Princeton sociologist Douglas Massey is one of my favorite scholars. The abstract from his new paper [gated] on “Globalization and Inequality: Explaining American Exceptionalism” will sound familiar to readers of other eminent Princetonians, such as Paul Krugman and Larry Bartels. I'm starting to think of it as “the Princeton Narrative” about inequality in the U.S.
Globalization creates pressure for greater inequality throughout the world, but these pressures are expressed more fully in the United States than in other developed nations. Although the distribution of US income before taxes is no more unequal than other nations, after taxes it is considerably less egalitarian. This occurs because of specific institutional arrangements that fail to redistribute income effectively and allow the pressures of globalization to be fully realized. These arrangements represent a shift from the past and were deliberately enacted over the past two decades with divergent consequences for those at the top and bottom of the socioeconomic hierarchy. The realignment of the US political economy can ultimately be traced to America's legacy of racism. Once leaders in the Democratic party sought to include African Americans in the benefits of Roosevelt's New Deal, support for economic populism evaporated in the middle and working classes. The advantage of the wealthy is further enhanced by a political system in which those with money are better able to have their interests served legislatively than the poor or working classes.
I have not read the paper, just the abstract. So I will certainly do violence to the nuance in the argument. But here are a few thoughts loosely inspired by the summary.
First, I think there's a good deal of truth in the Princeton Narrative. Second, racism aside, American exceptionalism has a good deal to do with our exceptional18th Century Constitution, the political culture that created it, and the political culture it subsquently reinforced. See Glaeser and Alesina and Persson and Tabellini.
Third, let's say explicitly what is implicit here: the New Deal was democratically feasible because it catered to Southern racism. Which is to say that many of the policies of the “Great Compression” were predicated on the explicit exclusion of blacks from many programs, which is part of the point of Brink's Nostalgianomics paper. The New Deal may have been economically egalitarian in the aggregate, but may have also helped to perpetuate more viciously inegalitarian Southern racial apartheid. The New Deal involved a magic button-style tradeoff between two kinds of equality. It's not clear to me that a liberal egalitarian, more concerned about equality of rights and social standing than about equality of material holdings, should have pushed that button.
Third, Barack Obama, points (a) and (b). Barack Obama point (a): wealthy voters now seem to be trending to the more redistributive party, and it seems that extremely wealthy voters may have very strongly preferred Barack Obama. Barack Obama point (b): Barack Obama is black, and his electoral success certainly signals a weakening in American racial animus. So, if the major impediments to higher rates of downward redistribution are that wealthy people don't want to redistribute, and most white Americans don't want to redistribute because black people will get their money and they don't like black people, then the success of Barack Obama in general, and among the rich in particular, is great news for egalitarians in two separate ways.
Fourth, it is a mistake to assume that equality of democratic voice improves the prospects of the poor and working classes unless the poor and working classes support policies that actually promote their interests. This is a pretty simple point many people have a hard time getting their heads around. But it's pretty clear that populist socialist revolutions around the world have not been very kind to poor and working-class people, because populist socialism doesn't tend to work very well. The now-vast public ignorance literature (subscribe to Critical Review!) would seem to suggest that the best case scenario for the poor and working classes is to have a relatively weak voice in a coalition with relatively strong-voiced highly-educated elites sincerely conerned with poverty alleviation and economic mobility. This presents another magic button for egalitarians. Suppose there is a button that simultaneously equalizes the democratic voice of the poor and working classes and reduces their expected lifetime income by 50%. Would you push it? Egalitarian liberals are going to continue to sound confused unless they can make up their minds about this.