In The Wall Street Journal Allan H. Meltzer argues that domestic policy can do very little about income inequality. The crux of his argument is that the share of income for the top 1% has increased across all countries despite them having widely divergent domestic income redistribution policies. The real reasons for income inequality must then be explained by global phenomena. He argues that these are:

• The millions of Chinese and Indian workers added to the global marketplace meant that mid/low income people faced increasing competition, thus causing wages to drop.
  
• The rich, on the other hand, didn’t have to deal with the same competitive pressure from developing countries, especially since most of them have either unique or difficult to obtain skills. These include not only bankers but also rock-stars, athletes, and doctors.
  
• Sweden experienced an income decline within the top 1%; however this was once again due to global economic pressures. Domestic policy had very little to do with this effect.
  
• In general income redistribution programs have only made marginal indents to the problem of income inequality.
  

To read what this means for domestic policy, our strange relationship with Steve Jobs, and what JFK had to say about all this click here. You can find a critique of Meltzer’s argument over here.

Source: The Wall Street Journal

Via: Why Nations Fail