Krugman Says It’s ‘Hard to See’ How U.S. Can Halt Prosperity Gap

(Bloomberg) -- Nobel laureate Paul Krugman said the growing regional divergence in prosperity that’s fueling U.S. political polarization will be extremely difficult to stop.

In a 12-page memo addressed to “young economists,” the economist and author said the country is at its third historic tipping point between what he calls convergence and divergence in the U.S. economy.

Divergence was the trend from the mid-19th century to the early 20th century, Krugman said. That was followed by convergence until about 1980, leading to a narrowing of income gaps among U.S. regions. The gap widened again over the last four decades as the “knowledge economy” driven by highly educated workers pulled ahead of lagging regions with intensifying social problems, according to the paper.

Krugman, 66, was presenting a Twitter preview of his take on America’s regional disparities ahead of a speech at a Boston Federal Reserve conference set for early October.

Regional divergence is happening even though the U.S. offers “startling” amounts of aid to lagging regions -- as much as 20% of GDP and “beyond the wildest dreams” of what the European Union transfers to its poorer regions, Krugman said.

“The growing gap between prospering and lagging regions, the social downsides of this gap, and the strong correlation between regional divergence and political polarization, are disturbing,” he wrote. “But it’s very hard to see any way to stop the process.”

Places such as Kentucky and West Virginia had the same life expectancy as New York as recently as 1990, and now they’re five years behind, Krugman said.

“This economic and social divergence is clearly contributing to political polarization,” he wrote.

To contact the reporter on this story: Hailey Waller in New York at hwaller@bloomberg.net

To contact the editors responsible for this story: James Ludden at jludden@bloomberg.net, Tony Czuczka, Virginia Van Natta

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