The inequality in the United States between the highest earners and the lowest is at its highest peak since just before the Great Depression. Middle class wages have stagnated for three decades. Stagnated is a kind way of saying, “You made more money over time, but inflation and changing patterns of spending ate the increase.”

The existence of the middle class is directly threatened. In a few years, there will be no middle class, only exploitable lower class peons and a well heeled upper class living in gated communities if they have not found a more comfortable home away from the riff raff, perhaps, in Singapore.

Mark Thoma, writing in The Fiscal Times, has an article called Income Redistribution: The Key to Economic Growth?

I’ve never favored redistributive policies, except to correct distortions in the distribution of income resulting from market failure, political power, bequests and other impediments to fair competition and equal opportunity. I’ve always believed that the best approach is to level the playing field so that everyone has an equal chance. If we can do that – an ideal we are far from presently – then we should accept the outcome as fair. Furthermore, under this approach, people are rewarded according to their contributions, and economic growth is likely to be highest.

But increasingly I am of the view that even if we could level the domestic playing field, it still won’t solve our wage stagnation and inequality problems. Redistribution of income appears to be the only answer.

The rest of the world has a huge supply of excess labor, and it is developing rapidly. So long as developing countries can continue to draw upon excess labor to expand economic activity, there will be little pressure for wages to rise and workers in the U.S. will continue to struggle. Until the rest of the world is more developed, or stops growing in a way that substantially alters the global pattern of production, a time that looks to be far, far away, unskilled workers in the U.S. will not get their share of economic growth.

We’ve given the market economy 40 years to solve the problem of growing inequality, and the result has been even more inequality. Markets do not appear to be able to solve this problem on their own, at least not in any reasonable time frame. Some people say education is the answer, but we have been trying to reform education for decades, yet the problems remain. The idea that a fix for education is just around the corner is wishful thinking.

Professor Thoma is a friend on Facebook and maintains a blog that he updates with great regularity. I recommend both.

James Pilant