Salvatore Babones: The economy is growing, but most workers are left behind.
JAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I’m Jaisal Noor in Baltimore.
Since the early ’80s, recoveries have become progressively unequal. During the ’90s expansion, 45 percent of income gains went to the top 1 percent. During the Bush economy, the top 1 percent increased their income share to 65 percent. And in the current recovery, the top 1 percent have managed to capture the entirety of income growth.
Now joining us to discuss this is Dr. Salvatore Babones. He’s the author or editor of eight books and more than two dozen academic research titles. His academic research focuses on income inequality, economic development, and statistical methods for comparative social science research. He writes a weekly column for Inequality.org and contributes to progressive websites and newsletters across America.
Thank you so much for joining us.
DR. SALVATORE BABONES, UNIVERSITY OF SYDNEY: Thanks for having me on the program.
Noor: So what can you tell us about this new number that’s come out about how in the current economic recovery the 1 percent has enjoyed the vast amount of income gained?
Babones: Well, really all I can tell you is that it’s nothing new. It’s part of a process that’s been going on really since the early 1970s.
Noor: And, Salvatore, what’s the significance that this inequality gap is increasing?
Babones: Well, the inequality gap has been increasing over time since the early 1970s. At first, it was really the top 20 or 25 percent who were pulling away from the rest of the population. By the early 1990s, it was only the top 10 percent. And since the late 1990s, it’s really been only a tiny sliver of the population, the top 1 percent, who’ve gained pretty much all of the gains that have occurred in the U.S. economy.
Noor: We often hear that income inequality is caused by desirable things like productivity, innovation, trade, education, thus we can’t do much about it without undermining the overall economy. Do you agree with this? And if not, what do you think are the principal factors responsible for this acceleration of inequality?
Babones: No, I think that explanation is entirely false, and I think’s history shows us that that’s the case. All through the late 19th century and early 20th century, the invention of the automobile, the telephone in the postwar era, with, you know, the invention of the modern world of the 1950s, ’60s, and ’70s, there was declining inequality over time. Ordinary people made enormous income gains between the 1870s and the 1970s. My own research shows that ordinary people’s income grew at about 2 percent per year between the 1870s and the 1970s and grew 0 percent per year from the 1970s through the 2010s. So certainly the two are not necessarily connected.
Noor: And how much are government policies responsible for this?
Babones: Oh, I’d say it’s all been a shift in government policies. Since the early 1970s, beginning with actually major tax cuts in the beginning in the ’60s and really picking up steam in the ’70s under Nixon and then Reagan in the ’80s have led to a massive shift in income in America from the the poor to the rich. But it hasn’t just been income tax reductions. It’s also been changes in the way income is distributed before taxes—the decline of unions, which didn’t just happen because something went wrong with unions. It happened because of changes in government policy that made it more difficult to unionize and that encouraged employers not to negotiate with unions.
Noor: And, finally, what can we do to help reverse this trend?
Babones: Oh, there’s lots we can do. I think the rising inequality has been driven by government policy and it can be driven back by government policy. We really need, you know, a three-pronged approach. One is to simply raise taxes on [incompr.] incomes back to their historical levels. Higher taxes mean that even if they make high incomes, we’ll be able to claw back some of that for the good of society. Second, we need government spending in ways that benefit ordinary people, so government spending on schools and education, government spending on hospitals, government spending in general to create jobs in our economy. And there—the government can change the regulatory environment. The regulatory environment of the last 30 or 40 years has made it very difficult to unionize, has led to very low minimum wages, has let corporations do whatever they want, essentially. If we reregulate the economy, we can claw back some of this dramatic increase in inequality over the last 30 years.
Noor: So what do you think is the most important thing for people to know about these new figures that have just been released?
Babones: One really interesting factor is that the rising inequality today is nothing new. It’s been going on for a long time. But during the last Great Depression in the 1930s, income inequality actually declined. The income share of the richest 1 percent went down, not up, through the 1930s. And at the same time their incomes were going down, their taxes were going up quite dramatically, up to a maximum of close to 99 percent. In the current recession, the incomes of the very rich have only gone up, not down, and at the same time their taxes have remained stable with a just tiny blip up in 2013.
Noor: Salvatore Babones, thank you so much for joining us.
Babones: Thanks for having me on.
Noor: Thank you for joining us on The Real News Network.