Can the rich save us?
Last week, in "Vote for the Romney economy?" I talked about supply-side measures needed to boost capital investment and labor productivity. The discussion above underlines the importance of encouraging CEOs and small-business owners to take risks, buy new equipment, hire new workers and spur innovation by lowering the cost of growth efforts and the potential tax burden when new initiatives succeed.
Government can play a role -- not by giving cheap loans to companies like A123 (AONE) so it can try to sell its taxpayer-funded battery technology to China when things don't work out but by rewarding successes by fostering competition and buying the results. Why not emulate the strategy of the X Prize Foundation, which offers prizes for private-sector successes in fields like space travel.
Human ingenuity remains undiminished. Consider this year's Nobel prizes for work in quantum physics and adult stem-cell research. Quantum computing holds great promise, given the ubiquity of microprocessors, including self-driving cars and humanoid robots that can finally cross the "uncanny valley" and become true human proxies. Stem cells could advance regenerative medicine as the populations of rich world economies gray.
A trickle-down solution?
But what about demand?
While most people are suffering because of the stagnation outlined above, the wealthy are doing just fine as we regress toward the stratified social structure of the pre-industrial era. Consider the latest Federal Reserve survey of consumer finances. Between 2001 and 2010, the wealth of the median middle-income family fell by more than 20%. For the median family in the upper 10% of income, wealth increased 17% to $1.2 million.
Globally, Credit Suisse expects global wealth to increase 50% over the next five years. Most of this will accumulate to the elites, since just 0.6% of the global population controls more than 39% of overall wealth. According to its estimates, 18 million new millionaires will be created.
The ugly truth is this: The only solution I see, outside of a wealth tax and a rewriting of the social contract between the moneyed and the rest, is encouraging businesses to push the boundaries of possibility to satisfy the desires of the ultrarich. They'll want new organs and cybernetic servants. They'll want first-class seats for travel into space. Hopefully, thanks to the trickle-down of technology and the new jobs created along the way, the middle class will come along for the ride.
At the time of publication, Anthony Mirhaydari did not own or control shares of any company mentioned in this column in his personal portfolio.
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Stock mentioned on the previous page: Facebook (FB).
