Are the Rich Necessary?

Great Economic Arguments and How They Reflect Our Personal Values
By Hunter Lewis
Paperback: $12.00 • ISBN: 978-1-60419-016-8

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Are the rich necessary? Do we need more millionaire taxes? Is Wall Street greed corrupting our politics? Is capitalism even compatible with democracy? Do free markets cause recessions? Is the profit system to blame for the recent financial crash? Are there alternatives?

In ARE THE RICH NECESSARY?: Great Economic Arguments and How They Reflect Our Personal Values, Hunter Lewis examines the most fundamental economic questions that underlie society. An introduction to economics for laymen, the book covers both sides of the great economic arguments of our day. In an always lively, point-counterpoint style, he challenges conventional positions on both sides of each issue.

Stepping aside from the current economic battle zone, Lewis next lays out the different value systems that guide all our economic choices. By understanding the personal values embedded in the arguments, we can make better sense of them.

Finally, Lewis proposes a new way to bridge the extremes of super rich and poor, of free markets and safety nets; a solution that would involve a massive expansion of the nonprofit sector through tax credits. His solution is to build up the nonprofit sector so that it will become a full partner of government and the private sector and be able to provide real solutions in the areas of social services, health, housing, and education. Lewis’s solution offers a forward-thinking alternative to the bitter and often sterile debate between friends and foes of “big” government regarding taxing the rich and creating economic equality.

With financial disparity and economic justice among the biggest issues on the agenda of the Obama administration, Lewis asks us to make our own judgment based on our personal values about the pros and cons of the rich and solutions to this vexing problem.

In addition, Federal Reserve policy and its impact on monetary inflation, the money supply, and the economy are explained, providing both an understanding of current Fed policies whether they lead to real economic recovery or more inflation or future economic collapse.

You may pick up this book to understand the recent economic crisis or to answer some vital questions that affect the way you vote, your job, and your financial future. Either way, you will have to rethink some of your most cherished beliefs.

“Worth reading aloud on a family vacation.”

—Gene Epstein (Barron’s)

Are the Rich Necessary? is both a highly provocative and a highly pleasurable read.”

The New York Times

Best Business Book of the Year

Library Journal

About the Author

Hunter Lewis, co-founder of global investment firm Cambridge Associates, has written nine books on moral philosophy, psychology, and economics, including the widely acclaimed Are the Rich Necessary? (“Highly provocative and highly pleasurable.”—New York Times). He has contributed to the New York Times, the Times of London, the Washington Post, and the Atlantic Monthly, as well as numerous websites such as Breitbart.com, Forbes.com, Fox.com, RealClearMarkets.com, and Townhall.com. He has served on boards and committees of fifteen leading not-for-profit organizations, including environmental, teaching, research, cultural, and global development organizations.

Reader Poll

Are the Rich Necessary?

No 29% Yes 71%

Are the rich compatible with democracy?

No 26% Yes 74%

Must we accept so much inequality?

No 44% Yes 56%

Does the profit system glorify greed?

No 54% Yes 46%

Featured Interview with Hunter Lewis in Times of London (January 19, 2010)

“Never was so much owed by so few to so many. Hunter Lewis, author of Are the Rich Necessary? talks about how the rich can actually be a benefit to us all.”

[Complete interview: Times London]

Harry Hurt III (The New York Times):

Are the Rich Necessary? is both a highly provocative and a highly pleasurable read.”

[Complete review: The New York Times]

David Gordon (The Mises Review):

“Excellent . . . Lewis has an ingenious idea . . . that he hopes will elicit agreement from the proponents of the major value perspectives.”

[Complete review: Ludwig von Mises Institute]

Publishers Weekly:

“Great reading for anyone interested in quickly expanding their knowledge of today’s political–economic issues.”

Carlo Martini (Metapsychology Online Reviews)

“Hunter Lewis…does not get lost in lengthy academic analyses…. His approach to the topics is very direct, the pulp of the debates on all sides of a multifaceted problem is squeezed out, and opposing positions are made to stand on their own against each other…. Lewis is a master at getting the theories naked for the confrontation, without academic embellishments, with their pros and cons, and down to their essential and pragmatic characters.”

[Complete review: Metapsychology Online Reviews]

Kevin Beerstecher (PhilantrophyNYU.com):

Are the Rich Necessary is a discussion about the roles that the wealthy play in our society, including philanthropic roles…. [It] concludes with an eleven-page solution to ending the war between differing social theories based on expanding the nonprofit sector. Lewis proposes increasing tax credits for philanthropic contributions, which would greatly expand the capacity of the nonprofit sector to solve the world’s problems.”

Author Interviews

Daljit Dhaliwal (ABC News)

[View video interview . . .]

Praise for Are the Rich Necessary

“Utterly enthralling.”

— McClatchy News Service

“A tour de force of economic thinking.”

— Arthur Segel (Professor of Management Practice, Harvard Business School)

“Carefully weighing the pros and cons of big-think economic issues . . .Lewis . . . offers some big ideas of his own.”

Justin Ewers (U.S. News & World Report)

“Highly readable . . .[with] punchy . . . argument[s].”

Harvard Magazine

“Goes back to the basic[s] . . . of economics.”

— Daljit Dhalival (ABC News)

“Lewis sees great promise in expanding the nonprofit sector . . . to bring the various economic factions together.”

— Lisa Von Ahn (Reuters)

“Radical, thought provoking.”

— Lord Rothschild (Jacob)

“Creative.”

Boston Globe

“Pits the likes of Al Sharpton against Milton Friedman. Fair fight.”

— Jesse Eisinger (Conde Nast Portfolio)

“Interesting . . . refreshing.”

— Thomas Kostigan (Market Watch, Dow Jones)

“Hunter Lewis . . . argues both sides of such questions as ‘Are there alternatives to the profit system?’ and ‘Can government protect us from the excesses of the profit system?’ . . . [then] sets forth his own argument on the best way to ease poverty and create economic cooperation, which he says is key to building lasting societal wealth.”

— Anne W. Howard (The Chronicle of Philanthropy)

“Provocative.”

— Mike Schneider (Bloomberg Television)

“Prompts the reader to question his or her assumptions.”

— Kathryn Fuller (Chair of the Board, Ford Foundation)

The ‘rich question’ is the issue on which economics was founded.”

— Mark Thornton (LewRockwell.com)

“I’m intrigued.”

— Helen Jonsen (Forbes.com)

“A fantastic book, a must read, five stars out of five.”

— Pat Gorman (Colorado Radio)

“[Lewis] . . . break[s] complex subjects down into understandable language.”

— David Maurer (Daily Progress, Charlottesville, Virginia)

Are the Rich Necessary? helps readers make sense of the ongoing debate about the state of the economy in an clear, objective, easy-to-read style. Does Fed policy protect against recessions, financial crashes, and inflation, or even create these conditions? Is the Fed effectively printing money? Or do free markets cause recessions? Is the profit system to blame for the recent financial crash? Are there alternatives?

Federal Reserve policy and its impact on monetary inflation, the money supply, and the economy are explained, providing both an understanding of current Fed policies whether they lead to real economic recovery or more inflation or future economic collapse.

Both sides of this issue are debated, and it is an important debate in light of recent events including the financial crash of 2008, the rising unemployment rate, and the possibility of inflation or more recessions.

Read a sample of Are the Rich Necessary? to see how enjoyable learning economics can really be.

Part One: The Central Economic Problem

1. Why Are We Still So Poor?

2. The Appeal of Science

3. Economic Arguments

Part Two: The Rich

4. Are the Rich Necessary?—No

5. Are the Rich Necessary?—Yes

Part Three: The Rich in a Democracy

6. Are the Rich Compatible with Democracy?—No

7. Are the Rich Compatible with Democracy?—Yes

Part Four: Profit-making

8. Are Private Profits Necessary?—No

9. Are Private Profits Necessary?—Yes

10. Are Private Profits Necessary?—No/Yes

Part Five: Glaring Inequality

11. Are There Alternatives to the Profit System?—Yes/No

12. Should We Accept This Degree of Inequality?—No/Yes

Part Six: Greed

13. Does the Profit System Glorify Greed?—Yes

14. Does the Profit System Glorify Greed?—Yes, and a Good Thing

15. Does the Profit System Glorify Greed?—No

Part Seven: Government

16. Can Government Protect Us from the Excesses of the Profit System?—Yes

17. Can Government Protect Us from the Excesses of the Profit System?—No

Part Eight: Profit-making and Depressions

18. Does the Profit System Cause Depressions?—Yes/No

Part Nine: Central Banks

19. Can Central Banks Protect Us from Depressions and Lead the Economy?—Yes

20. Can Central Banks Protect Us from Depressions and Lead the Economy?—No

Part Ten: The Global Profit System

21. Does Global Free Trade Destroy Jobs?—Yes

22. Does Global Free Trade Destroy Jobs?—No

Part Eleven: Four Economic Value Systems

23. Competing Economic Value Systems

Part Twelve: Reconciling Opposing Viewpoints

24. Expanding the Nonprofit Sector

Appendices

A. What Is a “Fair” Price?

The following excerpt shows how the compounding of money and physical assets is the key to economic growth. This process is the essence of capitalism and vital to an understanding of economics. Economic growth is stymied when capital is destroyed or is unsafe. In order to build capital, humans must cooperate, but they often fail to do so, while cooperation leads to increased wealth. The “other human follies” mentioned in this excerpt might include frenzied consumerism, the Federal Reserve policy in recent years of printing too much money, Wall Street greed, and the corruption of government as newly printed money flows from Wall Street to Washington in the form of campaign contributions.

Part One: The Central Economic Problem

From Chapter 1: Why Are We Still So Poor?

If you put $10 in a bank account and earn 3% interest, the money will double every twenty-five years. Even after a long lifetime, you might have only $30 or $40 dollars. “No way to get rich,” you are thinking.

But humanity goes on. Imagine that the bank account kept on doubling every quarter century for 1,000 years. The original $10 would then have grown to a sum worth over two times the world’s total wealth today.

Compounding money over long periods of time produces fantastic results. So why has humanity not done better? The reason is simple. Throughout human history, capital has been created, capital has been destroyed, over and over. Compounding has hardly had a chance to start, much less reach the magic of multiplying large numbers.

There are a variety of reasons for this: natural disasters such as disease and weather-related famine, war, and other human follies. But there has also been almost complete intellectual confusion about how to organize ourselves to end poverty and deprivation.

We also know, through simple intuition, that it is not enough to find the right answer. We must agree on the answer. Societies do not become rich simply by preserving and growing their capital. They become rich by cooperating. The more cooperation, the more potential to preserve, invest, and grow capital. There is an irony in this. We need to cooperate. But, almost at once, we start to argue about how we might best go about cooperating.

The following excerpts discuss central banks, including the U.S. Federal Reserve Bank, and the impact of its policies on interest rates, the money supply, and economic growth. Does Fed policy protect against financial crashes, inflation, and recession or even create these conditions? Both sides of this issue are debated, and it is an important debate in light of recent events including the financial crash of 2008 and the possibility of inflation or more recessions.

From Chapter 19: Can Central Banks Protect Us from Depressions and Lead the Economy?—Yes

Although governments are in charge of a nation’s money, they usually delegate day-to-day control to a central bank. The central bank will then decide whether there is too much or too little money in circulation, whether money market (short-term) interest rates are at an appropriate level, whether the banking system is operating safely and smoothly, and so on. In most cases, the central bank will also directly supervise and regulate private banks.

As a general rule, political progressives are supporters of central banks, because they favor more government leadership of the economy, assume that economic conditions will lapse into chaos without such leadership, and think that central bankers are more qualified to carry out this critical task than politicians. Laissez-faire advocates, by contrast, take a dim view of this, since they think that the government should not try to lead the economy. Nor are they convinced that central bankers will be that much wiser or successful than politicians.

Argument 1: Without a central bank, there would be no way to control the dangerous excesses of the banking system and otherwise keep the economy on a steady course.

The US Panic of 1907 provided some of the impetus for the Federal Reserve Act of 1913. Although the 1907 panic was unusually severe, it was only the latest in a long series of such episodes. As the Washington Post pointed out in an editorial,

The world’s . . . history . . . [has been] a succession of panics, slumps, and crashes in which markets were working, all right—but working as they sometimes do, perversely and blindly.159

The creators of the Federal Reserve hoped that it would prevent both bank excesses and bank runs, and by doing so help stabilize the economy. Despite uncertainties about how “loose” or “tight” monetary policy should be, the US “Fed,” as it is commonly called, has been a signal success. Economic writer Jeff Madrick states that “By 1913 the US federal government created a stable financial system with the creation of the Federal Reserve.”160

Given the convulsions of the Great Depression, economist Geoffrey Moore, architect of the government’s index of leading economic indicators, offers a sensible qualification: “I think in general the Federal Reserve has had a stabilizing effect on the economy, especially since World War II.”161

George Moore, who built the banking colossus Citibank, agreed and added that “The Federal Reserve has learned that at the very least you have to put a floor under the economy [by expanding the money supply whenever deflation threatens].”162

Alan Greenspan’s long eighteen-year tenure as Federal Reserve Chairman at the end of the twentieth century and the start of the twenty-first was at the time particularly singled out for praise. Employment during that period remained high, inflation averaged less than 3% a year, and the chairman earned, in economist Robert Solow’s words, “Massive respect, even awe. . . .”163

Some observers did express concern about the growing US trade and current account deficits of the Greenspan era. Because the US was buying far more from foreigners than it was selling, it was borrowing more and more to pay for the purchases. In many cases, the same foreigners who sold the goods provided the financing.

Worry about mounting US international debts was natural, but it was wrong. Trade and current account deficits do not really matter; it is probably a waste of effort even to measure them. The US ran in the red in both accounts for its first century. By the 1890s, foreigners owned sizeable minority and even majority stakes in the largest American companies, especially the railroads.164 What harm did this do? Only thirty years later, circumstances had reversed and Europeans were borrowing from America. We should not pay much attention to global financial flows and who owns what at any given moment.

It is also important to emphasize that the US, as a global currency reserve country, is able to borrow in its own currency, in dollars. This is unusual—most countries have to borrow money denominated in a foreign currency. Then, if the value of their own money falls in relation to the foreign currency, the amount of money owed can explode. By contrast, the US need not worry, since it can repay its debt in dollars, can even print new dollars for this purpose. If foreigners who have lent money to the US lose confidence in the dollar, the international value of the dollar will fall. But that hurts the foreign lenders, not the American borrowers. All the US has to do is to ignore financial writer James K. Glassman’s odd advice to borrow in yen, since the US cannot print its own yen, and all should be well.165

US economist Merton Miller has explained the situation clearly:

We’ve actually been playing a cruel trick on the Japanese [and Chinese]. We’ve persuaded them to send us expensive [goods]—and in exchange we give them pictures of George Washington. . . . [If] they want . . . their money . . . , “Okay,” we say, . . . “[but if you try to sell the US currency that we give you on world markets, you may only get] 20 cents on the dollar.” They’re the losers at this game.166

Economist Paul McCulley agreed:

To those with Calvinistic tendencies, always looking for what can go wrong, . . . the notion of . . . [the United States financing its consumption by borrowing from China] just doesn’t seem right . . . But . . . [at least for the moment] it is good, very good.167

 

From Chapter 20: Can Central Banks Protect Us from Depressions and Lead the Economy?—No

Argument 2: The record of the US Federal Reserve has been poor. The country did much better before its founding.

From the end of the US Civil War to the founding of the Federal Reserve almost a half century later in 1913–14, consumer prices fell more years than they rose, but ended up about where they started. This was a time of excellent economic and employment growth and also included some of the best stock market returns. At least one study of stock returns from 1872 showed that periods of mild deflation, such as we had in the latter half of the nineteenth century, have produced the best stock market returns of all, even better than periods of mild inflation.168

Shortly after the founding of the Fed, inflation surged. This was generally explained by the need to finance World War One. After that war ended, prices fell again, although not to pre-war levels. They declined gently during the 1920s, fell dramatically during the Great Depression (but again not to pre–World War One levels), rose during World War Two despite price controls, continued to rise after the war, and then surged again in the 1960s and 1970s. At the very end of the 1970s, the Fed under chairman Paul Volcker seemed to declare war on inflation, and double digit inflation rates fell dramatically. But in the quarter century following, consumer prices doubled again. All in all, during the first ninety years of the Fed, the US dollar lost 95% of its purchasing power.

Federal legislation requires the Fed to control inflation. Successive chairmen and board members have repeatedly affirmed this objective, and there is no doubt that the Fed could stop inflation if it wished to. All it would have to do is print less new money. As production grew without new money being created, the ratio of goods to money would increase which would mean more goods for less money or, in other words, lower prices.

Yet by the early twenty-first century, the board was pursuing an unacknowledged two percent inflation target similar to the European Central Bank’s acknowledged 2% target. Since the price of manufactured goods was generally falling, an overall rise in prices could only be engineered by subsidizing the relative lack of productivity and oversize price increases in services such as healthcare, housing, and education.

In 1985, Thibaut de Saint Phalle, author of The Federal Reserve: An Intentional Mystery, wrote that

It is puzzling that no one in Congress ever points out that it is the Fed itself that creates inflation and, more recently, permits Congress to ignore the growing budget deficits. The Fed, by financing the federal deficit year after year, makes it possible for Congress to continue to spend far more than it collects in tax revenues. If it were not for Fed action, Congress would have to curb its spending habits dramatically.169

Economist Murray Rothbard thought that there was no mystery about the Fed at all:

If the chronic inflation undergone by Americans, and in almost every other country, is caused by the continuing creation of new money, and if in each country its governmental “central bank” (in the United States, the Federal Reserve) is the sole monopoly source and creator of all money, who then is responsible for the blight of inflation? Who except the very institution that is solely empowered to create money, that is, the Fed (and the Bank of England, and the Bank of Italy, and other central banks)? . . . In short . . . the Fed and the banks are not part of the solution to inflation. . . . In fact, they are the problem.170

By the 1990s, even the widely respected Paul Volcker, deemed one of the most successful of Fed chairmen, concluded that “By and large, if the overriding objective is price stability, we did a better job with the nineteenth century gold standard and passive central banks, with currency boards or even ‘free banking.’”171

As some economists see it, the economy not only had more stable prices before the creation of the Fed; it was more stable, period. Economist Gottfried Haberler observed that

During the second half of the nineteenth century there was a marked tendency for [economic] disturbances to become milder. Especially those conspicuous events, breakdowns, bankruptcies, and panics became less numerous, and there were even business cycles from which they were entirely absent. Before [WWI], it was the general belief of economists that . . . dramatic breakdowns and panics . . . belonged definitely to the past.172

Milton Friedman has been even more critical:

The severity of each of the major contractions—1920–21, 1929–33, and 1937–38—is directly attributable to acts of commission and omission by the Reserve authorities and would not have occurred under earlier monetary and banking arrangements.173

Free-market economists do not all agree about how past economic contractions occurred. But all would agree with Friedman’s assertion that “The stock of money, prices and output was decidedly more unstable after the establishment of the Reserve System than before.”174

Argument 3: Price-fixing is especially toxic for an economy, and central banks are basically price-fixers.

As we have previously noted, interest rates represent the price of money, or technically the price of credit. The price of credit in turn is really the price paid for time, for deferring consumption from the present into the future. That is, if I lend you money, I am putting off my own immediate consumption. Once you pay me back, I can spend my money, but not for the time period covered by the loan. Since money and time are involved in virtually every transaction in the economy, there is no more crucial price than the price for credit. Nineteenth-century economist Jean-Baptiste Say was right to say that “[The] rate of interest ought no more to be restricted, or determined by law, than . . . the price of wine, linen, or any other commodity.”175

But it is important to emphasize that restricting this particular price is especially dangerous, because (as noted in Part Four), the economy depends on free prices for information, and on this price more than any other.

Economic writer Gene Epstein has correctly stated that “[The chairman of the Federal Reserve] is the head price fixer of a price-fixing agency.”176

The agency not only fixes the short-term cost of credit, which in turn influences other interest rates. In addition, it heavily influences what is perhaps the second most important economic price, that of the US dollar in world markets.

Moreover, this is a form of price-fixing whose deleterious effects are notoriously difficult to detect. As economic writer Gene Callahan explains:

Because [interest rates are paid over] . . . time, the negative effects of the artificial [credit] price take time to appear. . . . And because of that time lag, it is harder to trace the later problems to the earlier intervention.177

Argument 4: Central banks are national economic planners, and national economic planning does not work.

Like the debate about price controls, there is an ebb and flow to the perennial debate about economic planning. Adam Smith wrote at the end of the eighteenth century that:

The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.178

For a considerable time, Smith’s view prevailed, only to be superseded by Keynes’s ideas and by what Barbara Wootton called in 1935 “The Necessity of Planning”:

There should be some body of nation-wide authority charged with the duty of constructing [an] . . . economic . . . plan for the whole country, or at least with the duty of reviewing all our partial plans—plans for housing, plans for the relief of distressed areas, agricultural marketing plans, and so on—so as to make sure that they fit together.179

By the time the Berlin Wall fell in 1989 and Communism collapsed in the Soviet Union and elsewhere, the pendulum appeared to swing again. Economist Robert Heilbroner, a prominent friend of national economic planning, wrote in that same year:

The contest between capitalism and socialism is over: capitalism has won. [We now have] . . . the clearest possible proof that capitalism organizes the material affairs of humankind more satisfactorily than socialism.180

Some years later in 1997, The Economist agreed that “Almost any discussion of public policy nowadays seems to begin and end with the same idea: the state is in retreat.”181 And economic historian David Landes added that “[All] sides blithely assume that free markets are in the saddle and riding the world.”182

But was this assumption valid? Throughout the 1990s, central banks throughout the world were tightening their control of interest rates and currencies and taking on even more responsibility for guiding capital markets and economies. As economic writer James Grant observed,

Central planning may be discredited in the broader sense, but people still believe in central planning as it is practiced by . . . [The US Federal Reserve]. . . . To my mind the Fed is a cross between the late, unlamented Interstate Commerce Commission and the Wizard of Oz. It is a Progressive Era regulatory body that, uniquely among the institutions of that era, still stands with its aura and prestige intact.183

Economist William Anderson agreed about the “aura,” but was even more sharply critical:

Central banking, for all its “aura,” is no less socialistic than the Soviet Union’s Gosplan [the Soviet agency charged with creating Communist Russia’s economic plan].184

The growing power and prestige of central banking was surprising in other ways as well. Throughout the 1990s, the Fed published its own forecasts of economic growth, usually expressed as a rather broad range. But a study of sixty quarters through year-end 2004 revealed that actual growth had fallen within the range only a quarter of the time.185 The Fed, like a majority of economists, has never correctly forecast a recession.186

Gene Callahan has compared the Fed to a hyperactive pediatrician determined to intervene to ensure that a child under his or her care is growing at the “right rate.”187 In reality, no doctor, and no Fed chairman, can be sure what the “right” rate is, and interventions are little better than stabs in the dark.

Argument 5: The way that central banks operate, in particular the reliance on exceedingly flimsy tools and rules, is not reassuring.

The most famous rule for guiding monetary policy was Milton Friedman’s: just pick a money supply growth rate and expand or contract the money supply to meet the target. This was an attempt to take discretionary decision-making away from unreliable central bankers, but proved impractical because the money supply could not be precisely defined, much less tracked, especially in a global economy. Another much cited rule developed by economist John Taylor of Stanford University also utilizes variables (e.g., potential output, inflation rate) that are hard to define or observe, and thus subject to endless debate and disagreement.188

These and many other formulas used by Fed and other monetary economists bring to mind a story told by social philosopher Irving Kristol about a friend’s mother. The friend, who eventually became a leading novelist, used to bring college friends home to his family’s New York City apartment for endless political debates. It was the 1930s, everyone was some stripe of Marxist, and the finer points of Marxist doctrine were argued into the night. The friend’s mother, a Jewish immigrant without much formal schooling, hovered wordlessly and provided tray after tray of food and drink. Then:

Late one night, after they had all left, she turned to her son and said: Your friends—what brilliant young people! Smart! Smart!—and then, with a downward and dismissive sweep of her arm—Stupid.189

The thought that the world’s monetary policy is worked out through discussions and equations vaguely reminiscent of what went on in that 1930s living room is not reassuring. How then do the monetary authorities get away with it, get away with taking so much decision-making away from the market with so little intellectual basis to what they do? One explanation is that easy money policies generally suit whatever party is in power, whether ostensibly of the left or the right, and central bank chairmen want to be reappointed.

Another, equally cynical, explanation has been offered by Milton Friedman:

[The Federal Reserve] System . . . blames all problems on external influences beyond its control and takes credit for any and all favorable occurrences. It thereby continues to promote the myth that the private economy is unstable, while its behavior continues to document the reality that government is today the major source of economic instability.190

Each economic value system has appeal. Understanding economics is essential to choosing among these value systems. The following excerpt suggests one such choice.

From Chapter 24: Expanding the Nonprofit Sector

I personally find the ideals of fraternalism, reciprocalism, equalitarianism, and philanthropism to be all, without exception, profoundly moving. How could anyone not think that each of these philosophies makes an important appeal, one that reflects important aspects of human experience?

The reality, however, is that we cannot pursue all of these ideals, at least not at the same time and in the same context. In important respects, they are in conflict. We have to pick and choose. . . .

In any case, whatever the current regulatory errors, whatever the risks, whatever the caveats, an expansion of philanthropic values (along with an expansion of the nonprofit sector of the economy through tax credits) could offer a way forward out of the old, bitter, and often sterile economic quarrels of the past.

Most of Are The Rich Necessary? presents a series of vital economic arguments and looks at it from both sides or even all sides. In the last chapter, however, the author presents some of his own ideas, in particular his proposal to expand the charitable sector of the economy and make it a full partner with government and the private sector. This proposal is briefly outlined in the following Commentary that Mr. Lewis provided National Public Radio’s Marketplace on December 12, 2007.

A Fourth Way?

If we were really serious about ending poverty in America, what would we do?

Rely solely on economic growth? On government programs? On a mix of private and public, the so-called Third Way? Let’s consider a Fourth Way.

We hear a lot about social entrepreneurship. This means running a non-profit more like a business. Social entrepreneurs are making a big difference, but they still lack capital.

Non-profits today represent only a small sliver of the economy. We could change this by making charitable giving more affordable.

At present, when you donate to charity, you take a tax deduction. If you are in the 25% tax bracket, government will reimburse 25% of the value of the gift. Most of it still comes out of your pocket.

Let’s have charitable tax credits as well. With tax credits, you could take a charitable gift off your taxes dollar for dollar. You would have a simple choice. Pay it to government or give it to charity. This could produce a torrent of cash for charities.

At first this might apply only to charities working directly on the ground to help the poor. In the long run, government might outsource all its social programs to a much larger non-profit sector.

The charitable tax credit approach could help new business entrepreneurs too. They could donate shares to charity in lieu of taxes. This would leave more cash to grow their business faster and create more jobs.

Charitable tax credits would also make sense for estate taxes. Estates represent a lifetime of saving. And we need savings in America today. By using tax credits, we could steer more estates into charitable endowments. That would protect the savings.

The American political argument is usually framed in terms of having more or less government. Let’s try something new. Let’s expand the non-profit sector and bring more hope and help to those who need it.

—Hunter Lewis

Press Releases & Downloads

(Fortier Public Relations, October 31, 2009)

Contact: Mark Fortier

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Now a trade paperback updated and expanded edition that’s more timely than ever…

ARE THE RICH NECESSARY?

Great Economic Arguments and How They Reflect Our Personal Values

Updated & Expanded Edition

by Hunter Lewis

“Are the Rich Necessary? is both a highly provocative and a highly pleasurable read.”

— The New York Times

“Worth reading aloud on a family vacation.”

Barron’s

“Great reading for anyone interested in quickly expanding knowledge of today’s political-economic issues.”

Publishers Weekly

“Carefully weighing the pros and cons of big-think economic issues . . . Lewis . . . offers some big ideas of his own.”

US News & World Report

Should Obama cap financial executive pay? Should we tax the rich for healthcare—or for deficit reduction? What else can we do to rein in Wall Street greed? These are highly practical questions but inevitably involve our personal values. We need to get enough good information to help us make better value judgements.

In ARE THE RICH NECESSARY?: Great Economic Arguments and How They Reflect Our Personal Values (October 31; Axios Press Trade Paperback; $12), Hunter Lewis examines the most fundamental economic questions that underlie society. Written for laymen in clear language, the book covers both sides of the most divisive arguments. The result is a provocative book that every citizen will want to read to make up his or her own mind on such pressing economic questions of today as:

  • Do we need more “millionaire taxes”?
  • Does President Obama’s idea of limiting charitable deductions for the rich make sense?
  • Should we be taxing schoolteachers to bail out bankers?
  • Is Wall Street corrupting our politics?
  • Why does it seem that Goldman Sachs is running Washington?
  • Is the profit system to blame for the recent financial crash? Are there alternatives?
  • Has anything really changed after the Crash of 2008?
  • Are we in danger of becoming a banana republic?
  • Can we do anything about the widening income gap?
  • Are the rich even compatible with democracy?

In the last chapter, Lewis proposes a new way to bridge the extremes of rich and poor, of free markets and safety nets; a solution that would involve a massive expansion of the nonprofit sector through tax credits. His solution is to build up the nonprofit sector so that it will become a full partner of government and the private sector and be able to provide real solutions in the areas of social services, health, housing, and education. Lewis’s solution offers a forward-thinking alternative to the bitter and often sterile quarrels between friends and foes of “big” government around the world.

With income disparity one of the biggest issues on the agenda of the Obama administration, Lewis asks us to make our own judgment based on our personal values about the pros and cons of the rich and solutions to this vexing problem.

About the Author

Hunter Lewis is the author of six books in the related fields of economics and values, as well as numerous magazine, newspaper, and online articles. His most recent book is Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts.

A graduate of Harvard University, Lewis co-founded Cambridge Associates, LLC, a global investment firm whose clients include leading research universities, charitable organizations, and families. He has served on boards and committees of fifteen not-for-profit organizations, including environmental, teaching, research, and cultural organizations, as well as the World Bank.

About the Book

ARE THE RICH NECESSARY?

Great Economic Arguments and How They Reflect Our Personal Values

Axios Press

Publication date: October 31, 2009

Paperback, $12; 413 pages

ISBN: 978-1-60419-016-8