Edward Conard says what Mitt Romney won't

In fact, the GOP candidate himself should start arguing explicitly for greater inequality, as does his bold old crony from Bain Capital.

By MSNMoney partner May 10, 2012 2:11PM

By Michael Kinsley


The people at the New York Times Magazine must think that nobody has ever read Ayn Rand, or maybe even Adam Smith.


Their cover story on Sunday -- misleadingly titled "Are the Rich Worth a Damn?" -- reports breathlessly that there is this fellow named Edward Conard who believes in free-market capitalism and is willing to fill a gap in the argument we've been having about growing income inequality. Until now there hasn't been anyone, or at least anyone still alive, willing to say publicly that what the U.S. needs is more inequality, not less. (Conard has even written a book about "Why Everything You've Been Told About the Economy Is Wrong.")


The argument is basically Smith's, carried to extremes: The invisible hand of free-market capitalism turns individual greed into prosperity for all. But Conard also shares Rand's special twist of portraying the successful businessman as a hero, the Alpha Male at his finest, and everybody else as mediocre deadbeats and leeches.


He says Warren Buffett should "quit taking a victory lap" for saying that the rich should pay more taxes, because "that money is for the middle class." Conard means, believe it or not, that the middle class is better off paying more taxes so that people like Buffett can pay less and use their superior drive and brains to finance innovation that makes everybody richer.


Let's accept the thesis that people have earned their wealth if their contribution to society outweighs the contribution to their own pocketbook. This still leaves you a long way from Conard's belief that incomes should be more unequal, not less. There is a necessary distinction between riches gained through truly productive, socially beneficial activity, and riches from activities that just enrich the actor.


The New York Times story, by Adam Davidson, concedes that many large fortunes are nothing more than what economists call "monopoly rents" such as the value of broadcast licenses given away free by the government, or ownership of land ("they're not making any more of it," as they say) in places where rising population makes it more valuable.


Conard clearly believes that he is in the Alpha elite that should get more money, not less. He was a partner of Mitt Romney at Bain Capital until he retired a few years ago at age 51. This makes him a counterexample to his own theory. His rapid accumulation of huge wealth (estimated in the story to be "most likely in the hundreds of millions") did not cause him to buckle down and work even harder. It caused him to retire and follow pursuits more satisfying to him than making more money.


The theory behind free-market capitalism is undeniably true and undeniably powerful in explaining the world around us. But it explains less and less as we move up the income scale. At the tippy-top, among the really rich, it makes no sense at all.


Why do people try to maximize their incomes? The poor person wants more money in order to eat. The middle class person wants a better house or a new washing machine. Even a rich person may want an even better house or a servant to wash the clothes. But what does a really, really rich person -- worth, say, "most likely in the hundreds of millions" -- want that money can buy? What motivates him or her to get up and go to work every morning?


It's not hard to come up with a few obvious psychological factors (competition, egocentrism, lack of imagination . . .), but the desire for even more money to spend can't be one of them. The more someone has benefited from free-market economics, the less the theory behind free-market economics explains her actions or justifies his remuneration.


By Conard's reasoning, the proper measure for reward of a billionaire isn't the value of her contribution to society. It's how much it would take to induce him -- or someone like him -- to make that contribution. Facebook's imminent IPO could leave its founder, Mark Zuckerberg, with a fortune of more than $17 billion.


Let's accept that the existence of Facebook contributes more than $17 billion to the good of society. (Conard offers Sergei Brin of Google to make this same argument.) It doesn't follow, as Conard seems to think, that every dollar of Zuckerberg's $17 billion is a bargain for society, or that we should want Zuckerberg to have more money, not less.


Would Zuckerberg not have created Facebook if he expected to make, say, only $12 billion? If Zuckerberg had never been born, would no one else have come up with the idea of Facebook? Even if someone else's Facebook would be worth less than $17 billion, it would still be worth more than nothing. And it lowers the amount Zuckerberg needs or deserves, dollar-for- dollar.


There is no evidence that remuneration at the very top of society is calculated to extract the maximum amount of entrepreneurial energy and talent at the minimum price. In fact, quite the reverse: There's every reason to think we overpay.


Let's even imagine that all the paper shuffling and exotic transactions that go on in American finance are productive somehow. Does it follow that we need to pay Jamie Dimon, chief executive officer of JPMorgan Chase & Co., $23 million to do whatever it is that he does?


Maybe Dimon is uniquely talented and simply would not do it for less. But maybe he would settle for $10 million if pushed to the wall. Or perhaps someone just as good, or almost as good, would do the job for a lower price? This doesn't mean that Dimon should be fired and replaced. But it does mean that he doesn't need to be paid more, or even as much.


Conard's argument justifying inequality is just a fleshed-out version of his former colleague Mitt Romney's campaign stump speech about how he can save the country as a businessman. Romney might have preferred not to have his old buddy Conard spelling out the case for income inequality in quite so much brutal detail. I, on the other hand, think that the more of Romney's friends there are publishing books and appearing in magazine articles trying to make the case for more inequality in the next few months, the better.


In fact, Romney himself should start arguing explicitly for greater inequality. It would be the result of his announced economic policies in any event. But I suppose that's too much to hope for.

More from Bloomberg

May 13, 2012 4:55PM
A lot of talk about running the government like a business. The government is not a business and can never be run like one. To be called a busness, you have to produce something.
May 10, 2012 3:11PM
These people are all going to die sometime. You think they can't be replaced? Think again. A lot more qualified people would pop up in a minute. The only things that holds them back now, are the proper connections.
May 11, 2012 11:19AM

Republicans have no reasonable or responsible answers to anything of importance to the

nation's citizens.  Just listen to them.  RantraverantraverantraveRomneyrantraverantraverant. 

Three and a half years of unremitting negativity is unproductive, ungodly, uninspiring and...

unAmerican.  Just say NO to the GOP.  The only thing we have to fear is the GOP itself. 

May 11, 2012 2:58PM
The author misses the most obvious question.  At least a Conard or Zuckerberg created something of value on the way to making their fortunes.  The average politician comes out of office 10 times wealthier than going in.  What value did they create?  Pres Obama would never have gotten 10 cents for his book if he wasn't the president with paid off Unions to buy truckloads of copies to hand out to their brainwashed faithful.  How many citizens would love to take a politician's seat for half the pay, perks and benefits?  Of course you cannot get there without first selling out to the special interests.
May 11, 2012 9:16AM
Off course we're better off when the rich make money.  I never got a job from a poor person.  Name one country on earth where the little guy is doing well because their government confiscated wealth from the top producers.  The only effect confiscatory tax policies have is to discourage the top producers to the point to where they stop producing.  That means they hire less, buy less, invest less and simply there is less to go around for everyone.

 Let's stop worrying what others have and work toward an environment where everyone has the opportunity to make as much money as they can legally.  This doesn't mean we will all become rich but it does guarantee we all have the opportunity to succeed. 
May 13, 2012 9:23PM

@john q citizen...  Nobody is making the argument that billionaires have it rough...  conservatives are making the argument that they are irrelevant.... If you taxed the 1% from 35% to 80% (yes I said 80)

it would raise about 45 billion a year extra... Yes 45.... We spend 1.2 trillion or 1,200 billion over what we take in..... So 1,200 less 45 is 1,155 billion or 1.15 trillion..... Going a trillion dollars upside down every year is no economic plan and will be the end of America as we know it..... and you can see that taxing the 1% almost all of their money would have no effect whatsoever.... So can we PLEASE quit talking about the billionaires when spending MUST be cut...

May 13, 2012 10:15AM
Steal someboby elses money is always the answer you hear to solve the debt issues. Please, not my taxes, let's spend "someone elses". In your home budget{for those of you that really have a job} you only have x to spend because you only make x. So x + is probably not going to be good for your family budget.  My family has lived our life via the x - principal. Hence, we have money to save. Is that easy enough to understand? Or are you from California?
May 13, 2012 9:14PM
Still waiting for @reality to explain to us "idiots" why expecting able bodied people to work at least hard enough to support themselves and their children is such a draconian, hard hearted proposition... I was also still waiting to be educated as to how spending 3.5 billion a day over what we take in as a country is good sound economic policy and have us as our Pres. put it "Headed in the right direction"  
May 11, 2012 9:39AM
The great error of Conrad, Rand and all the others is seeing inequality solely in the economic dimension, when, as Adam Smith clearly knew as he wrote A Theory of Moral Sentiments before he wrote The Wealth of Naitons, economics is simply one dimension of life. For example, The Economist once detailed that greater inequlity leads to higher rates of obesity as the poor eat cheaper and fattier foods, which is killing our health care system, higher rates of teenage pregnancies as young women with little more to gain in life can always make a baby, which exacerbate our political debates over life issues, and so on. We all should read My Years with Ayn Rand by Nathaniel Branden before going homo economicus.
May 13, 2012 6:49AM

Btw. @reality,,  The taxes you mentioned, sales tax, property tax, city tax, state tax.... none of that goes to the federal government which is spending 3.5 BILLION dollars a day over what it takes in. Sometimes "reality", no matter how good the program sounds,, it isn't worth borrowing more money from China to pay for the program.. and guess how much we ACTUALLY pay when we borrow 3.5 billion from China and then pay interest on it until who knows when.. For the next 50 years?? forever??   You do realize the U.S. spends around 400 billion a year in interest on the national debt right now right?? How much "reality" would you think is a good number of billions to add to this 400 billion???  The extra income tax % the Pres. wants to add to the 1% would bring 4.7 bill a year into the mix according to both the CBO and Pres. Obamas admin..... Great,,, that takes care of almost 1 and a half days of deficit...   Waiting for your answer "@reality" since I'm an "idiot" I can't wait to be educated about how this can continue without the U.S. failing.

May 11, 2012 1:18PM

If I had to make one argument against either the community organiser or the banker it would be this. All of the previous prosperity of our country has come from the liberties to pursue success regardless of your starting point. The government has been stripping us of our rights through the war on drugs and terrorism. The regulatary structure of government has the force of law without the perils of lost elections for cingress abd the senate, NAFTA and other free trade agreements have forced us to work for less and less while the rich get richer.

 We need a restoration of our civil liberties and a shrinkage of our government and the only one talking about this is Ron Paul. With liberty prosperity follows. Go Ron Paul 2012!!!

May 13, 2012 7:41PM
the class warfare line is getting old.theres just so many times a person can hear about how hard it is on the billionares.especially when most of america is wondering if they should pay the rent'to the rich" or keep the electricity on.141 million americans had jobs in 2009 138 million have them now.and still our government says things are getting better.it is for them.theyre making a fortune getting us to look the other way as were being replaced by cheaper foreign labor.unions plus tariffs equal a high standard of living.free trade means the end of america
May 12, 2012 12:58PM
Past a certain point, additional wealth does not translate either into addtional drive to be creative or to trickle down benefits.  For one thing, the top 5% earn 35% of all income yet contribute on 17% to consumer spending.  If the 1/6 of the Middle Classes income that's been distributed to the top 1% alone, representing 15% of America's GDP, most of that would be spent to survive, increasing consumer spending by 5-10%.  Imagine THAT effect on the American economy!
May 14, 2012 11:15AM
Most people on "welfare" are single parents, usually mothers, with dependent children. Just for the record.
May 13, 2012 6:12AM

@reality,  I never said that the 47% sit around and wait for money.. I was only pointing out that 47% of the wage earners fair share of Fed. taxes is 0%... That is all..   Of the people waiting around to get others money.... That is a different matter entirely.  If you think the only people doing little to no work are elderly, disabled you are delusional. Welfare, medicaid, food stamps, section 8 housing, wic and any number of other programs go for primarily people who are not elderly or disabled. Able bodied people who are getting other peoples money through these programs I submit to you are not doing their "fair" share.  Would you argue that an able bodied person who works little or not at all is doing their "fair' share??? 

May 14, 2012 10:51AM

As far as deficit spending, of course that is not helping.  If you are arguing that electing a republican would reverse that I say facts and history prove you completely wrong.  When Reagan left office in 88 he had tripled the deficit from 800 billion to 3 trillion.  When Clinton got out in 2000 the deficit was 5.5 trillion, not great but manageable.  What does Bush and the republcian congress do?  Cut taxes, start two unfunded wars and pass the largest increase in medicare in history to the tune of doubling the deficit to 11 trillion by 2009.  Cutting taxes not only didn't create more jobs (there was negative job creation during the Bush years) it helped cause a recession which "required" ever more spending.  I say required because EVERY president has spent their way out of a recession republcian or democrat.   Would love to hear how you think returning to the policies of Bush would prevent this country from failing.

May 14, 2012 4:57AM

@reality -  TONS of people, absolutely almost everyone I've ever met on welfare is more able bodied then many I work with. 

Go the walmart on the 3rd of the month when the checks are in.    

Go to the post office -  Multiple checks can be picked up by the welfare vampires.

I've known obese people whose doctor ok'd them to sit home and do nothing.  Like the last thing they need.   

I've known people who would not venture into the realm of taking care of themselves  because they would loose their checks. 

I've (accidentally) driven through a huge inner city neighborhood with dozens and dozens of able bodied people lounging around in the middle of the day.  

It is not possible to lounge around in the middle of the day without a check coming in.  

JUST BARELY enough to survive but nothing more.  Those checks have sucked the need to earn a living out of  generations of people and robbed them of every bit of self esteem that they deserve had they known to decline the democrats purchase of their vote.  

The flip side of that audacity is mitt romney and I hope he vanishes as soon as possible.

The best for everyone is somewhere between the two.  It is a monumental lie that their wealth is about superior brains as opposed to dismantling long-term profitable businesses that sustained communities as well as investors for short-term personal wealth that ONLY profits the CEO's and his cronies on the board should be publicized every time someone mentions mr's name.

May 11, 2012 1:17PM

If I had to make one argument against either the community organiser or the banker it would be this. All of the previous prosperity of our country has come from the liberties to pursue success regardless of your starting point. The government has been stripping us of our rights through the war on drugs and terrorism. The regulatary structure of government has the force of law without the perils of lost elections for cingress abd the senate, NAFTA and other free trade agreements have forced us to work for less and less while the rich get richer.

 We need a restoration of our civil liberties and a shrinkage of our government and the only one talking about this is Ron Paul. With liberty prosperity follows. Go Ron Paul 2012!!!

May 14, 2012 4:33PM
Why is it that  no one ever questions why a baseball player can get paid $20 million a year? Or how about the Hollywood crowd and what they get paid for movies?  What socially redeeming productive activity is performed by a movie star acting in a film? Or by someone paid  $1 million or more a week on a TV show? It's always some business executive that is the poster child for "greed", because ultimately the mainstream media hates the business community.  
May 11, 2012 9:32AM
Mr. Kinsley,

Do you really believe that socializing wealth won't centralize power? I think you confuse wealth and net worth with power. Bigger government crowds out business investment and if you redistribute wealth to the "less fortunate" you take away power, business formation and jobs. And who will run the department of wealth distribution? The Government? They're broke and haven't ever run a successful business in their history. Surely you don't think a successful businessman like Mr. Romney should be given the job!

John Maynard Rand
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.




Quotes delayed at least 15 min
Sponsored by:


There’s a problem getting this information right now. Please try again later.
There’s a problem getting this information right now. Please try again later.
Market index data delayed by 15 minutes

[BRIEFING.COM] The major averages posted solid gains ahead of tomorrow's policy directive from the Federal Open Market Committee. The S&P 500 rallied 0.8%, while the Russell 2000 (+0.3%) could not keep pace with the benchmark index.

Equity indices hovered near their flat lines during the first two hours of action, but surged in reaction to reports from the Wall Street Journal concerning tomorrow's FOMC statement. Specifically, Fed watcher Jon Hilsenrath indicated that the statement ... More


There’s a problem getting this information right now. Please try again later.