I'm going to talk about the price of inequality.

I grew up in Gary, Indiana, which is a steel town, and was a steel town, on the southern shore of Lake Michigan.

And the history of Gary really reflects the history of industrialization in the United States.

It was founded in 1906.

It was named after Judge Gary, who was the chairman of the board of U.S.

Steel.

It was the largest integrated steel mill in the world.

It grew during the mid-20th century and then went into decline.

As I was growing up, I saw so vividly problems of inequality, poverty, discrimination.

I saw workers fighting to get a decent wage, a decent income to live on.

After I left Gary, things got worse.

I went back a couple years ago to do a job a film.

And what I saw really reflected how much worse things have gotten since the period where I was growing up.

And I want to talk a little bit about the way things have evolved in the United States in the last especially 30 years.

These concerns about inequality, poverty, about discrimination, were among the reasons that, things that motivated me to study economics.

But the consequences of this inequality now affect not just our economy, not just the moral issue, it affects our politics, it affects our society.

What I've written in my book, The Price of Inequality, is that we are paying in all these dimensions in the dimension of politics, society, economy, a very high price for this inequality.

So let me describe first a little bit about the way things have changed, how inequality has been growing.

Now first let me emphasize that there's no single way of measuring inequality, no single feature.

What's so striking about the United States is that every aspect has gotten worse.

The fraction of the income that goes to the very top, the top 1% get around 20, 25% of the total national income.

The top 1 tenth of 1% get an even more disproportionate share of the national income pie.

And things have gotten much worse, as I said.

The share that goes to the top 1% has doubled since 1980.

share that goes to the top one tenth of one percent has tripled.

We could also talk about the howling out of the middle, the fact that those in the middle are not doing very well.

And we could also talk about the increase of poverty, the larger numbers of people with poverty, the miseration of those at the bottom of the income distribution.

So all of these These are ways in which things have been in many ways getting worse in the United States in the last especially 30 years.

But since the onset of the Great Recession in 2008, things have gotten much, much worse.

To give you a little picture of what's happening, some data that just came out very recently shows that in the last two years, more than 100% of all the gain in the United States has gone to the top 1%.

That means while the 1% is doing very well, the rest of us are actually doing worse.

Most Americans' major asset is their home.

And the result of the crash of the housing prices is that the median wealth in the United States, well, half of the people are above, half below, has fallen to the level that it was in the early 1990s.

What does that mean?

That means that all the gain in the wealth in the United States over the last two decades has essentially gone to the top of our income distribution.

Well, there are a number of myths that have persisted about this inequality.

Some people have said, for instance, that inequality is just, that even discuss it is the politics of envy, that you should only talk about it in quiet rooms in hushed voices.

One of the presidential candidates actually said that.

I disagree.

I think it's fundamental to an understanding of what is going on in our politics, in our economy, in our society today.

So one of the important myths is that everybody benefits.

This is an old idea called trickle-down economics.

I wish it were true because we've thrown so much money at the top, if it were true, we would all be doing very well.

But in fact, while the top has been doing very well, those in the middle, the median, has not.

income today in the United States is lower than it was a decade and a half ago.

Median income of a full-time male worker, and that's a large part of our population, the median income of a full-time male worker is lower than it was in 1968, 45 years ago.

So if you understand why, if you want to understand why there's a kind of frustration in the United stakes, it really reflects a reality of this kind of stagnation.

Another myth that's been very, very pervasive is the notion that those at the top deserve their higher income.

They contributed more.

They made it on their own.

And a lot of people who become very wealthy like to convince themselves that they did it on their own.

But nobody makes it on their own.

Everybody is helped along the way in one way or another.

We all depend on a functioning society.

There are people in poor countries that I've seen over and over again who worked extraordinarily hard.

And in spite of them working so hard, the level of income that they have is very moderate.

Many of them are very poor.

If you look at the people at the top, it's not the people who really transformed our society, who really transformed our knowledge.

It's not the people who discovered DNA, who invented the laser or the transistor.

It's disproportionately a group of people that I refer to as rank seekers.

People who've been very good at seizing a larger share of the pie rather than making the pie bigger.

People like monopolists, people in the financial sector, who really perfected skills of predatory lending, abuse of credit card practices.

So a whole variety of ways in which people can grab a bigger share of the pie.

We're used to thinking of people in oil rich countries as rank-seeking.

And unbeknownst to unwittingly, we have become, to a large extent, a country in which those who are rewarded the most are rank-seekers.

A third important myth concerns opportunity.

We would like to believe America is a land of opportunity.

That's the notion of the American dream and it's very much in part of our psyche.

Stories of Horatio Alger, people who did make it by dint of their own hard work from the bottom to the middle, the bottom to the top, really a part of American psyche.

But if you look at the numbers, they don't support this view.

If you look at the numbers, yes, some people do make it from the bottom to the middle or the bottom to the top.

But what matters is what is the chance?

And President Obama in his inaugural address talked about the fact that somebody born to a poor family should have an equal chance of making it to the top.

It's not true today.

But what's even more striking is not only is the United States the country, the banks industrial country with the most inequality of any of the other countries, but it's also the country with among the worst equality of opportunity.

That means the chances of somebody going from the bottom to the middle, the bottom to the top are lower in the United States than even in old Europe.

That means that the life prospects of a young person in the United States is more dependent on the income and education of his parents than in other advanced countries for which there's data.

And this course goes very much against our own self-image.

The fact that there are such different outcomes, really in different countries, itself destroys another myth.

That myth is that this is inevitable.

This is just market forces.

Just learn to live with it.

But the same market forces are operating on both sides of the Atlantic, both sides of the Pacific.

those are global forces why is it with the same global forces the same laws of demand and supply the same economic forces America has wound up as the country with the most inequality and among the worst in terms of equality of opportunity of any of the advanced countries the answer is it's the way we shape those market forces our laws regulations how we enforce them just to give you one example something that reflects one of the most heart-rending stories that I encountered as I went around the country talking about my book And that is, take something, an arcane thing like bankruptcy law.

In the United States, bankruptcy means who gets money when the debtor can't pay back all the money he owes.

In the United States, it's the banks and their derivatives, those risky products that brought AIG down and required a $150 billion bailout from the United States government.

Those have the first claim.

And when you have something like a first claim of that kind, you are in effect encouraging speculation.

You're encouraging not only those individuals to get more money, they get claims before workers.

And most other civilized countries, it is the workers who have the first claim.

But not only is that true, at the other end, students cannot discharge their debt, even in bankruptcy.

When I was, as I say, going around the country, I heard over and over again stories of young students graduating from college with debts, the average debt in the United States now is over $25,000, but saying they can't get a good job.

They know that to get a good job they need a graduate education.

But their friends who have rich parents can't afford to send them to graduate school.

Their friends who have rich parents can take an unpaid internship.

They couldn't do that and that meant that their life prospects were diminished particularly in a period in which jobs are so short.

And that brings me to the final myth that I want to talk about, and that is the notion that yes, inequality may be bad, but to do anything about it, we would have to pay a very big price.

We'd have to trade, there's a trade-off, we'd have to give up, we'd have to give up growth, we'd have to give up on economic efficiency.

Main message in my book is that's wrong.

It's very wrong.

the level of inequality and the way inequality is created in the United States has resulted in our economy performing more poorly than it would if we had less inequality, if we began to attack these forms of rank seeking, if we worked to try to create a more equal society.

I want you to know that there has to be something in what I'm saying when a magazine like The Economist, not normally known as a liberal magazine, left-leaning magazine, agrees with me on almost every aspect of what I've just said.

It should be a source of concern.

The final question is, is there hope?

Inequality has been at the level that it is now in the United States at two previous periods, the Gilded Age, the Roaring Twenties.

In both of those instances, Americans looked over the brink.

They decided they didn't like the direction in which we were going.

In both of those instances, we pulled back from the brink.

The Gilded Age was followed by the Progressive Era.

The Roaring Twenties was followed by important social legislation in the 30s.

The question today is, as we understand the enormous cost that our society is paying by this high level of inequality, will we once again pull back from the brink?

Thank you.