Wealth Inequality as Explained by Quantitative Easing and Law's Inertia

51 Pages Posted: 21 May 2016 Last revised: 23 Jun 2016

See all articles by John J. Chung

John J. Chung

Roger Williams University School of Law

Date Written: May 20, 2016

Abstract

Wealth inequality is increasing. Recent studies show that middle and lower class wealth and income are stagnating or declining. More alarmingly, the size of the middle class in America is shrinking. This is occurring at the same time that wealth is exploding at the top of the financial pyramid. Popular attention is focused on the “1%.” This is, however, a misleading way to describe growing wealth inequality. The situation may only be fully understood by focusing on the top 1/10th of 1%. This tiny few is experiencing an explosive growth in wealth. The fact is that billionaires are growing richer, while almost every part of the population below them is trying to hold steady or growing poorer, including “average” millionaires. More importantly, it is the middle class that is taking the brunt of growing inequality (including law students with their debt loads). What caused this situation? This article, and other commentators, contend that the quantitative easing (“QE”) policies of America’s central bank and central banks around the world are a primary cause of today’s increasing wealth inequality.

This paper examines the scale and scope of wealth inequality, and explains QE’s crucial role in creating it. It discusses the potential societal consequences of unrestrained growth in inequality, and why the law and its legal institutions will likely act slowly to alleviate inequality. It is unlikely that the law will take a leading role in addressing the problem because it is an inherently conservative institution whose historical (and contemporary) role is to perpetuate the power of those who control the law and its institutions.

The poles of the economic spectrum are pulling away from each other, and the middle class is losing ground. It is undeniable that the beneficiaries of recent economic policies have been the richest 1/10th of 1%, and that almost everyone else has seen little benefit or even erosion in their financial condition. Would any rational policy-maker (starting from scratch) deliberately design such a system with the current situation as the intended result?

The purpose of this article is to draw further attention to the problems and causes of today’s wealth inequality, with the hope that thoughtful responses are generated to address the problem.

Suggested Citation

Chung, John J., Wealth Inequality as Explained by Quantitative Easing and Law's Inertia (May 20, 2016). UMKC Law Review, Forthcoming; Roger Williams Univ. Legal Studies Paper No. 170. Available at SSRN: https://ssrn.com/abstract=2782418

John J. Chung (Contact Author)

Roger Williams University School of Law ( email )

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Bristol, RI 02809
United States
(401) 254-4688 (Phone)

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