The resurgence of economic and social inequality

The ‘social ques­tion’ of eco­nom­ic and social inequal­ity and poverty emerged with the Indus­tri­al Revolu­tion. It remained at the centre of debates for more than a cen­tury, inspir­ing rad­ic­al think­ing but also provid­ing solu­tions that drove the evol­u­tion of cap­it­al­ism. Two very dif­fer­ent eco­nom­ic events have seen it take a back seat.

The first is the Keyne­sian trans­form­a­tion of the eco­nomy in the wake of the 1929 crisis. Redis­tri­bu­tion and inclus­ive growth led to a vast move­ment to reduce eco­nom­ic and social inequal­ity in developed eco­nom­ies and to cre­ate a middle class. The second event fol­lowed the eco­nom­ic crises of the 1970s, which was seen as the exhaus­tion of the Keyne­sian mod­el. The major issue then became growth, and there was an assump­tion that inequal­it­ies would increase in order to pro­mote it. Moreover, glob­al­isa­tion led to the West hav­ing access to an unpre­ced­en­ted range of cheap products.

The ques­tion of eco­nom­ic inequal­ity was then filtered through that of dis­crim­in­a­tion: in the Keyne­sian world, as in the ‘Reagan­ite’ world that fol­lowed it in the 1980s, the clearest divide was not between rich and poor, but between the vast major­ity of the middle classes and the minor­it­ies who struggled to integ­rate them. Pos­it­ive dis­crim­in­a­tion is one of the responses to these ‘soci­et­al’ inequal­it­ies, which have a high­er impact depend­ing on skin col­our or eth­nic origins.

It was after the 2008 crisis that the issue of eco­nom­ic inequal­ity returned to the fore­front, and with it the crisis of the middle classes.

In April 2014, a 900-page eco­nom­ics book topped the sales charts on Amazon. Thomas Piketty’s Cap­it­al in the Twenty-First Cen­tury cap­tured the spir­it of the times, provid­ing a the­or­et­ic­al basis for the Occupy Wall Street move­ment’s cri­tique of the “1%”.

Under the deluge of data, his argu­ment was simple: “as soon as the rate of return on cap­it­al exceeds the rate of growth of pro­duc­tion and income – which was the case until the 19^th Cen­tury and is likely to become the norm again in the 21^st Cen­tury – then cap­it­al­ism mech­an­ic­ally pro­duces unsus­tain­able, arbit­rary inequal­it­ies, rad­ic­ally call­ing into ques­tion the mer­ito­crat­ic val­ues on which our demo­crat­ic soci­et­ies are based.”

Two years earli­er, anoth­er eco­nom­ist caused a stir by sum­mar­ising the eco­nom­ic fate of glob­al soci­ety in a single graph. Branko Mil­an­ovic presen­ted on the hori­zont­al scale (abscissa) the dis­tri­bu­tion of the Earth’s inhab­it­ants accord­ing to their income (the poorest on the left, the richest on the right), and on the ver­tic­al scale (ordin­ate) the pro­gres­sion of income between 1988 and 2008. The res­ult was an ele­phant­ine curve, sug­gest­ing that glob­al­isa­tion has benefited the poorest Asi­an coun­tries and the richest West­ern­ers at the expense of the work­ing and middle classes in rich countries.

This work has had an impact on pub­lic debate, also giv­ing rise to numer­ous aca­dem­ic works. In polit­ics, it has been used to explain the rise of pop­u­lism and the suc­cess, for example, of Don­ald Trump. In eco­nom­ics, Piketty’s work has brought issues such as wealth tax­a­tion and redis­tri­bu­tion to the forefront.

In recent years, the phe­nom­ena described by Piketty have gained momentum. One of the effects of the massive cre­ation of money by cent­ral banks after the 2008 crisis was spec­tac­u­lar infla­tion in cer­tain mar­kets, not­ably fin­an­cial assets, and real estate: hence the rap­id increase in value of the largest for­tunes. The pan­dem­ic itself has accel­er­ated this trend: Cap­gem­in­i’s World Wealth Report 2021, for example, looked at the ‘High Net Worth Indi­vidu­als’ (HNWI), the 20 mil­lion or so people in the world who own wealth of more than one mil­lion dol­lars, exclud­ing their main res­id­ence. By 2008, the num­ber of HNWIs had fallen by 13% and their wealth by almost 20%. Now, after a year of health crisis, not only are there more mil­lion­aires (+6.3%) in the world, but their wealth is rap­idly increas­ing, grow­ing by 7.6% – almost two per­cent­age points more than in the 2013–2019 period.

The theme of inequal­ity has also been linked to the cli­mate crisis. Accord­ing to the Glob­al Inequal­ity Lab 2022 report (Par­is School of Eco­nom­ics) pub­lished in Decem­ber 2021¹, the richest 10% of the world’s pop­u­la­tion accoun­ted for almost half of all car­bon diox­ide emis­sions in 2019 (47.6%).

Non­ethe­less, there are also crit­ics. Daniel Walden­ström high­lights the dif­fer­ences between the Amer­ic­an and European tra­ject­or­ies, point­ing out that with mod­ern pen­sion sys­tems we are all poten­tial ren­ti­ers, even if we do not have cap­it­al to our name.

OECD eco­nom­ists, for their part, draw atten­tion to the need to dis­tin­guish between income inequal­ity before and after redis­tri­bu­tion, point­ing out that most developed coun­tries have imple­men­ted pro­gress­ive tax­a­tion that pro­duces power­ful equal­ising effects. But they add in the 2018 report Equity in Edu­ca­tion: Break­ing down bar­ri­ers to social mobil­ity², in some highly redis­tributive coun­tries such as France, the real prob­lem of inequal­ity lies in social repro­duc­tion and inequal­it­ies at birth, which can appear par­tic­u­larly unfair.

The prob­lem is that while pub­lic policies can partly rem­edy these inequal­it­ies, by invest­ing in edu­ca­tion for example, some of these efforts are can­celled out by the much great­er fin­an­cial and per­son­al invest­ments of the upper classes, and in par­tic­u­lar of the overedu­cated elite that has come to be known as “the aspir­a­tion­al class”. The soci­olo­gist Eliza­beth Cur­rid-Halkett shows in The Sum of Small Things: A The­ory of the Aspir­a­tion­al Class (Prin­ceton Uni­ver­sity Press, 2017) that while the share of spend­ing on edu­ca­tion increased by 60% for all Amer­ic­ans between 1996 and 2014, it increased by 300% for the richest. But more import­antly, she adds, highly edu­cated par­ents now spend a con­sid­er­able amount of time on edu­ca­tion. “Par­ents from priv­ileged back­grounds are devot­ing more and more time to their off­spring, in par­tic­u­lar by encour­aging chil­dren to express them­selves so that they can devel­op their inde­pend­ence, sharpen their argu­ment­a­tion skills, enrich their vocab­u­lary and test their social skills.” In this way, elites devel­op in a vacuum.

Sym­met­ric­ally, many soci­olo­gic­al stud­ies point to the tend­ency of inequal­it­ies to accu­mu­late and worsen. The Cov­id crisis would have fur­ther rein­forced these effects, as Yann Coat­an­lem and Ant­o­nio de Lecea note in their con­tri­bu­tion to this dossier.

This is how the con­tem­por­ary vis­ion of eco­nom­ic and social inequal­it­ies is defined. Our soci­et­ies accept eco­nom­ic inequal­it­ies, which they are also try­ing to cor­rect, with some suc­cess. But while they are foun­ded on the expli­cit prom­ise of an equal­ity of pos­sib­il­it­ies, they are threatened by an immob­il­isa­tion of social destinies.

This is the para­dox of our time: the inequal­it­ies that worry us are con­ceived and lived under the sign of per­son­al dynam­ics and the mobil­ity of indi­vidu­als. But these dynam­ics build up to form a polar­ised and immob­ile, two-speed society.