Is Krugman a Prophet? Wealth Gap Goes Back to the Future
When it comes to economic policy, rarely is anyone more divisive than Princeton economist and New York Times blogger Paul Krugman.
The staunchly liberal, Keynesian economist believes in all of the classically liberal ideals: trickle-down economics do not work, that social welfare programs do; that assisting corporations does not provide more jobs, while government intervention within markets provides more jobs.
Krugman is a polarizing figure, who can galvanize the left and piss off the right. As a result, he is often the target of conservative media backlash, causing his message to be washed out by such conservative sentiment. Anyone with such a singular, one-sided perspective must be a raving lunatic, out of touch with reality; oh, the irony.
More and more frequently, people are realizing that the scales of income inequality are at the tipping point, almost to levels found just before the Great Depression. Krugman is looking more like a legitimate fortune teller than a false prophet. In fact, in 1992, he published a long form piece, titled “The Rich, The Right, and the Facts” in The American Prospect. Reading through this now is chilling, because it’s essentially telling the same story only two decades earlier.
The current state of wealth inequity started to develop as early as 1977, when the top 1% of earners in this country began increasing their wages hand over fist. Income inequality can be sourced from shifts in labor compensation - at least according to the Congressional Budget Office numbers. This differs from pre-Great Depression levels because that type of inequality was caused by differences in capital (money used to make more money).
The fact of the matter is this: useless semantic arguments about the validity of these statistics occur rampantly. The Right is filled with inequality deniers who claim that these statistics, which are THE statistics our government has used to govern itself for over a century, are invalid. So because the source seems to give a partisan answer does not mean it becomes less valid? That’s the dictionary definition of an ad hominem fallacy. The Left has the answer, but the Right is just far too efficient at making it seem as if there isn’t even a problem with income inequality.
It’s actually been very easy for the Right to create confusion about this issue, because holistically, income inequality is one of the most complex issues of our time. The key to understanding how skewed income inequality has become, however, is by understanding that the United States is a much more productive country now versus the last time wages were stable, which was around the late 1970’s.
Structurally, industries are being disrupted and changed much faster than they have in the past. Technology continues to outpace industrial standards, and new waves of technology must be adopted each year. This is causing laborers to have a harder time figuring out how they can be effective in the ever more volatile service industries which predominantly employ Americans. Therefore its no wonder that employers have a hard time justifying higher wages and long-term hires, chances are there is always someone more skilled in the latest and greatest technology to do the work. To boot, CEOs are being payed 400 times as much as their lowest paid workers, on average, because these disruptions are making it imperative that companies find the best person for that role.
Deregulation has caused income inequality, and the Republican right has been the driving force behind shrinking the government. Don't let them tell you any different by washing out Krugman's message.
Want to know just how bad income inequality is? Check out the video below for a quick primer.