BRAD DELONG: THREE DIMENSIONS OF INEQUALITY: GLOBAL, EDUCATIONAL/TECHNOLOGICAL, AND PLUTOCRATIC

We used to have a framework for understanding the time dimension of inequality in the United States: we called it the "Kuznets Curve". The United States starts out as a country that is relatively equal--at least among white guys who speak English. Free land, lack of serfdom, the possibility of moving the west if you don’t like the wages you’re being offered in the east--all of these produce a middle-class society. Then comes 1870 or so, and things shift. The frontier closes. Industrial technologies emerge and they are highly productive and also capital intensive. So we move into a world of plutocrats and merchant princes: people in the cities, either off the farms or from overseas, competing against each other for jobs. And we get the extraordinarily stark widening of American income inequality up until the mid-1920’s or so.

This then calls forth a political reaction. Call it progressivism, call it social democracy, call it--in Europe--socialism. The idea is that the government needs to put its thumbs on the scale, heavily, to create an equal income distribution and a middle class society. Progressivism and its candidates are elected to power in democratic countries in the North Atlantic in the twentieth century--in spite of everything you say about Gramsci and hegemony and the ability of money to speak loudly in politics. Thus from 1925 to 1980 we see substantial reductions in inequality in the United States--the creation of a middle-class society, at first only for white guys and then, gradually, for others.

In 1980 things shift again. Since 1980 we have had an extraordinary explosion of inequality in the United States. This explosion has taken place along two dimensions.

First, we have seen extraordinarily rapid growth between the top twenty percent and the lower eighty percent. The benefits to achieving a college education skyrocket--for reasons that I don’t really have time to go into, and for reasons that are still somewhat uncertain.

Second, we have an even larger explosion of inequality between the top .01 percent, the top 15,000 households, and the rest of the top twenty percent. This second explosion is the most puzzling and remarkable feature of the past generation.