10th anniversary post: "Inequality for All"

 

 

Ten years ago this month, I saw the documentary film "Inequality for All," produced by Robert Reich, former Secretary of Labor and longtime advocate for progressive economic policies. In the film Reich argued that increasing economic inequality in America, driven by globalization and technology, was exacerbated by governmental deregulation; that it limited economic opportunity for many Americans; and that it was solvable only by shifting money from the rich to the middle class. 

Reich's film came out three years before Donald Trump stunned the world by getting elected President on a campaign fueled almost entirely by resentment. While analysts debate the source of Trump's sustained appeal, it surely draws to some degree on insecurity brought by economic inequality, as well as cultural nostalgia. Trump, an extraordinarily wealthy man who inherited his fortune, has sharp words for "elites," but of course it is the most vulnerable who suffered the most under his rhetoric and policies.

What has been the story of inequality in the eleven years since the film? FRED, the wondrous economic dashboard created by the St. Louis branch of the Federal Reserve, provides data on the Gini Index going back to 1963. By this measure, inequality declined through the 1960s and 70s, before rising from the mid-30s to around 40 in the early 1990s. It's hovered there ever since, declining a bit when recessions hit upper incomes. At the time "Inequality for All" came out, the single-year high was 41.4 in 2006; it recovered to 41.5 in 2014, and stayed around there through 2019 before COVID hit. It was 39.7 in 2021, the last year for which there are data. I'll lay odds it's back to at least 41.5, if not higher.

As of 2016 our Gini score of 41.1 was the highest in the developed world, with only Israel (39.0) within five points of it (The CIA World Factbook 2023-2024, p. 1007) . The UK scored 34.8, Canada 33.3, Japan 32.9, Germany 31.9, and France 31.6. So it's definitely a choice to be as unequal as we are.

Thomas Piketty's data go back farther, though he prefers to look at income shares rather than the Gini Index (see Piketty 2013: 266-267) the post-1963 pattern is virtually identical. At the time he published Capital in the Twenty-First Century (Belknap-Harvard, 2013), the share of US national income going to the top 10 percent had reached levels not seen since the 1920s (cf. Figure 1.1, p. 24, and Figure 8.7, p. 299). Moreover, those high shares were already sustained longer than they had been in the 1920s, and now of course have been sustained even longer. (The same can be said of the share of national income going to the top 1 percent, viz. Figure 8.8 on p. 300.)

So we're at historical levels of inequality in America. Reich concluded his film on a hopeful note: "History is on the side of positive social change." Certainly we can point to past examples of positive social change, and there's surely no point in being hopeless. But it's hard to see this story ending well without a sharp change of course. Right now the main available business models are far from inspiring: either to sell luxury items to the rich, or cheap crap to the poor. That leaves us with sprawl, unstable employment, unaffordable housing, stressed parents, vehicle gigantism, deaths of despair, and less opportunity for small business starts. And where does that take us? Social fragmentation, threats to democracy, violent outbreaks... the mind reels.

I guess the one thing I would say in 2024 is it's too bad more people didn't listen to Robert Reich back then instead of Donald Trump and his ilk. Positive social change is never easy, but community-building is always worth it.