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NewsHour series on income inequality and wealth (MAL)distribution

PBS's NewsHour had a two-part series last week on wealth distribution and income inequality, the first based primarily on the study done by Dan Ariely, a psychologist at Duke University, which asked people to name which of three pie charts showing three different wealth distributions best described the United States. The first had equal distribution of wealth between the five quintiles (a fantasy nation called Freedonia); the second showed a wealth distribution which is matched most closely by the distribution in Sweden; the third was the actual wealth distribution in the United States.

In the study, most Americans think the chart depicting Sweden is what the US is like, and they thought the actual US wealth distribution, Chart 3, was a Third World nation with most of its population living in dire poverty.

Paul Solman of NewsHour interviewed people waiting to get into the David Letterman Show and asked them about these charts. While this study has had some reporting done on it, and lots of commentary in left Blogistan, the MCM (Mainstream Corporate Media) has not covered it very much. So, this NewsHour series is something of a breakthrough for many of its viewers. The responses on the unscientific poll run by Solman with Letterman's audience showed the import of the study has certainly not gotten through to most people. Most Americans think they live in Sweden, but, in cold hard figures, they live that Third World poor nation, at least in terms of wealth distribution.

The segment, Land of the Free, Home of the Poor, continues with reactions and some explanations for the results from economists Video (about 11:45) and transcript at link.

The series continued with a segment titled Americans Facing More Inequality, More Debt and Now More Trouble?, which goes into some economists' thoughts on why there is so much inequality and whether it is damaging to the society and the economy. It's kind of a usual cast of Very Serious People, a NewsHour staple, but one Harvard economist was interveiwed who said he'd found an alarming correlation between income inequality and economic crashes. The chart is shown at about 5:10 into the video. The segment runs about 10 minutes.

DAVID MOSS, Harvard Business School: As the crisis was in full swing in late 2008, November, December of 2008, I started to put together a graph, a simple chart on bank failures in the 19th and 20th century up to the present. And a really very striking pattern emerged.

PAUL SOLMAN: Striking, says Moss, was the resemblance between his bank failure chart and a graph of U.S. income inequality over the last century.

DAVID MOSS: Sure enough, the match with bank failures was remarkably strong. Inequality peaked just before the financial crisis in 1929 to 1933. And then it peaks again in 2007, just before this recent financial crisis at almost exactly the same level. And that got me thinking more and more, maybe there is some connection.

Those at the high end are putting some of their money into lending to everyone else. And those down below, who are not seeing the kind of income growth they had gotten in before and don't have the kind of bargaining power to raise their incomes that they had before, they're doing the borrowing. That's creating a source of enormous instability. But, if that model is right, then there really could be a connection between inequality and financial crises. [Ya think?] (My emphasis)

The interviews with people affected by the current economic downturn are interesting and may help those watching NewsHour to feel more empathy for those losing their jobs and homes. The economists' views, as I mentioned, tend to be within the discussion parameters allowed by NewsHour (right to center-right, with the occasional actual center, called leftist in the US, economist permitted.)

In looking for these links and transcripts, I came across a NewsHour on-line only video of economists answering viewers' questions about income inequality. The right was represented by Dan Mitchell of the Cato Institute, the other side by Pomona College economist and dean Cecilia Conrad. (Just under 4 minutes.)

Mitchell says inequality per se should not be a worry, a rising tide lifts all boats (has he seen the actual stats??), and he is concerned that the poor are being held down by government policies. Huh?

Kind of fun, in an MCM kind of way.

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Submitted by Hugh on

Interesting. If the NewsHour was serious about this, it would repeat and work in the wealth inequality angle in its reporting on economic stories generally. The other thing is that media have various ways of dealing with subjects related to the ongoing kleptocracy. They ignore them or distract by focusing on the most recent missing white girl. When the issue enters the public consciousness at whatever level, they move to attack the idea, trivialize it, spin it, or limit coverage of it, or limit coverage to only certain aspects of it.

I would agree with you that this is not the NewsHour breaking new ground, especially since many of us have been discussing this for some time, but rather an acknowledgement that wealth inequality has become an issue despite their prior non-coverage of it. I mean real wage growth went flat some 35 years ago. It is in the setting of the meltdown, the bailouts, and the failure to create jobs that wealth inequality could no longer be hidden. Now they talk about it, a little. But as I said above, it should be one of the bases of all their economic reporting. The other two are class war and kleptocracy. So you can see how far they remain from any serious reporting, limiting coverage to a couple of stories of one aspect of the dominant economic and political realities of our times.

I would agree too that Moss is an idiot. I tend to be very skeptical of historical comparisons that go back to the 19th century. Government, the banking system, and the monetary system are just so different then and now. The only useful historical comparison is between the 1929 crash and the subsequent Great Depression. There are many parallels between that and now.

For the 19th century stuff I think a lot of that had to do with sudden losses of liquidity. Credit then dried up and you had big crashes and a lot of bankruptcies. For the Great Depression you had a real estate bubble burst followed by a big stock bubble burst followed by contractionary monetary and fiscal government policy. Then as now, and I would say unlike the 19th century busts, the problem was not liquidity but solvency.

Concentration of wealth means that a few can influence and control markets and the economy. That is their actions can have a vastly disproportionate effect on the rest of us, and through greed, miscalculation, or design, these effects can be extremely negative to us. That is the instability that the dimwitted Moss "discovered" but it is an instability that is almost tautological in nature. Or to put it even more simply, the absence of a strong middle class, the dispersal of power and wealth among the many, is the root of our current instability, that and that we are currently being run by kleptocratic elites. Kleptocracy is unstable. Who knew? /s