or great-grandchildren, or to be spent during retirements which will never arrive. In a sense, the cashlike assets of the fully-satiated rich are entirely different than the money of the poor: they represent past commitments to pay at some future date. Nominally, these cashlike assets are nonrevolving. In a practical sense, however, they are rolled over as they come due, deferring their obligations ever-further into the future.

Second: it's being spent on consumption. Not their consumption. Our consumption. Once wages began to flatten, consumer credit began to rise precipitously. Investors like Conard like to think that they're not involved in consumer credit. They're wrong. Cut out the middleman, and you'll find that Apple (for instance) is in the business of selling iPads to banks. Virtually all of the increase in final consumer spending since 1973 is attributable to the rise in consumer credit. Investors carry both the purchaser's credit card balance and Apple's profits on their books as 'assets,' artificially inflating the total amount of value.

Perhaps there's some value here. If there is, however, we need to look elsewhere than Conard to defend it: he doesn't even seem to understand what's going on.
A former partner of Mitt Romney’s at Bain Capital argues that more income inequality is good for the economy.
Bob O`Bob's profile photoJay Gischer's profile photoBridget Wolfe (Pan Incarnate)'s profile photoAndres Soolo's profile photo
I like what you said about apple being in the business of selling ipods to banks. I've often considered that many of my lower income friends who fall on the right side of the political spectrum might not lean that direction if they actually lived and felt lower income. Most of them are financed to the gills, so they have mentally separated themselves from other low income folks who either live within their means, or who have run the credit well dry. They really don't seem to realize their social position because they aren't yet forced to do so.
Greg S
+Ryan O'Neill Damn, that is a good line, isn't it? Sharing this entire thing...
Wow, an entire book in denial.
The vast majority of the resources of such people are "invested" in one single overriding endeavor: making that person even more wealthy, at any cost to anyone else. More than any other every day example that might mean something to us regular folks, the super-rich are competing with each other in the race to be ''first'' to that next stop light. They are not intentionally targeting us little guys, in fact just the opposite. We are merely collateral damage in their competition with each other.
I've actually run across this attitude in the financial world before: If your smarter with money, then the world is better off if you control it all. How do you prove that your smarter with money? By making more of it.

And if consumer spending is now financed by debt, rather than cash, it means that the bankers control it. That's good, right?
Currently the rich mostly play the casino market buying and selling stocks and derivatives instead of doing actual business. We can see this in the rise of the financial sector's share of the USA GDP.

Show the GDP minus financial services and you will get a real sense of our economic standing.
The argument doesn't fail because the rich aren't investing in economy; they are. The argument fails because it implies that these investments wouldn't happen if wealth would be distributed in another manner, particularly a less inequal manner. This is an unsupported hypothesis. For one, the invention of corporation created a simple and convenient vehicle for small investors to pool their resources to a shared large-scale investment. For another, the invention of government created a simple and convenient vehicle for citizens to pool their resources to a shared large-scale investment. For third, the invention of church created a simple and convenient vehicle for parishioners to pool their resources to a shared large-scale investment.
Add a comment...