Friday Interview: Focus On Growth, Not Inequality | Eastern North Carolina Now

    Publisher's note: This post was created by the CJ Staff of the Carolina Journal, John Hood Publisher.

Scholar James Piereson tackles popular left-of-center argument

    RALEIGH     Left of-center pundits and politicians have spent a lot of time recently bemoaning growing income inequality in the United States. James Piereson, president of the William E. Simon Foundation and senior fellow at the Manhattan Institute, says the focus on inequality diverts attention from more important problems. Piereson explored that theme during a 2014 Hayek Lecture at Duke University. He also discussed inequality with Mitch Kokai for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)

    Kokai: This inequality issue has had a lot of attention largely because of a very well-publicized book by the French economist Thomas Piketty. You set out to look at what Piketty wrote and found some interesting observations about his work.

    Piereson: Well, the Piketty book is a very serious work. I've written about it and spoken about it. It focuses exclusively on the distribution of income and wealth in our free-market societies, and it places great emphasis on the growing inequality which they detect.

    It's a very much one-sided interpretation of our free-enterprise system. It has many dimensions that go beyond the distribution of income — innovation, quality of life, progress, freedom. All sorts of dimensions that have to be taken into account, and he only looks at one of them.

    As I've said, this focus on inequality is a new issue. Traditionally, when we've spoken about inequality, we've talked about elevating the poor into the ranks of the middle classes. All of our government programs in the '60s and '70s, and even before that, were focused on elevating the poor.

    This comes at the problem from the reverse angle. That is, the wealthy, the very rich, and trying to find ways to redistribute their wealth and income back down through the rest of the 99 percent.

    As I say, I think that is a fool's errand. We can't improve the living standards of 99 percent of our people by trying to take income and wealth from the 1 percent who are successful. And as I say, that obscures the real problem that we're facing in America and other societies across the West, which I think is not inequality but something else.

    Kokai: And you mentioned during the Hayek Lecture — after you showed a number of slides and discussed a lot of the data, including some data from Piketty and his colleagues — and said that to you it looks like slower, sluggish economic growth is a much more pressing problem.

    Piereson: That I think is the core problem that we're facing in the United States and in Europe and of course in Japan, which has been struggling with this for 20-odd years. Our economy has had sluggish growth since at least the year 2000. Even before the financial collapse in 2008, our economy is growing only at 2-2.5 percent.

    And then, of course, it went over the cliff in 2008. And we really haven't really regained the kind of solid economic growth we had in the 1960s or in the 1980s or the 1990s.

    Two percent economic growth in America is not going to get the job done. That's a recipe for stagnation of incomes and standard of living for our middle classes. And it will not allow for mobility for people who are way down the ladder.

    So that is really what we need to focus on. Inequality is a false issue. Economic growth, dynamism, innovation, prosperity, progress — these are the things we need to talk about. How do we get our economy growing again in a dynamic way to improve the living standards of our middle classes?

    Kokai: Listening to the Hayek Lecture, I was thinking, "Well, perhaps there is going to be a silver lining, or let's move in this direction and things will all be better." But you had some serious concerns about how the United States and the West are going to deal with these issues. We don't have a silver bullet, do we?

    Piereson: No, we don't, Mitch, and I wish we did. Of course, in the 1970s we had a stagnating economy, and Ronald Reagan came along and, with the help of some Democrats, cut taxes, deregulated the economy, ended the Cold War, and we had a more than two-decade burst of pretty solid economic growth. I'm not sure if those bullets are available to us today to jump-start our economy.

    And unfortunately, the current administration in Washington seems to have almost no interest in the issue of economic growth. They have no growth agenda for taxes or regulation. They seem mainly concerned about spending money, running up debt, and sending money to their constituent groups and the voting blocs.

    And I think that's misguided, but I don't think we're going to get much of a change until we get a different administration in Washington — Democratic or Republican — that wants to focus on the critical question of economic growth.

    In the meantime, you know ... all sorts of things could happen. We could have a war in the Middle East, send oil prices through the roof. It could create a recession in the United States, a stock market collapse. And I don't know that we recover that quickly from that kind of disaster, should it happen.

    So yes, I'm definitely concerned in the short run, and I suspect that it's entirely possible the United States will have to go through a crisis of sorts, perhaps the kind we had in the 1970s, really before we get our house in order and reorient our policies toward growth.

    Kokai: You mentioned the administration and saying that there's not really a plan for economic growth, but the administration has been open to this argument from Piketty and his colleagues on income inequality and doing something about that. Based on what you've just said, I would suspect you'd recommend: Stop talking about this and do something else.

    Piereson: That is a diversion, I think, from our real problems. We've got a political stalemate. We have slow growth. We have rising debt. We have all sorts of problems in our country. Inequality is the least of them. We ought to be focusing on the fundamental issues that we can address to improve the living standards of the 99 percent.

    Kokai: You mentioned that this will take a new administration probably, either Democrat or Republican. What do you hope the people who are vying to be the next president will be talking about in terms of jump-starting our economy?

    Piereson: I would overhaul the tax structure, to some degree, and orient it toward growth and innovation. And I would address the debt problem. Government spends too much, and they spend money in a lot of wasteful ways.

    One other thing I would do is I'd turn the energy revolution loose. We have tremendous opportunity in the United States to have an energy revolution that's taking place in modest ways already. The United States, I believe now, is maybe the largest producer in the world of oil.

    I think the potential is enormous. It's one of these things that could generate tremendous growth in our economy. I believe that that can be turned loose.

    But that's just a start. That's not enough. So we have to do a lot of other things as well. So I think when the next administration comes into office, it's going to have plenty of opportunities to focus on this.

    Kokai: In the brief time that we have left, do you have much confidence that we are going to see a change, or is it going to take of these crises that you mentioned in the past?

    Piereson: You know, I think the problem is that a lot of these challenges can never be dealt with pre-emptively. So it often takes a crisis until you can generate the consensus among the politicians that something drastic has to be done.

    Otherwise they'll coast along as they've always done. I think that's the pattern, and that's what I fear is likely to happen — that things ... might have to get worse before they get better. That's unfortunate, but that's the way life and politics tend to work.