Paul Graham’s naiveté – MLK day, 2016

by Robin Harris on Monday, 18 January, 2016

In Economic Inequality, Paul Graham – of Ycombinator fame – posted an astonishingly naive essay on income inequality. While many others have written take-downs (see here and here, of Mr. Graham’s factual and logical flaws, there’s another that deserves attention.

The role of entrenched wealth in creating a less just society
The stagnating incomes and declining social mobility of America’s shrinking middle class is well-documented. The role of entrenched wealth in making that so is less so.

The most visible example are the brothers Koch, whose billions have funded conservative think tanks, “astro-turf” advocacy groups like Americans for Prosperity, climate change denial, national debt scare tactics, and many political campaigns for decades. Their work led directly to the infamous Citizens United Supreme Court decision, gutting campaign finance laws.

Who on the side of working Americans is doing the same as the Kochs? Unions have been eviscerated, despite the fact that Europe’s biggest enconomy – Germany – is heavily unionized, with mandatory union representation on company boards. George Soros and Pierre Omidyar – both immigrants – do what they can, but despite their billions they are outgunned.

The Democratic party takes a lot of money from Wall Street and big corporations – they’ve got it, right? – and, most famously, not a single executive responsible for the Great Recession has faced legal action.

The difference is that the 0.01 percent take a long view – decades – while most Americans live paycheck to paycheck. Average Americans don’t have $800 an hour lawyers arguing their views in court or with regulatory agencies. Average Americans can’t call their Senator or Congressman at home to ask a favor or schedule a dinner. Average Americans don’t have Presidential candidates visiting their homes begging for money.

At the same time, average Americans are constantly told by media elites that “government isn’t the solution, it is the problem” encouraging fatalism and cynicism. News flash: America has – despite its many imperfections – the best government on earth. Which is why we are, at our best, a beacon to the rest of the world.

The Silicon Valley bubble
Not the economic one. The data-driven, engineering, “transformational power of technology” one.

That’s where Mr. Graham lives. While I love the Silicon Valley culture, Valley people should recognize that the wealthy of the world often operate in a less savory bubble: naked self interest, greed, self-absorption, and empathy-free.

The problem of storage in a democracy
One problem is the asymetric nature of public policy information. Problems are forgotten while the laws and regulations meant to manage them remain on the books.

Take the Depression-era’s Glass-Steagall act, which kept banking boring – and safe – for decades. After looking at the causes of the Great Depression, Congress passed that law to prohibit the abuses that led to the crash.

In the 1990s, after decades of propaganda funded by entrenched wealth, Bill Clinton signed a bill that repealed Glass-Steagal. It only took 10 years for Wall Street to use its new-found freedom to drive most of the world into a ditch.

Canada, which retained similar laws, didn’t have the housing crisis we did. Nor did they have to bail out their big banks. Today, even Clinton admits it was a mistake.

The StorageMojo take
It is the success of laws and regulations that allows the forces of entrenched wealth to argue that they aren’t needed. But as the recent conviction of a peanut company exec who recklessly shipped products that killed people shows, there are awful people that we need to be protected against.

Whether it is tobacco companies arguing against medical science, oil companies arguing against climate science, or banks arguing against economic experience, the wealthy and powerful are all too often happy to ignore the future misery of others in favor of this quarter’s profits – and their bonuses.

So, Mr. Graham, please step outside the Silicon Valley technocracy bubble and breathe the air the rest of us do. Open up an Old Testament and read what Isaiah and the other prophets said about the wealthy grinding down the faces of the poor.

Ask yourself, has human nature changed in the last 5,000 years? I don’t mind people getting absurdly rich. I do mind it when it leads to abuse of the less fortunate.

Courteous comments welcome, of course. When Martin Luther King Jr. was murdered, there were riots at my high school. Nine white kids managed to fold themselves into my VW bug. Extra credit: Watch the excellent Talk to Me, starring Don Cheadle, tonight.

{ 10 comments… read them below or add one }

Geoff Arnold January 18, 2016 at 6:35 pm


Jack January 18, 2016 at 10:17 pm

Rather than asking your readers “Who on the side of working Americans is doing the same as the Kochs?”, you should do some elementary research. Open Secrets can answer your question regarding individual donations.

Sen. Reid’s bogey men, the Koch family, ranks 10th, at $5M. #1 is Tom Steyer, at $75M – 15 times as much money. Of the top 10 donors, $103.4M went to Democrats/Liberal causes and less than half that amount, $48.3M went to Republican/Conservative causes. The top 100 went $166.9M Democrat and $120.6M Republican.

That’s a far cry from Soros and Omidyar are “outgunned”.

Further, the facts make a mockery of your audacious claim that the unions have been eviscerated. The SEIU, the #1 organizational donor, was all in to the Democrats for – get this – $222.5M. That single organization donated 1.3 times as much money to the Democrats as the top 100 individual donors. (I guess those Republican or Conservative union members are out of luck, as their mandatory contributions netted them a paltry $1.3M, or 0.58%).

The top 10 organizations went $905.5M Democrat and only $108.3M Republican. That’s 8 unions + Tom Steyer’s Fahr LLC against Sheldon Adelson’s Las Vegas Sands, 9:1 on contributors and 9:1 on dollars.

The top 100 organizations were $2.357B Democrat to $1.275B Republican, a 2:1 advantage for, as you called it, “the side of the working American”.

You’d best stick to technology analysis, as your political commentary is…

Robin Harris January 19, 2016 at 11:05 am

Jack, the proof is in the pudding, not campaign contribution numbers – which are, in any case, a small part of the Koch Bros. expenditures. Incomes of the top 1% have skyrocketed. America’s middle-class is shrinking and is now less than 50% of the population. Middle class incomes are and have been stagnant for decades, despite dramatic gains in productivity. Union membership as a percent of the workforce has been steadily declining for decades – and now the Supreme Court is set to declare dues optional for union members. 85% of American workers are making less today than they were before the Great Recession. The U-6 unemployment rate – which includes the unemployed, underemployed and discouraged workers – is 9.9% and higher than the pre-crisis rate. And yes, hedge-fund managers have an extra-special low tax rate on their multi-million dollar incomes.

So, yes, the power of entrenched wealth in America is growing, and it is an existential threat to our democracy. Step outside of your Silicon Valley bubble, Jack, and you might see that.


Ryan January 21, 2016 at 1:44 am

Not that I’m not concerned about poverty in the US, but there’s no comparison to the poverty in many countries. The middle class of the US is wealthy compared to the vast majority of the world’s population, and in a sense, could be viewed as keeping them down via protectionist/isolationist policies. Funny how wealth is always a relative thing.

Nonetheless, I agree about some of the inherent and manmade forces at play here, and I think history tends to show there’s a perceived livable balance. If the pendulum swings too far in one direction, a populist movement will naturally rise up and cause unrest. All benefit when the balance is managed. And if for no other reason than the inherent forces, as with paddling upstream, it needs to be pushed continually in favor of the poor just to stay in one place.

Just Cause January 31, 2016 at 11:35 pm

@Ryan The middle class may be wealthy compared to vast majority of 2nd and 3rd world countries, but the middle class of the US doesn’t live in those countries. They live in the US and they are swimming in debt and trying to keep up, and it’s only gotten worse every year. Let not even talk about the poor and the homeless.

Just Cause January 31, 2016 at 11:57 pm

In the US there needs to be a large tax increase on the top 1-4% (income,capital gains and property), there needs to be elimination of taxes on the bottom 20% range and a 10-20% sliding tax decrease on those in the 20%-70% range (both income and capital gains). And lastly a sliding gift tax for individuals based on the receiving individuals income (no more $14k limit, give a poor person $50k it may change their life, or maybe not).

Additionally there needs to be a corporate tax minimum put in place where medium to large companies (based on revenue) can’t avoid paying each year, Lastly a tax on market trades of high volume traders.

Just rough numbers 🙂

Last five changes:
1) Corporations must be defined as special entity and no longer given the same rights as people.
2) Citizens United must be overturned and tax payer financed elections instated.
3) Religious tax exemptions must be eliminated (The government shouldn’t decide what is true a religion and what isn’t, so eliminate part of the discussion)
4) Drugs should be legalized and treated like alcohol (tax , educate, treat). Minimize gangs and organized crime by bringing it into the light.
5) Prostitution should be legalized, licensed and tracked (tax , educate, treat). Minimize human trafficking, pimps, gangs and organized crime by bringing it into the light.

Pej February 15, 2016 at 3:08 pm

This is a good example of why technology literate people should stick to writing about tech instead of improvising something showing how much they are economics and finance illiterate.

Sorry for being so harsh… But I would recommend reading Rothbard and Mises books.

Robin Harris February 15, 2016 at 5:00 pm

Hilarious! You assume because I don’t agree with you that I’m an “economics and finance illiterate.” You should have read my About page: I’m a Wharton MBA in finance, decades in corporate America and the last decade running my own business. While I have a lot of respect for Schumpeter, most of the Austrians, and their American freshwater acolytes, have been wrong, wrong, WRONG! for the last decade – and yet their models never evolve. They might as well be illiterate.

Far from being harsh, you gave me a good laugh!

Pej February 17, 2016 at 11:27 am

Ignorance is bliss, as they say.

If you say Austrian economists have been wrong, it does certainly mean you don’t know what you’re talking about. Maybe some have have been wrong at forecasting stock markets, but who has been more wrong than the Fed on that topic?

Once youve finished laughing, maybe start with Economics in One Lesson. It’s a very easy read. Then maybe follow with Rothbard’s about Gold, the Fed, government.

Again, I highly respect your insights on storage. But economics…

Chuck March 8, 2016 at 10:12 pm

Hello Robin,

This post was more interesting than most of the drama on the political sites. Americans are indeed suffering in a prolonged multi decade economic vise.

Since the 1960s or 70s, a person’s wages may have risen but not actual purchasing power. There was a time when one wage earner could comfortably support a spouse & child. Now 2 wage earners barely support themselves. The situation is akin watching people walk forward on an airport ‘people mover’, … but in the reverse direction. You know you are walking, but others are passing you.

Thanks Robin !

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