Krugman's review of Reich's new book: Inequality results from corporate market power which in turn

[pampango]

comes from the rise in corporate political power.

Economists struggling to make sense of economic inequality are, increasingly, talking not about technology but about power. This may sound like straying off the reservation—aren’t economists supposed to focus only on the invisible hand of the market?—but there is actually a long tradition of economic concern about “market power,” aka the effect of monopoly. True, such concerns were deemphasized for several generations, but they’re making a comeback—and one way to read Robert Reich’s new book is in part as a popularization of the new view ...

Meanwhile, forms of market power that benefit large numbers of workers as opposed to small numbers of plutocrats have declined, again thanks in large part to political decisions. We tend to think of the drastic decline in unions as an inevitable consequence of technological change and globalization, but one need look no further than Canada to see that this isn’t true. Once upon a time, around a third of workers in both the US and Canada were union members; today, US unionization is down to 11 percent, while it’s still 27 percent north of the border. The difference was politics: US policy turned hostile toward unions in the 1980s, while Canadian policy didn’t follow suit. And the decline in unions seems to have major impacts beyond the direct effect on members’ wages ...

There’s growing evidence that market power does indeed have large implications for economic behavior—and that the failure to pursue antitrust regulation vigorously has been a major reason for the disturbing trends in the economy. Suppose that we hypothesize that rising market power, rather than the ineluctable logic of modern technology, is driving the rise in inequality. How does this help make sense of what we see?

Part of the answer is that it resolves some of the puzzles posed by other accounts. ... Furthermore, focusing on market power helps explain why the big turn toward income inequality seems to coincide with political shifts, in particular the sharp right turn in American politics. For the extent to which corporations are able to exercise market power is, in large part, determined by political decisions. And this ties the issue of market power to that of political power.

http://www.nybooks.com/articles/2015/12/17/robert-reich-challenging-oligarchy/

Great to see one liberal economist comment on another liberal economists new book.

We all know that the rise in corporate political power has increased exponentially since the 1980's while corporate regulation has declined precipitously during the same period. Likewise, the rise in corporate political power has resulted in more regressive taxation, the rise in 'right-to-work' legislation and other anti-worker policies.

[jwirr]

1. Seems like a good book. I will have to see if the library has

it.