The rich man in his castle

New research shows that inequaliy is inherited more, not less, in the USA than in Europe.

— 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.

Author: James Wimberley

James Wimberley (b. 1946, an Englishman raised in the Channel Islands. three adult children) is a former career international bureaucrat with the Council of Europe in Strasbourg. His main achievements there were the Lisbon Convention on recognition of qualifications and the Kosovo law on school education. He retired in 2006 to a little white house in Andalucia, His first wife Patricia Morris died in 2009 after a long illness. He remarried in 2011. to the former Brazilian TV actress Lu Mendonça. The cat overlords are now three. I suppose I've been invited to join real scholars on the list because my skills, acquired in a decade of technical assistance work in eastern Europe, include being able to ask faux-naïf questions like the exotic Persians and Chinese of eighteenth-century philosophical fiction. So I'm quite comfortable in the role of country-cousin blogger with a European perspective. The other specialised skill I learnt was making toasts with a moral in the course of drunken Caucasian banquets. I'm open to expenses-paid offers to retell Noah the great Armenian and Columbus, the orange, and university reform in Georgia. James Wimberley's occasional publications on the web

34 thoughts on “The rich man in his castle”

  1. This is, of course, the nature of life in a free society, without artificial barriers to success. Success builds on success, after all.
    But the poor aren't poor because the wealthy are wealthy, they're poor because they and their parents didn't do what ceasing to be poor required. So if we're going to abandon a commitment to freedom, (And it IS a choice between egalitarianism and liberty.) maybe we should explore encouraging the empoverished to improve themselves, instead of just induging in spiteful attacks on the people whose behavior already IS successful?
    Spite doesn't smell any better, just because you dress it up in fancy theory, and call it "egalitarianism".

  2. Brett Bellmore said: "But the poor aren't poor because the wealthy are wealthy, they're poor because they and their parents didn't do what ceasing to be poor required."
    Oh come on. Everyone I've ever heard say this has had an immeasurable greater opportunity than say an inner city black or a white kid from a trailer park in Alabama.
    Do these classes of people fail over generations because of laziness? How about you, would you have thrived if you were born in such a situation? Lots of people feel they have worked very hard for what they have, but others work just as hard at WalMart or whatever and die owning nothing.

  3. "The people whose behavior already IS successful" of course includes all those who took the forward-thinking step of being born into a wealthy family. If the poor had only applied themselves, they could have done the same.
    As Barry Goldwater said (well, a cartoon version of him did anyway), "Why don't you show some initiative? Why don't you go out and inherit a department store like I did?"

  4. I'll have to quibble about your doomsday scenario, specifically about the last sentence, "In contrast to Rome, nobody will be able to say exactly when the American republic dies."
    I don't think anyone can reasonably say exactly when the Roman republic died, not even to the nearest century. The Social War? Sulla's dictatorship? Caesar's dictatorship? The Principate of Augustus? The Visigothic kingdom? The formal structures of the Republic lasted through all those things; they just became increasingly unimportant. I think it would be hard to pick a particular moment beyond which one would say that the Republic was completely irrelevant to the real business of government.

  5. Only a prodigy is going to go from the ghetto to wealth, but an ordinary person, by not making a whole series of mistakes, can go from the ghetto to the middle class. And a journey of a thousand miles DOES start with a single step. Maybe we should encourage those steps, instead of making it easier to not take them?
    My chief proposal is that all public assistance over more than a short period should involve a requirement that you move to someplace with a lower unemployment rate. Why pay people to stay where they have no prospects?

  6. "Why pay people to stay where they have no prospects?"
    So you're proposing to pay people to move to parts of the country that won't welcome them, where they have no roots or understanding of how things work, to take jobs for which they are in all likelihood untrained?
    And are there actually areas of the country with low unemployment rates looking for influxes of non-transient low-skill labor?

  7. Brett Bellmore wrote, "This is, of course, the nature of life in a free society, without artificial barriers to success. Success builds on success, after all."
    No artificial barriers to success? What do you call the government forcing renters to pay landowners for the use of land, which the landowners didn't produce or contribute?

  8. I think you're wrong about what "elasticity" means. As you're using the words, a *slope* of .2 would mean $1000 more for the father corresponds to $200 more for the son, but an *elasticity* means (roughly) 10% more for the father corresponds to 2% more for the son. Formally speaking, the elasticity is the slope after taking logarithms. Depending on how they've transformed the variables, it could be a little more complicated than that, though I'd have to read the paper to know for sure.

  9. 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.
    American liberalism began to focus on discrimination and social issues during the 1950s and 1960s, and at the time it actually made sense. During this era, good middle-class union jobs were plentiful, income inequality was relatively low, marginal tax rates were high, and it seemed that things would continue to get better for most Americans. Then, the challenge became integrating groups that had been historically excluded from the American dream, such as blacks.
    However, this liberal paradigm really started to fall apart during the 1980s, with Reagan's concentrated assault on American labor and the American middle class. Liberalism just hasn't shifted gears. It has been far too cowed by phony cries of "class warfare" from the right – cries that even a Canadian or British liberal party, let alone a Scandinavian one, would dismiss with a contemptuous horselaugh.
    BTW, ignore Brett. He's been on this same tired libertarian schtick for the past seven years. Just remember that Libertarians are about 1% of the American population, so we don't really need to care what they think.

  10. Sam (and others), I think Brett is both correct and terribly unfair to the poor. I tend to side with Jane Galt: the poor are poor because they don't do the things they would need to be un-poor, but they mostly don't do those things because they aren't raised in an environment that encourages it. She says something like, "High schoolers are incredibly vulnerable to peer pressure. If I'd gone to a school where the cool thing to do, what all my friends were doing, was to drop out and sell drugs, I'm sure I would have done that in a heartbeat. I had the good fortune to instead go to a school where getting an education and going to an elite college was considered the most important thing, so I did that instead."
    Basically, I don't think the problem of poverty is lack of access to material resources. No matter how much money we pump into the inner cities, kids there aren't raised with the skills and desires to take advantage of that. This is a cultural problem, and thus very difficult; I don't know a good solution. The best solution certainly isn't to say, "well, it's their fault, so we don't need to worry about it." The solution also isn't to say, "the solution is that they have no money, so we'll give them a lot." I think you have to find some way to encourage kids to want an education, to want to succeed.

  11. Matt Austern: in conventional rhetoric, the Republic died when Caesar crossed the Rubicon on January 10 of 49 BC. OK, you're right in that it was in fact a long-drawn out process. But only the forms survived under Augustus, like the Supreme Soviet under Stalin.
    In Brett's odd worldview, how exactly is the child of a Swedish dropout mother unfree? Since the rich and poor in both countries can both do more or less what they want with their lives and property, the Swedish rich are only less "free" than the American ones in that they pay a lot more taxes. If you treat the loss in the rich man's income as a reduction in his practical freedom (rights x talents x resources x environment), you must treat the greater resources of the Swedish poor as a gain in their practical freedom. Where's the net loss?
    Incidentally, the study is limited to sons with easily traced fathers – the comparison would surely be much more unfavourable to the USA for the fatherless.

  12. "What do you call the government forcing renters to pay landowners for the use of land, which the landowners didn't produce or contribute?"
    Property rights, without which there wouldn't BE any rental property for renters to steal.
    "So you're proposing to pay people to move to parts of the country that won't welcome them…. And are there actually areas of the country with low unemployment rates looking for influxes of non-transient low-skill labor?"
    Gosh, I wasn't aware that we didn't have freedom of movement in this country, and that my neighbors actually posessed a veto over whether I moved here. I guess well off people can be forced to pay taxes, but asking them to have poor people move in nearby is just too out there…
    "This is a cultural problem, and thus very difficult; I don't know a good solution."
    That's what my "Move to get welfare" proposal aims at: By paying people to stay in economicly depressed areas, we deny the next generation the crucial role models of gainfully employed neighbors, and CREATE a culture of poverty. I want to break up that culture, and see to it that if your (probably single) parent is on welfare, at least your neighbors aren't, too.
    The children of poor people need to associate with people who are actually gainfully employeed, so that they see working for a living as a real prospect. They need that just as much as they need to be living in a place where there ARE jobs to be had.

  13. "the poor are poor because they don't do the things they would need to be un-poor, but they mostly don't do those things because they aren't raised in an environment that encourages it"
    I know this is what you believe, but this paper says its untrue, and they have the numbers to back it up. Oh, I know – It sounds good, it feels good, those lazy poor people who don't know how to manage their lives. But, its false.

  14. Certainly, Tim. Right after *you* support Swedish taxes on the rich. And I mean that – hold me to this. Just send me your clippings.

  15. Brett: "…but an ordinary person, by not making a whole series of mistakes, can go from the ghetto to the middle class."
    Last I heard, the record for surviving a free fall with no parachute is 37K feet. So a person *can* survive that. Likelihood is a whole other thing, of course, and likelihood is what statements about societies are all about.

  16. Surviving a free fall from 37,000 feet is the prodigy going from rags to riches. Going from rags to merely middle class is easy enough that merely not making a series of major mistakes is enough to accomplish it.
    Of course, we've allowed a culture that *admires* making those serious mistakes to form. Short of destroying that culture, we're never going to solve poverty in this country. You can't save people from their own self-destructive behavior, if you're going to humor them in thinking that self destruction is cool.

  17. "Going from rags to merely middle class is easy enough that merely not making a series of major mistakes is enough to accomplish it."
    Brett, you keep saying this.

  18. "Going from rags to merely middle class is easy enough that merely not making a series of major mistakes is enough to accomplish it."
    We know this isn't true, just from personal experience. Why? If it were the case, there would be tons of middle class people falling into poverty every year, and poverty in the US isn't pleasant, and those former middle class people would be complaining LOTS..

  19. > but an ordinary person, by not making
    > a whole series of mistakes, can go from
    > the ghetto to the middle class.
    From 1940-1975ish, when there were a fair number of manufacturing (and other value-added) jobs available to those willing to work hard, I would say that was somewhat true (considering racism, etc). A year on a mop crew allows you to get a cook's job at a hamburger stand allows you to get a dishwasher job at a fancy resturant allows you to get a low-end manufacturing job allows you (with some luck) to get a good unionized manufacturing job that pays a middle-class salary and benefits.
    Today? A job at a fast food joint gets you a job as a Wal-Mart clerk gets you a job as a Sam's Club greeter gets you… not much of anything. The pyramid at Wal-Mart is fierce: perhaps 1% of their store positions pay a middle-class wage. Solid blue collar/lower middle class jobs are moving to India faster than you can snap your wallet shut.
    Cranky

  20. "Brett, you keep saying this."
    And you keep denying it. Maybe you think your denial is the default position that doesn't need any evidence?
    "If it were the case, there would be tons of middle class people falling into poverty every year."
    It does not logically follow that if getting out of poverty is simple, that falling into it is easy. In fact, it pretty much logically does NOT follow.
    Come on, guys, it isn't exactly a secret that if you just follow the straight and narrow, avoid vices, finish school, don't have kids out of wedlock, and work even if the only thing available pays badly, you improve your situation. It's right on a level with the secret to losing weight: Eat less and exercise.
    Boring, at times unpleasant, but it works.

  21. Brett Bellmore wrote, "Property rights, without which there wouldn't BE any rental property for renters to steal."
    False, if you construe "property rights" to include "the right of the landowner to capture all or most of land rent."
    Which was known to folks like Smith and Mill centuries ago.

  22. Brett Bellmore wrote, "Come on, guys, it isn't exactly a secret that if you just follow the straight and narrow, avoid vices, finish school, don't have kids out of wedlock, and work even if the only thing available pays badly, you improve your situation."
    Why do it that way? Far better to inherit land and allow the government to force others to hand over a toll to you for using it, even though you had nothing whatsoever to do with it being there in the first place, or having the value it does.

  23. Georgists. As crazy as Scientologists, without the entertaining mythology…. LOL
    Why do it that way? Well, um, because you can't arrange to be the heir of a great fortune, but you CAN decide to work for a living, and not destroy your own prospects.

  24. Most of us know this already but Brett Baltimore lives in Dreamland.
    I was born into a working-class family. I am the first person in my immediate family to finish college. The pressures on me, all the way through, to quit school, stay home, get a clerical job to help support and look after aging elatives, and eventually get married, WERE the straight and narrow, morally acceptable path when I was in high school and college. I was considered a seriously immoral rebel for being a girl who dared to say I did not want to spend my life in the traditional way, to such a degree that various relatives refused to speak to me for years. Not to mention the financial problems of scholarships/loans/financial aid, any one of which might have derailed me and all of which have only increased for kids now starting college. None of the reasons i was told/asked to drop out of school had a damned thing to do with drugs or out of wedlock births.
    Now I work with a woman who did not go to college and asked me for information and help when her own daughter was a sophomore in high school. She wanted her daughter to go to college, but since she hadn't been herself she had no idea what was involved. For example, she had never heard of the PSATs, which are the first step to apply for a national merit scholarship; she hadn't been considered to be college material when she herself was in high school so this information was not conveyed to her, any more than I ever was told how to apply for med school. and the financially strapped, budget-cut high school her daughter attended did not have the resources to tell students these things. The school tells kids there is a college guidance office where information is available, but there is no full time college counselor. My colleague also did not know what kinds of financial aid might be available; I was able to help her with that as well.
    Middle-class kids have parents who know this stuff, and they tell the kids. Or they are placed in schools that hold meetings for parents and kids to get the word out – "this is what you have to do if you want to go to college."
    Anyone who thinks kids in poor-district high schools have the same access to these resources as middle class kids in private schools, or good public schools, is smoking something I'd like to get my hands on.

  25. "Middle-class kids have parents who know this stuff, and they tell the kids. Or they are placed in schools that hold meetings for parents and kids to get the word out – "this is what you have to do if you want to go to college.""
    THIS IS MY POINT!
    We created a self-perpetuating culture of poverty in this country, by handing people money to live on, without their having to work for it, without their having to leave the ghettos they were living in. People without jobs raised children without good role models, and the whole thing snowballed to the point where they think the things you have to do to succeed are *bad*!
    You can redistribute income until the cows come home, and all you're going to do is help that culture spread further through society. Because redistribution treats the symptoms, while making the disease itself worse.
    We need to destroy the culture of poverty. Eradicate it, root and branch. We need to teach the poor what it takes to stop being poor, and disabuse them of their warped value system.
    We need to stop ENABLING poverty. Because that's all income redistribution does. It doesn't cure poverty, it enables it.

  26. There are lots of "formerly middle class" people falling into poverty: single mothers. No, not all single mothers are black or from poor families – there are plenty of young women from middle-class backgrounds who have kids with men who don't stick around. They become poor. Though quite often, they become un-poor in a few years, because they know what it is that middle-class people do that makes them be not-poor.
    It might help if the US were to stop importing large numbers of low-skilled people from other countries to compete against the low-skilled people who were born here, and if we stopped importing large numbers of non-english-speaking children so that the schools might have a chance of teaching something useful to the children of poor people, instead of collapsing under the burden of teaching a second language to upwards of 50% of their charges in poor neighborhoods.

  27. Brett Bellmore wrote, "Georgists. As crazy as Scientologists, without the entertaining mythology…. LOL"
    Thanks for conceding the argument by providing no reasoning or evidence.
    I'm also not a Georgist, since I'm not a "single taxer."
    As for Georgists being crazy…was Adam Smith a Georgist?
    "Both ground-rents and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents and the ordinary rent of land are, therefore, perhaps, the species of revenue which can best bear to have a peculiar tax imposed upon them."
    How about John Stuart Mill?
    "The ordinary progress of a society which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing. What claim have they, on the general principle of social justice, to this accession of riches?"

  28. You can redistribute income until the cows come home, and all you're going to do is help that culture spread further through society. Because redistribution treats the symptoms, while making the disease itself worse.
    Out of curiosity, Brett, why is it that countries with more redistribution than the US also have greater social mobility? If we're claiming that redistribution makes it too easy to not get out there and make something of yourself, then why do Sweden and Denmark, with their high social spending, have more intergenerational mobility than the US, which, in international terms, is very non-redistributive? If you want to argue that redistribution has different effects in teh US and UK than in Scandinavia, I'm up for listening, and have some theories on that myself, but intellectual rigour would seem to demand that you not say that variable Y is clearly the problem, when the data show that having something like twice as much Y in other countries does not lead to as much of the problem as we see in teh US and UK, in terms of social mobility.

  29. "…nobody will be able to say exactly when the American republic dies."
    The first American Republic died on December 12, 2000. I put first in there as I still hope we can restore it.

  30. Brett – There is a far easier way to change cultural ideals and teach low income children how to behave. Get your ass out and volunteer. Show these youngsters appropriate ways of behaving and realign their value systems.
    Also… You can talk all day about forcing welfare and unemployment recipients to move, but even a person with a mediocre understanding of the american government can predict that something like that would never get passed.

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