Posted by
Bill Crawford on Sunday, June 19, 2011 7:28:43 PM
The idea that the gap between rich and poor is increasing is a popular one now, and is at the heart
of many policy proposals to correct it.
I do not dispute the increasing gap over the last twenty years. I’m simply saying that there are good reasons for it and it will correct itself soon. I will also try to show why it looks worse than it really is because of what is being used as a comparative baseline.
In the beginning of the Industrial Revolution, the same increasing gap occurred, first in Western Europe and then in America. The new technology that revolved around the steam engine was developed and owned by a select few, who made out like bandits at first and then eventually saw their industry run past it’s patents, get copied by others
and then spread, beyond their direct control, to the mainstream.
In the meantime, only workers possessing the new skills could take advantage of the new technology and make a living out of it. Over a few decades, the dispossessed either were left behind completely or made out the best they could in what they were doing. The next generation grew up adjusting to the new world and closed this gap when
they entered the workforce, coming of age with the needed skills just when the technology was becoming the largest part of the economy. The rich became not as rich as the poor had more access to the new jobs, and the gap closed.
The same thing is happening now. The billionaires that led the way into the computer age have done their work, and there are others out there now, expanding the efforts of pioneers like Bill Gates and bringing what used to be the tools of the few and leaving it to anyone who can operate a personal computer.
As with the maturation of the Industrial Revolution, the rich will stop accumulating wealth as fast, and the new generations of workers will enter the labor force with a comfortability with the new jobs, just when they are expanding into almost every aspect of our lives. The entry level workers will make close the gap from the bottom up.
This is a cyclical process, and there isn’t much that government policy can do to change it, or change it’s speed.
The baseline that is beingused to show the increasing gap is deceptive. It is the state of average pay at the end of the post World War II expansion.
At the end of that war, almost half the economic activity on the entire planet took place within our borders. Our trade with the rest of the world as they rebuilt provided a basis for the United States expanding at an average rate of 7% a year for a quarter century, until it was cut off by the first OPEC oil embargo. We have only had
one year (1984) since that came even close to that.
Because of this expansion, the career paths of the WWII veterans allowed generosity in pay increases that we have also not seen since then, at least not on a wide scale. That expansio came closer to creating a true middle class than anything the world has ever seen. Comparing our income gap now to that makes it look much worse than it
really is.
The gap that came with the new age of computers, along with it shrinking when that technology matures, is cyclical and expected. The expansion that started in 1945 was an aberration.