San Francisco Federal Reserve Bank president Janet Yellen warns that income inequality in the U.S. may be so severe that it’s “intensifying resistance to globalization, impairing social cohesion, and could, ultimately, undermine American democracy.”
The Heartland Institute misrepresents her statement, en route to regurgitating the libertarian party line that relative inequality never matters as long as everyone gets a crumb. The chair of a university economics department is too busy setting up straw men to grasp the point.
Meanwhile, actual discussion is occurring in some surprising places. Andrew Leonard at Salon (brief ad viewing required) notes that even the editorial page of the Wall Street Journal understands what Yellen is talking about.
For a reality-based approach to this issue, Chris Bertram’s post at Crooked Timber is a good place to start, not because he’s necessarily right, but because he lists some of the arguments and where to find more. For instance, “Amartya Sen goes through some of them in his well-known essay ‘Poor Relatively Speaking’: if wealthier people come to have access to new technologies, and if access to important goods get mediated through access to those technologies, then the poor who lack such access will find it harder and more expensive to supply their needs.”