Income Inequality May Have Big Costs For Economy, Country

Monday, August 30, 2010

A small group of economists are trying to study whether income inequality may have contributed to the economic collapse. The income gap in the years leading up to the recent recession, which is often compared to the Great Depression, has a striking resemblance to the income equality in 1928, when the top 10 percent of earners received nearly half of the total income. Finance reporter Louise Story wrote about this theory for The New York Times earlier in August, and we spoke with her about the income gap on The Takeaway last week.


Today, we look at the income disparities on a state-by-state basis and examine how gaps in income contribute to social and financial crises. Ray Brescia from Albany Law School recently published a study called, "The Cost of Inequality."

Bresica and Story explain the impact of income inequality on the financial sector and why connecting the two can be difficult for economists.



Ray Brescia and Louise Story

Produced by:

Arwa Gunja

Comments [7]

Keith Platt from South Florida

Thank you for alerting us to this new research. I introduce my college students to the writings of karl Marx, and they are amazed at how well he describes the darker side of capitalism. the students from lower class origins are especially interested in the structure of the economy as seen through conflict theory. broadcasts like this remind them that these issues are not merely academic.

Aug. 30 2010 01:12 PM

Hearing Louise Story use the word "crisises" bugged me as well, but it looks like "crisis" can be pluralized as either "crises" or "crisises."|en&hl=en&sa=X&ei=udN7TMjuKpG-sQPks8GDBw&ved=0CBQQmwMoAA

Aug. 30 2010 11:54 AM
Marcel from Westchester, NY

How's this for an analogy: It's as if the predators at the top of the "food chain" become so rapacious that they entirely eliminate their prey. The prey is gone, the predators have nothing left to eat, the whole system crumbles and becomes defunct. One other question: Am I mistaken, or is the plural of crisis, crises, not crisises?

Aug. 30 2010 11:30 AM
David Zapen from Miami FL (WLRN)

Books by Mark Crispin Miller like FREE LUNCH explain this better. The current concentration of wealth matches that of 1929, what ex-Secretary of Labor Robert Reich calls the hourglass figure that squeezes out the middle. The sub-prime mortgages targeted the white working poor and minority middle class for fees fueled by mortgage-backed securities, thanks to artificially low interest rates that sent low-taxed money to dangerous investments. America needlessly lost $2T to tax cuts and $3T to illegally undeclared wars. Thom Hartmann is great, but the fix is in the Truman/Eisenhower income taxes of 90% on all money made at or above $5M/year where anything under $5M is at a normal 40% rate on the same person or corporation. That is what paid off the Second World War and the Korean War. The next surge should be in teachers and doctors and nurses and public defenders with living wages and forty-hour weeks without second or third jobs like NPR reported on 3/17/2005 in Argentina. America's neglect on MN's I-35 bridge and the New Orleans levees and the Deep Water Horizon rig have destroyed from within what terrorists, foreign and domestic, could not dent.

Aug. 30 2010 10:42 AM
Rick Evans from Taxachusetts

Reference was made to investors "preying" on the middle class luring them into houses they couldn't afford. Oh, please! How about blaming middle class house lust where middle income doofuses turn off their tiny, weak brains and go house shopping, mouths drooling, after watching the latest HGTV show. Maybe we need to have a Restoring Adult Responsibility rally at the Lincoln Memorial.

Aug. 30 2010 09:22 AM
Grady Lee Howard from Edison, NJ

Capitalism itself is a fire, updrafting all value to those at the top. Notice how it also scorches the environment. Over time the conflagration intensifies until the fuel (human labor) is exhausted.
Capitalism "works" all too well and is not sustainable. Adjustments after the Great Depression began to control the draft and the embers became superheated. Deregulation over the last 40 years has melted the stove. People at the top will not share without forceful intervention.

Aug. 30 2010 07:49 AM

An analogy - when you apply most of the fertilizer to the top leaves of the plant they grow overly lush - AND TOP HEAVY - the spindly underfed roots cannot sustain the the top leaves and eventually the pretty plant keels over under its own weight. Feed the roots for even strong growth throughout the entire plant and make sure to prune any overly lush growth at the top for a healthy, happy garden.

Aug. 30 2010 07:21 AM

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