All This Inequality Talk Does Nothing for the Poor – Bloomberg 07-31-13

Salient to Investors:

Clive Crook writes:

The crash will recede, confidence will come back and stronger growth will resume. The zeal of Americans to work hard and prosper will prevail over the weary incompetence of the political class.

Inequality is rising, but the theory that the US system is fundamentally flawed is wrong. As is the belief that the rich have rigged the system, middle class incomes stagnate as labor productivity keeps rising, and if you are born poor, you stay poor.

Scott Winship at Brookings said the CBO found that up to the recession, US median household incomes were rising in inflation-adjusted terms, decade by decade, despite the supply of foreign labor growing faster than ever.

Successive generations are better off than their predecessors, and once the crash is behind us, this will continue. The US recovery is much stronger than Europe’s because US macroeconomic policy was better and the US more flexible and resilient, meaning more capitalist.

If technology and globalized markets had not boosted the incomes of superstar entertainers, athletes and business leaders, incomes would be more equal, but the middle class would not be better off.

A child of a poor family in the US is more likely to stay poor as an adult than his counterparts are in many comparable advanced economies. In this respect, the American Dream is a myth.

Miles Corak at the University of Ottawa and other economists argue that high inequality causes low mobility. But while the recent surge in the incomes of the super-rich, the main driver of US inequality, will make it easier for the very richest children to stay very rich, it is hard to believe it will help the poorest to stay poor.

Worsening inequality and the persistence of poverty from generation to generation are solvable problems, not hard-wired features of the system.

Read the full article at  http://www.bloomberg.com/news/2013-07-31/all-this-inequality-talk-does-nothing-for-the-poor.html

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