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This is a good article (mrc)ECONOMIC INEQUALITY IN THE UNITED STATES
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Taken from an article by Paul Krugman in the 9/18/07 NY Times
The chart shows the share of the richest 10 percent of the
American population in total
income – an indicator that closely tracks
many other measures of economic inequality –
over the past 90 years, as
estimated by the economists Thomas Piketty and Emmanuel
Saez. I’ve added
labels indicating four key periods. These are:
The Long Gilded Age: Historians generally say that the Gilded Age gave way
to the
Progressive Era around 1900. In many important ways, though, the Gilded
Age
continued
right through to the New Deal. As far as we can tell, income remained
about as unequally
distributed as it had been the late 19th century – or
as it is today. Public policy did little to
limit extremes of wealth and poverty,
mainly because the political dominance of the elite
remained intact; the politics
of the era, in which working Americans were divided by racial,
religious, and
cultural issues, have recognizable parallels with modern politics.
The Great Compression: The middle-class society I grew up in didn’t evolve
gradually
or automatically. It was created, in a remarkably short period of time,
by FDR and the New
Deal. As the chart shows, income inequality declined drastically
from the late 1930s to the
mid 1940s, with the rich losing ground while working
Americans saw unprecedented gains.
Economic historians call what happened the
Great Compression, and it’s a seminal episode
in American history.
Middle class America: That’s the country I grew up
in. It was a society without extremes of
wealth or poverty, a society of broadly
shared prosperity,
partly because strong unions, a
high minimum wage, and a progressive tax system
helped limit inequality. It was also a
society in which political bipartisanship
meant something: in spite of all the turmoil of Vietnam
and the civil rights
movement, in spite of the sinister machinations of Nixon and his henchmen,
it was an era in which Democrats and Republicans agreed on basic values and
could
cooperate
across party lines.
The great divergence: Since the late 1970s the America I knew has unraveled.
We’re no longer
a middle-class society, in which the benefits of economic
growth are widely shared: between 1979
and 2005 the real income of the median
household rose only 13 percent, but the income of the
richest 0.1% of Americans
rose 296 percent.
Most people assume that this rise in inequality was the result of impersonal
forces, like technological
change and globalization. But the great reduction
of inequality that created middle-class America
between 1935 and 1945 was driven
by political change; I believe that politics has also played an
important role
in rising inequality since the 1970s. It’s important to know that no other
advanced
economy has seen a comparable surge in inequality – even the
rising inequality of Thatcherite
Britain was a faint echo of trends here.
On the political side, you might have expected rising inequality to produce
a populist backlash.
Instead, however, the era of rising inequality has also
been
the era of “movement conservatism,”
the term both supporters and
opponents use for the highly cohesive set of interlocking institutions
that
brought Ronald Reagan and Newt Gingrich to power, and reached its culmination,
taking
control of all three branches of the federal government, under George W. Bush.
(Yes, Virginia,
there is a vast right-wing conspiracy.)
Because of movement conservative political dominance, taxes on the rich have
fallen, and the
holes in the safety net have gotten bigger, even as inequality
has soared. And the rise of movement
conservatism is also at the heart of the
bitter partisanship that characterizes politics today.
Why did this happen? Well, that’s a long story – in fact, I’ve
written a whole book about it, and
also about why I believe America is ready
for a big change in direction.
For now, though, the important thing is to realize that the story of modern America
is, in large part,
the story of the fall and rise of inequality.