Anyone who has a white female Democrat friend on Facebook invariably has seen posts by Boston University history professor Heather Cox Richardson. The creator of a popular Substack column, Richardson presents a message that followers of people like Robert Reich, Sen. Bernie Sanders, and Rep. Alexandria Occasio-Cortez would agree with: capitalism is systematic theft and anyone who is a billionaire got that money by stealing from others.
In a column earlier this year, she first quotes former President Joe Biden’s warning to the nation that it is being overtaken by “an oligarchy,” and then writes:
It is not exactly news that there is dramatic economic inequality in the United States. Economists call the period from 1933 to 1981 the “Great Compression,” for it marked a time when business regulation, progressive taxation, strong unions, and a basic social safety net compressed both wealth and income levels in the United States. Every income group in the U.S. improved its economic standing.
That period ended in 1981, when the U.S. entered a period economists have dubbed the “Great Divergence.” Between 1981 and 2021, deregulation, tax cuts for the wealthy and corporations, the offshoring of manufacturing, and the weakening of unions moved $50 trillion from the bottom 90% of Americans to the top 1%.
While the column goes on to make even more questionable allegations—along with giving a backhanded justification of the murder of United Healthcare CEO Brian Thompson allegedly by Luigi Mangione—we will address some of Richardson’s claims, which, one might add, are seen by her loyal followers as being nearly ex cathedra. Like Sanders, Reich, and Paul Krugman, Richardson is obsessed with income equality to the point where she seems to believe that times of relative income equality also must be good overall economic times. History tells us something different.
Before examining her claims, however, it is important to point out the perspective she and so many other detractors of capitalism have about the economy. To them, the economy is a large pool of wealth (really, money) that—in a just world—everyone would grab an equal share. There is no discussion of how the wealth was created in the first place and certainly no mention of how wealth has grown exponentially in the past two centuries. It just happens, with the main problem being that some people have managed to unjustly snatch an unfair share, men like Henry Ford and Andrew Carnegie who simply positioned themselves in the right place to steal what they could, leaving others to starve.
It is important to note that one cannot have a discussion on economics with someone who believes in this nonsense. If an Austrian economist sees the entrepreneur as having acted in the face of uncertainty, and that an entrepreneur can be successful only by satisfying the needs of others, someone like Richardson simply believes the entrepreneur is a thief, someone who has unjustly stolen what surely belongs to someone else. Likewise, inflation does not occur because of central bank malfeasance but rather is a product of greedy corporations that raise prices unjustly in the lust for even more profits—on top of the “record” profits these corporations are making (because corporations always are making “record” profits).
Richardson has a curious chain of causality. First, she assumes that a combination of high marginal tax rates, a strict economic regulatory structure that protects politically-connected industries from competition, and the enforcement of highly restrictive labor markets result in the creation of widespread new wealth that is evenly distributed. This is highly doubtful on its face.
Likewise, she would have a very high burden of proof to verify her claim that lowering tax rates at all levels of income, permitting new entry into fields like telecommunication and transportation (which resulted in lower prices for those products and services), and permitting liberalization of labor markets resulted in a $50 trillion wealth transfer from both poor and middle-income Americans to the wealthiest one percent. There is nothing in those measures that would cause the results she listed.
Furthermore, her real claim is that most Americans today are considerably poorer than they were in 1980, that they are economically worse off. While she claims to be a research academic, her command of the facts is suspect. By almost any measure, the standard of living for Americans today is considerably higher than it was in 1980. While there is economic uncertainty today due to inflation and heavy accumulation of federal government debt, not to mention the effect of President Trump’s tariffs, Cox lists none of those things as pushing people into poverty. As Ryan McMaken has written, poverty is not caused by income inequality.
Interestingly, Cox is probably making more than $1 million a month with her Substack blog, which, if one were to employ her rhetoric, means that she is stealing more than $1 million a month, since no one should be making that kind of money. Like Bernie Sanders—who has amassed millions of dollars by attacking capitalism—Cox has become a very wealthy person by denouncing people who create wealth.
Incomes Were Compressed – During the Great Depression
Paul Krugman spent much of his career as a New York Times columnist decrying what he called a “new Gilded Age,” calling for taxes and regulations that would enhance “income equality.” What he described as the most ideal time in the US economy was what he called the “Great Compression” from 1929 to 1947:
The Great Compression, 1929-1947: The birth of middle-class America. The real wages of production workers in manufacturing rose 67 percent, while the real income of the richest 1 percent of Americans actually fell 17 percent.
One would think Krugman was describing good economic times when he actually was referencing two of the worst calamities in US history: the Great Depression and World War II. The Great Depression featured double-digit unemployment for a decade and for all of the “good times” talk about the World War II economy, Robert Higgs sets the record straight:
World War II, the so-called Good War, has been a fount of historical fallacies. One of the greatest—and one of the most pernicious for subsequent policymakers—is the notion that prosperity prevailed during the war. Although Americans might have been dying in the Pacific and European theaters of war, people on the home front actually benefited from the war, because it propelled the economy at long last out of the Great Depression. This view of the war would be sufficiently egregious if it were true, but despite the claims of historians for the past half century, it is not true.
Note that Richardson, in following Krugman’s lead, assumes that the reduction of income inequality done through imposition of high marginal tax rates and cartelization of the economy through economic regulation resulted in improved economic well-being for most Americans. Higgs contradicts that view:
Yes, national output as conventionally measured did grow hugely during the war. As shown by the figure, gross domestic product (in constant 1987 prices) increased by 84 percent between 1940 and 1944. What the orthodox account neglects, however, is that this “miracle of production” consisted entirely (and then some) of increased government spending, nearly all of it for war materials and equipment and military personnel. The private component of GDP (consumption plus investment) actually fell after 1941, and while the war lasted, private output never recovered to its pre-Pearl Harbor level. In 1943, real private GDP was 14 percent lower than it had been in 1941. If a nation produces an abundance of guns and ammunition, it does not thereby achieve genuine prosperity. As the figure shows, only after the war ended did the private economy—the part of the economy that directly or indirectly satisfies freely expressed consumer demands—recover fully from its 15-year slump.
One cannot emphasize this point enough: reducing the so-called income gap between the wealthy and non-wealthy through government intervention does not increase economic well-being. If that were true, then the Great Depression would have been one of the most prosperous times in US history. One senses that Richardson and Krugman would rather people become poorer overall just as long as the spread between high and low incomes is reduced, which would seem to fit with their worldview.
This is not to say there are no harmful wealth transfers occurring from lower income to the so-called one percent. By creating asset bubbles that inflate the assets held by the wealthiest people in our economy through inflation, the Federal Reserve System has been running a wealth distribution scheme that really does harm to the economy and to those who are in lower-income groups. Writes Russell Lamberti:
How is wealth transferred by inflation? Money represents purchasing power. Creating money out of thin air, which is what central banks and commercial banks are licensed to do, confers purchasing power on those who are able to use the money first. For this new money to obtain purchasing power, it must rob little bits of purchasing power from all the other money in the economy. Purchasing power is transferred from those who hold money to those who create new money at close to zero marginal cost.
This explains how and why wealthy, creditworthy asset owners get richer while many poor people tend to resort to overconsumption and ultimately get poorer.
Conclusion
One can examine the writings of people like Cox, Krugman, and Reich, but they will not inform their readers that economic “inequality” has nothing to do with the success of the economy. That is because they claim that inflation simply is caused by corporations unjustly raising prices to chase so-called record profits. In fact, the left-wing publication, The Intercept, has claimed that “inflation is good for you.”
So, Cox and others look at the worst economic times as being times of prosperity and dismiss the negative effects of monetary inflation. It is unfortunate that they have millions of followers, but we already have learned long ago that economic illiteracy is most prevalent among the academic and political elites.
