Paul Krugman has a piece in today’s New York Times titled Why Inequality Matters and it hits on the major reasons that economic inequality is a major problem, irrespective of what the rest of the economy is doing. Krugman’s points are that inequality itself was just as damaging economically as the great recession. According to Krugman, inequality is the biggest reason that the American middle class underperforms as much as it does.
But there’s another issue with inequality, and I agree with Krugman that this is the biggest point of all: economic inequality translates into political inequality. Where can we see the warping effect of money in politics? Well, everywhere, but here three of the biggest examples.
The U.S. has the developed world’s least efficient healthcare system: we pay exorbitant prices for middling results. Why? Insurance companies have turned into incredibly profitable middle-men, our patent system is written so that pharmaceutical companies get enormous profits for their new drugs, and hospital costs have skyrocketed. Obamacare will help, with its rule that 80 percent of insurance company revenue must go to providing care, but there’s a much simpler solution: single-payer healthcare. Canada and most of Europe does it, and they get better care for cheap. An accident can’t ruin you financially in Canada. If we had a government that didn’t skew toward the interests of the rich and the big corporations, we would have single-payer by now.
Read More: What Is Obamacare?
2. Financial Regulation
Remember the financial crisis of 2008 and how we had to spend over a trillion dollars bailing out the banks so that our economy wouldn’t collapse? Not a whole lot has happened to prevent that from happening. Too Big Too Fail is still around, and banks still factor the likelihood of a government bailout into their risk assessments. That, however, is a complicated problem and the solutions will be complicated too, so at least you can say that much about the failed attempts to solve Too Big Too Fail. You know what is clearly damaging and has an easy solution? High frequency trading.
As you read these words, millions of financial translations are being performed by computers who notice micro-differences in the prices in the same stock between two indices (i.e. the New York Stock Exchange and the NASDAQ could have a different price on Facebook stock by .002 pennies). These computers are gradually sucking money out of the economy with no social gain. A miniscule transaction fee or a regulation that transactions have to exist for half a second before being completed is literally all it would take to fix that. Why don’t we? Because the people making money off of it have more power than the people who want it stop.
Read More: The Billionaire Brigade
3. Minimum Wage
2014 will see Democrats make a big push to raise the federal minimum wage, but there’s a reason that minimum wage has stayed almost the same over the last two decades while the economy as a whole has grown: big corporations like Walmart don’t like having to give more of their profits (and they are extremely profitable) to their workers. The restaurant and retail store lobbies also fight against minimum wage increases, which is why we can have a policy that has 70-80% support in the U.S. with very little action on it from politicians.
Money in politics might not be the biggest issue we have to tackle, but until we do, not a lot is going to happen on other issues. Check out Rootstrikers and watch Lawrence Lessig (above) to find out how you can help.