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Martin Wolf is worried by the new gilded age.

by Colman Wed Apr 26th, 2006 at 07:11:50 AM EST

Commenting on a paper from National Bureau of Economic Research, he notes much of what has been discussed here about increasing income disparties in the English-speaking economies, with a superstar class of corporate managers reaping the profits from productivity gains.

His conclusions are interesting, though he proposes no solutions:

graph added by Jerome, and some text pushed below the fold

Jérôme and his obsession with graphs ... I've added a link to the story now, which would be useful - Colman


This raises a bigger question: do these changes in the US distribution of incomes matter? I would suggest that they should do so even to non-egalitarians, for three reasons.

First, income mobility does not offset the rising inequality. As the two Northwestern university authors note, “not only are half the penthouse dwellers still there a decade later, but the differential opulence of the penthouse keeps increasing relative to the basement”. The chances of leaving the basement are low. Moreover, intergenerational opportunity is also adversely affected.

Second, the failure of an economy to generate rising incomes for a majority over decades causes frustration. US individualism may contain this reaction. Most cultures cannot.

Third, politics inevitably become more populist: the US “right” has become “pluto-populist” – an alliance of free-marketeers, nationalists and social conservatives – and the “left” is increasingly “protecto-populist” – an alliance of protectionists, dirigistes, social liberals and anti-nationalists. This endangers both intellectual coherence and sensible policymaking.

So long as the distribution of incremental incomes remains as skewed as it has been in recent decades, politics in the US are likely to remain at least as fractious as they are today. Moreover, so long as this trend continues, many other high-income countries will reject the US economic model. No simple solutions exist. But the return of the “gilded age” is a big event, for the US and the world.

An interesting article for one of the high priests of the conventional wisdom.

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He's concerned, of course, because this doesn't work for business either, in the long run. Which is an argument we've made before.
by Colman (colman at eurotrib.com) on Wed Apr 26th, 2006 at 07:15:29 AM EST
Apparently (as I gleaned from someone's comment in a thread about Bulgarian politics, if I remember correctly) "populism" has a very definite meaning in the US and refers to a political movement which was strong between the Gilded Age and the Great Depression. I think Wolf's comments about the return of populism refer to that implicitly. (link)

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Apr 26th, 2006 at 07:20:14 AM EST
[ Parent ]
No, I think he was mostly referring to populism.
by Colman (colman at eurotrib.com) on Wed Apr 26th, 2006 at 07:27:45 AM EST
[ Parent ]
Populism is a political philosophy or rhetorical style that holds that the common person's interests are oppressed or hindered by the elite in society, and that the instruments of the state need to be grasped from this self-serving elite and used for the benefit and advancement of the people as a whole. Hence a populist is one who is perceived to craft their rhetoric as appeals to the economic, social, and common sense concerns of average people. Most scholarship on populism since 1980 has discussed it as a rhetorical style that can be used to promote a variety of ideologies.
I suppose that makes us populist.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Apr 26th, 2006 at 07:33:23 AM EST
[ Parent ]
I keep telling my friends in Hollywood that the two growth industries of the next decade will be security and kidnapping.
by Lupin on Wed Apr 26th, 2006 at 07:17:04 AM EST
I'd like to avoid that.
by Colman (colman at eurotrib.com) on Wed Apr 26th, 2006 at 07:18:45 AM EST
[ Parent ]
They may not be able to: the rise of the gated community in Southern California is a bad symptom.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Apr 26th, 2006 at 07:23:32 AM EST
[ Parent ]
The gated community is for chumps, wannabe richs. Though I suppose you might reasonably safely extort $50K out of any of them, but it's not worth the risk.

The real money is in personal protection, CEOs, CFOs, media personalities, etc.  Their communities aren't so visibly gated that they look like targets.

by Lupin on Wed Apr 26th, 2006 at 07:53:18 AM EST
[ Parent ]
The Palm Springs gated community that I had the pleasure to see once is not for wannabe richs: we're talking an internationally renowned film director.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Apr 26th, 2006 at 07:59:13 AM EST
[ Parent ]
The whole of Palm Springs is a "gated community". :-)

The peones leave in Hemet, Beaumont, Indio or Temecula.

I was referring to the ones along Orange County, Del Mar, etc.

by Lupin on Wed Apr 26th, 2006 at 08:17:42 AM EST
[ Parent ]
Ah, Hemet, Perris, Lake Elsinore... I'm getting nostalgic.

Isn't it interesting that there are two towns called Indio (Injun) and Chino (Chinaman) in that general area?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Wed Apr 26th, 2006 at 08:20:05 AM EST
[ Parent ]
pre-State businesses.

Reaganism and Thatcherism are a return to feudalism.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 26th, 2006 at 07:28:03 AM EST
[ Parent ]
Will we see transnationals fielding mercenary armies to protect their assets and building fortress communities to house their employees?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Apr 26th, 2006 at 07:35:02 AM EST
[ Parent ]
Yeah. Back to the basics.

Three years ago, I interviewed a potential client who was the extremely handsome young star of a Venezuelan soap who'd chosen to leave his successful TV career to start again from scratch in the much tougher LA environment, because he'd already been ransomed three times in Venezuela.

PIs and their bodyguard sideline are doing "boffo biz" (as we say) in LA.

America as a whole is clueless.

You want to become a millionaire: hire and train a dozen immigrants, get then gun licenses etc. and run a bodyguard business as you would a temp agency: taking kids to school, the wife shopping, driving the nanny to see her mother, etc.

Five years from now you'll sell that business for $50-$75 million guaranteed.  I know a guy who did it, sold to one of the larger firm, based in Atlanta.  (The name escapes me.)

by Lupin on Wed Apr 26th, 2006 at 07:50:17 AM EST
[ Parent ]
It doesn't surprise me to hear this...but it saddens and sickens me...

"Once in awhile we get shown the light, in the strangest of places, if we look at it right" - Hunter/Garcia
by whataboutbob on Wed Apr 26th, 2006 at 08:17:55 AM EST
[ Parent ]
Just today a new report has come out about how 18 super rich families in the US have funded a $500 million disinformation campaign over the past decade to push for the abolition of the estate tax.

They managed to persuade enough people that the tax affected them to sway (some) public opinion. They funded front groups to lobby, produce bogus white papers, and run false advertising.

Here is a link to the paper (PDF):
http://www.citizen.org/documents/EstateTaxFinal.pdf

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Wed Apr 26th, 2006 at 08:48:30 AM EST
Jerome could probably produce a graph showing a correlation between a decrease in the number of kidnappings and a rise in the number of super-rich.
by Lupin on Wed Apr 26th, 2006 at 08:59:01 AM EST
[ Parent ]
Over on the Becker-Posner blog, Posner argues this is a good think because it shows the better educated are being rewarded for their investment in education.

Personally I think appallingly bad corporate governance coupled to the lionisation of CEO is a more likely explanation.

by Colman (colman at eurotrib.com) on Wed Apr 26th, 2006 at 12:47:44 PM EST
Given that the average CEO is still not that educated, it's an "interesting" theory.
by Metatone (metatone [a|t] gmail (dot) com) on Wed Apr 26th, 2006 at 01:34:13 PM EST
[ Parent ]
I'm going to be among the last to defend these excessive CEO (actors, sports heroes, directors, singers, etc).  But why do you say the average CEO is not that educated?  are you referring to some data that you have seen on this?
by wchurchill on Wed Apr 26th, 2006 at 07:33:38 PM EST
[ Parent ]
Oh bullshit.

If "better educated" was predictive of "a higher paycheck" then Ph.d. Musicologists would be paid higher then a Finance BA/MBA.

Why can't these morons process more than 2 variables in their pinsized brains?

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Apr 26th, 2006 at 05:33:40 PM EST
[ Parent ]
one real problem in the future for this trend is the elimination of the inheritiance tax.  Hopefully the elimination of this tax will not hold up.  It sold to the American people because it seemed unfair in the sense that taxes had already been paid once on these inheritances, so the inheritance tax meant double taxation.  Also, the ceilings on which these taxes took effect had not been adjusted for inflation, so they really were ridiculously low.  An upward adjustment, and then maybe some inflation index would be a far better solution.

If I recall correctly, this elimination of the tax expires in 2010 or something like that, and it will have to be voted on again--hopefully with more thoughtful results.

by wchurchill on Wed Apr 26th, 2006 at 07:40:02 PM EST
Holy shit.

Point n'est besoin d'espérer pour entreprendre, ni de réussir pour persévérer. - Charles le Téméraire
by marco on Fri Apr 28th, 2006 at 03:09:15 AM EST


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