The Serious Steps We're Going to Have to Take to Share the Wealth

As of right now, the owning class once again enjoys concentrated wealth.

The postwar boom was a time of broadly shared prosperity, when working- and middle-class people not only enjoyed steadily increasing incomes but were also able to accumulate lifetime wealth. The measures that made possible this wealth-broadening included expansion of homeownership under a reliable, well-governed system of mortgage finance; the development of a retirement system, with Social Security complemented by private pensions; debt-free higher education; and rising real wages. Each of these instruments interacted with the others.

Today, these mechanisms have all gone into reverse. Meanwhile, the capacity of the already-rich, the parentally endowed, and the well-situated to accumulate financial wealth has only intensified. Wealth inequality gets less attention than income inequality, but it is every bit as important. And the two are related. Wealth helps generate income and the capacity to earn income. Decent income increases the capacity to save and to amass wealth. As public systems for wealth-broadening collapse, private wealth within families provides asset endowments to the young and positions the next generation to become upper-income earners like their parents.

Economist Thomas Piketty called overdue attention to wealth extremes in his celebrated book, Capital in the Twenty-First Century. Assembling more than two centuries of data from several countries, Piketty demonstrated something close to an iron law of capitalism: The return on capital tends to exceed the rate of GDP growth. Thus, as a matter of simple arithmetic, wealth becomes ever more concentrated. But the most interesting and least developed part of Piketty’s book was his discussion of the mid-20th century—an anomalous period when wealth and income became more equal.

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