Reviving Citizenship in the New Gilded Age
Social scientists are gap-minders. We fixate on gender gaps, racial gaps, generation gaps. We obsess over salary gaps, health gaps, housing gaps, education gaps. A few years ago I co-authored a book on the political relevance of the "God gap" among voters in presidential elections. Even the divine defines our gaps.
We have many reasons for our preoccupation with gaps. One is simply that they frequently present an intriguing empirical puzzle, an odd variation that cries out for explanation through our models and methods. But the more interesting reason is normative: There is often something troubling about gaps. Not all of them, to be sure. While I'm a foot taller than my wife, the disparity matters mainly in basketball and access to high cupboards, not to our moral dignity or possession of rights. But in some cases, the existence of a gap appears to violate a treasured value or principle. And when we confront a gap in the distribution of certain social or economic goods, we might even use the morally freighted language of inequality.
Economic inequality has become the dubious gap du jour. Pope Francis has repeatedly placed before Christians the injustices of modern poverty and "economies of exclusion." President Obama has likened confronting income inequality to the moonshot of the 1960s. Prominent academics as different as the center-left Robert Putnam (in Our Kids) and the self-described "wishywashy libertarian" Charles Murray (in Coming Apart) have made opportunity gaps and class distinctions the central themes of their recent work. Pundits of every ideological stripe have raised similar concerns, and sizable majorities in the U.S., Canada, and across Europe have identified the divide between rich and poor as a big problem that is getting worse.
But even popes, presidents, and political scientists can't compete on the issue with a certain French economist labouring in the dusty archives of early twentieth-century tax rolls. That kind of celebrity belongs to Thomas Piketty, professor at the École des hautes études en sciences sociales and the Paris School of Economics. In just a little more than a year, he sprang from relative obscurity (in non-academic circles) to Time Magazine's list of the "100 Most Influential People of 2014" (he landed in the "icon" category, right alongside Taylor Swift and Björk). What's particularly striking is that he owes his fame largely to a 599-page book (not counting footnotes) of economic history, his unlikely international bestseller, Capital in the Twenty- First Century.
All of this ferment suggests that we've reached an untenable point in how societies distribute their goods. But what are these "goods"? It's natural to point to the economic effects of economic inequality, especially on basic needs such as housing, nourishment, and health. But what is often lost in the discussion are the non-economic goods that might be "basic" in their own way. Consider the good of citizenship. It is difficult to imagine a good that is more basic to a democracy, and economic inequality has profound impacts on its practice. Piketty helps us see this connection, even though he gives it virtually no attention himself.
Downton Abbey Rising
Piketty's Capital is exquisitely matched to the zeitgeist. Its punch comes from both its claims about inequality and its rare combination of rigor, elegance, and accessibility. It is hardcore economics on a complex issue that, nevertheless, relies more heavily on its clear prose than its technical equations. It also contains just enough literary allusions to warm the humanist's heart. The book's methodological power comes from its historical reach: It draws richly from centuries— yes, centuries—of data on wealth and income distributions.
Still, Piketty's reception is a bit puzzling for another reason apart from his book's daunting length. That is, he nods to that other Capital, Karl Marx's magnum opus. Didn't the experience of both capitalism and communism in the twentieth century bury the legacy of that nineteenth-century rabblerouser? But Piketty anticipates this question. He acknowledges that Marx lacked the data to sustain his "apocalyptic" and "dark" predictions about capitalism's demise; he also takes Marx to task for giving scant attention to the structures that would govern the postcapitalist future. Yet while Piketty does not see Marx as much of a prophet, he does give Marx credit for asking many of the right questions and focusing on some of the right data, notably trends in capital accumulation. Indeed, in its own emphasis on capital, Piketty's book is something of a throwback. He is, to use David Brooks' term (which Brooks also applies to himself, only halfjokingly), "quasi-Marxist." But I would add that it isn't merely the subject of study that owes a debt to Marx; it is also Piketty's underlying approach to history. He is convinced that because economic dynamics pose a broader political problem, the solution to the problem must be better economic dynamics. I will return to that assumption later.
Piketty's thesis is summarized in a signature formula: r > g, where r equals the rate of return on capital and g equals the rate of economic growth (i.e., growth in output and income from labour). For Piketty's purposes, "capital" and "wealth" are synonymous, and they refer to the total value of non-human assets that might produce income—or, more precisely, "can be traded on some market." So if r is almost always greater than g in a given year, and if that difference is compounded year after year, the gap will widen between those with substantial wealth (e.g., real estate, factories, intellectual property, financial investments) and those who rely largely on earned income from wages. That is precisely the "force of divergence" that Piketty charts through economic history. What's more, even the labourers who have enjoyed extreme increases in (ostensibly) earned income in recent years—"super managers" like hedge fund directors and others in hyper-compensated positions—will turn much of their largesse into legacies of inherited wealth for their families within another generation. As a result of these forces, we face a new version of oligarchy, or what Piketty calls "patrimonial capitalism."
Such a dismal projection from the dismal science was bound to generate some interest, and indeed the critiques of his economic assumptions and analysis have been numerous and wide-ranging. Some examples: He rests on implausible assumptions about nearly full reinvestment of returns on capital; he underestimates the law of diminishing returns on accumulated capital; he treats wealth monolithically, when in fact capital in the form of, say, owner-occupied real estate is very different than a 401(k) or a manufacturing plant; his data is limited to the North Atlantic, and even there to a few countries. Others complain that his prescriptions are misguided and/or hopeless, most notably his proposal of a global tax on wealth (even Piketty admits that this approach is "utopian" and politically infeasible).
Yet one thing is clear: No serious reviewer denies the existence of high levels of income and wealth inequality in the here and now. We have returned to levels of inequality that haven't been seen since the early nineteenth century in Europe. In the United States, half of national income today goes to the top 10 percent of the economic ladder. At a more granular level, the top 1 percent alone took in roughly the same amount—20 percent— as the bottom half of earners. While top earners in Canada and Europe have a somewhat lower share of national income, the gap between the bottom and the top has been nearly as pronounced in those regions as in the United States. (These are Piketty's numbers. Some other measures result in lower percentages at the top, but the story is basically the same.) And these gaps persist even after adjusting for taxes and government transfer payments.
So one might accept many of the critiques of Capital in the Twenty-First Century and still join New York Times columnist Paul Krugman (and others) in declaring a new Gilded Age—or my own metaphor: a new Downton Abbey, before the estate's decline and with the vast majority of us living downstairs.
We're Reading the Wrong Frenchman
Oligarchy? Patrimonialism? The Gilded Age? Downton Abbey? These are provocative descriptors for the problem. But what precisely is the problem? After all, developed economies in western democracies have always tolerated—even embraced—inequalities in wealth and income. Even the most radical of capitalism's critics (Marx, or perhaps Christians who see the church of Acts 2 as an ideal model of society) rarely argue for a pure egalitarianism. In fact, recall that both Marx and those Christians would say that distribution should be based on need. To demonstrate simply that inequalities are greater now than in the past is not to say that those inequalities are worse. We need an account of the values that growing inequality offends.
And here is where the most interesting (and basic) point gets lost in all the haze of Piketty commentary: The problem isn't really economic inequality. Inequality is driving something else; it's a force for a different kind of divergence. It's right there on Piketty's first page: The problem is how inequality shapes democracy. To be specific, inequality "radically undermines the meritocratic values on which democratic societies are based."
It's difficult to slide by Piketty's linkage of inequality to democracy without thinking of his compatriote, Alexis de Tocqueville, the great nineteenth-century observer of Jacksonian democracy and author of another thick book, Democracy in America. Tocqueville marveled at what he called "equality of condition" in the United States, an innovation of modern democracy. But he did not envision this equality as an actual material state, nor did he think that such an egalitarian state was attainable or recommended. He understood equality of condition as an assumption in political culture, a belief that, unlike in the dying aristocracies of Europe, no democratic citizen's economic or social status was defined by the vagaries of birth. Equality of condition is more social-psychological than objective. Tocqueville perceived that modern democracy operated on a grand confidence in every person's equal dignity and equal capacity.
But the democratic story could play out badly. Tocqueville saw a profound challenge to democracies because in the absence of aristocratic arrangements—the established social structures, the fixed social obligations— citizens would turn to the majority for cues about how to think and behave. This change would shift the potential locus of tyranny from the few to the many. But even the threat of tyranny of the majority illustrated the hold equality had on the emerging modern mind; equality was the democratic essence of a "world made new."
For Piketty, however, that new world, now including democracies throughout the West, has reverted to old patterns. He fears the democratic assumptions are themselves crushed by growing patrimonialism. This concern is perhaps best illustrated in contrasting Tocqueville and Piketty on inheritance. Like others of his time, Tocqueville recognized that discarding the law of primogeniture—the exclusive right of a firstborn male to a family estate—had fundamentally reshaped modern democracies in an egalitarian direction by fragmenting dynastic wealth. But jump ahead nearly two hundred years, and his fellow citizen insists that concentrated wealth that comes from income on "unearned" inheritances is a resurgent threat to democracy:
Our democratic societies rest on a meritocratic worldview, or at any rate a meritocratic hope, by which I mean a belief in a society in which inequality is based more on merit and effort than on kinship and rents [i.e., income from capital]. This belief and this hope play a very crucial role in modern society, for a simple reason: in a democracy, the professed equality of rights of all citizens contrasts sharply with the very real inequality of living conditions, and in order to overcome this contradiction it is vital to make sure that social inequalities derive from rational and universal principles rather than arbitrary contingencies.
The religiously evocative language of "worldview" and "hope" here makes sense. Piketty takes as first principles some basic tenets of the liberal democratic faith. We have certain rights; we (therefore) have certain opportunities. And while we don't have guarantees of what might happen when we freely exercise those rights and take advantage of those opportunities, we expect (in principle) that whatever happens is reasonably connected to our choices, not simply our birth or race or gender. Democracy—at least its liberal version—assumes that the range of human choices, from voting to entrepreneurship, matter to the distribution of political and economic goods.
Piketty, then, is leveling a charge that goes to the root of modern democratic values. Over the long haul of history, the market reproduces economic inequalities that become increasingly arbitrary (e.g. income from inheritance) and therefore not meritocratic (i.e. based in choice). It ought to be possible for even the least advantaged, through the rights and opportunities they share with the wealthiest and most powerful, to have their voice heard or make their way out of their economic station by their merit. But the system is stacked against them.
The Culture of Citizenship
We could easily run along some well-worn rabbit trails in response. What do we mean by "merit as a democratic value"? Do we accept the individualist vision of liberal theory? But I wish to avoid a disquisition on Rawls and Hayek or Locke and Mill—let alone all the knotty theological questions about liberal democracy. Let me simply stipulate a political scientist's truism: Inclusive democratic systems generally assume that beyond certain basic rights that we all share, political and economic goods are related in some way to the choices of their citizens. The distributions can never perfectly reflect merit, however we define it (and there are many ways to define it); but we do usually expect that our effort or intelligence or other indicators of merit will bear some relation to what we receive in return for our choices. "Meritocracy" is the expression of that expectation on a societal scale.
So if meritocracy is in some sense a key democratic aspiration, and if arbitrary inequalities are a stumbling block to this meritocratic "hope," then it would seem that Piketty's exhortation to tackle those kinds of inequality is a reasonable response. And he tries to tackle the problem when he weighs a host of regulatory and tax-based reforms in the final section of Capital in the Twenty-First Century.
But it's here that the terms of the discussion seem misplaced. Piketty suggests changes in outputs—on economic policy—which entail citizen engagement with the state. But an unstated message of Piketty's book—and certainly the explicit message of much public discussion about inequality—is that the gap between rich and poor has soured people on inputs, that is, on the democratic process itself. If inequality is undermining that grand assumption of democracy—that we all have a (roughly) equal say in the fate of the body politic—then why have confidence in the democratic process to address inequality in the first place?
We have good reason to worry about a democratic fix to inequality's threat to democracy. Nearly everywhere we see evidence of decline in social trust and tolerance, alarmingly low levels of political knowledge, and eroding civic engagement. Even those citizens who are reasonably knowledgeable about inequality and view it as a problem are often skeptical about a policy response because they don't trust policy-making institutions. To use an old idea in political science, citizens across western democracies have lost a great deal of "political efficacy," their sense that their political participation matters. This distrust is particularly disturbing among the young who increasingly eschew citizen-state participation in favor of apolitical engagement, from volunteering at a local non-profit to helping NGOs shore up economies in developing countries.
So Piketty has given us economic policy prescriptions without first taking stock of the more basic problem of the impoverishment of citizenship throughout western democracies. It is not clear how to address that problem by tweaking the economy, because that assumes a citizenry ready to do so. If we're going to counter increasing inequality, we need a revival of citizenship first. And such a revival is not simply about getting people out to the polls or onto the barricades. It is about fostering a set of dispositions and common goals. There's no point in calling democracies to respond to inequality if citizens lack dispositions of trust or reciprocity or shared interests in combatting poverty.
The point is that the democratic challenge posed by inequality is not simply about economics or politics narrowly understood; it is about culture. It's why addressing inequality means enlisting the institutions of culture-making, and particularly those organizations and associations within civil society—including the church—that are so demonstrably important to fostering democratic citizenship.
It can be helpful to illustrate the point by considering economic mobility, a key part of the story of inequality. Western democracies put a lot of emphasis on opportunities to move up (and down) the economic ladder because they assume that movement in any direction on the ladder is evidence that birth isn't destiny. People can apply their intelligence and effort and find their way out of their current station in life.
In a sense, Piketty's entire argument crashes if there is evidence that economic mobility is robust, or at least that it's getting a little better. Yet some of the most rigorous recent studies, most notably by the Harvard-based Equality of Opportunity Project, have concluded that economic mobility hasn't changed much in the last thirty years in western democracies. In fact, another persistent and intriguing finding in light of Tocqueville is that the U.S. has had less mobility over time than its political cousins in Europe.
But that does not necessarily suggest we simply have to get our economic policies in order. While the authors of the Harvard study are careful not to assert clear causal explanations, they did find a strong relationship between economic mobility and a variety of factors. Some are obviously rooted in economics (e.g., parental income), but many are not: racial desegregation, stability of family, and—most important—the presence of two parents, quality schools, and a few other variables. A 2015 study by the same research groups added the crucial importance of safe neighbourhoods to the mix. Robert Putnam in Our Kids suggests a host of similar explanations in the specific experience of youth, including their experience of church. (In fact, Comment readers might appreciate that Putnam, who also recently co-authored a book on the civic capacities of churches, believes the faithful could do much more to combat opportunity gaps.)
A clear takeaway of this sort of analysis is that the richness and moral depth of one's social network is a strong predictor of both healthy citizenship norms and economic mobility, and those networks are not simply defined by r and g. (Anyone hear Tocqueville again?) Those networks are grounded in varied conceptions of the good, and almost all of them shape their members in formative practices that have implications for citizenship.
Piketty and others who focus on economic gaps in modern democracies are clarions. They remind us that economic inequality is intolerable when it undermines values that give shape to the body politic. But those values do not exist simply because we protect them from threat; they exist because they are built in culture.