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Nick Hanauer on the TED talk, income inequality controversy

Venture capitalist Nick Hanauer discusses his controversial TED talk, why income and inequality has become political and what happens next.

Kai Ryssdal: There was a story this week about income inequality and politics and the economy that got a decent amount of buzz. A guy named Nick Hanauer -- I should say a rich venture capitalist named Nick Hanauer -- gave a TED talk, those three- or four-minute big ideas talks that started as part of a conference called Technology, Entertainment and Design, TED. They're taped and a lot of them are posted online. But Hanauer's talk from a couple of months ago, about how the wealthy really aren't the engine of economic growth, went viral this week because it wasn't posted on the TED site. Chris Anderson, who runs TED, said it was too controversial politically. The two of them, Hanauer and Anderson, had it out. The video's up on the TED site now, so that part's done.

But we called Nick Hanauer anyway to ask why income inequality raises so many partisan hackles. We reached him -- perhaps appropriately enough -- on a private plane. Good to have you with us.

Nick Hanauer: It's great to be with you.

Ryssdal: So let's stipulate that wealth and poverty in this country, income and equality, has become partisan -- which it obviously has. The question is why -- what happened to make it this way?

Hanauer: I think that's a great and very important question and I wish that I had a good answer to it. We became enthralled with the view that wealth trickled down from the top and that if you poured money into rich people, sort of like an ingredient, prosperity and jobs would squirt out of them like donuts. And if you understand economies in the 19th century way that view is plausible and I think a lot of people accepted it. And look, lots of rich people accepted it because it's a super convenient thing to accept, right? What a great story that the less taxes I pay, the better off everyone else will be. This is a marvelously self-justifying viewpoint, but at the end of the day it hasn't worked. It's kind of been a catastrophe for everybody in the country except people like me and I think it's time for us all to sort of look up and reexamine these assumptions and go another way.

Ryssdal: When you go out for beers with your friends -- who I imagine are in the same socioeconomic strata that you are, what do you say when you say, 'Listen, I think we ought to tax people like you and me more.' They must look at you like you have three heads.

Hanauer: Yeah, not a great way to grow your friend group. But in truth -- and you can talk to them about it -- I suppose when I started to make these arguments, people were angry. But most of my friends have come around begrudgingly. Of course, no one wants to pay more in taxes. I don't want to pay more in taxes. But if you understand how the system works I think in a more realistic way, what you begin to see is that in the end it's better for me because honestly, what do I care if my tax rate is 15 percent or 30 if my businesses are growing twice as fast. Prosperity for people like me is a consequence of the number of customers I have, not the tax rate that I pay. If low taxes were the way that people like me created wealth, then we'd be starting our companies in the Congo or Somalia or Afghanistan, but we're not. We come to places where there are lots and lots of customers. While that may hurt a little bit in the short term, for people like me in the long term it's just a huge winner.

Ryssdal: What happens now in this whole debate, Nick? We're heading into an election and that of course is part of the reason that this has become controversial with you and TED. Where do we go? What happens?

Hanauer: I think that we need to debate this very important issue of where prosperity comes from. If we can come to a more healthy conclusion, which is that it is the middle class and the success of middle class that animates future and shared prosperity and begin to invest again in that middle class; and for wealthy citizens like me to begin to pay more than our fair share, I think the future is very, very bright. I think you'll see the economy begin to grow quickly again and I think you'll begin to see the median wage grow again and I think the country will be in super shape.

Ryssdal: Nick Hanauer, we've reached him on a plane as you might be able tell from the way this sounds. Nick, thanks a lot.

Hanauer: Very pleased to be here. Thank you for having me.

Ryssdal: You can see Nick's talk about income inequality -- click here. We called Chris Anderson of TED, by the way. Didn't want to talk.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

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