Evan Soltas
Apr 3, 2013

This Unequal Recovery

In Bloomberg, I look at why inequality leads to broken political systems:

If the stock market's major indexes had recovered at the pace of the unemployment rate, where would we be today? By one rough reckoning, the S&P 500 would read 831, and the Dow Jones Industrial Average, 8,053. That's not how it is in real life. Both the S&P 500 and the Dow set new highs last month. At Tuesday's close, the S&P 500 stood at 1,562 and the Dow at 14,573.

It's been slow going for recovery in labor markets, and just the opposite on Wall Street. This raises a question: If the stock market were recovering as slowly as the labor market, would the policy response have been different? The answer is surely yes. It's hard to imagine Washington tolerating it. Recall the panic that gripped Congress when the stock market tanked in 2008. The result was a rush to action.

In contrast, high unemployment has become strangely acceptable. Bear in mind, the numbers would be even grimmer if we looked at a better indicator, such as the employment-population ratio of people of working age. We don't trouble ourselves with such details. It's odd: Stockholders get one vote per share in company meetings, but only one vote per person in elections to public office. You'd think democracies would respond more sensitively to high unemployment than the state of equity portfolios. Evidently, you'd be wrong.