Standard postwar theories of class composition in the global north emphasized occupational differences between employers, blue collar, and white collar workers. But deindustrialization, and the army of underpaid service workers it generated, has increasingly muddied these categories.
In a 2018 article, MORITZ KUHN, MORITZ SCHULARICK, and ULRIKE STEINS redraw these distinctions for the era of asset ownership. Using household-level archival data from the Survey of Consumer Finances, they argue that portfolio composition and asset prices, rather than income or occupation, are the defining features of class in the contemporary economic landscape.
From the paper:
"A channel that has attracted little scrutiny so far has played a central role in the evolution of wealth inequality in postwar America: asset price changes induce shifts in the wealth distribution because the composition and leverage of household portfolios differ systematically along the wealth distribution. While the portfolios of rich households are dominated by corporate and noncorporate equity, the portfolio of a typical middle-class household is highly concentrated in residential real estate and, at the same time, highly leveraged. These portfolio differences are persistent over time.
An important upshot is that the top and the middle of the distribution are affected differentially by changes in equity and house prices. Housing booms lead to substantial wealth gains for leveraged middle-class households and tend to decrease wealth inequality, all else equal. Stock market booms primarily boost the wealth of households at the top of the wealth distribution as their portfolios are dominated by listed and unlisted business equity. Portfolio heterogeneity thus gives rise to a race between the housing market and the stock market in shaping the wealth distribution. A second consequence of pronounced portfolio heterogeneity is that asset price movements can introduce a wedge within the evolution of the income and wealth distribution. For instance, rising asset prices can mitigate the effects that low income growth and declining savings rates have on wealth accumulation."
Link to the piece.
- "Of course, income from work remains vitally important for many people as a way to access subsistence goods, but by itself it is less and less able to serve as the basis of what most people would consider a middle-class lifestyle." In the LARB, an excerpt from Lisa Adkins, Melinda Cooper, and Martijn Konings' forthcoming book, The Asset Economy. Link.
- "I discuss three clusters of class analyses, each associated with a different strand of sociological theory. The first identifies classes with the material life conditions of individuals; the second focuses on the ways in which social positions afford some people control over economic resources; the third considers how economic positions accord some people power over the lives of others." Erik Olin Wright in 2009. Link.
- "Wright’s class scheme is based on the premise of a free market system and private production organizations under advanced capitalism; however, the mode of production in transitional China is a complex hybrid." Xin Liu on "Class structure and income inequality in transitional China." Link. And Alejandro Portes and Kelly Hoffman analyze changing social structures across Latin America. Link. And a brand new Göran Therborn article on the "Dreams and Nightmares of the World's Middle Classes." Link.
The domestic drivers of international orders
Postdoctoral Researcher at the Watson Institute ERIK PEINERT investigates the politics of policymaking in advanced industrial states. A recent paper, "Cartels, competition, and coalitions," argues that domestic industrial relations shape international trade agreements.
From the abstract:
"Most theoretical and empirical accounts of trade politics focus on political conflict among competing private interest groups and over policies between the dichotomy of trade liberalization and protectionism. This article argues instead that issues of antitrust, market power, and competition are central to the politics over free trade, and that in this domain state actors are comparatively more important. Original archival evidence from the American New Deal and post-war foreign economic policy shows that post-war free-trade policies were heavily influenced by views, formed in the 1930s, about domestic industrial organization and antitrust. These preferences were then pushed into international economic policy during and after World War II through trade negotiations, extraterritorial application of American law, and pressure for domestic competition laws abroad. In one of the most prominent episodes of trade liberalization, an antitrust campaign and debate permeated trade issues, based in independent state learning and economic preferences."
Each week we highlight great work from a graduate student, postdoc, or early-career professor. Have you read any excellent research recently that you'd like to see shared here? Send it our way: email@example.com.
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- In case you missed our event with Mona Ali, Daniela Gabor, Izabella Kaminska, Matt Klein, JW Mason, Michael Pettis, Brad Setser, Jon Sindreu, Colby Smith, Nathan Tankus, and Adam Tooze, watch it here. And, for an extensive but not exhaustive reading list compiled by the panelists, click here.
- Join us next Friday August 21 at 3pm EST for a research session with Thea Riofrancos, on the subject of her new book Resource Radicals, on resource nationalism and environmental movements in Ecuador. Email firstname.lastname@example.org to register.
- "Rather than being the product of individual characteristics of peripheral states, sovereign debt crises are inherent to the asymmetric character of global liquidity." New on Phenomenal World: Karina Patricio Ferreira Lima on proliferating sovereign debt crises since Covid-19. Link.
- Last week, we shared several items on the US unemployment insurance system. There has been some change in the intervening days with a new White House EO on pandemic unemployment compensation. Link to WaPo coverage, and link to BI coverage, in which expert Michele Evermore says: "It's absolutely 100% impossible states will have this up in a couple of weeks."
- "We argue that finance has been a causal factor for the decline in manufacturing value added (MVA) and the share of employment in the manufacturing sector in Nigeria, as such, necessary for understanding premature de-industrialization." By Oluwafemi Awopegba and Richard Itaman. Link.
- "We use novel data from the Freedman’s Savings Bank—created following the American Civil War to serve free Blacks—employing an instrumental variables strategy exploiting the staggered rollout of bank branches. Families with accounts are more likely to have children in school, be literate, work, and have higher occupational income, business ownership, and real estate wealth." By Luke Stein and Constantine Yannelis on financial inclusion. Link, and link to an excellent blog post by Áine Doris on the Freedman's Savings Bank and the limits of financial inclusion.
- A NBER paper on the mortality consequences of climate change induced temperature increases. Link.
- Elliot Ash, Daniel Chen, and Arianna Ornaghi use natural language processing to determine a judge-specific measure of gender attitudes, and find that "slanted judges vote more conservatively in gender-related cases, and are more likely to reverse lower-court decisions if the lower-court judge is a woman than a man." Link. (And re-upping a favorite paper co-authored by Ash analyzing judicial opinions written by former Manne seminar attendees. Link.)
- Eric Levitz on the attack on the US Postal Service. Link. See also: a recent newsletter on the political history of the USPS.
- A paper by Gustavo Oliveira, Canfei He, and Jiahui Ma looks at how a 2006 shift in Brazilian policy transformed the Chinese agrochemical industry. Link.
- A new article by Caitlin Rosenthal: "Capitalism when Labor was Capital." Link. See also Suresh Naidu's paper from April of this year on American slavery and labor market power: "American slavery is the historical labour market that looks closest to the textbook model of perfect competition." Link.
- A new CEPR paper by Yixia Cai and Shawn Fremstad on the differential exposure to housing insecurity is the US during the pandemic. Link.
- "Spread the Fed," a two-part post by Robert Hockett. Link.
- "Vienna invested more heavily in policing in the Mediterranean after 1848 than it did in other regions, such as Western Europe, due to the multitude of ‘Forty-Eighters’ settled there and the alleged inadequacy of the local polities (e.g., the Ottoman Empire, Greece) to satisfactorily deal with the refugee question themselves. The article explains that Austria made use of a wide array of both official and unofficial techniques to contain these allegedly dangerous political dissidents. These methods ranged from official police collaboration with Greece and the Ottoman Empire to more subtle regional information exchanges with Naples and Russia. However, they also included purely unilateral methods exercised by the Austrian consuls, Austrian Lloyd sailors and ship captains, and ad hoc recruited secret agents to monitor the émigrés at large. Overall, the article argues that Austrian policymakers in the aftermath of 1848 invented new policing formulas and reshaped different pre-existing institutions, channelling them against their opponents in exile." By Christos Aliprantis. Link.