The Metrics of Protest: Extreme Inequality and the Payoff to College Degrees

By David Howell, November 7th, 2011
Changes in income shares, 1979 - 2007 © Paul Krugman | krugman.blogs.nytimes.com

Not so long ago, during the first several decades of the post-war era, the American dream of a broad and growing middle class was a significant reality. But since the 1970s the shape of the American distribution of income has steadily become more like an hourglass: as the middle has collapsed, large numbers of workers earn very low wages and at the other end of the scale, very few take home gigantic sums.

Figure 1 shows the extraordinary reallocation of national resources from the bottom 80 percent of the population to the top 1 percent, while those in between (81st-99th) have, as a group, shown no change in their share of total income.

FIGURE 1

Source: CBO Report “Trends in the Distribution of Household Income Between 1979 and 2007”

Not surprisingly, over the last three decades many households in the bottom 80 percent have faced sharp declines in their standard of living as the costs of health care, higher education, food and energy have risen far faster than the wage check. The result has been the accumulation of unprecedented levels of mortgage, credit card, and student debt.

I have argued that the roots of the economic crisis can be found in the shift in economic thinking and public policy toward free market fundamentalism in the 1970-80s, which fueled the rise in debt, financial instability, and extreme inequality. We’ve seen a toxic mix of financial deregulation, evisceration of protective labor market institutions (like collective bargaining and the minimum wage), a political system corrupted by campaign contributions, and an increasingly polarized education system that performs poorly for most of those in the 80 percent and terribly for the most disadvantaged communities.

But this is not at all the conventional wisdom. Rather, it has become widely accepted that the government is the root cause of the economic crisis of 2008-11 and the decline in living standards for the vast majority. The problem in this conservative vision is too much regulation, too much taxation, too much encouragement of home . . .

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November 7th, 2011 | Tags: , , , , , , , , ,

The Metrics of Protest: “99 Percent”

By David Howell, October 31st, 2011
© 2009 Avi Feller and Chad Stone (based on data from Thomas Piketty and Emmanuel Saez) | cbpp.org (Center on Budget and Policy Priorities)

Occupy Wall Street protests have spread across the country behind the rallying cry that the “99 percent” have been left behind. There is a sense of outrage that the “system” is not just rigged in favor of the elite – something like the top 1% – but has spun out of control, leading to an accelerating concentration of wealth and power in the hands of the very few.

Wage stagnation, the explosion of health and education costs as the American welfare state shrinks, and above all the financial manipulation of debt has generated extraordinary profits on Wall Street and massive indebtedness and housing foreclosures on Main Street. Losses from outrageous risk-taking by too-big-to-fail financial institutions are made good by the taxpayer, who is told there is no alternative.

This new gilded age political-economic system can be thought of as the interlocking trifecta of a mostly degraded and increasingly dual educational system, a financial system that became mostly unregulated by either law or social norms, and a political system increasingly corrupted by money.

The educational system has promoted a meritocracy of cumulative advantage. The vast majority of American students experience primary and secondary schools during which they fall far behind their peers in much of the rest of the developed (and even less-developed) world, and then face costs of post-secondary education that produce a level of debt that cannot possibly be repaid out of earnings. But the elite reproduces itself with an ability to pay for college and graduate school educations whose superiority has steadily grown, while at the same time feeling entitled since the educational process has also become extraordinarily competitive.

The financial sector was systematically deregulated as free market orthodoxy took off in the 1980s. This deregulation served to extract resources from the “real” economy and concentrated it in the bank accounts of a tiny elite, who are increasingly those same victors of the Darwinian educational competition. As the concentration of income at the very top of the distribution proceeded in the 1990s-2000s, . . .

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