The Inequality Industry
Atossa Araxia Abrahamian/ The Nation
14 سبتمبر 2018
ince 2008, wonks, politicians, poets, and bankers have all started talking about inequality. But are they interested in making us more equal?
In the fall of 2011, Janet Gornick, a professor of political science at the City University of New York, went down to Manhattan’s Zuccotti Park to join Occupy Wall Street. For the past two decades, Gornick had been working at the Luxembourg Income Study, an organization with a branch in New York City that amasses data sets on income and wealth disparities around the world. Gornick knew from her work that economic inequality had long been a subject of scholarly inquiry. “There were hundreds of working papers assessing its causes, looking at how welfare states mitigate market-driven inequality, and so on,” she recalls. But for most of her tenure at the LIS, the study of inequality was still a niche field, and an academic one at that. Save for a handful of economists and sociologists, the growing gap between rich and poor wasn’t keeping a lot of scholars up at night. As long as the economy was growing, most analysts in wealthy countries figured everyone would eventually end up better off.
This isn’t to say that no one was paying attention. The late economist Tony Atkinson—the British “godfather” of inequality studies, according to Gornick—had written extensively on how and why societies grow unequal. But for decades, Atkinson was an outlier, someone shouting in the dark. Inequality was also passionately debated in philosophy departments after the publication of John Rawls’s A Theory of Justice in 1971, but that conversation tended to center on highly theoretical notions of how much inequality a society could reasonably tolerate—not popular demands to rein in the earnings of the 1 percent.
After the crash of 2008, the language of inequality began to trickle into the popular discourse. Then the Occupy movement launched it into the mainstream; the fall of 2011 was the first time in generations that concerns about distributive justice drove crowds into the streets and made front-page news. Scholars, pundits, and politicians all took note, and before long, Gornick and her colleagues found themselves at the center of what President Barack Obama called “the defining challenge of our time.” Reporting from a gathering at the Brookings Institution in late 2012, the journalist Chrystia Freeland (now Canada’s minister of foreign affairs) observed: “Three decades later, trickle-down economics”—the theory that slashing taxes on businesses and the rich would spur investment and eventually benefit society as a whole—“has met its antithesis. We are set for one of the great battles of ideas of our time.”
Even the International Monetary Fund, which for decades has imposed privatization and austerity programs on nations as the price of its financial aid, began to sound repentant. In 2013, IMF head Christine Lagarde conceded at Davos, of all places, that “the economics profession and the policy community have downplayed inequality for too long,” and that “a more equal distribution of income allows for more economic stability, more sustained economic growth, and healthier societies.”
These events set the stage for an unlikely best seller: The English translation of Thomas Piketty’s Capital in the Twenty-First Century, published in 2014, sold over 700,000 copies. Since then, enthusiasm for the subject has not waned. Professors speak of inequality institutes “springing up like mushrooms” and students looking to “get into the inequality area.” In 2015, the London School of Economics started to offer a master’s degree in inequality studies. (The price tag for a nonresident to attend the yearlong course: $27,000.) That same year, the Ford Foundation, one of America’s most prominent philanthropic institutions, changed its mission statement. Ford’s new focus: offering grants for work seeking to reduce inequality “in all its forms”—an ambitious, if vague, endeavor that funds projects exploring housing fairness, racial disparities, and the future of work. “This is how people are experiencing life in America today,” says foundation president Darren Walker. Even poets were taking note: Frederick Seidel titled his latest poetry collection Widening Income Inequality.
“It’s where the interest is,” Gornick observes. “It’s where the attention is; it’s where people think the grant money is. People who studied immigration or education now study inequality. People in the humanities are studying inequality in all kinds of qualitative and literary ways.” (A recent Australian study found that women in economically unequal areas tend to take more “sexy selfies.”)
The new conversation around inequality marks an important break in how we think about economic growth. But it is also a complex, evolving, and multifaceted discussion. In the shuffle of income-distribution curves, fiscal policy, and Gini scores (a popular measure of economic disparities), the idea of egalitarianism as a moral imperative tends to get buried by more instrumental aims—particularly when the institutions and individuals who are hosting and paying for these discussions on gaping inequality owe their very existence to it.
Though the policies this research feeds aren’t necessarily egalitarian, some of the solutions that have been proposed—higher taxes on the rich, better social-welfare programs—are generally progressive. Still, given the surge of populist rhetoric in contemporary politics, it’s worth wondering how inequality will end up figuring into politics five, 10, or 20 years down the line—and who will profit by it. We are seeing the emergence of a way of thinking about inequality that many rich people can get behind, one that appeals to those who have no interest in advancing equality on moral grounds. But this raises an important question: Are the new inequality activists interested in achieving equality, or just fighting inequality?
In the United States, economic inequality hasn’t always been seen as a problem. It’s not that the yawning disparities in fortune leading up to the Great Depression didn’t stir up feelings of discontent. Nor were socialists the only ones alarmed by its evils: Even Franklin Roosevelt deplored the moral bankruptcy of the fat cats and bankers. But during the recovery that followed and in the decades thereafter, the central measure of economic health wasn’t equality but rather growth and, to some extent, employment levels. It didn’t matter so much who got rich or by how much, as long as everyone wound up less poor.
This philosophy came to be embraced for decades by politicians, intellectuals, economists, and many ordinary Americans, who clung to a deep faith in capitalism and in their own potential to get ahead. John Steinbeck’s famous (misquoted) observation that Americans are all temporarily embarrassed millionaires was, in this respect, apt: If everyone believes they’re next in line to receive untold riches, it’s perfectly reasonable to let the wealthy be. This also meant the welfare state that emerged in the United States wasn’t as interested in reducing inequality as it was in solving the problems of poverty and instability. While European social democrats were setting up welfare states in a more egalitarian spirit in the first half of the 20th century, American liberals focused on basic subsistence, not redistribution. As Samuel Moyn, the author of Not Enough: Human Rights in an Unequal World, recently noted, Roosevelt’s Four Freedoms included the freedom from want, not a positive vision of equality.
In the postwar years, the freedom from want nonetheless helped build a more equal society—what economists and historians have come to call the “Great Compression.” Thanks to deficit spending during and after the Second World War, as well as gains in worker productivity, strong labor unions, and progressive tax rates, inequality in the decades between the 1940s and the ’70s saw a notable decline. Yet the postwar Red Scare made it difficult for those with redistributionist ambitions, and when a New Left emerged in the 1960s, its protest movements were focused primarily on civil rights, poverty, and the Vietnam War.
In the economics profession, the study of inequality was similarly limited. In the 1950s, economist Simon Kuznets advanced a theory that would be widely cited in the coming decades: that as an economy develops, it will see an increase in inequality, followed by a decrease thanks to political pressure for increased social spending as well as lower returns to capital. Kuznets’s analysis was descriptive, but it nevertheless dovetailed with prescriptive political ideologies that argued inequality was natural and self-regulating—much like the market itself. Seen in this light, economic disparities could even be desirable: Encouraging people to get ahead by rewarding their hard work and talent would ultimately benefit society as a whole… or so the story went.
Beginning in the 1970s, inequality began to surge with the economic shocks of that decade. But the language and politics around inequality did not; indeed, by the 1980s, free-market principles were in full force. Under the “Reaganomics” of Ronald Reagan’s presidency, taxes on the wealthy were slashed, dropping from 70 percent in 1982 to just 28 percent in 1988. And a new generation of Democratic politicians felt they had to move to the right on economic and social issues to attain electoral success. Bill Clinton and the “New Democrats” were the avatars of this movement in the United States, and they were joined by British Prime Minister Tony Blair and German Chancellor Gerhard Schröder on the other side of the Atlantic.
Clinton’s welfare “reforms,” along with widespread financial deregulation and the declining power of organized labor, would end up pushing wealth further to the top, to the detriment of poor people, who no longer had much of a social safety net or the power to demand one. Still, officials like then–Federal Reserve chairman Alan Greenspan insisted that this accumulation of riches wasn’t a zero-sum game: “[W]hile I do not deny that there are very major holdings of wealth by individuals, it’s by no means clear to me that these have in any way been extracted [from] other people in society.”
By the dawn of the new millennium, the contours of an unequal nation—and an even more unequal world—were coming into focus. Between 1993 and 2010, the top 1 percent in the United States saw their incomes grow by 58 percent, compared with 6.4 percent for everyone else; in 2010, 388 people owned fully half of the world’s wealth.
Americans may now recognize these vast gulfs in wealth. They show up in TV shows like Billions and Succession, blockbusters like Crazy Rich Asians, and even in recent slang, such as the concept of “fuck-you money.” But what’s wrong with inequality, anyway?
Answers to this question are rarely satisfying, but they do serve as a political litmus test about the kind of inequality that matters. A Marxist might concern herself with how economic inequality divides society into classes, allowing capitalists to wield wealth as a weapon, disempower workers, and extract their labor. The humanitarian position tends to prioritize sufficiency of resources and basic rights; feminists, environmentalists, and advocates for the undocumented, the disabled, and minorities would say social inequalities matter, too, and that part of the problem with economic inequality is that it reinforces them. New research has shown us that economic, social, racial, and gender inequality are inextricably linked—and that the effect of high inequality is to create even more inequality.
Thomas Piketty, Joseph Stiglitz, and the many other economists they have worked with or inspired have shown that high levels of inequality hurt democracy because, among other things, they allow rich people and corporations to buy the support of politicians. Berkeley economist Gabriel Zucman has helped us more fully understand the consequences of tax havens, which allow money to accumulate offshore instead of being redistributed (or even accounted for), thereby enriching only those who possess it. Branko Milanovic’s tireless work at the World Bank, and now from his post at the City University of New York, has shown that while nations themselves are growing more unequal, the economic inequality between countries has actually fallen, especially as China and India have reduced poverty over the past 30 years. He has also made crucial contributions showing how migration can reduce global inequality. It’s a sign of the times that Milanovic’s update to the Kuznets curve—which maps how inequality in rich countries rises, falls, and then rises again—went viral on Twitter for its elegant depiction of inequality in the 21st century.
The overall effect of this research has been to significantly change the narrative. It has shown that intense concentrations of wealth are a product of policy, not human (or economic) nature. Crucially, it has depicted extreme disparities as harmful because they lead to abuses of power and structural barriers to prosperity, as well as the social tensions and reactionary political movements that follow. It is simply not true that the rich can stay as rich as they are without consequences for those at the very bottom, or that their gains will eventually “trickle down” to everyone else. The imbalance, in other words, distorts society as a whole, creating a host of social ills that could ultimately threaten capitalism itself.
For Darren Walker, who has led the Ford Foundation’s pivot to inequality, this fight is personal. “I was born in absolutely the bottom decile of the income strata in the US,” he says. “I am now in the top.” Walker worries, with good cause, that what allowed him to “climb out of poverty”—namely, public investment in education programs like Head Start and the fiscal policies that support them—are disappearing. But he’s also clear that the foundation’s newfound interest in inequality isn’t a pitch to bring down the institutions of capitalism. On the contrary: “The level of inequality we have today is a result of the way we have constructed economic policies and systems,” he says. “I refuse to believe that this is just a natural phenomenon or a part of capitalism.”
In fact, Walker traces the foundation’s new goals back to its benefactor, the automobile baron Henry Ford, who, Walker notes, wanted the workers on his assembly lines to be able to afford the products they made. This was not because Ford was interested in their empowerment (he was openly hostile to unions), but because he saw their economic well-being as fundamental to his own. Considered in this context, it’s no surprise that tech billionaires and centrist politicians are fretting about the wealth gap and considering basic-income experiments. Otherwise, if things continue as they have been, “who’s going to be able to afford an iPhone?” Walker asks.
Another charitable organization to take up the inequality fight is Oxfam. The anti-poverty organization has been advocating limits on executive compensation, the elimination of the gender pay gap, ending corporate tax avoidance, and taxing the rich more equitably for almost a decade. Each year, Oxfam issues a press release ahead of the World Economic Forum in Davos, Switzerland, highlighting the astonishing percentage of the world’s wealth that is owned by a small number of people, which routinely gets picked up by thousands of media outlets. Oxfam has also lobbied the United Nations to add reducing inequality to its Sustainable Development Goals.
“We’re a development organization making sure people in poverty were getting resources and accountability,” says Paul O’Brien, Oxfam America’s vice president for policy. “And what we realized is: The way we were approaching our work—largely using resource transfers and dealing with poverty’s symptoms—wasn’t working. So we started calling out the structural issues beneath these widening disparities and asking ourselves: Can we address poverty if we don’t address structural inequality?”
Given that Oxfam is a charity that raises funds externally, rather than relying on its endowments like the Ford Foundation, you’d think the inequality talk would put it in an awkward position—“taking money from rich people to fight rich people having too much money,” as O’Brien puts it. But it turns out there are plenty of rich people who are game; in fact, Oxfam has been invited to participate in the Davos conference itself. “We believe there’s a useful role to be played by engaging directly with those whose behaviors and advantages we hope to correct,” O’Brien explains. Still, he confesses that this dance makes him a little uncomfortable. “Are we being so polite that we, at some level, are being co-opted? We ask ourselves that all the time.”
Editor Ian Malcolm, who acquired Piketty’s Capital in the Twenty-First Century for Harvard University Press, and has since worked on a number of other books on inequality, calls elite interest in the issue “the Bismarck approach”: taking pains to curb inequality “largely in order to prevent revolution and for stability.” “That’s not a bad reason,” he adds, “but the Davos crowd might worry about this, because this is not a problem of justice” for them; rather, they “are pursuing self-interest and thinking, ‘We’ve lost the world where we were preeminent.’”
It feels churlish to complain about the existence of an inequality-industrial complex. No matter the inner contradictions of such an enterprise, the research it has produced is valuable, and the conversations it has provoked are illuminating. Perhaps most significant, it seems to be helping elucidate how these tremendous differences in wealth aren’t a product of moral turpitude or personal failure, but of calculated and determined policy.
This sentiment has been prevalent in recent movements, from the Fight for $15 to Black Lives Matter and #MeToo. It has featured prominently in political campaigns and stump speeches, both from those on the left, like Bernie Sanders and Alexandria Ocasio-Cortez, and those tacking toward the center, like Kamala Harris and Cory Booker. Even Hillary Clinton made inequality a central issue on the campaign trail in 2016. Heather Boushey, who led economic policy for Clinton’s transition team and now works at the think tank Washington Center for Equitable Growth, says that it was one of Clinton’s most popular points. (Stephen Moore, an economic adviser for Trump’s campaign, accused Boushey of being “focused on equality instead of growth,” while “our campaign is based on growth, growth, growth.”)
But the fact remains that inequality talk can fuel right-wing rallying cries against immigration as easily as it can figure into left-wing talking points for fairer taxation. Reducing inequality on a national scale still requires drawing boundaries, which raises questions about whom a leveling of resources might benefit, and how. There’s nothing progressive about redistribution in a white ethnostate, for example, even if it means appropriating Rupert Murdoch’s yachts. Nor is there anything admirable about blocking all immigration with the goal of raising wages for “real” Americans.
Recognizing the limits of inequality discourse—and conducting it in an egalitarian, not an instrumental, spirit—is thus crucial. Because regardless of their station, Americans today feel unequal—whether it’s because, as women, they get paid 81 cents to the dollar; or because, as African Americans, they have barely seen their household incomes rise since the civil-rights era; or because, as white men, they are on the “losing” end of initiatives aimed at promoting equality of opportunity, such as affirmative action; or because, as 1 percenters, they feel envious of their neighbor’s sixth car. This suggests that there is something fundamental about advocating for economic equality as a matter of fairness, not just because inequality is a drag on growth. It also underscores the importance of considering inequality in universal, global terms, not nationalist ones.
What’s more, the current “inequality paradigm”—the subject of a forthcoming book by London School of Economics sociologist Mike Savage—raises its own set of vexing questions. It just may be that, given the earth’s increasingly limited capacity to handle traditional “growth,” we can’t aspire to bring everyone to the top. “If we want to live in a better society, it’s not ‘How do we grow more?’” Savage points out. “It’s ‘How do we become more sustainable and think about having inequality at a level which people find acceptable and not extreme?’” A rising tide might not lift all boats—or even only the yachts, as Joseph Stiglitz so memorably put it. Instead, it might simply flood us all out of existence.
Anthropologists David Graeber and David Wengrow reject the inequality paradigm for many of these reasons. In a recent essay in Eurozine, they argue that the common policy prescriptions—fiddling with tax rates, for instance—are technocratic, self-serving, and insufficiently radical. The current discussions of inequality may well “shock the public with figures showing just how bad things have become (‘can you imagine? 0.1% of the world’s population controls over 50% of the wealth!’),” but they fail to address “any of the factors that people actually object to about such ‘unequal’ social arrangements: for instance, that some manage to turn their wealth into power over others; or that other people end up being told their needs are not important, and their lives have no intrinsic worth.”
Graeber and Wengrow have a point. Incrementalism, historically, has not worked. Most of the factors that have reduced inequality to a significant degree have been grim: wars, plagues, immiseration, the guillotine. What those without wealth need, even before wealth, is power—through unions, through political parties, and through the state. That might mean pressuring governments to take from the few to give to the many. It might mean more cooperative models of ownership. It might involve burning the whole thing down.
In fairness, inequality researchers have begun to quantify power imbalances—by adding up corporate power, for instance, or revealing the distortionary effects of monopolies, or examining how inequality corrupts the political process. At the same time, there is always the risk of the issue becoming depoliticized by technocrats, much like past initiatives to fight poverty or promote sustainable development.
Now that we understand these phenomena better, we need radical solutions to come into play in the political arena as well as the intellectual one. And they need to be animated by an egalitarian spirit, not a technocratic one that, in the current context, is doomed to fail. Boushey suggests going back to basics and figuring out what it is we’re referring to in the first place when we talk about economic growth. The gross domestic product “has been our measure,” she points out. “We think that if GDP went up, that’s good! But we need to show people what matters is not how much it grows [but] to whom the gains go.”
“We need to make sure wealth is not self-perpetuating,” Boushey adds. “We got here by saying, ‘Rich people and Wall Street have our interest at heart, and they’ll regulate themselves and there will not be bad outcomes if we let them do what they want.’ We saw how that turned out.”