Mark Thoma on the Inequality Wildcard

Mark Thoma reads Ken Rogoff and comments:

Economist's View: Rogoff: The Inequality Wildcard: Kenneth Rogoff says "it would be very wrong to suppose that gaping inequality is stable," and that "it is very likely that countries’ abilities to navigate the rising social tensions generated by gaping inequality could separate the winners and losers in the next round of globalization."...

Most of the solutions I've seen are long-term -- things like improving education and infrastructure with the hope that things will turn around many years down the road. We should do those things, but it is unlikely to be enough and it will be a long time before we know if it is working or not. In the meantime, if we leave the problem unaddressed and present trends continue -- and there's no sign that they won't -- the level of inequality will grow even larger and create even more volatile conditions. Even if I thought all of the present inequality was the fair outcome of a level playing field, I would still call for something to be done now (and I have). But I don't think what we are seeing is anywhere close to the result of an equitable system delivering gains to deserving, high-skilled individuals -- gains that are amplified as markets expand with globalization. Wages have not kept up with productivity as they should have since the "Great Decoupling" in the 1970s. Instead wages have been stagnant even as income continued to grow. There's something else driving this wedge, something that goes beyond rewarding people for their productivity.