The topic should be at the forefront of our current political debate, for economic inequality has been growing in the United States for some time, and very evidently so in the 1980s.
Distribution almost always means some degree of inequality. This turns out to be ambiguous. Inequality can be good or bad depending on a host of intricate connections with nearly all facets of economy and society. Income, wealth, size of firms, size of communities--all functioning entities in society can be, and are, of unequal size. As a consequence, they control different sized parts of the whole that is distributed among them. This includes the control of the creation and allocation of human capital.
The meaning of inequality touches on many factors, both individual and collective. Among them are incentives to exertion; reward for effort; the resources to realize one's potential; welfare, both individual and collective; and power within society--power to maintain one's private sphere versus the power of great wealth to coerce or enforce the will of the rich and the economically powerful. Money power often tends to infringe on ballot power. James Madison, the principal author of the U.S. Constitution, warned against the possible misuse of money power.
The basic explanation of economic inequality was put forth nearly two centuries ago ...
The experience of primitive resource abundance got a new lease on life in the Western hemisphere following the geographic discoveries. The North American frontier experience was a breeding ground for economic and political democracy. The same force was frustrated in Latin America because its institutions were patterned on Old World scarcity and inequality. Similar problems also took root in the South of the United States with the slavery economy. Here, the logic of scarcity was inverted: Bondage (as in parts of the Old World) was a response to the scarcity of labor. The history of bondage and labor freedom in Europe, including Russia, reflects this paradox. The same has been true until recently in parts of Brazil, for instance.
The American experience with abundant land was paralleled later in the country's unexpected abundance of petroleum and natural gas. Again, as in the Old World, resource owners sought relief from the cheapening of abundant resources by promoting intentionally designed overuse, leading to social waste, and hence contrived scarcity. Contrived scarcity turns the relation between rich and poor into a class conflict rather than a matter of economic rationality.
From the New Deal until recently, public policy in the United States to some extent tended to favor less economic inequality among the population, as should be expected from economic development and affluence. In the 1980s, however, this trend was reversed. Tax reform also has moved the trend in the wrong direction, without achieving the consequences for the sake of which it was advanced. An already disturbing tendency toward plutocracy in the nation's political