Bidenomics Is A Questionable Way To Fix Inequality In The US

Market processes can deliver on this aim without hurting growth

- ALLISON SCHRAGER

Is inequality turning around on its own? A Biden administration official recently described the philosophy of Bidenomics as caring less about the growth rate of the economy than about growth being widely shared. The need for more muscular intervention, at the expense of growth, is based on the assumption that explosive inequality is inevitable in an unchecked market economy. That may not be true. Depending on the cause, wealth disparities can self-correct. Efforts to interfere with this process may prolong extreme inequality.

Some inequality will always be present in a market economy, but excessive imbalances come in waves. A new technology benefits the entrepreneurs best able or lucky enough to capitalize on it in a big way first. Those who benefit become very rich. People whose jobs were based on the old technology benefit much less or become poorer. But the extremity does not last very long. Eventually, the technology gets diffused throughout the economy. It is imitated and improved upon by others and the economic benefits are more widely shared. This is also true of globalization. This phenomenon increases gains to entrepreneurship as access to new markets makes some people wealthy. But eventually, people in foreign markets build on those innovations and take some of the profits for themselves.