Income inequality

(written by lawrence, however indented passages are often quotes)

Why has income inequality increased in the USA?

Finally – the role of organizations. Hacker and Pierson suggest that organizations play a key role in pushing through policy change (and a very important role in elections too). They typically trump voters (who lack information, are myopic, are not focused on the long term) in shaping policy decisions. Here, it is important that the organizational landscape of the US is dramatically skewed. There are many very influential organizations pushing the interests of business and of the rich. Politicians on both sides tend to pay a lot of attention to them, because of the resources that they have. There are far fewer – and weaker – organizations on the other side of the fight, especially given the continuing decline of unions (which has been hastened by policy decisions taken and not taken by Republicans and conservative Democrats).

In Hacker and Pierson’s account, these three together account for the systematic political bias towards greater inequality. In simplified form: Organizations – and battles between organizations over policy as well as elections – are the structuring conflicts of American politics. The interests of the rich are represented by far more powerful organizations than the interests of the poor and middle class. The institutions of the US provide these organizations and their political allies with a variety of tools to promote new policies that reshape markets in their interests. This account is in some ways neo-Galbraithian (Hacker and Pierson refer in passing to the notion of ‘countervailing powers’). But while it lacks Galbraith’s magisterial and mellifluous prose style, it is much better than he was on the details.

In long form, this comes back to the decline of the unions.

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