The (Very) Rich Are Getting (Much) Richer

Tuesday, 24 September 2013 11:08 By Paul Krugman, Krugman & Co. | Op-Ed
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Demonstrators denouncing growing income inequality at an Occupy Wall Street protest in New York in 2011. (Photo: Ozier Muhammad / The New York Times)Demonstrators denouncing growing income inequality at an Occupy Wall Street protest in New York in 2011. (Photo: Ozier Muhammad / The New York Times)

Inequality wonks wait eagerly for updates to the Piketty-Saez data, in which the economists Thomas Piketty and Emmanuel Saez estimate the concentration of income at the top in the United States based on income tax returns.

The latest edition does not disappoint: It shows, as one might expect but needed confirmed, that the very rich have recovered just fine from the Great Recession, even as the great majority of Americans continue to struggle. In fact, the super-elite — the top 0.01 percent — actually had higher incomes in 2012 than they did at the height of the bubble.

The new data also provides an opportunity to emphasize a key fact that all too many discussions of inequality miss: we're not talking about the rise of a broad class of highly educated workers, but a tiny elite. The income share of the top 10 percent has risen to a record high; but you're completely missing the picture if you think of the top 10 percent as a homogeneous group.

Of the gains made by the top 10 percent, almost none went to the 90 percent to 95 percent group; in fact, the great bulk of gains went to the top 1 percent. In turn, the bulk of the gains of the top 1 percent went to the top 0.1 percent; and the bulk of those gains went to the top 0.01 percent. We really are talking about the flourishing of a tiny elite.

Toxic Inequality

The New York Times recently published a fascinating portrait of a society being poisoned by extreme inequality. The society in question is, in principle, highly meritocratic. In practice, inherited wealth and connections matter enormously; those not born into the upper tier are, and know themselves to be, at a huge disadvantage.

Furthermore, some of the other costs of inequality are clearly visible — for example, expenditure cascades, in which the less well-off feel compelled to go into debt in an attempt to keep up. The society in question? At Harvard Business School, where students who can't spend lavishly on social events are effectively in an inferior class, and borrowing to keep up appearances is apparently common.

The point is not that we should weep for middle-class students at Harvard Business School, most of whom still have better prospects than the great majority of Americans. It is, instead, that what's going on at the school is a microcosm of what's happening to America, and it's an excellent illustration of the harm extreme inequality can do.

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Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008. Mr Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes, including "The Return of Depression Economics" (2008) and "The Conscience of a Liberal" (2007).
Copyright 2014 The New York Times.

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