How the Elites Built America’s Economic Wall

July 20 (Bloomberg) -- For a century, incomes becameincreasingly equal across the U.S., as poor states such asAlabama caught up to rich places like California.

Economists have long taught this history to theirundergraduates as an illustration of the growth theory for whichRobert Solow won his Nobel Prize in economics: Poor places areshort on the capital that would make local labor moreproductive. Investors move capital to those poor places, hopingto capture some of the increased productivity as higher returns.Productivity gradually equalizes across the country, and wagesfollow. When capital can move freely, the poorer a place is tostart with, the faster it grows.