Will social and/or class inequality ever change?

My answer on Quora:

If we were to define class inequality as income inequality, then history tells us that it is indeed likely to change. The reasons for those changes is where the real story is.

Branko Milanovic in his book Global Inequality presents two key factors that can reduce high levels of inequality: malign and benign factors.

Malign factors lowered income inequality in the 20th century…

Malign factors include war, conflict, and anything else that destroys wealth, income and capital at a large scale. Those closer to the top of the income scale hold the most income and capital, and so they are disproportionately affected.

The steep decline in income inequality in the West over the 20th century was influenced, on one hand, by the Great Depression and war. Thomas Piketty in his book Capital in the Twenty-First Century suggests that the rapid decline in inequality that became in the early to mid-1900s was due to (i) the financing of war where the rich were heavily taxed and (ii) the destruction of property by war. Stanford historian Walter Scheidel makes a similar case in his recent book The Great Leveler (going back to the Stone Ages!)

…and so did benign factors

On the other hand, benign factors also helped reduce extreme levels of income inequality and helped keep them relatively low by historical standards. Technological change, robust infrastructure investment and wider access to quality education raised productivity levels and the incomes of a broad majority shot up. Policies that strengthened the social safety net, invested in public education, and strengthened worker bargaining power helped address the negative externalities that had resulted in the Great Depression.

But these factors can work in the other direction too. With the election of Ronald Reagan in the US and Margaret Thatcher in the UK in the 1980s, changes in tax policy and the scaling back of the “welfare state” precipitated a rise in income inequality that, in the US, is back to its levels last seen before the Great Depression. Add to the that the new wave of technological change with totally different skill requirements and the lack of investment in education, we see market forces pushing inequality up again given the same set of policies and institutions.

Social Mobility Matters

In addressing the question’s motivation: Social and class inequality can take a lot of forms that are difficult to directly observe and measure. One measure that researchers have been estimating is the level or rate of social mobility (how likely someone is to move up and down the income ladder). This too has changed.

In the United States, social mobility has declined dramatically. If you were born in the 1940s, there was over a 90 percent chance that you would make more than your parents did by the time you were thirty. If you were born in the 1980s, that likelihood dropped down to 50 percent (The Equality of Opportunity Project). A variety of other measures suggest the same decline in mobility. A great book on this topic is Dream Hoarders by Richard Reeves.


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