Income Equality – No; Consumption Equality – Yes
By: Ron Lipsman
There is a remarkable article in the January 3rd Wall Street Journal by Andy Kessler, a hedge fund manager turned author. In it, he proposes a novel idea – namely, while acknowledging substantial income inequality in the US, he asserts that in fact the nation has achieved an amazing level of equality in consumption. According to Mr. Kessler:
“It used to be so cool to be wealthy—an elite education, exclusive mobile communications, a private screening room, a table at Annabel’s on London’s Berkeley Square. Now it’s hard to swing a cat without hitting yet another diatribe against income inequality. People sleep in tents to protest that others are too damn wealthy.
Yes, some people have more than others. Yet as far as millionaires and billionaires are concerned, they’re experiencing a horrifying revolution: consumption equality. For the most part, the wealthy bust their tail, work 60-80 hour weeks building some game-changing product for the mass market, but at the end of the day they can’t enjoy much that the middle class doesn’t also enjoy. Where’s the fairness? What does Google founder Larry Page have that you don’t have?
Luxury suite at the Super Bowl? Why bother? You can recline at home in your massaging lounger and flip on the ultra-thin, high-def, 55-inch LCD TV you got for $700—and not only have a better view from two dozen cameras plus Skycam and fun commercials, but you can hit the pause button to take a nature break. Or you can stream the game to your four-ounce Android phone while mixing up some chip dip. Media technology has advanced to the point that things worth watching only make economic sense when broadcast to millions, not to 80,000 or just a handful of the rich.
The greedy tycoon played by Michael Douglas had a two-pound, $3,995 Motorola phone in the original ‘Wall Street’ movie. Mobile phones for the elite—how 1987. Now 8-year-olds have cellphones to arrange play dates.”
Mr. Kessler goes on the explain how the average middle class Joe – and not one necessarily high up in that class – can consume products and services that are shockingly similar to those enjoyed by the millionaires and billionaires so prominent on President Obama’s hit list. Even the most mundane cars today sport features and gadgets not terribly different from those that adorn the highest end luxury models. Yes, the super rich can jet all over the world in their private Lear jets; but there is nary a place on the globe that is immune from Aunt Nellie and Uncle Horace’s touring club. Moreover, as Kessler says, “most places worth seeing are geared to a mass of visitors.” As for high quality medical care: the rich have always had access to it; but “Arthroscopic, endoscopic, laparoscopic, drug-eluting stents—these are all mainstream and engineered to get you up and around in days. They wouldn’t have been invented to service only the 1%.” In quality of health care, electronic gadgetry, transportation, even food and drink, the quality of the goods and services enjoyed by the masses is not that different from those savored by the super wealthy.
So, egalitarianism has come to America! It’s just not politically imposed by the government; but rather it has been acquired via the market. We have achieved leftist goals by rightist means.
Well, is all of this “stuff and nonsense,” or is Kessler on to something? I would say: yes and no. First, there is no question that income and asset disparities are becoming more pronounced in the United States. Despite the fact that the rich pay an increasingly disproportionate share of the income tax in America, and despite the fact that more and more of us derive robust incomes from government – both directly and indirectly, the gap in income and assets between the rich and the rest of America continues to grow. Why that might be is the topic of a separate article. Suffice it to say that even though Keynesian, soft socialists have been running the country (with a few exceptions) for decades, income equity – the Progressives’ dream – is no closer to being achieved than it has ever been in the nation’s history.
But have we truly achieved, as Kessler implies, a state of equity in our consumption of goods and services? It is undoubtedly true that many products and services that we traditionally think of as exclusively the province of the wealthy have become accessible to the middle class (and sometimes even to the poor), even if only in relatively modest versions. Whereas in the past, the meals, clothes, travel and vehicles of the rich were so far beyond the grasp of the common man, today that is no longer the case. Joe the Plumber may not be able to fork out thousands of dollars for a bottle of rare wine, but for $50-$100 – which he might well be willing to spend, he can get something remarkably close in quality. Lowly Louise cannot jet off to Vienna to see a production of La Boheme, but she can watch it streamed on her big screen LCD TV at a tiny fraction of the cost. Neither Joe nor Louise can afford an elaborate second home on Lake Winnipesaukee, but they can rent the place with friends at an affordable price and enjoy all the amenities.
Maybe Kessler is right. And if so, it is an amazing consequence of our (relatively) free market system in which courageous entrepreneurs, brilliant inventors, sagacious investors and visionary businessmen bring the playthings of the rich and famous down to the level of the common man.
And yet, while there is certainly truth to Kessler’s observation, he is missing an important point: all those zeroes. Whatever the budget/income/expenditures of your average middle class bloke might be, the corresponding figure for the super wealthy has multiple zeroes tacked onto the right end. Moreover, the power, accessibility, opportunity, connectivity and authority afforded by those zeroes are impossible for the bloke to experience or even understand. Yes, it might be that our amazing capitalistic economy has enabled the middle class – and sometimes the poor – to experience the flavor of the gadgets and amenities favored by the wealthy. But it is totally beyond the ability of the middle class to mimic the gargantuan sense of authority, control and influence that enormous wealth affords.
Now I do not claim that such a sense makes the wealthy any happier, better adjusted, humane or honorable than the middle class. We know of too many instances of wealthy individuals who stoop to crime, corruption, cruelty or cravenness. And often they do so because all those zeroes give them a false sense of superiority and invincibility.
“Now Lipsman,” you might interject, “how would you know? You’re not wealthy.” True. But I’ve known some very rich people. And in every instance, I’ve sensed a super self-confidence, haughty arrogance and air of entitlement that is impossible to miss. Sometimes it’s merited; sometimes not. Either way, the phenomenon of consumption equality that Kessler has identified – while interesting, and on target to some extent, does not really describe a true equality in the citizenry of the type that Progressives envision when they pine after income equality. The middle class may be able to acquire a taste of the concrete accoutrements enjoyed by the rich. But they cannot feel the power, haughtiness and grandeur of the latter. I suspect Progressives know this and resent it. Thus they will continue to strive for income equality. Let’s hope they continue to fail. My reason for saying that is also a topic for another day.
Ron Lipsman, Professor Emeritus of Mathematics, Former Senior Associate Dean College of Computer, Math & Physical Sciences University of Maryland