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Symposium 2014

Virtual Library File - Inequality Is Not Inevitable.

The Challenge

Inequality is rising in most parts of the world, irrespective of whether one looks at it in terms of annual income, in terms of wealth (i.e. of accumulated capital and other assets) or in terms of o ...

Inequality is rising in most parts of the world, irrespective of whether one looks at it in terms of annual income, in terms of wealth (i.e. of accumulated capital and other assets) or in terms of opportunity. In most high-income countries, the share of national income earned by households at the top of the income distribution has soared since the past decades (from the 1980s onward). As the World Top Incomes Database shows, the income share of the richest households continued to climb during and after the crisis of the past few years. In 2012, the income of the top 1% of households accounted for 22.5% of total income; the highest figure since 1928. One explanation is that globalization expands the market for a small group of people with sought-after talent, but competes away the income of ordinary employees. In turn, the competition among countries for skilled individuals constrains the ability of governments to maintain high tax rates on the wealthy.

An insidious trend has developed over this past third of a century. A country that experienced shared growth after World War II began to tear apart, so much so that when the Great Recession hit in late 2007, one could no longer ignore the fissures that had come to define the American economic landscape. How did this “shining city on a hill” become the advanced country with the greatest level of inequality?