Can The Rich Save The World? (2)

Clinton and Branson

Not only can’t the rich save the world, but philanthrocapitalism is a ruse to keep the rest of us in our place says former New York Times columnist Anand Giridharadas in Winners Take All: The Elite Charade of Changing the World (2019). The Amazon book blurb calls it “the New York Times bestselling, groundbreaking investigation of how the global elite’s efforts to ‘change the world’ preserve the status quo and obscure their role in causing the problems they later seek to solve.”

This edited extract from the book begins with a recitation of the same economic trends we’ve been following for the past two years in this blog — essentially how the equitable, “floats all boats” neoliberal years melted down in the past four decades of runaway economic inequality. After that, the book’s argument sorts itself into two main points:  however praiseworthy “doing well by doing good” may be, (1) it perpetuates inequality, and (2) it’s taking place off the government ledger, and that’s not how democracy is supposed to work:

“In recent years a great many fortunate Americans have also tried … something both laudable and self-serving: they have tried to help by taking ownership of the problem. All around us, the winners in our highly inequitable status quo declare themselves partisans of change. They know the problem, and they want to be part of the solution. Actually, they want to lead the search for solutions. They believe their solutions deserve to be at the forefront of social change. They may join or support movements initiated by ordinary people looking to fix aspects of their society. More often, though, these elites start initiatives of their own, taking on social change as though it were just another stock in their portfolio or corporation to restructure.

“For the most part, these initiatives are not democratic, nor do they reflect collective problem-solving or universal solutions. Rather, they favour the use of the private sector and its charitable spoils, the market way of looking at things, and the bypassing of government. They reflect a highly influential view that the winners of an unjust status quo – and the tools and mentalities and values that helped them win – are the secret to redressing the injustices. Those at greatest risk of being resented in an age of inequality are thereby recast as our saviours….

“This genre of elites believes and promotes the idea that social change should be pursued principally through the free market and voluntary action, not public life and the law and the reform of the systems that people share in common; that it should be supervised by the winners of capitalism and their allies, and not be antagonistic to their needs; and that the biggest beneficiaries of the status quo should play a leading role in the status quo’s reform.

“This is what I call MarketWorld – an ascendant power elite defined by the concurrent drives to do well and do good, to change the world while also profiting from the status quo.

“The elites of MarketWorld often speak in a language of ‘changing the world’ and ‘making the world a better place’ – language more typically associated with protest barricades than ski resorts. Yet we are left with the inescapable fact that even as these elites have done much to help, they have continued to hoard the overwhelming share of progress, the average American’s life has scarcely improved.”

The New Elites’ Phoney Crusade to Save the World Without Changing Anything, The Guardian (Jan. 22, 2019).

MarketWorld is about putting the fox in charge of the chicken coop; or, as Giridharadas says it, “ the people who broke the progress machine are trying to sell us their services as repairmen.” That’s exactly the point is the rejoinder of the philanthrocapitalist movement, and thus we have yet one more case of polarized assumptions and opinions talking past each other. There’s plenty more where that came from — for example:

The Prosperity Movie’s website declares “It’s not just a movie. It’s a movement.”

“The businesses we showcased in the film are only a handful of the thousands of new and existing companies who are actively trying to make changes in the world around us.

“The challenge we face is simple. We can’t predict the future, but we can help make choices that turn us in the right direction.

“We could feature something cool a company is doing today and, tomorrow they can go off the rails and do something bad.

“Our goal is not to endorse specific companies, but rather reward ANY company making an effort and showing good behavior. Let’s come together and encourage them to continue doing good things… and reward them for that.”

There’s a lot of “good” and “right” and “bad” in that blurb. Says who? On the other side, the title of this op-ed piece tells you all you need to know about its bias:  Tech Capitalists Won’t Fix The World’s Problems — Their Unionised Workforce Might.

So, one more time with feeling:  Can the rich save the world?

It depends who you ask.

Photo:  Bill Clinton and Richard Branson at a Clinton Global Initiative event in New York in 2006. Photograph: Tina Fineberg/AP

Can The Rich Save The World?

adam Smith

Adam Smith didn’t think so.

“For while Smith might be publicly lauded by those who put their faith in private capitalist enterprise, and who decry the state as the chief threat to liberty and prosperity, the real Adam Smith painted a rather different picture. According to Smith, the most pressing dangers came not from the state acting alone, but the state when captured by merchant elites.

“Political actors, Smith claimed, were liable to be swept up by a ‘spirit of system’, which made them fall in love with abstract plans, which they hoped would introduce sweeping beneficial reform. Usually the motivations behind these plans were perfectly noble: a genuine desire to improve society. The problem, however, was that the ‘spirit of system’ blinded individuals to the harsh complexities of real-world change.

“What Smith is saying is that … the ‘spirit of system’ infects politicians with a messianic moral certainty that their reforms are so necessary and justified that almost any price is worth paying to achieve them.”

The Real Adam Smith, Aeon Magazine (January 16, 2018).

Smith had little faith in the free market’s altruism:

“Smith was, however, deeply pessimistic about the stranglehold that the merchants had managed to exert over European politics, and despaired of it ever being loosened. Accordingly, he labelled his preferred alternative – of liberal markets generating wealth to be passed on to all members of society – a ‘Utopia’ that would never come to pass.”[1]

The Real Adam Smith

Today’s “philanthrocapitalists” would beg to differ. Their social and economic charter originated in the 1990’s, under President Clinton’s leadership. Post-WWII neoliberalism had begun to fatigue in the 70’s, and the tide had turned against the 80’s social conservatism. Clinton and his U.K. counterpart Tony Blair offered a mix of conservative economics with social liberalism:

“As much as possible, they preferred a progressive politics that channelled private initiative, and the logic of philanthrocapitalism was pleasingly straightforward. Since the rich were getting richer, they had more money to throw around. The lure of yet more lucre could now be used to steer them into sinking some of this new wealth into the poorest communities, something touted by Clinton late in his presidency when he went on a four-day ‘new markets’ tour of deprived American neighbourhoods. Urging the super-rich to do some good with a portion of their rapidly growing prosperity, Clinton told them that a better world would make them richer yet. ‘Every time we hire a young person off the street in Watts and give him or her a better future,’ he said, ‘we are helping people who live in the ritziest suburb in America to continue to enjoy a rising stock market.’”

Economics As A Moral Tale, Aeon Magazine (Jan. 9, 2019) [2]

The rich and famous jumped on board, and the rest of the 90’s into the 2000’s, private foundations were a growth industry. The Economist’s Matthew Bishop and development pro Michael Green  wrote the book on the topic, with a foreword from Bill Clinton:  Philanthrocapitalism: How Giving Can Save the World (2009). The book blurb captured the spirit of the approach and the times:

“For philanthropists of the past, charity was often a matter of simply giving money away. For the philanthrocapitalists – the new generation of billionaires who are reshaping the way they give – it’s like business. Largely trained in the corporate world, these “social investors” are using big-business-style strategies and expecting results and accountability to match. Bill Gates, the world’s richest man, is leading the way: he has promised his entire fortune to finding a cure for the diseases that kill millions of children in the poorest countries in the world.

“In Philanthrocapitalism, Matthew Bishop and Michael Green examine this new movement and its implications. Proceeding from interviews with some of the most powerful people on the planet―including Gates, Bill Clinton, George Soros, Angelina Jolie, and Bono, among others―they show how a web of wealthy, motivated donors has set out to change the world. Their results will have huge implications: In a climate resistant to government spending on social causes, their focused donations may be the greatest force for societal change in our world, and a source of political controversy.”

Maybe philanthrocapitalism’s greatest appeal was that it offered a fresh, inspiring story:

“At heart, philanthrocapitalism offered not a new science of development, but an old-fashioned moral tale – one in which a hero, who would reveal himself by some magnificent achievement, would come along to save us from some peril.”[3]

Everybody loves a great story, but does this one have a happy ending?

We’ll look at that next time.

[1] Id. For more, journalist and social commentator Chris Hedges thoroughly and adamantly deconstructs and debunks secular and religious utopian thinking in his book I Don’t Believe in Atheists, which he wrote after debating Sam Harris and Christopher Hitchens — two of the “four horsemen” of the “new atheism.” His analysis explains why utopias invariably crash into dystopias. If that topic interests you, I’ve been writing about it in my Iconoclas.blog, and you might like to check it out.

[2] The author is John Rapley, academician, world development expert, journalist, and government advisor. His latest book is  Twilight of the Money Gods: Economics as a Religion and How it all Went Wrong (2017).

[3] Id.

Rebel Without A Cause

Continuing with David Graeber’s analysis of Eric’s job experience from last time:

“What drove Eric crazy was the fact that there was simply no way he could construe his job as serving any sort of purpose.

“To get a sense of what was really happening here, let us imagine a second history major–we can refer to him as anti-Eric — a young man of a professional background but placed in exactly the same situation. How might anti-Eric have behaved differently?

“Well, likely as not, he would have played along with the charade. Instead of using phony business trips to practice forms of self-annihilation, anti-Eric would have used them to accumulate social capital, connections that would eventually allow him to move on to better things. He would have treated the job as a stepping-stone, and this very project of professional advancement would have given him a sense of purpose.

“But such attitudes and dispositions don’t come naturally. Children from professional backgrounds are taught to think like that from an early age. Eric, who had not been trained to act and think this way, couldn’t bring himself to do it.”

James-Dean-Rebel-Without-A-Cause-Movie-PosterLike Eric, I couldn’t bring myself to do it either — although it was not so much that I couldn’t, it was more a case of not knowing how. I was bright enough, had a knack for the all-important “likeability factor” with clients and colleagues, and worked with lots of clients and other professionals who were members of the Red Velvet Rope Club. But like Eric, I remained on the outside looking in, and I spent a lot of time feeling envious of others who fit in so easily. Those dynamics dogged the early years of my law career. In time, a general sense of inadequacy became depression, which I compensated for by nursing a rebel-without-a-cause attitude.

My experience didn’t have to be that way. Consider, for example, the story of super-lawyer David Boies. Like Eric and me, Boies was also born to working class parents and grew up in a farming community, but that’s where the resemblance ends. Chrystia Freeland introduces him this way in her book Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (2012):

“As the world economy grows, and as the super-elite, in particular, get richer, the superstars who work for the super-rich can charge super fees.

“Consider the 2009 legal showdown between Hank Greenberg and AIG, the insurance giant he had built. It was a high-stakes battle, as AIG accused Greenberg, through his privately-held company, Starr International, of misappropriating $4.3 billion worth of assets. For his defense, Greenberg hired David Boies. With his trademark slightly ratty Lands’ End suits (ordered a dozen at a time by his office online), his Midwestern background, his proud affection for Middle American pastimes like craps, and his severe dyslexia (he didn’t learn how to read until he was in the third grade), Boies comes across as neither a superstar or a member of the super-elite. He is both.

“Boies and his eponymous firm earned a reputed $100 million for the nine-month job of defending Greenberg. That was one of the richest fees earned in a single litigation. Yet, for Greenberg, it was a terrific deal. When you have $4.3 billion at risk, $100 million — only 2.3 percent of the total — just isn’t that much money. Further sweetening the transaction was the judge’s eventual ruling that AIG, then nearly 80 percent owned by the U.S. government, was liable for up to $150 million of Greenberg’s legal fees, but he didn’t know that when he retained Boies.”

What did Boies have that Eric and I didn’t?

Well, um, would you like the short list or the long?

Boies is no doubt one of those exceptionally gifted and ambitious people who works hard enough to get lucky. I suspect his plutocrat switch was first activated when his family moved to California while he was in high school, and from there was exponentially supercharged by a series of textbook upwardly mobile experiences:  a liberal arts education at Northwestern, a law degree from Yale, an LLM from NYU, joining the Cravath firm and eventually becoming a partner before leaving to found his own firm.

That’s impressive enough, but there’s more to his story:  somehow along the way he was transformed into the kind of person who belongs — in his case, not just to the 9.9% club, but to the 0.1 %. Yes, his human capital was substantial, but it was his personal transformation that enabled him to capitalize (I use that term advisedly) on the opportunities granted only by social capital.

And now, if the 9.9 percenters we heard from a couple weeks back are correct, the pathway he followed is even more statistically rare (if that’s even possible) than when he travelled it — in part because of an economic principle that’s at least as old as the Bible.

We’ll talk about that next time.

Whatever Happened to Working For a Living? (Cont’d.)

“Politically, every transformation has begun
with a repudiation of the certainties of the previous age.”

– Economist Guy Standing

Last time, I quoted at length from economist Guy Standing’s analysis of how the notion of working for a living has historically fared under the social democracy and neoliberalism economic models. Prof. Standing believes that, as a result of the developments chronicled there, a new class system now dominates the working world. Again, I’ll quote from his book The Corruption of Capitalism (2016):

“Globalization, neo-liberal policies, institutional changes and the technological revolution have combined to generate a new global class structure superimposed on preceding class structures. This consists of a tiny plutocracy (perhaps 0.001 per cent) atop a bigger elite, a ‘salariat’ (in relatively secure salaried jobs, ‘proficians’ (freelance professionals), a core working class, a precariat and a ‘lumpen precariat’ at the bottom. The plutocracy, elite, salariat, and proficians enjoy not just higher incomes but gain most (or an increasing part) of their income from capital and rental income.

“The three classes below them gain nothing in rent. Indeed, increasingly they pay rent in some form to the classes above them. First, there is the shrinking proletariat, relying mainly on labour in stable, mostly full-time jobs, with schooling that matches the skills their jobs require. The precariat, which ranks below the proletariat in income, consists of millions of people obliged to accept a life of unstable labour and living, without an occupational identity or corporate narrative to give to their lives. Their employers come and go, or are expected to do so.

“Many in the precariat are over-qualified for the jobs they must accept; they also have a high ratio of unpaid ‘work’ in labour — looking and applying for jobs, training and retraining, queuing and form-filling, networking or just waiting around. They also rely mainly on money wages, which are often inadequate, volatile, and unpredictable. They lack access to rights-based state benefits and are losing civil, cultural, social, economic and political rights, making them supplicants if they need help to survive.

“This precariat is all over the world… For instance, more Americans today see themselves as in the lower classes. In 2000, according to Gallup polls, 63 percent saw themselves as middle-class and 33 percent as lower-class. In 2015, 51 percent saw themselves as middle-class and 48 percent as lower-class. Similar trends have been reported elsewhere.

“Below the precariat in the social spectrum is what might be called a ‘lumpen-precariat,’ an underclass of social victims relying on charity, often homeless and destitute, suffering from social illnesses including drug addiction and depression. … Their numbers are rising remorselessly; they are a badge of shame on society.”

Prof. Standing’s unique contribution to the conversation about work, happiness, and meaning is his identification of the new social strata. The balance of his analysis is not unique — as he says above, it has been reported “all over the world.” In the coming weeks, we’ll look at various implications of these findings:

  • The old job market’s last stand — “bullshit jobs”;
  • Whether the middle class is truly vanishing;
  • Whether a rising tide truly does float all boats;
  • Why this might be a good time for a new vision of utopia; and
  • Why law firms might want to make their next associate hire a robot.

And much more. Stay tuned.

Meet the New Boss

Same as the old boss.

– The Who

Commentary about economic inequality often compares the situation today to America’s Gilded Age. Back then they had the Robber Barons. Now we have the Robber Nerds. Same dif? It depends who you ask.

A quick check of a list of the Robber Barons on Wikipedia reveals the names of several household brand names that still endure, plus numerous key universities and charities. And this article from a European source — The Truth About the Robber Barons from the Mises Institute ( “30 Years of Austrian Economics, Freedom, & Peace”) — says don’t be too hasty to condemn:

“The late nineteenth and early twentieth centuries are often referred to as the time of the ‘robber barons.’ It is a staple of history books to attach this derogatory phrase to such figures as John D. Rockefeller, Cornelius Vanderbilt, and the great nineteenth-century railroad operators — Grenville Dodge, Leland Stanford, Henry Villard, James J. Hill, and others. To most historians writing on this period, these entrepreneurs committed thinly veiled acts of larceny to enrich themselves at the expense of their customers. Once again we see the image of the greedy, exploitative capitalist, but in many cases this is a distortion of the truth.”

For more, consider the following articles, whose titles telegraph whose side they’re on. but they’re all worth reading:

Seven Myths about the Great Philanthropists:  The turn of the 20th century was a golden age of American philanthropy. It deserves to be better understood.  The Philanthropy Roundtable (2011).

The Robber Barons Weren’t Robbers. Here’s Why. The Learn Liberty project of George Mason University (2017).

Robber Barons. Economists View (2007, reprinting a 1998 article).

The Dark Side of the Gilded Age. The Atlantic (2007)

The Myth of America’s Golden Age. Politico Magazine (2014)

On the lighter side, see P.J. O’Rourke’s Up To a Point: Robber Barons Make Way For Robber Nerds. Rockefeller, Carnegie, J.P. Morgan: This country used to produce impressive if immoral captains of industry. Now we’re stuck with unrefined geeks like Mark Zuckerberg. The Daily Beast (2014).

One thing seems to be consistent in all these commentaries:  both then and now. soaring wealth for the haves and a commensurate decline for the have-nots occurred in a capitalistic, market-based economy. A second key point gets less consensus:  whether the Barons benefited then and the Nerds are benefiting now from government policy and financial subsidies (including tax breaks in our day) — i.e., whether the economy was then and is now truly a free market.

Satisfy yourself, but at this point, after examining far more sources than I can cite in a blog post of this length, and having interviewed a couple free market champion friends of mine, I can comfortably say, as they did, “There never has been a free market.” Instead, what we had then and what we have now was and is a skewed version of capitalism — a perfect political and economic storm that made economic inequality possible back in the Gilded Age and makes it possible again today. This is the missing piece that Econ 101 and its simplistic supply/demand curves doesn’t provide.

The result in both eras has been a new class system that morphs the Horatio Alger ideal into a Great Gatsby reality. When the new class system hits the job marketplace, the result is a vast worldwide demographic of the Angry Left Behind — unhappy, disillusioned, dissatisfied, depressed, and even suicidal workers suffering from meaning malaise. What bothers them is often equated to the same anger that has fueled worldwide political shifts such as Brexit, Trumpism, the move to the right in Germany and France, and a whole lot more. (See for example No Job Left Behind and Back to Work, and countless more initiatives and opinions like them.)

When the subject of economic inequality invokes those kinds of inflammatory developments, it’s no wonder we don’t want to talk about it. Which is precisely what we’ll continue to do, right here.  Stay tuned.

meet the new bossHere’s the original music video of The Who’s We Won’t Get Fooled Again. Watching it draws you all the way back into the turbulent, polarizing 60’s — if you remember them, that is — and the tone feels eerily similar to what we’re living with today. By the way, who said, “If you remember the 60’s, you really weren’t there”? Find out here

And who first called the Robber Barons era the “Gilded Age”? Find out here.

Economic Inequality Statistics

My research on economic inequality consistently turns up three key points:

  1. since the 80’s, there has been an ever-widening gap in incomes and capital ownership between the rich and poor,
  2. the gap has been growing at an accelerating rate, especially since the year 2000, and
  3. this phenomenon is worldwide.

So what?

As I’ve mentioned before, many U.S. economists and policy-makers greet those findings either with indifference or as a clarion call to defend endangered capitalism, while their international counterparts find them alarming. We’re talking about them here because it turns out that economic inequality has a lot to do with happiness and meaning at work. (Stay with me — we’ll get there, we’re just taking the scenic route.)

We all know that it’s easy to mold statistics to fit opinions — here’s a neurologist’s take on Why People Can’t Agree on Basic Facts. Any stats we look at here will have been pre-sorted, pre-analyzed, and pre-interpreted. My goal today is to provide a sampling of statistics from a variety of global sources — starting with a quote about how the new global super-rich are a bunch of economic data curve busters, which makes finding honest data even harder.

plutocrats“The skew toward the very top is so pronounced that you can’t understand overall economic growth figures without taking it into account. As in a school whose improved test scores are due largely to the stellar performance of a few students, the surging fortunes at the very top can mask stagnation lower down the income distribution.

“Consider America’s economic recovery in 2009-2010. Overall incomes in that period grew by 2.3 percent — tepid growth, to be sure, but a lot stronger than you might have guessed from the general gloom of the period. Look more closely at the data, though… and it turns out that average Americans were right to doubt the economic comeback. That’s because for 99 percent of Americans, incomes increased by 0.2 percent. Meanwhile, the incomes of the top I percent jumped by 11.6 percent.”

Plutocrats:  The Rise of the New Global Super Rich and the Fall of Everyone Else (2012), by Canadian journalist and politician Chrystia Freeland.

kwak“Across the developed world, vast fortunes are again ascendant. In the United States, the top 1 percent take home a larger share of total income than at any time except the late 1920’s. The total wealth of the world’s billionaires has quadrupled in the past two decades (even when the definition of “billionaire” is adjusted for inflation).

“In the 1950’s, a typical CEO of a large company took home as much money as twenty average employees; today he makes as much as two hundred workers.”

Economism (2017), by UConn law professor James Kwak.

the wealth of humans“In 2014, the inflation-adjusted income of the typical American household was just 7 per cent higher than it was in 1979. By contrast, the income of a household in the 95th percentile of the income distribution grew 45 per cent over that period.”

The Wealth of Humans:  Work, Power, and Status in the Twenty-First Century (2016), by Ryan Avent,  a thoroughly Anglicized American who works as a senior editor and economic columnist for The Economist.

the fourth industrial“[C]ompare Detroit in 1990… with Silicon Valley in 2014. In 1990, the three biggest companies in Detroit had a combined market capitalization of $36 billion, revenues of $250 billion, and 1.2 million employees. In 2014, the three biggest companies in Silicon Valley had a considerably higher market capitalization ($1.09 trillion), generated roughly the same revenues ($247 billion), but with about 10 times fewer employees (137,000).”

The Fourth Industrial Revolution (2016), by German engineer and economist Klaus Schwab, Founder and Chairman of the World Economic Forum.

Prior to the 2017 World Economic Forum annual meeting of world leaders, U.K.-based Oxfam International issued a report that offers a fascinating slant on Schwab’s comments. According to the report:

“Eight men now control as much wealth as the world’s poorest 3.6 billion people… The men — Bill Gates, Warren Buffett, Carlos Slim, Jeff Bezos, Mark Zuckerberg, Amancio Ortega, Larry Ellison and Michael Bloomberg — are collectively worth $426 billion.”

As reported by CNN.

“By contrast, half the planet’s population, some 3.6 billion people, have a combined wealth of $409 billion.”

As reported by The Mirror Online (the U.K.’s “intelligent tabloid”).

Not only are the Elite Eight collectively worth more than the lower half of the world’s entire population, each individual member of the group is worth more than the combined market capitalization of Detroit’s three largest companies 27 years ago. The Mirror also noted this about the study:

“The report found that between 1988 and 2011 the incomes of the poorest 10% increased by just $65, while the incomes of the richest 1% grew by $11,800 – 182 times as much.”

A couple years ago, Credit Suisse’s Global Wealth Report 2015 reported that half of the world’s assets were controlled by the top 1% of the global population, while the lower half owned less than 1%.

There’s plenty more where all of that came from. In fact, there’s such an abundance of global data and opinion on the topic that, if nothing else, it’s probably safe to conclude that economic inequality either really is a problem or, even if it’s not, a whole lot of people around the world sure seem to think it is.

We’ll continue our economic inquiries next time.

Why We Can’t Talk About Economic Inequality

see no evil

“It is not just the super-rich who don’t like to talk about rising income inequality. It can be an ideologically uncomfortable conversation for many of the rest of us, too. That’s because even — or perhaps particularly — in the view of its most ardent supporters, global capitalism wasn’t supposed to work quite this way.”

plutocratsThat’s from Plutocrats:  The Rise of the new Global Super Rich and the Fall of Everyone Else, Chrystia Freeland (2012). The book reads like an extended academic version of People Magazine meets CNN meets The New York Times, and could only have been written by someone who logged years on the insider track and took lots of notes.

Turns out that’s precisely who Chrystia Freeland is. She’s a Canadian writer, journalist, and politician. She worked in a variety of editorial positions at the Financial Times, The Globe and Mail, and Thomson Reuters, was elected to the Canadian Parliament in 2013 (the year after the book came out), and was appointed Canada’s Minister of Foreign Affairs earlier this year. She’s a Harvard grad, a Rhodes Scholar, and was named one of Toronto’s 50 most influential people by Toronto Life Magazine in 2015.

The book takes names and tells stories, and is awash in dates and times and statistics. Reading it all the way through can be a bit of a slog, and I wonder how many people actually do — I confess, I skimmed a lot. I quote it here because it does a great job of capturing the lessons of my last two posts:  1) most of us haven’t updated our understanding of economics since Econ 101, and 2) we don’t like talking about economic inequality. Beginning with the quote above, the book provides a useful overview of how those two things are related. (These quotes are particularly re: income inequality, but apply to capital inequality as well.)

“Until the past few decades, the received wisdom among economists was that income inequality would be fairly low in the preindustrial era–overall wealth and productivity fairly small, so there wasn’t that much for the elite to capture– then spike during industrialization, as the industrialists and industrial workers outstripped farmers (think of China today). Finally, in fully industrialized or postindustrial societies, income inequality would again decrease as education became more widespread and the state played a bigger, more redistributive role.”

(This theory was articulated by Nobel Prize winning economist Simon Kuzmets, and can be plotted in what has become known as the Kuzmets curve. According to Wikipedia, Kuzmets won the award in 1971 “for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development.”)

Continuing with Plutocrats:

“Until the 1970’s, the United States… was also an embodiment of the Kuzmets curve. The great postwar expansion was also the period of what economists have dubbed the Great Compression, when inequality shrank, and most Americans came to think of themselves as the middle class.

“But in the late 1970’s, things started to change. The income of the middle class started to stagnate and those at the top began to pull away from everyone else. The shift was most pronounced in the United States, but by the twenty-first century, surging income inequality had become a worldwide phenomenon, visible in most of the developed Western economies, as well as in the rising emerging markets.

“The switch from the America of the Great Compression to the America of the 1 percent is still so recent that our intuitive beliefs about how capitalism works haven’t caught up with the reality. In fact, surging income inequality is such a strong violation of our expectations that most of us don’t realize it is happening.”

We’ll look at some inequality stats next time.