News & Analysis This Month/Supplement - Investment adviser asks if wealthy are necessary

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NEW YORK (Reuters) - At a time when a CEO of a large U.S. company is likely to earn in one day what the average worker does in a year, an investment adviser takes the income-disparity controversy a few steps further in "Are the Rich Necessary?"

That question, almost unthinkable in a capitalist society, is one of many that Cambridge Associates LLC co-founder Hunter

Lewis poses in his latest book (Axios Press, $20). Lewis, the author of "A Question of Values" and "The Beguiling Serpent," also looks at the profit motive, its effect on democracy and society, and the roles government and central banks should play in wealth distribution.

"Are the Rich Necessary?" offers no simple or even definitive statements on these complex issues. Instead, Lewis presents a cross-section of often divergent viewpoints, in keeping with the book's subtitle: "Great Economic Arguments and How They Reflect Our Personal Values."

On the question of whether the rich are necessary, for example, one school of thought considers them decadent parasites who reap the harvest sown by those less fortunate than themselves.

But another theory contends that any government seizure and redistribution of the fruits of that harvest would cause buyers to disappear and prices to plummet.

There's also the concept that the wealthy are both outnumbered and outgunned financially by the rest of society. As a result, the average consumer rules, and millionaires and billionaires are mere public servants, trustees or social agents, although Lewis acknowledges that such a view might surprise even the deep-pocketed.

In terms of the profit system, some consider it unfair and inefficient, pitting employers against workers. Others say the quest for earnings leads to increased supply and lower prices, benefiting people who have to watch what they spend.

Many theorists advocate progressive taxation -- in which the rich pay more -- as a way to ease the effects of income inequality, but Lewis sees great promise in expanding the nonprofit sector, an area in which he has decades of experience.

He helped start Cambridge Associates in 1973 after working on a review of Harvard University's investment approach, and nonprofit organizations are still the firm's main client base. He has also sat on board and committees of 15 not-for-profit groups.

Philanthropic associations could take over many government functions, such as social services, health, housing and education, Lewis writes. The government could either fund these groups directly or encourage the wealthy to do so with tax credits.

One scenario, he said, would be a simple income tax with only a few allowed deductions. The poor would be fully exempt, and the initial tax bracket would fund the government.

There would also be one or two higher brackets for the rich, who could either pay these additional taxes directly to the government or receive a full tax credit by donating the same amount to registered charities.

An estate tax whose revenues would go to nonprofit organizations is another possibility.

Enlarging this sector, which now accounts for only about 8 percent of the U.S. economy, would mean more money would flow directly to the needy, Lewis said. He also sees philanthropic organizations as more creative and responsive to the people they are trying to help.

But even here, he is careful to list possible objections, such as an aversion to donations as government policy and concerns that charities could become bloated and inefficient.

Still, he sees the nonprofit approach as one way to bring the various economic factions together.

"An expansion of philanthropic values," he writes, " ... could offer a way forward out of the old, bitter, and often sterile economic quarrels of the past."