Income’s Unnatural Unbalance

…of incomes that Americans had long taken for granted as a happy fact of modern life was reversing itself.”

Nearly 30 years after this trend began, income inequality in America was as large as at any point since the Great Crash of 1929, with the wealthiest 1 percent controlling nearly a quarter of the country’s fiscal resources, and with the earning power of most of the working and much of the middle class declining by the year.

While the majority saw their income stagnating or falling during the Great Divergence, the top 5 percent had benefitted somewhat from the late 1970s onward, the top 1 percent had benefited a lot, the top 0.1 percent more than a lot, and the top 0.01 percent had soared off into the stratosphere. Despite the dip in top earnings income following the 2008 collapse, in the last couple of years the march to greater inequality has resumed with a vengeance.

Noah’s project is to explain why, and his use of the word “democratization” is a key clue. Inequality waxes and wanes not only with economic currents but with political ones. Apologists for rampaging inequality like to argue that there’s something inevitable about it — that inequality and modernity are somehow natural bedfellows, and that attempts to mitigate it are inherently coercive. Noah is having none of it. If inequality is inevitable, he writes, then why is American inequality much more pronounced than that experienced by almost every other OECD country? And why, too, did inequality decline so magnificently in the decades following Franklin Roosevelt’s election, years in which the economy as a whole grew by leaps and bounds?

Noah’s answer, after noting what doesn’t cause inequality — the entry of women into the labor force; large-scale immigration; racial divisions; even the increased computerization of the workplace — is that politics plays a defining role in shaping our economic destiny. When conservative demagogues come to control the media, for example, that makes it more likely that the broader public will be convinced to embrace anti-tax, anti-government philosophies. When the Supreme Court allows corporations to contribute unlimited amounts into election campaigns, again that makes it more likely that the country will veer away from, say, progressive tax structures. For Noah, there’s something qualitatively undemocratic about such actions, since they significantly restrict access to the body politic for individuals and groups lacking financial clout.

In more democratic moments — the New Deal, say, or the post–World War II decades — our collective sense of political justice leads us to embrace economic policies that restrict inequality. We tax the wealthier at higher rates; we invest more in infrastructure; we look for political interventions in the labor market to boost the earning power of those at the bottom. In less democratic moments, the “winner take all” moments described by political scientist Jacob Hacker, we retreat from those commitments — rolling back taxes for the wealthy; allowing the powerful to use their lobbying clout to set public policy; restricting the rights of workers to organize into trade unions. The result of such a set of policies is plutocracy — the increasing concentration of wealth, power, education, and opportunity at the very top of the society.

While Noah’s writing can lag in occasional tangents, his thesis is seductive. There’s nothing inevitable about the modern American plutocracy; it’s as much a consequence of human choices and political opportunism as, say, the Russian oligarchy. And, thus, it is vulnerable: to a re-energized grassroots campaigning on issues of economic justice, and to leaders willing to push for financial regulations or a redistributive tax system.

Noah’s book is a valuable addition to the political landscape. Uncontrolled inequality is undermining many of America’s best attributes. As he concludes, “The worst thing we could do to the Great Divergence is get used to it.”

Sasha Abramsky is the author of several books, including Breadline USA: The Hidden Scandal of American Hunger and How to Fix It.