Rising inequality
from David Ruccio
Income inequality is increasing between counties across America. Income gains in richer counties are outpacing gains in poorer places. Meanwhile, there is growing evidence that inequality has a number of ill effects on all of society.
Those are the conclusions of a recent study [ht: db] by Roberto Gallardo and Bo Beaulieu of the Southern Rural Development Center at Mississippi State University.
They show, first, that income inequality dramatically increased between 1980 and 2008 (when measured as the growing differences between the top 10 percent and bottom 10 percent counties, in terms of per capita market income, which does not include government transfer receipts). Thus, for example, the per capita market income of the top 10 percent wealthiest counties in the nation increased 63.8 percent between 1980 and 2008 compared to a 38.3 percent increase in the 10 percent poorest counties. In 1980, the per capita income in the richest counties was 2.6 times that of the poorest group of counties; by 2008, the 10 percent wealthiest counties in the nation had a per capita market income that was 3.5 times higher than the 10 percent poorest counties in the nation.
They also show that urban counties have undergone a more unequalizing trend than rural counties.
Finally, they show that rising inequality is correlated with negative social effects, such as crime and poverty.
In other words, rising inequality is a disaster not only for those left behind but also for everyone who is forced to live in a society in which the distribution of income has become dramatically more unequal over time.
Five or ten years ago you couldnt find an article in mainstream press about inequality rising. Yet it was rising then. Now its obvious and it has finally made the mainstream media and what are policy makers doing?
Nothing.
Not a single thing.
Making tit even worse.
If this the great benefits of “the rising tide that would lift all boats” modern innovative entrepreneurial globalisation economy at work,
then its been an abject failure.
I’m going to throw in a point here, as much because I want to complain about it as it is relevant: I downloaded and read Brad Delong’s paper “Seven Sects of Macroeconomic Error” last evening. It is an interesting read because, as was pointed to in the post http://rwer.wordpress.com/2011/02/25/my-name-is-brad-delong/ he’s still doing some AA-style soul cleansing; and he’s added some finger pointing (maybe he’s done that before – it’s not like I follow the guy like I follow this blog); but he’s as convinced as he ever was that “over accumulation of capital” has nothing whatsoever to do with our modern predicament. The problem is, as I understand him, the lack of supply of secure financial assets…
And I guess you can get to that conclusion if you accept his version of what he labels the Marx-Hayek-Mellon-Hoover (a great rhetorical move, I have to admit) thesis of over-accumulation, and if you are simply oblivious to “inequality” as a causal factor.
When searching the text, neither the words “inequality” nor “excess capacity” are found. There is no “inequality” to explain why workers cannot purchase all the consumer goods they produce – there’s just some bad allocation of capital (from p. 24-25):
“Sometimes the economy does indeed get too much capital for the sustainable level of demand. But equally there are times when the economy has too much consumption goods for the sustainable level of demand as well–some times there is not an over accumulation of capital but instead an overproduction of consumption goods. When that happens the people who make consumption goods do lose their jobs and have to go find jobs someplace else. But that process does not produce a recession: it produces a boom. No period of high unemployment is generated by the redeployment of workers from consumption goods to capital goods industries. High unemployment arises only when workers are switching out of capital goods and into consumption goods industries.”
True enough, I am one of those people who sometimes does not see what is obviously in front of me, but I sure don’t see how/why capitalists are going to hire workers in capital goods production when the existing capital goods produce an oversupply of consumption goods that workers cannot buy because their wages haven’t kept up with their productivity, etc. I thought we’d already figured out that in those circumstances, the capitalists will take their profits and stack up paper assets until those collapse under their own weight … the solution to which, I guess, is reinforcing the assets.
That will make things more equal?
Which gets back to inequality and excess capacity…. I’d think….
Not to be picky, but doesnt the diagram show that at 1980 the rural rich were 2,3 fold richer than the rural poor (urban; 2,5 fold), while 2008 2,7 fold (urban; 2,8 fold). Looks to me rather that the difference between rural and urban is too small to be of importance, but if anything, the differences grew more in the rural countries rather than in the urban countries. Just saying that if this is the only data to back up that specific statement, its a bit shaky.