[Some] animals are more equal than others.
— George Orwell, Animal Farm, 1949.
— George Orwell, Animal Farm, 1949.
Equality of Opportunity
Parental income and university access, United States, 2014
Thomas Piketty (1971):
In 2014, the rate of access to higher education (percentage of individuals age 19–21 enrolled in a college, university, or other institution of higher education) was barely 30 percent for children of the poorest 10 percent in the United States and 90 percent for the richest 10 percent.
(Figure I.8, Capital and Ideology, 2020)
The persistence of hyperconcentrated wealth
| Europe | United States | ||
|---|---|---|---|
| Wealth Cohort | 1913 | 2018 | 2018 |
| Top 10% | 89% | 55% | 74% |
| Middle 40% | 10% | 40% | 14% |
| Bottom 50% | 1% | 5% | 2% |
| Top 10% : Bottom 50% | 445:1 | 55:1 | 185:1 |
| Europe = Average of United Kingdom, France, and Sweden. | |||
Thomas Piketty (1971):
The sharp increase of the top decile share, especially in the United States, reflects a gradual and worrisome erosion of the share owned by the rest of the population.
The lack of diffusion of wealth is a central issue for the twenty-first century, which may undermine the confidence of the lower and middle classes in the economic system …
(Figure 13.10, Capital and Ideology, 2020)
Financial assets held in tax havens
Thomas Piketty (1971):
By exploiting anomalies in international financial statistics and breakdowns by country of residence from the Bank for International Settlements (BIS) and the Swiss National Bank (SNB), one can estimate that the share of financial assets held in tax havens is:These figures exclude nonfinancial assets (such as real estate) and financial assets unreported to BIS and SNB, and should be considered minimum estimates.
- 4 percent for the United States,
- 10 percent for Europe, and
- 50 percent for Russia.
(Figure 12.5, Capital and Ideology, 2020, emphasis added)
The fall of the bottom 50 percent share of total income in the United States, 1960–2015
Thomas Piketty (1971):
The share of the bottom 50 percent of the income distribution fell from about 20 percent of total income in the United States in the 1970s to 12–13 percent in the 2010s.
During the same period, the top centile share rose from 11 percent to 20–21 percent.
(Figure 11.5, Capital and Ideology, 2020)
Low and high incomes in the United States, 1960–2015
Thomas Piketty (1971):
It is now well known that the explosion of inequality in the United States since 1980 was due to an unprecedented increase in very high incomes, especially the famous '1 percent'. …
In 1970, the average income of the poorest 50 percent was $15,200 per year per adult, and that of the richest 1 percent was $403,000, for a ratio of 1 to 26.
In 2015, the average income of the poorest 50 percent was $16,200 and that of the richest 1 percent was $1,305,000, for a ratio of 1 to 81.
All amounts are in 2015 dollars. …
[One] of the main consequences of the extremely high marginal rates (70–90 percent) on top incomes between 1930 and 1980, especially in the United States and United Kingdom, was to put an end to the most extravagant executive pay.
By contrast, the sharp reduction of top tax rates in the 1980s strongly contributed to the skyrocketing of executive pay.
Indeed, if one looks at the evolution of executive pay in listed companies in all the developed countries since 1980, one finds that variations in tax rates explain much of the variation in executive pay — much more than other factors such as sector of activity, firm size, or performance. …
In the 1950s and 1960s, the top executives of major British and American firms had little interest in fighting for huge raises … because 80–90 percent of any raise would have gone directly to the government.
In the 1980s, however, the nature of the game changed completely.
The evidence suggests that executives began to devote considerable effort to persuading others that enormous raises were warranted, which was not always difficult to do, since it is hard to measure how much any individual executive contributes to the firm’s success.
What is more, compensation committees were often constituted in a rather incestuous fashion.
This also explains why it is so difficult to find any statistically significant correlation between executive pay and firm performance (or productivity). …
In the 1950s and 1960s, the United States had by far the highest minimum wage in the world.
In 1968–1970 the federal minimum wage was more than $10 an hour in today’s dollars.
Since 1980, however, the failure to raise the minimum wage regularly gradually eroded its value in real terms: in 2019 it was only $7.20, representing a 30 percent decline in purchasing power over half a century — remarkable for a country at peace and growing economically. …
Many works have shown that the drop in the minimum wage in the United States contributed strongly to the declining position of low-wage workers since the 1980s in a general climate of decreased worker bargaining power.
(Figure 11.7, Capital and Ideology, 2020)
Inequality of labor income and capital ownership across time and space(Adapted from Tables 7.2 and 7.3, Capital in the Twenty First Century, pp 248-9) | |||||||
Total Income(income from labor and capital) | Wealth(capital ownership) | ||||||
| Europe | US | Europe | US | ||||
| Class (Percentile) | 1910 | 2010 | 2010 | 1910 | 2010 | 2010 | |
| Top 10% (P90-100) | 50% | 35% | 50% | 90% | 60% | 70% | |
| Dominant 1% (P99-100) | 20% | 10% | 20% | 50% | 25% | 35% | |
| Well-off 9% (P90-99) | 30% | 25% | 30% | 40% | 35% | 35% | |
| Middle 40% (P50-90) | 30% | 40% | 30% | 5% | 35% | 25% | |
| Bottom 50% (P0-50) | 20% | 25% | 20% | 5% | 5% | 5% | |
| Ratio between the Dominant 1% and the Bottom 50% | |||||||
|---|---|---|---|---|---|---|---|
| 50:1 | 20:1 | 50:1 | 500:1 | 250:1 | 350:1 | ||
| Ratio between the Top 10% and the Bottom 50% | |||||||
| 12.5:1 | 7:1 | 12.5:1 | 90:1 | 60:1 | 70:1 | ||
peaceandlonglife:
Figures are approximate and deliberately rounded off.
The disparity of total income in the US in 2010 is comparable to that in Europe in 1910.
Between 1910 and 1970, 25% of national wealth was transferred from the top 1% to the middle 40% as a result of:
- wartime destruction,
- progressive tax policies and
- exceptional post-war growth (p 356).
Assuming US wealth inequality was comparable to that Europe in 1910, it would appear that in the US since 1970, the top 1% has managed to claw back two fifths (10%) of that 25% from the middle classes.
Wealth inequality lags behind income inequality because it takes time for wealth to accumulate.
The wealth share of the top 10% in the US (%70) has not yet reached the peak in Europe in 1910 (90%); but, given the rising income disparity, it is only a matter of time before it catches up.
In the meantime, the relative shares of income (20%) and wealth (5%) of the bottom 50% have remained the same for over a century.
James McPherson (1936):
In the largest American cities [in] the 1840s, the wealthiest 5% … owned about 70% of the taxable property, while the poorest half owned almost nothing.
[In] the nation as a whole by 1860 the top 5% of free adult males owned 53% of the wealth and the bottom half owned only 1%.
(Battle Cry of Freedom, 2nd Edition, Oxford University Press, 2003, p 21)
The growth rate of top global wealth:
(Adapted from Table 12.1, Capital in the Twenty First Century, p 435) | |||
Wealth Holders | 1980s | 2010 | Average annual growth rate (1987-2013) |
| Top 1 in 100 million | 30 | 45 | 6.8% |
| Top 1 in 20 million | 150 | 225 | 6.4% |
| Average adult | 3 billion | 4.5 billion | 2.1% |
The Great Divergence
Share of the richest 10% of the American population in total income.
(Based on Piketty and Saez, Income Inequality in the United States, 1913–1998, Quarterly Journal of Economics, 118(1), 2003, pp 1–39)
Paul Krugman (1953):
[America is] no longer a middle-class society in which the benefits of economic growth are widely shared:
[Between] 1979 and 2005On the political side, you might have expected rising inequality to produce a populist backlash.
- the real income of the median household rose only 13%, [while]
- the income of the richest 0.1% [rose 296%.]
Instead, however, the era of rising inequality has also been the era of “movement conservatism" [during which] taxes on the rich have fallen, and the holes in the safety net have gotten bigger, even as inequality has soared.
(Introducing This Blog, NYT, 18 September 2007)
John Quiggin (1956):
The top 0.01% … doubled their share of [US national] income between 2000 and 2007, from 3% of all income to 6% …
This group of around 15,000 households earned more than the the bottom quarter of the population — around 75 million people.
(p 141)
Since 2000, [US] median household incomes have [fallen over a full business cycle for] the first time in modern history …
(Zombie Economics, Princeton University Press, 2012, p 157)
Thomas Hungerford:
[The] share of income accruing to the top 0.1% of US families increased from 4.2% in 1945 to 12.3% in 2007.
[And, while] changes over the past 65 years in the top marginal tax rate and the top capital gains tax do not appear correlated with economic growth [they have been] associated with the increasing concentration of income.
(Taxes and the Economy: An Analysis of the Top Tax Rates Since 1945, Congressional Research Service R42729, September 14 2012)
Peter Singer (1946):
[Under Ronald Reagan,] 60% of the growth in the average after-tax income of all American families between 1977 and 1989 went to the richest 1% of families [ie those with] average annual income of at least $310,000 a year, for a household of four.
(How Are We to Live?, 1993, p 97)
Robert Wade (1944):
The highest-earning 1% of Americans doubled their share of aggregate income … from 8% in 1980 to over 18% in 2007 [excluding capital gains.]
The top 0.1% (about 150,000 taxpayers) quadrupled their share, from 2% to 8%.
Including capital gains [the income share of the] top 1% [reached 23%] by 2007.
During the seven-year economic expansion of the Clinton administration, the top 1% captured 45% of the total growth in pre-tax income …
[While] during the four-year expansion of the Bush administration the top 1% captured 73% …
During the seven-year economic expansion of the Clinton administration, the top 1% captured 45% of the total growth in pre-tax income; while during the four-year expansion of the Bush administration the top 1% captured 73% …
(John Ravenhill, Global Political Economy, 3rd Edition, Oxford University Press, 2010, p 396)
Nate Silver (1978):
[US Senators:]return a profit on their investments that beats the market average by [nearly one percentage point per month.]
- who often gain access to inside information about a company while they are lobbied and
- who also have some ability to influence the fate of companies through legislation,
(The Signal and the Noise, 2012, p 342)
Mark Twain | Samuel Clements (1835 - 1910):
It takes a thousand men to invent a telegraph, or a steam engine, or a phonograph, or a telephone or and other important thing — and the last man gets the credit and we forget the others.
Alexis de Tocqueville (1805–1859):
We may naturally believe that it is not the singular prosperity of the few, but the greater well-being of all, which is most pleasing in the sight of the Creator and Preserver of men. …
A state of equality is perhaps less elevated, but it is more just; and its justice constitutes its greatness and its beauty.
(Democracy in America, 1835, Bantam, 2011, p 878)
Thomas Piketty (1971)
OWNERSHIP SOCIETY (sometimes called proprietarian society):[In] 1880 nearly 80% of the land in the United Kingdom was … owned by 7,000 noble families (less than 0.1% of the population), with more than half belonging to just 250 families (0.01% of the population), a tiny group that largely coincided with the hereditary peers who sat in the House of Lords. …
A social order based on a quasi-religious defense of property rights as the sine qua non of social and political stability.
Ownership societies flourished in Europe and the United States in the nineteenth and early twentieth centuries. …
Proprietarian ideology is the ideology of ownership society, based on the sacralization of property rights.
[The] House of Lords played a clearly dominant role in British becameralism until the last third of the nineteeth century. …
Specifically, all laws had to be approved in identical terms by both houses, effectively conferring a veto power over all legislation, including fiscal and budgetary matters and anything to do with property rights, on the House of Lords (and thus on a few hundred hereditary peers). …
In the early 1860s, roughly 75 percent of the seats in the House of Commons were still occupied by members of the [landed] aristocracy, which accounted for less than 0.5 percent of the British population at the time. …
[Before the] secret ballot was … introduced [in] 1872 … each individual vote was announced publicly and recorded …
Hence it was not easy for voters to make political choices that went against the wishes of their landlords or employers. …
The local member of Parliament (MP) was reelected in election after election and often in generation after generation.
In 1860 the House of Commons was still profoundly aristocratic and oligarchic. …
[The] famous Black Act of 1723 … stipulated the death penalty for anyone caught pilfering wood or poaching game on land they did not own.
Humble folk had taken to blackening their faces and trying their luck by night, and landlords in the House of Lords and their allies in the House of Commons were determined to prevent this.
Anyone who killed a deer, cut down a tree, poached fish from a breeding pond, pulled up plants, or abetted or incited such activity fell under the shadow of the act and could be sentenced to death by hanging without trial of any kind.
Initially intended to expire after three years, the law was renewed and reinforced over the next century until these acts of rebellion ceased and the proprietarian order was restored. …
Universal male suffrage was established in 1918, and the vote was finally extended to women in 1928.
This final phase of reform also witnessed the first decisive successes of the Labour Party.
The [Swedish] social democrats of the SAP came to power in the early 1920s …
The party subsequently held power more or less permanently from 1932 to 2006, and this long period in government allowed it to develop a very sophisticated welfare and tax system, which in turn achieved one of the lowest levels of inequality ever observed anywhere.
[Prior to] the early twentieth century, Sweden was a profoundly inegalitarian country …
[In] Sweden from 1865 to 1911 … the number of votes each voter could cast depended on the size of that voter’s tax payments, property, and income.
The men sufficiently wealthy to vote in elections for the lower house were divided into forty-odd groups, and each group was assigned a different electoral weight.
Specifically, each member of the least wealthy group could cast one vote, while each member of the wealthiest group could cast as many as fifty-four votes.
A similar system applied to municipal elections … with the additional wrinkle that corporations also had the right to vote in local elections, again casting a number of ballots that depended on their tax payments, property, and profits.
No voter in an urban municipal election, whether a private individual or a corporation, could cast more than one hundred ballots.
In rural towns, however, there was no such ceiling; indeed, in the municipal elections of 1871, there were 54 rural towns in Sweden where one voter cast more than 50% of the votes. …
[Yet] in the space of a few years Sweden moved from the most extreme hyper-inegalitarian proprietarian system … to a quintessential egalitarian social-democratic society once the SAP came to power in the 1920s …
People sometimes imagine that each culture or civilization has some “essence” that makes it naturally egalitarian or inegalitarian. …
In fact, everything depends on the rules and institutions that each human society establishes, and things can change very quickly depending on the balance of political and ideological power among contending social groups as well as on the logic of events and on unstable historical trajectories …
Sweden reminds us that equality is always a fragile sociopolitical construct, and nothing can be considered permanent: what was transformed in the past by institutions and the mobilization of political movements and ideologies can be transformed again by similar means, for better or for worse.
In 1885, Sweden still had a law on the books allowing anyone without either a job or sufficient property to live on to be arrested and sentenced to a term of forced labor. …
In 2015, a clear political decision was made to humiliate Greece, which in the eyes of European (and especially German and French) authorities had elected a “radical left” party, Syriza (a coalition of communist, socialist, and green parties to the left of Pasok, the Greek socialist party, which had been discredited by having held power between 2009 and 2012 at the height of the financial crisis).
Having won the election, Syriza sought to soften the terms of the austerity policy imposed on Greece by Europe’s leaders.
But to avoid handing Syriza a symbolic victory, which European leaders feared might lead to a contagious spread of left-wing resistance (especially in Spain, where Podemos was on the rise), they decided to force the new Greek government to accept an even harsher austerity policy …
(Capital and Ideology, Chapter 5, 2019)
