http://www.nytimes.com/2015/05/06/business/thinking-outside-the-debate-on-income-inequality.html <http://www.nytimes.com/2015/05/06/business/thinking-outside-the-debate-on-income-inequality.html?hp&action=click&pgtype=Homepage&module=second-column-region®ion=top-news&WT.nav=top-news&_r=0>
The United States economy is one of the most effective on earth in terms of generating new wealth. But for all the wealth it generates, it does an exceptionally dismal job at sharing it broadly among Americans. Is this the best we can do? Over the last four decades the debate in Washington about poverty and inequality has been bogged down in a somewhat pointless, often surreal debate about the size of government and the amount spent on behalf of the poor. Over that same period, the earnings of workers in the bottom half of the income pile have progressed little. American society has buckled under the strain. The actual size of government? Measured by the taxes we pay. it was about 25 percent of our gross national product in 1970. It is still about 25 percent of our G.D.P. today. And the share of our wealth spent on the poor, apart from money devoted to the rising cost of health care, has not changed very much, either. And yet there are other tools. In the furious partisan bickering, the debate has bypassed all the other ways the government affects the distribution of the nation’s prosperity, selectively placing its thumb on the scales. The trick to achieving a more equitable society might simply be to turn the government from an active participant in widening inequality, to one that at least seeks — through norms, laws, regulations — to narrow the gap. What has driven the stagnation of the incomes of typical workers? It’s clearly not just lagging educations or a drop in their productivity. Olivier Giovannoni of the Levy Economics Institute at Bard College calculates that the share of national income going to the entire bottom 99 percent of workers has shrunk by 15 percentage points since 1980. The task is to redress this dynamic. This requires acting on many fronts — economic but also legal and regulatory. Joseph E. Stiglitz, the prominent left-leaning Nobel laureate in economics, has just published a second book on inequality called “The Great Divide” (W.W. Norton & Company). He stresses a range of economic and institutional changes weakening ordinary workers that serve to benefit the wealthiest in society. This includes, he argues, the weakening of unions and the proliferation of trade agreements, which have protected the rights of corporations to move operations outside the country and done little to protect the formerly middle-class workers on the wrong side of trade. It includes the steady tightening of intellectual property rights and the rise of finance, with its lavish rewards for activities of dubious social value. It includes the furious consolidation of industry, which has reduced competition across the economy. Professor Stiglitz is particularly incensed by the Obama administration’s attempt to include investment pacts in trade agreements it is negotiating with Asia and Europe, which would allow multinationals to sue governments for compensation if regulation hurts their profits. “We have been consistently weakening workers’ bargaining position,” he told me. “We are creating a legal framework for rules that lock in inequality.” Shi-Ling Hsu at the Florida State University College of Law articulates a similar thought in a critique of the central proposition of Thomas Piketty, the French economist. Perhaps it is true, Professor Hsu concedes, that inequality will grow relentlessly because the rate of return to the capital of the rich is higher than the rate of economic growth, as Mr. Piketty proposed. Still, he notes, “Piketty, his supporters and his critics are all missing a huge piece of the puzzle: the role of law in distributing wealth.” Subsidies, tax treatment, legal protection and other mechanisms conspire to aid the wealthy while often serving to damp economic gains. [...]
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