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All of this illustrates the central theme of chapters 3 and 9, that macroeconomic policies—including monetary policies—have to too large an extent been circumscribed by ideology, and it’s the market fundamentalist ideology that serves the interests of the top, often at the expense of the rest of society.
Will they be able to construct a social contract for the twenty-first century, ensuring that the benefits of such growth as occurs will be fairly shared?
We shouldn’t have expected the architects of the system that has not been working to rebuild the system to make it work, and especially work for most citizens—and they didn’t.
We are, in fact, paying a high price for our growing and outsize inequality: not only slower growth and lower GDP but even more instability. And this is not to say anything about the other prices we are paying: a weakened democracy, a diminished sense of fairness and justice, and even, as I have suggested, a questioning of our sense of identity.
Thomas Ferguson, in his 1995 book Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems,
book by Jacob S. Hacker and Paul Pierson, Winner-Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class,15 leaves off.
Lawrence Lessig’s Republic, Lost: How Money Corrupts Congress—And a Plan to Stop It.
In the first post-recession years of the new millennium (2002 to 2007), the top 1 percent seized more than 65 percent of the gain in total national income.
(a) Recent U.S. income growth primarily occurs at the top 1 percent of the income distribution. (b) As a result there is growing inequality. (c) And those at the bottom and in the middle are actually worse-off today than they were at the beginning of the century.
(d) Inequalities in wealth are even greater than inequalities in income. (e) Inequalities are apparent not just in income but in a variety of other variables that reflect standards of living, such as insecurity and health. (f) Life is particularly harsh at the bottom—and the recession made it much worse. (g) There has been a hollowing out of the middle class. (h) There is little income mobility—the notion of America as a land of opportunity is a myth. (i) And America has more inequality than any other advanced industrialized country, it does less to correct these inequities, and inequality is
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The simple thesis of this chapter is that even though market forces help shape the degree of inequality, government policies shape those market forces. Much of the inequality that exists today is a result of government policy, both what the government does and what it does not do. Government has the power to move money from the top to the bottom and the middle, or vice versa.
Inequality is the result of political forces as much as of economic ones.
Economists have a name for these activities: they call them rent seeking, getting income not as a reward to creating wealth but by grabbing a larger share of the wealth that would otherwise have been produced without their effort.
The analysis of changes in inequality then focuses on two questions: (a) What determines shifts in demand and supply curves? and (b) What determines individuals’ endowments, that is, the fraction of the population with high skills or large amounts of wealth?
There are strong interactions between poverty, race, and government policies. If certain minorities are disproportionately poor, and if the government provides poor education and health care to the poor, then members of the minority will suffer disproportionately from poor education and health.
22 Our failure to make these critical public investments should not come as a surprise.
Views that our political system is rigged are even stronger than those that our economic system is unfair. The poor, especially, believe that their voice is not being heard.
Ensuring that we have a well-informed public citizenry is important for a well-functioning democracy, and that in turn requires an active and diverse media. Other countries have attempted to ensure this diversity—with some success—by providing broad public support for media, ranging from national public broadcasting stations to community radio stations to support for second newspapers, even in smaller communities.24
The perception that they are set in ways that are unfair—that they give disproportionate power to economic elites, in a way that further strengthens the economic power of those at the top—reinforces political alienation and a sense of disempowerment and disillusionment. The sense of disempowerment occurs at myriad levels of engagement with government.
Since corporations have many millions of times the resources of the vast majority of individual Americans, the decision has the potential to create a class of super-wealthy political campaigners with a one-dimensional political interest: enhancing their profits. It was hard to justify the Court’s
Social sciences like economics differ from the hard sciences in that beliefs affect reality: beliefs about how atoms behave don’t affect how atoms actually behave, but beliefs about how the economic system functions affect how it actually functions.
America has been hot in pursuit of the wrong goals. We’ve lost our way. We thought that simply by increasing GDP all would benefit, but that has not been the case. Even if the American economy produces more goods and services, if, year after year, most Americans have lower and lower incomes, our economy is not performing well.
To take one example of how GDP can give a false impression of a country’s success, GDP per capita mismeasures the value of goods and services produced in several sectors, including health and the public sector—two sectors whose importance today is much greater than when GDP first started to be measured a half century ago.
America, for instance, gets
worse health outcomes, in terms of longevity or virtually any other measure of health performance, but spends more money. If we were measuring performance, the lower efficiency of America’s sector would count against the United States, and France’s health care sector output would be higher. As it ...
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just as there are large inequalities in income, there are large disparities in almost all of the other dimensions that contribute to our general welfare, and none of these are reflected in GDP as a measure of economic performance. Take, for instance, health, education, or the environment.
Our systems of measurement affect our perception of how well we are doing—and of the relative performance of different economic systems.
For years the standard measure of economic performance was GNP, gross national product, roughly equal to the gross income of the citizens of a country.
The causes of the reversal in the U.S. fiscal position provide a clear prescription for how to put it on a firm foundation: reverse the Bush era tax cuts for millionaires, end the wars and scale back defense spending, allow the government to negotiate drug prices, and, most importantly, put the country back to work.
Beyond this, making the tax system not only more fair but more progressive would involve closing loopholes and enacting increases in the tax rates at the top and reductions in tax rates at the bottom.
raise taxes at the top; cut out corporate welfare and the hidden subsidies; increase taxes on corporations that don’t invest and create jobs in the United States relative to those that do; impose taxes and charges on polluters; stop the giveaways of our country’s resources; cut back on military waste; and don’t overpay for procurement, whether from the drug companies or defense contractors.
our economic system has benefited those at the top, at the expense of the rest, and that this system is far removed from what has been called “the achievement model of income determination,” in which incomes reflect contributions to society.
We have seen that politics and economics are inseparable, and that if we are to preserve a system of one person one vote—rather than one dollar one vote—reforms in our political system will be required; but we are unlikely to achieve a fair and responsive political system within an economic system that is characterized by the degree of inequality that marks
