The Inequality Paradox

by Stuart Shapiro

Inequality has been in the news. Rick Perry says it doesn’t matter. The Congressional Budget Office says it is getting worse. And a fascinating article by Alexander Stille contemplates a fascinating question about it. Stille observes that in terms of rights, American society is getting better. There is less discrimination against minorities, women, and homosexuals than there was a generation ago (not no discrimination, but certainly less). And yet in terms of opportunity, the chasm between the well off and the rest is rising. And he quotes celebrated free market economist Gary Becker,

“I think we have become more meritocratic — educational attainment has become increasingly predictive of economic success,” Professor Becker said. But with educational attainment going increasingly to the children of the affluent and educated, we appear to be developing a self-perpetuating elite that reaps a greater and greater share of financial rewards. It is a hard-working elite, and more diverse than the old white male Anglo-Saxon establishment — but nonetheless claims a larger share of the national income than was the case 50 years ago, when blacks, Jews and women were largely shut out of powerful institutions.

And this makes us different than Europe which still has tremendous problems integrating racially but has much less inequality.  Here, the rising inequality fuels both the Tea Party and Occupy Wall Street. While the party they blame is different, the inability to live the American Dream animates both groups. Unless the growing chasm between the powerful and the powerless shrinks, and everyone again believes they can move from the bottom to the top (or that their kids can), our days as an economic power are near their end.

By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.