Chart of the day

Published by Anonymous (not verified) on Sat, 18/11/2017 - 2:30am in


On Wednesday, I referred to the wealth pyramid in the United States. But I didn’t really represent that pyramid in the chart I provided.

Here it is, above, with the wealth share of the bottom 50 percent (in red), the middle 40 percent (in blue), and the top 10 percent (in green)—a wealth pyramid for each year, from 1962 to 2014.


Or, here’s another, if you prefer a three-dimensional version of the latest year for which data are available. In 2014, the wealth share of the top 10 percent was 73 percent, while the middle 40 percent had 27 percent of net personal wealth. And the bottom 50 percent? It was exactly zero.

Now that is a real wealth pyramid!

Tagged: chart, inequality, United States, wealth

At the bottom of the wealth pyramid

Published by Anonymous (not verified) on Thu, 16/11/2017 - 1:00am in

wealth shares

Yesterday, I looked at the enormous wealth of U.S. billionaires and the growing gap between them and the rest of the American people.

Today, I want to examine what’s happened in recent years at the bottom of the wealth pyramid.

We know that, for decades, the share of net personal wealth owned by the bottom 90 percent has been declining. It peaked at 38.5 percent in the mid-1980s and, by 2014, it had fallen to 27 percent—more or less where it started in the early 1960s.

As is clear from the chart above, most of the change occurred for the middle 40 percent (the blue area), since the bottom 50 percent in the United States has owned very little personal wealth. Its share (the red area), which reached a peak in 1987 (2.4 percent), has since fallen below zero (-0.1 percent, in 2014).

Clearly, the small and declining share of wealth owned by the vast majority of Americans challenges the fundamental presumptions and promises of the country and its economic institutions—that American workers should and would share in the nation’s growing wealth. They haven’t and, if current trends continue, they won’t.

In fact, as it turns out, there is only one dimension of American society where wealth inequality is actually decreasing: the racial wealth gap among low-income households. And that’s only because, since the onset of the Second Great Depression, the median net worth of low-income whites has been cut by nearly half—while the median net worth of low-income blacks and Hispanics has remained relatively stable.

According to an analysis conducted by the Pew Research Center of the data contained in the most recent Survey of Consumer Finances by the Board of Governors of the Federal Reserve System, there is a large gap between the median net worth of white families ($171 thousand) and both black ($17.6 thousand) and Hispanic ($20.7 thousand) families—a gap that increased between 2013 and 2016. The white-black gap grew from $132,800 to $153,500 while the white-Hispanic gap increased from $132,200 to $150,300.


The gap between whites and both blacks and Hispanics also increased for middle-income Americans (those with incomes between two-thirds and twice the national median size-adjusted income). Thus, for example, white households in the middle-income tier had a median net worth of $154,400 in 2016, compared with $38,300 for middle-income blacks and $46,000 for middle-income Hispanics.

But for low-income Americans (those with size-adjusted household incomes less than two-thirds the median), the racial gap, while still large, has shrunk considerably since 2007, the year the most recent crash began. In that year, the white-black gap was 5 to 1 and the white-Hispanic gap almost 10 to 1. In 2016, those wealth gaps had fallen to less than 3 to 1 and 5 to 1, respectively.

As is clear from the chart above, the major reason for the decline in the racial wealth gap is the fact that the median wealth of low-income whites fell by more than half between 2007 and 2013, while the median wealth of both blacks and Hispanics decreased by much less (around 19 percent).

The cause of both the racial gaps and the decline in white wealth has to do with homeownership, the only major form of wealth held by low-income Americans. In 2007, 56 percent of low-income whites were homeowners, compared with 32 percent each for low-income blacks and Hispanics. The homeownership rate among low-income whites has trended downward since then, falling to 49 percent by 2016, but the rate for blacks and Hispanics is largely unchanged. The decline in low-income white wealth was caused by the crash of the housing market, leading to a fall in housing prices and a decline in the rate of homeownership.

Economically, then, the crash and the uneven recovery moved low-income Americans—white, black, and Hispanic—much closer together at the bottom of the U.S. wealth pyramid. Politically, those changes created losses and resentments that affected the outcome of the presidential election of 2016, which in turn have made it difficult to challenge the conditions and consequences of the Second Gilded Age.

Tagged: blacks, Gilded Age, Hispanic, homeownership, inequality, race, United States, wealth, white

Escaping from imaginary worlds

Published by Anonymous (not verified) on Wed, 15/11/2017 - 9:50pm in

“We, economics students of the world, declare ourselves to be generally dissatisfied with the teaching that we receive… We wish to escape from imaginary worlds!”

So began the open letter from 1,000 unhappy French economics students, published in Le Monde on 17 June 2000, that with hindsight kickstarted student protests over economics curriculum reform. When the International Student Initiative for Pluralism in Economics, a coalition of 65 student societies, published its own open letter in 2014, it claimed that “we are dissatisfied with the dramatic narrowing of the curriculum that has taken place over the last couple of decades.”

It has become conventional wisdom that traditional economics courses do not satisfy the desires of students. But is this true of most students, or just a vocal minority? Even some who advocate curriculum reform doubt whether the majority of students are really “generally dissatisfied”. Dennis Snower, president of the Kiel Institute for the World Economy, pointed this out in Frankfurter Allgemeine Zeitung in February 2015: “Almost everyone is opposed to fundamental changes in teaching… [including] the students who often learn by heart and don’t want to think in new ways.”

For the last two years we have tried to answer this question about students using a new approach: asking them. We asked CORE teachers around the world to pose the question: which topics do they want to learn more about by studying economics? We then collected their responses as word clouds.

This isn’t a rigorous experiment, so the results are indicative only. They suggest, however, that the mainstream of students everywhere want a broader, more relevant curriculum. And remember, these students hadn’t studied any economics at this point, and they had not chosen to study CORE in preference to any other textbook.

First, compare the students at University College London (top) and the University of Los Andes (bottom) in Bogota, Colombia. It’s remarkable how similar their contributions are, and what dominates their thinking.

When we aggregate across all the universities that took part in our experiment in 2017, inequality is still overwhelmingly the most import thing on the students’ minds (surprisingly, this was also the case when we put the question to employees at the Bank of England in 2016).

When he did this experiment last year, Nikolaus Wolf, Professor of Economics at Humboldt University, wasn’t surprised to see inequality dominating the thinking of first-years. “Students today seem to feel that the issue of inequality is no longer far away, but actually important within Germany and our European neighbours. I think it is an important factor to understand why Europe is disintegrating.” Although it dominates their thinking, historically they would have had to wait until Chapter 20 of Mankiw’s Principles to learn about it (we introduce inequality in Unit 1).

Thinking global, acting local

But we shouldn’t think only about the aggregate “representative undergraduate”, and assume that all students are the same. For example, at the University of La Réunion, one issue dominates to the point that it’s hard to make a word cloud out of the responses:

“It’s not a surprise for us that our students consider that the problem of unemployment is so important,” says Dr Zoulfikar Mehoumoud Issop, who teaches the introductory course. “In 2014, the rate of unemployment in Reunion Island was 54% for people between the ages of 15 and 24.”

And at the University of Arkansas, where adopting CORE has saved students $100,000 in textbook costs, poverty and debt are more salient:

Updating a curriculum means teachers must solve two problems. First, to reflect day-to-day experience within a structure that teaches students the important tools of economics. But it’s clearly also important to “act local”, and adapt teaching for different economies, and views of the world. Our volunteer translators in places like India are not just doing word-for-word translations: we hope to localise our text too, adding relevant data, different examples and new text. We also know that many of you are taking advantage of our Creative Commons licence to combine CORE with your own material.

These words clouds show that curriculum reform isn’t just about pandering to a few fanatical students. It’s about helping the next generation of economists everywhere make sense of the real world they experience, in the place where they live.

The post Escaping from imaginary worlds appeared first on CORE.

Gilt Trip

Published by Anonymous (not verified) on Wed, 15/11/2017 - 3:43pm in

How the “Boston Brahmins” of the late nineteenth century laid the foundations for modern American capitalism.

Monopoly men*

Published by Anonymous (not verified) on Wed, 15/11/2017 - 1:00am in


Wealth inequality in the United States has reached such extreme levels it is almost impossible to put it into perspective.

But the folks at the Institute for Policy Studies (pdf) have found a novel way, by comparing the fortunes of the 400 wealthiest Americans to the meager assets of everyone else.


Here’s what they found:

  • The three wealthiest people in the United States—Bill Gates, Jeff Bezos, and Warren Buffett—now own more wealth than the entire bottom half of the American population combined, a total of 160 million people or 63 million households.
  • America’s top 25 billionaires—a group the size of a major league baseball team’s active roster—together hold $1 trillion in wealth. These 25 have as much wealth as 56 percent of the population, a total 178 million people or 70 million households.
  • The billionaires who make up the full Forbes 400 list now own more wealth than the bottom 64 percent of the U.S. population, an estimated 80 million households or 204 million people—more people than the populations of Canada and Mexico combined.


Here’s another way: the average wealth of the top 10 billionaires (from the Forbes 2017 list) is $61 billion. In 2014 (the last year for which data are available), the average wealth for the United States as a whole (the blue line in the chart above) was only $297 thousand, while the average wealth owned by the middle 40 percent (the green line) was even less, $202 thousand. As for the top 1 percent, their average wealth (the red line) was $1.15 million—clearly far more than most other Americans but not even close to the extraordinary level of wealth that has been accumulated by the tiny group at the very top.

As the authors of the report explain,

The elite ranks of our billionaire class continue to pull apart from the rest of us. We have not witnessed such extreme levels of concentrated wealth and power since the first Gilded Age a century ago. Such staggering levels of wealth inequality threaten our democracy, compound racial and class divisions, undermine social cohesion, and destabilize our economy.

The problem is, while mainstream economists look the other way, politicians in Washington continue to allow the Monopoly men to pass Go, collect their additional billions in wealth, and win the game.


*”Monopoly men” are not just men: there are 50 women on the 2017 Forbes 400 list, who are worth a combined $305 billion. (An additional five women who built and share fortunes with their husbands also made the list.) They include Alice Walton (with a net worth of $38.2 billion), Jacqueline Mars ($25.5 billion), Laurene Powell Jobs ($19.4 billion), Abigail Johnson ($16 billion), and Blair Parry-Okeden ($12 billion).

Tagged: 1 percent, billionaires, Forbes, inequality, Monopoly, United States, wealth

Desperately seeking a link between wages and productivity

Published by Anonymous (not verified) on Tue, 14/11/2017 - 1:00am in


Everyone, it seems, now agrees that there’s a fundamental problem concerning wages and productivity in the United States: since the 1970s, productivity growth has far outpaced the growth in workers’ wages.*

Even Larry Summers—who, along with his coauthor Anna Stansbury, presented an analysis of the relationship between pay and productivity last Thursday at a conference on the “Policy Implications of Sustained Low Productivity Growth” sponsored by the Peterson Institute for International Economics.

Thus, Summers and Stansbury (pdf) concur with the emerging consensus,

After growing in tandem for nearly 30 years after the second world war, since 1973 an increasing gap has opened between the compensation of the average American worker and her/his average labor productivity.

The fact that the relationship between wages and productivity has been severed in recent decades presents a fundamental problem, both for U.S. capitalism and for mainstream economic theory. It calls into question the presumption of “just deserts” within U.S. economic institutions as well as within the theory of distribution created and disseminated by mainstream economists.

It means, in short, that much of what American workers are produced is not being distributed to them, but instead is being captured to their employers and wealthy individuals at the top, and that mainstream economic theory operates to obscure this growing problem.

It should therefore come as no surprise that Summers and Stansbury, while admitting the growing wage-productivity gap, will do whatever they can to save both current economic institutions and mainstream economic theory.

First, Summers and Stansbury conjure up a conceptual distinction between a “delinkage view,” according to which increases in productivity growth no long systematically translate into additional growth in workers’ compensation, and a “linkage view,” such that productivity growth does not translate into pay, but only because “other factors have been putting downward pressure on workers’ compensation even as productivity growth has been acting to lift it.” The latter—linkage—view maintains mainstream economists’ theory that wages correspond to workers’ productivity and that, in terms of the economy system, increasing productivity will raise workers’ wages.

Second, Summers and Stansbury compare changes in labor productivity and various time-dependent and lagged measures of the typical worker’s compensation—average compensation, median compensation, and the compensation of production and nonsupervisory workers—and find that, while compensation consistently grows more slowly than productivity since the 1970s, the series (both of them in log form) move largely together.

Their conclusion, not surprisingly, is that there is considerable evidence supporting the “linkage” view, according to which productivity growth is translated into increases in workers’ compensation and hence improving living standards throughout the postwar period. Thus, in their view, it’s not necessary—and perhaps even counter-productive—to shift attention from growth to solving the problem of inequality.

ButSummers and Stansbury are still unable to dismiss the existence of an increasing wedge between productivity and compensation, which has two components: mean and median labor compensation have diverged and, at the same time, there’s been a falling labor share in the United States.

That’s where they stumble. They look for, but can’t find, a link between productivity and those two measures of growing inequality. There simply isn’t one.

What there is is a growing gap between productivity and compensation in recent decades, which has result in both a falling labor share and higher growth of labor compensation at the top. That is, more surplus is being extracted from workers and some of that surplus is in turn distributed to those at the top (e.g., industrial CEOs and financial executives).

Moreover, one can argue, in a manner not even envisioned by Summers and Stansbury, that the increasing gap between productivity and workers’ compensation is at least in part responsible for the productivity slowdown. Changes in the U.S. economy that emphasize capturing an increasing share of the surplus from around the world have translated into slower productivity growth in the United States.

The only conclusion, contra Summers and Stansbury, is that even if productivity growth accelerates, there is no evidence that suggests “the likely impact will be increased pay growth for the typical worker.”

More likely, at least for the foreseeable future, is the increasing inequality and the (relative) immiseration of American workers. Those are the problems neither existing economic institutions nor mainstream economic theory are prepared to acknowledge or solve.


*Actually, the argument is about productivity and compensation, not wages. In fact, Summers and Stansbury assert that “the definition of ‘compensation’ should incorporate both wages and non-wage benefits such as health insurance.” Their view is that, since the share of compensation provided in non-wage benefits significantly rose over the postwar period, comparing productivity against wages alone exaggerates the divergence between pay and productivity. An alternative approach distinguishes what employers have to pay to workers, wages (the value of labor power, in the Marxian tradition), from what employers have to pay to others, such as health insurance companies, in the form of non-wage benefits (which, again in the Marxian tradition, is a distribution of surplus-value).

Tagged: CEOs, compensation, inequality, Larry Summers, productivity, surplus, United States, wages, workers

Land of opportunity?

Published by Anonymous (not verified) on Mon, 13/11/2017 - 11:37am in

From a new report on wealth inequality in America:

The three wealthiest people in the United States — Bill Gates, Jeff Bezos, and Warren Buffett — now own more wealth than the entire bottom half of the American population combined, a total of 160 million people or 63 million households.

Read it here.

“Manufacturing the Future”

Published by Anonymous (not verified) on Sat, 11/11/2017 - 3:12am in

Last year, I was honored to deliver the 9th Annual Wheelright Memorial Lecture at the University of Sydney.

A couple of weeks ago, my longtime friend and collaborator Katherine Gibson presented the 2017 Wheelright Memorial Lecture, “Manufacturing the Future: Cultures of Production for the Anthropocene.”

her work has consistently challenged orthodox and heterodox economics’ primary focus upon the operation of ‘Big-C’ Capitalism. Instead, Gibson has crafted a unique methodological framework she terms ‘participatory action research’, which looks to the diversity of existing community economic arrangements by engaging directly with local subjects.

The method engages with local communities to shed light upon the idiosyncrasies and often non-commercial nature of local modes of provisioning. Rather than accepting the ‘tragedy of the commons’ – the notion of the inevitable degradation of commonly used land and resources – Gibson’s work has revealed the importance of the commons to many existing developmentally diverse communities. She thereby challenges the core tenet of orthodox economics, which prioritises the optimisation of the allocation of scarce resources through facilitating smoothly functioning markets.

Tagged: Anthropocene, Australia, commons, community, economics, inequality, mainstream, manufacturing, sustainability

Hyperinflation and inequality

Published by Anonymous (not verified) on Sat, 11/11/2017 - 12:23am in

I'm still reading The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century, which is fun, well-written and in my view less controversial than what most reviews have suggested. Yes, inequality tends to fall mostly by violent means during periods of crisis. Note, also, that Walter Scheidel uses in this book the concept of surplus, and as noted earlier here (or here and here) before is part of this broader group of social scientists that still use the concepts of the old and forgotten classical political economists. There are significant advantages to this approach (see here, for example).
Having said there is an issue that is a bit annoying in the book, which is it simplistic Monetarist view of hyperinflation. For example, he says about the two world wars and the inter-war period that:
“These gargantuan struggles were for the most part funded by borrowing, printing money, and collecting taxes. Borrowing variously translated to future taxation to service public debt, inflation to erode it, or default. Only the leading Western powers successfully managed inflation...
... the United Kingdom, the United States, and Canada were prepared to 'soak the rich,' whereas more autocratic systems such as Germany, Austria-Hungary, and Russia preferred to borrow or print money to sustain their war effort. The latter, however, later paid a high price through hyperinflation and revolution, shocks that likewise compressed inequality.”
There is no more detailed analysis, but one would infer from this that if the elites chose to print money to finance their war incurred fiscal deficits they ended up with hyperinflation. I have discussed hyperinflations before here (see also this one). Don't get me wrong, hyperinflations are destructive forces and certainly played a role in the Great Contraction (the inequality reducing forces that operated in this period, although I would put, as Scheidel seems to do also, more emphasis on the policy variables like New Deal kind of programs, taxation, land reform, etc). However, money supply was simply endogenous and had little impact on economies that were already in shambles. Inflation (hyper) resulted from the collapse of the economies and more often than not the pressing need for foreign currency that led to massive depreciation, and wage resistance.
You can read my paper on inflation and money here, if you're interested.

“We are all equal, but in the very long run”

Published by Anonymous (not verified) on Fri, 10/11/2017 - 2:38am in

There is
complete social mobility - the only problem is that the process takes some
three hundred years. Interview. Español

Public domain.

: Nowadays, the
debate over inequality is pervasive. Some people have wealth, proper education
and proper healthcare. Others do not. They have poverty, poor healthcare and
even poorer education. How unequal are our societies today?

Gregory Clark: Compared to past
societies, ours is less unequal – less unequal than it was before the Industrial
Revolution. But if you go back in time, to the hunter-gathered societies, then it
is obviously more unequal. As soon as agricultural land became important, societies
became highly unequal: a quarter of all income went to the landowners. Ownership
of capital is vastly unequal. However, one of the things that kept inequality
down in the modern world was the share of labour. The problem is that the share
of labour is currently declining. For example, in England, in the last ten
years, wages have been declining at about 1% per year. The last time anything
like this occurred was during the Napoleonic wars. That is the big worry now: property
ownership and the share of profits and capital is steadily increasing.

A second problem is that the rewards for experts will
keep increasing too. Within a global economy, these skills can be sold to the
entire world. In Davis University, for example, we have a list of everyone´s
salaries. The two football coaches top the list. Just after them are medical
doctors, who are getting now between two or three million dollars per year. The
reason why they are being paid this much is simple: they generate a lot of
income. People are willing to travel to Los Angeles to get treatment.

Both the increasing share of income that goes to
capital and to experts and very small groups of talented people makes it very
difficult to know where our societies are heading to - and how unequal the
future will be.

If we are now entering a period of greater inequalities, what we should do is tackle the inequalities directly. 

MS: You argue that too
much faith is put in the idea of movement between classes. Why is it better to
focus on improving income equality than on social mobility?

GC: The reason I say this
is because evidence suggests that it is almost impossible to change the rate of
social mobility. Look, for example, at the Nordic countries. They are the ones who
have done most to try to provide a proper education for everyone, good
nutrition for children, family support, and guaranteed income. They have done
all of this, and yet it turns out that the Swedish elites of the eighteen
century are still the dominating class in Sweden today. If Sweden cannot change the rate of
social mobility, what chances do other countries stand?

What we have to ask ourselves is: what is the maximum
level of social intervention that we can have to improve the social mobility
rate? Adoption, for instance: we should aim at guaranteeing that all children are
brought up in nurturing families. But evidence suggests that these children end
up resembling their biological parents, much more than their adopted parents. Studies
analyzing their occupation when they are forty or fifty show that being adopted
change very little their outcome in life. This is the maximum level of social
intervention possible, and it fails to have a significant impact in the children´s

The evidence we have is that it is very hard to change
the rate of social mobility. So, if we are now entering a period of greater
inequalities, what we should do is tackle the inequalities directly. We know
that we can reduce them dramatically, as has been done in countries like Sweden
or Norway.

It turns out that the Swedish elites of the eighteen century are still the dominating class in Sweden today.

MS: You maintain that
the magnitude of social inequalities varies across societies, but that
democratizing education and eliminating discrimination over the last century has
had no noticeable effects on mobility. What impact do social institutions have on

GC: You can change
inequality in society by taxing people and redistributing income. But,
surprisingly, when Britain went through its period of great redistribution, it
did not affect those who were admitted to the best universities. Poorer
students were still not getting into the good places. It did not change the
distribution of occupation. Inequality could not be made less obvious in
society, nor could the benefits of those at the top be reduced. It turns out
that is very hard to stop certain families from being at the top of the distribution
ladder. After looking over hundreds of years of data, I must say that there is,
in fact, complete social mobility - the only problem is that takes around three
hundred years. This is a philosophical problem we face: we are all equal, but in
the very long run.

MS: And what about the
role of social movements? What about America´s civil rights movement? Do they not
have an impact on the social mobility rate?

GC: There are some
cases where social institutions have indeed been responsible for changes in
social mobility rates. America is a good example, especially as regards the
peculiar history of the South. But those are extreme cases. Even medieval
England had the same rate of social mobility as modern Sweden. Medieval England
actually had complete social mobility, as the lower classes could eventually
become the upper classes. But it turns out that it takes fairly extreme situations
to affect the rate of social mobility. India is another good example. But in
terms of the kind of institutional changes that people would expect in
countries such as Spain or Portugal, there is absolutely no evidence that
moderate levels of intervention would do anything to change the rates of social
mobility. There is no evidence that supporting university students, for
example, would achieve anything in this sense. Extreme interventions yes,
moderate interventions no.

This is a philosophical problem we face: we are all equal, but in the very long run.

In Britain, for example, public education only became
available in the late nineteen century. It had no significant effect on the
rate of social mobility. Nor did free colleges in the nineteen forties. Take,
for instance, a group that can be classified as elite in Britain: the members
of Parliament. When the Labour Party became the dominant party in the twentieth
century, it did not have any significant effect on the class composition of
Parliament. The new leaders of Labour were the same as former leaders of other
parties and remained an elite. Another example is the former editor of The Guardian, Alan Rusbridger: we
remember his name because that was an elite surname in the nineteenth century.

In my forthcoming book, From who the bell curve tolls, I am going to explore why social
mobility is so resistant to change. And it will contain a controversial claim:
because genetics have a surprising importance in determining a person´s social
position, whatever the social environment may be. As part of the analysis, we have
started going through some data coming in from Russia which suggest that even
in societies that have been transformed by revolution, the rate of social
mobility does not change that much. People just adapt. Some turned out to be very
good Communists, others turned out to be not that good. The interesting puzzle is
why is it so difficult to change the rate of social mobility.

Public Domain.

MS: That will certainly
be very controversial. In your latest book, The
Son Also Rises
, you have conducted a study on surnames and the history of
social mobility. Could you explain your findings?

GC: Basically, in many
societies, when surnames were first formed, some of them had a high status on
average, and some had a low status. It was just the way surnames were formed. In
Britain, if you were called after a place, that was a high status surname in
medieval times. We can actually sort out those names and see if, in a high
social mobility world, the children of high status people become low status,
and their surnames lose their information content. This allows us to test much
social entropy there is in a given society.

The amazing thing is that the surnames, in all the societies
we have been able to observe, show a very strong persistence of status. We have
done studies, for example, on Australia, a completely new society which broke
away from Britain with new institutions, and we have found the same rate of
social mobility as in the metropolis. We have looked at Sweden, at India, at
China and we have found very different configurations, but very similar rates
of persistence.

Even in societies that have been transformed by revolution, the rate of social mobility does not change that much. People just adapt.

Another thing that happens in societies like England,
is that there are one and a half million surnames, and lots of them are very
rare. And what happens is that, just by the random forces in society, after a
certain number of generations, some of these surnames end up as being average, despite
the fact that, originally, those who had them were either very educated or
wealthy. We can just go to any generation, find the surnames that are doing
very well or doing badly, and track them over the next three hundred years, and
see how they do.

We can also track prehistory, and find very
interesting dynamics: it typically took high status people three hundred years
to get them to that position. This means that social mobility is even slower
than you think, because it takes three hundred years to go from the top back to
the average, but it takes another three hundred years to go the other way – so,
it is a six hundred year process for these families.

Gregory Clark during the conference. Alfredo Matos. All rights reserved.

MS: In the same book,
you also argue that the “the world is less corrupt and nepotistic than people
might think”. A lot of people would disagree with you on this.

GC: The important thing
here is that a lot of people think that there are some in our societies that
have not had a fair chance in life - they did not have the opportunity to
thrive, because their parents were born in a particular setting. But studies
and evidence seem to go against this idea. It may be the case that people at
the bottom of the distribution ladder do not have as many good opportunities to
make it to the top, but it turns out that these are not particularly relevant
opportunities for many people at the bottom. The interesting aspect, however,
about social processes and dynamics is that there is always a movement upwards
from the bottom and that, surprisingly, those in the worse circumstances are
the ones who actually make bigger gains. They are not stuck in the bottom, as
the surname study revealed. They will end up back again on top.

Social mobility is even slower than you think, because it takes three hundred years to go from the top back to the average, but it takes another three hundred years to go the other way.

What you can extract from the data is that there is not
a poverty trap in society and that the children of those living in the most
desperate circumstances are systematically doing much better. Actually, what
makes it very difficult to deal with the poverty burden is that helping those
in the bottom does not help the next generation, because they are not the ones being
helped. It is very hard to identify who is going to drop to the very poor

A lot of people have a depressive view on this, but I
am more optimistic: there is no poverty and no wealth trap. Processes are slow,
but they are slow because children resemble their parents to a very high degree.
In the end, we live in a world where it is just not the case that a huge number
of people are being denied opportunities. And it is not the case that there a vast
number of wealthy children with zero talent are running our modern societies.
There is a steady downward movement: the upper class desperately wants to hold
on to their position, but they cannot protect their children from downward
mobility. Even if the process is slow, what is interesting is that there is a
process, a mixing actually going on. And that if you  want to know what the future of your great
great great grandchildren is going to be, the answer is that, on average, they
will be average.

The American Dream really is a myth. People have the same opportunities in the market, but inequality takes place before entering the market.

MS: What about the
American Dream, then?

GC: America is in the
process of creating what will be, inherently, an enormously unequal society. It
is already quite unequal, but its immigration policy is now bringing into
America elite groups from several places in the world. Social processes being
very slow, the interesting thing is that the old white Protestant upper classes
in the United States are now average, having been displaced by new elites. But,
at the same time, many extremely poor immigrants are arriving. In terms of
inequality, California is now like Colombia. And there is no speeding up of
social processes in America: the American Dream really is a myth. People have
the same opportunities in the market, but inequality takes place before entering
the market, and America cannot wipe that away. The poor people who are arriving
will stay at the bottom, while the rich people will remain at the top - but now
in a different country. America is reproducing many inequalities from across
the world.

If you  want to know what the future of your great great great grandchildren is going to be, the answer is that, on average, they will be average.

The one thing in favour of America is that it has been
very tolerant with the replacement of the old upper classes by new ones. It is still
a society that is very open to this transition, and that is admirable – except,
that is, that part of society supporting Trump: people from a traditional class
that has been losing out, and who are resentful because their position in the social
ladder is sliding downwards because of the high skilled new emigrants arriving.

America is an interesting laboratory, but the
differences between social groups are so great, that they are driving up
inequality in the country.    

interview was conducted on September 30 in Lisbon, at the conference
Equality: impact, conflicts and challenges, organized by the Francisco Manuel dos Santos Foundation.

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