Romney on income inequality and 'quiet rooms'

By Henry Banta
henrybanta@aol.com

By now most of us have heard Mitt Romney’s take on the income inequality issue: it’s all a matter of envy – presumably envy on the part of the 99% of the guys in the top 1%. More, Mr. Romney strongly asserted that inequality is not a proper subject to be discussed in front of the help. It should be kept in “quiet rooms” and not allowed in public debate. President Obama is some kind of a crypto-Eurosocialist for even mentioning the subject within the hearing of those who might take it the wrong way.

This is an amazing position for Mr. Romney, particularly coming from one who purports to be a defender of capitalist principles and values. One of the core principles of capitalism is that each element in the economic system – capital, labor, and management – is rewarded, more or less, in proportion to what it contributes. This has been the teaching of free market economists since Adam Smith. Indeed, it has been one of the corner stones of capitalism. This “efficient allocation of resources” ensures the overall success of the system.

Forgive us Mr. Romney, but here is where some of us have a problem with the massive shift in wealth and income away from the middle class and to the top 1% and even the top .1%. Throughout most of the last 30 years virtually the entire growth in GDP has gone to this small fraction of the population. If the basic paradigm of capitalism is correct there are two possibilities: First, all of the growth in GDP had to have been reward for the work of the guys at the very top – pretty much the top management of the larger corporations. Everybody else, (really everybody else) computer programers, auto mechanics, doctors, nurse, engineers, school teachers, truck drivers, bar tenders, etc., contributed next to nothing. Or, the second possibility, somebody screwed with the game and loaded the dice in favor of the guys at the top.

Mr. Romney does not want to deal with this issue. He strongly condemns those who even want to talk about it. For Mr. Romney to so casually turn away from such a fundamental a principle leaves us wondering just where is he coming from? What are his economic principles? A search of modern economic literature is no help. To a man, the great economists since Smith – Ricardo, Marshall, Keynes, Friedman – all bought into the efficient allocation theory. 

We are left with the strong possibility that Mr. Romney is not a capitalist. He is a pre-capitalist. He would take us back to those thrilling a days of the Middle Ages when knights slew dragons, rescued maidens, sieged castles, burned heretics, etc., and when workers (i.e., those not in the noble 1%) were kept in their place and nobody talked about fair wages much less efficient allocation of resources. (A crypto-Eurofeudalist?)

An important precedent for his thinking comes from the year 1351, in the reign Edward III, when Parliament enacted the “Statute of Labourers” (Statutes of the Realm, vol. i, p.307) which forbade employers to pay more than “customary wages.” Further, anyone who did not own his own business and was employed by somebody else (the 99%?) was bound to take what his employer paid him (i.e., the “customary wage”) and shut up about it. Those guys knew how to deal with envy.

Of course thirty years later the English peasants revolted, but by then Edward III was gone. 

Romney might want to rethink this issue – or at least what he says about it -- given his loss of two elections in just a few days – the recount defeat in Iowa and a weak second-place finish in South Carolina.

Henry M. Banta is a partner in the Washington, DC, law firm of Lobel, Novins & Lamont. E-mail: henrybanta@aol.com

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