Business, Community & Government

Inequality: The Growing Gap

Paul Krugman

Lesson time 11:33 min

The growing income gap poses a danger to the well-being of our economy. Learn the history of economic inequality, how race is always related, and the economic effects of growing up boomer vs. growing up millennial.

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Topics include: Growing up Boomer vs. Growing up Millennial • Know Your Inequality History: Piketty’s Chart • Income Inequality vs. Wealth Inequality • Race Is Always Related • An Unequal Crisis, an Unequal Recovery


We have a problem of inequality. An awful lot of the gains from economic growth have gone to a small number of people, at least within rich countries. And that's a bad thing, I would say on multiple fronts. It's a bad thing partly because it means that regular people aren't getting that much, partly it's because extreme inequality I think distorts our politics, distorts our society. So trying to find ways to mitigate that, to get back to something that's more like a middle class society, that's a big economic challenge. [MUSIC PLAYING] If you're watching this, I don't know, what age you are. I was born in 1953. So I was born right in the middle of the baby boom. I grew up during the great postwar economic expansion. And the America I knew when I was growing up was one that was, it was a middle class society. There weren't big differences. We thought somebody was rich if they had a split-level ranch, as opposed to just a ranch house like we did. And that all shows in the numbers, that we had this relatively flat distribution of income, and the growth after World War II was shared just about equally across the whole economic spectrum. If you're a younger person, you grew up in a very different America. You grew up in one in which a small number of people are extremely rich, in which even at the upper fringes of the middle class, you feel like you're struggling, you've been left behind. When I was growing up, you didn't think-- you wanted to work hard, you wanted to succeed, you didn't worry too much about whether you were going to make it, because everybody was going to make it. That's what we thought. Now it's like, for a 20-something, it's like one of those old war movies, where the tough Marine sergeant says look at the man to you're left, look at the man to your right, only one of you three is going to make it. And that's what a highly unequal society does. There's a rat-race feel to America now that wasn't there before. And I think it's a source of great anxiety. And of course, if you lose in that race, bad things happen. [MUSIC PLAYING] How do we know what we know about inequality? How do we know how incomes are distributed? A lot of it comes out of this project that Piketty and Emmanuel Saez at Berkeley have been pursuing. They've tracked top incomes, how one of the incomes-- what share of the income generated is going to the top 10%, the top 1%, the top 0.1%, all of which follow pretty much the same pattern. And it looks like this. We're going back to World War I. And this is the top 10%. But the truth is, it's going to be the same shape, although even more extreme, if you look at the top 1%, or the top 0.1%. So we have an early on period where almost half of total income went to just 10% of the population. Then something happened, the drastic drop on the eve of World War II. We come out the other end of World War II and we are a middle class society. Wartime policies, the rise of unions have a whole lot ...

About the Instructor

For Nobel Prize-winner Paul Krugman, economics is not a set of answers—it’s a way of understanding the world. In his economics MasterClass, Paul teaches you the principles that shape political and social issues, including access to health care, the tax debate, globalization, and political polarization. Heighten your ability to read between the lines and decipher the underlying economics at play.

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Paul Krugman

Nobel Prize-winning economist Paul Krugman teaches you the economic theories that drive history, policy, and help explain the world around you.

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