Paul Krugman (Reuters/Chip East)

Paul Krugman: American inequality isn't about education or opportunity -- it's about oligarchs!

Conservatives want you to believe that the big rewards in modern America go to "job creators" -- they're lying

Katie McDonough
May 9, 2014 6:00PM (UTC)

Institutional Investor’s latest survey of the 25 highest-paid hedge fund managers is out, and -- if you can believe it -- the 25 men who made the "rich list" are very, very, very rich.

These men (they are all men, natch) made a combined $21 billion in 2013. And while it's tempting to dismiss a report on an assorted crew of hedge funders as just another of many generic and demoralizing reminders about the of the obscene wealth of the .01 percent, New York Times columnist Paul Krugman points out in his Friday column that the "good fortunes" of these rich dudes actually expose a lot of the lies we're told about income inequality in America:


First, modern inequality isn’t about graduates. It’s about oligarchs. Apologists for soaring inequality almost always try to disguise the gigantic incomes of the truly rich by hiding them in a crowd of the merely affluent. Instead of talking about the 1 percent or the 0.1 percent, they talk about the rising incomes of college graduates, or maybe the top 5 percent. The goal of this misdirection is to soften the picture, to make it seem as if we’re talking about ordinary white-collar professionals who get ahead through education and hard work. [...]

Second, ignore the rhetoric about “job creators” and all that. Conservatives want you to believe that the big rewards in modern America go to innovators and entrepreneurs, people who build businesses and push technology forward. But that’s not what those hedge fund managers do for a living; they’re in the business of financial speculation, which John Maynard Keynes characterized as “anticipating what average opinion expects the average opinion to be.” Or since they make much of their income from fees, they’re actually in the business of convincing other people that they can anticipate average opinion about average opinion. [...]

More broadly, we’re still living in the shadow of a crisis brought on by a runaway financial industry. Total catastrophe was avoided by bailing out banks at taxpayer expense, but we’re still nowhere close to making up for job losses in the millions and economic losses in the trillions. Given that history, do you really want to claim that America’s top earners — who are mainly either financial managers or executives at big corporations — are economic heroes?

These models of inequality are only becoming more entrenched. "We’re on our way toward a society dominated by wealth, much of it inherited, rather than work," Krugman writes. What he means is that most of the money being made by these men has nothing to do with their "work" (abstract as the money moving and wealth extraction they do may seem to most of us), it comes from returns on the wealth they already have. Basically, the system is rigged so that being rich only makes people richer.

And because of our country's distorted believe that we have to "protect" what these men "earn" through their "work," we continue to let them slide by not taxing their massive incomes, Krugman notes:

America has a long tradition of imposing high taxes on big incomes and large fortunes, designed to limit the concentration of economic power as well as raising revenue. These days, however, suggestions that we revive that tradition face angry claims that taxing the rich is destructive and immoral — destructive because it discourages job creators from doing their thing, immoral because people have a right to keep what they earn.

But such claims rest crucially on myths about who the rich really are and how they make their money. Next time you hear someone declaiming about how cruel it is to persecute the rich, think about the hedge fund guys, and ask yourself if it would really be a terrible thing if they paid more in taxes.

Katie McDonough

Katie McDonough is Salon's politics writer, focusing on gender, sexuality and reproductive justice. Follow her on Twitter @kmcdonovgh or email her at

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Hedge Fund Jerks Income Inequality Oligarchs Paul Krugman

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