There are times when it becomes necessary to change the way
that we look at something; and there are times when the attempt to do so takes
on the allure of changing the rules in the middle of the game. Even science –
which is the most exact of the disciplines – is never definitive about anything
because it recognizes that a theory that works for now may only be a part of a
larger theory that will eventually be formulated when new instruments will make
it possible to take more accurate measurements.
And given that economics remains one of the least exact of
the disciplines, it stands to reason that people should want to modify the way
they look at aspects of it when new information surfaces that seems to affect
the way the system works. The problem is that unlike science which can usually
be verified with an experiment, economics can only rely on statistical data
that must be interpreted, therefore can be subjected to opinions that are bound
to be colored by the prejudices of the interpreters.
And this is what has been happening lately when it came to
measuring the wealth of different entities for the purpose of comparing the
well being of groups of people living in the same jurisdiction, or comparing
the well being of nations that follow different cultures while adhering to
different political and/or economic systems.
It so happened that an arm of the World Bank conducting a
survey called International Comparison Program issued its latest report, one
that turned the figures for Africa upside
down. Whereas South Africa was thought to be the largest economy on the
Continent, it turned out to be number three after Egypt that was classified as
number one by a wide margin, and Nigeria as number two. When you think that based
on false information, South Africa
– and not Nigeria or Egypt ,
or indeed any Arab country – was invited to join the G-20; you wonder what kind
of dirty politics played a role in this selection.
You can get a taste of the games that people play manipulating
statistical data to score political points. This time, the opportunity is
presented in the form of an article by Neil Gilbert who wrote it under the
title: “The Denial of Middle-Class Prosperity” and the subtitle: “Government
data show that average disposable income has increased across all income groups
since 1979.” It was published on May 17, 2014 in the Wall Street Journal.
You can see the author establish the rules of the game early
on to make it easy to present the arguments he has already formulated in his
head. He begins by brushing aside the “countless reports” that “claim the
middle class is being crushed by inequality, declining mobility and diminishing
income.” He asserts that the middle class are better off than they were 30
years ago, and they live better than their counterparts in other places. This
is something that was never done before in a country that used to consider
itself so exceptional; it could not be compared to anyone else.
To make his point, Gilbert dismisses the research which he
says is showing the middle-class stagnation because it looks at market incomes
which exclude, among other things “government transfers … It overlooks the
welfare state's enormous power to redistribute income.” What? Hold it buddy. Say
it again. Are you saying that the marketplace would have left the middle-class
in a state of stagnation if not for the welfare state that redistributed the
income, gave the middle-class equality, an upward mobility and a rising income?
The Left must be dancing and singing Halleluiah, welcome into the body of
believers, ye blessed convert to our cause! But tell me, who else is talking
like you? Is it Martin Feldstein? Yes it is. Look what he wrote lately.
Writing about Thomas Piketty who says that capitalism will
lead to an increasing inequality of income and wealth, Feldstein who is an icon
of the conservative movement wrote: “Picketty's comparing the income of top
earners with total national income has another flaw. National income excludes
the value of government transfer payments including Social Security, health
benefits and food stamps that are a large and growing part of the personal
incomes in low- and middle-income households.” He made that comment in the
article he wrote under the title: “Piketty's Numbers Don't Add Up” and the
subtitle: “Ignoring dramatic changes in tax rules since 1980 creates the false
impression that income inequality is rising.” It was published in the Wall
Street Journal on May 15, 2014. Hey, look here my friend; they all say the same
thing: Big government is necessary to achieve the equality that market income
alone would have eroded.
Not realizing what image he is painting, Gilbert goes on to
explain that the Congressional Budget Office has demonstrated how the tendency
to the effect that the rich could have gotten richer at the expense of the
poor, and that the Middle class could have stayed the same during the past
three decades – was rectified with the tax regime and the social benefits
brought about by big government.