There is no dispute that there has been a massive upward redistribution of income over the last quarter century. There is dispute about the causes. The NYT is anxious to tell us that a big part of the upward redistribution was just “basic economics.” It tells readers that: “One reason for the change is basic economics. In a global, high-technology economy the most successful workers can be more productive and can play on a bigger field.” Is that so? How about the fact that in a global, high-technology economy the “most successful” workers face a much bigger group of competitors who can depress their wages. Isn’t that also “basic economics”? The fact is that CEOs and other highly paid workers have seen their pay explode in ways that is not matched by the most highly paid workers in Europe, Japan, and other wealthy countries. Perhaps it is “basic economics” that allows an incompetent CEO at Home Depot to walk away with a $210 million severance package, but there are alternative explanations, like crony capitalisms in which the insiders get to rip off the company to fatten their wallets. This also seems the best description of how the executives at major banks, who incurred multi-billion dollar losses on securities backed by subprime mortgages, got tens of millions in severance pay on their way out the door. Is it basic economics or government intervention in the form of copyright monopolies that made Bill Gates fabulously wealth? The tightening and extension of patent monopolies (partly through “free” trade agreements) also explains the wealth of Pfizer, Merck, and the rest of the pharmaceutical industry as well as the thousands who have made their fortune through this route. It is very much a debatable question as to whether there is anything intrinsic to the economy that lead to the explosion of inequality in the last quarter century. If someone at the NYT wants to make this case, then they can be given the opportunity in an oped column. Unsubstantiated assertions like this do not belong in a news article.
--Dean Baker
