The Power Of The Top 1%

The debate over income inequality is about democracy, not economics.

In two well-reasoned and, even better, well-sourced columns this summer, Thomas F. Cooley, the dean of NYU's Stern School of Business and one of my favorite conservatives, tackles the problem of "the beleaguered middle class."

He finds first that labor's share of the U.S. economy hasn't been shrinking, it just hasn't grown anywhere near as quickly as the share controlled by those capitalists at the top 1% of society. He finds that skilled workers have done better than unskilled workers. And he finds that, in the end, we should realize that the economy isn't a zero-sum game. So long as the whole thing is growing, people's lives can improve even if they don't take home the lion's share of progress.

No, the problem of inequality isn't how many flat screens one person can buy. The problem is how many senators (or Senate seats) one person can afford. Ultimately, it's about how many lives they can control. It's really a debate about democracy rather than economics.

The power of wealth has been badly abused in America's past. Henry Ford developed a sociology division with his own company that kept tabs on Ford Motor ( F - news - people ) employees and even tried to influence their private, off-the-clock behavior. He felt he had both a right and responsibility to treat his employees in an authoritative and paternal way that recalls Russian landowners and their serfs.

Before that, rail car manufacturer George Pullman put his workers in a company town outside of Chicago, referred to them as "my children" and controlled every aspect of their lives by renting them their homes and selling them food through company stores.

Obviously, the situation has improved, but the past shows us how bad things can get. Even in these more enlightened times, employers find reason to investigate the private behavior of employees, even when they're off duty. For one, we have tests for illegal drug use. In most states with "employment at will" laws, an employer can fire an employee for a perfectly legal but perhaps ill-advised private activity like tobacco use. People have been fired for having political bumper stickers on their cars and for writing things on the Internet, even from their home computers.

If people don't like their employers, they can always leave--in principle. But, practically speaking, that choice doesn't usually exist. Kids need to be cared for, and our insane health system means that a lot of people will have no affordable access to basic medicine unless they keep their jobs and the insurance that's provided.

Cooley talks about the growing wage divide between skilled and unskilled workers. But obtaining the skills necessary to enter the skilled work force is quite a struggle for people not blessed with the advantages of wealth.

Fairtest.org breaks down average SAT scores by, among other things, family income. In 2008, a student from a family with income of over $200,000 a year scored a 550 in reading, 570 in math and 552 in writing. At income levels between $80,000 and $100,000 the scores are all well lower, but above 500 in each category. Down at $40,000 a year, none of the averages are above 500; and below $40,000 a year, the scores are all below 450.

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