Inequality is good---the top 0.1% propels the country in innovation, economic production, defense, and poverty-reduction.

A frenzy of highly skilled entrepreneurial risk-taking is benefiting the U.S. economy. The U.S. economy continues to produce billion-dollar unicorns—venture-backed privately owned start-ups with billion dollar valuations—at a substantially faster pace than Europe and with valuations that are substantially larger.42 From January 2014 to March 2016 alone,* the number of U.S. unicorns has grown from thirty-two to eighty-eight, despite eighteen companies exiting the list after going public, with a combined value growing from $75 billion to over $300 billion.43 Over the same period, European unicorns have grown from two to sixteen (less two public offerings), with $9 billion of combined value increasing to $35 billion.44 During a time when large European start-ups created $26 billion of addition value, the United States created $225 billion of additional value—almost ten times as much!

While it’s true that American consumers will benefit from a cure for cancer even if it’s discovered by a Chinese company, American workers benefit more when the successful innovators are also American. At the very least, company’s founders, investors, and workforce disproportionately spend their gains in the United States, which pumps up the demand for goods and services made by lesser-skilled Americans.

Since 1980, the U.S. economy has increased employment nearly 50 percent—more than twice the growth of that of Germany and France, and more than three times the growth of Japan while providing median after-tax incomes for American families that are 15 to 30 percent higher than those of Europe and Japan. This is an unheard-of difference in performance.

And that difference in growth would have been greater still were it not for the disproportionate benefit of U.S. innovation, which accelerated the rest of the world’s growth.

Successful American innovators also increase tax revenues as rich Americans pay a disproportionate share of taxes.46 Increased tax revenues provide more government services and benefits to lesser-skilled Americans. And a larger U.S. economy is also better able to defend itself militarily. It would be shortsighted to leave these opportunities to other economies to discover and commercialize when they are available to America even though they increase income inequality.

As other sources of growth have waned, information technology fortunately opened a large window of new investment opportunities. More so than the rest of the world, the U.S. economy capitalized on these opportunities. IT increased the productivity of the most productive workers. With investment opportunities growing faster than productivity gains, the pay of the most productive workers grew.

A positive feedback loop ensued that further increased the productivity of the most productive worker. Better-trained workers and investors increased the likelihood and payoff for successful innovation. Like any game of chance, better odds increase the risk-taking needed to produce innovation. A larger economy also increased the value of innovation. And unlike capital-intensive manufacturing, IT reduced the need for capital investment to scale to economy-wide success. These factors magnified the value of success and the pool of eager and talented risk-takers.

More risk-taking increases the number of fortunate successes even if the returns to risk-taking don’t improve significantly. Success diminishes the status of others. Loss of status drives many status seekers to regain their lost status by taking ill-advised risks. More risk-taking produces innovation that is beneficial to all of us. Despite the success of America’s economy, demagogues have demonized the success of America’s 1 percent as a liability that hollows out the middle class, lowers wages, and damages the fabric of American society.47 But were it not for the successes of America’s most successful workers, U.S. employment growth would have slowed further, as employment growth did in Europe and Japan

The outsized success of America’s 0.1 percent is the true source of its growing income inequality. Growing income inequality is a byproduct of the success of the U.S. economy. This success has been shared broadly by the rest of the economy. If anything, America should try to entrench and expand its position as a hub of innovation by encouraging its best and brightest students to get the kind of training demanded by customers, and to take the risks necessary to produce more innovation.