Inequality in the USA – driven by politics?

1) Multi-part Slate series  The Great Divergence 2010:What’s causing America’s growing income inequality? by Timothy Noah examines changes in inequality in the USA and evaluates multiple explanations.  He introduces the series by writing:

In the late 1970s, a half-century trend toward growing income equality reversed itself. Ever since, U.S. incomes have grown more unequal. Middle-class incomes stagnated while the top 1 percent’s share of national income climbed to 24 percent.

2) Crooked Timber reviews new popular book Winner take All Politics: How Washington Made the Rich Richer–and Turned Its Back on the Middle Class by political scientist’s Jacob Hacker and Paul Pierson.  Henry Farrell writes:

[the book] should transform the ways in which we think about and debate the political economy of the US.  The underlying argument is straightforward. The sources of American economic inequality are largely political – the result of deliberate political decisions to shape markets in ways that benefit the already-privileged at the expense of a more-or-less unaware public.

3) An academic paper in Politics and Society (DOI: 10.1177/0032329210365042) by Jacob Hacker and Paul Pierson presents the ideas behind the book and a number of commentaries was published this year in a special issue.  It is available online at: http://pas.sagepub.com/content/38/2/152.full.pdf.  Hacker and Pierson conclude their article by writing:

Explaining the remarkable rise of winner-take-all requires a true political economy— that is, a perspective that sees modern capitalism and modern electoral democracies as deeply interconnected. On the one side, government profoundly influences the economy through an extensive range of policies that shape and reshape markets. On the other side, economic actors—especially when capable of sustained collective action on behalf of shared material interests—have a massive and ongoing impact on how political authority is exercised.
… Too many economists and political scientists have treated the American political economy as an atomized space, and focused their analysis on individual actors, from voters and politicians to workers and consumers. But the American political economy is an organized space, with extensive government policies shaping markets, and increasingly powerful groups who favor winner-take-all outcomes playing a critical role in politics. Finding allies in both political parties, organized groups with a long view have successfully pushed new initiatives onto the American political agenda and exploited the opportunities created by American political institutions to transform U.S. public policy…. In the process, they have fundamentally reshaped the relative economic standing and absolute well-being of millions of ordinary Americans. Politics and governance have been central to the rise of winner-take-all inequality.

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