Did Bankers Rob the Middle Class?
By Derek Thompson
Jan 10 2011
In the last decade, a greater share of money flowed to our banking system than almost any time in American history. Meanwhile, middle class wages continued their 30 year freeze. Are the two related? Are the banks robbing the middle class?
Kevin Drums suggests as much in a series of articles that accuse the new super-rich, which is disproportionately in the financial sector, of swindling the middle class. At one point, Drum quotes from a great essay on income inequality by Tyler Cowen: “It’s as if the major banks have tapped a hole in the social till and they are drinking from it with a straw.”
Great sentnece … but Cowen’s analysis does not blame rich bankers for impoverishing the middle class. Instead, his theory is: Bankers squeeze money from volatile markets in the short term, and they rely on government bailouts in the long term. As a result, they make reckless bets at the casino knowing that Washington will always refill their chips if they go all in and lose. That’s an argument for moral hazard, inefficient financial markets and the possibility of higher post-crash taxes. If it’s also an explanation for stagnating wages for mid-level sales people, I don’t see it.