American Inequality:How Did We Get Here andWhat Can We Do About it?

Archon FungHarvard Kennedy School

#OccupyHarvard Teach-In

December 7, 2011

Thursday, December 8, 11

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Three Questions

• How F**ked Up Is It?

• How Did It Get to Be So F**ked Up?

• What Can We Do About It?

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How F**ked Up Is It?

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Very.

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$2M

$1.5M

$1M

$0.5M

AVERAGE HOUSEHOLD INCOMEbefore taxes

2007 dollars. Source: Congressional Budget Office

‘79 ‘83 ‘87 ‘91 ‘95 ‘99 ‘03 ‘07COURTESY OF:

BASED ON GRAPHS BY:

top 1%

top 20%

second 20%

third 20%

fourth 20%

bottom 20%

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Source: Congressional Budget Office, 2011

Growth in After-Tax Income, 1979-2007

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Top 1% Share, 1960-2007

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Distribution of Wealth

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Distribution of Wealth

■

■

■

■

■

Source: Michael Norton and Dan ArielyThursday, December 8, 11

0

15,000

30,000

45,000

60,000

75,000

90,000

105,000

120,000

1945 1955 1965 1975 1985 1995 2005

($ 2

006)

GDP / Family

Median Family Income

Who Eats The Pie?

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Text

Source: Mother Jones MagazineThursday, December 8, 11

How Did It Get So F**ked Up?

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Economics

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Economics

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Economics

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Politics!

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Dominant Explanation

Skills Biased Technological Change

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But...

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Mechanism for top 1% may be very different

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Who Is Top 1%?

0

10

20

30

40

1979 1993 1997 1999 2001 2002 2003 2004 2005

Composition of Top 1%

Executives, managers, supervisors (non-finance)MedicalFinancial professions, including managementLawyersComputer, math, engineering, technical (nonfinance)

Source: Source: Mike Konzcal via New York TimesThursday, December 8, 11

Executive Compensation

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SBTC Should Be Global

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Top 1% in Anglo CountriesFigure 4. Plutonomy At Work: The Income Share of the Top 1% Has Risen Dramatically Since the Late 1970sin the U.S., the U.K., and Canada

5

7

9

11

13

15

17

19

60 63 66 69 72 75 78 81 84 87 90 93 96 99 025

7

9

11

13

15

17

19

USAUKCanada

Income Share of the Top 1%

Please see references 18, 4, 22 in the bibliography at the end of the report for the data underlying the chart. Estimates based on tax return data.Source: Citigroup Investment Research

Figure 5. Of Egalitarian Bent: The Income Share of the Top 1% Is Much Smaller and Is Not Rising as Much, Ifat All, in Switzerland, the Netherlands, Japan, and France

5

7

9

11

13

15

17

19

60 63 66 69 72 75 78 81 84 87 90 93 96 99 025

7

9

11

13

15

17

19

SwitzerlandFranceJapanNetherlands

Income Share of the Top 1%

Please see references 7,17,15,4 in the bibliography at the end of the report for the data underlying the chart. Estimates based on tax return data.Source: Citigroup Investment Research

See Figures 6 thru 11 for a panorama of plutonomy and egalitarianism.

6

Source: CitiGroup Investment ResearchThursday, December 8, 11

Top 1% Elsewhere

Figure 4. Plutonomy At Work: The Income Share of the Top 1% Has Risen Dramatically Since the Late 1970sin the U.S., the U.K., and Canada

5

7

9

11

13

15

17

19

60 63 66 69 72 75 78 81 84 87 90 93 96 99 025

7

9

11

13

15

17

19

USAUKCanada

Income Share of the Top 1%

Please see references 18, 4, 22 in the bibliography at the end of the report for the data underlying the chart. Estimates based on tax return data.Source: Citigroup Investment Research

Figure 5. Of Egalitarian Bent: The Income Share of the Top 1% Is Much Smaller and Is Not Rising as Much, Ifat All, in Switzerland, the Netherlands, Japan, and France

5

7

9

11

13

15

17

19

60 63 66 69 72 75 78 81 84 87 90 93 96 99 025

7

9

11

13

15

17

19

SwitzerlandFranceJapanNetherlands

Income Share of the Top 1%

Please see references 7,17,15,4 in the bibliography at the end of the report for the data underlying the chart. Estimates based on tax return data.Source: Citigroup Investment Research

See Figures 6 thru 11 for a panorama of plutonomy and egalitarianism.

6

Source: CitiGroup Investment ResearchThursday, December 8, 11

Political Causes

• Executive compensation policies

• That tie exec incomes to stock markets

• Deregulation of financial sector

• Tax policy (esp. capital gains and corporate tax)

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What Can We Do?

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Strategy 1

Social Democracy:Effective Demand

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Policies

• Tax and Transfer

• De-commodification

• social wages

• health care

• pensions

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Strategy 1I

Productive Democracy:Effective Supply

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Modes of ProductionLow Road High Road

Price Competition Value Competition

Sweated Labor Good training & equipment

Poor Labor Relations Productivity Partnerships

Economic Insecurity Continuous improvement

Minimal state Rich public goods

Rising inequality Higher worker incomes

Source: Joel Rogers, University of WisconsinThursday, December 8, 11

Public Policy

“Help pave the high-road, block off the low road”

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Industrial Policy

• Real, relevant training

• Aligned standards

• Deliberative spaces for employers, workers, communities, governments to form productivity partnerships

• Even playing field for workplace governance

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Time to get to work.

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Occupy the truth.

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Educate.

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We have real choices.

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Occupy the future.

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