Government Policy Led to Inequality

Colin GordonColin Gordon over at the Center for Economic and Policy Research annotated this great graph of the income share of the top one percent (from data by Emmanuel Saez). He says that the events are meant to be “representative rather than exhaustive.” Of course, the pattern is clear, “The share of the top one percent rose during eras of tax cutting, light financial regulation (or deregulation), and labor weakness. And inequality narrowed when policy pushed in the opposite direction.”

This pushes back against one of the most annoying aspects of economic reporting in this country. We are constantly told that there is nothing the government can do about inequality and associated problems. Supposedly, the current system is just the outcome of a globalized economy and the only way we could fix it would be to have a command economy that would hurt everyone. But of course this isn’t the case at all. Inequality went down during much of the last century because of government policy—especially policies that allowed workers to organize. And the huge increase in inequality over the last 35 years has been the outcome of government policies that have harmed worker organizing ability and lowered taxes on the rich.

The greatest victory of the rich over the past 30 years has been to get the public intellectual class to believe that the smartest thing is to solemnly shake their heads and claim that there just aren’t any easy answers. We’ve seen that throughout this economic crisis where the important pundits (e.g. Thomas Friedman) have claimed that there is nothing we can do but grind our way back. The fact that World War II showed the way out of the Great Depression seems to have been erased from memory. And we are left with the low inflation and high unemployment answer to the economic downturn that just so happens to be exactly what is best for the rich.

Income Share of the Top 1%
(Click image to enlarge.)
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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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