Lawrence Summers demonstrates an art form
Great kudos to Lawrence Summers for his article today in the Financial Times! A fantastic example of the subtle yet highly entertaining and downright humorous art form we see almost every day in the media. As discussed previously, this particular art form is based on a very strict formula in which there is never deviation. There’s four key components: 1) The author must be a well known establishment figure comfortable with the status quo and possessing an aura of profundity. 2) The title of the article must promise a no-nonsense real solution to an important problem. 3) The body of the article must describe that problem in a serious, truthful and sometimes even radical way. 4) It must conclude with an absurd solution that fully conforms with status quo thinking, doesn’t at all challenge power, and is in fact silly. The great beauty of the art arises from the contrast between the seriousness of 2) and 3) and the outlandish immateriality of 4). Tremendous humor arises from the contrast and many elites just roar with laughter when it’s done right as it powerfully brings home in a humorous way the essential truth that the system can never provide effective solutions to societal problems.
Principle 1) of course is easily met as Summers is a pillar of great profundity. The piece is well titled as well, promising a serious solution to a dire problem. In the Kindle version, it’s evocatively titled “Inequality can no longer be held at bay by the usual ideas”, although the online version is a somewhat less grabbing “We have to do better on inequality”. Either way, the requirements of 2) are easily met.
Summers demonstrates profound profundity with a centuries spanning grand overview on the evolution of human civilization. “Just as the evolution from an agricultural to an industrial economy has far-reaching implications for almost all institutions, so too does the evolution from an industrial to a knowledge economy. Trends that pre-date the Great Recession will be with us long after any recovery. The most important of these is the strong shift in the market reward for a small minority of citizens relative to the rewards available to most citizens.”
As just one example of the magnitude of ever rising inequality he summons forth this damning statistic: “In 1965, only 1 in 20 men between 25 and 54 was not working; by the end of this decade it will probably be 1 in 6, even if the full cyclical recovery is achieved.”
The stage then is well set for the grand conclusion, which we recall must be meaningless and completely nonthreatening to the status quo. Connoisseurs sit back, eagerly anticipating the great laugh to come.
Here it is:
What then is the right response to rising inequality? There are too few good ideas in current political discourse and the development of better ones is crucial. Here are three.
First, government must be careful that it does not facilitate increases in inequality by rewarding the wealthy with special concessions. Where governments dispose of assets or allocate licences, there is a compelling case for more use of auctions to which all have access. Where government provides insurance implicitly or explicitly, premiums must be set as much as possible on a market basis rather than in consultation with the affected industry….
Second, there is scope for pro-fairness, pro-growth tax reform….When there are more and more great fortunes being created and the government is in larger and larger deficit, it is hardly a time for the estate tax to be eviscerated.
Third, the public sector must insure that there is greater equity in areas of the most fundamental importance. It will always be the case in a market economy that some will have mansions, art and the ability to travel in lavish fashion. What is more troubling is that the ability of the children of middle-class families to attend college has been seriously compromised by increasing tuition fees and sharp cutbacks at public universities and colleges.
At the same time, in many parts of the country a gap has opened between the quality of the private school education offered to the children of the rich and the public school educations enjoyed by everyone else. Most alarming is the near doubling over the last generation in the gap between the life expectancy of the affluent and the ordinary.
To summarize, the three-fold answer to the great problem of inequality boils down to something like: 1) have auctions when the government sells assets or issues licenses, and set insurance premiums based on market principles; 2) don’t further eviscerate the estate tax; and 3) while accepting the appropriateness of mansions, art, and the ability to travel lavishly, we should also look into how public education is doing and also life expectancy.
Great humor, Lawrence Summers. Well done! Bravo!