A: JAY CORRIGAN | PROFESSOR OF ECONOMICS
Slices of the economic pie are more lopsided than ever before. According to recent data, the richest 10 percent of American households earn just more than half of all U.S. income. That’s the highest fraction since the federal government started keeping these sorts of records 100 years ago. And the U.S. isn’t the only place where the gap between rich and poor is growing. During the last 40 years, the richest 10 percent gained ground in Canada, Germany and Japan.
So what explains this increase in income inequality across rich countries? Economists most often point to technological changes that have made the most talented workers ever more productive. As an example, consider that the only way to listen to professional musicians at the turn of the 20th century was to go to a live performance. The most talented performers played in the largest venues and, therefore, made more money than their less-talented peers, but the difference would have been relatively modest.
Today, most of us listen to recorded music. And because an iTunes download costs the same whether it’s recorded by the top artist in a genre or by someone less popular, the most-talented performers now capture a much larger share of our entertainment dollars. Thousands of musicians still are scratching out a living, but technology has increased the gap between the most-talented and the slightly less-talented. Something similar has happened in most industries.
To understand what, if anything, can be done to reduce income inequality, it helps to look back to the 1940s, ’50s and ’60s, when income inequality actually decreased. That's because the supply of highly skilled workers increased more rapidly than the demand for their services, keeping their incomes — and income inequality — in check. This increase in supply was due to an increase in college graduates and women entering the workforce. Unfortunately, both of those trends have leveled off since about 1980.
If there’s one area where there’s still low-hanging fruit, it’s immigration. Immigrants create about half of all successful startups, but we make it hard for highly skilled immigrants to live and work in the U.S. Increasing the cap on the number of visas issued to highly skilled immigrants each year — or removing the cap entirely — would increase the supply of top talent, reducing income inequality.
A: CHRIS PALUDI ’20 | Political Science Major from Los Angeles
Just completed a final exam on a similar question in my “International Relations” class, where we talked extensively about this issue. Though we didn’t achieve world peace in a semester, the class did shed some light on why the largest nations in the world have enjoyed a long period of peace and prosperity after World War II, but why the world is, in some ways, a much less stable place than it was 20 years ago.
The world is a dangerous place, and countries’ first priority in their international relations is their own security. With no one to protect them, they have to protect themselves, and to do so, they arm themselves. If everyone is arming themselves, there is no way to really know whether or not someone with the ability to hurt you is simply protecting themselves or is preparing to attack. The only way to be safe is to make sure you’re the strongest one around. If you’re thinking, “That sounds like an arms race,” well, you’d be right. That’s why most countries agree on rules that help everybody feel safer.
Ever since World War II, the U.S. has been a “global policeman” that enforces these rules. To prevent the insecurity that makes the international system so dangerous, the U.S. makes it clear that we're ready to use our power to stand up for our allies if they're attacked. Since the 1940s, America has accumulated binding promises to protect almost 70 countries across the globe, from NATO nations to Japan and South Korea. And since the U.S. is not a country others have wanted to mess with, things have been pretty peaceful from a historical perspective.
The world also has a neighborhood watch in the United Nations, which helps countries talk things out as much as possible. Countries also trade more today than ever before, and are pretty interdependent in ways that have made peace and prosperity not only possible but probable. That wasn’t something you could count on for most of history. And when that situation gets more dicey, like today, countries flex their muscles in nonviolent ways to maintain the status quo. We’ve found that smart, strong sanctions and even public pressure can often prove really useful to changing behaviors.
Unfortunately, humans haven’t figured out how to simply negotiate our way out of every disagreement. We may never will. Acknowledging this ugly reality, we should all be more empathetic and seek to understand and respect other states and other cultures. Doing so may help prevent misunderstandings and adversarial attitudes that lead to violence where it need not arise.