Read Aftershock: The Next Economy and America's Future for Free Online Page A

Eccles and John Maynard Keynes saw a broader economic justification for organizing the economy in such a way that the rich did not accumulate a disproportionate share to begin with: the need to maintain enough total demand. Assume that Ken Lewis somehow managed to spend a quarter of his $100 million compensation in 2007. That would have left him with $75 million. While his $25 million of spending likely would have created lots of American jobs—construction workers who built new additions to his estates; restaurant and retail workers who catered to his appetites; doctors and hospital workers who attended to his health; financial consultants, accountants, and tax attorneys who managed his money; personal trainers, therapists, coaches, and masseurs who attended to his psychological stresses; technicians who repaired and upgraded his music systems, his personal communications systems, and his cars; people who cleaned his homes, laundered his clothing, and tended to his gardens; those who piloted his personal jets and drove his limousine—his $75 million of savings would have created far fewer. Even if invested rather than hoarded or circulated in a frenzy of speculation, the money would have moved at the speed of an electronic impulse wherever around the world it could get the highest return. (To be sure, many of the goods he bought likely would havebeen assembled abroad; but the largest portion of his direct spending would remain here, mostly for services.)
    Now suppose Ken Lewis’s $100 million had instead been divided among five hundred people, each of whom took home $200,000 that year. Assume that each spent $150,000—hardly difficult in and around New York City, or in other big cities—and saved $50,000. Total spending by those five hundred would have added up to $75 million, most of it supporting jobs in the United States. Take the logic a step further. Suppose Lewis’s $100 million had been paid instead to two thousand people, each of whom took home $50,000—just about what the typical American family earned in 2007. Each of those two thousand families is likely to spend all, or nearly all, of that money. The lion’s share will be for services. Most of that $100 million would have gone directly into the U.S. economy, sustaining jobs.
    Before the 2008 meltdown, about half of U.S. consumer spending was done by the highest-earning fifth of the population. Roughly 40 percent of total spending came from the top 10 percent.But that was hardly because richer Americans were spendthrifts; it was because the top 10 percent took home almost 50 percent of total income. Had the broad middle class taken home a larger portion, total spending would likely have been far greater—and the middle class would not have had to go so deeply into debt.
    This is not an argument for more personal consumption, per se. It is rather an argument for paying attention to total demand for all types of goods and services a society might need and be capable of producing—including, hopefully, those that conserve energy and reduce carbon emissions. Greater consumption of education, public recreation, and the arts would also, presumably, make daily life more useful and pleasant for more people without increasing
material
consumption at all.
    Many of America’s very rich have been exceedingly generous.Andrew Carnegie built libraries and opera houses. John D. Rockefeller and his sons established a famously important foundation. During the most recent swing of the pendulum, Bill and Melinda Gates set up another large foundation—and in June 2006, Warren Buffett pledged a huge share of his total wealth to support its activities. These are all commendable acts, but they are beside the point I am trying to make, which is that they do not, in and of themselves, generate more jobs and more economic growth than would be the case had a larger percentage of the nation’s people shared a bigger portion of the nation’s bounty. (From a moral perspective, the