Chris Christie’s inequality nonsense: Why he has no clue what really promotes excellence

The real threat to America’s capacity for innovation comes not from the left -- but the anti-government right

Published February 13, 2014 7:02PM (EST)

Chris Christie                (Reuters/Carlo Allegri)
Chris Christie (Reuters/Carlo Allegri)

Is extreme inequality in income and wealth the necessary and just the price that America must pay for economic success?  Unable to justify America’s third-world level of inequality on moral grounds in terms of fair rewards for effort or laziness, most American conservatives prefer to defend high inequality with the utilitarian argument that everyone benefits from the economic growth generated by individuals who earn outsize rewards from their investments or inventions.

Speaking recently in Chicago, Chris Christie said:  “You want income equality?  That is mediocrity. Everybody can have an equal mediocre salary.” Christie insisted that Americans want opportunity, not equality — as though we must choose between the two.

Let us ignore the fact that no serious progressives in the U.S. have ever proposed mandatory equal incomes for everyone; this is mere red-baiting of liberals on the part of the scandal-embroiled New Jersey governor.  Americans in the progressive-liberal tradition have never been socialists.  They have sought to rescue capitalism by embedding markets in a mixed economy with social insurance and public goods, while preserving private property and competition in appropriate sectors.

Mainstream progressives accept the legitimacy of profits for investors who risk their own money in socially useful enterprises, as well as reasonable patent royalties (that is, government-sanctioned monopoly rents) for those who invent socially useful goods and services.  The real debate between progressives and conservatives is not over whether investors and inventors should be rewarded for their risks to some degree, but whether policies like unionization, social insurance and spending on public goods that tend to ameliorate pre- or post-tax inequality will kill innovation by discouraging productive effort or crowding out private capital.

In a 2012 paper, the economists Daron Acemoglu, James A. Robinson and Thierry Verdier provided apparent support for the conservative position by claiming that there is a tradeoff between “cutthroat capitalism” and “cuddly capitalism”:  “[S]ome countries will opt for a type of 'cutthroat capitalism' that generates greater inequality and more innovation and will become the technology leaders, while others will free-ride on the cutthroat incentives of the leaders and choose a more “cuddly” form of capitalism.”  If the U.S. adopted the more egalitarian social policies of the Nordic countries, they argued, the result could be the collapse of American innovation, to the detriment of the world as well as the U.S.

But the evidence does not support the Acemoglu/Robinson/Verdier thesis, according to Jonathon Hopkin and Lovisa Moller of the London School of Economics and Victor Lapuente of the University of Gothenburg.  These scholars mapped the Global Innovation Index for different countries against the Gini Index (a measure of inequality).  They discovered a rough correlation between innovation and social equality, with high-equality countries like Switzerland and Sweden scoring higher on innovation than grossly unequal countries like Mexico, Turkey, Poland and Portugal.

The U.S., as a country with both high innovation and high inequality, is an unrepresentative outlier, even among other English-speaking nations, which tend to have higher inequality than continental European countries.  According to the Global Innovation Index, the U.S. is no more innovative than Britain, Canada and New Zealand (Australia is less innovative than all of these).

Acemoglu, Robinsona and Vedier made much of the fact that the U.S. has exceeded the Scandinavian welfare states in patent filings in the last two decades. But as Hopkin, Moller and Lapuente point out, for most of the last 50 years, “cuddly” Sweden has had more patent filings per resident than the “cutthroat” U.S.!

America’s extreme level of inequality cannot be the source of its innovative capacity, because most other countries as innovative as the U.S., or more innovative than the U.S., have much less economic inequality.  If extreme inequality is not the factor that drives American innovation, what is?

Serious students of technological innovation attribute national success, not primarily to huge rewards for successful venture capitalists or entrepreneurs, but mainly to the health of a national “innovation ecosystem.”  The innovation ecosystem is made up of many interdependent individuals and institutions. Venture capitalists and entrepreneurs motivated by desire for profits are indispensable — but they cannot succeed in the absence of public funding for basic scientific research, world-class research universities, and a flourishing system of public education that produces great numbers of scientists, engineers and business innovators each generation.

The real threat to America’s capacity for technological and economic innovation comes, not from the welfare-state left, but from the anti-government right.  If the conservative theory of innovation-driven economic growth is correct, then we can cut federal funding for R&D, slash the research budgets of public and private universities, and allow gross inequalities between schooling for the children of the affluent minority and schooling for the children of the majority—without any harm to America’s capacity for innovation and growth.  If conservatives are right, we can starve most parts of the American innovation system of money, while diverting even more of society’s resources to the rich—and as a result, the healthy greed of venture capitalists and inventors and entrepreneurs will maintain America’s innovative edge.

But we know from American history itself that private innovation is often dependent on prior public innovation. The great fortunes of the founders of Microsoft, Google and Facebook have been based on the commercialization of technologies originally developed by government labs or with government funding by research universities or corporations like IBM with government contracts.  If public funding for public and private research is slashed, because of libertarian anti-statist ideology or the austerity programs pushed by misguided deficit hawks like the front groups funded by the right-wing billionaire Pete Peterson, then the next generation of entrepreneurs and start-ups who will capitalize on publicly developed technology by commercializing it may never appear.

Nor is there the slightest evidence that poverty provides a useful spur to innovation. On the contrary, almost all of the successful innovators of today — Bill Gates, Steve Jobs, Jeff Bezos, Mark Zuckerberg, the founders of Google — came from comfortable middle-class or rich families. That makes sense, if you think about it.  Upper-income young people are far more likely to have the parental resources that allow them to experiment with fledgling technology and to have the social skills as well as the literacy and numeracy necessary to succeed in business.

From this it follows that if we want more entrepreneurs like Gates and Bezos, then we should want more Americans to enjoy the educational and social advantages of the typical successful entrepreneur. Policies that raise the median level of education, income and economic security in the U.S., by providing greater numbers of talented Americans with adequate resources and supportive environments, could greatly increase the talent pool on which the American innovation ecosystem draws. (Importing a greater number of talented foreign middle-class immigrants to work for low wages — the policy preferred by Silicon Valley’s plutocrats — is at best a stopgap measure until more domestic talent can be cultivated, and at worst a mere sleazy cheap-labor policy).

Conservative propaganda to the contrary, Americans need not choose between innovation and growth combined with today’s grotesque level of American inequality or the economic stagnation of Korean or Cuban-style communism. America does not need Mexican or Turkish levels of inequality to achieve Swedish or Swiss levels of innovation. The majority of the most innovative societies in the world manage to combine less inequality with equivalent or greater levels of innovation. So can we.

By Michael Lind

Michael Lind is the author of more a dozen books of nonfiction, fiction and poetry. He is a frequent contributor to The New York Times, Politico, The Financial Times, The National Interest, Foreign Policy, Salon, and The International Economy. He has taught at Harvard and Johns Hopkins and has been an editor or staff writer for The New Yorker, Harper’s, The New Republic, and The National Interest.

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