Interview with CUNY’s Stone Center on Socio-Economic Inequality. Podcast with The Argument‘s Jerusalem Demsas.

It’s available from Oxford University Press, Amazon, and elsewhere. The introductory chapter is online here. From the opening:

Historically, the belief that inequality is unfair was the main reason for objection to it. In recent decades the source of opposition has shifted. A prominent concern now, perhaps the dominant one, is that inequality may have harmful effects on a range of outcomes we value, from democracy to opportunity to health and more.

The case for inequality reduction surely is much stronger if this is true. Is it true?

I examine the country evidence on the effect of income inequality on living standards, democracy, equality of opportunity, longevity, and happiness. As it turns out, support for the notion that reducing inequality will improve other outcomes is underwhelming.

Rich democratic nations with higher levels of income inequality or larger increases in income inequality haven’t tended to have slower economic growth, lower or slower-growing household income, or worse household balance sheets.

Government policy decisions tend to reflect the preferences of people with high incomes more than those of people with middle or low incomes. That’s inconsistent with what we’d like in a democracy — equal opportunity for political influence. However, in the United States, which has experienced a large rise in income inequality since the late 1970s, the amount of inequality in political influence hasn’t increased. Nor does it appear to differ notably from other nations that have far lower levels of income inequality. So even if the United States was able to reduce income inequality back to the level of the late 1970s, its lowest level ever, there is little reason to expect that would reduce inequality of political influence.

There are a number of pathways through which income inequality might increase inequality of opportunity, from family structure to family expenditures to schools and neighborhoods. Yet evidence that reducing income inequality will significantly reduce inequality of opportunity is quite thin.

The notion that income inequality is harmful for health has received substantial attention from researchers, and some now take it for granted that inequality reduces longevity. But the country evidence offers very little support for this conclusion.

Does income inequality and its rise account for why the rich democratic nations have had so little improvement in life satisfaction since the 1970s despite rising incomes and living standards? Inequality might be a contributor, but if so it appears to be a minor one.

None of this tells us that inequality isn’t a problem. But it does strongly suggest that inequality isn’t the problem. Reducing income inequality isn’t likely to significantly boost living standards for the poor or the middle class. It probably won’t do much to equalize political influence. It’s unlikely to help much with equalization of economic opportunity. It probably won’t make much difference for our health. And it’s doubtful that it will facilitate a rise in happiness.

We have less data with which to assess the consequences of wealth inequality. But two key facts from the country experience recommend skepticism about the wealth-inequality-is-harmful hypothesis. One is the success of the Nordic countries in creating good outcomes despite comparatively high wealth inequality. The other is the massive advance in wellbeing in France over the past two centuries despite the small and stagnant wealth share held by the bottom half of the French population.

We’re likely to make more progress in living standards, democracy, opportunity, health, and happiness by pursuing these outcomes directly, rather than by hoping to achieve them indirectly via a reduction in income inequality or wealth inequality.

Much of the gap in income and wealth between people is undeserved, because most of what determines where each of us ends up on the socioeconomic ladder is beyond our control. Less economic inequality would be fairer. Moreover, lots of people would like there to be less inequality. Reducing inequality of income and wealth is therefore a sensible goal. I’ll offer suggestions for how to do this.

At the same time, inequality reduction shouldn’t be a top-level priority. We don’t need the Gini coefficient or the top 1 percent’s income share to be among our headline economic and social indicators. We don’t need to enact a policy whereby tax rates shift automatically in order to hold income inequality at a constant level. I don’t think we should impose a cap on the amount of income or wealth a person can have. It wouldn’t be wise to decrease spending on government services in order to fund a universal basic income, even though doing so would sharply reduce income inequality. And while widespread homeownership is an effective way to reduce wealth inequality, we should hesitate to encourage that.

Our principal aim should be to make people’s lives better, especially by bringing up the floor of living standards and wellbeing. A key element of this is public goods and services. These don’t show up in measures of income or wealth, so they don’t contribute to reduction of income inequality or wealth inequality. But they matter greatly for our capabilities and quality of life.

Chapter list:

1. Inequality Isn’t the Problem
2. Is Income Inequality Bad for Living Standards?
3. Does Income Inequality Degrade Democracy?
4. Does Income Inequality Obstruct Opportunity?
5. Does Income Inequality Lessen Longevity?
6. Does Income Inequality Hinder Happiness?
7. Is Income Inequality Harmful?
8. People Want Less Inequality, But It’s Not a Priority for Them
9. Inequality Reduction in Rich Nations May Impede Reduction of Worldwide Inequality
10. What About Wealth?
11. Inequality Reduction Should Be a Secondary Goal
12. How to Reduce Inequality

At https://www.youtube.com/watch?v=OxIukHQqKhI. With Anna Romano, Garima Talwar Kapoor, and Bryan Smale. Part of the University of Toronto Munk School of Global Affairs and Canadian School of Public Service’s “Future of Democracy” symposium.

At https://www.youtube.com/watch?v=eRsXsHoIj94.

At https://www.bostonreview.net/forum/is-equal-opportunity-enough.

A discussion on Would Democratic Socialism Be Better?

The key conclusion of my Would Democratic Socialism Be Better? book is that capitalism — particularly its social democratic version — has performed better than many socialists seem to think on many of the outcomes they say they care about. That includes poverty, the quantity and quality of jobs, economic growth, middle-class income growth, the provision of public goods and services, health, democracy in politics, gender equality, and community.

Over at Crooked Timber, John Quiggin suggests (here and here) we could do better by replacing large private companies with public ones in utilities, finance, education, healthcare, energy, manufacturing, and information technology. In the United States this would increase public employment from around 15% of total employment to perhaps 50%.

John’s view is that more public ownership would reduce economic inequality with little, if any, loss in economic performance. This seems a very plausible hypothesis. What kinds of things would we expect to see if it were true?

One, which John points to, is the over-time pattern in the rich democratic nations. The several decades following World War II are commonly viewed as the period in which public ownership reached its height, before declining during the neoliberal era that began around 1980. This seems to fit with the shifts in income inequality and wealth inequality. Both were lower in the first of these two periods and higher in the second. Unfortunately, for most of these countries we don’t, to my knowledge, have good data on public employment or output that go very far back in time.

What about comparing across countries? We would expect nations with more public ownership to have less inequality of income and wealth. The OECD has public employment data beginning in 2007. The horizontal axis in figures 1 and 2 shows the public employment average for each country in the years 2007-2019. There’s a good bit of variation. Japan, South Korea, Switzerland, and Germany are at the low end with public employment at around 10% or less, and Norway, Denmark, and Sweden are at the high end with 30%. In figure 1 the vertical axis has a measure of income inequality, and in figure 2 it has a measure of wealth inequality. Neither chart offers any support for the hypothesis that public employment reduces economic inequality.

Figure 1. Public employment and income inequality across countries
Average for the years 2007-19. Income inequality: top 1%’s share of income. Pretax income. Excludes capital gains. Data source: World Inequality Database. Public employment: government employment as a share of total employment. Data source: OECD, Government at a Glance Database. Public employment data are missing for Australia and New Zealand. “Aus” is Austria. The line is a linear regression line.

Figure 2. Public employment and wealth inequality across countries
Average for the years 2007-19. Wealth inequality: top 1%’s share of wealth. Data source: OECD, Wealth Distribution Database. Public employment: government employment as a share of total employment. Data source: OECD, Government at a Glance Database. Public employment data are missing for Australia and New Zealand. Wealth distribution data are missing for South Korea and Switzerland. “Aus” is Austria. The line is a linear regression line.

Let’s return to the over-time story, because some countries do have a lengthy data series for public employment. One is the United States. Figure 3 again shows public employment on the horizontal axis and income inequality on the vertical. This time the data points are years. I’ve drawn two lines through the data points: one for 1946-1979 and the other for 1980-2018. In the first period, we see the expected downward slope — public employment is increasing and income inequality is decreasing. However, there were a number of other causes of the decline in top-end income inequality during those years, including union strength, a stakeholder-oriented corporate governance orientation, and high income tax rates.

In the second period we again see the predicted downward slope. Here public employment is falling and income inequality is rising. However, the magnitude of the implied causal effect is implausible. Public employment decreases by just a few percentage points while the share of income going to the top 1% jumps from 11% to 21%. Here too social scientists tend to agree that other developments — globalization, technological change, a shift to “shareholder value” corporate governance, financialization, and union decline — were the key contributors to the rise in inequality.

Figure 3. Public employment and income inequality in the United States
The data points are years. Income inequality: top 1%’s share of income. Pretax income. Excludes capital gains. Data source: World Inequality Database. Public employment: government employment as a share of total employment. Data source: FRED database, series usgovt and payems. The lines are linear regression lines for 1946-79 and 1980-2018.

Figure 4 is a similar plot with data for Denmark. As in the United States, we see a downward slope for the post-WW2 era. But once again we know there were other contributing factors that likely played a more prominent causal role. After 1980 the pattern runs in the wrong direction; public employment has continued to rise, yet income inequality has increased.

Figure 4. Public employment and income inequality in Denmark
The data points are years. Income inequality: top 1%’s share of income. Pretax income. Excludes capital gains. Data source: World Inequality Database. Public employment: government employment as a share of total employment. Data source: Henrik Christoffersen, Michelle Beyeler, Reiner Eichenberger, Peter Nannestad, and Martin Paldam, The Good Society: A Comparative Study of Denmark and Switzerland, Springer, 2014, p. 255, using data from Statistics Denmark. The lines are linear regression lines for 1946-79 and 1980-2012.

This simple data check suggests there might be something to the notion that public employment matters for income inequality. But it also offers substantial grounds for skepticism.

It could be that differences in public ownership at or below 30% of total employment don’t have much impact on economic inequality but moving to 50%, as John proposes, would. But why, exactly?

There is the additional question of whether reducing economic inequality should be high on our list of priorities. In a society where many of life’s core needs — housing, childcare, schooling, healthcare, a job, retirement income, eldercare, and more — are assured by government programs, inequality might not cause much consternation. I think we see this in today’s Nordic countries, which have comparatively high levels of wealth inequality but also enviable quality of life and high subjective well-being.

I’m not averse to more public ownership if it will yield better outcomes. But at the moment I don’t see compelling evidence or reasoning to support the case.

“We are at a critical juncture and need to build new institutions for a fairer, more equitably shared, and environmentally less damaging economic growth. But how? Lane Kenworthy has been the leading proponent of social democratic institutions both in the US and around the world. This spirited and readable book develops the powerful argument that social democracy is much better for our future than both unregulated global capitalism and democratic socialism. It is a must-read for all of those who are worried about our current predicament.”
– Daron Acemoglu, Institute Professor, Massachusetts Institute of Technology

“A readable, sober, grounded, empirically-based, humane, and even hopeful presentation of social democratic capitalism. Even for the US!”
– Lawrence Mishel, Former President, Economic Policy Institute

“Lane Kenworthy has produced a briskly written and utterly convincing argument for the benefits of social democracy over an alternative socialist system that has never existed. His book is a splendid example of how what Michael Harrington called ‘the left wing of the possible’ has bettered the lives of tens of millions of people and has the potential to do so for billions more.”
– Michael Kazin, Professor of History, Georgetown University, and author of What It Took to Win: A History of the Democratic Party

“In a series of compelling books, Lane Kenworthy has convincingly argued that ‘social democratic capitalism,’ the Nordic model, delivers high levels of equality and social inclusion, low levels of poverty, high levels of employment, and a cleaner environment without sacrificing economic growth. In this book, Kenworthy carefully considers whether democratic socialism would be an even better alternative. He is skeptical, emphasizing the advantages of social democratic capitalism.”
– John D. Stephens, Lenski Professor of Political Science and Sociology, University of North Carolina

You can get it from Amazon, Barnes & Noble, Oxford University Press, and elsewhere. It’s available now in kindle and nook; the hard copy version will be out later this month.

The introductory chapter is online here.

Here is the opening and the table of contents:

Socialism is back in the conversation. In the United States, of all places, recent polls suggest the share of young people who have a favorable impression of socialism is about the same as the share that have a favorable view of capitalism. A self-described democratic socialist, Bernie Sanders, was runner-up in the Democratic Party’s presidential primary in 2016 and 2020. Think tanks and magazines devising plans for socialist policies and institutions have sprouted up. The New York Times and the Washington Post have each had an avowed socialist among their op-ed writers in recent years. Since 2016, membership in the Democratic Socialists of America (DSA) has jumped from a few thousand to nearly 100,000.

Is there a compelling case for socialism? Should we aspire to shift, in the reasonably near future, from a basically capitalist economy to a socialist one?

Let’s stipulate that socialism refers to an economy in which two-thirds or more of employment and output (GDP) is in firms that are owned by the government, citizens, or workers. Two-thirds is an arbitrary cutoff, but it’s as sensible as any other. It connotes a subsidiary role for the private non-worker-owned sector.

Since the Bolshevik revolution in Russia in 1917, much of the debate about socialism has focused on lessons that can be drawn from the experience of the former Soviet Union, Cuba, and other actually existing self-styled socialist countries. I will ignore this almost entirely. Because each of those cases featured an autocratic political system, they are of little or no relevance to most modern proposals for socialism. Similarly, while the contemporary Chinese model is attractive to some, my focus is on the kind of socialism currently desired by proponents in the world’s affluent democratic nations. That socialism presupposes a democratic political system. That socialism would be a democratic socialism.

Some of the debate over democratic socialism concerns goals. The case for democratic socialism typically is motivated by goals such as freedom, opportunity, democracy, equality, and solidarity, among others. While I have some quibbles — as I explain in later chapters, I think some attach too high a priority to economic equality and to a particular form of economic democracy — for the most part I endorse the outcomes democratic socialists say they want. The aim of this book isn’t to question those goals.

To offer a realistic alternative, socialism must be workable. Socialism’s proponents have put a good bit of effort into designing institutions and policies that might make a democratic socialist economy function effectively. I will draw on these proposals. In doing so I’ll assume they are in fact workable, though I’ll also emphasize that there is considerable uncertainty, since evidence is thin or nonexistent.

A potentially significant consideration in evaluating democratic socialism is the possibility of a “transition trough” — a steep and lengthy downturn in economic well-being during the shift from capitalism to socialism. There might indeed be a significant economic cost to transitioning if opponents stop investing or shift their assets to other countries. But maybe not. Perhaps the transition trough would be like an ordinary economic recession — painful but temporary. This too I will set aside.

My focus is on what has tended to be the centerpiece of the case for democratic socialism: the notion that capitalism is bad, or at least not very good. In reaching this conclusion, most have either analyzed a theoretical ideal-type of capitalism, as Karl Marx famously did in Capital, or used a single country, often the United States, as a stand-in for capitalism. To fully and fairly assess democratic socialism’s desirability, we need to compare it to the best version of capitalism that humans have devised: social democratic capitalism, or what is often called the Nordic model. I try in this book to offer such an assessment. My conclusion is that capitalism, and particularly social democratic capitalism, is better than many democratic socialists seem to think.

1. Is Capitalism Not Good Enough?
2. An End to Poverty in Rich Countries
3. An End to Poverty Everywhere
4. More Jobs
5. Decent Jobs
6. Faster Economic Growth
7. Inclusive Growth
8. More Public Goods and Services
9. Affordable Healthcare for All
10. Helpful Finance
11. Truly Democratic Politics
12. Economic Democracy
13. Less Economic Inequality
14. Gender and Racial Equality
15. More Community
16. A Livable Planet
17. Would Democratic Socialism Be Better Than Social Democratic Capitalism?

1. On social democratic capitalism, politics, and the left, with Steve Williamson
2. On economic justice in post-pandemic America, with Oren Cass and Dan DiSalvo

A discussion on Social Democratic Capitalism with Michael Baranowski.

My thoughts at Foreign Affairs.

A discussion on Social Democratic Capitalism at Jim’s “Political Economy” podcast.

If you’re interested in purchasing my new book, there are ways to pay less than the $27.95 list price:

• The kindle version is $9.99.
• The hardcover version at Amazon is currently $22.26.
• If ordering it from Oxford University Press, promotion code ASFLYQ6 will give you 30% off.

Two pieces at the Washington Post, here and here. The shift is long-run, unsurprising, and likely to continue.