A Great Shining Blog

Paul Krugman has a new blog hosted at the NY Times, titled "The Conscience of a Liberal".  If the first post is any indication, Prof. Krugman has no conscience at all, at least when it comes to choosing between truth and left-pleasing spin.  His topic, probably not for the last time, is income inequality, and he recycles with even greater emphasis a howler we targeted back in 2002.  Here is Krugman on what many of us have learned is the Great Depression:

The Great Compression: The middle-class society I grew up in didn’t evolve gradually or automatically. It was created, in a remarkably short period of time, by FDR and the New Deal. As the chart shows, income inequality declined drastically from the late 1930s to the mid 1940s, with the rich losing ground while working Americans saw unprecedented gains. Economic historians call what happened the Great Compression, and it’s a seminal episode in American history.

...Most people assume that this rise in inequality was the result of impersonal forces, like technological change and globalization. But the great reduction of inequality that created middle-class America between 1935 and 1945 was driven by political change;

The Great Compression was "created" by FDR and the New Deal?  I am sure libs would like to think so, but an alternative view is that the Great Depression and WWII were the real causes of income compression, and FDR and the New Deal were responses to the depression.  James Scrivener had fun with this a few years ago when Krugman made a similar point.

Of course, as a policy prescription, urging Dems to inflict a depression and world war on the rest of us in order to achieve Krugman's vision of greater income may seem a bit harsh, so I can see why he shies away from that.

Let's cut to Piketty and Saez, whose work has received glowing praise from Krugman.  These excerpts are from their 2001 paper:

Before WWII, the highest incomes were overwhelmingly composed of rentiers deriving most of their incomes from their wealth holdings (mainly in the form of dividends).

...The large depressions on the first part of the century destroyed
many businesses and thus reduced significantly top capital incomes.

...This very specific timing, together with the fact that very high incomes account for a disproportionate share of the total decline in inequality, strongly suggests that the shocks incurred by capital owners during 1914 to 1945 (depression and wars) have played a key role. The depressions of the inter-war period were far more profound than the post-WWII recessions. They destroyed many businesses and had a stronger impact on capital income than labor income.

No mention of the New Deal as a cause of income compression.  However, folks looking for a government role can find this:

The negative effect of the wars on top incomes can be explained in part by the large tax increases enacted to finance the wars. During both wars, the corporate income tax (as well as the individual income tax) was drastically increased and this reduced mechanically the distributions to stockholders (see our discussion below and appendix A4).

Somewhat helpful, but since the US only formally entered the war in 1941 this does not provide much support for fans of the New Deal.

In a bit of a cart and horse reversal, Piketty and Saez also argue that some of the government programs of the New Deal changed societal norms about acceptable levels of (high) pay.  Alternatively, one might have thought that changed norms made these New Deal programs possible.

Let's try another perspective - since Claudia Goldin and Robert A Margo coined the phrase "Great Compression" (and have the number one hit on Google), let's hand them the mic:

The structure of wages narrowed considerably during the 1940's, increased slightly during the 1950's and 1960's, and then expanded greatly after 1970. The era of wage stretching of the past two decades has been a current focus, but we return attention here to the decade that was witness to an extraordinary compression in the wage structure. Wages narrowed by education, job experience, region, and occupation, and compression occurred within these cells as well. For white men, the 90-10 differential in the log of wages was 1.414 in 1940 but 1.060 in 1950. By 1985 it has risen back to its 1940 level. Thus the recent widening of the wage structure has returned to it a dispersion characteristic of fifty years ago. We explore various explanations for the rapid compression in the wage structure during the 1940's and for its maintenance during the subsequent decade or more. We first assess the hypothesis that the Great Depression left the wage structure in 1939 more unequal than in the late 1920's, but we find evidence to the contrary. World War II and the National War Labor Board share some of the credit for the Great Compression. But much belongs to a rapid increase in the demand for unskilled labor at a time when educated labor was greatly increasing in number. These same factors caused the wage structure to remain compressed until its expansion during the past two decades.

Hmm - high demand for unskilled labor coupled by a low supply.  How is Krugman going to recreate that?  I have no idea what his plans might be for the demand side, but are libs really planning to close the borders to reduce the supply of unskilled immigrants?  I don't think so.

Well.  Krugman wants to return us to a happy place we reached by way of war and depression, a place where minorities and women could not work, and where illegal immigrants toiled in the fields but nowhere else.  And he wants to pretend that is not how we got there, and not where we were.  Good luck.  Let's hope his subsequent blog offerings show a bit more of a basis in reality.

Comments

[kim]

Ten years ago Paul Krugman considered Social Security in trouble. That's all I, or anyone, need to know about him.
=================

[Bigfoot]

who cares about income differential? I make enough to be happy, no I cant afford a jet to take me to my private island, but I can afford to live what I consider a comfortable life. I do not care that there are people who have more,but do they have more worries? that, I don't need

[syn]

Some legacy that New Deal, a Great Society of serfs stuck inside the socialist slave plantation run by really smart liberal do-gooders who are experts in the art of scamming the system.

Rich Collectivists never suffer the consequences of their ideals since their wealth protects them however they need to keep people impoverished so that their ideals have substance.

[MarkD]

We'll have to get along without Times Select, but it's still possible and wise to ignore Krugman. I grew up sans color TV, computer, microwave, the internet, etc. More equal and poorer is nothing I aspire to.

[Clarice]

"Rich Collectivists never suffer the consequences of their ideals since their wealth protects them however they need to keep people impoverished so that their ideals have substance"

The US Senate consists of the largest collection of rentiers and spouses of rentiers in our society. Second to them are those like reid and Murtha and Mollahan and Byrd who've grown wealthy by pelf.

[Rick Ballard]

Junior Sulzberger's brilliant idea to fence off his dung heap and charge admittance has gone a glimmering so he tore down the fence? Can we appeal to the zoning board?

Flogging Krugman is fine light sport but the whole group that Sulzberger had locked behind his fence is rather low hanging fruit. It's not as if they've generated a new idea in the past thirty years or so.

In terms of the gist of the argument made by Golden and Margo, we're going to have a test of the theory beginning in 2010. Current BLS projections are founded upon the premise that boomers are going to postpone retirement at a rate sufficient to provide the full increase in additional workers necessary to sustain a growing economy. While I woudn't bet a nickel on the accuracy of the premise, I would note that it does not address the need for a larger pool of workers on the bottom rung. "Cheap" labor is going to become scarce fairly quickly and the effect on wages should be very noticeable by 2012.

With a bit of luck, the Times will at minimum be under new ownership by then, so we may well be spared another Krugman fantasy analysis concerning spurious cause married to ill defined effect. I'll keep my fingers crossed, at any rate.

[Barney Frank]

I feel kind of sorry for Krugman after that demolition by TM, in the same way I feel sorry for a pitbull that has to be put down after it bites someone. The real guilty party is the owner. Shame on the Times for letting Paul outside without his muzzle.
Bring back Times Select!

[Ralph L]

I think Krugman wants to go back to the punitive tax rates FDR put in before the war, which lengthened the Depression, but lowered the upper incomes. Who would declare income to have it taxed at 90%? Then the politicians can sell tax breaks to their grateful friends.

[Ralph L]

Here's a chart of top tax rates which doesn't seem to take into account Reagan's 1981 tax law, which I thought lowered all rates 25% over three years (and the unearned rate from 70% to 50 before that). Some rich people must feel guilty, so they support Dems against their own interest. What's the matter with Westchester? is a book waiting to be written.

[sbw]

What makes you think Paul Krugman is liberal?

[Sara]

All I know is we were a very middle class family and my parents and grandparents never referred to FDR by name, only "that man in the White House." They despised him every bit as much as those who despised Bill Clinton or who despise GWB today.

[bgates]

sbw - this?

[PeterUK]

"Second to them are those like reid and Murtha and Mollahan and Byrd who've grown wealthy by pelf."

So,in effect,they are pelf made men?

[John]

To read some of these posts you'd think income inequality is unimportant. If that's the case why are responsible members of the administration like Hank Paulson making speeches about it and saying it needs to be turned around. Krugman is not requesting a return to the great depression or world war two, although commentators on the right keep telling us were involved in the equivalent, he's merely pointing out that between 1932 and around the early eighties there was a lot less income inequality than today and that in terms of the common good that's probably a good thing. The country knows there's a problem that's why there is so much gloom around despite the fact the economy has performed well at the macro level over the last few years. The knee jerkers on the right want to deny it which is basically the Republican position on this and a bunch of other issues from global warming to healthcare. It's symptomatic of the entire disconnect from reality and the lives of ordinary people that has become the norm in today's extremely polarized Republican party. They are going to pay a huge price for it at the next election.

[Wotzi]

Tom,

I'm back to reading blogs again and found your response to PK - as one does - at memeorandum.
My choice was taken around having read you before and found a fair pov with which to try balance my understanding of things.

This time though I was disappointed. There appears in your writing an almost complete lack of understanding/appreciation of the undoubted echelon society in which you live. And without adding to the personal it would now seem that you are part of the present 'divergence' and thus incapable of partaking in a solution.

Which adds to my disappointment.

[Rick Ballard]

"he's merely pointing out that between 1932 and around the early eighties there was a lot less income inequality than today and that in terms of the common good that's probably a good thing."

The Great Depression plus one World War plus a Cold War plus two rather nasty minor wars plus wholesale violations of citizens rights (internment of the Japanese Americans) plus multiple race riots plus rampant inflation plus stagflation plus....

How stupid do you figger we are around here? Your pitch works fine at with a crowd where mean IQ-1SD is the rule but this crowd ain't that crowd.

[PeterUK]

John,
John "Find a rich one and marry her" Kerry,the Sulzburgers,Al "Rolling in it" Gore,John "Even the tip was more than $100" Edward,Harry G.Reid,Their Imperial Highnesses the Kennedy family,I could go on but you might have got the message by now.If not do be careful parking their cars.

[Blotto]

This whole inequality whine is a silly canard that is effortlessly exploded when the effects of immigration are correctly factored in. Leftists like Krugman can't possibly get their brains wrapped around this simple fact because it requires a rudimentary understanding of grammar school arithmetic...which sadly, is no longer taught in our Marxist Youth Camps (public schools and universities). So don't hold your breath waiting for an "economist" to understand that importing massive amounts of poverty tends to swell the head count of the lowest quintiles without any proportional and corresponding increase in total wealth for that quint. And that dividing the same number by an increasingly larger number tends to result in a smaller "average".

This importation of poverty shoves people at the top-end of that lowest quint into the next higher quint which has the effect of lowering that quint's total share of the wealth....and so on.

Income inequality in this country peaked in the first decade of the 20th century when the tidal wave of European immigration occured. Income inequality curves follow immigration curves exactly. The trough that occured in the 1930's and '40's happened at a time when immigration to the US was at its lowest. Again....you don't need to be a Princeton flunky to figure out why people weren't pouring into the US during the Great Depression.

As immigration rates increased (especially after 1970)....so did income inequality...it has to...most immigrants arrive penniless and simple arithmetic drags down their share of total wealth.

But try explaining to a leftist that this is actually a GOOD thing....because it is.

We import poverty into the US and then RESOLVE it. As impoverished immigrants flood into this country, they inevitably find jobs and begin to climb the economic ladder. It no longer takes two or three generations to elevate into the middle class as it did during Krugman's hallucinated utopian period. The people who actually immigrate to the US now are working their way into the middle class in their own life time. So our income inequality actually documents the incredible success the US has in importing massive levels of third world poverty and RESOLVING it.

It's no coincidence that the countries that have the "best" income equality are North Korea and Zimbabwe. And that fact alone exposes Krugman's true Marxist agenda. One that demands that we all be poor.

[Extraneus]

So,in effect,they are pelf made men?

Ha!

[Extraneus]

You go, Blotto.

[Whitehall]

Long cycle theory also makes predictions that match historical income series. During the 15 to 20 year expansionary phases following depressions, wealth creation is at a frenzy and the innovators create big piles. Income "inequality" is at a max. BTW, a "depression" is defined as the end of cash cows as capital is forced to seek new and risky investments. 1990 to 1991 meets this definition. Venture capital started to really take off about then. Oddly, Trotsky predicted these dates too!

About midway through the 50 to 60 year long cycle, "trickle down" happens and the general standard of living increases. We should be starting this phase about now.

If we can cut off the poverty imports (3rd world immigration) we should see a very nice increase in Americans' standard of living over the next decade or two.

The bad news prediction is hegemonic war around 2020.

[Richard Head]

Actually, last year Krugman did call for closing the borders to address income inequality:
"Because Mexican immigrants have much less education than the average U.S. worker, they increase the supply of less-skilled labor, driving down the wages of the worst-paid Americans...Realistically, we'll need to reduce the inflow of low-skilled immigrants..."
http://select.nytimes.com/2006/03/27/opinion/27krugman.html

[Patrick R. Sullivan]

As I suspected, Krugman deletes comments that disagree with him. 'Cause mine (entirely polite) pointing out the Great Depression/WWII explanation of what he's so happy about. And that the past half century splits into two twenty five year segments, where the just concluding quarter century had only two short, mild recessions, but the one he's nostalgic for had six...didn't get posted with all the comments congratulating him.

[PeterUK]

"The bad news prediction is hegemonic war around 2020."

Not all bad for you,the US came out of WWII richer than it was in 1939.

[Blotto]

"Actually, last year Krugman did call for closing the borders to address income inequality:"

This is a simplistic supply-demand argument that completely ignores new wealth creation in an expanding economy (remember, Marxists like Krugman believe that wealth is finite).

This argument only works if you accept that the demand for low skill labor remains stagnant...which it absolutely does not.

If people like Krugman would abandon their archaic reverence for ancient and discredited Marxist silliness...they would see that the market resolves all issues.

When I was growing up in the 1970's....nobody had a gardner...neighborhood kids cut lawns for a buck or two. Now we have an entire gardner industry...and I don't know anybody who does NOT have a gardner. My gardner barely speaks English, employs his two brothers, and according to him...nets for himself after taxes and expenses (including his employees) $60K/year...which I believe because I know the neighborhood where he owns his own home. He gets $100/month for four weekly visits of about 10 minutes (mow-blow and go)....do the math...that's lawyer money.

Now...anecdotal evidence is not offered to prove anything except for an effect - all this low skilled labor creates new markets.

Did you have a professional dog groomer when you were a kid (let alone a MOBILE one who comes to your house)? Of course not...the thought would have been silly. We do now. Why? Krugman needs to answer that before he pigeon-holes himself into a cheap supply-demand argument fraudulently devoted to ever increasing supply and stagnant demand.

[Seth]

It's been a while since I've seen a straw-man argument carried out this extensively. I've read numerous Krugman editorials that were explicitly anti-war and I'm fairly certain that no one is pro-massive depression. To offhandedly dismiss Krugman's displeasure with the widening income gap in this country and claim that he pines for the days of bigotry and depression is horribly weak analysis.
Hopefully, Realclearpolitics.com doesn't link to you anymore so I don't accidentally get exposed to such a sad strawman argument again.

[sbw]

bgates, there are lots of people who call themselves liberal who are not. Too many who call themselves liberal today tend to advocate large government they can use to oppress others. They tend to be foggy thinkers who prefer to shout down those who disagree with them. They are more interested in appearing correct than actually being correct.

And all that, my friend, is not liberal.

[MikeS]

It is true that modern progressive liberals are neither liberal nor progressive. Yet they are generally referred to by those words in this country.

I consider myself to be liberal in the traditional sense of the word, however if I described myself as a liberal people might be mislead.

[Soylent Red]

This argument only works if you accept that the demand for low skill labor remains stagnant...which it absolutely does not.

Outstanding Blotto. I'm no economist but allow me to pile on...

The assumption above is also based on the definition of "low skill labor" vis a vis "low wage jobs". As we move away from a purely industrial economy into a predominantly info/service economy, the truly low wage jobs will not even exist in this country. Entry level wages will therefore tend to rise.

To see this effect at its logical conclusion, recall the days when you could make a meager living as a customer service rep or software support rep. Today you still can, if you live in India.

My points are:
1. As the nature of the economy changes, so too will the wealth distribution. The rich will have to get richer quicker to keep the so-called gap from shrinking. The low end will rise faster than in an industrial economy.

2. We'll still be importing lettuce pickers and hotel maids, but they will be a proportionately smaller and smaller segment as the global economy specializes.

3. As they become a smaller segment, they too will see wages increase.

[carlf]

Krugman is a relentless idealouge who knows less about economics than my granddaughter. Only a puppy training aid like the NYTimes would give actually ask him to opine on subjects he has demonstrated he knows little of. His win loss record on predicted outcomes make the Cubs look like the Yankees.

[Blotto]

"To see this effect at its logical conclusion, recall the days when you could make a meager living as a customer service rep or software support rep. Today you still can, if you live in India."

That's right....and America has been the world's leading exporter of jobs for nearly a century. Good for us...let's hope that never ends.

What Marxists like Krugman will never understand is that America is always about "what's next". For example, we created the consumer electronics industry...and then gave it away to the Japanese. Krugman moaned the whole time about what a tradgedy that was...what a "crisis" that is for our "manufacturing" sector. Meanwhile....go in to any home and you'll see an $80 Japanese DVD player that required design, development, testing, a factory, special machine tools, labor/union negotiated settlements, expensive supply lines and shipping to retailers who take a big chunk leaving a profit margin of about two dollars for the manufacturer who took all that pain.

Then look next to it...what do you see? Five, six foot stacks of American made DVD's, each purchased for $15 ...and the collection never stops growing.

Score:

Japan $2
US $15,000 and counting

Yeah....we were really stupid (according to Krugman).

I'm sick of hysteria. And right now....hysteria is all the Left has to offer. Krugman and his ilk are victims of what is known as "The law of increasing annoyance." This law states that as humanity resolves more and more of the large problems, the lesser problems that are left take on ridiculously higher level of annoyance and therefore, disproportionate levels of hysteria. And for the political Left - whose entire dogma is based on contrived "crisis"...the less significant the problems are, the sillier the "crises" become.

Income inequality is precisely that...a silly canard by depressed leftists who have nothing bigger to worry about...and nothing better to exploit for their nefarious wealth redistribution schemes.

Income equality and income inequality are equally destructive in the extremes. Everything in life exists in the margins. So the problem is deciding when income inequality has gone too far. Given that a large part of our income inequality is merely a function of our elevated levels of immigration and its impact on simple arithmetic...it is impossible to argue that we are anywhere near that point. It is equally difficult to argue that we could EVER get to that point. The market is the great equalizer...sadly leftist "economists" like Krugman will never understand that simple fact.

[Topsecretk9]

Right on Blotto!

This law states that as humanity resolves more and more of the large problems, the lesser problems that are left take on ridiculously higher level of annoyance and therefore, disproportionate levels of hysteria.

AKA, lefties sweat the mouse poops and then Dateline and 20-20 "investigative" programming becomes all important. There is always a menace in the eyes of the left -- doesn't matter that they have to go out and create the menace, it is a menace to be sure. (and in creating a menace the teachable moment is ultimately for the greater good, so it's all good)

Wish we could just start a "send a lefty a rose bush to smell ONCE AND WHILE" campaign? --oops Roses prolly contain some carcinogen that causes sleep apnea or some obscure "crisis" ailment we don't even know yet and banned by the Progressives Against the Deadly Emissions of Plants (PADEP) and I didn't get the memo about the rose boycott.

Seriously though, I think much of this economic had wringing comes from the elite trust fundies that worry so for the little people and the pampered ill prepared boomers.

Not my problem. My parents are boomers, sitting on a home in the most desirable real estate in the country at retirement age and STILL can't retire right. Can't move just anywhere because prop 13 isn't honored in lots of CA counties (not as slowly anymore - almost a thing of the past) and the poor darlings lived ever so slight beyond their means and didn't plan well - they figured on more. Did I mention they're Democrats and they think everything is unfair? Love them to peaches, but they dug their own hole just like most everyone.

I don't even have to wonder, I know Krugman would be irrate more than I am at my neighbor who doesn't work, screams profanity etc. at her children all day while she collects big checks because 2 of those screamed at children are disabled. She lives in a really nice neighborhood, her children are picked up by a bus directly in front of her home. While the children are away she watches TV, movies, talks on her cell phone and then listens to music very loud all day. And NICE cars she has, 2 brand new SUV's. Don't know where dad"s" are.

He'd not be irritated at the gratuitous screaming abuse towards her gravy train providers, or the obscenity in the misuse in those taxpayer provided funds, he'd be pissed at the loud interruptions at his cocktail hour parlor discussions on poverty or his daily "fresh air" episode. OH - that's right he's RICH, he'd never live next to her! My bad.

I've lived with and next to enough lefties to witness the farce behind their high minded altruistic verbal atonements. Krugman was the man they made this cookie cuter shape out of.

[JorgXMcKie]

I've made this point before, but I believe it bears repeating.

Given a relatively Bell-shaped distribution of income (and ours is, and mostly has been for the data available), you can't go below zero, but the right end is infinite.

Thus, IF the distribution remains Bell-shaped AND grows, the right end goes further out while the mean/median moves right but the left end remains zero.

Thus, income that *increases* across the board *AUTOMATICALLY* increase the 'gap' between rich and poor but does so while improving everyone on the curve (on average) except those and or very near zero (who are mostly new entrants, anyway).

Our other choice would appear to be Krugman's, although he doesn't appear to want to claim it, which would be NO GROWTH or NEGATIVE GROWTH for everyone. This would, of course, decrease the 'inequality' he sees, while making us much more like North Korea. I think that explains a lot.

[Topsecretk9]

Incidentally, I read on some blog, don't think it was TM's place, but the wacko troother publicity whore who begged to be tazed was in the past PRAISED by some adorning crap he wrote about Krugman -- Krugman asked his people to contact the dude and offer to publish him or some such ----I will see if I can dig it up.

Now Krugman has a history of getting pwned by his adoring fans (Jason Leopold for sure and some other big embarrassment he had to retract- hey, was it about the wackos Kerry won math theory? I think so) - but I never know what's funnier - that the big smart man is so duped all the dang time or that he seeks out adoring Krugman porn for himself. Either way it's creepy.

[Jim Glass]

Thanks for the link, and the memories, but I'm not James Scrivener. I mean, feel free to call me whatever names you want, but in this case the real one might mind.

[Bostonian]

To add to what JorgX said, I'll note this:

What the hell business is it of mine if some fortunate and/or hardworking soul makes far more money than I do? How does that affect me in any way, shape, or form?

A pox on collectivism in all its forms!

[Voice of reason]

The land of the free (markets), and the home of the brave (entrepreneurs) – those words and that characterization of our great country have resonated thru the decades in spite of the default victim mentality of the liberal thought process.

That economic “inequality” is manifest in a system that rewards and promotes courage, passion, creativity, determination, and persistence is not the discovery of some deep thinking intellectual, but a necessary part of the equation –as surely as the lion gave the antelope its speed.

Even the platform of free speech from which Dr. Krugman demonstrates his ignorance is built on the blood and sacrifice of those who came before us and believed in equal opportunity for all – not equal reward for lazy, half-hearted, entitlement driven souls.

Even if the statistics he referenced are accurate, they only stand to demonstrate the obvious – beauty is in the eye of the beholder.

God bless America – land of the free, and home of the brave…

[kim]

Where ever is heard, discouraging words, and the clouds in the skies keep us cool.
=================================

[SPQR]

calf,
Unfortunately, you are not correct. Krugman knows a great deal about economics. The problem is not Krugman's lack of knowledge but his lack of scruple. He has been often caught making arguments that he knows are false. Krugman thinks that his previously good reputation as an economist can act as cover for his intentional misrepresentations of economics in furtherance of his rabid partisan oped pieces.

[sylvia]

"The negative effect of the wars on top incomes can be explained in part by the LARGE TAX INCREASES enacted to finance the wars. During BOTH wars, the corporate income tax (as well as the individual income tax) was drastically increased and this reduced mechanically the distributions to stockholders (see our discussion below and appendix A4).

Somewhat helpful, but since the US only formally entered the war in 1941 this does not provide much support for fans of the New Deal."

Am I missing something here TM ? - the quote says taxes were increased in BOTH wars, such as WWI. Now I don't have a chart of the tax increases memorized, and can't tell you exactly when FDR's tax increases kicked in as compared to any tax increases before his. Still the point holds that tax increases were active during all the relevant early years of the Great Compression. Probably Krugman's point is that the greatest reduction in income inequality did occur during FDR's years of tax increases. Whether there is support for the idea that FDR "created" the income equality as compared to "strongly influenced" I'm not sure. Obviously other factors were at play there. Still one mistake does not void his larger point.

I'm not sure if it is possible to weed out what exactly had the most influence on the Compression. Kind of hard to say if the Depression was responsbile for the Compression or FDR's response to the Depression was the most responsible. You cite some economist study, but I hardly think that is the end all be all. I suppose one good way to look at it is to just use a little observational logic. The Depression started in 1929, America's involvement in WW2 started in 1941, yet the strongest growth in income equality happened in the late 30's - many yhears after the Depression started. If the Depression were the greatest influence, why was not the greatest uptick at the start of the Depression instead of at the end of the 30's, when coincidentally, the tax increases were greatest? And I don't believe in coincidences.

If you want to get a good idea of what life was like during those times, read any Edith Wharton book from the early part of the century. She wrote one book I read a long time ago, which I forget the title to now, about some girl from upper crust New England society, who was constantly threatened that if she did not behave, she would be sent up the mountains to live with her real relatives, who were in Appalachia I believe. The idea of living 'up the mountain' among the poor people was a thought worse than death to her, and sufficient to make her comply. The poor people were practically not even considered human. I think those were the days before income tax for the rich.

[sylvia]

One thing the income inequality during the Guilded Age was good for was all the good architecture that came out of that time. We are still living with all the huge Victorian houses with all the luxurious wood details and the well built brick downtown office buildings. Compared to the crap they built later, when buildings became more "practical", somebody sure had the money to have good taste back then, and we are still lucky enough to have much of that Guilded Age excess in most of our city centers. Without that, we'd be one ranch house and strip mall after another.

[sylvia]

One more thought on this. I'm glad you brought up the Great Depression as I am very interested in the early part of the last century. One thing I learned recently by reading Wiki (whether it's true who knows) that one probably main cause for the Great Depression was not just some overextended monetary policy. Even with all the overbuilding of the 20's, things seemed to be going along just fine. What happened was that there was a huge heat wave and drought throughout the 30's (think John Steinbeck Grapes of Wrath dustbowl) that caused the farm crop to fail, having a ripple effect on the whole society and the world.

This idea was just recently supported in my mind by the information that just came out, that, contrary to what global warming alarmists are telling us, many of the hottest years on record were in the 1930's. On the other hand, this idea that the Great Depression was caused by a heat wave gives support to the global warming crowd. Just think that because of climate fluctuation, we experienced the Great Depression, which probably influenced Germany's lack of recovery after WW1, which influenced Hitler's rise and WW2. Basically life as we know it today occurred because of some extra warm years in the 1930's. So climate change is something to not be dismissed I suppose.

[Bostonian]

Sylvia, if you have not already done so, get a copy of _FDR's Folly_, which describes FDR's various statist attempts to control the economy, as well as what occurred afterward.

One thing I remember from it is a law that corporations were not permitted to retain "excess" profits from year to year. This meant that corporations were prevented from saving up money to spend on large items (you know, new factories and what not).

The book is not about the causes of the Great Depression but about how FDR prolonged and deepened it.

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