The scourge of structural inequality.

A tax system that targets workers

Imagine a society with two tax systems. One taxes the wealth people have accumulated. The other taxes the labor people perform. This society seems to be getting along well enough, raising enough tax revenue to finance the public goods and services that voters have told lawmakers they want to see supported.

Now imagine that lawmakers have decided to cut the tax rates on wealth and raise them on labor. At the same time, the amount of wealth subject to the lower tax rates is rising as income from labor is shrinking.

That society, we would agree, is asking for trouble. In real life, would any society choose to take such an unsustainable course? One already has — the United States since 1980.

What happened in 1980?

Inequality as Policy
The United States Since 1979

Since the end of the 1970s, the United States has seen a dramatic increase in economic inequality.
While the United States has long been among the most unequal of the world’s rich economies, the
economic and social upheaval that began in the 1970s was a striking departure from the movement
toward greater equality that began in the Great Depression, continued through World War II, and
was a central feature of the first 30 years of the postwar period.
Despite the magnitude of the rise in inequality, the political discourse in the United States refers
only obliquely to these developments. The public debate generally acknowledges neither the scale
of the increase in inequality nor, except in the most superficial way, the causes of this sudden and
sustained turn of events.

The United States of Inequality

Liberal politicians and activists have long argued that the federal government caused the Great Divergence. And by "federal government," they generally mean Republicans, who have controlled the White House for 20 of the past 30 years, after all. A few outliers even argue that for Republicans, creating income inequality was a conscious and deliberate policy goal. Until recently, the consensus among academics—even most liberal ones—was quite different. Economists argued that the Great Divergence was the result not of Washington policymaking but of larger "exogenous" (external) and "secular" (long-term) forces. In June, the Congressional Budget Office calculated that spending by the federal government made up 23 percent of U.S. gross domestic product, after averaging 18.5 percent during the previous four decades. But even with federal spending at this unusually high level (necessitated by a severe recession), Washington's nut remains less than one-quarter the size of the economy. Most of that nut is automatic "entitlement" spending over which Washington policymakers seldom exert much control. Brad DeLong, a liberal economist at Berkeley, expressed the prevailing view in 2006: "[T]he shifts in income inequality seem to me to be too big to be associated with anything the government does or did."My Slate colleague Mickey Kaus took this argument one step further in his 1992 book The End of Equality, positing that income inequality was the inevitable outgrowth of ever-more-ruthlessly efficient markets, and that government attempts to reverse it were certain to fail. "[Y]ou cannot decide to keep all the nice parts of capitalism," he wrote, "and get rid of all the nasty ones." Instead, Kaus urged liberals to combat social inequality by nurturing egalitarian civic institutions (parks, schools, libraries, museums) and by creating some new ones (national health care, national service, a revived WPA) that remove many of life's most important activities from the "money sphere" altogether.

Tracing the Source of Income Inequality

The second half of Thomas Piketty’s provocative book, Capital in the 21st Century, addresses the structure and causes of economic inequality as he lays out recommendations for how to deal with what he sees as this pervasive and long-ignored problem. [For Part One of this review, click here.]

In this context, Piketty’s focus shifts to a detailed examination of income inequality in the United States, the combination of capital and earnings. He notes that at the end of the Nineteenth Century, American income distribution was more equitable than in Europe, in part, because the U.S. had fewer rentiers — landowners renting land to small farmers — and they were not as wealthy as those in Europe.

Then, despite the ups and downs of the Roaring Twenties, the Depression-era Thirties and World War II of the Forties, the trend by the middle of the century was toward a more equitable America. From 1950 to 1980, the level of inequality in America was at its lowest ebb in the century. Piketty noted that the top 10 percent owned about 30 to 35 percent of total wealth, a relatively modest amount.

How does inequality effect society?

Economic inequality, democratization
and civil conflict
Measuring the long-run effects

The democratization literature has suggested the possibility of a dynamic interplay between
democratization and civil conflict (see Boix 2003; Acemoglu and Robinson 2006).
In this thesis I argue that regime changes and civil conflict in many instances are so closely
associated, that they should be studied in conjunction. I develop an analytical framework
where economic inequality is seen as an important determinant for the speed and ease
of democratization, and for the amount of civil conflict observed during its course. High
inequality is hypothesized to both cause regime instability and violence.

Remember to warm up before throwing rocks.

Eyes open, know your enemy.

Break the chains.

Everybody awake?

Feel free to vent or rant, we can all howl at the moon.