Reviews

Created 8/14/1995
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Review of Wolff's Top Heavy

A Review of
Edward N. Wolff, Top Heavy: A Study of the Increasing Inequality of Wealth in the United States (New York: Twentieth Century Fund, 1995)

Ed Wolff's book--a review of his earlier work on wealth, with some new additional material added--documents that the United States today is a more unequal society than at any time since the Great Depression.

According to his numbers--which are lousy, but are nevertheless the best we have or are likely to acquire-- in 1929 the richest one percent of households had about 41 percent of the economy's total wealth. But the leveling associated with the Depression and World War II had reduced the richest one percent's share to about 22 percent by 1945. Thereafter, the leveling trend continued. By the mid-1970s, the richest one percent's share--including the implicit value of rights and claims on the Social Security system. of total wealth was down to 13-16 percent of the economy's total wealth.

But by the late 1980s, the richest one percent's' wealth was back up to 21 percent of the economy's total wealth. And scattered pieces of information suggest that the trend toward increasing inequality has continued into the 1990s.

Increasing inequality is not due to a surge in entrepreneurial activity: economic growth was unusually low in the 1980s (in substantial part because of the drain on investment resulting from the Reagan deficits). The fortunes made were, for the most part, not to any unusual extent the by-product of especially rapid economic growth.

Rising inequality is cause for alarm for two reasons: First, in a time of high inequality politics becomes nasty and democracy becomes less secure and stable. Second, an unequal economy--an economy in which the chances of striking it rich are larger and the chances of failing to maintain middle-class incomes are larger--fails to provide adequate social insurance. Risk-averse people would, if given a choice when young, overwhelmingly prefer to live in an equally rich overall but more equally distributed society.


Reviews

Created 8/14/1995
Go to
Brad DeLong's Home Page


Associate Professor of Economics Brad De Long, 601 Evans
University of California at Berkeley; Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/