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October 20, 2002

Krugman on Income Inequality

I don’t normally post on political topics. That’s not because I’m not passionate about politics, but because there are already enough blogs out there filling that particular ecological niche.

But this weekend, the Sunday New York Times Magazine carried Paul Krugman’s article on the rise of Income Inequality in America. It’s an important topic, because it serves as a backdrop for almost every other item of debate in the domestic political agenda – from taxation, to healthcare reform, to campaign finance.

In a nutshell, after a generation of relative income equality (the postwar era through the '70s), we have returned to the rates of income inequality (the top 1% receive 14% of the total after-tax income in the country) which characterized the Guilded Age.

And, despite what you may have heard, greater income inequality is not the necessary price of greater prosperity overall (“A rising tide raises all boats.” was the Reagan-era motto). It’s true that the US has the highest GDP per capita in the world. Sweden, the bête noire of conservatives, has a GDP per capita comparable to that of Mississippi, one of the poorest states in the Union. But that statistic misleads, because it is skewed by the overwhelming rates of income inequality here. Median family income in Sweden is far higher than in Mississippi – comparable to that of the US as a whole. And, of course, the Swedes achieve that while taking longer vacations, having longer life-expectancies, etc. The average American is not significantly better-off than his counterparts in other developed countries, and the admirable growth of the American economy “as a whole” has not trickled down to the average worker. Median Family Income (adjusted for inflation) rose only 0.5% per year from 1979 to 1997.

Anyway, it’s an important read. And if you want to delve deeper into the statistics, here’s a compendium of data sources for the article. You might also want to look at Income Inequality in the United States, 1913–1998 by Pikkety and Saez.

Posted by distler at October 20, 2002 12:50 PM

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Re: Krugman on Income Inequality

we are left in a symantic quandry, the average person seems to be unable to differentiate between the income of the average person ( and using words like mean income merely further clouds the eyes)and the average income. The average income in america. to wit Bill Gates ( or any of many Waltons) in a room with 100 itinerant from a shelter: the average income is better than a million each. The average citizen is experiencing 2% inflation (only the Gatesian average citizen is doing that well.

Posted by: Joe S. Schmukler on November 1, 2003 10:40 AM | Permalink | Reply to this

Re: Krugman on Income Inequality

Even today, 8 years after, Sweden is still a good example. Not only is it still true, that “the Swedes achieve that while taking longer vacations, having longer life-expectancies, etc, but they are also leading in implementing green technologies and policies.

I think that the better income equality in Sweden has a lot to do with the taking action when it comes to environment issues.

Posted by: Martin in Sweden on July 25, 2010 3:52 AM | Permalink | Reply to this

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