Rising Inequality Contributes to Slow Recovery

[themack89]

Something we don't often see on beyond, an academic reference:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2205524



Inequality, the Great Recession, and Slow Recovery

Barry Z. Cynamon
Federal Reserve Bank of Saint Louis

Steven M. Fazzari
Washington University in St. Louis

January 23, 2014


Abstract:

Rising inequality reduced income growth for the bottom 95 percent of the income distribution beginning about 1980, but that group’s consumption growth did not fall proportionally. Instead, lower saving led to increasing balance sheet fragility for the bottom 95 percent, eventually triggering the Great Recession. We decompose consumption and saving across income groups. The consumption-income ratio of the bottom 95 percent fell sharply in the recession, consistent with tighter borrowing constraints. The top 5 percent ratio rose, consistent with consumption smoothing. The inability of the bottom 95 percent to generate adequate demand helps explain the slow recovery.

Capitalism has its merits, but when wealth transfer and/or concentration appears to lead to situations like this, you gotta wonder...

[ZenOps]

I dunno.

Arguably, the industrial revolution mechanized tasks that improved productivity without requiring extra human labor. IE: Knitting each thread of yarn would take a person two weeks to make a shirt.

Now with a knowledge based revolution, thinking tasks improve productivity. IE: Calculating GPS coordinates and road directions to a fire or a hospital in any city in the world would be impossible without a team of humans.

The inequality may be justified if your skills can be replaced by a machine or calculator. Becoming a painter or singer - might not be as bad a profession as some might think, as the machine and the computer have yet to master these areas.