Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktI heartily admit that I am not the equal of most of you when it comes to posting. While I enjoy the back-and-forth, I often get lost in the weeds. So, I’ve pulled out the income inequality argument from the Sun. night comments and am posting the following IMF study entitled “Equality and Efficiency.”
An excerpt:
Do societies inevitably face an invidious choice between efficient production and equitable wealth and income distribution? Are social justice and social product at war with one another?
In a word, no.
In recent work (Berg, Ostry, and Zettelmeyer, 2011; and Berg and Ostry, 2011), we discovered that when growth is looked at over the long term, the trade-off between efficiency and equality may not exist. In fact equality appears to be an important ingredient in promoting and sustaining growth. The difference between countries that can sustain rapid growth for many years or even decades and the many others that see growth spurts fade quickly may be the level of inequality. Countries may find that improving equality may also improve efficiency, understood as more sustainable long-run growth.
Inequality matters for growth and other macroeconomic outcomes, in all corners of the globe. One need look no further than the role inequality is thought to have played in creating the disaffection that underlies much of the recent unrest in the Middle East. And, taking a historical perspective, the increase in U.S. income inequality in recent decades is strikingly similar to the increase that occurred in the 1920s. In both cases there was a boom in the financial sector, poor people borrowed a lot, and a huge financial crisis ensued (see “Leveraging Inequality,” F&D, December 2010 and “Inequality = Indebted” in this issue of F&D). The recent global economic crisis, with its roots in U.S. financial markets, may have resulted, in part at least, from the increase in inequality. With inequality growing in the United States and other important economies, the relationship between inequality and growth takes on more significance.
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All Things in Moderation 
I read this report last week Mike and thought it made a lot of sense. I really don't understand how people can believe that the stagnation of the middle/working class isn't a long term problem. Of course the solutions, if we agree it's a problem, which we don't based upon the discussions here, are pretty tricky. For example every economic report I've seen regarding the new trade deals point to a net job loss for American workers. Most Americans from every political persuasion didn't like the deals, and yet here we are.
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I tend to view high income inequality as a symptom, rather than the root cause of the economic problems usually associated with it and therefore solutions that involve channeling more economic resources through the Federal Government through increased taxation and redistribution are a misguided response. I.e. the real problems that cause the recent income inequality statistics in the United States are the crony capitalism, rent seeking, and regulatory capture due to the nexus between the Federal Government and Wall Street. Going back to the Clinton tax rates won't address that.
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"Most Americans from every political persuasion didn't like the deals, and yet here we are."Except for the inside-the-beltway persuasion. Which, in the end, is the persuasion that matters most. Middle/working class stagnation is/would be better than that things getting worse. And it depends on what you mean by "problem" . Could it be better? Of course, it could be better, but I have difficulty imagining a time when things couldn't be possibly get any better. That being said, there are numerous examples of countries that maintained tremendous income equality, and income was generally low, and real growth was largely non-existent. Are there examples of first world (not emerging) economies with significantly lower income disparities that are doing noticeably better for longer? Income disparities are much smaller in Japan, which has been struggling with a 15 year recession (or longer), has it not? BTW, thanks for the post, Mike. Awesome . . .
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I skimmed the paper mentioned; it seemed like it was more focused on developing economies than developed economies.
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the real problems that cause the recent income inequality statistics in the United States are the crony capitalism, rent seeking, and regulatory capture due to the nexus between the Federal Government and Wall Street.Agreed, and I think that's what many Americans are waking up to. Whether awareness changes anything remains to be seen.I don't think going back to the Clinton tax rates will hurt, but it's not a long term solution by any means. Maybe Brent's right, a new energy revolution and debt reduction are the main things we're waiting for. I've personally lost faith in both the government and the private sector to change the employment dynamic, maybe they can't. Meanwhile we wait I guess.
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"I've personally lost faith in both the government and the private sector to change the employment dynamic, maybe they can't. Meanwhile we wait I guess. "Correct. However, we aren't just waiting, but deleveraging. If Rogoff and Reinhart are correct and we hold to the average of a seven year deleveraging cycle from a financial crisis, things should improve around the 2014 – 2015 time frame.This Time Is Different: Eight Centuries of Financial Folly
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jnc, have you seen Taibbi's latest? It's a response to being dragged into Breitbart's latest conspiracy regarding OWS. So I was amazed to wake up this morning and find that various right-wing sites had used these exchanges to build a story about a conspiracy of left-wing journalists. "Busted. Emails Show Liberal Media & Far Left Cranks Conspired With #OWS Protesters to Craft Message," wrote one.Breitbart's site, BigGovernment.com, went further, saying that the Occupy Washington D.C. movement is "working with well-known media members to craft its demands and messaging while these media members report on the movement."The list, the site wrote, include: …well known names such as MSNBC’s Dylan Ratigan, Rolling Stone’s Matt Tiabbi [sic] who both are actively participating; involvement from other listers such as Bill Moyers and Glenn Greenwald plus well-known radicals like Noam Chomsky, remains unclear.Aside from the appalling fact of these assholes stealing private emails and bragging about it in public, the whole story is completely absurd. None of the people on the list, as far as I know, are actually organizers of OWS — I know I'm not one, anyway.
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Kristof cited the same report in an op-ed yesterday. I found this claim from that piece interesting: "According to the C.I.A.’s own ranking of countries by income inequality, the United States is more unequal a society than either Tunisia or Egypt."http://www.nytimes.com/2011/10/16/opinion/sunday/kristof-americas-primal-scream.html(CIA's report here: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html )
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A little more from Taibbi:What nobody is comfortable with is a movement in which virtually the entire spectrum of middle class and poor Americans is on the same page, railing against incestuous political and financial corruption on Wall Street and in Washington. The reality is that Occupy Wall Street and the millions of middle Americans who make up the Tea Party are natural allies and should be on the same page about most of the key issues, and that's a story our media won't want to or know how to handle.
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"The reality is that Occupy Wall Street and the millions of middle Americans who make up the Tea Party are natural allies and should be on the same page about most of the key issues"Absolutely. If each side can get over their preconceived notions about one another, they'll be an extremely powerful force.
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""According to the C.I.A.’s own ranking of countries by income inequality, the United States is more unequal a society than either Tunisia or Egypt."I believe income inequality is greater in the US than lots of places. Except for Luxembourg. What it suggests to me is that lower levels of income disparity are hardly a panacea. Whatever problems we have, and we certainly have them. Include in the places with most even distributions: Iceland and Slovakia. Sweden has the most even income distribution of any nation. And they're doing all right. But Iceland is close, and is not.
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"jnc, have you seen Taibbi's latest?"Yep. As usual, he's perceptive and correct."This whole episode to me underscores an unpleasant development for OWS. There is going to be a fusillade of attempts from many different corners to force these demonstrations into the liberal-conservative blue-red narrative.This will be an effort to transform OWS from a populist and wholly non-partisan protest against bailouts, theft, insider trading, self-dealing, regulatory capture and the market-perverting effect of the Too-Big-To-Fail banks into something a little more familiar and less threatening, i.e. a captive "liberal" uprising that the right will use to whip up support and the Democrats will try to turn into electoral energy for 2012.Tactically, what we'll see here will be a) people firmly on the traditional Democratic side claiming to speak for OWS, and b) people on the right-Republican side attempting to portray OWS as a puppet of well-known liberals and other Democratic interests."Interesting reading is to compare this to the recent article about Sarah Palin in the NYT:"She made three interlocking points. First, that the United States is now governed by a “permanent political class,” drawn from both parties, that is increasingly cut off from the concerns of regular people. Second, that these Republicans and Democrats have allied with big business to mutual advantage to create what she called “corporate crony capitalism.” Third, that the real political divide in the United States may no longer be between friends and foes of Big Government, but between friends and foes of vast, remote, unaccountable institutions (both public and private).In supporting her first point, about the permanent political class, she attacked both parties’ tendency to talk of spending cuts while spending more and more; to stoke public anxiety about a credit downgrade, but take a vacation anyway; to arrive in Washington of modest means and then somehow ride the gravy train to fabulous wealth. She observed that 7 of the 10 wealthiest counties in the United States happen to be suburbs of the nation’s capital.Her second point, about money in politics, helped to explain the first. The permanent class stays in power because it positions itself between two deep troughs: the money spent by the government and the money spent by big companies to secure decisions from government that help them make more money.“Do you want to know why nothing ever really gets done?” she said, referring to politicians. “It’s because there’s nothing in it for them. They’ve got a lot of mouths to feed — a lot of corporate lobbyists and a lot of special interests that are counting on them to keep the good times and the money rolling along.” "Some of Sarah Palin's Ideas Cross the Political Divide
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And those with a clue understand this is exactly why the U.S. shouldn't have been a cheerleader for the Iranian Green protests.Swap in OWS for Greens and swap in Breitbart for mullahs.BB
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"And those with a clue understand this is exactly why the U.S. shouldn't have been a cheerleader for the Iranian Green protests."Remind me; weren't some admin critics taking shots at the Obama WH at the time for not supporting the Greens? And, now that I think about it, those aren't the same critics that are now trying to characterize the Arab Spring as a bad thing, right?
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