All inequality all the time

 

It’s clear we are in the midst of an acute period of inequality: not only of grotesque levels of economic inequality (which are now well documented) but also of a wide-ranging discussion of the conditions and consequences of that extreme inequality (which appears to be taking off).

There are, of course, the deniers, like my dear friend Deirdre McCloskey. What inequality, is her mantra. The only thing that matters is economic growth, such that the amount of stuff people have today is much more than they’ve had throughout much of human history. OK, but that doesn’t tell us much about how that growth took place (it’s the surplus, Deirdre) or what it’s consequences are (on the majority who actually produce the surplus versus the tiny minority who appropriate it).

And then there are those who are actually thinking seriously about inequality, some of whose work is published in the latest issue of Science (a lot of which, unfortunately, is behind a paywall). Leave aside the silly article on econophysics (really, the existing distribution of income is a kind of “natural inequality,” which is what you would get from entropy?), the article that focuses on the psychological pathologies of the poor (what about those of the rich?), and the fact that all the economics is narrowly confined to mainstream theories (which have done more to deflect attention from, as against the wide range of heterodox theories that have actually focused on, inequality over the course of the past three decades). Just the fact that a special issue of such a prestigious journal is devoted to the problem of inequality tells us something about how it has risen to the top of our agenda.

And it offers lots here to think about: the types of inequality that can be found in the archeological record (Heather Pringle), the absence of fundamental inequalities in hunter-gatherer societies (Elizabeth Pennisi), the devastating effects of inequality on health (Emily Underwood), growing inequality in developing countries (Mara Hvistendahl and Martin Ravallion), the intergenerational transmission of inequality via unequal maternal circumstances and health at birth (Anna Aizer and Janet Currie), and finally a dire warning about what will happen if current inequalities continue to grow (Angus Deaton):

The distribution of wealth is more unequal than the distribution of income, and very high incomes will eventually pupate into very large fortunes, ultimately leading to a hereditary dystopia of idle rich.

The pair of articles by economists—one by Thomas Piketty and Emmanuel Saez, the other by David Autor—tells us a great deal about how the issue of inequality is being framed within mainstream economics (since, as I wrote above, all the various types of nonmainstream economics are simply ignored in the issue). For Piketty and Saez, it’s all about the inequality (both income and wealth) that separates the top 1 percent (and, within that, the top .1 percent and .01 percent) from everyone else, while Autor’s piece focuses on the inequality of earnings within the bottom 99 percent. The debate comes down to seeing inequality as a result of high CEO incomes and returns on accumulated wealth (especially when the rate of return on wealth is greater than the overall growth rate, leading to more concentration of wealth) versus the inequality that derives from earnings based on different levels and kinds of skill (presuming that earnings are equal to marginal productivities). In other words, it’s a (mostly) classical approach—which focuses on scarce wealth concentrated in the hands of the already rich—versus a (thoroughly) neoclassical approach—according to which scarce skills attract higher earnings. The solution from the classical perspective is a global tax on wealth; from the neoclassical viewpoint, all we need is an increase in education and skills for those at the bottom.

Here’s what I find interesting about the debate, not only between the economists but throughout the entire special issue: it’s all about economic inequality—what it is (absolute or relative), how it can be measured (within and across nations, and over time), what its causes and consequences are (including not only the health of individuals but also of society as a whole), and so on—but there’s not a single mention of class.

Not literally. The word class doesn’t appear in any of the articles or reviews. But class is the specter that, in my view, haunts this entire debate. We saw it back in the First Great Depression. And now we’re seeing it rear its ugly head once again, in the midst of the Second Great Depression. We didn’t solve it then. Perhaps, now, we’re ready to tackle it.

And, if we don’t, we’ll be faced with even more inequality all the time.

Update

As if on cue, the latest issue of the American Spectator focuses on what they consider to be the “new class warfare”—using as a threat the universal symbol of “off with their heads.”

For which Gavin Mueller offers the only appropriate response:

Remember this: no matter how many country clubbers flip through Piketty’s book, at bottom, the rich hate us. They disdain us. They mock us. And they fear us, even though the current balance of forces favors them overwhelmingly and sometimes “common ruin of the contending classes” seems like an optimistic outcome.

Yet I have to fall back on some advice I got as a kid: If the American Spectator wants to cry about class warfare, we should give them something to cry about.