Home > Plutonomy, upward income redistribution > Inequality—missing the story twice over

Inequality—missing the story twice over

from David Ruccio

According to David Rosnick and Dean Baker, the OECD misses the story about inequality. But so do Rosnick and Baker.

The OECD misses the story because of (a) how they measure inequality—they focus on the gap between the top and bottom deciles (the richest 10 percent of the population versus the bottom 10 percent) and forget about the growing inequality within the top 10 percent, especially the share of income going to the top 1 percent—and (b) how they determine the causes of inequality—focusing too much attention on the effects of technology and not enough on changing labor market institutions and the growth of finance. 

But Rosnick and Baker also miss the story, in that fail to identify the source of the incomes that are captured by those in the top 1 percent—that is, they don’t trace the origins of the growing surplus as it originates in some sectors of the economy (based on rising productivity and stagnant wages) and how it has been siphoned off both upward (to the top 1 percent who run and own large corporations) and outward (especially into banks and other financial institutions).

Now, to be fair, both the OECD and Rosnick and Baker do get some things right. The OECD folks do admit that “that there is nothing inevitable about growing inequalities.” And Rosnick and Baker do understand that “changes in inequality in recent decades are driven in large part by increasing income shares at the very top – higher than the 90th percentile.”

The noninevitablity of the enormous gains of those at the very top of the income distribution is at least a start in telling a different story about the conditions and consequences of inequality in the United States and other OECD nations over the course of the past three decades.

  1. henry1941
    July 21, 2012 at 6:16 pm

    The cause of this inequality was comprehensively studied and explained by Henry George in Progress and Poverty, published in 1879. There is little more to be said on the subject other than filling in with local and contemporary detail.

    His conclusion is absurdly obvious, so obvious that almost nobody notices. It is an elephant in the room.

  2. Georg Trappe
    July 23, 2012 at 7:12 am

    If you are looking for a model/explanation for the very fundamental source of this evolution of inequality, you may want to take a look at what I call the “Fettaugensyndrom”:

    • henry1941
      July 24, 2012 at 5:59 pm

      All the theories on inequality, including the fettaugensyndrom, can be traced back to David Ricardo as they are implicit in the Law of Rent which he formulated.

  3. July 25, 2012 at 3:51 pm

    The point which needs to be emphasised, surely, is that Ricardo’s Law is a mathematical summary of observations in Capitalist society as Ricardo knew it, not an invariant Law of Nature. As the OECD folks admit, “there is nothing inevitable about growing inequalities.”

    Nor is there about monetary profit seeking. If, with supply needs accounted for by automated accounts of what has been demanded, provision for sustenance and motivation is separated out from a bucket “income” into e.g. into generous fixed scales of statutary credit for sustenance and a fixed prize fund rather than on-going percentage increases for motivation, then the books will balance and inequality will be earned rather than (sometimes fraudulently) “won”.

    • henry1941
      July 25, 2012 at 6:36 pm

      Ricardo’s Law is a natural law of economics. Every street beggar and protection racketeer is aware of it.


      Ricardo’s Law is inescapable. A correct understanding of this also leads to the solution of the problem. But the solution is not regarded as mainstream and so it is disregarded. In fact, one is hardly allowed to mention it for fear of being told it is cranky or a hobby horse.

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