The Stinking Rich Can Be Good for Everybody

The Stinking Rich Can Be Good for Everybody

Inequality between the very richest and the rest correlates with greater innovation.

But we mustn’t let the top level become a closed shop.

We hear a lot about income inequality these days; so much that I wouldn’t be surprised if the 1% were cowering behind the gates of their enormous mansions, shaking in fear as they contemplate the torch and pitchfork-wielding crowds. But one positive factor accompanying growing inequality is growing innovation. Academics and politicians alike are now focusing on the super-rich and how governments might use tax policy to redistribute income. 

For example, Democratic presidential hopeful Senator Elizabeth Warren supports a 2% tax on wealth over $50 million. There are plenty of billionaires who are on board with that too, like George Soros and Facebook co-founder Chris Hughes. They’re more than happy to give up some wealth to benefit society. 

Las month a professor from the London School of Economic stated that there is no evidence that faster innovation will create greater inequality down the income scale; it has an impact only when comparing the 1% with the rest of us. He also noted that increasing innovation is linked to greater social mobility. 

It is in fact this social mobility that has motived many tech pioneers in the first place. They want to make enough money to join the ranks of the elite. But some believe that when the government targets excess profits, it dampens the desire to innovate. But that is overly simplistic and there is ample scope for public policy to address issues. 

Productivity growth among tech companies peaked in the mid-90s to mid-2000s and has trended downward since. At the same time, companies are becoming more able to charge markups over cost. Innovators are rolling in money, in part due to the barriers of entry they have created themselves. 

To learn more about how productivity growth and innovation are related to income inequality, please visit:
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