Morici: What President Obama Doesn't Get About Inequality

NEW YORK (TheStreet) -- Inequality is President Obama's highest priority, but his solutions are wholly naive.

Disparities between the rich and the poor are as ancient as civilization, but in modern democracies, this condition is exacerbated by globalization and technologies that drive it.

Successive advances in communication and transportation, for example, permit top opera singers, athletes and other professionals to reach wider audiences and earn incomes many times greater than their peers.

Before the radio, phonograph and moving pictures virtually every city, small and large, had an opera house or music hall that offered live entertainment. The top stars sang in New York, London and Milan and earned considerable wealth, but many local performers and traveling journeymen could earn a decent living, too

Caruso made 260 recordings for RCA Victor from 1904 to 1920, and radio sent his voice around the world. His income soared to levels unheard in past generations, but less renowned performers were displaced as regional opera companies folded.

Satellite communications, the Internet and jet travel permit star journalists to reach millions across the globe, but are causing the demise of newspapers and opportunities for local reporters and columnists. The same goes for Wall Street bankers, big-firm lawyers and multinational executives, but at the expense of their brethren in smaller enterprises.

For ordinary workers, cheaper ocean and rail transportation for goods and the Internet for services have magnified global competition. More workers in the United States must now compete with those in China. Workers in northern Europe must compete with those in southern Europe and in large Chinese cities with those elsewhere in Asia.

Governments have made extremes in income worse. Big cities, often with federal support, subsidize concert halls and sports stadiums, and further raise the salaries of top performers and big-league ball players.

The U.S. and European Union have gone along with trade and environmental agreements that permit China to charge high tariffs on imports and avoid pollution abatement, making made-in-China even cheaper. That pushes down wages for American and European workers and wreaks havoc on the global environment.

In China, migration laws permit rural workers to move to factories in big cities, but most may not bring their children. One in five Chinese children lives without their parents, and often those drop out of school. They become unemployable, and will create enormous social problems.

Income disparities are making education more unattainable for the children of the poor and working classes. This is a social time bomb, but government policies to address the problem often make things worse.

In the U.S., government subsidized loans drive up tuition costs. Community and less-prestigious four-year colleges have lots of children from low- and middle-income families, but many graduates are saddled with huge debt and haven't found jobs that pay much better than high school graduates.

Enrollment at top business and professional schools are still dominated by students whose parents are well-off. They get most of the top-paying jobs on Wall Street, in high-end law firms and among multinational corporations.

ObamaCare is making health insurance more expensive for many middle-class families and driving up the cost of health care. That makes income disparities worse, not better.

Research at the nonpartisan National Bureau of Economic Research has shown putting otherwise able people on public assistance encourages the same in their children, and extended unemployment benefits actually increase unemployment by raising employer costs and reducing the demand for labor.

All these burdens slow growth and lessen job opportunities for the struggling middle class and disadvantaged.

High talk about social justice, widening economic opportunities and income redistribution makes liberal politicians media darlings and wins elections, but such demagoguery does little to fill the belly of the poor.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Professor Peter Morici, of the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Prior to joining the university, he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals, including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions, including Columbia University, the Harvard Business School and Oxford University. His views are frequently featured on CNN, CBS, BBC, FOX, ABC, CNBC, NPR, NPB and national broadcast networks around the world.

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