Economic Special: 1% off.

"The backlash against globalisation is becoming more pronounced every day in the US." So begins a comment piece by Jacques Mistral, a European economist currently at Harvard, in this Morning's FT. Tell us more about that, Jaques:

Rapid growth in recent decades did not deliver those results; the best-off have done so well in the past decade only because they succeeded in capturing a huge part of the increase in national income. The top one-tenth of 1 per cent of the income distribution earned as much of the real 1997-2001 gain in wage and salary income (excluding non-labour income) as the bottom 50 per cent. It should come as no surprise that the number of those without health insurance is increasing and poverty ratesin the US are the highest amongall Organisation for Economic Co-operation and Development countries, in particular for children and seniors.

Lest you think this is just a nasty case of we-told-you-so euromoaning, Mistral isn't the only one making this argument. Listen carefully, and elsewhere in the commentary jungle this morning you'll hear the unmistakeable thound of distant resumes clashing. This thudding noise is a different take on same brouhaha, midway to being thrashed out by Paul Krugman (D- Times, nobel laureate presumptive), Brad De Long (D- Berkely, Republican hating ex-Clinton economy boffin) and Greg Mankiw (R- Harvard, ex-Bush economy boffin.)

The gist of the debate has been exactly how unequal America has become, and how much of that inequality can be put down to returns to education.A decent summary of where they've got to is here, on the superb Economist's View website. The argument stems from an updated economic study, mentioned here last week. The killer point of disagreement is what explains the huge recent income gains made by the top 1% of Americans (see graph in link). The fact that such an increase has occured - what Krugam calls "Guilded Age II - is not in dispute. (In fact, the discussion is all the more remarkable for what isn't up for discussion. Just one example would be the fact that even the top 10% of wealthy Americans have seen relatively pedestrian increases in their incomes lately)

Again, don't take my word for it. Whats that? You want me to engage in my usual habit of finding business-friendly firepower to back up seemingly partisan anaylsis. Well ok then, i'll give you the ever Democrat-supporting Outlook section of this morning's Wall St Journal, discussing last week's improved budget figures. Quoth the Journal: "So, the tax windfall is another piece of evidence that income inequality in the U.S. continues to grow, which in turn may explain why the average American still gives President Bush low marks on the economy despite its overall strength.

Does this matter? Sure it does. The latest example of why comes in the opening paragraph of a fascinating story in this morning's Washington Post:

Jerry Nelson steered his grocery cart out of the Wal-Mart on a recent night, fuming about globalization, Southern style. "Another great night at the Mexican Wal-Mart," he groused to no one in particular.

Whatever the smartest-men-in-the-room decide, its increasingly clear that this 1% economy is not performing for Jerry Nelson, or most other Americans for that matter. Bringing that fringe 99% of the rest of us along for the ride can rarely have seemed more important.