Escaping the Inequality Trap
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Extreme economic inequality in U.S. society is indeed beginning to generate widespread discontent. But some economists and sociologists have argued that the last 30 years of capitalist ascendancy have brought us to something other than a routine tide-turning moment. What these last decades have brought us to, or rather gotten us into, they say, is an inequality trap -- a situation in which capitalists are so far ahead that it may be nearly impossible to turn things around without fundamental change.
The kind of inequality trap in which we find ourselves has a number of parts. One is the nearly complete capitalist capture of the state. As capitalists and their elite agents -- think here of the richest 1% -- have accumulated more and more wealth, their ability to control elections and policy-making has grown enormously. This has yielded not only an economic game hugely rigged in favor of capitalists, but the squeezing-out of populist opposition in government. It’s no surprise, then, that many people have lost hope in mainstream electoral politics, and thus refuse to participate in what seems like a sham. Under these conditions, capitalist dominance is more or less ensured and inequality is locked in.
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Economists stress the fourth part of the inequality trap: the loss of capitalist incentive to invest in ways that would benefit everyone. This incentive disappears once capitalists are so far ahead of everyone else that what they would gain from economic growth is less than what they would have to give up to produce that gain. Under these conditions, capitalists fiercely resist populist efforts to make them give up any wealth for purposes of productive investment -- the kind that builds new industries, or revitalizes old ones, and puts more people to work at decent wages that increase over time.
http://www.commondreams.org/view/2012/01/04-8
More at the link...
{Parts 2 & 3 of the "inequality trap" have to do with the destruction of unions (which is a big deal and part of the reason for our Democratic party's rightward drift) and globalization (which is not simply market forces unleashed - trade & immigration policies are rigged in favor of elites).}
Edit to add: inequality is highly correlated with a host of other problems: poor educational performance, worse health, higher levels of violent crime, and lower socioeconomic mobility, among others.
