Economist Dean Baker explains this phenomenon like this:
Trade is probably the best place to start just because it is so obvious. Trade deals like NAFTA were quite explicitly designed to place our manufacturing workers in direct competition with the lowest paid workers in the world. The text was written after consulting with top executives at major companies like General Electric. Our negotiators asked these executives what changes in Mexico's law would make it easier for them to set up factories in Mexico. The text was written accordingly.
When we saw factory workers losing their jobs to imports from Mexico and other developing countries, this was not an accident. In economic theory, the gains from these trade deals are the result of getting lower priced products due to lower cost labor. The loss of jobs in the United States and the downward pressure on the jobs that remain is a predicted outcome of the deal.
There is nothing inherent in the globalization process that necessitated this result.
For example: Fully qualified doctors work for much less money in Mexico, India and elsewhere in the developing world than in the United States. In fact, they work for much less money in Europe and Canada than in the United States. So, if we had structured the trade deals to facilitate the entry of qualified foreign doctors into the country, it would have placed downward pressure on the wages of American doctors (many of whom are in the top one percent of the income distribution), while saving consumers tens of billions a year in health care costs.
In other words, the government quite deliberately structured our trade to put downward pressure on the wages of much of the labor force, while protecting doctors and other highly paid professionals from similar competition. But trade is just one of many ways in which the government has redistributed income upward over the last three decades.
The subsidy for too-big-to-fail banks, which makes the Wall Street crew incredibly rich, is another way that the government redistributes money to the top. Bloomberg estimated the size of this annual subsidy for Wall Street at $80 billion a year, which is more than the government spends on food stamps.
The longer and stronger patent protection the government has given pharmaceutical companies is another way that money goes from the rest of us to the very rich. The annual size of patent "rents' in the drug industry (i.e. their unfair taking of excessive profits that does not occur in other industrialized countries) is currently in the neighborhood of $270 billion, more than three times as much as the government spends on food stamps. This $270 billion is, of course, extra money that the public must ultimately shell out for the unnecessarily high-priced drugs they purchase.
The macroeconomic policies implemented by our government have systematically increased inequality.
Budgets are crafted by politicians, not by the gods or by nature. The decision not to run a more stimulatory policy (which would reduce unemployment), is every bit as much a conscious act as would be the decision to try to bring the economy to full employment with further stimulus.
In other words, for the sake of what might be called "trickle-up,' Congress and the president have quietly but deliberately decided to craft budgets that lead to tens of millions of people being unemployed or underemployed. As Jared Bernstein and Dean Baker point out in their new book, high levels of unemployment put downward pressure on workers' wages, especially those in the bottom third of the labor force. This means we have a federal budget that limits growth and employment in a way that redistributes income upwards.
Full employment used to be an explicit goal of economic policy in most of the industrialized world. Some countries even achieved it. In his new book, Back to Full Employment, yet another economist, Robert Pollin, argues, along with Baker and Bernstein, that the United States -- today faced with its highest level of unemployment and underemployment since the Great Depression -- should put full employment back on the agenda.
Full employment will help individuals, families, and the economy as a whole, while promoting equality and social stability, Pollin says. Equally important, creating a full-employment economy can be joined effectively with two other fundamental policy aims: ending our dependence on fossil fuels and creating an economy powered by clean energy.
Pollin argues that the policy was abandoned in the United States in the 1970s for idiotic reasons, and he shows how it can be achieved today despite the serious challenges of inflation and globalization. He says the biggest obstacle to creating a full-employment economy is politics. For that reason, putting an end to the prevailing neoliberal opposition to full employment will require nothing less than an epoch-defining reallocation of political power away from the interests of big business and Wall Street, and toward the middle class, working people, and the poor, while simultaneously mounting a strong defense of the environment. In the end, achieving full employment will be a matter of political will: But in the face of withering opposition and very fat political campaign contributions from the financial top 1%, can the United States make having a decent job a fundamental right?
There is a very long list of ways in which our well paid(-off) government officials have obediently acted to redistribute income upwards over the last three decades. Find that discussion in Baker's book, The End of Loser Liberalism: Making Markets Progressive. The key point is that inequality didn't just happen; it was the result of government policies. That's why those of us who actually want to see inequality reduced, so that the poor and middle class can once again share in the benefits from economic growth, are not likely to be very happy about President Obama's recent speech on the topic. His ridiculous comment about the government being a mere "bystander' disingenuously ignores the real source of the problem! Therefore it is not likely he will come up with much in the way of real solutions. Real solutions are obviously not what Obama is about; "hopeful' talk, and pretty talk, talk, talk is what he is about.
As Bill Moyers informs us, the distance between the first and the least in America is indeed vast and growing -- proven by shocking statistics and personal stories of challenge and hardship, made even harder by policies and political collusion that reward the wealthy at the cost of everyone else. Learn more here about the class gap, how it happened, what's making it worse, and what you can do about it.