Growing Unequal
New report from the OECD indicates that we maybe ought to be doing more to spread the wealth around:
The gap between rich and poor has grown in more than three-quarters of OECD countries over the past two decades, according to a new OECD report.
OECD’s Growing Unequal? finds that the economic growth of recent decades has benefitted the rich more than the poor. In some countries, such as Canada, Finland, Germany, Italy, Norway and the United States, the gap also increased between the rich and the middle-class.
A couple of points. I saw John McCain this morning drawing a distinction between spreading the wealth around and spreading opportunity around. In reality, the only way to create broadly shared opportunity is to have a background of broadly shared prosperity. It’s neither possible nor desirable to have complete equality of income, wealth, or opportunity. But at the same time, it’s impossible to prevent large inequalities in income and wealth from creating the kind of large inequalities in opportunity that most people, including people like McCain who are committed to making the distribution of wealth and income as unequal as possible, find undesirable.
It’s also worth observing that the causes of a growing rich-poor gap are likely to be different from the causes of a growing rich-middle gap.
49 Responses to “Growing Unequal”
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October 21st, 2008 at 12:27 pm
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October 21st, 2008 at 12:27 pm
It’s also worth observing that jeezes fucking christ, all we’re talking about here is nudging the upper tax rates back to the wildly successful 1990’s, which are still amongst the lowest since the U.S. instituted an national income tax. For fuck’s sake.
It’s also worth observing that someone’s gonna have to pay for the shit-all fucking stupid Iraq Invasion, and some of were hoping that it would be the ultra-wealthy, who’ve somehow managed to prosper at a higher rate than us Littles under both Clinton and Bush, Jr. It’s worth observing.
October 21st, 2008 at 12:30 pm
You always seem to have a hard time grasping simple truths.
Here’s some truth. Income inequality on such a grand scale creates civil unrest. As I’ve said for years, if you don’t throw the dogs some bones, they’ll eventually bite you.
Think Gangs of New York on a world-wide scale.
October 21st, 2008 at 12:35 pm
That’s so easy for the Elitist McCain to say. He lived his life as the beneficiary of being the son of a powerful man. We already had one of the most screwed-up 8-year periods in our history thanks to another C student with a powerful father.
Finishing at or near the bottom of his class and then being promoted, er… failing upward. Sound familiar?
October 21st, 2008 at 12:36 pm
The response to this is –
It Is DEMOCRATS Who Grow the Economy! Throwing people out of work doesn’t create wealth. Throwing people out of work is bad for families, and bad for national security.
October 21st, 2008 at 12:41 pm
You make an astute point at the end there. I think the gap between rich and middle class is more important economically. The gap between rich and poor (or more accurately, I think, middle and poor) is more an issue of fairness, and unfortunately, a tougher issue to drive in America. You can get sympathy talking about the needs of the middle class, but our basic attitude, even among many poor people, is f*ck the poor. The best we can do is help the poor at the same time as we help the middle class. But I think that really can result in a rising tide lifting all boats. Which is different than supply-side aid to the rich. That leads to credit fueled bubbles that eventually burst, robbing the middle class of the credit they need to generate demand in the economy and leading to economic recession/depression. That is the hidden issue here. The banks could have avoided exposure to real estate and survived this crisis, but we’d still be looking at a bad recession b/c regardless of how loose the fed tries to make monetary policy, there’s only so much credit we can extend to the middle class. Eventually, they need actual money to spend.
October 21st, 2008 at 12:43 pm
Shut up and eat your bootstraps before they get cold!!
October 21st, 2008 at 12:57 pm
What is McCain doing? He should take the argument that Obama is more concerned with income inequality than real median income growth rate. While progressives would still disagree there is a lot of ambiguity and no one has an accurate model demonstrating Obama’s plans would increase median income more than McCain’s in the long term. McCain could then use Europe (i.e. high equality but outrageously low median incomes) as an example of where Obama’s plan could led America. But most importantly McCain must say he cares primarily with the middle class and he is no willing to engage in populistic class warfare which might jeopardize their future.
October 21st, 2008 at 1:01 pm
It’s also worth observing that jeezes fucking christ, all we’re talking about here is nudging the upper tax rates back to the wildly successful 1990’s, which are still amongst the lowest since the U.S. instituted an national income tax. For fuck’s sake.
Jeezes fucking christ, Ed. Income inequality grew more under Clinton’s tax rates than it has under Bush’s. For fuck’s sake.
October 21st, 2008 at 1:09 pm
Here’s some truth. Income inequality on such a grand scale creates civil unrest.
Yes, that must explain all the riots we’ve been seeing over rising income inequality recently. Could you point us to some evidence of this alleged “civil unrest?”
October 21st, 2008 at 1:57 pm
There mere fact of increasing inequality is not a justification for redistribution. I do not understand why so many social democrats think that this is a sufficient reason for expansive coercion.
Doesn’t the case for redistribution depend at all on why the inequality has occurred? Doesn’t the history of entitlements and institutions prior to the current time slice have any moral weight? And doesn’t it take a little bit more than pointing out an unequal distribution to justify giving the state the incredible power required to rearrange property titles?
It is at this point that a liberal like me sees social democrats like Yglesias at their most illiberal, the friends of incredible power rather than liberty.
October 21st, 2008 at 2:05 pm
Jeezes fucking christ, Ed. Income inequality grew more under Clinton’s tax rates than it has under Bush’s. For fuck’s sake.
Yeah, I fucking noted that it went up under both, maybe you should have fucking read what I wrote. So what do you suggest, not rescinding the fucking regressive tax cuts that are so fucking stupid that Alan Fucking Greenspan finally rejects them? Are you fucking insane? And who’s gonna pay for the stupidest fucking invasion of another country ever? The fucking Littles?
October 21st, 2008 at 2:16 pm
Doesn’t the case for redistribution depend at all on why the inequality has occurred?
No. For liberals like Matt, redistribution is an end in itself. This is why they talk obsessively about Bill Gates and Paris Hilton, when really we’re talking about policies that affect people much lower down on the income scale. Two hundred and fifty thousand is a nice income, even one hundred and sixty-six thousand, but it’s not a life of fabulous opulence, as their rhetoric would suggest. Most people in that range have worked hard to get there, but still, they have too much money and more should be taken from them.
October 21st, 2008 at 2:22 pm
Yeah, I fucking noted that it went up under both, maybe you should have fucking read what I wrote.
The fucking point, Ed, is that inequality fucking increased more under Clinton’s fucking tax rates than fucking under Bush’s. You should fucking read more carefully.
October 21st, 2008 at 2:32 pm
The fucking point, Ed, is that inequality fucking increased more under Clinton’s fucking tax rates than fucking under Bush’s. You should fucking read more carefully.
But there’s fucking more to it than that (I’ll take a fucking link to btfw). You should practice what you fucking virtually preach.
October 21st, 2008 at 2:34 pm
The fucking point, Ed, is that inequality fucking increased more under Clinton’s fucking tax rates than fucking under Bush’s. You should fucking read more carefully.
And how’d the Littles do under Clinton vs. Bush, Jr.? Just asking.
October 21st, 2008 at 2:35 pm
Doesn’t the case for redistribution depend at all on why the inequality has occurred? Doesn’t the history of entitlements and institutions prior to the current time slice have any moral weight? And doesn’t it take a little bit more than pointing out an unequal distribution to justify giving the state the incredible power required to rearrange property titles?
This kind of commentary betrays a false understanding of the source of the economic arrangements of our social order. It assumes that there is a natural a priori economic arrangement that the assertion of state power disrupts. But it is extremely difficult to make this argument. Nozick style libertarians may try, but they are not very convincing. A more reasonable understanding is that when we apply the state’s power to create the rules of law and economics, we are able to generate substantial wealth that would not have been present absent government interference, and an ordering of that wealth among the people results. One way of thinking about this is to look at the economic value of being raised as an American. It’s about $500K. Only about 10% of that is physical infrastructure. The rest is social infrastructure. So the correct question is not whether it’s fair to tax the rich. A better question is whether it’s fair to the less fortunate members of our social order to not tax the rich.
No. For liberals like Matt, redistribution is an end in itself.
This is not even true of Rawls. The end of redistribution is to help the least advantaged. But you don’t have to go that far to justify a redistribution of wealth from where we currently stand. Even a desire to benefit the median worker would advocate it. Also, there is a strong argument to be made that in the long run, if the economic gains our society experiences are not well distributed, they will be unsustainable.
There is a tremendous hubris among the wealthy to assume they are somehow ‘deserving’ of the wealth they possess. This is natural, given human nature. But it is also completely ridiculous. We are not talking about flipping the economic ordering around or even flattening it, we are talking about a very slight moderating.
October 21st, 2008 at 2:36 pm
But there’s fucking more to it than that
You said you fucking want to return to the fucking tax rates of the 90s, when inequality fucking grew more. You want inequality to fucking grow faster, do you, Ed?
October 21st, 2008 at 2:37 pm
Nicely put.
October 21st, 2008 at 2:40 pm
And how’d the Littles do under Clinton vs. Bush, Jr.? Just asking.
The gap between the Littles and the Biggies grew more under Clinton than it did under Bush. If you want to speed up inequality, Clinton’s your guy.
October 21st, 2008 at 2:43 pm
The gap between the Littles and the Biggies grew more under Clinton than it did under Bush. If you want to speed up inequality, Clinton’s your guy.
But the question was how the Littles did. Better under Clinton? or under Bush, Jr.? Did you read my link? Do you have any for me? Thanks in advance. And who should pay for the Iraq Invasion? The Littles? Thanks again.
October 21st, 2008 at 2:44 pm
McCain finds large inequalities in opportunity undesirable? Large inequalities in opportunity are almost entirely responsible for McCain’s career, wealth, and prominence. Read the Rolling Stone article on him.
His military career was founded on nepotism powerful enough to outweigh his incompetence, and his political career was based on his second wife’s inherited money. Without inequalities in opportunity he’d be an ex-deckhand working a dead end job, not an ex-pilot running for President.
October 21st, 2008 at 2:50 pm
As reported by the Census Bureau, under Bill Clinton the income share going to the middle fifth of households decreased from 15.1% to 14.6%, while the income share going to the top fifth of households increased from 48.9% to 50.1%.
Under George W. Bush, the income share going to the middle fifth of households increased from 14.6% to 14.8%, while the income share going to the top fifth of households decreased from 50.1% to 49.7%
Under Clinton, the Gini ratio of income inquality increased from 0.454 to 0.466. Under Bush, it has decreased to 0.463.
Clinton increased income inequality enormously. Bush has lowered it.
October 21st, 2008 at 3:00 pm
@ mpowell
I have a paper on this argument, if it is of interest. I think your point is confused. There are many ways to hold that property rights are socially constructed without holding that they are socially constructed by the state such that the state has the authority to rearrange them according to some pattern.
There are many property arrangements that can arise through spontaneous order processes and in fact have, through common law evolution under the Roman empire, for instance. Property rights perhaps aren’t ‘natural’ but they also are rarely created or enforced by mere state power. If property rights are socially recognized through a spontaneous order process (like the social recognition of new forms of language), then an individual can have a valid claim against the state on behalf of her property rights.
I also have a problem with your view that the rich are undeserving. Its worth noting that even a leftist political philosopher like David Miller thinks there’s something to the idea that once the social order is just, people can deserve according to their marginal product. I hold the same view. Contributions aren’t ’social’ as many Rawlsians claim. Instead, the market can disentangle them through assigning to individuals their marginal product. In this way, individuals can be said to deserve their marginal product and thereby have a claim against the state forcibly reducing their income.
Another point: Loren Lomasky is not a Nozick-style libertarian but is himself a contractualist libertarian. He has his own argument about how rights claims (including property rights claims) are established against the state. His book contains an excellent defense of my claim without Nozickean presuppositions.
Further, I think its also just plain false to claim that redistribution of wealth is never coercive even if the state helps to create property rights. Suppose a bureaucrat comes to your door and demands that you fork over 100% of your income or else, effectively destroying your ability to implement your life projects or plans. Is it *really* right to say this wouldn’t be a grand act of coercion?
October 21st, 2008 at 3:05 pm
@ mpowell
I also think that an argument against Matt can be made from within a Rawlsian perspective. Many libertarians have argued that allowing inequalities of wealth of this kind are required to maximize the position of the least advantaged because of incentive effects. Massive redistribution slows growth rates which in turn slow the growth of the poorest (there is solid data on this connection). I’m not saying the case is a slam-dunk but on the Rawlsian view property rights claims can be made against the state by the rich if they maximize the position of the least advantaged.
October 21st, 2008 at 3:17 pm
But the question was how the Littles did.
I told you how the Littles did. They fell further behind the Biggies under Clinton than under Bush. In fact, according to the Census Bureau’s inequality data, the Littles have gained ground on the Biggies under Bush.
October 21st, 2008 at 3:41 pm
There are many property arrangements that can arise through spontaneous order processes and in fact have, through common law evolution under the Roman empire, for instance. Property rights perhaps aren’t ‘natural’ but they also are rarely created or enforced by mere state power. If property rights are socially recognized through a spontaneous order process (like the social recognition of new forms of language), then an individual can have a valid claim against the state on behalf of her property rights.
This is not a very compelling argument, in my opinion. First of all, the processes you describe do not take place in a vacuum. Rather, they are heavily influenced by prevailing law in many, many ways. I don’t see how you can even theoretically disentangle modern property rights arrangements from the legal environment in which they evolved. The law determines everything from contract regulations to tax code to educational costs, all of which impact property rights arrangements in different and fundamental ways. If you are looking at the history of the modern state, the basis for current property rights arrangement appears even less justifiable. You can easily describe the development of the modern nation state as the legitimization of organized crime. The alternative to state-like influences on understanding of property rights are far more likely to be ‘might makes right’ types of principles. Perhaps you have a novel argument explaining why the arrangements that result have some claim against state power, but this is not exactly a new subject and, suffice it say, there is a substantial body of work that disagrees.
As to how much the rich deserve, I’ll turn it around and point out that even a dedicated free market proponent such as Hayek recognizes that the marginal product of each worker’s effort is extremely arbitrary and doesn’t deserve any real moral weight. I would also point out, that our capitalist system is also not really a free market one, and the incomes of the people at the top of the income structure are more likely to be the result of the acquisition of market breaking power than marginal contributions to the economy.
As for the incentives argument, this is the whole point, isn’t it? Let me just say that I think there are plenty of incentives to make money in our system, even if we raise the upper income brackets 5-10 points or even more. On the other hand we have two problems with shorting the middle and poor. If the middle class doesn’t make enough, the economy lacks demand. We solved this problem temporarily through credit, but that only lasts so long and then you run out of worthwhile things for the rich to invest in and the whole thing blows up. With the poor, it is very clear that they have a severely limited opportunity to make a decent marginal contribution. This is unfortunate from both a productivity side and a consumption side. I think from a pragmatic view the argument for redistribution from the current state of affairs is overwhelming, but I suppose there will always be die-hard Reagan supply-siders out there.
October 21st, 2008 at 3:52 pm
Wow, Mixner thinks that the middle 5th of the income bracket are the “littles”. Sometimes when I come here and read the comments, I wonder if this isn’t a joke from Dali’s ghost.
October 21st, 2008 at 3:56 pm
Wow, Mixner thinks that the middle 5th of the income bracket are the “littles”.
Wow, Benny Lava can’t read.
October 21st, 2008 at 5:24 pm
Clinton increased income inequality enormously. Bush has lowered it.
Wait a minute, you’re talking about income share. I’m talking about rates. (Sure the raw gap increased under Clinton, but the Littles still grew). How’d The Littles do under Clinton vs. Bush, Jr. in terms of the rate of income increase (or in Bush, Jr.’s case, decrease)? How do you think it’ll end up for Dear Leader? And how about for each quintile, not just the middle one?
How was it for the 50s and 60s? Should we embrace tax schemes from those eras instead?
And who should pay for the disastrous Iraq Invasion? The Littles?
October 21st, 2008 at 5:36 pm
Wait a minute, you’re talking about income share. I’m talking about rates.
I’m talking about inequality, since that is the subject of this thread. Income share is a measure of inequality. Gini ratio is a measure of inequality. “Rates” are not. Under the “rates” you apparently want to reinstate, inequality grew dramatically.
(Sure the raw gap increased under Clinton,
Yes, under Clinton inequality grew dramatically. I thought you were against that.
but the Littles still grew).
“The Littles” have grown under Bush, too.
October 21st, 2008 at 7:52 pm
@ mpowell
I do not think that spontaneous order processes take place in a vacuum, nor do I think we can abstract property rights from their evolutionary origins. All we can do is evaluate the current system in light of what we find reasonably rejectable. I do not think that after this contractualist process is completed that it will result in a single, determine, historically disentangled set of property rights.
My own view is that real-world evolutionary processes can help to make determinate Kantian contractualist procedures that are by themselves indeterminate.
So on this view, I don’t need to disentangle property rights or show that they have ‘clean’ histories. I only need to show that elements of the current scheme of property rights are ones that few reasonable people have overriding reason to reject at the right level of idealization. Kant meets Hume here. But on this view, we can still have strong normative claims against the state taking our property because the state is not necessary or sufficient to show that give these claims their normative force. Yes, I think rights are to some extent socially constructed and to exist must be implicitly socially recognized. But socially recognized property rights can arise with no state at all, and in fact have.
On desert: I think that’s not Hayek’s core point with desert. He thinks that it presupposes some kind of collective distributive perspective. He does think that wages on the market have a rough tendency to approach marginal product however, despite how skeptical he is of equilibrium analysis. That said, I still think David Miller has some interesting things to say about Hayek’s argument and desert according to marginal product.
I recognize that our system isn’t very free-market. Desert claims are not the only claims that protect property rights against the state’s iron claws. But I do think that because we would deserve our incomes on a free-market that we have strong reason to re-organize our institutions in a more classical liberal direction. Otherwise, we have no idea what we deserve.
I think that your view about the incentives argument suffers from an excessive short time horizon. Even small increases in redistribution can decrease long-term growth at the market. Though perhaps our disagreement is just about time preference. I think our institutions should care about one hundred years from now almost as much as they do about one year from now. But it drops off afterwards.
As for ‘weak demand’, this Keynesian idea is one that I think lacks serious credibility. What would be the truth-maker for this claim? Weak relative to what? What people should want? I can’t see a perspective from which you could make such a judgment validly.
I think the problem is that the Federal Reserve System made credit too easy to get in ’02 and ’03 (where we had an effectively negative interest rate), creating a bubble. If we had free-market money and no federal reserve system, I think business cycles would be far less severe. But regardless, this wasn’t a problem of insufficient demand. Not even the neo-Keynesians in the econoblogosphere (Krugman, DeLong) think that is the problem.
Note: I’m not a ‘die-hard’ ‘supply-sider’. If anything I’m sympathetic to Hayek and Mises’s economic views.
Second note: I think that claims for redistribution to the poor can be justified in some cases, by the way. But not on egalitarian or prioritarian grounds but rather on desert-sensitive, defeasible sufficientarian grounds. So I don’t want to leave anyone out in the cold. I just don’t give one damn about income inequality. I only care about reducing undeserved suffering.
October 21st, 2008 at 8:22 pm
And yet Matt also wants to import more poor people.
Go figure.
October 21st, 2008 at 9:19 pm
Mixner- did you read the about the food and gas riots in Asia? How about the CEO who was attacked and killed in India by a bunch of laid-off workers?
I believe Greenspan made some mention of the dangers of income inequality. History is replete with revolution. You should try reading more. I recommend Paris in the Terrors.
October 21st, 2008 at 9:44 pm
Mixner- did you read the about the food and gas riots in Asia?
The degree of economic inequality in the U.S. isn’t remotely close to the level in Asia. There doesn’t seem to be even a small risk of inequality-induced riots here.
I don’t think most people really care much about inequality, anyway. What they care about is poverty.
October 21st, 2008 at 11:37 pm
things be getting pretty bad when the fucking OECD is worried about income inequality.
you might remember that in the late 1990s, the OECD was busy trying to design and implement the multilateral agreement on investment.
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