Financial Times columnist warns about social inequality in US

“Republicans,” he warns, “will not be able for ever to divert attention to religious and ‘moral’ issues.” They “would be wise not to tempt fate by insisting on making permanent the tax cuts at the top of the scale.” He expresses his fear that the alternative to some modest increases in taxation on the very wealthy may well be a more aggressive soak-the-rich campaign.

Brittan advocates “forms of redistribution that do not inhibit economic performance.” He argues that this was the problem in the UK in the 1970s when the top marginal income tax rates were over 90 percent. He suggests that land and wealth taxes accompanied by more shareholder activism against high CEO salaries would be a better way of ensuring that inequality is reduced.

It is not exactly a damascene conversion, or even a return to the Keynesianism in which he was trained, but Brittan’s warning is a sign that highly experienced figures with a background in economics and politics are increasingly concerned about the direction of the US economy and the political impact it may have if social inequalities continue to grow.

Brittan’s warning follows a recent study from the US that shows that between 1966 and 2001 only the richest 10 percent enjoyed a growth rate in their real wages and salaries that was equal to or above the average rate of growth in productivity. [2]

The study finds that “Growth in median real wage and salary income barely grew at all while average wage and salary income kept pace with productivity growth, because half of the income gains went to the top 10 percent of the income distribution, leaving little left over for the bottom 90 percent.”

It has always been a standard argument in conventional economics that if all incomes were equal, it would benefit most people very little. UK Prime Minister Tony Blair has argued that he is not concerned about the income of few super-rich people like footballer David Beckham, but about raising the living standards of the poor. What this new study shows is that so much wealth has now accrued to the super-wealthy that it does indeed affect how much is left for everyone else.

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http://www.wsws.org/articles/2006/feb2006/ftim-f24.shtml