Inequality as premise, redistribution as conclusion
Bob Zadek frames income inequality as a fact of a market economy rather than a defect: a doctor earns more than a factory or office worker, some athletes earn more than office workers, and “income inequality is not a defect; it’s a feature.” He distinguishes this from what he calls “bad” income inequality, and argues that once inequality is identified as a problem, the fix that follows is redistribution — legislating by fiat to “level the playing field,” which he compares to legislating that somebody six-foot-six be no taller than somebody five-foot-ten. He notes that the discussion of income inequality is linked to redistribution, and that the Biden administration would be looking at every policy through the lens of income inequality Questioning Biden’s Inequality Narrative (2021).
Edward Conard, the guest, grants the other side its strongest form: if somebody works harder or takes more risk successfully and builds a business, nobody has any problem with that person earning more. He then states the argument that “the talents of mankind belong to mankind, not to the lucky recipients,” and that the aim is to harvest the most value possible from that talent — analogous to the idea that we all kind of own the oil, the land, the air. On that premise, the question becomes how much more a talented person must be allowed to earn so that everybody gets the maximum value from the talent. Conard adds a second component: if the money was stolen, gotten unfairly, or through crony capitalism, then redistribution is defensible; he says he views luck and risk as something that should be rewarded, while acknowledging an argument on the left that the merely lucky should not keep the money Questioning Biden’s Inequality Narrative (2021).
The trade-off between taxing and motivating
Conard reframes the question as a trade-off between taxing a person more and motivating that person to take more risk, work harder, and use their talents. He says even the most liberal economists he has debated agree that an investor or innovator has to put about $5 of value in other people’s pockets to put a dollar in their own, and asks whether policy should try to get that person to create another $5 or tax the dollar in their pocket more heavily. He itemizes the existing taxation of that dollar: 23% at the corporate level, then capital gains at 20% plus state taxes in California of another 10-ish percent, which he says gets you to 50, and then estate tax taking 50% when the person dies Questioning Biden’s Inequality Narrative (2021).
He argues the United States has created more of the $5 with less talent than other high-wage economies. Using academic test scores as a quantitative measure of talent, he says the U.S. has about half as much talent per capita and about twice as many low scores per capita as Northern Europe, the second richest place in the world — twice the management challenge and half the talent. On that basis he says U.S. incomes are 30% higher on average and about 30% higher in the middle class than the richest countries in Europe, naming Germany, Scandinavia, France and the UK, and about 70% higher than Southern Europe. He attributes this to motivating talent to take risks, get training, work longer hours and produce innovation, and cites producing five times as many billion-dollar startups as Europe with half the talent per capita and economies of about the same size. He poses the choice as higher incomes for the middle class or more equality, and says everywhere more equality has been tried, incomes ended up substantially lower Questioning Biden’s Inequality Narrative (2021).
Morality, calm, and buying votes
Zadek calls redistribution a moral obligation only in the sense Conard identified it, and objects that a moral obligation is personal: one person cannot enforce their morality on another with force and guns, and income redistribution is enforcing one worldview of morality on another, which he calls offensive to him. He embraces the practicality instead — that without some form of income redistribution there will be unrest and unhappiness — and describes redistribution as done to keep everybody calm, a sweet spot between redistributing enough to keep people calm and not discouraging the market. He frames government as facing two balancing acts it can get wrong: err one way and there is civil unrest, err the other way and the economy tanks Questioning Biden’s Inequality Narrative (2021).
Conard agrees they are trying to keep everybody calm but adds that in large part the Democratic Party’s reason for being is to buy votes with other people’s money, and that it has been successful at that objective. He cites spending about $22,500 per person on everybody in the bottom 20%, and says that since 2000 the money going to the middle class has increased to about $10,000 or $11,000 per family of four. He says free marketeers and libertarians are not just trying to keep people calm but to win elections against somebody determined to give more and more no matter how much more — “mercy at any cost” — and that the level is no longer soothing but at the “give me more” level. He offers a rowboat analogy: if everyone must work hard to live and you refuse to pull your weight, it is not clear you get to do whatever you want, and a vote could potentially throw you out; he says this is where he parts ways with libertarians, because freedom is not the only moral issue. He says he is willing to concede the left’s arguments about morality and the responsibilities of talented people for the sake of argument, and then asks what policies make the middle class as rich as possible, arguing that people think taxing the rich and giving to the poor costs them nothing when it demotivates the creation of the $5 to get a nickel of the dollar, and that another nickel will not make the middle class richer when 50% is already being taken Questioning Biden’s Inequality Narrative (2021).
Redistribution as buying peace
In a later episode, Zadek processes a guest’s argument into the thought that if the only goal were to improve everyone’s quality of life, more efficiency and more free market would be better, but that it leaves behind a lot of people — whether through their own failings, circumstances, or accident of birth, most of which are beyond their control. As that number grows, society becomes more vulnerable and fragile; people are angry, unhappy, and have no stake in the system. He says wealth transfers are therefore not correcting an imperfection but preventing a growing class of unhappy people from causing unrest — buying peace in a good way, not like paying protection money so your store does not burn down. He adds that democracy is threatened by the unhappiness of people who feel there is nothing they can do to catch up When More is Not Better (2021).
Roger L. Martin responds that Zadek emphasizes this more than he would: he does not think people want to catch up, only to have a better future, and that when they stop feeling there is a chance for a better future, they become unruly. He says he is much more obsessed about the band around the median than the tail of the distribution, though he believes a good society is one in which those who have more willingly help those who have less, and that the trigger for America is when the middle of the distribution gives up and says “This is not working” When More is Not Better (2021).
Costco and the question of what counts as redistribution
Martin asks whether Costco is into income redistribution. He describes Costco as one of the most successful retailers in America, dominating its category of club stores, with a policy of paying its lowest-paid workers in excess of 20 dollars an hour, so that minimum wage is irrelevant to Costco. He says he thinks that is not income redistribution but being non-stupid: paying workers well means they come to work happy and not worrying about making ends meet, they care about the company and customers, customers have a wonderful time and come more often and buy more. He adds that Costco promotes entirely from within, does not parachute in MBAs into the top ranks, and that anybody on the store floor doing a good job has a shot to be CEO someday. If that is income redistribution, he likes it, but he does not call it that; he calls it a smarter strategy about effectiveness over efficiency and resilience rather than short-term efficiency, and says we would not need as much income redistribution as some people call for if more businesses recognized it as a positive-sum game — for Costco, employees get rich, shareholders get super rich, and the economy does better When More is Not Better (2021).
Zadek responds that every employee paid $20 an hour by Costco is worth it to the penny, or Costco would pay 18, so Costco has found a way to create a job worth $20 an hour and helped the employee create value in their own time; Costco is not doing a wealth transfer. Martin agrees, saying they give the employee a context in which that employee can make the most of themselves rather than the least, and that this is what the economy needs more of. He describes Costco as not obsessed about proxies for efficiency, and says when criticized for paying so much — that cutting wages to competitive levels would put a billion dollars to the bottom line — Costco’s response is that doing so would destroy shareholder value, the store experience would go to hell in a handbasket, and employee turnover, epically low versus others, would shoot through the roof, so they would spend their time hiring new people who do not know the store; the billion dollars would come at a cost of perhaps $50 billion in shareholder value When More is Not Better (2021).
Across episodes: the excerpts show no development
The topic is touched in “Questioning Biden’s Inequality Narrative” and “When More is Not Better”; the excerpts show no development between the earlier and later treatment, with the first episode arguing the trade-offs of taxing and motivating talent and the second arguing that redistribution is unnecessary when businesses pay workers well.
What the sources do not cover
The excerpts do not state the name of any bill, the holding of any case, or the amendment any case turned on. They do not give a founding date or principle for any institution, nor the titles or fields of the speakers beyond what the labels and exchanges show. Where an excerpt breaks off mid-sentence, the thought is left where it stops.