WHAT CAUSES SOARING INCOME INEQUALITY? IT'S NOT THE ECONOMY, IT'S THE POLITICS

It's common knowledge that income and wealth inequality--the gap between the rich, the very rich and the rest of us--has soared in the U.S. from the 1980s on.

M/Y Eclipse Superyacht 9 August, 2012: Credit Moshi Anahory

There's no shortage of statistics to paint this increasingly bleak picture. To list just a few:

Percentage of total wealth owned by the richest 0.1%:

2007            17%

2011             22%

Percentage of total wealth owned by the richest 1%:

2007            35%

2011             43%

Percentage of total wealth owned by the richest 20%:

2007             86%

2011              93%        

Percentage of total wealth owned by the lowest 80%:

2007             15%

2011               7%

You get the idea.

New findings reported in the American Journal of Sociology--which must come as a huge surprise to academics and conservative ideologues who believe that such wealth disparities result from inevitable economic forces--show that the most powerful factor determining how wealth gets distributed is political, especially who occupies the oval office.

"You can't explain income inequality without looking at political factors," concludes David Jacobs, the study's lead author. Or, as George Orwell put it, ". . . economic laws do not operate the same way as the law of gravity."

Sociologists at the Ohio State University analyzed 33 years of data at both the national and state level. That gave them 1615 cases that they subjected to careful statistical analysis. They measured the impact of more than 20 factors that economists have proposed to explain the distribution of income and wealth.

Their key finding: the presidential administration in power is by far the dominant factor driving inequality. The Reagan administration alone fostered an 18 percent increase in inequality, they found. The research did not pin the blame on any one policy, but rather on the cumulative impacts of changes to the tax codes, deregulation of financial markets and other businesses, weakened unions, and truncated anti-poverty programs.

"I believe it was a lot of policies that each contributed a little bit to growing inequality, and when you added them all up the results were large," Jacobs said.

To those of us who remember the Reagan administration, noted for its anti-labor union-busting zeal, this comes as no surprise. I recall noting the simultaneous appearance of more and more chauffeur-driven limousines and sidewalks full of homeless people.

Homeless group: Credit Franco Folini

In other words, money doesn't flow from one segment of the population to another by accident or by magic. There's no invisible hand prestidigitating dollars out of your pocket into the coffers of the one percent. The hand is quite visible, greased of course by an army of lobbyists and their bosses, who I'm sure already knew in their bones what Jacobs has now shown us. Investing a few tens of millions (or, so far this election year, $2.3 million per day!) in the right politician can result in policies that transfer billions or trillions to the rich. What a great investment!

For an in-depth look at this issue, take a look at the book Rigged by economist Dean Baker.