Luke MacGregor / Reuters A businessman looks over the  Occupy London protest camp outside St. Paul's Cathedral in London, January 2011.

Inequality and Modernization

Why Equality Is Likely to Make a Comeback

During the past century, economic inequality in the developed world has traced a massive U-shaped curve—starting high, curving downward, then curving sharply back up again. In 1915, the richest one percent of Americans earned roughly 18 percent of all national income. Their share plummeted in the 1930s and remained below ten percent through the 1970s, but by 2007, it had risen to 24 percent. Looking at household wealth rather than income, the rise of inequality has been even greater, with the share owned by the top 0.1 percent increasing to 22 percent from nine percent three decades ago. In 2011, the top one percent of U.S. households controlled 40 percent of the nation’s entire wealth. And while the U.S. case may be extreme, it is far from unique: all but a few of the countries of the Organization for Economic Cooperation and Development for which data are available experienced rising income inequality (before taxes and transfers) during the period from 1980 to 2009.

The French economist Thomas Piketty has famously interpreted this data by arguing that a tendency toward economic inequality is an inherent feature of capitalism. He sees the middle decades of the twentieth century, during which inequality declined, as an exception to the rule, produced by essentially random shocks—the two world wars and the Great Depression—that led governments to adopt policies that redistributed income. Now that the influence of those shocks has receded, life is returning to normal, with economic and political power concentrated in the hands of an oligarchy.

Piketty’s work has been corrected on some details, but his claim that economic inequality is rising rapidly in most developed countries is clearly accurate. What most analyses of the subject miss, however, is the extent to which both the initial fall and the subsequent rise of inequality over the past century have been related to shifts in the balance of power between elites and masses, driven by the ongoing process of modernization.

In hunting-and-gathering societies, virtually everyone possessed the skills needed for

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