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LOUIS CHAUVEL [email protected]
Globalization of Extremes: The North-Western Middle Classes Facing the Return
of Pareto Distributions and Power-Laws
WITH THE SUPPORT OF
IRSEI Institute for Research
on Socio-Economic InequalityUniversity of Luxembourg
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1. Introduction: The point => de-middlization or even worse?Welcome back in a world of extreme inequalities
2. The theory: A “new” class structure: forget Quetelet, learn Pareto: A theory of imbalance of power
3. The world transformations: Brazilianisation of the North and expansion of some South
4. Conclusive RemarksThe long 21st century begins and the Hobsbawm / Arrighi
legacy
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1. Introduction:
The point => de-middlization or even worse?
Welcome in a world of extreme inequalities
The old French social science methodology: Social Facts first!
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1. Introduction:
a. Yesterday: The Western middle class dream
Fourastié « The great hope of the 20th century »
1- « Wage based middle class society » = permanent wage earner are a majority
2- Wage incomes sufficient to live well => the affluent society
3- Generalization of labor stability and social protection
4- Education boom and increasing value of diplomas, upward social mobility
5- Political centrality of middle class
6- Beliefs in progress
Galbraith, Goldthorpe and Lockwood, Mendras, Lederer?, etc. etc. (not everywhere but in many western countries)
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1. Introduction: de-middlization or even worse?
« The great worries of the 21th century »
1- « Wage uncertainty » = decline in predictability and repatrimonialization
2- Wage stagnation and real cost of life => the post-affluent society
3- Generalization of precariat and destabilization of social protection
4- Over-Education boom and increasing value of diplomas, downward social mobility
5- Loss of political centrality/control of middle class
6- New worries
Piketty, Alderson, Tomaskovic-Devey, Therborn, Mann, etc.
b. Today: Very bad news in social facts…for post-affluent countries (not everywhere but in many western countries)
Income Inequality: Economic Disparities and the Middle Class in Affluent Countries edited by: Janet C. Gornick and Markus Jäntti (Stanford University Press) 2013
http://www.sup.org/book.cgi?id=21329
Louis Chauvel 2006, Les classes moyennes à la dérive (The Middle
Classes Adrift), Seuil, Paris.
7The bad news (Piketty)
*Capital expansion and wage stagnation
*Structural Matthew effect(1):
R(real interest rates) > G(real eco growth)=> the new era
*The richer will save, not the poorer
*Auto-generated spiral of accumulation of wealth and inequalities
*Farewell to meritocracy
(1): “For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken
even that which he hath”. Matthew 25:29, King James Version.
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Even worse news (Alderson, Beckfield, etc. etc.)End of the 1960-70 Western social dream
*Demography-connected changes: baby-boom overcrowding effects, homogamy, role of education
*Market transformations: deindustrialization, global competition (new-developed countries and
destabilization of the western upper working class), technological bias, winner take all
*Economic & Social policies: Tax reforms at the top, declining minimum wages
and decay of social regulations at the bottom
Alderson, A. S., J. Beckfield and F. Nielsen, "Exactly How Has Income Inequality Changed? Patterns of Distributional Change in Core Societies." International Journal of Comparative Sociology, 46, 405-423, 2005.
Robert H. Frank and Philip J. Cook 1995 The Winner-Take-All Society(New York: The Free Press,).
Godechot, Olivier 2012 Is finance responsible for the rise in wage inequality in France?
Socio-Economic Review 10(3), 447-470
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2. The theory: A “new” class structure: forget Quetelet, learn Pareto Farewell to the theory of middle man
(Quetelet, Halbwachs)Welcome(back) to extreme society
(Pareto, Nielsen)
1- Normal law worldmax height = 227 cm (in a 1.000.00 sample)
Max/Median = 1.280 (in a 1.000.00 sample)
In the US: Robert Wadlow, the tallest person 272 cm = 1.53 the median
0.01.02.03.04Density
120
140
160
180
200
220
hei
ghtc
m
M=177 cm sd=10.1
https://archive.org/details/lathoriedelhom00halbuoft
height Median = Mean
Nielsen, François. 2007. “Economic Inequality, Pareto, and Sociology: The Route Not Taken.”. American Behavioral Scientist 50 (5): 619–638.
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Farewell to the theory of middle man (Quetelet Halbwachs)
Welcome(back) to extreme society (Pareto Nielsen)
2- Typical Income Pareto-Champernowne-Fisk law with a gini index = .45
Max/Median Income = 700(in a 1.000.000 sample)
In the US 2013 LNG Charif Souki $141 Millions
=3154 times the median US FT yearly earning lvl
M=177 cm sd=10.1
0.2.4.6.8Density
01
23
45
i
US Income Mean=1.4 * Median
Median
Fits based on SCF 2011
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Farewell to the theory of middle man (Quetelet Halbwachs)
Welcome(back) to extreme society (Pareto Nielsen)
3- Typical Wealth Pareto-Champernowne-Fisk law with a gini index = .72
Max/Median Income = 71 000(in a 1.000.00 sample)
In the US 6 Walton family members own $152 Billions
=250 000 times the median wealth
=500 000 times the median US FT yearly earning
M=177 cm sd=10.1
0.2.4.6.81Density
01
23
45
w
US Wealth Mean=4.3 * Median
Median
No wealth based middle classFits based on SCF 2011
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Farewell to the theory of middle man (Quetelet Halbwachs)
Welcome(back) to extreme society (Pareto Nielsen)
3- Typical Wealth Pareto-Champernowne-Fisk law with a gini index = .72
Max/Median Income = 71 000(in a 1.000.00 sample)
In the US 6 Walton family members own $152 Billions
=250 000 times the median wealth
=500 000 times the median US FT yearly earning
M=177 cm sd=10.1
0.2.4.6.81Density
01
23
45
w
US Wealth Mean=4.3 * Median
Median
No wealth based middle classFits based on SCF 2011
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2. The theory:An imbalance of power theory of income and wealthAnd the double Pareto curve (Champernowne-Fisk)
Power of income = Gini times Power of rank
At the top, your log of income is proportional to the number of people above youGaining one rank can dramatically change the size of resourcesAt the bottom as well to avoid radical poverty
Near to the median, rank changes have much less impact on resources=> the middle class face less radical competition
When Gini is smaller, the radicallity of the game is smoothed
(Champernowne, 1953; Fisk, 1960; Dagum 1975)Ln(y) ≈ Gini * logit(r)
http://www.lisdatacenter.org/wps/liswps/609.pdf
Louis Chauvel Mar - 2014 Intensity and shape of inequalities: the ABG method for the analysis of distributionsLIS working papers series - No. 609
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2. The theory:An imbalance of power theory of income and wealthAnd the double Pareto curve (Champernowne-Fisk)
World buzz: The red baron (Manfred von Richthofen) example(“victories” of WW1 aces are normally distributed, but fame is not…)
World biz: how the financial market works?
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3. The world transformations: Brazilianisation of the North
The big shift :
Increasing Ginis of IncomesIncreasing Ginis of WealthIncreasing size of Wealth relative to incomesetc.
Welcome(back) to a very non-normal world!
Drumbeat of bad news
Changes in the general shapes
Globalization of the income distribution:
The rich are indexed
on global firms size
The others on the BRICs working
and wage earner classes
Even more massive changes in the distributions still to come ?…
The strobiloid representation of income distribution
Upper middle class
6 Strobiloids Change
se81 se11
01
23
4
-1 0 1
de83 de11
01
23
4
-1 0 1
fr79 fr11
01
23
4
-1 0 1
uk79 uk10
01
23
4
-1 0 1
us79 us10
01
23
4
-1 0 1
il79 il07
01
23
4-1 0 1
Sweden Germany(W)
France
U.K. U.S. Israel
X` 18
Branko Milanovic version of Piketty-Saez
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Growthlog10(per capita GDP PPP)
Inequality (Gini coeff)
U.S.
U.K.
Turkey Tunisia
Taiwan
Switzerland.
Sweden
Spain
Slovenia Slovak Rep.
Russia
Romania
Portugal
Poland
Norway Netherlands
Malaysia
Korea, Republic of
Japan
Italy
Israel
Ireland
Hungary
Greece
Germany
France
Finland Denmark
Czech R.
Canada
Belgium
Austria
Australia
20
25
30
35
40
45
3,6 3,7 3,8 3,9 4 4,1 4,2 4,3 4,4 4,5 4,6
Australia
Austria Belgium
Canada
Costa Rica
Czech R.
Denmark
Finland
France
Germany
Greece
Hungary
Ireland
Israel Italy
Japan
Korea, Republic of
Luxembourg
Mexico
Netherlands
Norway
Poland
Portugal
Russia
Slovenia
Spain
Sweden
Switzerland.
Taiwan
Tunisia
U.K.
U.S.
Venezuela From early 1980’ to late 2000’
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Branko Milanovic version of Piketty-Saez
ArgentinaArgentina
Australia
Austria
BahamasBarbados
Belarus Belarus
BelgiumBulgaria
Canada CanadaCanada
Chile
Costa Rica
Croatia
Cyprus
Czech RepublicCzech Republic
Denmark
Dominican Republic
Estonia
Finland
France
Gabon
Greece
Hong Kong
Hungary Hungary
Iceland
Iran
Ireland
IsraelIsrael
Italy
Jamaica
Japan
Kazakhstan
Korea. Republic of
LatviaLithuania
Luxembourg
Malaysia
Malta
Mexico
Netherlands New Zealand
Norway
PolandPolandPortugal
Puerto Rico
Russia
Seychelles
Singapore
Slovak RepublicSlovak RepublicSlovenia Slovenia
Spain
Sweden
SwitzerlandSwitzerland
Taiwan
Trinidad &TobagoTrinidad &Tobago Trinidad &TobagoTrinidad &Tobago
Turkey
United Kingdom
United States
UruguayVenezuela
55
60
65
70
75
80
wgi
ni
20 30 40 50 60Gini
wgini=.35(.031) igini +55.3(1.3)R-sq=.41
Data fromJames Davies, Rodrigo Lluberas, andAnthony F. Shorrocks, different years
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Piketty
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In 1980 = wealth is 3 years of incomeIn 2010 = wealth is 6 years of income
Piketty
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01
23
4
-1 -.5 0 .5 1
US 1980
Income Gini=.35
WealthGini=.75
Mean wealth=3.7 med income
Median Income
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01
23
4
-1 -.5 0 .5 1
01
23
4
-1 -.5 0 .5 1
US 2010
Income Gini=.45
WealthGini=.79
Mean wealth=8.5 med income
Median Income
25
01
23
4
-1 -.5 0 .5 1
01
23
4
-1 -.5 0 .5 1
01
23
4
-1 -.5 0 .5 1
US 2040
Income Gini=.55
WealthGini=.82
Mean wealth=15.5 med income
Median Income
Piketty Central Scenario
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3. Consequences and side effects
More income and wealth homogamy
Less mobility
More opportunities for top quantile groups
Less for the others (even the upper middle class?)
Health, lack of human development, violence, …
“Inequality kills…” (Therborn, 2014)
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http://milescorak.files.wordpress.com/2012/01/inequality-from-generation-to-generation-the-united-states-in-comparison-v3.pdf
Corak, Miles. 2013. “Inequality from
Generationto Generation: The
United States in Comparison.”Chap. 6 in The
Economics of Inequality, Poverty, and
Discrimination in the 21st Century, edited by
RobertS. Rycroft. Santa
Barbara, CA: ABC - CLIO.
R-sq = 0.75 !!(slope close to 1)
“Great Gatsby” Curve
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4. Conclusive remarks: Brace! Brace !…
Hobsbawm / Arrighi and a new age of extremes
The self-sustaining inequality spiral
The differences with the 19th century capitalism: From material to symbolic starvation?
Which frustrations in Europe after de-middlization?What is the new class structure?
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4. Conclusive Re-Marx: Solutions!
Piketty: let us have a world level progressive wealth taxand more transparent information
Wright: let us have a universal minimum incomeand a real utopia
Therborn: let us construct a real democracy and re-balance power
Chauvel: let us understand/interpret again the real social facts
Sedulo curavi, humanas actiones non ridere, non lugare, neque detestari, sed intelligere.I have striven not to laugh at human actions, not to weep at them,
nor to hate them, but to understand them.Baruch Spinoza, 1675/1676 Tractatus Politicus (A Political Treatise)
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4. Conclusive remarks: but last last bad news …
The increasing concentration of power at the top changes the imbalance of power including the ideological one
The poor, the post-working class, and the new lower-middle class
no longer trust politicsand consider the intellectuals are a part of the 1%