Harold Meyerson rejects Greg Mankiw’s and Tyler Cowen’s views of what needs to happen to have a fairer economy in which more of the people share in the benefits of economic growth:
“The returns to growth,” Cowen recently told the New York Times, “are going . . . generally to people with high I.Q., no matter where they live. I don’t really know how you could undermine this dynamic, short of wrecking the world.”
But the IQ premium, to the extent it exists, is just one among many factors behind the upward redistribution of wealth. A more systemic factor is the shift in income from wages and salaries to investments. A study released this month by Standard & Poors Economic Research — no radicals, they — concluded that labor income accounted for three-fourths of all market-based income between 1979 and 2007, but that it had dropped to two-thirds of such income by 2007. Income from capital gains, by contrast, doubled during this time, from 4 percent to 8 percent. Moreover, the S&P study noted, “capital income has become increasingly concentrated since the early 1990s.” Even among the wealthiest 5 percent, more than 80 percent of capital gains were realized just by the wealthiest 1 percent.
There is a network of policies adopted over decades that have tended to produce the outcomes about which Mr. Meyerson is concerned. These policies have tended to reward the ownership of assets rather than labor and include trade, tax, and immigration policies as well as intellectual property law. An increasing share of income going to financial assets is not a law of nature but an artifact of policy.
Sadly, in this column Mr. Meyerson criticizes the views of others but presents no solutions of his own. Increasing the incomes of the poor is simple: you write checks to them. The thrust of policy over the last half century has been to write the checks to people performing services for the poor rather than the poor themselves which, presumably, makes them better off but doesn’t increase their incomes. That’s a policy, too.