The perpetual discussion about the ongoing battle between rich and poor, between the one percent and the ninety-nine percent, has generated a great deal of heat, but not much light. With The Great Divergence: America's Growing Inequality Crisis and What We Can Do About It, New Republic columnist Timothy Noah brings a well-reasoned array of high-wattage spotlights.
Noah, who joined Henry Blodget and me this morning to discuss his book, traces the history of income inequality and synthesized much of the academic research on the topic into a highly readable extended essay. And the news isn't great. "There are various ways to measure income distribution, and by all of them the United States ranks at or near the bottom in terms of equality."
The data — and our personal experiences — tend to tell a widely accepted story. Between 1950 and 1980, a period economist call "the Great Compression," income inequality tended to decline. The rising tide of American economic growth lifted all boats, and people at the bottom and middle runs of the income ladders enjoyed rising incomes and standards of living. But starting in about 1980, the period of "The Great Divergence," things began to change.
Noah runs through the various explanations that pundits, economists and polemicists have put forward to account for the fact that the very rich have been getting richer while the poor, middle-class, and upper-middle-class struggle. He rules out some of the usual suspects. "The Great Divergence did not result from societal prejudice against women or blacks," he writes. The influx of low-skilled immigrants has played a role in undermining wages and benefits at the bottom of the income scale. But, as Noah notes, while immigration "has helped create income inequality during the past three decades, it isn't the star of the show."
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