The Conglomerate ran a symposium last week on executive compensation, sparked by Say on Pay. My contribution, which talks about the effect of unionism on pay, is here. My post there is a bit of a elliptical response to Frank’s recent comments on income inequality, which assert that:
“When the top 5% account for 35% of consumption in the US, there is no way to improve “the economy” (as measured by stock prices and GDP) without intensifying the very inequalities that gave rise to the crisis in the first place. A weak labor market can’t bargain for the gains from productivity—they are going to the very top. Since the midterms, the President has shown little inclination to fight to tax those gains; rather, he cemented them into place with his recent tax deal. The inequality-intensifying dynamic is now self-reinforcing: those who bankrolled the fight against Obama’s modest efforts to tame inequality are more powerful thanks to their political victory in November.”
While I understand Frank’s point – and I think that the statistics he provides about relative income growth are sobering – I think that blaming law makers for failures to rein in inequality seems to me to put the cart before the horse. We should really be asking whether the relatively more egalitarian consensus about social wealth distribution that held from 1940 through 1970 was (as Frank’s post suggests) an ordinary one in American history, and, if not, what caused it rise and to fall. I suspect that law – including tax law – would play a pretty small role in that causal story.