Will Economic Inequality Be Reversed?

The increasing concentration of wealth in the hands of a small minority seems to be an inevitable consequence of capitalism as it is currently practiced.  Given that wealth and power are related, how likely is it that the trend towards ever-growing inequality can be reversed?  An somewhat optimistic assessment is provided by Ronald Inglehart in an article in Foreign Affairs: Inequality and Modernization: Why Equality Is Likely to Make a Comeback.  He sees a reversal as inevitable; it is only a question of when.

Inglehart reminds us that inequality was reversed in the postwar years, both in the US and in Europe.  The reversal was partly because of the tumult of World War II, but it was also due to the increased political power acquired by wage earners relative to the owners of capital.

“What most analyses of the subject miss, however, is the extent to which both the initial fall and the subsequent rise of inequality over the past century have been related to shifts in the balance of power between elites and masses, driven by the ongoing process of modernization.”

Economic evolution produced changes that facilitated the creation of an effective working class.  Increased urbanization concentrated workers into environments in which shared experiences nurtured bonding.  Better education led to improved literacy and more efficient expressions of political goals.  Unions won the right to bargain collectively and provided a platform for projecting political power.

“The expansion of the franchise gave ever more people the vote, and leftist political parties mobilized the working class to fight for its economic interests. The result was the election of governments that adopted various kinds of redistributive policies—progressive taxation, social insurance, and an expansive welfare state—that caused inequality to decline for most of the twentieth century.”

However, the nature of the economy and of society itself changed.  The idea of a society consisting of economic classes dissipated, along with the political power associated with that thinking.  The issues that created political passion changed, forcing realignment of voters between the two political parties.

“The success of the modern welfare state made further redistribution seem less urgent. Noneconomic issues emerged that cut across class lines, with identity politics and environmentalism drawing some wealthier voters to the left, while cultural issues pushed many in the working class to the right. Globalization and deindustrialization undermined the strength of unions. And the information revolution helped establish a winner-take-all economy.”

The political power of those who would promote redistribution diminished to the point of ineffectiveness, allowing the wealthy to take advantage of their power.

“The rich, in turn, have used their privilege to shape policies that further increase the concentration of wealth, often against the wishes and interests of the middle and lower classes.”

“Today the conflict is no longer between the working class and the middle class; it is between a tiny elite and the great majority of citizens. This means that the crucial questions for future politics in the developed world will be how and when that majority develops a sense of common interest.”

Inglehart supports the notion that society can be divided into a tiny elite and everyone else with this chart.

The median income by level of education suggests that higher levels of education pay off with higher income, but even the most highly educated, the doctors, lawyers, and scientists, are not sharing in the nation’s increase in wealth.  Gross domestic product, GDP, is essentially a measure of national income.  While it has grown since 1991, earnings for everyone but a few have remained stagnant.  The nation’s new wealth is being accumulated by that “tiny elite.”

“….even highly skilled jobs are being commodified, so that even many highly educated workers in the upper reaches of the income distribution are not moving ahead, with gains from the increases in GDP limited to those in a thin stratum of financiers, entrepreneurs, and managers at the very top.”

The highly-touted “knowledge economy” has been a disaster in terms of inequality.  It creates very few high-tech jobs and seems determined to turn the nation into a vast reservoir of contingent employees—people with no job security and few of the benefits that the laboring class fought so hard for a century ago.

“The rise of the postindustrial economy narrowed the life prospects of most unskilled workers, but until recently, it seemed that the rise of the knowledge society would keep the door open for those with sophisticated skills and a good education. Recent evidence, however, suggests that this is no longer true.”

“As expert systems replace people, market forces alone could conceivably produce a situation in which a tiny but extremely well-paid minority directs the economy, while the majority have precarious jobs, serving the minority as gardeners, waiters, nannies, and hairdressers—a future foreshadowed by the social structure of Silicon Valley today.”

Inglehart believes that political forces can once again intrude upon the oligarchy and tame it, as it did in the postwar years.

“Market forces show no signs of reversing these trends on their own. But politics might do so, as growing insecurity and relative immiseration gradually reshape citizens’ attitudes, creating greater support for government policies designed to alter the picture.”

Surveys of attitudes in developed countries, including the United States, suggest belief in a need for increased government action to counter inequality is growing.  It is likely to continue growing.  Inglehart believes that the conditions for the formation of a political “movement” are not yet in place, but they will be and action could follow quickly.

“In today’s postindustrial society, however, a large share of the population is already highly educated, well informed, and in possession of political skills; all it needs to become politically effective is the development of an awareness of common interest.”

“Will enough of today’s dispossessed develop what Marx might have called ‘class consciousness’ to become a decisive political force? In the short run, probably not, because of the presence of various hot-button cultural issues cutting across economic lines. Over the long run, however, they probably will, as economic inequality and the resentment of it are likely to continue to intensify.”

For those depressed by the current state of affairs, recall how quickly changes in attitudes and legal standing came for same-sex marriage.  Remember that in the United States there are three arenas in which political activism can be effective: local, state, and federal governments.  If stymied at the federal level, go to work at the city or state level.  That process has been relatively quickly successful in waging campaigns for a higher minimum wage.

A few months ago the common wisdom assumed a 2016 presidential campaign between Hillary Clinton and Jeb Bush.  Now we face the distinct possibility of a duel between Bernie Sanders and Donald Trump.  Who says change can only come slowly?

If we don’t make bold proposals, bold things can never happen.  If we don’t vote in support of our economic self-interest, we will lose our economic standing.  It is as simple as that.