Income inequality and American politics

The Gini index is a measure of income inequality. If everyone in a population earns exactly the same income its value is 0. For maximum inequality its value is 1, or 100%. How it's calculated is a bit complex, but one way to think about it is this: take two random members of the population and determine the difference in their incomes, compared to the mean income. Do this many times and take the average.

The comparison with the mean is important, because it allows you to compare different populations with different mean income, a rich country with a poor country. But it also has the interesting effect that the Gini index is particularly sensitive to income disparities around the mean. There are other ways of measuring income inequality, like comparing the total income of a small percentage at the top with that of a larger percentage at the bottom, but this is not so sensitive to disparities around the middle.

Anyway, here is a graph of 60 years' worth of data for the United States:

Income inequality goes down steadily until 1980, when it surges, gradually levelling off at a historically high level. What happened in 1980?

Ronald Reagan

After the surge with the neoliberal revolution of Ronald Reagan, income inequality rose steadily under both Republican and Democrat administrations. This, I believe, is where the Democrats lost the plot. The goal of the Republican Party has always been (and still is) to make the rich even richer. This is a feature, not a bug. It's all about redistributing wealth upwards. And being in power helps a lot. You can for example get rid of pesky environmental regulations or social benefits that increase costs to corporations and decrease returns to shareholders. You can help break those annoying labour unions with their demands for higher wages and humane working conditions. And of course you can give big tax breaks to your rich friends. (You might wonder how a party whose objective is to make the rich richer could convince the poor to vote for them. That's a great question that deserves its own separate post, and I will return to it later.)

You would expect the party of FDR and the New Deal to take up the cause of the disenfranchised poor and the sinking middle class (remember the Gini index is particularly sensitive to disparities around the mean of the income distribution). But alas, no. As America sinks, the Democrats insist on courting the people in the lifeboats instead of the ones screaming in the water.

It's time to acknowledge that neoliberalism, the ideology of unlimited corporate profit to the exclusion of everything else, has succeeded in creating a small ultra-wealthy society within a large and impoverished population, with the former siphoning off resources and wealth from the latter. Politically the situation cries out for a movement to resolutely turn this around. So far at least, the Democrats haven't been it.

Here's Joan Baez and Jeffrey Shurtleff from 1969.

#Inequality #Neoliberalism