Narratives of Inequality

The Great Divergence:
America’s Growing Inequality Crisis and What We Can Do About It
by Timothy Noah
Bloomsbury Press, 2012, 272 pp.

In September 2010, a full year before protesters occupied Zuccotti Park in New York City, Timothy Noah wrote a monumental ten-part series for Slate on the rise of economic inequality in the United States. The series earned Noah the 2011 Hillman Prize for Magazine Journalism and has now been updated, expanded, and published in book form as The Great Divergence. The book has created buzz, including reviews in the New Yorker, the New York Review of Books, the New York Times (weekday and Sunday), the Nation, and the American Prospect.

Noah canvasses a wide literature on the causes of inequality, and his book is an impressive synthesis. The problem is that he reports faithfully on what others have written about inequality, but he does not evaluate it critically. One part of his book is a persuasive account of the Great Divergence that puts politics at the center of rising inequality. Another part claims that rising inequality is primarily the byproduct of rapid technological change. These are two very different explanations that lead to radically different policies to reduce inequality. Neither Noah nor most reviewers of his book seem to be aware of the contradiction.

Noah is strongest in describing inequality. In a chapter titled “Rise of the Stinking Rich,” he assembles a mass of relevant data: the top 1 percent received 21 percent of national income in 2008, up from about 10 percent before the Great Divergence got under way in the late 1970s; 61 percent of the top one-percent work in finance or the highest tiers of corporate management; the top 0.1 percent (minimum income cutoff of about $9 million per year) are a lot better off than those who are merely in the top 1 percent (minimum income cutoff of about $368,000 per year); and many more.

Noah correctly highlights the importance of Wall Street. In a sensible world, banking would be a fairly boring job involving channeling the savings of one portion of the population to investments made by the other portion of the population. This is basically what the financial sector did before financial deregulation got under way in the 1970s. But, since then, as Noah observes, finance has come off the rails. Under the guise of increasing efficiency, Wall Street’s emphasis has shifted from traditional banking to short-term, highly leveraged trading for wealthy clients and banks’ own accounts. Meanwhile, Wall Street firms transformed themselves from staid arrangements where partners stood to lose their own money if things went wrong to large corporations where top executives were more often than not betting with other people’s money, backed up by the federal government’s implied “too big to fail�...