Frequent readers of Keywords will know that I am obsessed about the issue of inequality. One of the frequent arguments put forward by conservatives is that inequality is a necessary side-effect of growth and, as such, should be tolerated. This is the argument that former Bush economic advisor, and Harvard economics professor Greg Mankiw made in a letter to the New York Times:
The data show that the rich take a rising share of income when the economy is booming, such as during the 1920’s and 1990’s. Their share declines when the economy hits hard times, such as during the Great Depression and the most recent recession.
In other words, the rich are simply being rewarded for helping fuel growth.
However, former Clinton economic advisor, and Berkeley economics professor Brad DeLong sees things differently:
The rich do take a rising share during the 1920s and 1990s, but growth income per capita was no faster in the 1990s as a whole than in the 1980s and 1970s–it was only the last half of the 1990s that saw rapid growth. And the fastest-growth decades of all are the 1960s–with a low share of income inequality–and the 1940s (driven by recovery from the Depression and the high-pressure economy of World War II).
Here’s the chart: