If We Don't Understand The Causes Of Inequality We Can't Fix It

This article in The Financial Times, by an American, argues that it is time to do something about rising inequality in the US. It supports Obama's plan to make the income tax more progressive by letting parts of the Bush tax cuts expire. That is good idea, and it is not surprising that a member of the Clinton administration would approve of tax policies that were introduced in the Clinton administration. It is very weak on the causes of growing income inequality, however, and its other recommendations for reducing income inequality are, consequently, off- target.

He argues that income inequality is the result of the growing role of information technology in the economy and that the US labor force has not acquired the necessary skills. He also suggests, following some conservative economists, that growing income inequality is a global problem. These are conservative viewpoints and they lead to conservative solutions.

We had a booming economy in the Clinton administration that was fueled by the dot.com boom in technology. It was a full-employment economy as well. Employers had no problem finding the skilled workers that they needed. Its hard to believe that over a short period of time the skilled workers have disappeared and that unemployment is due to the poor quality of the US labor force. Since that premise is false, it does not make sense to argue that we can fix the unemployment problem, and the inequality problem, by improving the quality of our education system. We have a high quality education system. Our biggest education problem is that access to a quality education is unequally distributed. Wealthy school districts have good schools, and poor school districts have to deal with the problems of income inequality and broken families that interfere with the process of education. Access to higher education has also been limited by the lack of funding for state and locally supported higher education, and by rising tuition costs both public and private colleges. Access to a quality education is our problem. We take our eye off the ball when we focus on the problem of educational quality in the US. Moreover, it takes a long time to make changes to the education system. Education reform does nothing to reduce unemployment and inequality today.

The following post argues that growing income inequality in the UK and the US is related to conservative economic policies which reflect the ability of the wealthy to purchase favorable policies from government. In fact, many of the changes made in the Clinton administration contributed to the financial crisis in the Bush administration. They were purchased by Wall Street banks by making contributions to an administration that was intent on demonstrating that it was not anti-business. The only effective way to reduce income inequality is to limit the ability of the wealthy to purchase political influence. Even the modest changes to tax policy and healthcare reform by the Obama administration have been limited by the ability of the powerful to influence public opinion as well as policy.