Friday, September 15, 2006

Paul Krugman on economic pollyannas

Allysa writing for The Daily Kos quotes from economist Paul Krugman's subscription column in the New York Times, where he eviscerates right-wing economic pollyannas:

Right-wing commentators would like you to believe that the economy's winners are a large group, like college graduates or people with agreeable personalities. But the winners' circle is actually very small. Even households at the 95th percentile -- that is, households richer than 19 out of 20 Americans -- have seen their real income rise less than 1 percent a year since the late 1970's. But the income of the richest 1 percent has roughly doubled, and the income of the top 0.01 percent -- people with incomes of more than $5 million in 2004 -- has risen by a factor of 5.
Notice the desperate effort to find some number, any number, to support claims that increasing inequality is just a matter of a rising payoff to education and skill. Conservative commentators tell us about wage gains for one-eyed bearded men with 2.5 years of college, or whatever -- and conveniently forget to adjust for inflation. In fact, the data refute any suggestion that education is a guarantee of income gains: once you adjust for inflation, you find that the income of a typical household headed by a college graduate was lower in 2005 than in 2000.

Thirty years of American governments, both Republican and Democrat, but all free-market capitalists, have let the population down badly. Ordinary Americans, working class, middle class and "welfare class" have seen virtually no economic improvement through the decades.

It is certainly true that being a millionaire is not what it used to, but it is sobering to realise that even in the biggest economy of the world, the country which personifies the entrepenuerial spirit more than any other, only 0.01%, or one in ten thousand, make five million dollars a year.

We've been fooled by inflationary pressures on (for example) CEO golden handshakes and entertainment deals to think that a million dollars is not that much. As the rich become mega-rich, and the ordinary get left behind (or even go backwards), we come to believe that a five million dollar income is nothing special, not compared to those billionaires making a million dollars a week. And if a millionaire is nothing special, well, then it is easily within our reach, surely?

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