Hellegers: American Income Inequality is the Cause of our Crisis

[n2doc]

Plutarch, writing almost 2,000 years ago, told us that “an imbalance between rich and poor is the oldest and most fatal ailment of all republics.”

Below is a chart that shows the course of income imbalance over the last 93 years in the U.S. If it showed the course of net worth imbalance, it would be much more dramatic. If it showed data for the top tenth of one percent– not just the top ten percent– it would be extraordinarily dramatic.

Inter alia, the chart shows that both the Great Depression of the ’30s and the present crisis were immediately preceded by great buildups in inequality. When ordinary people lack the wealth to buy things– houses for example–the system crashes.

There’s also a lot of data that show that economic equality conduces, quite literally, to the health of society. The correlation between equality and most measures of well-being is stronger than the correlation between wealth and well-being. See Richard G. Wilkinson & Kate Pickett, The Spirit Level (2009). For a good review of that book, see David Runciman in the London Review of Books, Oct. 22, 2009, .

Still, the rich consistently try to destroy egalitarianism, because for their segment, inequality is fine. It means increasingly desperate people trying increasingly hard to serve the rich. The rich also try to destroy the political means by which the rest of society might seek relief, which is exactly Plutarch’s point. Witness the rise of the present-day Tea Parties. A recent article in the New Yorker describes how the Koch brothers– Texas billionaires– have lavishly financed that movement.

more

http://www.juancole.com/2010/09/hellegers-american-income-inequality-is-the-cause-of-our-crisis.html

[slackmaster]

1. This analysis looks at only one side of the "imbalance", and IMO the less important one

The problem isn't the rich being too rich, it's the poor and middle class being too poor.

[dkf]

2. And it is the cause of our lifetime.

We need to consider what leads to rising wages and what leads to declining wages. In particular labor costs are determined from the bottom up. When the cheapest labor is valued by illegally low amounts, all the rest of the tiers suffer. The work of an illegal immigramt is just as good as you could do but he/she gets paid waaaaaay less. This puts a value on your own labor and you are worth waaaaaaay less too.

[izquierdista]

3. Funny detail about the graph

Including capital gains always raises the share for the rich. What a surprise! It's like those blue collar workers must not be reading the right market timing newsletter so they can maximize their capital gains or something.

[pampango]

4. And it is why Europe has survived the Great Recession in much better shape than the US.

http://en.wikipedia.org/wiki/List_of_countries_by_income_equality

[GeorgeGist]

5. For those who believe in miracles ...

you can thank St. Ronnie and the free market for the latest delusion of grandeur.