"Fixing Inequality Can Save Us From the Next Crisis"

[applegrove]

Fixing Inequality Can Save Us From the Next Crisis

By James K. Galbraith at Bloomberg

http://www.bloomberg.com/news/2013-09-23/fixing-inequality-can-save-us-from-the-next-crisis.html?wpisrc=nl_wonk

"SNIP...........................



Inequality waned during most of the 20th century, to Schumpeter’s dismay. By 1958, even John Kenneth Galbraith could write, “few things are more evident in modern social history than the decline of interest in inequality as an economic issue.” In the 1980s and 1990s, though, inequality shot up and interest revived. These days the battle rages on.

Of course, market outcomes are unequal. And to liberals’ chagrin, inequality is exacerbated in good times. In the late 1990s, under President Bill Clinton, the U.S. had four years of full employment, and income inequality hit levels not seen since 1929. The reason is simple: Inequality is driven mainly by capital gains, stock options and the proceeds of venture capital and initial public offerings, all of which exploded during the information-technology boom.

But do more unequal countries, generally, work better? In Europe, “labor market flexibility” has been the mantra of conservative reformers for years. According to them, skilled workers were paid too little and unskilled workers too much. The supposed remedy was to weaken unions, cut pensions and reduce state benefits for working people. Recently Greece, Portugal, Ireland, Italy and Spain carried out such “reforms.” Competitiveness didn’t return and unemployment rose.

Here are two facts: First, rich countries are usually more equal than poor ones. For a nation to be rich and developed, it must -- by definition -- have a large middle class. Second, inequality and unemployment rise and fall together. If pay gaps are large, people will quit low-paying jobs (on farms, for example) and move to factory towns (or technology centers) where the jobs are better -- but scarce. Those who can’t get the good jobs stay unemployed. It’s pretty simple. Also, if wage rules forbid low pay, then businesses innovate more rapidly and productivity increases. Decades ago the Scandinavians grasped this dynamic, and since then, those countries have become some of the richest on earth.



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[indepat]

1. A government of the people, by the people, and for the people would promote the general welfare

through the tax code and other policies to, among others, exacerbate burgeoning income inequality, but a corporatist government would stay the course, as essentially has been the case since the gipper, by promoting this burgeoning income inequality among others and, sadly the administrations of both WJC and BHO are party thereto.