Must-Read: Josh Marshall: Our Big Series On Inequality

Must-Read: Josh Marshall: Our Big Series On Inequality: “Bob Dylan’s line that ‘he who is not busy being born is busy dying’…

… [we] need to constantly reinvent, experiment and never settle into the comfort of the deathly hand of the past. So this is something… new…. We were able to get AFSCME to sponsor the series which gave us the funds to really do it right… polished… go deep without the standard need… to sweat whether… [it] pays off in page views and clicks….

Half a century ago… wealth and income inequality were at historically low levels. The US… [was] the factory for rebuilding the world… unions were… pervasive…. So how did we get from there to here?… Our aim is to provide some of the building blocks to to think critically about the question…. Teasing apart this often chicken and egg interplay between economic forces and political change is critical to understanding the unfolding story. The first installment… kicks off next week with Rich Yeselson… [on] the politics of the left and the decline of organized labor…. But it is only part of the story….

Next John Judis looks at the complicated politics of inequality… how those who are in many ways most affected by the flattened economic prospects of the middle class have become increasingly skeptical about government’s ability to shift the trend…. Next, Jared Bernstein looks at the numbers…. Finally, Brad DeLong looks at the debate over Thomas Picketty’s book Capital in the 21st Century. Piketty argues… that we have the question basically wrong. What is happening now is simply how capitalism works, says Piketty…. DeLong looks at Piketty’s thesis through the prism of economic and politics and surveys the reactions his work has generated over the last year…

Very Sorry That I Missed: Charles C. Mann and Annalee Newitz: From the Neolithic Era to the Apocalypse: How to Prepare for the Future by Studying the Past

Very Sorry That I Missed: Charles C. Mann and Annalee Newitz: From the Neolithic Era to the Apocalypse: How to Prepare for the Future by Studying the Past: “Thursday, October 8, 2015 5:00 – 7:00 pm 3-270…

…For thousands of years, humans have experienced cycles of empire building and retreat, from the neolithic settlers of Levant and the Indus Valley to the ancient Cahokia and Maya civilizations. What can new discoveries teach us about how to plan our next thousand years as a global civilization?… How ancient civilizations shed light on current problems with urbanization, food security, and environmental change.

Charles C. Mann is the author, most recently, of 1493, a New York Times best-seller, and 1491, winner of the National Academies of Science’s Keck award for best book of the year. His next project, The Wizard and the Prophet, is a book about the future that makes no predictions. An early version of the introductory chapter was a finalist for a National Magazine Award.

Annalee Newitz writes science nonfiction and science fiction. She’s editor-in-chief of and founding editor of She’s the author of Scatter, Adapt, and Remember: How Humans Will Survive a Mass Extinction, which was a finalist for a Los Angeles Times Book Award. Her work has appeared in publications from The New Yorker and Technology Review to 2600 and Lightspeed Magazine. Her next book is a novel about robots, pirates, and the future of property laws.

Must Read: Steven B. Webb (1984): The Supply of Money and Reichsbank Financing of Government and Corporate Debt in Germany, 1919-1923

Steven B. Webb (1984): The Supply of Money and Reichsbank Financing of Government and Corporate Debt in Germany, 1919-1923: “During the five years of inflation, price stability, and hyperinflation in Germany after World War I…

…three factors determined the growth of the money supply. First, the Reichsbank freely issued money in exchange for whatever government or corporate debt the private sector did not wish to hold at the official discount rate. Second, the government persistently ran large deficits. Political instability and the inflation itself prevented taxation adequateto pay for social programs, subsidies to the railroad and businesses, and reparations to the Allies. The third factor was expectations of inflation, which, as they became more pessimistic, led people to hold less and monetize more of the outstanding stock of debt. Thus, the money supply was partly endogenous and partly dependent on government fiscal policy. The monetary policy of the Reichsbank, although essential to the inflation process, was a constant and passive one until stabilization at the end of 1923…

Who are today’s supermanagers and why are they so wealthy?

What explains the changes in top-earning occupations over the past four decades? Perhaps the most intriguing argument about the current state of income inequality in the English speaking economies that Thomas Piketty makes in his bestseller “Capital in the 21st Century” is this—“the vast majority (60 to 70 percent, depending on what definitions one chooses) of the top 0.1 percent of the income hierarchy in 2000-2010 consists of top managers.” He goes on to argue on page 302 of his book that the rise in labor income “primarily reflects the advent of ‘supermanagers,’ that is, top executives of large firms who have managed to obtain extremely high, historically unprecedented compensation packages for their labor.”


This really begs the question as to how and why these supermanagers came into existence. Nobel Laureate Robert M. Solow points out in The New Republic that this is primarily an American outcome. And Henry Engler at Thomson Reuters Accelelus’ Compliance Complete recently published an excellent piece on Piketty’s supermanagers in the United States and the United Kingdom. Both writers agreed with Piketty that these supermanagers were being vastly overly compensated given their questionable contributions to productivity.

I hope to shed a little more light on this issue by examining the change in professions comprising the top 0.1 percent of tax filers between 1979 and 2005. The purpose: to examine whether the changing composition of this super elite reflects changes in our economy that may explain the link between rising economic inequality and anemic economic growth over this period.

To do so, I used data from the April 2012 white paper “Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data,” by economists Jon Bakija of Williams College, Adam Cole of the Office of Tax Analysis at the U.S. Department of the Treasury, and Bradley Heim of Indiana University. They used tax data on the top 0.1% of filers to identify the top earning professions. The infographic below tells the tale, charting the change in occupations at the tippy top of the income ladder in 1979 and 2005.

The biggest change in the distribution of top earners is in the types of executives, managers, and supervisors at non-financial firms. In 1979, most of these people worked for large, publicly traded firms but by 2005 more were working in closely held firms. There is not enough information to provide a clearer picture as to who exactly these people are, but chances are they are employed by firms that are owned by private equity firms—the growth in the private equity industry over this period of time was substantial—and because financial professionals saw large gains, too. The share of people in the top 0.1 percent working in finance also increased substantially, to 18 percent in 2005 from 11 percent in 1979.

These findings are consistent with Piketty’s analysis in his new book. But there are alternative explanations. One is presented in George Mason economist Tyler Cowen’s latest book, “Average is Over.” He claims a skill biased-technological change is responsible for the shift in top occupations over roughly the same period. He argues that technology allows top performers to capture more of the market and thus earn substantially more than average performers. He and many other people hypothesize that this is a driver of increased economic inequality.

But if technology were a primary driver of inequality, then one would expect that skilled trades would have larger incomes and would have become a larger share in the top 0.1 percent. While there are slightly more technical types and entertainers among top earners (as can be seen in the data presented in our interactive) the biggest gains in both percentage terms and magnitude were among privately held business professionals.

Thus, the so called “average is over” argument—that that the top performers in each field will capture a bigger share of the pie—may be a driver of inequality, but it does not appear to explain the bulk of the changes in occupations at the top of the income ladder. Instead, the supermanagers appear to be capturing greater share of the wealth as is argued by Piketty and others. More detailed data would be required to assess who these people are and how workplace dynamics changed from 1979 to 2005 that would explain the change in income. The Washington Center for Equitable Growth will be examining this data in more detail in forthcoming publications.

The Daily Piketty: Some More Reviews of Piketty

One from the left that I like:

  1. Jedediah Purdy: To Have and Have Not: “Piketty recommends a small, progressive global tax on capital to draw down big fortunes and press back against r > g. He admits this idea won’t get much traction at present, but recommends it as a… measure of what would be worth doing and how far we have to go to get there. It’s an excellent idea, but it also shows the limits of Piketty’s argument. He has no theory of how the economy works that can replace the optimistic theories that his numbers devastate. Numbers — powerful ones, to be sure — are what he has…. Without a theory of how the economy produces and allocates value, we can’t know whether r > g will hold into the future. This is essential to whether Piketty can answer his critics, who have argued that we shouldn’t worry much… [because other economic forces will] blunt r > g. Piketty doesn’t really have an answer to these challenges, other than the weight of the historical numbers….

    “We should grope toward a more general theory of capitalism by getting more systematic about two recurrent themes in Piketty’s work: a) power matters and b) the division of income between capital and labor is one of the most important questions…. The period of shared growth in the mid-20th century was not just the aftermath of war and depression. It was also the apex of organized labor’s power in Europe and North America….

    Piketty shows that capitalism’s attractive moral claims — that it can make everyone better off while respecting their freedom — deserve much less respect under our increasingly ‘pure’ markets than in the mixed economies that dominated the North Atlantic countries in the mid-20th century. It took a strong and mobilized left to build those societies. It may be that capitalism can remain tolerable only under constant political and moral pressure from the left, when the alternative of democratic socialism is genuinely on the table…. Reading Piketty gives one an acute sense of how much we have lost with the long waning of real political economy, especially the radical kind…. Ideas need movements, as movements need ideas. We’ve been short on both…”

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