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Dr Peter Morici: Inequality is President Obama’s highest priority, but solutions are naive
By Professor Peter Morici
Jan 22, 2014 - 2:46 AM
|President Barack Obama walks to the White House residence with Chief of Staff Denis McDonough, after a day of meetings in the West Wing of the White House, Jan. 21, 2014. |
Dr Peter Morici: Inequality is President Obama’s
highest priority, but his solutions are wholly naive. Disparities between rich
and poor are as ancient as civilization, but in modern democracies, this
condition is exacerbated by globalization and technologies that drive it.
Successive advances in communication and transportation, for example, permit top
opera singers, athletes and other professionals to reach wider audiences and
earn incomes many times greater than their peers.
Before the radio, phonograph, and moving pictures virtually every city, small
and large, had an opera house or music hall that offered live entertainment. The
top stars sang in New York, London and Milan, earned considerable wealth, but
many local performers and traveling journeymen could earn a decent living too.
Caruso made 260 recordings for RCA Victor from 1904 to 1920, and radio sent his
voice around the world. His income soared to levels unheard in past generations,
but less renowned performers were displaced as regional opera companies folded.
Satellite communications, the internet and jet travel permit star journalists to
reach millions across the globe but are summonsing the demise of newspapers and
opportunities for local reporters and columnists. The same goes for Wall Street
bankers, big-firm lawyers and multinational executives but at the expense of
their brethren in smaller enterprises.
For ordinary workers, cheaper ocean and rail transportation for goods and the
internet for services have magnified global competition. More workers in the
United States must now compete with those in China, but also in northern Europe
with those in southern Europe and in large Chinese cities with those elsewhere
Governments have made extremes of income worse. Big cities, often with federal
support, subsidize concert halls and sports stadiums, and further raise the
salaries paid top performers and big league ball players.
The United States and European Union have gone along with trade and
environmental agreements that permit China to charge high tariffs on imports and
avoid pollution abatement, making made-in-China even cheaper. That pushes down
wages for American and European workers and wrecks havoc on the global
In China, migration laws permit rural workers to move to factories in big cities
but most may not bring their children. One in five Chinese children lives
without their parents, and often those drop out of school, become unemployable
and will create enormous social problems.
Income disparities are making education more unattainable for the children of
poor and working classes. This is a social time bomb, but government policies to
address the problem often make things worse.
In the United States, government subsidized loans drive up tuition costs.
Community and less-prestigious four-year colleges have lots of children from low
and middle income families, but many graduates are saddled with huge debt and
have not found jobs that pay much better than high school graduates.
Enrollment at top business and professional schools are still dominated by
students whose parents are well off. They get most of the top paying jobs on
Wall Street, in high-end law firms and among multinational corporations.
ObamaCare is making health insurance more expensive for many middle class
families and driving up the cost of health care. That makes income disparities
worse not better.
Research at the nonpartisan National Bureau of Economic Research has shown
putting otherwise able people on public assistance encourages the same in their
children, and extended unemployment benefits actually increase unemployment by
raising employer costs and reducing the demand for labor.
All these burdens slow growth and lessen job opportunities for the struggling
middle class and disadvantaged.
High talk about social justice, widening economic opportunities, and income
redistribution makes liberal politicians media darlings and wins elections, but
such demagoguery does little to fill the belly of the poor.
Professor, Robert H. Smith School of Business, University of Maryland,
College Park, MD 20742-1815,
703 549 4338 Phone
703 618 4338 Cell Phone
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