The Inequality Trap
In the early twentieth century, some argued that capitalism tends to generate chronic weakness in effective demand, as growing concentration of income leads to a “savings glut.” Nowadays, with income inequality on the rise, that argument has returned.
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WASHINGTON, DC – As evidence mounts that income inequality is increasing in many parts of the world, the problem has received growing attention from academics and policymakers. In the United States, for example, the income share of the top 1% of the population has more than doubled since the late 1970’s, from about 8% of annual GDP to more than 20% recently, a level not reached since the 1920’s.