Income inequality per a Nobel Laureate in Economics

On the good side, we finally are beginning to talk about income inequality. We are a nation of “haves” and “have-nots” with an increasing number in the middle class that are living one paycheck away from poverty. On the bad side, are the overly simplistic assessments of blame, reasons and solutions, most of which do a disservice to this complex topic.

Some lay blame on the policies of LBJ’s “Great Society,” yet that trivializes the last fifty years. In fact, LBJ’s “War on Poverty” was hugely successful with those over age 65 with the introduction of Medicare and Medicaid and improvement to Social Security. Yet, positive movements for those under age 65 have been waylaid by other factors over the last fifty years. Some lay blame on the issue with respect to African-Americans with too many children born to unwed mothers. Again, that is an issue, but overly simplifies that as a cause, and it does not reflect that most Americans on welfare are white.

The best place to look is the advice of Nobel Laureate in Economics, Joseph Stiglitz, who wrote the book “The Great Divide: Unequal Societies and What We Can Do About Them.” In his view, this Nobel Laureate feels the decline is due to a multiple of factors, some of which can be traceable to the failed Trickle Down economic policy set forth at the start of the 1980s. Significant reduction in tax rates under President Reagan set us on a course where the “haves” added greatly to their wealth and income, while the “have-nots” stayed flat, even while productivity climbed.

This echoes what I have read elsewhere which can be described by placing two arms out in front of you, one at an upward angle, with the other straight out. The straight out arm reflects what has happened in income to the significant majority of people, while the upward arm shows what happened to the upper-end earners. So, while a few of have done very well, many have not participated in the economic growth.

When this trend is coupled with deteriorating inner cities, the lack of targeted investment to rehabilitate areas of plight due to budget restrictions, the continued fall in education rankings which has occurred over time, the continued maltreatment of African-Americans where opportunity is denied and the introduction of crime as economic enterprise, the problems are exacerbated. If you season this, with the segmenting of society into market segments to sell products, services, news and politicians, we do not see the forest for the trees. We must also understand that poverty is the absence of money and is not due to being less virtuous, less hard-working or more prone to substance abuse.

Rather than belabor my opinions, please read more about Stiglitz’s thoughts as reported in the Business Insider: http://www.businessinsider.com/nobel-laureate-joseph-stiglitz-2015-4. Here is someone who should be listened to rather than people giving pat solutions to complex problems.

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6 thoughts on “Income inequality per a Nobel Laureate in Economics

  1. I agree with Hugh, Stiglitz is stating the obvious. I believe many have pursued this same path, most prominently is Paul Krugman. What is lacking in this and others writing along these lines is a specific plan, if only the first steps required, to make a change. Claiming the barn is on fire is stating the obvious that even the most unconcerned can see. What we need is a path to put the fire out. (Probably a bad premise)

    • And, that is where the hard part lies. Asset based community development would be a good place to start. Education, internships would be another as would community based policing.

  2. Interesting discussion. I agree that recognizing the the multifaceted problems is a start, but who will develop a realistic plan to rectify the situation? Certainly not politicians, as all they are capable of these days is pointing fingers at everyone else. I would add that even our education system is bifurcated. In some areas, kids barely learn to read, however, in more affluent school districts and especially where charter/private schools prevail, kids are developing amazing skill sets and even keen exposure to history.

    I’m interested in exactly what asset based community development looks like. Is that what my community does to cope with an continually shrinking tax base? That is, if you can’t tax the residents to build something, reach out into the business community and sell the benefits of local investment to them because that’s where the cash is?

    Also, while I love the concept of internships, I’m well aware of the abuse that is going on in the name of internships: Corporations get oodles of free work out students (because they don’t HAVE to compensate and especially don’t have to compensate at minimum wage), internees often sign up for positions that promise hands on experience in their fields, only to find that they spend their entire period step ‘n fetching for prima dona bosses. And in the cases where a corporation actually lets an internee do the promised job, they get a next-to-free laborer for a short time and when that internship is up, they bring in another intern, thereby reducing their own workforce, cutting full and part time positions.

    In addition to the things you and Stiglitz point out as problems, I think we have an even deeper problem. Lack of honesty, low moral tolerance among the wealthy and the political army that runs the country.

    • Linda, very thought provoking and detailed. As for your last paragraph, therein lies a deeper set of issues that get in the way of understanding many problems. The President needs to push this issue and should have pushed it in his first term. But, we all need to own it as that is the only way to address the problems. ABCD is what has made our country great. It is the combination of public and private money to invest in the assets in the community. Easy example – a community uses a school for more than children education; after school programs, meetings, etc. if the school closes, it hurts more than the kids. Interns have to be used as apprenticeships. If they are used as slave labor, then that is a disservice to all.

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