Engine of Inequality. Karen Petrou

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Engine of Inequality - Karen Petrou


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to many Americans. Here, as with overall American equality, the president was mistaken. As I said, African Americans are often now worse off than before the “Great Society” of the 1960s and subsequent anti-discrimination laws presumably afforded fair and free access to financial services.36 In 2016, the average wealth of white households ($933,700) was seven times the average wealth of Black households ($138,200) and five times that of Hispanic households ($191,200).37 In 2017, Black household median income ($38,183) was less than two-thirds that of median white households, with about one-third of Black households earning less than $25,000 compared to only 18 percent of white households.38

      Look below the numbers and it's even clearer how much of a difference policy decisions make to equality results. Western European nations are institutionally structured to ensure equality to the greatest extent possible through higher taxes, universal health care, inexpensive higher education, and generous state retirement benefits – just to mention a few equality-policy distinctions. Critics counter that these same policies constrain growth and, in the most recent period, innovation. However, US economic growth was at best lackluster before COVID and the “full” employment about which the Fed was wont to brag was in fact far less impressive when labor-participation rates and other factors are carefully considered.

Graphs depict the Diverging Income Inequality: Changes to Income Distribution 1980-2016, U.S. vs. Western Europe.

      Source: WID.world (2017).

      I have already established that the US is not only far less equal than President Trump said or many of us would like, but also on a downward trajectory that sharply differentiates America from many advanced democratic nations. However, this downward trajectory took a dive not during the 2008 Great Financial Crisis – when it might have been expected – but after 2010 when post-crisis financial policy kicked in. We shall see later why this was so and how financial policy made us so much more unequal so much faster than underlying trends would have forced. Now, I show that it was so.


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