Leghari 1

Araf Leghari
Professor George Wagner
September 25, 2014
POLS111
Why Were in a New Gilded Age versus A Different Road to a Fair Society
Paul Krugmans article, Why Were in a New Gilded Age, and Paul Starrs piece,
A Different Road to a Fair Society, both discuss the causes, effects and possible solutions
of the extreme economic inequalities between the top one percent wealthiest against the
rest of the population, drawing evidence from historical records and various publications
of well-known economists. While both of the authors present the significant issue
observed across the globe, Krugman provides a rather economic-based explanation,
differing from Starr, who interprets the issue from a more social perspective.
The majority of Krugmans article analyzes Capital in the Twenty-First Century,
a revolutionizing publication by economics professor Thomas Piketty. Krugman explains
that prior to Pikettys publication our knowledge of the distribution of wealth came from
random surveys conducted annually by the Census Bureau. While this surveying
technique provided a fairly accurate view of the shaping of American society, it carried
various limitations: it undercounted the income of individuals at the top of the income
scale, and it had limited historical depth. What made the results presented in Pikettys
publication revolutionizing was that he used his and his colleagues extensive economic
background to analyze tax data, which they had historically more of, and ultimately
summarized the fluctuations of inequality in the past decade. His results indicated that the
income shares of the top one percent of the population rose from seven percent to 20
Leghari 2
percent in only 30 years. Krugman compares current economic trends with movements
that have happened in the past, for instance in France in 1910 when the top one percent
controlled 60 percent of wealth. He summarizes that Pikettys theory ultimately attributes
the enormous financial gap primarily to accumulated inherited wealth along with
population growth and technological development. He also quotes Piketty stating,
Wealth is so concentrated that a large segment of society is virtually unaware of its
existence, conveying that another cause of the extreme disparity in income is the pure
ignorance of the lower part of the population. While Krugman is in agreement with
Pikettys work, he offers another, possibly more influential, explanation of the economic
equality: high compensation and incomes. Krugman states that the disparities of
Americas top one percent are due to reasons that lie beyond the scope of Pikettys
grand thesis. He introduces the discussion of supersalaries and contrasts how the wage
income of most Americans have minimally increased since the 1970s while the top one
percent have risen 165 percent, and the top 0.1 percent have swelled 362 percent. I find
this disturbingly interesting, for when discussing financials classes, one usually imagines
income objectively normally distributed, with the majority of wealth in the middle class,
but when considering these statistics, one realize that the distribution of wealth is in fact
drastically skewed. Krugman attributes this primarily to the fact that CEOs and those
working with finances have the ability to determine their worth in a company. The also
know how and have the ability to invest their money. He states that Pikettys solution to
decreasing this possible inevitable disparity is for wealth taxes to restrain the growing
power of inherited wealth. While Krugmans article delivers new insight on the economic
Leghari 3
issue of inequality, it also raises question of how we must disentangle the problem to
create a more uniform distribution of wealth.
Contrasting with Krugman, Starr briefly mentions Pikettys Capital in the
Twenty-First Century, but essentially supports the ideas presented in The Society of
Equals, a book by the French historian and political theorist Pierre Rosanvallon. Like
Krugman and Piketty, Starr and Rosanvallon draw on historical context to compare the
similarities between todays economic situation and where the United States and other
countries were in the past. While he gives specific examples of changes in income due to
industrialization and increased productivity as Krugman did, he also points out how
social inequality and poverty were seen as closely related. Starr relays the statistics that
Between 1973 and 2011, productivity increased 80 percent, but median hourly
compensation rose only 11 percent. This raises the question of to whom the money
coming from this high productivity is going. Similarly to Krugman, Starr attributes the
extreme increases in salaries of those in the top one percent to idea that executives are
being paid their market values, which may have increased due to new information and
communications technology. They both also consider the idea of winner-takes-all,
meaning those most talented will be compensated copiously beyond what those who
are almost if not as capable of performing the same task. Starr furthers this topic in his
article by describing Rosanvallons notion that modern capitalism now requires
individuals to be creativethe more unique and distinctive qualities, the more
marketable a person. While I have seen this desire to standout exhibited specifically in
social media, I had not expanded the thought to how it could impact economic equality.
Starr discusses one of Rosanvallons solutions to inequality that states there should be
Leghari 4
emphasis on three main principles: singularity, which supports diversity, as well as
reciprocity and commonality, which add a greater sense of mutual responsibility. Starr
agrees with this concept, but still stresses that one of the fundamental causes of inequality
is from top executives being salaried excessive sums.
While their methods and opinions of examining the concern of income disparity
differ between the authors, both Krugman and Starr conclude their articles by recognizing
that although it may be difficult, social, political and economic changes could reduce the
gap between the top percentage of wealthy citizens and the rest of the population, which
would ideally lead to an egalitarian society.














Leghari 5
Work Citied
Starr, Paul. "A Different Road to a Fair Society." New York Books. The New York
Review of Books, 22 May 2014. Web. 20 Sept. 2014.
Krugman, Paul. "Why Were in a New Gilded Age." New York Books. New York
Review of Books, 08 May 2014. Web. 20 Sept. 2014.