Krugman: Let’s talk first about the link between inequality and polarization.

[pampango]

So how did we end up in this state? How did America become a nation that could not rise to the biggest economic challenge in three generations, a nation in which scorched-earth politics and politicized economics created policy paralysis?

We suggest it was the inequality that did it. Soaring inequality is at the root of our polarized politics, which made us unable to act together in the face of crisis. And because rising incomes at the top have also brought rising power to the wealthiest, our nation’s intellectual life has been warped, with too many economists co-opted into defending economic doctrines that were convenient for the wealthy despite being indefensible on logical and empirical grounds.

Let’s talk first about the link between inequality and polarization.

What’s more surprising is the fact that the relatively nonpolarized politics of the post-war generation is a relatively recent phenomenon — before the war, and especially before the Great Depression, politics was almost as polarized as it is now. And the track of polarization closely follows the track of income inequality, with the degree of polarization closely correlated over time with the share of total income going to the top 1 percent.

The most likely explanation of the relationship between inequality and polarization is that the increased income and wealth of a small minority has, in effect, bought the allegiance of a major political party. Republicans are encouraged and empowered to take positions far to the right of where they were a generation ago, because the financial power of the beneficiaries of their positions both provides an electoral advantage in terms of campaign funding and provides a sort of safety net for individual politicians, who can count on being supported in various ways even if they lose an election.

In sum, extreme income inequality led to extreme political polarization, and this greatly hampered the policy response to the crisis. ... Leading politicians gave speeches that could have come straight out of the mouth of Herbert Hoover; famous economists reinvented fallacies that one thought had been refuted in the mid-1930s. Why?

The answer, we would suggest, also runs back to inequality. ...

http://politics.salon.com/2012/04/15/economy_killers_inequality_and_gop_ignorance/singleton/