The 9.9 Percent Is the New American Aristocracy

1. The Aristocracy is Dead

• As I got older, the holiday pomp of patriotic luncheons and bridge-playing rituals came to seem faintly ridiculous and even offensive, like an endless birthday party for people whose chief accomplishment in life was just showing up. I belonged to a new generation that believed in getting ahead through merit, and we defined merit in a straightforward way: test scores, grades, competitive résumé-stuffing, supremacy in board games and pickup basketball, and, of course, working for our keep.
• Our delusions of merit now prevent us from recognizing the nature of the problem that our emergence as a class represents.

2. The Discreet Charm of the 9.9 Percent

• It is in fact the top 0.1 percent who have been the big winners in the growing concentration of wealth over the past half century.

A Tale of Three Classes (Figure 1)

• The 9.9 percent hold most of the wealth in the United States.
• Every piece of the pie is picked up by the 0.1 perent, in relative terms, had to come from the people below. But not everyone in the 99.9 percent gave up a slice. Only those in the bottom 90 percent did.
• In between the top 0.1 percent and the bottom 90 percent is a group that has been doing just fine. It has held on to its share of a growing pie decade after decade. And as a group, it owns substantially more wealth than do the other two combined.
• As of 2016, it took $1.2 million in net worth to make it into the 9.9 percent; $2.4 million to reach the group’s median; and $10 million to get into the top 0.9 percent.
• “We are the 99 percent” sounds righteous, but it’s a slogan, not an analysis. The families at our end of the spectrum wouldn’t know what to do with a pitchfork.
• Let’s suppose that you start off right in the middle of the American wealth distribution. How high would you have to jump to make it into the 9.9 percent? In financial terms, the measurement is easy and the trend is unmistakable. In 1963, you would have needed to multiply your wealth six times. By 2016, you would have needed to leap twice as high–increasing your wealth 12-fold–to scrape into our group. If you boldly aspired to reach the middle of our group rather than its lower edge, you’d have needed to multiply your wealth by a factor of 25. On this measure, the 2010s look much like the 1920s.

Video: America’s Class Problem

• Contrary to popular myth, economic mobility in the land of opportunity is not high, and it’s going down.
• a number [called] “intergenerational earnings elasticity”, or IGE, which measures how much of a child’s deviation from average income can be accounted for by the parents' income. An IGE of zero means that there’s no relationship at all between parents' income and that of their offspring. An IGE of one says that the destiny of a child is to end up right where she came into the world.
• half a century ago IGE in America was less than 0.3. Today, it is about 0.5. In America, the game is half over once you’ve selected your parents. IGE is now higher here than in almost every other developed economy.
• Canada, for example, has an IGE of about half that of the U.S. Yet from the middle rungs of the two countries' income ladders, offspring move up or down through the nearby deciles at the same respectable pace. The difference is in what happens at the extremes. In the United States, it’s the children of the bottom decile and, above all, the top decile–the 9.9 percent–who settle down nearest to their starting point.
• Rising immobility and rising inequality aren’t like two pieces of driftwood that happen to have shown up on the beach at the same time, [Alan Krueger has noted]. They wash up together on every shore. Across countries, the higher the inequality, the higher the IGE (see Figure 2). It’s as if human societies have a natural tendency to separate, and then, once the classes are far enough apart, to crystallize.

The Great Gatsby Curve: Figure 2

• one of the founding myths of America’s meritocracy: that our success has nothing to do with other people’s failure.

3. The Origin of a Species

• We are the people of good family, good health, good schools, good neighborhoods, and good jobs. We may want to call ourselves the “5Gs” rather than the 9.9 percent. We are so far from the not-so-good people on all of these dimensions, we are beginning to resemble a new species.
• The polite term for the process is assortative mating. […] the frenzy of assortative mating today results from a truth that would have been generally acknowledged by the heroines of any Jane Austen novel: Rising inequality decreases the number of suitably wealthy mates even as it increases the reward for finding one and the penalty for failing to do so.
• In 19th-century England, the rich really were different. They didn’t just have more money; they were taller–a lot taller. According to a study colorfully titled “On English Pygmies and Giants,” 16-yeard-old boys from the upper classes towered a remarkable 8.6 inches, on average, over their undernourished, lower-class countrymen.
• Obesity, diabetes, heart disease, kidney disease, and liver disease are all two to three times more common in individuals who have a family income of less than $35,000 than in those who have a family income greater than $100,000.
• Rising inequality does not follow from a hidden law of economics, as the otherwise insightful Thomas Piketty suggested when he claimed that the historical rate of return on capital exceeds the historical rate of growth in the economy. Inequality necessarily entrenches itself through other, nonfinancial, intrinsically invidious forms of wealth and power. We use these other forms of capital to project our advantages into life itself.

4. The Privilege of an Education

• The skin colors of the nation’s elite student bodies are more varied now, as are their genders, but their financial bones have calcified over the past 30 years. In 1985, 54 percent of students at the 250 most selective colleges came from families in the bottom three quartiles of the income distribution. A similar review of the class of 2010 put that figure at just 33 percent. According to a 2017 study, 38 elite colleges–among them five of the Ivies–had more students from the top 1 percent than from the bottom 60 percent.
• The mother lode of all affirmative-action programs for the wealthy, of course, remains the private school. Only 2.2 percent of the nation’s students graduate from nonsectarian private high shcools, and yet these graduates account for 26 percent of students at Harvard and 28 percent of students at Princeton.
• Thanks to ambitious university administrators and the ever-expanding rankings machine at U.S. News & World Report, 50 colleges are now as selective as Princeton was in 1980, when I applied. The colleges seem to think kthat piling up rejections makes them special. In fact, it just means that they have collectively opted to deploy their massive, tax-subsidized endowments to replicate privilege rather than fulfill their duty to produce an educated public.
• Measured relative to the national median salary, tuition and fees at top colleges more than tripled from 1963 to 2013.
• In the United States, the premium that college graduates earn over their non-college-educated peers in young adulthood exceeds 70 percent. The return on education is 50 percent higher than what it was in 1950, and is significantly higher than the reate in every other developed country.
• Ten years after starting college, according to data from the Department of Education, the top decile of earners from all schools had a median scalary of $68,000. But the top decile from the top 10 highest-earning colleges raked in $220,000–make that $250,000 for No. 1, Harvard–and the top decile at the next 30 colleges took home $157,000.
• It is entirely possible to get a good education at the many schools that don’t count as “good” in our brand-obsessed system. But the “bad” ones really are bad for you. For those who made the mistake of being born to the wrong parents, our society offers a kind of virtual education system. It has places that look like colleges–but aren’t really. It has debt–and that, unfortunately, is real. The people who enter into this class hologram do not collect a college premium; they wind up in something more like indentured servitude.
• degree holders earn so much more than the rest not primarily because they are better at their job, but because they mostly take different categories of jobs. Well over half of Ivy League graduates, for instance, typically go straight into one of four career tracks that are generally reserved for the well educated: finance, management consulting, medicine, or law. To keep it simple, let’s just say that there are two types of occupations in the world: those whose members have collective influence in setting their own pay, and those whose members must face the music on their own.
• Why do America’s doctors make twice as much as those of other wealthy countries? Given that the United States has placed dead last five times running in the Commonwealth Fund’s ranking of health-care systems in high-income countries, it’s hard to argue that they are twice as gifted at saving lives. Dean Baker, a senior economist with the Center for Economic and Policy Research, has a more plausible suggestion: “When economists like me look at medicine in America–whether we lean left or right politically–we see something that looks an awful lot like a cartel.” Through their influence on the number of slots at medical schools, the availability of residencies, the licensing of foreign-trained doctors, and the role of nurse practitioners, physicians' organizations can effectively limit the competition their own members face–and that is exactly what they do.
• Similar occupational licensing schemes provide shelter for the meritorious in a variety of other sectors. The policy researchers Brink Lindsey and Steven Teles detail the mechanisms in The Captured Economy.
• By now we’re thankfully done with the tech-sector fairytales in which whip-smart cowboys innovate the heck out of a stodgy status quo. The reality is that five monster companies–you know the names–are worth about $3.5 trillion combined, and represent more than 40 percent of the market capital on the nasdaq stock exchange. Much of the rest of the technology sector consists of virtual entities waiting patiently to feed themselves to these beasts.
• when educated people with excellent credentials band together to advance their collective interest, it’s all part of serving the public good by ensuring a high quality of service, establishing fair working conditions, and giving merit its due. That’s why we do it through “associations,” and with the assistance of fellow professionals wearing white shoes. When working-class people do it–through unions–it’s a violation of the sacred principles of the free market. It’s thuggish and anti-modern. Imagine if workers hired consultants and “compensation committees,” consisting of their peers at other companies, to recommend how much they should be paid. The result would be–well, we know what it would be, because that’s what CEOs do.
• A genuine education opens minds and makes good citizens. It ought to be pursued for the sake of society. In our unbalanced system, however, education has been reduced to a private good, justifiable only by the increments in graduates' paychecks.
• The metric that has tracked the rising college premium with the greatest precision is–that’s right–intergenerational earnings elasticity, or IGE.

5. The Invisible Hand of Government

• The income-tax system […] has had the unintended effect of creating a highly discreet category of government expenditures. They’re called “tax breaks,” but it’s better to think of them as handouts that spare the government the inconvenience of collecting money in the first place.
• In total, federal tax expenditures exceeded $900 billion in 2013. […] 51 percent of those handouts went to the top quintile of earners, and 39 percent to the top decile.

6. The Gilded Zip Code

• From 1980 to 2016, home values in Boston multiplied 7.6 times. When you take account of inflation, they generated a return of 157 percent to their owners. San Francisco returned 162 percent in real terms over the same period; New York, 115 percent; and Los Angeles, 114 percent. If you happen to live in a neighborhood like mine, you are surrounded by people who consider themselves to be real-estate geniuses.
• It’s not surprising that the values are up in the major cities: These are the gold mines of our new economy. Yet there is a paradox. The rent is so high that people–notably young people in the middle class–are leaving town rather than working the mines. From 2000 to 2009, the San Francisco had some of the highest salaries in the nation, and yet it lost 350,000 residents to lower-paying regions.
• the immediate cause of the insanity is the unimaginable pettiness of backyard politics. Local zoning regulation imposes excessive restrictions on housing development and drives up prices.
• proximity to economic power isn’t just a means of hoarding the pennies; it’s a force of natural selection. Gilded zip codes deliver higher life expectancy, more-useful social networks, and lower crime rates.
• Nowhere are the mechanics of the growing geogrpahic divide more evident than in the system of primary and secondary education. Public schools were born amid hopes of opportunity for all; the best of them have now been effectively reprivatized to better serve the upper classes. According to a widely used school-ranking service, out of more than 5,000 public elementary schools in California, the top 11 are located in Palo Alto. They’re free and open to the public. All you have to do is move into a town where the median home value is $3,211,100.
• Beyond a certain threshold–5 percent minority or 20 percent, it varies according to the mood of the region–neighborhoods suddenly go completely black or brown. It is disturbing, but perhaps not surprising, to find that social mobility is lower in regions with high levels of racial segregation. The fascinating revelation in the data, however, is that the damage isn’t limited to the obvious victims. According to Raj Chetty’s research team, “There is evidence that higher racial segregation is associated with lower social mobility for white people.”
• Given the social and cultural capital that flows through wealthy neighborhoods, is it any wonder that we can defend our turf in zoning wars? We have lots of ways to make that sound public-spirited. It’s all about saving the local environment, preserving the historic character of the neighborhood, and avoiding overcrowding. IN reality, it’s about hoarding power and opportunity inside the walls of our own castles. This is what aristocracies do.
• Zip code is who we are. It defines our style, announces our values, establishes our status, preserves our wealth, and allows us to pass it along ot our children. It’s also slowly strangling our economy and killing our democracy. It is the brick-and-mortar version of the Gatsby Curve. The traditional story of economic growth in America has been one of arriving, building, inviting friends, and building some more. The story we’re now writing looks more like one of slamming doors shut behind us and slowly suffocating under a mass of commercial-grade kitchen appliances.

7. Our Blind Spot

• Americans have trouble telling the difference between a social critique and a personal insult. Thus, a writer points to a broad social problem with complex origins, and the reader responds with, “What, you want to punish me for my success?”
• Human beings are very good at keeping track of their own struggles; they are less likely to know that individuals on the other side of town are working two minimum-wage jobs to stay afloat, not watching Simpsons reruns all day. Human beings have a simple explanation for their victories: I did it. They easily forget the people who handed them the crayon and set them up for success. Human beings of the 9.9 percent varity also routinely conflate the stress of status competition with the stress of survival. No, failing to get your kid into Stanford is not a life-altering calamity.
• The recency of it all may likewise play a role in our failure to recognize our growing privileges. It has taken less than one lifetime for the (never fully formed) meritocracy to evolve into a (fledling) aristocracy. Class accretes faster than we think. It’s our awareness that lags, trapping us within the assumptions into which we were born.
• We feel in our bones that class works only for itself; that every individual is dispensable; that some of us will be discarded and replaced with fresh blood. This insecurity of privilege only grows as the chasm beneath the privileged class expands.
• The source of the trouble, considered more deeply, is that we have traded rights for privileges. We’re willing to strip everyone, including ourselves, of the universal right to a good education, adequate health care, adequate representation in the workplace, genuinely equal opportunities, because we think we can win the game.

8. The Politics of Resentment

• Our status is visible only through its reflection in the eyes of others.
• The 2016 presidential election marked a decisive moment in the history of resentment in the United States. In the person of Donald Trump, a resentment entered the White House. It rode in on the back of an alliance between a tiny subset of super-wealthy 0.1 percenters (not all of them necessarily American) and a large number of 90 percenters who stand for pretty much everything the 9.9 percent are not.
• The counties that supported Hillary Clinton represented an astonishing 54 percent of the GDP, while Trupm counties accounted for a ere 36 percent.
• To make all of America as great as Trump country, you would have to torch about a quarter of total GDP, wipe a similar proportion of the nation’s housing stock into the sea, and lose a few years in life expectancy. There’s a reason why one of Trump’s favorite words is unfair. That’s the only word resentment wants to hear.
• Pew’s latest analysis indicates that Trump lost college-educated white voters by a humiliating 17 percent margin. But he got revent with non-college-educated whites, whom he captured by a stomping 36 percent margin.
• The historian Richard Hofstadter drew attention to Anti-intellectualism in American Life in 1963; Susan Jacoby warned in 2008 about The Age of American Unreason; and Tom Nichols announced The Death of Expertise in 2017. In Trump, the age of unreason has at last found its hero. The “self-made man” is always the idol of those who aren’t quite making it. He is the sacred embodiment of the American dream, the guy who answers to nobody, the poor man’s idea of a rich man.
• According to a survey by the political scientist Brian Schaffner, Trump crushed it among voters who “strongly disagree” that “white people have advantages because of the color of their skin,” as well as among those who “strongly agree” that “women seek to gain power over men.” It’s worth adding that these responses measure not racism or sexism directly, but rather resentment. They’re good for picking out the kind of people who will vehemently insist that they are the least racist or sexist person you have ever et, even as they vote for a flagrant racist and an accused sexual predator.
• As mass phenomena, racism, xenophobia, anti-intellectualism, narcissism, irrationalism, and all other variants of resentment are as expensive to produce as they are deadly to democratic politics. Only long hours of television programming, intelligently manipulated social-media feeds, and expensively sustained information bubbles can actualize the unhappy dispositions of humanity to the point where they may be fruitfully manipulated for political gain. Racism in particular is not just a legacy of the past, as many Americans would like to believe; it also must be constantly reinvented for the present.
• The raging polarization of American political life is not the consequence of bad manners or a lack of mutual understanding. It is just the loud aftermath of escalating inequality. […] The Gatsby Curve does not merely cause barriers to be built on the ground; it mandates the construction of walls that run through other people’s minds.
• But that is not to let the 9.9 percent off the hook. We maybe not be the ones funding the race-baiting, but we […] are the staff that runs the machine that funnels resources from the 90 percent to the 0.1 percent. We’ve been happy to take our cut of the spoils. We’ve looked on with smug disdain as our labors have brought forth a population prone to resentment and ripe for manipulation.
• The first thing to know about these consequences is the most obvious: Resentment is a solkution to nothing. […] The politics of resentment is a means of increasing inequality, not reducing it. Every policy change that has waded out of the Trump administration’s baffling morass of incompetence makes this clear. […A]ll will have the effect of keeping the 90 percent toiling in the foothills of merit for many years to come.
• The second thing to know is that we are next in line for the chopping block. As the population of the resentful expands, the circle of joy near the top gets smaller. The people riding popular rage to glory eventually realize that we are less useful to them as servants of the economic machine than we are as model enemies of the people.
• the third and most important consequence of the process: instability

9. How Aristocracies Fall

• In The Great Leveler, the historian Walter Scheidel makes a disturbingly good case that inequality has reliably ended only in catastrophic violence: wars, revolutions the collapse of states, or plagues and other disasters. It’s a depressing theory. Now that a third wave of American inequality appears to be cresting, how muc do we wnt to bet that it’s not true?

10. The Choice

• History shows us a number of aristocracies have made good choices. […] America’s first generation of revolutionaries was mostly 9.9 percenters, and yet htey turned their backs on the man at the very top in order to create a government of, by, and for the people. The best revolutions do not start at the bottom; they are the work of the upper-middle class.
• The defining challenge of our time is to renew the promise of American democracy by reversing the calcifying effects of accelerating inequality. As long as inequality rules, reason will be absent from our politics; without reason, none of our other issues can be solved. It’s a world-historical problem.
• The American idea has always been a guide star, not a policy progarm, much less a reality. The rights of human beings never have been and never could be permanently established in a handful of phrases or old declarations. They are always rushing to catch up to the world that we inhabit. In our world, now, we need to understand that access to the means of sustaining good health, the opportunity to learn from the wisdom accumulated in our culture, and the expectation that one may do so in a decent home and neighborhood are not privileges to be reserved for the few who have learned to game the system. They are rights that follow from the same source as those that an earlier generation called life, liberty, and the pursuit of happiness.
• Yes, the kind of change that really matters is going to require action from the federal government. That which creates monopoly power can also destroy it; that which allows money into politics can also take it out; that which has transfered power from labor to capital can transfer it back. Change also needs to happen at the state and local levels. How else are we going to open up our neighborhoods and restore the public character of education?
• It’s going to take something from each of us, too, and perhaps especially from those who hapen to be the momentary winners of this cycle in the game. We need to peel our eyes away fro the mirror of our own success and think about what we can do in our everyday lies for the people who aren’t our neighbors. We should be fighting for opportunities for other people’s children as if the future of our own children depended on it. It probably does.