October 21, 2007

Its Politics, stupid!

Inequality.
Not exactly current affairs, but interesting nonetheless. The graph (from a entry last month from Krugman’s new, and very good, blog) show the proportion of US income that goes to the richest 10% of American’s. As clearly shown, there is increasing inequality in the US.

What is most interesting however from this graph is that, if anything, it’s a cry to arms for political activists (of any allegiance). Being an economist I often here the idea that the markets determines the distribution of income, etc, and there is little that the government can actually do that isn’t superficial.

However the massive decrease in inequality we can see that was achieved in the 1930s appears to be proof that the motivated intervention by the New Deal activists really did manage to achieve a real change in the distribution of income. Furthermore the reactionary conservative movement of the 1980s managed to sweep away the New Deal legislation and hence lead the economy to the previous levels of inequality. In the first case it took 5 years, in the second about 15 years, but either way the conclusion is the same. A strong and concentrated political movement can lead to very real movements in the nature of our society.


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