Both mainstream economists and political scientists have failed to understand the conditions and consequences of economic inequality in the United States.
In the latest issue of Politics and Society (with free access at the moment), Jacob S. Hacker and Paul Pierson set out to analyze the “organized combat” that led to the rise of business power in order to account for the rise of extreme income inequality in the United States over the past 30 years. They challenge the accounts of both mainstream economists (who, “conceptualizing government’s role in an excessively narrow way,. . .have attributed highly concentrated gains to impersonal technological forces”) and mainstream political scientists (who, “conceptualizing politics and policy in excessively narrow ways, . . .have sought to sustain an explanatory focus on the median voter”). In their view, an analysis of the winner-take-all character of U.S. capitalism requires
a true political economy—that is, a perspective that sees modern capitalism and modern electoral democracies as deeply interconnected. On the one side, government profoundly influences the economy through an extensive range of policies that shape and reshape markets. On the other side, economic actors—especially when capable of sustained collective action on behalf of shared material interests—have a massive and ongoing impact on how political authority is exercised.
The one thing missing from Hacker and Pierson’s account is an analysis of the economic processes whereby the combination of the labor performed by and the stagnant incomes paid to workers created the conditions for the immense surplus that those at the very top of the distribution of income managed to secure with the help of government policy. It’s not the natural working-out of technological change or median voting behavior that produced such an income; it’s precisely the political economy of capitalist exploitation and business influence on government policy that explains the roots of the current crises of capitalist democracy in the United States.
So, if Paul Krugman, Robert Reich, and their mainstream colleagues are still looking for the links between inequality and crisis in the United States, one place to start is the work of Hacker and Pierson.