Fixing our financial system would leave 100% of us better off
Kai Ryssdal: The question we’re offering this week relates directly to the news of the day this Monday — the Occupy protests and what happens next. Would the 99 percent be better off if the 1 percent had less? Our commentator yesterday said yes. Today, Reihan Salam.
Reihan Salam: Recently, the top 1 percent has drawn a tremendous amount of attention. In part, that is because America’s highest earners have enjoyed a robust recovery while most of the rest of the country has not. Wall Street in particular has fared very well. Fueled by bailout money, the so-called “too-big-to-fail” banks have been making big, risky bets on short-term price movements that — so far at least — have paid off.
Given that excessive risk-taking on Wall Street is what got us into our economic mess, it is no surprise that this kind of behavior has led to resentment. But even if we fixed our financial system — even if we made it much less risky — there is good reason to believe that the top 1 percent would continue to pull ahead.
Between 2007 and 2009, the share of earnings that went to the top 1 percent fell from 23.5 percent to 17.6 percent — a steep drop of six percentage points. While the super-rich are hardly the most sympathetic victims of financial instability, they happen to have a lot to lose from wild boom-and-bust cycles. All Americans would benefit from a more stable financial system. But the top 1 percent might benefit most of all.
Why is that? Well, a better-functioning, more stable financial system will mean a bigger economic pie, and more good-paying jobs, for everyone. But it will also mean more successful entrepreneurs, more successful business executives, and more superstars in various other fields. Wall Streeters might wind up earning much less. But the most successful earners in Silicon Valley and Hollywood and the manufacturing belt might wind up with much more.
Now, if all we cared about is inequality, this would be a disappointment. But if we cared about a more flourishing, more innovative economy, fixing the financial system would still be a no-brainer, even if it meant more inequality.
So instead of talking about the 1 percent or the 99 percent, let’s focus on how a broken financial system hurts the bottom line of America as a whole.
Ryssdal: Reihan Salam is a policy advisor at E-21, that’s an economics think tank. Tomorrow, Robert Reich on the same question. Is everyone else better off if the 1 percent has less?
What’s your take? Send us your thoughts.
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