Monday’s Mtg: Inequality’s Causes and Effects

[Note: This will be our first meeting at the PANERA CAFÉ at 5620 Balboa Ave.]

It has been almost two years since President Obama declared that “a dangerous and growing inequality and lack of upward mobility” are “the defining challenge of our time.” Elizabeth Warren, Bernie Sanders, and every progressive I know believes the same. Hillary Clinton may not make inequality the rhetorical centerpiece of her campaign, but the policies she’s recommending are clearly designed to combat it. Even some conservatives are talking about inequality. (In fact, one might argue that Donald Trump sudden rise reflects a split between GOP elites and its base voters over inequality. His tirades target policies that downscale GOP voters blame – fairly or unfairly – for their stalled prosperity, like immigration and free trade.) The issue is not going away anytime soon.

I thought it might be useful for us to start at the beginning of the inequality debate by asking two basic (and not yet settled!) questions: (1) What’s been causing inequality’s sharp rise, and (2) what harm does it actually do? Of course, these are to some extent technical disputes among experts. Still, I think we’ll have no problem grasping the basic arguments, which will give us some insight and healthy skepticism going into the debate and bumper sticker slogan phase of the GOP and Democratic primary season.

I will start us off on Monday first by defining what is usually meant by “inequality.” Then, I’ll briefly explain its half-dozen or so most often-cited causes and effects. Partial lists:

CAUSES OF SOARING INEQUALITY (alleged) –

  1. Skills-based technological change: The idea that tech innovation has made Americans with the skills to use the technologies more valuable than those without the skills, and so the pay gap between them keeps widening.
  2. Trade and globalization may have put downward pressure on wages in sectors that are vulnerable to foreign competition.
  3. Immigration: The same night be true for low-skilled, non-college educated occupations that compete with either legal or illegal immigrants.
  4. De-unionization has weakened worker bargaining power.
  5. Financialization of the economy distorts incomes at the top and bottom.
  6. Corporate culture and structures may have changed to devalue workers and encourage excessive executive pay.
  7. Government policies: Tax cuts, spending cuts, anti-trust non-enforcement, mass incarceration, educational inequality, and a host of other policies have made the rich richer and left many of us to tread water or sink.
  8. The Great Recession could have suddenly magnified all of these other factors – or, maybe led us to overstate their impact.

EFFECTS OF SOARING INEQUALITY (alleged) –

  1. Stalled wages and social mobility for most Americans.
  2. Lower growth rates in the overall economy.
  3. Repeated boom and bust economic cycles from which only the rich recover quickly and fully.
  4. Slower recovery from the 2008 Great Recession and future recessions.
  5. Political polarization: There is an argument that soaring inequality contributes to partisan political polarization.
  6. Disconnected elites: Falling elite support for the 20th century American social contract, including full employment and the social safety net.
  7. Plutocratic elites: They’ve taken over our political system and used that power to…
  8. Rig the economic game to perpetuate their power and status.

Most conservative I’m familiar with argue that inequality has not risen by much if measured accurately, and/or that the increase is a result of “natural” market forces, and/or that it does more good than harm anyway.

Fewer links this week, even though it’s one of our more complicated topics.

SUGGESTED BACKGROUND READING –

Next Week:  Cyber-Security – Threats and Responses.

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2 responses

  1. Of course, we all know, presumably, that inequality, if extreme, leads to social upheaval and revolution; something we presumably wish to avoid.
    The question however is exactly when do we reach that point, or how to we keep from going there? Or in other words, since some inequality is doubtless unavoidable, and even socially useful, where do we draw the line?
    The enthusiasm for Bernie perhaps shows that consciousness of this issue has now penetrated into the body politic.

  2. How complicated are the causes of inequality? See this article for what I mean by “changes in corporate culture” as an independent cause. BTW, the aarticle is from Harvard Biz Review magazine, which I believe is making its entire archive available for free during July and Aug 2015.

    https://hbr.org/2014/09/profits-without-prosperity

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