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Did Wealth Inequality Help Cause The Great Recession?

October 21, 2011

JEFFERSON CITY, Mo. - The "99 Percent" movement continues to spread from Wall Street to Main Street, including Missouri. And according to one of the architects of the Clinton era prosperity, the protesters have a point when they criticize the gap between the richest one percent and everyone else.

Former Labor Secretary Robert Reich says concentrating wealth at the top makes the entire economy weaker because it undermines consumer demand.

"The only way the vast middle class and working class can keep the economy going and keep spending, is by going deeper and deeper into debt. And of course, those debt bubbles eventually explode."

Contrary to accepted dogma, Reich says increasing money for investment by the top one percent is not the best way to create jobs. He says the wealthy tend to funnel their money into just a few places, which also makes the economy fragile.

"People at the top are taking their assets and they are investing them in a limited number of asset classes, which inevitably generate speculative bubbles."

Conservatives have argued for lower taxes on businesses as a way to spur job creation. But Reich says they already have $2 trillion in the bank – and they're not investing now.

"It's not as if businesses are not creating jobs because they don't have enough money or they don't have enough profits. The reason they're not creating jobs is they don't have enough demand."

Reich, who is now chancellor professor of public policy at the University of California, Berkeley, says inequality is worse now than at any time since the Great Depression. Real hourly wages for most Missouri workers have fallen over the last three decades, while the wages of those at the top have increased.

In Missouri, more protest events are planned through this weekend throughout the state.

Heather Claybrook, Public News Service - MO