Monday, December 15, 2008
Income Inequality in America
First, I enjoy Paul Krugman's theories on income inequality in the United States. He cites one of the proximate causes for this trend as an increasingly individualistic-centered political sphere. To be clear, the notion of more limited government and the rugged individualism ideals which promoted private gain and social indifference exceeded a mindset of the government aiding its citizens and equalizing living conditions. Political and social environments thus metamorphasized from a post-depression era compression of income inequalities into an incredible disparity between the lowest and highest incomes in the United States.
The "skilled-biased technological change" argument has some validity, though I find it more or less a cop-out argument, which doesn't relate to the central problem of widening incomes. For instance, it's as if you are reasoning that the reason why someone would punch another person in the face is because they are angry. Yes, but why are they angry? Weird analogy, but it's workable. Skilled-biased technological change, for less nerdy economic gurus than myself, is the idea that as a country's exports and production move towards an industry with a higher skill level, the demand for this industry will shift outward and will require more workers with higher wages. This will in turn release workers from the lower skilled sectors, and push the demand for labor in these sectors down, along with their wages. With the relatively rapid advancement of technology over the past few decades and a shift towards a higher demand for information technology, it seems like this is more or less completely the case. It is also the reason why many Americans say that Mexican immigrants are depressing their wages. True as it may be, nobody seems to ask what is causing these movements, and why some people get left behind and others get magnificently rewarded. Could they just be lucky? Perhaps, suggests Krugman, it is a financial sector that has been able to loosen moral standards over the past couple of decades in order to gain higher incomes for themselves, which they argue they deserve--such as hedge fund managers, financial analysts, etc.
Again, what is causing this? Why is it that some people have the right skills at the right time and others do not? The American notion that individual prosperity rests on the individual leaves many behind that cannot afford to be left behind. The only problem with this is, that as more and more people get left on the bottom to eat the richs' leftovers and die on the richs' streets, the greater portion of the population will be engulfed by this percentage. It is not sustainable. It never has been, and I find it difficult to believe that it will continue. What needs to change is the political atmosphere of corporate elitism, not the skills that the population possesses. It is a cause of this problem, and not an effect. As power and the density economic wealth concentrates, to the degree that it concentrates, this pattern perpetuates, and creates trends which will continue the concentration of power. It is in their best interest to do so, if they are given the chance to further nurse their greed and need for control. Nothing is checking these people-- and though I hope that their mindset is a unique one, and not of the majority of the world's population, their actions are incredibly pervasive, as well as destructive.
I will be posting more on income inequality and notable economists' opinions on the concentration of prosperity soon-- if you have anything to say, please do so.