1 “The Next Capitalist Revolution,” Economist, November 17, 2018, 13. Janan Ganesh expresses the same concerns, while pleading for capitalists to counter this trend when he writes, “If . . . [Trump’s tax cuts and “welfare efficiencies” to make up the budgetary shortfall] is the right’s plan to save the free-market system, then capitalists should take their chances with the left. There is a plausible future in which a more generous welfare state, funded by taxes on those who have been enriched by a decade’s asset inflation, drains some of the anti-capitalist pus from the body politic. . . . Millennial attitudes to capitalism should keep them up at night.” See Janan Ganesh, “Why Ardent Capitalists Should Embrace ‘Socialism,’” Financial Times, March 13, 2019.
2 Thomas Piketty, Capital in the Twentieth-First Century (Cambridge: Belknap Press of Harvard University Press, 2014).
3 Central Intelligence Agency, The World Factbook 2016–17 (Washington, D.C., 2016).
4 See Teresa Kroeger and Elise Gould, “The Class of 2017,” at Economic Policy Institute, May 4, 2017. Age 21–24 college grads’ hourly wages in 2017 averaged $19.18, just 1.4 percent more than in 2000. Fewer than one in four had a 401k with any employer contribution.
5 On the Gini Coefficient numeric scale, a value of zero (0) denotes complete equality where everyone has the same income, while a value of one (1) denotes maximum inequality, where one person has 100 percent of the economy’s income. Our Gini Coefficient time series was built by adjusting data from the St. Louis Federal Reserve using techniques summarized in Eugene Smolensky and Robert Plotnick, “Inequality and Poverty in the United States, 1900 to 1990,” Discussion Paper #998-93, University of Wisconsin-Madison Institute for Research on Poverty, 1993. The series on the wealth share of the top 1 percent is from the World Inequality Database (accessed August 1, 2018). The series on the wealth share of the top 0.1 percent is from Emmanuel Saez and Gabriel Zucman, “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data,” Quarterly Journal of Economics 131, no. 2 (May 2016): 519–78. Our unionization rate time series is from the U.S. Department of Labor’s Bureau of Labor Statistics’ database, with the 1897–1961 portion developed from the series used in Leo Wolman, Ebb and Flow in Trade Unionism (New York: National Bureau of Economic Research, 1936).
6 In Europe, social democracy movements began earlier, in 1918, when a strong labor movement was able to leverage elites’ fear of a spreading Bolshevik revolution; they also benefited from the de facto expropriation of the assets of the German elite after World War I.
7 For a fuller analysis of these credit market events, see Craig A. Zabala and Jeremy M. Josse, “Shadow Credit in the Middle Market: The Decade after the Financial Collapse,” Journal of Risk Finance 19, no. 5 (2018): 414–36; Craig A. Zabala and Jeremy M. Josse, “Shadow Credit and the Private, Middle Market: Pre-Crisis and Post-Crisis Developments, Data Trends and Two Examples of Private, Non-bank Lending.” Journal of Risk Finance 15, no. 3 (2014): 214–33; and Craig A. Zabala and Jeremy M. Josse, “Shadow Banking: Rising Opportunities in the Private Middle Market,” KPMG Institutes (New York: KPMG Advisory Institute and Global Enterprise Institute, October 2013), 1–12.
8 See “Tax Avoidance and Evasion—The Scale of the Problem,” Tax Justice Network, accessed March 16, 2019. Annual government receipts are estimated to be $500 billion lower globally than they would be in the absence of this large‑scale tax evasion.
9 Nelson D. Schwartz and Michael Corkery, “When Sears Flourished, So Did Workers. At Amazon, It’s More Complicated,” New York Times, October 23, 2018.
10 “The Rivals,” Economist, October 20, 2018, 22–23.
11 China’s relative rise is now extending deep into critical new technologies. British business journalist James Vincent writes that, “In July 2018, China’s government published an ambitious policy paper, outlining how the country would become the world leader in AI by the year 2030. But by some measures China has already succeeded in this goal—a decade ahead of schedule. . . . The finding suggests that China’s plan to expand its AI capabilities with the help of generous government investment in both educational facilities and private industry is paying off. . . . [T]he Seattle-based Allen Institute for Artificial Intelligence (AI2) accounts for this by measuring not just the number of papers, but how often they are cited, a good shorthand measure for influence in the wider community. . . . After analyzing more than two million AI papers published up until the end of 2018, the Allen Institute found that China is “poised to overtake the US in the most-cited 50 percent of papers this year, in the most cited 10 percent of papers next year, and in the 1 percent of most-cited papers by 2025.” The researchers found that America’s share of the most cited 10 percent of papers declined from a high of 47 percent in 1982 to a low of 29 percent in 2018. China’s share, meanwhile, has been “rising steeply,” reaching a high of 26.5 percent last year.” See James Vincent, “China Is about to Overtake America in AI Research,” The Verge. Sound familiar? It should: it echoes Kennedy’s initiative to land U.S. astronauts on the moon before the Soviet Union, which worked out very well for the United States, with central industrial planning paving the way for today’s Internet.
12 Data on the top tax rate are from the Bureau of Economic Analysis. As noted earlier, our Gini Coefficient series was built by adjusting St. Louis Federal Reserve Bank data using techniques summarized in Eugene Smolensky and Robert Plotnick, 1993.
13 The income tax changes that took effect in 2018 are also having a negative effect on the after-tax incomes of many middle-class (and even some of the top 1 percent) households, particularly in usually Democratic states on the east and west Coasts. This is due in large part to the new limitations on deductions for state and local income and property taxes (“SALT”). The top 1 percent, and especially the top tenth of the 1 percent, lose much less from the SALT limitation than they gain from the lower rates in the legislation.
14 Half of Americans would be willing to shoulder the cost of paying teachers more and providing more money to schools via higher taxes, with only 26 percent opposed. But while 69 percent of Democrats say yes to higher taxes for schools, only 38 percent of Republicans and 30 percent of independents say the same. See “More than Half of Americans Support Pay Raises for Teachers, Poll Finds,” PBS, April 23, 2018.
15 Hugh Schofield, “Macron ‘Had No Choice,’” BBC News, December 10, 2018.
16 See Karl Marx, “The Eighteenth Brumaire of Louis Bonaparte,” The Marx-Engels Reader, 2nd edition, ed. Robert C. Tucker (New York: Norton, 1978).
17 Emily Sullivan at NPR reports that, “A study published this month by Christopher Kurz, Geng Li and Daniel J. Vine found millennials are less financially well-off than members of earlier generations when they were the same ages, with ‘lower earnings, fewer assets and less wealth.’” See Emily Sullivan, “Why Aren’t Millennials Spending? They’re Poorer Than Previous Generations, Fed Says,” NPR, November 30. See also Christopher Kurz, Geng Li, and Daniel J. Vine, “Are Millennials Different?,” Finance and Economics Discussion Series 2018-080 (Washington, D.C.: Board of Governors of the Federal Reserve System, 2018), 1–56.
18 Frank Newport at Gallup confirmed the Economist’s 2016 survey results in an August 2018 Gallup poll: “Americans aged 18 to 29 are as positive about socialism (51%) as they are about capitalism (45%). This represents a 12-point decline in young adults’ positive views of capitalism in just the past two years and a marked shift since 2010, when 68% viewed it positively.” See Frank Newport, “Democrats More Positive about Socialism Than Capitalism?,” Gallup, August 13, 2019.