Don’t Blame Inequality on the Rich

Paul Krugman asks, “Is vast inequality necessary?” His answer is that some inequality is “inevitable,” but “the rich don’t have to be as rich as they are.”

But maybe the problem isn’t the rich are too rich. Maybe the problem is the poor aren’t rich enough. Like Bernie Sanders, who accuses Trump of being a demagogue and then spends most of his speeches lambasting the wealthy, Krugman wants to blame the wealthy for being rich. But the wealthy aren’t the ones who put policies in place that keep the poor oppressed.

The Antiplanner recently met Alan Graham, who helps homeless people in Austin. He says the homeless have too many health problems to make good employees, but they are very entrepreneurial. But the only entrepreneurial activity they are legally allowed to engage in is begging, because the courts have ruled that begging is a First Amendment right. Anything else they would like to do, even just open a lemonade stand, requires fees they can’t afford and permits from a bureaucracy they can’t understand. These rules were made by middle-class bureaucrats and progressive elected officials, not the wealthy.

As the Antiplanner documented in American Nightmare, homeownership is such an important route out of poverty that working-class families actually had higher homeownership rates in 1890 than middle-class families. Since then, middle-class bureaucrats have layered zones upon rules upon fees on land available for housing.

Despite this, homeownership continued to rise until around 1970, which happens to be about the same time that income inequality in the United States bottomed out. The continued rise in homeownership was possible because working-class homebuyers could always escape the regulated cities into unregulated suburbs where they could afford to buy or build homes.

Then some states and urban areas began regulating the suburbs as well. Since then, national homeownership rates plateaued at a little over 60 percent. But this disguises the continued growth in homeownership in relatively unregulated states and the declines in homeownership in more regulated states. Homeownership rates in California, Oregon, and Washington, for example, all peaked in 1960. Were it not for anti-sprawl regulation, national homeownership rates today would probably be above 70 percent.

The wealthy didn’t pass such land-use laws and regulations (though they and many upper-middle and middle-class families benefitted from it). Instead, progressive politicians and bureaucrats passed this regulation.

So quit blaming the wealthy. If people like Krugman, Naomi Klein, and Bernie Sanders want to know who is responsible for growing inequality, they should look in the mirror.

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4 thoughts on “Don’t Blame Inequality on the Rich

  1. Frank

    “Despite this, homeownership continued to rise until around 1970, which happens to be about the same time that income inequality in the United States bottomed out.”

    It’s also around this time that the US abandoned the remnants of a gold standard and went to pure fiat currency. The “Great Inflation” of the 1970s was a result. So was the loss of purchasing power by consumers and erosion of savings.

    If you want to look at the real culprit behind decreasing wealth of the middle class and the poor, look no further than monetary policy, which just so happens to favor the wealth and the well connected.

  2. msetty

    I hate to admit it when both The Antiplanner and Frank have gotten parts of the economic puzzle correct. The poor and working classes suffer economically from the aesthetic desires by the upper middle class as exemplified by nit-picking zoning codes and similar petty b.s. rules and regulations. And the rich have gotten richer and everyone else relatively poorer by U.S. financial policies and tendencies towards rampant crony capitalism, whether through direct subsidies such as the money shoveled through the Pentagon, or financial manipulations made possible through favorable rules or the elimination of some rules (e.g., repeal of Glass-Steagal).

    But this only goes to show that the important thing politically is how power plays out, e.g., who decides and who benefits. Ever since Reagan the economic and social rules have been tilted in favor of the upper classes and the super-rich, certainly not the result of the market as some of the more naive libertarians and Randoids often claim. We have a so-called “economic recovery” where the lion’s share of new income is going to the 1%.

    So I don’t understand why it is such a shock to some people that Donald Trump and Bernie Sanders are gathering such strong followings. Of course, while Trump has gotten huge mileage out of race-baiting, Muslims and Mexicans aren’t the problem. “Wall Street” and their political whores are, as Sanders correctly points out.

  3. CapitalistRoader

    And the rich have gotten richer and everyone else relatively poorer by U.S. financial policies and tendencies towards rampant crony capitalism, whether through direct subsidies such as the money shoveled through the Pentagon, or financial manipulations made possible through favorable rules or the elimination of some rules (e.g., repeal of Glass-Steagal).

    Because, donchaknow, GE and Obama am da best and they ain’t no crony capitalists. There just working for the proletariat. Definitely not bourgeoisie : Iimproved literacy + Increased Jobs + Accessible Healthcare+ Affordable Housing = Community Empowerment.

    It’s just that Massachusetts, um, came up with more “community empowerment” $$$ than Connecticut. I hate it when that happens. “Hey, buddy, I’m pretty low on community empowerment $$$, Can you front me some?

    But community empowerment $$$ am NOT the same as crony capitalism. No! They am completely different.

  4. Freeman

    I hypothesize that there is a correlation, if not causal, relationship between monetary policy and zoning restrictions, at least in certain markets:
    – loose money creates investment “gold rush” to develop
    – community reacts to increased development pressure by enacting more restrictive zoning
    – investment bubble collapses, leaving community with fewer jobs and less tax revenue
    – community reacts by reducing zoning restrictions

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