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Paul Krugman on the Second Gilded Age


Graduates Versus Oligarchs: Dean Baker raises an important point here: it’s really awfully late in the game to be saying that the important inequality issue is college graduates versus non-graduates. It’s not clear that this was ever true, and it certainly hasn’t been true for a while. I wrote about this years ago, using Ben Bernanke’s maiden testimony as Fed chair as an entry point. As I said then, Bernanke — like many others — had made:

a fundamental misreading of what’s happening to American society. What we’re seeing isn’t the rise of a fairly broad class of knowledge workers. Instead, we’re seeing the rise of a narrow oligarchy: income and wealth are becoming increasingly concentrated in the hands of a small, privileged elite….

Why would someone as smart and well informed as Mr. Bernanke get the nature of growing inequality wrong? Because the fallacy he fell into tends to dominate polite discussion about income trends, not because it’s true, but because it’s comforting. The notion that it’s all about returns to education suggests that nobody is to blame for rising inequality, that it’s just a case of supply and demand at work. And it also suggests that the way to mitigate inequality is to improve our educational system…. The idea that we have a rising oligarchy is much more disturbing. It suggests that the growth of inequality may have as much to do with power relations as it does with market forces. Unfortunately, that’s the real story.

Let me illustrate this point…. [T]ere has been no rise in the [income] share of the 81-99 group! It’s all about the top 1 percent. Second, even within the top 1 percent the gains are going mainly to a small minority…. [I]ncome inequality in America really is about oligarchs versus everyone else. When the Occupy Wall Street people talk about the 99 percent, they’re actually aiming too low.

One last point: I see that David Brooks is arguing that the oligarchy issue, if it matters at all, is a coastal phenomenon, not the issue in the heartland. Let me point out, then, that we have one country…. [H]aving much of the wealth your state creates go to people who are in effect absentee landlords, whose income therefore shows up in another state’s statistics, doesn’t mean that you have an equal distribution of income. Out of state shouldn’t mean out of mind.

Look, I understand that some people find the notion that we’ve become an oligarchy — with all that implies about class relations — disturbing. But that’s the way it is.