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Krugman: Reshuffling our stacked economic deck

  • (SIGNE WILKINSON / Philadelphia Daily News)

A few days ago, the New York Times published a report on a society that is being undermined by extreme inequality. This society claims to reward the best and brightest, regardless of family background. In practice, however, the children of the wealthy benefit from opportunities and connections unavailable to children of the middle and working classes. And it was clear from the article that the gap between the society's meritocratic ideology and its increasingly oligarchic reality is having a deeply demoralizing effect.

The report illustrated in a nutshell why extreme inequality is destructive, why claims ring hollow that inequality of outcomes doesn't matter as long as there is equality of opportunity. If the rich are so much richer than the rest that they live in a different social and material universe, that fact in itself makes nonsense of any notion of equal opportunity.

By the way, which society are we talking about? The answer is: the Harvard Business School — an elite institution, but one that is now characterized by a sharp internal division between ordinary students and a sub-elite of students from wealthy families.

The point, of course, is that as the business school goes, so goes America, only even more so — a point driven home by the latest data on taxpayer incomes.

The data in question have been compiled for the past decade by economists Thomas Piketty and Emmanuel Saez, who use IRS numbers to estimate the concentration of income in America's upper strata. According to their estimates, top income shares took a hit during the Great Recession, as things like capital gains and Wall Street bonuses temporarily dried up. But the rich have come roaring back, to such an extent that 95 percent of the gains from economic recovery since 2009 have gone to the famous 1 percent. In fact, more than 60 percent of the gains went to the top 0.1 percent, people with annual incomes of more than $1.9 million.

Basically, while the great majority of Americans are still living in a depressed economy, the rich have recovered just about all their losses and are powering ahead.

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