Inequality and Immobility: The Gateway to Feudalism

A lot has been written recently about the growth of income inequality in America.  A CBO report and even a cover story on Foreign Affairs entitled The Broken Contract explore the extent to which income inequality has grown over the last 30 years.  But now comes a study from the Federal Reserve Bank of Boston that examines vertical mobility in the economy; that is, how easy is it for people to “live the American Dream” of economic advancement through hard work and fair play and move up the economic scale.

Let’s do a quick refresher on “The American Dream.”  It is a uniquely American ethos.  In the midst of the Great Depression, in 1931 to be exact, author James Truslow Adams penned The Epic of America.  In that work he coined the term The American Dream and believed that it was

that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.

That no longer sounds like our America, does it?  When did we lose this dream?  When did we wander off the path of freedom and equality?

The FED report, released October 20th, 2011, entitled Trends in U.S. Family Income Mobility, 1969–2006 by Katharine Bradbury examines the history of family mobility across income quintiles and finds that we have, over time, become a society in which it is increasingly more difficult to advance from one income bracket to another.

Changes in economic mobility are of particular consequence when economic disparities among families are increasing over time, as has been the case in the United States in recent decades. If family income inequality is increasing, changes in the degree to which families move up and down can either offset or amplify longer-term inequality—and loosen or tighten the link between a family’s circumstances in any given year and its later outcomes. Other things being equal, an economy with rising mobility—one in which families move increasingly frequently or traverse increasingly greater distances up and down the income ladder—will result in a more equal distribution of lifetime incomes than an economy with declining mobility.

We know from the recent reports, and from the GINI index (also see the index by country), America has become much less equal over time.  But if mobility is also declining, then we’re in real trouble.  This would indicate that we’re well on our way to an old European-style class system with an aristocracy and peasants, an emergence of a modern feudalism.

Source:, Table H.4

Things are clearly off-the-rails in America.  Equality is declining faster than any time since the 1920s.  From a GINI perspective, we’re down there with Cameroon and Bulgaria.

Source: CIA Factbook

Now, on top of this wretched inequality, let’s layer on some economic immobility too.

A variety of measures indicate that U.S. family income mobility has decreased over the 1969–2006 time span, and especially since the 1980s. Most overall relative mobility measures fell, on net, with mobility significantly lower in the 1995–2005 period than in the 1977–1987 period. Origin-specific measures also declined, with families starting in the poorest quintile less likely to make far moves (to the middle or higher quintiles) during the 10 years from 1995 to 2005 than within the 1977–1987 period. Similarly, absolute quintile mobility declined overall and for poor families after 1981–1991 (when real post-government income growth began to slow). Thus, families have become increasingly less likely to change rank or move out of their (relative or absolute) decile or quintile of origin, and when they move, to move less far; this appears to be the case overall and for those who start rich or poor.

And yet the Republicans have no idea why Occupy Wall Street is happening.  They spout platitudes about living the “American Dream” but have no idea that the dream has died.  They helped kill it.  They simply cannot fathom what all the Occupy fuss is about.  Perhaps the words of another author, one of the original “muckrakers,” Upton Sinclair, will help them come to some comprehension, though I have my doubts.

It is difficult to get a man to understand something, when his salary depends upon his not understanding it.

Indeed it is, Mr. Sinclair.  Indeed it is.


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