[I]f current trends continue, “the consequences for the long-term dynamics of the wealth distribution are potentially terrifying.”We're doomed! Doomed, I tell you, Dooooomed!!!
Errr, well, what are these terrifying consequences? Scanning the article, I don't see any terrifying consequences at all.
The article above is in a nice liberal rag, The New Yorker, so I decided to go to that bastion of conservative thought, the New York Times, which summarizes the current understanding of inequality's effects thusly:
For all the brain power thrown at the problem since then, however, specific evidence about inequality’s effects has been hard to find.Apparently, terrifyingly hard to find. As a result, folks like Piketty seem to have decided they might as well jump on every little terrifying possibility:
“People that worry about inequality for normative reasons have been very quick to jump on plausible hypothesis and a little bit of evidence to make sweeping conclusions about its consequences,” Professor Kenworthy told me.Professor Kenworthy himself had been hoping to write a terrifying book on inequality's impacts, but disappointingly (for him), couldn't really find anything that would hold up to close scrutiny:
To avoid misleading correlations and better isolate inequality’s impact, Mr. Kenworthy studied its evolution over time, comparing how changes in income concentration across the world’s industrialized nations related to changes in a whole set of social and economic outcomes, from growth and employment to health and educational attainment.He came up mostly empty-handed: “My tests suggest it seems to be a small player in the overall story.”
Professor Stiglitz notes that the United States grew faster during the decades of low inequality immediately after World War II than it did after inequality started rising in the 1980s. But Mr. Kenworthy finds no meaningful impact of inequality on growth one way or the other. “Income inequality isn’t the only thing that differed between these two periods,” he said.
Similarly, Mr. Kenworthy found no significant relationship between increasing inequality and life expectancy, infant mortality or college graduation rates, among others. Even when some patterns do mesh — teenage pregnancy rates fell a little more slowly in countries where the share of income going to the top 1 percent grew fastest — the relationship is weak. If you take the United States and Britain off the list, the relationship disappears.
The relationship between inequality and the alleged stagnation of others' incomes is also not yet terrifying according to a colleague of Kenworthy:
“Most economists don’t feel there’s a logical mechanism that really is persuasive” linking the rise of the 1 percent and the stagnation of incomes for the rest, Professor Jencks said.
Even though hardly terrifying, Mr. Jencks still thinks we should take action:
Mr. Jencks describes the state of the debate between friends and foes of inequality in these terms: “Can I prove that anything is terrible because of rising inequality? Not by the kind of standards I would require. But can they prove I shouldn’t worry? They can’t do that either.”
That, alone, is enough to spur action. “Something that looks bad is coming at you,” he said. “Saying that we shouldn’t do anything about it until we know for sure would be a bad response.”
So not terrifying, but hey, something looks bad. So. We. Must. Do. Something!
And there's no doubt in my mind that "something" involves reduced freedom, bigger government, and more taxes. What a surprise!