Wealth shapes social class and economic growth. Yet, unequal distribution deepens disparities—within households, across nations, and around the world.
Wealth is in many ways a key topic in heterodox economic research: for one, it is a key source of social stratification and determines the class position of individuals and households. For another, the distribution of wealth is highly unequal, which creates socio-economic power asymmetries, that give rise to differential returns, which often reinforce existing inequalities. This latter observation holds on the level of households, but also on the level of nations, where rich nations can often easily acquire key assets in foreign countries biasing the distribution of future returns in their favor. And, finally, wealth is also economically powerful: the investments undertaken out of private wealth are not only a key driver of economic growth, but also shape the developmental trajectory of nations.
Heterodox Economics Newsletter
Der Heterodox Economics Newsletter wird herausgegeben von Jakob Kapeller und erscheint im dreiwöchentlichen Rhythmus mit Neuigkeiten aus der wissenschaftlichen Community multiparadigmatischer ökonomischer Ansätze. Der Newsletter richtet sich an einen Kreis von mehr als 7.000 Empfänger*innen und zählt schon weit mehr als 250 Ausgaben.
Observations like these motivate much of my research on wealth inequality: For about a decade now I, together with some highly cherished colleagues (like Rafael Wildauer, Ines Heck and Anna Hornykewycz), use the data supplied by the Household Finance and Consumption Survey (HFCS) of the European Central Bank to provide plausible empirical accounts of wealth concentration in Austria and Europe and to assess the potential revenue of a tax on net wealth for the top 1–3% of the population (see., e.g., here, here or here).
This year we got lucky and could publish our estimates right before the national elections took place – and indeed our estimates pointed to significant revenues (about 1–3% of GDP, depending on the exact definition of tax brackets), which gave some credibility to those parties that were pushing for wealth and inheritance taxes. In times of rising inequality and surging inflation, one could expect that voters have some sympathy for such proposals. However, as the results of our national elections indicate voters did not favor ‚taxing the rich’, but, rather, preferred a version of ‚hunting the poor’ by voting for right-wing populists, who promised to save on refugees and foreign-born citizens. This is a pity as we have to concede that it is much more difficult to come up with plausible economic solutions and suggestions in a discursive climate that is fuelled by rage, disappointment, and hate. In such a climate numbers will drown in narratives and, seemingly, those pushing for more equality need some improved narratives ;-)
On quite a different level wealth inequality in Africa was the key topic of a SummerSchool I organized jointly with Howard Stein and Resty Naiga at Makerere University in Kampala two weeks ago (see also my last editorial). As expected, I could learn a lot from both, presenters as well as students, about how wealth inequality dynamics play out in diverse parts of Africa. A quite general finding was that the formalization of land ownership – that is, transferring communal into private property – is a key issue of contention in many countries. It comes with several drawbacks that often challenge the assertion that formalized ownership is more secure and reliable. Rather, we saw how formal ownership can lead to an overburdening of households with (one-time) fees and (reoccurring) taxes that often undermine land accumulation by local households and families. These costs will eventually create a too high bar for many as income from agricultural production is often too small and volatile to cover the associated costs, which forces people to sell the very land, whose ownership they just formalized.
This amounts to a specific notion of poverty traps, where existing assets are not enough to earn the income needed for sustaining and preserving these assets. For me this pattern illustrates that the notion of cumulative advantage, which is often used to describe ‚rich-get-richer’ effects, could be completed by a notion of cumulative disadvantage, where downward spirals affect those households that have too few assets to cover the basic costs associated with these assets (see, e.g., here for an applied example). All this illustrates how cumulative (dis)advantage as a shared cornerstone of heterodox economics is a quite general concept that can explain many aspects of wealth dynamics in many different socio-economic contexts.
Best,
