Through school and pretty much all my working life the work of Adam Smith and to some extend that of John Keynes has permeated the economies, commerce, and politics that I have lived and worked within.
In the last month or so, it seems more and more is written about linkages between Charles Darwin’s (remember Voyage of the Beagle and On the Origin of Species) work and economics. In September Robert Frank’s book “The Darwin Economy: Liberty, Competition, and the Common Good” was published (Princeton University Press) and deliberation has not seized.
Frank worries that Americans are headed toward a crisis greater than the one they find themselves in now. He expresses frustration with the state of political discussion and cites how important issues like infrastructure investment get bogged down in political squabble at the detriment of safety and long-tern needs.
Frank uses Charles Darwin’s theory of evolution to develop a more nuanced understanding of the role competition plays in the economy. On the one hand, competition has been an incredible driver of wealth for the U.S. However, he notes, economic competition frequently pits the needs of the group against the needs of the individual.
People, however, can address the dissonance between group and individual needs through policy. Frank suggests a progressive consumption tax can help us do just that. This tax would represent a fundamental departure from the current system, taking the place of current income tax. Instead, we would report our spending to the IRS and, minus a standard deduction, pay a rising tax rate on any additional spending. Importantly, this proposal stands to raise a great deal of revenue from those who consume the most – that is, the wealthy.
And here is why. Mark Twain coined the phrase “the Gilded Age” to describe that period of rapid growth, a time when the dazzling exterior of American life actually concealed mass unemployment, poverty and a society ripped in two.
Trends in the US indicate that the growing disparity between the rich and the poor is genuinely overwhelming. In fact, the 400 wealthiest Americans now own more than the “lower” 150 million Americans put together.
In 1980, American CEOs earned 42 times more than the average employee. Today, that figure has skyrocketed to more than 300 times. Last year, 25 of the country’s highest-paid CEOs earned more than their companies paid in taxes.
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