"How Inherited Wealth Helps the Economy" is, I kid you not, the title of an actual op-ed piece published last week by a Harvard economics professor. I swear it's not a snarky little something posted over at The Onion. It appeared in the Sunday New York Times. In the Business section, no less. It's also perhaps the most egregious piece of trickle-down claptrap since William Jennings Bryan -- in his 1896 "Cross of Gold" speech -- first condemned Republicans for believing that "if you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below." Read it and weep (or laugh):
When a family saves for future generations, it provides resources to finance capital investments, like the start-up of new businesses and the expansion of old ones. Greater capital, in turn, affects the earnings of both existing capital and workers.
Because capital is subject to diminishing returns, an increase in its supply causes each unit of capital to earn less. And because increased capital raises labor productivity, workers enjoy higher wages. In other words, by saving rather than spending, those who leave an estate to their heirs induce an unintended redistribution of income from other owners of capital toward workers.
The bottom line is that inherited wealth is not an economic threat. Those who have earned extraordinary incomes naturally want to share their good fortune with their descendants. Those of us not lucky enough to be born into one of these families benefit as well, as their accumulation of capital raises our productivity, wages and living standards. (emphasis mine)
Which "economist" produced this supposedly serious piece of propaganda? That would be N. Gregory "Greg" Mankiw. Although an academic, Professor Mankiw is no stranger to politics. He served from 2003 to 2005 as the head of the Council of Economic Advisers under George W. Bush, and served as an adviser to Mitt Romney for both of his presidential runs. Mankiw was rumored to be a serious candidate to replace Ben Bernanke as Fed Chairman had his boss defeated Barack Obama. One more reason to be relieved that didn't happen.
Can this stuff about multimillionaires like the Romneys leaving huge inheritances to children (who haven't themselves earned it) helping workers actually be true? Here's what Mankiw had to say to anyone concerned that it will only exacerbate our country's ever-increasing income and wealth inequality, and the related stagnation in living standards for those outside the top few percent: "Pshaw!" Well, that's essentially what he said when he noted that "standard economic analysis suggests otherwise." Are you ready to take the word of the guy behind the Bush-Romney economic policy? If so, you probably believed it when, on Election Night, Karl Rove insisted that the Mittster had beaten President Obama in Ohio.
Danny Vinik, political reporter at Business Week, begs to differ with Mankiw's "economic analysis." In far more detail, economist Ed Dolan, writing for Nouriel Roubini's Economonitor, takes the article in question apart, piece by piece. Vinik and Dolan both cite (with minor differences) the following data from the Economic Policy Institute, which shows that, over the past four decades, the once strong connection between increases in worker productivity and hourly compensation -- which Mankiw cited above in support of his argument -- has almost completely been broken.
On a related note, this graph, created by Tom Lum Forest, demonstrates that as corporate profits have risen dramatically since the end of the Great Recession, employment has not.
Together, these two graphs make clear that Mankiw's claim about the accumulation and inheritance of great wealth helping workers, and the broader argument that what helps the 1 percent also helps the other 99 percent, makes as much sense as, well, working people voting Republican.
What's so important here is that this argument stands at the dark heart of the entire Republican philosophy. And it's an argument that makes no sense at all in the real world, a place where people understand that the only person helped by inherited wealth is the person inheriting it. But without the cover of that argument, Republicanism is exposed for what it really is, naked class warfare waged by those with large amounts of capital against the overwhelming majority of Americans.
We can contrast Mankiw's trickle-down/noblesse oblige mumbo jumbo with the Democratic idea described in the second part of the aforementioned statement by William Jennings Bryan:
The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it.
Bryan -- three times the presidential nominee of the Democratic Party but never the president -- represents the shift of his party away from the conservative economic philosophy of the Bourbon Democrats and toward the populist, pro-worker ideas that have, ever since Bryan, separated progressives from conservatives, Democrats from Republicans.
Republicans worship capital, they believe capital "creates" jobs. We progressives know that without consumer demand, all the capital in the world on its own can't create a job without enough people with money to buy the products being sold. We also know that a society in which wealth is too concentrated at the top is neither morally nor economically sound. We aren't interested in bankrupting the rich, we simply understand that a healthy economy grows from the middle out, and that those who earn great success must contribute enough back to ensure that society can provide opportunities for everyone to gain a measure of that success.
Finally, we know that there's a reason why the two great economic crashes of the past century -- those of 1929 and 2008 -- followed long periods where conservative Republicans controlled the White House and both houses of Congress, and were able to inflict their "pro-business" trickle-down policies on our country.
Someone like Greg Mankiw -- a man attached at the hip to the Bush-Romney Republican economic brain trust -- cannot help but defend vast amounts of inherited wealth. He cannot help but argue that such inherited wealth benefits workers, despite the absurdity of such nonsense.
The goal of such an argument is to make working people believe that down is up, that day is night, that Republicanism works for them, and not merely for the 1 percent. To the American people, I would simply say this: Don't you believe it.