Krueger's article was not an in-depth review on the two books by Reich but he conscientiously raised the important social-political issue - the ever increasing income/wealth gap which all citizens are concerned with. Stated in Reich's 1992 book, "20% of U.S. citizens enjoy 50% of national income", a serious social concern then has evolved into "the 1% richest citizens earned more than 19% of all household income in 2014". (Or "10% of the U.S.citizens captured 48.2% of total national earnings in 2014" for easier comparison). It is no wonder that Reich entitled his new book, Saving Capitalism: For the Many Not the Few and economists like Krueger would raise the income/wealth gap issue on the radar screen of economics. It is certainly politically correct to say that we need right policies to solve the problem of growing income/wealth gap, but what policies are right seem to be difficult to define under capitalism versus socialism. If politicians would have difficulties to define right policies, you could imagine how citizens could understand and fare under the difficult to define policies. Therefore, we need to discuss this 'gap' issue more on the principle level of capitalism under our democratic and capitalistic economic and political system, in a language that both citizens and politicians can easily understand.
Reich has tried to correlate wages and skills to understand the income gap in his 1992 book (as Krugman stated: “Reich popularized the skill-based technical changes (SBTC) factor”) but today labor and skills are losing grounds to capitals which contribute to the rapid growth of income/wealth gap favoring capital owners and/or professional capital managers. Reich and Krugman have defined a new view - market power - which instead of being affected by the variables in the economy, it is controlled by individuals (and oligarchy) who have market power (monopolists set sell price and monopsonists set buy price). Examples of local monopoly on broadband services, Monsanto's monopoly on soy and corn seeds as well as MacDonald (monopsony power) were cited to emphasize the importance of policies such as rigorously pursuing anti-trust laws. Reich has pointed out the positive feedback loop of driving up income/wealth gap, i.e. the 1% can buy political power (campaign, lobby, etc) to protect or enhance their market power, for example, through a sustained campaign effort to prevent public provision of Internet Access to stifle competition and protect profit.
From the above books and reviews, I come away with frustration that the economists (and politicians) are talking complicated 'surface' issues on the widening of income/wealth gap problem without offering any convincing solutions based on principles of democratic capitalism. Living in our democratic capitalistic society for six decades, I felt like venting my common folks view on the crux of the matter - why are Americans losing out in our economic status and having an ever-increasing income/wealth gap? The simple diagnostic is in one phrase: we lose because we are taking competitiveness out of capitalism in the wrong place in our economic system and society. Communism tried to produce a flat income/wealth distribution for everyone, it failed miserably; Russia, China, Cuba, N. Korea were clear examples. The U.S. was founded on capitalism and she prospered. We do know that capitalism needs some dosage of socialism or social policies to deal with the problem of wealth distribution or concentration. Why aren't our policies working in the last four or five decades?
In a simple common sense way, I think, we forgot that the principal driving force for capitalism is free competition. Free competition offers opportunities for individuals (and corporations) to create jobs, to produce goods and services, to earn income and to accumulate wealth. Equally important, but miserably forgotten by socialists is that free competition can also offer individuals and corporations opportunities to distribute wealth, to create public good, and to invest for the future. It is important to manage and balance competitiveness (competition-ism!) in our capitalistic system and society to save capitalism for the many not for the few.
The U.S. workers lose their global competitiveness hence their earning power from many root causes. One of the most fundamental reasons is in our public education system. A system discourages free competition under capitalism. The teachers union and administrative and employee unions stifle 'free competition', a vital gene of a capitalistic society. The public education system therefore produces decades after decades young people framed by 'politically correct socialistic ideals not much grains in true capitalistic principles', which the developing countries are now embracing. The second important reason is the creation of entitlement concept replacing competition-ism. The New Deal was meant to be a society's safety net not a guaranteed leisure retirement life at the age of mid fifties or sixties. Public employees (including law makers) especially set such entitlement examples causing private sectors giving up the responsibility of healthcare, retirement, etc. simply because the entitlement concept will eventually kill the capitalistic system.
Socialists often blame capitalism for its faults particularly in producing the 'gap' problem. In reality, we need to understand that living in a democratic capitalistic society, 'competition-ism' not 'entitlement' must be preserved and used to distribute wealth in addition to create wealth. Under capitalism, income and wealth must be earned and high income and accumulated wealth can be encouraged to be distributed by ‘competition-ism’. I recall as an employee of IBM, I personally enjoyed the various incentive programs the Corporation offers to everyone and many social benefits the Corporation volunteered to provide in a competitive spirit to be a 'good', 'respected', 'employee-minded' and 'proud' corporate citizen. IBM and many other corporations changed under the weight of "right policies" Reich and Krugman alluded to. Why?! Individual wealthy citizens earned their wealth in the capitalistic America are willing to give up their U.S. citizenship to live elsewhere. Why?! Shouldn't our economists and politicians think deeper in the principles of capitalism?! Shouldn’t we restore and preserve the simple concept of ‘competitionism’?!