From a research paper by Cambridge University professor of economics, Gabriel Palma.
And third, that within an overall trend of rising inequality, there are two opposite distributional forces at work. One is ‘centrifugal’, and takes place at the two tails of the distribution—leading to an increased diversity across country in the shares appropriated by the top 10 percent and bottom forty percent. The other is ‘centripetal’, and takes place in the middle—leading to a remarkable uniformity across countries in the share of income going to the half of the population located between deciles 5 to 9. Therefore, globalisation is creating a situation where virtually all the within-nation distributional differences are the result of what the very rich and the poor are able to appropriate. In turn, it seems that regardless of the political settlement at work current distributional outcomes are characterised by half of the population (located in the middle and upper-middle of the distribution) acquiring strong ‘property rights’ over half of the national income. The other half, however, seems to be increasingly up for grabs between the very rich and the poor. And if what really matters in distributional terms is the income-share of the rich—because the rest ‘follows’ (middle classes able to defend their shares, and workers with ever more precarious jobs in ever more ‘flexible’ labour markets)—everybody attempting to understand the within-nations disparity of inequality (including myself) should always be reminded of this basic distributional fact following the example of Clinton’s campaign strategist: by sticking a note in our notice boards saying “It is the share of the rich, stupid”.
Beezer here. Bottom line is that in-country, the gains or losses in income come from either the bottom 40% of the population or the top 10% of the population. The middle 50% appears to be more stable and can defend it’s income and property rights. In the United States over the past 30 years, however, the big income and wealth gains have gone not just to the top 1% but even more so to the top 0.01%–only about 15,000 families. And it also appears that the normally ‘safe’ families in the 50% are getting nicked as well, thus the complaints of a disappearing ‘middle class.’
Continuing. From a post by economist Bradford DeLong, UC Berkeley.
For the second dimension of inequality let me turn to the United States and to the coming to the United States of what we now call the Second Gilded Age.
We used to have a framework for understanding the time dimension of inequality in the United States: we called it the “Kuznets Curve”. The United States starts out as a country that is relatively equal–at least among white guys who speak English. Free land, lack of serfdom, the possibility of moving the west if you don’t like the wages you’re being offered in the east–all of these produce a middle-class society. Then comes 1870 or so, and things shift. The frontier closes. Industrial technologies emerge and they are highly productive and also capital intensive. So we move into a world of plutocrats and merchant princes: people in the cities, either off the farms or from overseas, competing against each other for jobs. And we get the extraordinarily stark widening of American income inequality up until the mid-1920’s or so.
This then calls forth a political reaction. Call it progressivism, call it social democracy, call it–in Europe–socialism. The idea is that the government needs to put its thumbs on the scale, heavily, to create an equal income distribution and a middle class society. Progressivism and its candidates are elected to power in democratic countries in the North Atlantic in the twentieth century–in spite of everything you say about Gramsci and hegemony and the ability of money to speak loudly in politics. Thus from 1925 to 1980 we see substantial reductions in inequality in the United States–the creation of a middle-class society, at first only for white guys and then, gradually, for others.
In 1980 things shift again. Since 1980 we have had an extraordinary explosion of inequality in the United States. This explosion has taken place along two dimensions.
First, we have seen extraordinarily rapid growth between the top twenty percent and the lower eighty percent. The benefits to achieving a college education skyrocket–for reasons that I don’t really have time to go into, and for reasons that are still somewhat uncertain.
Second, we have an even larger explosion of inequality between the top .01 percent, the top 15,000 households, and the rest of the top twenty percent. This second explosion is the most puzzling and remarkable feature of the past generation. It puts the American political system under substantial long term threat, if only because equality of opportunity in the next generation will require substantially greater equality of result in this generation than we see today: a world in which Republican presidential candidate Mitt Romney puts his wealth into a blind trust but that blind trust then decides just as a matter of chance that what it should fund is Tagg Romney and he then raises money from interests that want the Romney clan to think well of them. That is not a society fulfilling a democratic commitment to equality of opportunity, not at all.
Beezer here. We just had the re-election of President Barack Obama who made it very clear he believes the wealthy should pay more and his budget proposals call for raising the top two tax rates back to where they were under President Clinton, modestly raising the capital gains tax rate of 15% to 20% at minimum, plus putting dividend income on the same rates as those paid by wage earners. Yet Republicans still refuse to even consider raising any tax rates.