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Timothy Noah: Why the Rich Are Getting Richer and the Middle Class Is Disappearing

In his new book "The Great Divergence," Noah digs into the causes of America's rapidly increasing inequality. In this interview, he talks to AlterNet about what he found.

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SJ: You talk about the rise of debt as a substitute for wages and the debt-fueled consumption bubbles. And you asked “Was it income inequality that drove the worldwide economy to the brink of ruin?” – which I thought was a really interesting, provocative thing to say.

TN: This is the “let them eat debt” kind of argument. Debt is what was at the core of the economic crisis. There is an interesting chart that Daniel Alpert has produced – when you look at the comparison of debt and wages, you see debt rising as the median wage levels go down. Alpert is actually working on a book of his own about this and I think he makes a persuasive case that debt has been a byproduct of income inequality. It’s a creator of income inequality to the extent that we have substituted actual income.

SJ: Anyway, so the last thing I wanted to ask: somewhere you say, “An inequality trend driven by large and quickly growing income shares at the top is not capitalism’s norm.” I mean, the countries that we’re comparing the US to, most of them have a stronger labor movement, most of them have more regulation, most of them, as you pointed out, have more mechanisms for social equality. Things like a healthcare system, better education.

So my question is – is this actually what happens when we get unfettered capitalism? You mentioned before that we used to care about income inequality because we had American communists and anarchists or we had the Soviet Union. We had some sort of check on capitalism. Without it, is this just what we get?

TN: Well, yes. I think that government policy plays a huge role in the creation of income inequality. Not so much in a direct way when it comes to taxes and benefits, but in all sorts of indirect ways. Including regulation of Wall Street, including its policy towards labor unions, including whether the minimum wage goes up or down, and including Fed policy which is a trade-off between fears of inflation and fears of unemployment.

So I think that, yes, government makes a huge difference and the government of the United States today, compared both to governments as comparable, advanced industrial democracies today, and also compared to the government of the United States at mid-20th century, the government today fosters much more income inequality.

It is a global trend. You do have to make that caveat. Income inequality is on the rise in advanced industrial democracies around the world, but nowhere is it as great as it is in the United States and nowhere is it accelerating as quickly as in the United States. Another point worth making is that while it is a global trend, it is not a universal trend. You can actually identify some countries, some advanced industrial democracies where the trend is either towards greater equality or where it has remained level.

In my book I mention France as a place that’s becoming more equal. More recent data that just came out after the book that was published shows that there has been an uptick in income inequality in France, but it remains true that over 30 years the trend has been essentially flat. So government policy does have a big influence on how much income inequality you end up with.

 

Sarah Jaffe is a staff writer at In These Times and the co-host of Dissent magazine's "Belabored" podcast. Her writings on labor, social movements, gender, media and student debt have been published in The Atlantic, The Nation, The American Prospect, AlterNet and many other publications, and she is a regular commentator for radio and television. You can follow her on Twitter: @sarahljaffe.

 
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