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June 05, 2006

 The rich man in his castle

-- The poor man at his gate
God made them high and lowly
And ordered their estate.
Welcome to America at the end of the twentieth-century. The Economist does what it used to see as a central task and reports on a striking new piece of comparative economic research. The May 27 Charlemagne column "Snakes and Ladders" describes work by a Nordic team (Bernt Bratsberg, Markus Jäntti et al.) on the transmission of income inequality between generations. The paper is here and an earlier version here. Money quote:
Mobility [in intergenerational income] among men is lower in the U.S. than in the U.K., where it is lower again compared to the Nordic countries. .... The main driver of the difference in the pattern of male intergenerational mobility in the U.S. from that of each of the other countries in our study is the low mobility out of the lowest quintile group in the United States.

The elasticity of a man's income with respect to his father's is about 0.2 for the Nordic countries, 0.36 for Britain, and 0.54 for the United States. In case the jargon is new to you, this means that if you start from a particular mark like $20,000 or $50,000 a year, every additional $1,000 step in the father's income translated into an increase in the son's later income of $200 in the Nordic countries, $360 in Britain and as much as $540 in the United States.

It's just conceivable that these foreigners are doctrinaire socialists using unsound data and questionable methodology. Somehow I don't think so, and the magnitude of the effect is huge. So unless the paper is demolished, the finding has to stand.

It should actually not surprise us. In the Nordic countries, reducing inequality of condition is the central aim of huge and expensive welfare states, with not only income support for the poor, but excellent education and health care at all income levels. Britain is somewhat less serious, and the USA hasn't been serious since Roosevelt. The American left has come to focus its efforts on discrimination; success, it seems, is for different ethnic groups to share the same inequalities.

The report punctures the American illusion that socio-economic gravity does not apply in the land of the free; that you can have the pleasant fiction called equality of opportunity without equality of condition. The sad truth is that inequality, like soft discrimination, works patiently throughout a child's life, adding a minute but cumulative bias every day. Uranium enrichment centrifuges are separately very inefficient, but in a cascade they grind exceeding small.

The time-frame of the study is several decades, so the findings cannot be blamed on the five years of George W. Bush. They do shed a depressing light on the Republican war on the poor, calculated not only to widen inequality but to increase its already scandalously high heritability.

It's an old truism of political theory that democracy and republican government are at risk from great inequalities of fortune. The collapse of the Roman Republic had a lot to do with the widening gap between the great senatorial families, who did well out of the expanding empire, and the ordinary Roman for whose vote they bid more and more cynically.

The doomsday scenario would read like this. There is no reversion to the mean; inequality unchecked reinforces itself in a positive feedback loop. Eventually the rich stop paying lip service to egalitarianism and adopt an ideology of plutocratic entitlement, disseminated by servile scribblers through a captive media. The money corruption of politics becomes more extreme, and any redistributive policies aimed at opportunity for children are dismantled. Bread, circuses, triumphs and pensions will be kept to keep the mob content, as they offer no doors to social mobility. In contrast to Rome, nobody will be able to say exactly when the American republic dies.

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