Every August, for most of the last four decades, top central bankers from around the world have been making their way to the Wyoming mountain resort of Jackson Hole for an invitation-only blue-ribbon economic symposium.
This year’s Jackson Hole hobnob, once again hosted by the Federal Reserve Bank of Kansas City, last week attracted the usual assortment of central bankers, finance ministers, and influential business journalists. But this year’s gathering also attracted something else: protesters.
For the first time ever, activists converged on Jackson Hole — to let the Fed’s central bankers know, as protest organizers put it, that “it’s not just the rich who are watching them.”
Over 70 groups and unions backed the protest and signed onto an open letter that calls on America’s central bankers to start nurturing an economy that works for workers. At one point, early on in the Jackson Hole gathering, protesters actually had a brief exchange with Federal Reserve Board chair Janet Yellin.
“We understand the issues you’re talking about,” Yellin told them, “and we’re doing everything we can.”
But that “everything” remains distinctly dispiriting. Many of Yellin’s fellow central bank officials, protesters note, are pushing the Fed “to put the brakes on growth so wages don’t rise” and, the fear goes, stimulate inflation.
Those “brakes”— higher interest rates — are definitely coming, Kansas City Fed president Esther George told protest leaders in another Jackson Hole exchange. America needs them, she added, to better “balance” the economy.
But America, the protesters point out, needs a balancing of an entirely different sort. The nation’s top-heavy economy needs to become less top-heavy. The nation can’t afford to be a place where far too many “struggle to secure even basic levels of dignity” while “the wealthiest Americans are richer than ever.”
The green-shirted protesters at Jackson Hole had plenty of support for that stance at last week’s other blue-ribbon global gathering of economic dignitaries, Germany’s fifth Lindau Meeting on Economic Sciences.
No hotshot central bankers show up in Bavaria for this Lindau conference, only Nobel Prize laureates in economics and aspiring economic researchers from around the world. This year’s Lindau event attracted half the world’s living Nobel laureates and over 450 young economists from more than 80 countries.
The central focus of their dialogue? Our increasing global maldistribution of income and wealth. Session after session zeroed in on “drivers of rising inequality” and the “counteractive measures” that can narrow our global divides.
Soaring inequality, Nobel laureate Joseph Stiglitz told the Lindau assembly, has brought the global economy well past the point where any tinkering will cure what ails us. The provocative title of his Lindau address: “Inequality, wealth, and growth: why capitalism is failing.”
Wages for average US workers, Stiglitz notes, have fallen over the past 40 years — at the same time that American worker productivity has doubled.
“Any economic system that doesn’t deliver for a majority of its citizens,” notes Stiglitz, “is failing.”
What sort of rebalancing could leave us with an economy that does deliver? Another Nobel laureate at Lindau, Scotland’s Sir James Mirrlees, put on the table a notion that no central banker at Jackson Hole would ever dare whisper: a 100 percent top tax rate on income over a certain point, in effect a “maximum wage.”
The 78-year-old Mirrlees explored in his address a series of model situations where a 100 percent top marginal tax rate would make eminent sense and went on to suggest applying such income caps “in certain fields or professions.”
A practical political possibility? Perhaps, says Mirrlees. “Particularly in Europe,” he observes, serious people are already discussing limiting banker pay.
In the United States, on the other hand, concern about income and wealth concentration hasn’t yet reached the point where ideas as bold as income caps are gaining any significant traction.
Why not? Another Lindau presenter, Judith Niehues of Germany’s Cologne Institute for Economic Research, has some clues.
Niehues has analyzed surveys of public perceptions about inequality in two dozen European nations and the United States. In all these nations save one, her research has found, people overestimate the level of inequality around them.
On average, for instance, the French believe that just under 15 percent of their nation’s households have incomes that fall between 80 and 110 percent of France’s median — most typical — income. In fact, nearly 28 percent of the French have middle class incomes.
And the share of the French people living in poverty, with incomes less than 60 percent the nation’s median income, is actually running at just half the poverty level that the French people estimate.
The one nation where people underestimate the inequality that engulfs them? The United States. Americans believe that just over a quarter of their fellow Americans, 25.7 percent, have incomes that fall between 80 and 110 percent of the national median. The actual share of Americans clustered in this statistical middle: just 15.3 percent.
The United States, Niehues goes on to relate, ranks as “the only country in our sample with a more optimistic perception of the society than suggested by the actual distribution of incomes.”
The United States, in sum, doesn’t just have the world’s most unequal major developed economy. The United States has the most people in denial about the inequality they live amid.
Niehues doesn’t go into the reasons for this denial. Her paper does note one consequence: People who underestimate their society’s level of inequality turn out to be less likely to support policies that would help distribute their society’s income and wealth more equally.
Inequality, in other words, matters. But the perception of inequality may matter — in the struggle for a fairer future — even more.