Why Public Policy Helps the Rich Get Richer
The rise in income and wealth inequality throughout much of the developed world, and particularly in the United States, since the late 1970s is a well-documented phenomenon. It is often argued that this is the natural result of technological changes and global market forces.
In Winner-Take-All Politics: How Washington Made the Rich Richer – and Turned Its Back on the Middle Class, authors Jacob Hacker and Paul Pierson argue that it is instead largely the result of 'public policies that have concentrated and amplified the effects of the economic transformation and directed its gains exclusively towards the wealthy'. Just some of the policies that have benefited affluent individuals and business interests include:
- Lowered income tax rates at the upper end of the income scale and relaxed tax treatment of capital gains and other investment income
- Reduced regulation on banks and financial institutions
- Special tax treatment for compensation via stock options, thereby encouraging greater emphasis on short-term stock price gains vs long-term investment and growth
- Weakening of the organising and collective bargaining rights of unions
The authors argue that the foreign policy, cultural and economic crises of the 1970s punctured the consensus behind America's New Deal and Great Society reforms. Conservatives, empowered with effective organisation and significant funding from the business community, were able to begin what would become a decades-long process of deregulation, tax cuts for the wealthy and overall dominance of the policy-making process.
Hacker and Pierson offer few specific remedies for the issues they highlight. They emphasise the need to rebuild the organisational capacity of the middle and working classes to act as a legitimate counter-balance to the power of business interests and restore what they see as balance to American policy making.
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