The Duh Factor, or Biz School Brilliance

Income Inequality and Financial CrisisIncome Inequality and Financial Crises

For the most part, I am an admirer of professional academics. Their roles as researchers, thinkers and teachers are essential to the maintenance and enhancement of a civilized society.

However, I confess to major reservations about those who work in and for the business schools that now take up far too much otherwise valuable space on most major college and university campuses.

An article in the New York Times for Sunday, August 22, may explain that attitude, to some degree. It also may call for the loudest “DUH” of the year.

The writer, Louise Story, tells us that David A. Moss, an economic and policy historian sheltering under the roof of the Harvard Business School, has “spent years studying income inequality” and “has long believed that the growing disparity between the rich and the poor was harmful to the people at the bottom” (a sort of medium Duh! here) but until recently hadn’t seen any risks caused by such disparity to the “world of finance, where many of the richest earn their great fortunes.”

About a year, ago, said the writer, the esteemed academic followed the suggestion of a colleague that he chart economic inequality and financial crises.

Eureka! The charts showed that growing disparity between the rich and everybody else equates directly with bank failures.

As Ms. Story quoted Moss: “I could hardly believe how tight the fit was –- it was a stunning correlation. And it began to raise the question of whether there are causal links between financial deregulation, economic inequality and instability in the financial sector. Are all of these things connected?”

Yes, indeed. Moss charted economic disparity –- big money at the top, increasing poverty at the bottom of the human pile –- and was shocked to learn that just maybe when the very rich get richer while everybody else gets poorer, general economic crises occur.

Like, maybe, when people don’t have money to buy the stuff peddled by the rich, the rich get hurt, too?

Income disparities before the Great Depression and before our present great recession were the greatest of the last 100 years, Moss discovered.

I know. The shock has taken your breath away. Sit still and breathe deeply for a few minutes.

Or simply slap your forehead and yell DUH!!!! at the top of your voice.

Story goes on at considerable length, noting that many high ranking individuals, such as R. Glenn

Hubbard, top economic adviser to George W. Bush, have never seen income inequality as a factor in economic crises. She also notes that quite a few high rankers remain skeptical of the relationship despite Moss’s research.

And those people not only make big bucks, but they also teach and affect government and corporate policy. Now you can hyperventilate.

Jim Fuller

Here’s something you can do to counter the power of the bankers:

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Comments

  1. says

    The rich need the poor to buy the goods that the rich are responsible for producing and the poor need the rich to give them the jobs so that they can buy them. Can’t we all just get along?

  2. Marshall says

    by the way, I do not use a big national bank, my credit card is with an credit union, the one at that funny shaped bulding in DC. I recommend credit unions over banks unless you are a company that needs very large loans.

    Laus Deo unt viel gluck to all

  3. Marshall says

    Does anyone remember when a president had the idea to tax those real big boats the rich used to sail around the world? Well it passed, and soon the sale of those biggie boats fell faster than the tax collected. It seems the middle class were making the boats, they had jobs and could feed the family. The rich were paying to have the boats built but were not willing to pay a 10% tax on top of the selling price. The workers lost their jobs until the brains in DC figured this out.

    Now if anyone wants to spread education, then I suggest they use some of their off time to fund and teach at night schools to give the children who need help and a hand up in order to get them through high school and into college. Their is an edcation problem in the US and progressives are the ones needed to give this a jump start, they can shame the others into joining them.

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