October 27, 2017
Roger Altman, an investment banker and deputy treasury secretary under President Clinton, warned about the effect of growing inequality on national politics in a Washington Post column. He implies that this increase in inequality has been a natural outcome of the market:
“A series of powerful, entrenched factors have brought the American Dream to an end. Economists generally cite globalization, accelerating technology, increased income inequality and the decline of unions. What’s noteworthy is that these are long-term pressures that show no signs of abating.”
The “powerful entrenched factors” are all the result of deliberate policy choices that Mr. Altman apparently doesn’t want to see altered. In the case of globalization, we have made a deliberate decision to put our manufacturing workers in direct competition with low-paid workers in the developing world, while largely protecting our most highly paid workers like doctors and dentists. This has the predicted and actual effect of shifting income upward.
“Accelerating technology” (actually it has been decelerating as productivity growth has slowed to a crawl in the last decade) does not lead to upward redistribution; laws determining ownership of technology, such as patent and copyright monopolies redistribute income upward. There is a huge amount of money at stake with these government-granted monopolies. In the case of prescription drugs alone, patents and related protections add close to $370 billion a year (almost $3,000 per household) to what we pay for drugs in the United States. Bill Gates, the world’s richest person, would probably still be working for a living without patent and copyright monopolies for Microsoft software.
And, the drop in unionization rates in the United States has also been the result of deliberate policy to make it more difficult to organize unions and to weaken the unions that do exist. Canada, which has a very similar culture and economy, has seen no comparable decline in unionization rates over the last four decades.
Someone seriously interested in reversing the upward redistribution of income would look to reverse these policies, but Altman seems to want us to believe that they are unalterable and instead focus on band-aid solutions. But, what do you expect from Jeff Bezos’ Washington Post? (Yes, this is the point of my [free] book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.)
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