Complex human societies, including our own, are fragile. They are held together by an invisible web of mutual trust and social cooperation. This web can fray easily, resulting in a wave of political instability, internal conflict and, sometimes, outright social collapse.
Analysis of past societies shows that these destabilizing historical trends develop slowly, last many decades, and are slow to subside. The Roman Empire, Imperial China and medieval and early-modern England and France suffered such cycles, to cite a few examples. In the U.S., the last long period of instability began in the 1850s and lasted through the Gilded Age and the “violent 1910s.”
We now see the same forces in the contemporary U.S. Of about 30 detailed indicators I developed for tracing these historical cycles (reflecting popular well-being, inequality, social cooperation and its inverse, polarization and conflict), almost all have been moving in the wrong direction in the last three decades.
Every year U.S. law schools churn out about 25,000 “surplus” lawyers, many of whom are in debt. A large number hope to enter politics.
The roots of the current American predicament go back to the 1970s, when wages of workers stopped keeping pace with their productivity. The two curves diverged: Productivity continued to rise, as wages stagnated. The “great divergence” between the fortunes of the top 1 percent and the other 99 percent is much discussed, yet its implications for long-term political disorder are underappreciated. Battles such as the recent government shutdown are only one manifestation of what is likely to be a decade-long period.
How does growing economic inequality lead to political instability? Partly this correlation reflects a direct, causal connection. High inequality is corrosive of social cooperation and willingness to compromise, and waning cooperation means more discord and political infighting. Perhaps more important, economic inequality is also a symptom of deeper social changes, which have gone largely unnoticed.
Increasing inequality leads not only to the growth of top fortunes; it also results in greater numbers of wealth-holders. The “1 percent” becomes “2 percent.” Or even more. There are many more millionaires, multimillionaires and billionaires today compared with 30 years ago, as a proportion of the population.
Let’s take households worth $10 million or more (in 1995 dollars). According to the research by economist Edward Wolff, from 1983 to 2010 the number of American households worth at least $10 million grew to 350,000 from 66,000.