03.05.11
How and why the vulture economy boosts inequality explained (as well as lots of other stuff)
UPDATED
A long scholarly paper from 2008 by James K. Galbraith took up most of my morning, stumbled across by following Krugman’s pointer to a conference on the causes and consequences of inequality at Princeton.
I’ll jump right to the conclusion of it for an excerpt:
“[Equality] fuels efficiency. A society that systematically reduces the dispersion in its structure of pay forces the pace at which technological change is absorbed by business enterprise, and therefore tends to move up the scale of available productivity levels … [this mechanism] underpinned the rise of Scandinavia where political commitment to egalitarian economic outcomes preceded the advance of the region from the middle to the top of the European (and world) income scales. Similar effects applied to the United States in the New Deal and the Golden Age of economic growth.
“It is intuitively obvious that higher levels of economic inequality make it more difficult to reduce poverty through growth. Where growth is isolated and incomes are concentrated, those who are not directly involved do not benefit. On the contrary, growth necessarily entails environmental degradation and waste, and it is on the poor and the excluded that these burdens necessarily fall. Only when the fruits of growth are distributed, as income or by the provision of infrastructure and other public goods, does the statistical fact of a rising gross domestic product come to be experienced as an improvement in mass living conditions.”
And that describes the United States now where great inequality is the norm. The spoils of growth are concentrated in a few industries — financial, military, technology. Everything else is left to rot which seems to be the very picture of national inefficiency.
It’s also “intuitively obvious” that one political party is ideologically dedicated to increasing inequality — the GOP.
The Democratic Party is less enthusiastically so but still seemingly committed to going along for the ride.
The webpage on “The Politics of the Economic Crisis” at Princeton is here.
The Galbraith paper is a suggested reading on “historical studies of inequality.” A link to it, along with many others, is found therein.
The waning and waxing of inequality in countries like Brazil, Mexico, the Eurozone and China are also analyzed in depth.
Krugman’s slide presentation, “Inequality and Crises: Coincidence or Causation???? — is also worth a quick look.
Much is on the page, to put it mildly. Going for a walk now or I’d read more.
Quote of the day, another “intuitively obvious” observation, from Krugman in the pm:
One is whether emphasizing education — even aside from the fact that the big rise in inequality has taken place among the highly educated — is, in effect, fighting the last war. Another is how we have a decent society if and when even highly educated workers can’t command a middle-class income.
While Krugman attributes this to technological advance in this post, I’d say that some of it also has to do with inefficiency from inequality — even the highly educated, if they’re out of position when they’re downsized by the vulture economy, can’t reconnect with the labor force. “Those who are not directly connected do not benefit,” is the quote of personal interest from a few graphs upstream.
Related: Every time I’ve see Obama at a community college or going on about something have to do with Pell grants, my bullshit detector pegs.
Win The Future! Win The Future! Even as dumb slogan, it’s pretty stinky.
Dick Destiny » The war boom was very good for them said,
June 6, 2011 at 7:25 am
[…] a scholarly paper a couple months ago, not specifically about the war boom riches but accurately describing the phenomenon in countries whe… Where growth is isolated and incomes are concentrated, those who are not directly involved do not […]