The Two Big Issues for 2015: #1 – Income Gap Economics
I speak to and work with many business and other audiences. We explore trends – technology, society, demographics, global dynamics, energy, and so on. And of course we discuss economics and the environment. These last two turn out to be hard to explore with many audiences. Why? Because the objective trends do not seem to match pre-conceived notions about how the world is or should be. And because the issues have become so polarized as we live in our media bubbles that any open minded discussion is difficult. But I try to creatively raise these two big issues for 2015, specifically income gap economics and climate change, because I believe they are the two most fundamental long-term issues facing us if we want to shape a preferred future.
Consider what I call income gap economics, popularly known as the 99% and the 1%, or as simply income inequality. I’m talking mostly about the U.S., but similar principles apply in other post-industrial economies. As David Brin has often pointed out, the rise of the great middle class in the U.S. in the 20th Century, especially after World War II, may be a stark aberration from the more typical norm of human history, which has seen wealth tend to accumulate at the top. A great many dynamics following World War II changed this, including a dominant industrial infrastructure, tax and labor policy, much greater access to higher education, a sense of the public commons that came with that war effort. These and other factors all combined to generate a rapid expansion of the middle class and a substantial and broadly shared increase in family wealth. But by the 1970’s the ancient patterns were reasserting themselves, and while wealth grew it began to settle in fewer and fewer hands.
I recall pointing this out in a speech to an annual Chamber event in about 2004. The patterns were very clear by then, well before the economic collapse a few years later. Discussing growing inequality, I noted that anything that gets so far out of balance eventually falls over. As I talked the room began to get noticeably uncomfortable. I was saying this divergence is a) not good for the future, and b) will not last. But what can we do about it? I think we should study the Eisenhower years, for their industrial policy, labor support, infrastructure investment, high marginal tax rates, lack of favoring unearned income, modest values, and a shared sense of economic direction. How much of that could be recreated in this post-industrial global world is of course open to debate, not to mention seemingly impossible politically. The 50’s had some less than admirable features, but in terms of growing the middle class, they were on to something.
We clearly need better debate and discussion about how to re-generate an economy that grows the middle class and expands it. Simply avoiding the topic does not make the trend go away.
For an interesting infographic review of the state of income gap economics, see the following piece in Medium. The illustration above comes from that article.