Frightened by growing inequality

Posted: 30 September 2009 in Uncategorized
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Bruce Judson, author of the forthcoming It Could Happen Here: America on the Brink, finds the newest economic inequality numbers to be frightening:

The Census Data reports that, contrary to the almost universal expectations of economists, economic inequality most likely did not decrease in 2008. Experts had anticipated that the declines in income of the rich would lead to a reversal in this groups ever–widening share of our national income. Instead, the Census reported that the 2008 income losses by the top 10% of Americans were offset by larger losses among middle class and poorer Americans.

The conventional economic wisdom, based on historical data, is that income inequality decreases, at least temporarily, as the richest Americans lose income faster than less-well-off Americans during a downturn. In contrast, this new data suggests that the dangerous cycle toward increasing income at the top of America has become even more self-reinforcing than previously recognized. We are now at the point where the pure market forces [whatever they might be], which many economists told us would eliminate this issue, are no longer effective.

The two key ideas behind his book are (a) that economic inequality can reach a self-reinforcing cycle, where a rise in inequality creates—via concentrations of wealth and power—the conditions for even more inequality, and (b) that

once economic inequality reaches a self-reinforcing cycle it is halted only by inevitably controversial, hard-fought, bitterly opposed government action.

It is clear that, in the current situation, existing inequalities are leading to solutions to the crises of capitalism that involve bailing out capital and making the rest of us pay for it.

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