Posts Tagged ‘class’


Chris Rock may be right. Still, Americans are well aware that economic inequality in their country is obscene, even though they often underestimate the growing gap between the poor and the rich.

But it’s Frank Rich, who conducted the interview with the American comedian, who made the more perceptive observation:

For all the current conversation about income inequality, class is still sort of the elephant in the room.

All the experts agree—from Thomas Piketty and the other members of the World Inequality Lab team to John C. Weicher of the conservative Hudson Institute—that inequality in the United States, especially the unequal distribution of wealth, has been worsening for decades now. Both before and after the crash of 2007-08. And there’s no sign that things are going to get better anytime soon, unless radical changes are made.

But, as it turns out, even the experts underestimate the degree of inequality in the United States. The usual numbers that are produced and disseminated indicate that, in 2014 (the last year for which data are available), the top 1 percent of Americans owned one third (35 percent) of total household wealth while the bottom 90 percent had less than half (45.3 percent) of the wealth.

According to my calculations, illustrated in the chart at the top of the post, the situation in the United States is much worse. In 2014, the top 1 percent (red line) owned almost two thirds of the financial or business wealth, while the bottom 90 percent (blue line) had only six percent. That represents an enormous change from the already-unequal situation in 1978, when the shares were much closer (28.6 percent for the top 1 percent and 23.2 percent for the bottom 90 percent).

Why the large difference between my numbers and theirs? It all depends on how wealth is defined. Both the World Inequality Lab and the Federal Reserve (in the Survey of Consumer Finances) include housing and retirement pensions in household wealth—and those two categories comprise most of the so-called wealth of most Americans. They just don’t own much in the way of financial or business wealth. They live in their houses and they retire based on contributions from their wages and salaries over the course of their work lives. They produce but don’t take home any of the surplus; therefore, they just don’t have the ability to amass any real wealth.

For the small group at the top, things are quite different. They do get a cut of the surplus, which they use, not only to purchase housing and put aside in their pensions, but to accumulate real wealth, for themselves and their families. If we take out housing and pensions and calculate just the shares of financial or business wealth—and, thus, equities, fixed-income claims, and business assets—the degree of inequality is much, much worse.

Yes, rich people in the United States are very rich—even more than either regular Americans or the experts believe.

But that’s not the real elephant in the room. The big issue that everyone is aware of, but nobody wants to talk about, is class. And that’s the reason there should be, if not riots, at least a sustained political movement to transform the existing economic and social structures in the United States.

graph_dl (1)

Economic inequality is arguably the crucial issue facing contemporary capitalism—especially in the United States but also across the entire world economy.

Over the course of the last four decades, income inequality has soared in the United States, as the share of pre-tax national income captured by the top 1 percent (the red line in the chart above) has risen from 10.4 percent in 1976 to 20.2 percent in 2014. For the world economy as a whole, the top 1-percent share (the green line), which was already 15.6 percent in 1982, has continued to rise, reaching 20.4 percent in 2016. Even in countries with less inequality—such as France, Germany, China, and the United Kingdom—the top 1-percent share has been rising in recent decades.

Clearly, many people are worried about the obscene levels of inequality in the world today.

In a famous study, which I wrote about back in 2010, Dan Ariely and Michael I. Norton showed that Americans both underestimate the current level of inequality in the United States and prefer a much more equal distribution than currently exists.*

In other words, the amount of inequality favored by Americans—their ideal or utopian horizon—hovers somewhere between the level of inequality that obtains in modern-day Sweden and perfect equality.

What about contemporary economists? What is their utopian horizon when it comes to the distribution of income?

Not surprisingly, economists are fundamentally divided. They hold radically different views about the distribution of income, which both inform and informed by their different utopian visions.

For example, neoclassical economists, the predominant group in U.S. colleges and universities, analyze the distribution of income in terms of marginal productivity theory. Within their framework of analysis, each factor of production (labor, capital, and land) receives a portion of total output in the form of income (wages, profits, or rent) within perfectly competitive markets according to its marginal contributions to production. In this sense, neoclassical economics represents a confirmation and celebration of capitalism’s “just deserts,” that is, everyone gets what they deserve.

From the perspective of neoclassical economics, inequality is simply not a problem, as long as each factor is rewarded according to its productivity. Since in the real world they see few if any exceptions to perfectly competitive markets, their view is that the distribution of income within contemporary capitalism corresponds to—or at least comes close to matching—their utopian horizon.

Other mainstream economists, especially those on the more liberal wing (such as Paul Krugman, Joseph Stiglitz, and Thomas Piketty), hold the exact same utopian horizon—of just deserts based on marginal productivity theory. However, in their view, the real world falls short, generating a distribution of income in recent years that is more unequal, and therefore less fair, than is predicted within neoclassical theory. So, bothered by the obscene levels of contemporary inequality, they look for exceptions to perfectly competitive markets.

Thus, for example, Stiglitz has focused on what he calls rent-seeking behavior—and therefore on the ways economic agents (such as those in the financial sector or CEOs) often rely on forms of power (political and/or economic) to secure more than their “just deserts.” Thus, for Stiglitz and others, the distribution of income is more unequal than it would be under perfect markets because some agents are able to capture rents that exceed their marginal contributions to production.** If such rents were eliminated—for example, by regulating markets—the distribution of income would match the utopian horizon of neoclassical economics.***

What about Marxian theory? It’s quite a bit different, in the sense that it relies on the assumptions similar to those of neoclassical theory while arriving at conclusions that are diametrically opposed. The implication is that, even if and when markets are perfect (in the way neoclassical economists assume and work to achieve), the capitalist distribution of income violates the idea of “just deserts.” That’s because Marxian economics is informed by a radically different utopian horizon.

Let me explain. Marx started with the presumption that all markets operate much in the way the classical political economists then (and neoclassical economists today) presume. He then showed that even when all commodities exchange at their values and workers receive the value of their labor power (that is, no cheating), capitalists are able to appropriate a surplus-value (that is, there is exploitation). No special modifications of the presumption of perfect markets need to be made. As long as capitalists are able, after the exchange of money for the commodity labor power has taken place, to extract labor from labor power during the course of commodity production, there will be an extra value, a surplus-value, that capitalists are able to appropriate for doing nothing.

The point is, the Marxian theory of the distribution of income identifies an unequal distribution of income that is endemic to capitalism—and thus a fundamental violation of the idea of “just deserts”—even if all markets operate according to the unrealistic assumptions of mainstream economists. And that intrinsically unequal distribution of income within capitalism becomes even more unequal once we consider all the ways the mainstream assumptions about markets are violated on a daily basis within the kinds of capitalism we witness today.

That’s because the Marxian critique of political economy is informed by a radically different utopian horizon: the elimination of exploitation. Marxian economists don’t presume that, under capitalism, the distribution of income will be equal. Nor do they promise that the kinds of noncapitalist economic and social institutions they seek to create will deliver a perfectly equal distribution of income. However, in focusing on class exploitation, they both show how the unequal distribution of income in the world today is affected by and in turn affects the appropriation and distribution of surplus-value and argue that the distribution of income would likely change—in the direction of greater equality—if the conditions of existence of exploitation were dismantled.

In my view, lurking behind the scenes of the contemporary debate over economic inequality is a raging battle between radically different utopian visions of the distribution of income.


*The Ariely and Norton research focused on wealth, not income, inequality. I suspect much the same would hold true if Americans were asked about their views concerning the actual and desired degree of inequality in the distribution of income.

**It is important to note that, according to mainstream economics, any economic agent can engage in rent-seeking behavior. In come cases it may be labor, in other cases capital or even land.

***More recently, some mainstream economists (such as Piketty) have started to look outside the economy, at the political sphere. They’ve long held the view that, within a democracy, if voters are dissatisfied with the distribution of income, they will support political candidates and parties that enact a redistribution of income. But that hasn’t been the case in recent decades—not in the United States, the United Kingdom, or France—and the question is why. Here, the utopian horizon concerning the economy is the neoclassical one, or marginal productivity theory, but they imagine a separate democratic politics is able to correct any imbalances generated by the economy. As I see it, this is consistent with the neoclassical tradition, in that neoclassical economists have long taken the distribution of factor endowments as a given, exogenous to the economy and therefore subject to political decisions.


Much has been made of the rise of populism in recent years and the threat it poses to liberal democracy.

My view is that liberal critics of populism, standing on their heads, get it wrong. If made to stand on their feet, they’d have to admit that populism actually represents the failure of liberal democracy.

Populism has experienced a resurgence of late—in Hungary, Britain, France, Turkey, the United States, and elsewhere—especially the form of populism variously characterized as right-wing, nationalist, or authoritarian. It has attracted increasing support and achieved notable political victories within the institutions and procedures of liberal democracy.

The problem is that liberal democracy has failed to confront, much less solve, the problems that have led to the rise of populism in the first place.



Consider, for example, the history of populism in the United States. The three notable periods—in the late nineteenth century (with the rise of the People’s Party, which was also known as the Populist Party), the first Great Depression (around such figures as Father Charles Coughlin and Huey P. Long), and then during the second Great Depression (starting with the Tea Party and culminating in the election of Donald Trump)—all coincided with obscene levels of inequality and severe economic crises that decimated American workers and other classes (including farmers and small businesses) across the country.

Populism has been one of the principal responses to the complex and shifting layers of discontent and resentment that the ideas and policies of the leading political parties, economic elites, and mainstream intellectuals within American democracy first created and then failed to respond to. As I explained last November,

The paradox of the 2016 presidential race is that both major party candidates claim (or at least are identified by those in the media with) support of portions of the U.S. working-class and yet neither campaign offers anything in the way of concrete policies or strategies that actually respond to the real issues and problems faced by the members of the working-class. . .

It’s no wonder, then, that over the course of the past year and a half American workers have rejected establishment politics—as offered by both Democrats and Republicans—and voted in large numbers for Bernie Sanders and Donald Trump. They’re simply fed up with an economic system that has been rigged to benefit only a small group at the top and frustrated by a set of political candidates (not to mention economists and economic pundits) who pronounce fundamental change to be undesirable and unrealistic. Better to stay the course, so the elites preach, and eventually trickledown economics will work.

A different response was, of course, possible in all three circumstances. Instead of populism, marginalized classes in the United States might have been persuaded by and coalesced into a movement with utopian impulses—an association, organization, or political party that combines a critique of the existing order, including the elites that defend it, with an agenda that seeks to radically transform economic and social institutions in a progressive direction.**

As I see it, both right-wing populism and left-wing utopian movements see the existing system as “rigged” against the vast majority of people and level an indictment against “elites” that both benefit from and defend the existing system. Both responses therefore represent a failure of liberal democracy.

But the two reactions are not at all similar, even when both attempt to represent the grievances of workers and other classes that have been left behind.

There are, it seems to me, two key differences between right-wing populist and left-wing utopian movements. First, they approach the matter of alliance and opposition quite differently. Utopian movements identify a basic conflict between the people and an elite or establishment, and then challenge the claims to universality of those on top in order to form a different universality, a set of changes that will create a new humanity and realm of freedom for everyone, including the existing elites. As John Judis explains, right-wing populists exhibit a radically different approach. They

champion the people against an elite that they accuse of favouring a third group, which can consist, for instance, of immigrants, Islamists, or African American militants. Rightwing populism is triadic: it looks upward, but also down upon an out group.

The second major difference is that right-wing populists look backward, conjuring up and then offering a return to a time that is conceived to be better. For Trump, that time is the 1950s, when a much larger share of workers was employed in manufacturing, American industry successfully competed against businesses in other countries, and Wall Street played a much smaller role in the U.S. economy.***

That time was, of course, exceptional—in terms of both U.S. and world history. And it’s a vision that conveniently forgets about many other aspects of that lost time, such as worker exploitation, Jim Crow racism, and widespread patriarchy inside and outside households.

Instead of looking backward, left-wing utopian movements look forward—criticizing the existing order but also understanding that it creates some of the economic and social conditions for a better, more just society.

Liberal critics of populism understand neither their own role in producing the circumstances within which populism emerged nor the senses of injustice—especially class injustice—that fuel populism’s gathering strength.

The Left should be able to do better, both in analyzing the rise of populism as a failure of liberal democracy and in offering a utopian alternative to the status quo. But for that, it will have to look beyond the idea that populism alone represents a threat to liberal democracy.

If liberal democracy is under threat it is because of its own failures.


*The chart illustrating the wealth shares of the top ten percent and top one percent is from Richard Sutch, “The One Percent across Two Centuries: A Replication of Thomas Piketty’s Data on the Concentration of Wealth in the United States,” Social Science History 41 (Winter 2017): 587-613.

**Such a movement did in fact gather strength during the first Great Depression, the Thunder from the Left, which is precisely what led to the second New Deal in 1935 (after the 1934 midterm elections and before Franklin Delano Roosevelt’s 1936 reelection campaign).

***Joshua Zeitz argues that the Populists of the late nineteenth century also looked backward and that the parallels between then and now are striking:

Ordinary citizens chafed at growing economic inequality and identified powerful interests—railroads, banks, financial speculators—that seemed to control the levers of power. Many came to believe that the two major political parties, despite certain differences, were fundamentally in the pockets of the same interests and equally unresponsive to popular concerns.

labor share

The United States is now more than eight years out from the end of the Great Recession and the one-sided nature of the recovery is, or at least should be, clear for all to see.

Even as unemployment has dipped below the so-called “natural rate,” workers are far from recovering all they’ve last in the past decade.

According to the official data illustrated in the chart above, the labor share of national income remains just above the lowest level it reached in the entire postwar period. Using 100 in 2009 as the index value, the current labor share has fallen to 96.5—down from 110.24 in 2001 and 114 in 1960.

The question is, how low can the labor share go?


Posted: 4 December 2017 in Uncategorized
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How bad have things gotten in the United States? It’s now up to Nitin Nohria [ht: ja], the dean of Harvard Business School, to sound the alarm that “class lines. . .have become far more distinct and visible in recent years.”

Nohria published his essay at the end of the same week that the U.S. Senate passed its version of the “Tax Cuts and Jobs Act,” which is nothing more than an enormous boon to large corporations and wealthy individuals under the guise of trickledown economics,  and Philip Aston, the United Nations monitor on extreme poverty and human rights, has embarked on a coast-to-coast tour to investigate the widespread existence of extreme poverty in the United States.

The inspiration for Nohria’s reference to class lines is Arlie Hochschild’s Strangers in Their Own Land (which we taught in the spring, as the final text of A Tale of Two Depressions). According to Hochschild, the U.S. class structure once resembled an orderly queue: the premise and promise of economic and social institutions were that, if you worked hard, you would achieve the American Dream.


Notwithstanding the large number of exceptions (for racial and ethnic minorities, impoverished whites, women, and many others), it was a story Americans told about themselves and their country. And it held a kernel of truth: until the early-1970s, workers’ wages did keep pace with growing productivity and the wage share was relatively stable.

Now, of course, the American Dream lies in tatters. In response, the members of the white working-class in Hochschild’s account are resentful that others at the bottom—especially minorities and immigrants—have been allowed, with the help of the government, to cut ahead of them in the line.

Nohria goes in a different direction:

As I read Hochschild’s analysis, my thoughts turned to a different sort of resentment the white working class is feeling. Even as it stews over people cutting into its ever slower-moving line, it also envies another faster-moving queue: the special one reserved for people with means—the ones who travel business or first class. The affluent people in this line believe they have earned their preferred status through a meritocratic process that has assessed and rewarded their ambition and enterprise. This group becomes accustomed to its special privileges and comes to expect them everywhere, from legacy admissions to college for their children to special seating at sports events to VIP treatment at theme parks. It begins to believe that there should be a special line for innovators and pioneers who have sacrificed time with friends and family to achieve their personal best—those who want to reach for the top, to be number one. Yet even preferred status is not enough; those on any fast track can always see a still-faster track. If the first-class line is short, flying on a private aircraft from a terminal with no security lines is even faster.

The result is that

Now there are fewer and fewer opportunities for people in different lines to ever encounter each other in person. They go to different schools, shop at different stores, and rarely interact. Yet they are hyper-aware of each other due in part to the ubiquity of social media and television. You can gawk at the lives of the privileged on Instagram, tap into the resentment of the white working class on Brietbart [sic], and see the plight of the disenfranchised on Vice. This ready visibility has unleashed a range of emotions, including resentment, entitlement, envy, and despair—and it’s tearing America apart.

Neither Hochschild nor Nohria offers an analysis of why those class lines are moving further and further apart—there’s no mention of how more and more surplus is being captured and kept by the small group at the top. And Nohria’s proposed solution, to allow more underprivileged students into Harvard Business School and to expose all business students to “cases that describe the challenges of the working class and the impoverished,” is derisorily inadequate.

In my view, we don’t need yet another effort “to better understand those who may not be in the same line as us.” What we need instead is an open and frank discussion of how the existing economic and social institutions in the United States are predicated on creating and reproducing those class lines—and how a different set of institutions would erase the class lines that keep Americans apart.

Let’s see them teach that lesson at Harvard Business School.


There are plenty of reasons to be interested in—and, even more, concerned about—Facebook. Many of them are raised in the recent review of Facebook-related books by John Lanchester [ht: db]: the fragmentation of the polity (via the targeting of posts), the dissemination of “fake news” (which played an important role in the 2016 U.S. presidential election), the undermining of other livelihoods (such as journalism and music), the level of surveillance of users (much more than any national government), the violation of anti-monopoly rules (via individualized pricing), and so on.

All of them are important—and they get at what the Facebook business model is all about:

For all the talk about connecting people, building community, and believing in people, Facebook is an advertising company.

That’s right. That’s how the owners of Facebook make their money: they track users, collect information, and then sell that to advertisers.*

But it still doesn’t get at the issue of who works for Facebook, who creates that value, what the class structure of Facebook (and Google and other such companies) is.

Lanchester’s answer is that we, the two billion or so of us who use Facebook, actually work for the social-media giant.

Access to an audience – that unprecedented two billion people – is a wonderful thing, but Facebook isn’t in any hurry to help you make money from it. If the content providers all eventually go broke, well, that might not be too much of a problem. There are, for now, lots of willing providers: anyone on Facebook is in a sense working for Facebook, adding value to the company.

In one sense, Lanchester is right: if Facebook users don’t create or repost content and click on and respond to one another’s postings, then Facebook’s business model falls apart. In fact, as Lanchester explains,

Perhaps the biggest potential threat to Facebook is that its users might go off it. Two billion monthly active users is a lot of people, and the ‘network effects’ – the scale of the connectivity – are, obviously, extraordinary. But there are other internet companies which connect people on the same scale – Snapchat has 166 million daily users, Twitter 328 million monthly users – and as we’ve seen in the disappearance of Myspace, the onetime leader in social media, when people change their minds about a service, they can go off it hard and fast.

But what I find interesting is the fact that Lanchester can write a longish essay on Facebook and never once mention the word labor—and the only people who seem to be working are Facebook users.

What about Facebook’s employees? As it turns out, Facebook reported a headcount of 18,770 in its first-quarter earnings release (and likely employs more workers, as independent contractors for specific projects). Why don’t we consider them to be the ones who create the value realized by selling space to advertisers and information to others who purchase the data gathered by Facebook? And Facebook employees the ones who are working for and being exploited by Facebook’s board of directors?

When General Motors sells cars, the people who purchase and drive the cars aren’t being exploited; GM workers are. The same is true for other corporations, from Abbott Laboratories to Zoetis (which, along with Facebook, make up the Standard & Poor’s 500, covering about eighty percent of the American equity market by capitalization). They’re employees, not their customers, are the ones who create value and surplus-value.

So, why is Facebook (and, by the same token, other social-media and internet companies) different?

The answer, I think, is our relationship to the commodity being produced and sold is different. We purchase cars—and, if we’re aware of it, we know they’re produced by exploited auto-workers. But in the case of Facebook, we’re not purchasing anything at all, at least directly. We post content to our friends or advertise a business or try to form a community. And then it’s Facebook that collects data about us and sells it—not to us but to others, other corporations. Without our participation, of course, Facebook would not have anything to sell, and therefore no way of making a profit.

And, more generally, we seem to be spending more and more time involved in activities for which we are not remunerated but are essential for the profit-making activities of corporations we don’t work for. We post on social-media sites. We use search engines to navigate the internet. We search for flights. We check-out and bag the commodities we purchase at retail stores. And so on.

But I’m not convinced we’re creating value and subjecting ourselves to class exploitation. We may be performing labor but we’re not working for those corporations. And we are being commodified, and participating in our commodification.

But we’re not working for those corporations. Their employees are—and they’re the ones who are being exploited.


*Although, according to a recent report, Facebook may exaggerate the reach of its advertising platform: it claims to reach millions more users among specific age groups in the U.S. than the official census data show reside in the country.


We’ve long known there is a strong correlation between growing up in poverty and low academic achievement. Thus, for example, children living in poverty tend to have lower scores on standardized tests, lower grades, and are less likely to graduate from high school or go on to college.

Now we’re learning that that there is a correlation between poverty and children’s actual brain development.

According to Mike Mariani, the results of studying the “neurocognitive profile” of socioeconomic status and the developing brain are startling. For example, according to one study, kids from poorer, less-educated families tended to have thinner subregions of the prefrontal cortex—a part of the brain strongly associated with executive functioning—than better-off kids. Moreover, according to the data from another study:

small increases in family income had a much larger impact on the brains of the poorest children than similar increases among wealthier children. And [Kimberly] Noble’s data also suggested that when a family falls below a certain basic level of income, brain growth drops off precipitously. Children from families making less than $25,000 suffered the most, with 6 percent less brain surface area than peers in families making $150,000 or more.

Noble is one of the pioneers in this area and, in order to go beyond correlation to causality, she’s now proposing a randomized controlled trial of giving some mothers a $333 monthly income supplement or others a $20 monthly income supplement.

I am all in favor of giving cash to members of poor households—as against, for example, taking over poor people’s lives by using brain science to promote more effective “executive function skills” such as “impulse control” and “mental flexibility” of the sort proposed by the Crittenton Women’s Union (pdf).

However, as I see it, there are two problems inherent in the way these new poverty-brain trials are proceeding.

First, the trial that Noble proposes is another instance of the kind of work we’re now seeing in development economics (associated especially with Abhijit Banerjee and Esther Duflo), which conducts experiments on poor people. One “treatment” group is assigned randomly to receive an intervention, and the other is randomized to receive the “control” experience, enabling the investigators to assess the impact of one intervention or another—in this case, on brain development. In other words, poor people are being used as human guinea pigs to conduct scientific experiments.

What’s the alternative? Set up programs, with the participation of poor people, to analyze the causes and consequences of poverty and identify changes that need to be made in the system in order to end existing poverty and prevent its recurrence in the future.

Second, the focus is on the brains of poor children, which in Noble’s language are “at much greater risk of not going through the paces of normal development to eventually become the three-pound wonder able to perform intellectual feats, whether composing symphonies or solving differential equations.”

What about the brains of rich children—why are they presumed to go through “the paces of normal development”? I’m thinking, for example, of the new psychological research on the “pathologies of the rich,” which involves studies of “social class as culture” and “sharing the marbles.” And, of course, there’s the infamous 2013 manslaughter trial of Ethan Couch, whose defense included a witness saying the teen was a product of “profoundly dysfunctional” parents who gave him too much and never taught him the consequences of his actions.

The issue here is not just the continued existence of obscene poverty, but also grotesque levels of inequality—which affect both poor and rich children, albeit in different ways. In my view, we need to be worried about an economic and social system that generates extreme levels of both poverty and inequality and that alters the brains of all children.

There’s nothing normal not just about the minds of children who are born into such a system, but the system itself.