Is there a light amidst the economic darkness? Those who have for years been excoriating the widening of a rich-poor gap should now be ecstatic. As countless trillions of dollars of wealth has been wiped out in the bursting of the housing bubble and the ensuing financial market meltdown, there can be no question the difference in wealth between rich and poor has shrunk considerably. Be careful what you wish for.
Nobel Laureate Paul Krugman is one such cheerleader. Back in the day, Professor Krugman was expounding on the technicalities of comparative advantage, and how free trade is one rising tide that lifts all boats. Since then he has become unhinged. Krugman has borrowed with enthusiasm the phrase Great Compression to describe the period from 1933 to 1945. Many have been and currently are enamored with the concept of economic woes leading to higher equality of wealth - or lack thereof.
This obsession with the rich-poor gap should seemingly be satiated by the massive destruction of wealth in the present. No need to worry anymore about private jet travel – that mode of transportation is now reserved for only government officials. Are Wall Street bonuses a thorn in the side? No longer – modern finance has one foot in the grave (the cemetery being lower Manhattan). The dreaded McMansions are becoming a novelty of a previous way of life. Got 401(k) envy? Now it must be only half the jealousy.
Yes, the economic meltdown and present march towards socialism is evening the playing field. As unemployment rises, by definition more people are earning similar wages (a number that trends towards zero). While the stock market continues to free fall, the collective lack of wealth increases. As economic growth disappears, the dimming of prospects becomes more universal.
The debate over trickle-up or trickle-down economics also diminishes. The slowing of economic activity means there is no trickling in any direction. The real bright side is that hopefully we can dispel the notion that getting rich is bad and that it is desirable to have as narrow a rich/poor gap as possible. The means certainly do not justify the ends, but actually create a self-fulfilling prophecy whereby all get poorer. The desire might be good-hearted, but it is simply wrong-headed. Everyone suffers. Only sound economic principles will lead to economic growth and enhanced prosperity for all.