Bidenomics Won’t Cure Inequality. It May Prolong It.
The benefits of new technology will slowly spread throughout the economy, even without government intervention.
A Biden administration official recently described the philosophy of Bidenomics as caring less about the growth rate of the economy than about growth being widely shared. The need for more muscular intervention, at the expense of growth, comes from the assumption that explosive inequality is inevitable in an unchecked market economy. That may not be true. Depending on the cause, wealth disparities can self-correct. Efforts to interfere with this process may simply prolong extreme inequality.
Some inequality will always be present in a market economy, but excessive imbalances come in waves. A new technology benefits the entrepreneurs best able, or lucky enough, to capitalize on it and do so in a big way first. Those who benefit become very rich. People whose jobs were based on the old technology benefit much less or become poorer. But the extremity does not last. Eventually the technology is diffused throughout the economy. It is imitated and improved upon by others and the economic benefits are more widely shared. This is also true of globalization. Globalization increases the gains to entrepreneurship as access to new markets makes some people wealthy. But eventually people in foreign markets build on the innovation and take some of the profits for themselves.
Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
Photo by Sean Rayford/Getty Images