Modern Age - Winter 2016 - 15

CONSERVATISM AND THE REAL PROBLEMS OF INCOME INEQUALITY

Although the left frequently talks about income inequality, it is
really focusing on wealth inequality. Income is more reflective of
present economic trends. It is more essential to how people live
and what opportunities exist for them. Income is more immediate and more vital to livelihoods. Wealth, on the other hand, is
often more a product of what has happened in the past. Therefore, a focus on wealth misses the picture of what is happening
to that broad group of people in the middle and lower end of the
income-distribution spectrum. A focus on wealth seems to reflect
more a desire to confiscate or penalize a certain class of households, rather than to empower the broader group of households.
For people in the middle- and lower-income levels, it's all about
earnings and income, not about wealth.
The Fed's monetary policy for a long time has been much more
effective in boosting balance-sheet wealth than in spurring real
income growth, which results from capital investment that in
turn spurs job growth. Because of Fed policies, corporate managers have often chosen financial engineering tools-for example,
debt-financed share buybacks-over the kind of capital investment that would create wage-paying jobs. This is largely because
financial markets have rewarded the former. In a rising assetprice environment, businesses engage in asset manipulation, not
capital investment, and are more concerned with balance-sheet
wealth than with business investment, which is the only way to
boost real economic growth. Wealth creation comes from strong,
sustainable growth that turns productivity into labor income,
and then to more business investment. Federal Reserve-engineered balance-sheet wealth creation provides no shortcut to
real growth.

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Modern Age - Winter 2016

Table of Contents for the Digital Edition of Modern Age - Winter 2016

Contents
Modern Age - Winter 2016 - Cover1
Modern Age - Winter 2016 - Cover2
Modern Age - Winter 2016 - Contents
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