The crisis they forgot
In 1979, inflation was 13.3 percent. Unemployment hit 7.5. Mortgage rates climbed past 12. The economy Volcker inherited was not a victim of deregulation — deregulation had barely started. It was a victim of price controls, wage-price spirals, and monetary policy that purchased full employment with inflation and got neither. The postwar consensus had not been murdered by capital. It had eaten itself.
The democratic socialists always start with the solution. They describe the postwar compression as a stable equilibrium disrupted by ideology. It was sustained by conditions that no longer existed: Bretton Woods, American manufacturing dominance, cheap domestic energy. The deregulation was a response to a system already failing.
Wealth concentration is real. We do not dispute the numbers. The carried interest loophole is indefensible — a fund manager’s performance fee taxed as capital gains. Close it. Stepped-up basis allows dynasties to pass gains tax-free. Eliminate it. These are rent-seeking outcomes, not market outcomes. But the unrealized gains debate is more complicated — forcing liquidation of illiquid assets creates real problems.
The largest driver of wage stagnation is skill-biased technological change. The college wage premium doubled between 1980 and 2020. Workers with advanced degrees saw 25-to-50-percent real gains. Workers without a diploma saw decline. The remedy is not redistribution but human capital investment.
Tariffs saved 1,800 steel jobs and cost 75,000 in steel-consuming industries. For every job saved, forty-two were lost. The trade deficit is comparative advantage, not conspiracy.
Where we concede ground: We have prescribed education for thirty years and the results are thinner than advertised. Student debt hit $1.7 trillion.
What would change our mind: The Scandinavian model adopted at continental scale, cutting the Gini ten points without GDP decline over fifteen years.
Read the full synthesis: Why does wealth keep concentrating?