Divided We Stand: Why Inequality Keeps Rising

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Yesterday the OECD published a big new study of the causes of inequality: Divided We Stand. Readers without accreditation of some kind may have to pay for it, but you can download a good overview for free.

The study looks especially valuable because it emphasizes international comparisons and makes careful distinctions between different kinds of inequality (for instance, in earnings, in incomes, in incomes after taxes, in incomes after taxes plus cash transfers, in incomes after taxes plus cash transfers and in-kind benefits...). Despite the current preoccupation with inequality, these essential aspects of the issue rarely get much attention.

The full document will demand careful reading. Skimming through, which is all I've had time for so far, one thing struck me. Inequality of market incomes is high in the US, on the standard measure, but not exceptionally so. (It's about as high in Britain, for instance, and a bit higher in Italy.) And the effect of the US tax system on the distribution of income is not that different from its foreign counterparts: the US income tax is moderately equalizing (in the middle of the decade, more so than Britain's, and about the same as Canada's and Sweden's); moreover the US, unlike most other countries, does not have a regressive VAT as part of the mix.

The US is an outlier not in either of those respects but in social transfers: these are far smaller, and have a far smaller redistributive effect, than in other rich countries.

American progressives are strangely quiet on this issue, don't you think? Their long preoccupation and lately all-consuming obsession with inequality expresses itself almost entirely as zeal to raise taxes on the rich. In that regard, as I say, the US is not much out of line by international standards--and higher taxes on the rich anyway do nothing to relieve poverty, where the US really is out of line.

Why so little agitation on the American left for more generous transfers to the poor?  

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Clive Crook is a senior editor of The Atlantic and a columnist for Bloomberg View. He was the Washington columnist for the Financial Times, and before that worked at The Economist for more than 20 years, including 11 years as deputy editor. Crook writes about the intersection of politics and economics. More

Crook writes about the intersection of politics and economics.

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