Income Inequality in The United States - Significance of Inequality

Significance of Inequality

Among economists and related experts, most agree that America's growing income inequality is "deeply worrying", unjust, a danger to democracy/social stability, or a sign of national decline. Concern extends even to such supporters (or former supporters) of laissez-faire economics and private sector financiers.

Former Federal Reserve Board chairman Alan Greenspan, has stated reference to growing inequality: "This is not the type of thing which a democratic society — a capitalist democratic society — can really accept without addressing." Some economists (David Moss, Paul Krugman) believe the "Great Divergence" may be connected to the financial crisis of 2008. Money manager William H. Gross, managing director of PIMCO, criticized the shift in distribution of income from labor to capital that underlies some of the growth in inequality as unsustainable, saying:

"Even conservatives must acknowledge that return on capital investment, and the liquid stocks and bonds that mimic it, are ultimately dependent on returns to labor in the form of jobs and real wage gains. If Main Street is unemployed and undercompensated, capital can only travel so far down Prosperity Road."

He concluded: "Investors/policymakers of the world wake up – you’re killing the proletariat goose that lays your golden eggs."

On the other side of the issue are those who have claimed that the increase is not significant, that it doesn't matter because America's economic growth and/or equality of opportunity are what's important, that it is a global phenomenon which would be foolish to try to change through US domestic policy, that it "has many economic benefits and is the result of ... a well-functioning economy", and has or may become an excuse for "class-warfare rhetoric", and may lead to policies that "reduce the well-being of wealthier individuals".