« Fed Watch: FOMC Meeting Something of a Nail Biter | Main | The Impact of Unemployment on Well-Being »

Monday, December 16, 2013

Paul Krugman: Why Inequality Matters

Inequality is "the defining challenge of our time":

Why Inequality Matters, by Paul Krugman, Commentary, NY Times: Rising inequality isn’t a new concern. ... But politicians, intimidated by cries of “class warfare,” have shied away from making a major issue out of the ever-growing gap between the rich and the rest.
That may, however, be changing..., the discussion has shifted enough to produce a backlash from pundits arguing that inequality isn’t that big a deal.
They’re wrong. ...
Start with the numbers..., inequality is rising so fast that over the past six years it has been as big a drag on ordinary American incomes as poor economic performance, even though those years include the worst economic slump since the 1930s.
And if you take a longer perspective, rising inequality becomes by far the most important single factor behind lagging middle-class incomes.
Beyond that,... it’s now widely accepted that rising household debt helped set the stage for our economic crisis; this debt surge coincided with rising inequality, and the two are probably related... After the crisis struck, the continuing shift of income away from the middle class toward a small elite was a drag on consumer demand, so that inequality is linked to both the economic crisis and the weakness of the recovery that followed.
In my view, however, the really crucial role of inequality in economic calamity has been political.
In the years before the crisis, there was a remarkable bipartisan consensus in Washington in favor of financial deregulation... Deregulation helped make the crisis possible, and the premature turn to fiscal austerity has done more than anything else to hobble recovery. Both ... corresponded to the interests and prejudices of an economic elite whose political influence had surged along with its wealth. ...
Surveys of the very wealthy have ... shown that they — unlike the general public — consider budget deficits a crucial issue and favor big cuts in safety-net programs. And sure enough, those elite priorities took over our policy discourse.
Which brings me to my final point. Underlying some of the backlash against inequality talk, I believe, is the desire of some pundits to depoliticize our economic discourse, to make it technocratic and nonpartisan. But that’s a pipe dream. Even on what may look like purely technocratic issues, class and inequality end up shaping — and distorting — the debate.
So the president was right. Inequality is, indeed, the defining challenge of our time. Will we do anything to meet that challenge?

    Posted by on Monday, December 16, 2013 at 12:33 AM in Economics, Income Distribution | Permalink  Comments (118)

          


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.