Oligarchy, American Style
By PAUL KRUGMAN
Published: November 3, 2011
Inequality is back in the news, largely thanks to Occupy Wall Street,
but with an assist from the Congressional Budget Office. And you know
what that means: It’s time to roll out the obfuscators!
Anyone who has tracked this issue over time knows what I mean. Whenever growing income disparities threaten to come into focus, a reliable set of defenders tries to bring back the blur. Think tanks put out reports claiming that inequality isn’t really rising, or that it doesn’t matter. Pundits try to put a more benign face on the phenomenon, claiming that it’s not really the wealthy few versus the rest, it’s the educated versus the less educated.
So what you need to know is that all of these claims are basically
attempts to obscure the stark reality: We have a society in which money
is increasingly concentrated in the hands of a few people, and in which
that concentration of income and wealth threatens to make us a democracy
in name only.
The budget office laid out some of that stark reality in a recent
report, which documented a sharp decline in the share of total income
going to lower- and middle-income Americans. We still like to think of
ourselves as a middle-class country. But with the bottom 80 percent of
households now receiving less than half of total income, that’s a vision
increasingly at odds with reality.
In response, the usual suspects have rolled out some familiar arguments:
the data are flawed (they aren’t); the rich are an ever-changing group
(not so); and so on. The most popular argument right now seems, however,
to be the claim that we may not be a middle-class society, but we’re
still an upper-middle-class society, in which a broad class of highly
educated workers, who have the skills to compete in the modern world, is
doing very well.
It’s a nice story, and a lot less disturbing than the picture of a
nation in which a much smaller group of rich people is becoming
increasingly dominant. But it’s not true.
Workers with college degrees have indeed, on average, done better than
workers without, and the gap has generally widened over time. But highly
educated Americans have by no means been immune to income stagnation
and growing economic insecurity. Wage gains for most college-educated
workers have been unimpressive (and nonexistent since 2000), while even
the well-educated can no longer count on getting jobs with good
benefits. In particular, these days workers with a college degree but no
further degrees are less likely to get workplace health coverage than
workers with only a high school degree were in 1979.
So who is getting the big gains? A very small, wealthy minority.
The budget office report tells us that essentially all of the upward
redistribution of income away from the bottom 80 percent has gone to the
highest-income 1 percent of Americans. That is, the protesters who
portray themselves as representing the interests of the 99 percent have
it basically right, and the pundits solemnly assuring them that it’s
really about education, not the gains of a small elite, have it
completely wrong.
If anything, the protesters are setting the cutoff too low. The recent
budget office report doesn’t look inside the top 1 percent, but an
earlier report, which only went up to 2005, found that almost two-thirds
of the rising share of the top percentile in income actually went to
the top 0.1 percent — the richest thousandth of Americans, who saw their
real incomes rise more than 400 percent over the period from 1979 to
2005.
Who’s in that top 0.1 percent? Are they heroic entrepreneurs creating
jobs? No, for the most part, they’re corporate executives. Recent
research shows that around 60 percent of the top 0.1 percent either are
executives in nonfinancial companies or make their money in finance,
i.e., Wall Street broadly defined. Add in lawyers and people in real
estate, and we’re talking about more than 70 percent of the lucky
one-thousandth.
But why does this growing concentration of income and wealth in a few
hands matter? Part of the answer is that rising inequality has meant a
nation in which most families don’t share fully in economic growth.
Another part of the answer is that once you realize just how much richer
the rich have become, the argument that higher taxes on high incomes
should be part of any long-run budget deal becomes a lot more
compelling.
The larger answer, however, is that extreme concentration of income is
incompatible with real democracy. Can anyone seriously deny that our
political system is being warped by the influence of big money, and that
the warping is getting worse as the wealth of a few grows ever larger?
Some pundits are still trying to dismiss concerns about rising
inequality as somehow foolish. But the truth is that the whole nature of
our society is at stake.
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