The conservative mind is binary: If you do A the result will be B. If you are prudent you will be prosperous. If you are profligate you will be poor. Income inequality is a measure of virtue. If you give tax breaks to the the rich these "job creators" will stimulate the economy. Conversely, all tax hikes -- always and everywhere -- are "job killing."
Conservatives don't do nuance. Theirs is a Poor Richard's Almanac view of the world that reduces complexities to Whitman Sampler-like solutions which represent, at best, half-truths and superficialities.
And so the conservative view of the euro crisis in Europe today is that Germany is in the driver's seat because it has been virtuous by watching its money while basket-cases like Greece, Spain and Ireland should be punished for spending like drunken sailors.
There is another economic view based on the idea that economies are like living ecosystems which only prosper when there are balances and equilibriums - where supply and demand are in sync, or when consumers have the wherewithal to purchase the goods their labor produces. This is the virtuous circle that can become unbalanced and distorted whenever some groups - rich investors, say - demand more than their fair share and so engage in economic-distorting activities, such as hoarding capital or dismantling factories and businesses, for the short-term profits they provide.
Two recent reports support the view that economies are circular, not linear, and that maintaining rough equilibriums is far more important than catering to the holders of capital who read Ayn Rand for the flattery she provides on how they are the "productive class" who serve all those "parasites" out there who feed off of the initiative and the enterprise their hard work produces.
We already know from an October report from the Congressional Budget Office that, from 1979 to 2007, the average real after-tax household income for the top 1% of the population with the highest incomes rose 275% while it rose just 18% for the bottom 20%.
As Charles Blow reports in today's New York Times, another report released last May from the OECD found that "the gap between rich and poor is the highest its been in over 30 years."
In that time, average incomes of the richest 10% in America rose 14 times more than the poorest 10%.
What these reports also suggest is that efforts to rectify this wage gap are not based on envy, as Wall Street interests assert, but economic necessity and survival.
"Our growing income inequality is a fact," says Blow. "So is the possibility that it could prove economically disastrous."
According to the International Monetary Fund, said Blow, growing income inequality "has a negative effect on economic expansion."
The IMF report found that long periods of high growth -- called "growth spells" -- were "much more likely to end in countries with less equal income distributions. The effect is large."
It continued: "Inequality seemed to make a big difference almost no matter what other variables were in the model or exactly how we defined a 'growth spell.' "
By castigating all efforts to equalize incomes as "class warfare" America's rich and powerful may be slitting their own throats, for as Blow reports: "Our income inequality could jeopardize our recovery."
American financial elites aren't alone in their self-destructive behavior.
In Europe, as Harold Meyerson of the Washington Post reports, fiscal austerity is the wrong medicine for what ails the Continent.
Most plans to rescue the euro are based on the notion that nations "hanging by a thread" like Greece, Italy, Spain, Portugal and Ireland must pay the piper for their past profligacy.
Yet, of those countries, only Greece failed to meet the 3% targets European leaders set for budget deficits and national debt, says Meyerson.
Instead, says Meyerson, quoting a Financial Times report, the deficits these embattled euro-zone members ran weren't budgetary at all. They were economic, the result of trade gaps ranging from 1% of GDP in Italy to 9% in Portugal. Those Euro-zone members in trouble, in short, all imported more than they exported, while members whose finances aren't threatened - Germany, Finland, the Netherlands, Austria, Belgium and France - all ran trade surpluses, reports Meyerson.
And it turns out that the lead exporter to these nations was Germany - "which through its fiscal austerity pact is demanding that these nations curtail investments in education and infrastructure, which are the very investments that could help make these nations more productive and more competitive with . . . Germany," says Meyrson.
Michael Lewis in his new book - Boomerang - makes much the same point about Germany. While the Germans are praised for their prudence in watching their own spending the Germans also have a penchant for empowering profligacy in others. Promoting bad behavior in others is a cultural characteristic which Lewis weirdly ascribes to what he says appears to be a national obsession with human excrement, given the many hundreds of different expressions the Germans have for, well, shit.
The Germans understand, says Meyerson, that if Italy or Spain goes under Germany would suffer too. But that doesn't seem to be dissuading the Germans from demanding economy-shrinking austerity measures as a condition for bailouts that, if not "diabolical," says Meyerson, are at the very least "dunderheaded."
What we are learning, in other words, is that Adam Smith's invisible hand is at best a half-truth. Allowing individuals to pursue their own economic self interest results in the greatest good for the greatest number - until it doesn't. And, conversely, economic or industrial "planning" which tries to bring order to chaos in an economy to achieve certain consensus objectives, is suffocating for individual initiative and economic growth - except when it isn't.
The combined result of US "free market" actions over the past three decades, after all, "reads as though we intended to diminish America's economic edge," says Meyerson, who lists all the usual suspects of America's growing wage inequality and middle class stress: Off-shoring of high tech industries; job creation mostly in the less-productive service sector; a US infrastructure that's been allowed to deteriorate; and an addiction to credit card debt to replace lost purchasing power due to wage stagnation and actual declines.
"So while Americans decry our lack of spending discipline, our larger problem is that we have exported industries and eliminated, downgraded or failed to deliver the jobs that once made our economy vibrant," says Meyerson. And, like the Germans demanding austerity for what ails Europe, Americans have "misread our weakness as fiscal when, fundamentally, it is the result of policies - financial, corporate and governmental - that have failed to preserve, expand and reward productive work."
As that old American revolutionary saying reminds us: We shall hang together or we shall surely hang separately.