When The Middle-Class Thrived

Mike Konczal writes about how a strong middle class is a win-win and features this graphic from a lost era (h/t Mark Thoma):

But why should this be? If the long-term health of the economy is driven by human capital, savings, and technology, what does inequality have to do with anything? Here is where they create a map of the arguments through which a strong middle class and a more egalitarian distribution of income can build long-term growth:

We have identified four areas where literature points to ways that the strength of the middle class and the level of inequality affect economic growth and stability:

 

• A strong middle class promotes the development of human capital and a well educated population.

• A strong middle class creates a stable source of demand for goods and services.

• A strong middle class incubates the next generation of entrepreneurs.

• A strong middle class supports inclusive political and economic institutions, which underpin economic growth.

They pull together the current research, as well as the range of supporting evidence, for each point. They focus on how educational attainment is becoming more tied to parents' income, the instability of growth and macroeconomic risks to weak middle-class demand, the fact that the Kauffman Foundation found that less than 1 percent of entrepreneurs come from extremely poor or extremely rich backgrounds, and the way inequality is involved with our polarized politics. All of these have consequences for our economy.

It is nice to know that there was a time when outrageous wealth wasn't accepted as untouchable.  The United States happened to prosper at that time.  Tax policy was by far not the only reason for that prosperity, but it was one reason.  The Great Depression led to much better times for nearly everybody in the United States.  I get the feeling that the Great Recession won't.