In the Nation's Interest

Here’s How We Tackle Inequality

Increasing disparities in income and wealth threaten capitalism's sustainability. We as business leaders need to champion ways to improve equality of opportunity, or the nation risks losing support for its unique form of free-market enterprise. 

Free-market economies always generate some inequality. Individuals differ in their abilities and endowments. Investors and innovators who take risks, bring successful ideas to fruition, and create jobs for others are and should be rewarded. Over the long run, free market capitalism has fueled unprecedented prosperity and growth in living standards, and it is the only known pathway to enduring growth.

But capitalism can endure only if its rewards accrue broadly to customers, employees, and the larger community — as well as to owners. Today, capitalism's indisputable benefits aren't being shared broadly enough. By our calculations, inequality has escalated to levels at or near those of 1930, which were the highest on record. 

Some of the increased inequality we've experienced over the past few decades is the result of highly successful innovations and investments that yielded high returns for a small number of innovators and investors. However, some of today's inequality also comes from lagging income growth for working Americans. Many individuals and households have not recovered fully from the financial crisis of 2008. Lagging income growth raises questions about the fairness and, in some quarters, even the desirability of our capitalist system.

How do we best address this concern? 

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