In the current issue of Politics and Society, Jacob Hacker and Paul Pierson offer a political explanation of the top-heavy rise in income inequality in the U.S. in recent decades. Their piece is followed by six commentaries and a response from Hacker and Pierson. The full set of papers is available online for a little while.
Jacob Hacker and Paul Pierson, “Winner-take-all politics: public policy, political organization, and the precipitous rise of top incomes in the United States”
Fred Block and Frances Fox Piven, “Deja vu, all over again”
Andrea Brandolini, “Political economy and the mechanics of politics”
Andrea Louise Campbell, “The public’s role in winner-take-all politics”
Neil Fligstein, “Politics, the reorganization of the economy, and income inequality, 1980-2009”
Lawrence Jacobs, “Democracy and capitalism: structure, agency, and organized combat”
Lane Kenworthy, “Business political capacity and the top-heavy rise in income inequality: how large an impact?”
Jacob Hacker and Paul Pierson, “Winner-take-all politics and political science: a response”
Here’s a summary of the lead article:
The dramatic rise in inequality in the United States over the past generation has occasioned considerable attention from economists, but strikingly little from students of American politics. This has started to change: in recent years, a small but growing body of political science research on rising inequality has challenged standard economic accounts that emphasize apolitical processes of economic change. For all the sophistication of this new scholarship, however, it too fails to provide a compelling account of the political sources and effects of rising inequality. In particular, these studies share with dominant economic accounts three weaknesses: (1) they downplay the distinctive feature of American inequality — namely, the extreme concentration of income gains at the top of the economic ladder; (2) they miss the profound role of government policy in creating this “winner-take-all” pattern; and (3) they give little attention or weight to the dramatic long-term transformation of the organizational landscape of American politics that lies behind these changes in policy. These weaknesses are interrelated, stemming ultimately from a conception of politics that emphasizes the sway (or lack thereof) of the “median voter” in electoral politics, rather than the influence of organized interests in the process of policy making. A perspective centered on organizational and policy change — one that identifies the major policy shifts that have bolstered the economic standing of those at the top and then links those shifts to concrete organizational efforts by resourceful private interests — fares much better at explaining why the American political economy has become distinctively winner-take-all.
Lane Kenworthy 
There is really no doubt in my mind that at some point in the future we will look back and realize that income inequality (and increasing unemployment + stagnant wages) is caused primarily by ADVANCING TECHNOLOGY. Different politics (ie if Reagan hand’t flattened tax rates) may have helped to slow this transition down, but it would not have STOPPED it. It was inevitable and it will get worse.
I don’t know why economists are so completely blind and clueless when it comes to this issue.
For an excellent overview of this problem, please check out this book (available as a free PDF): The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future. (http://www.thelightsinthetunnel.com).
If there were a textbook on this issue of technological unemployment and where it will lead, this book is it. I wish every economist would take a break from data analysis and READ THIS BOOK.
From my vantage point the educational system is designed to produce industrial employees who memorize and repeat; not to think critically. It is entirely fashioned to reward memorization of dubious information and it punishes the inquisitive and creative while fostering stupidity from top to bottom.
I am a tinkerer, inquisitive and creative. In school I was a B student because a part of me refused to regurgitate things which I myself could poke holes in. Being told that I was sub standard convinced me of such. I graduated from college and got the best job I could find. I’ve now been at the same place for over 4 years where I’ve automated and solved all manner of problem. My role is now an advisor to senior management. All I want to do is get my degree in engineering and solve problems but I will not take out a mortgage to do so.
If you need to find a reason for wealth disparity look no further then the societal norms and the education system we have in place. It is not set up to reward creativity or problem solving skills. Rather it is set up to reward those who memorize the most. Affluence, of course, allows individuals more time for memorization and thus the loop is perpetuated as the false intelligentsia pats themself on the back.
When I spend more time convincing people that all they have to do is press the button then I spend designing the programming for the button it speaks volumes about the education system we have.
“The dramatic rise in inequality… has occasioned… strikingly little [attention] from students of American politics.”
I doubt that this fact has escaped a single one of our representatives in Washington; many have fought hard to have it come about. How can it have escaped students’ attention when the practicioners are wallowing in it?
Robert, you make a good point, but almost 150 years of increasing industrialization and automation does justify – in any way – this increase in income inequality over the last 30 years. Why is income inequality not as bad in Germany, or Japan? These are more technologically advanced society than ours, so by your reckoning, the disparity should be greater there, yet it is not.
jbay, you also make a good point, but it is very much off-topic. A more creative curriculuum is not going make income inequality reduce. That’s naiive. Still, I do agree with you, just not in the context of Income Ineq.
Income inequality is rising because the structure of our economy helps ensure the benefits from technological, operational (outsourcing), tax code and policy changes accrue almost exclusively to those at the top.
The great political philosopher John Rawls believed inequality is acceptable, but only if the system that makes it possible benefits those at the bottom at least as much as those at the top.
Our system does not.
A little late…but the top heavy gains are driven by dropping tax rates (but it depends if you are looking at non-capital gains or capital-gains inclusive income). And it is not simply the rich temporarily shifting income to minimize how it gets taxed, lower top tax rates have a “sticky” effect.
On the high-technology aspect: Much of the technological displacement was promoted by what Fred Block calls “A Hidden Development State” in that (the state) invested in and promoted much of the technology that started paying off in the 1990s. Thus, socialism for the rich.
Capital-gains inclusive share of the top 1%: very simple: ASSET INFLATION. A tale of three bubbles (bonds, stocks, and housing prices). In the post-crisis world, they are still trading heavily in mortgage-backed securities and derivatives and fighting Dodd-Frank tooth-and-nail and laughing down the “Volcker rule.” The rise of the super-rich was not necessarily planned, but it is heavily rooted in financialization (which in my view is the product of policies implemented by monetarists, supply-siders, and neoconservatives) beginning urgently during the last two years of the Carter presidency.