I’m glad to see center-left pundits finally begin to comprehend that the fundamental problem causing wages and income to stall is the excessive concentration of profits in the hands of corporations and shareholders, not technological change (though that does play a role). In other words, it’s the wealth extraction, stupid. The Krugman (boldface mine):
Our discourse on inequality has been dominated for decades by issues of education and talent — and for what were good reasons at the time. There was a big increase in the college premium in the 1980s and to some extent in the 1990s — but since then, not so much….
So the story has totally shifted; if you want to understand what’s happening to income distribution in the 21st century economy, you need to stop talking so much about skills, and start talking much more about profits and who owns the capital. Mea culpa: I myself didn’t grasp this until recently. But it’s really crucial.
We don’t talk much about monopoly power these days; antitrust enforcement largely collapsed during the Reagan years and has never really recovered. Yet Barry Lynn and Phillip Longman of the New America Foundation argue, persuasively in my view, that increasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees.
And one more:
I think our eyes have been averted from the capital/labor dimension of inequality, for several reasons. It didn’t seem crucial back in the 1990s, and not enough people (me included!) have looked up to notice that things have changed. It has echoes of old-fashioned Marxism — which shouldn’t be a reason to ignore facts, but too often is. And it has really uncomfortable implications.
Actually, considering millions of Americans went in hock up to their eyeballs, so it was crucial–it was just ignored (that debt is how someone named Elizabeth Warren cut her academic bones). Likewise, Matthew Yglesias also notes how Federal Reserve policy has favored capital over labor.
So I wrote this six and half years ago:
What you’ll notice missing from this list are any proposals that would seriously alter the relationship of citizens to massed economic power. Before you say, “Oh the Mad Biologist is going off into lefty bizarro world”, keep in mind that most of the problems we face, from healthcare, to information privacy, to environmental degradation, stem in part, if not entirely, from the imbalance between capital and labor, or between capital and the individual citizen. Here’s what you don’t hear about very much in the lefty blogosphere:
- The necessary and morally just role of government in moving towards (if not reaching) full employment.
- A more progressive income tax (leaving aside the issue of how much revenue should be generated).
- More tax revenue from corporate sources.
- Raising wages, particularly of those in the service industries (which are the fastest and largest sectors of job growth, such as it is under Little Lord Pontchartrain).
- Affordable housing, for both homeowners and renters.
I’m genuinely puzzled. Krugman is a smart guy, but he seems to have missed this phenomenon entirely. How does that happen? He’s not an unsympathetic asshole. Does he need to get out more? Does being tenured with a very good income insulate you from most people’s day-to-day realities? Was he on a fast-track career path and never had to worry about things most people do? Because I think a lot of people from the mid-90s on saw this quite clearly. In fact, it was pretty obvious. I wrote about it years ago, and I’m not that bright a guy (not fishing for compliments, but I work with really smart people, and I know smart). By the same token, the whole skills argument seemed to revolve around a very unrealistic depiction of what skills are actually needed in the workplace. Maybe those stupid fucking natural history facts matter after all?
Nonetheless, it’s good to see this issue raised.