The Very Ancient Phenomenon of Middle-Class-Centered Economic Growth

As Paul Glastris aptly observes in his Editor’s Note for the June/July/August issue of the Washington Monthly, just underneath the surface in many discussions of growing inequality and the shrinking middle class is a specter of futility:

[I]n the back of many people’s minds, certainly mine, is the fear that maybe there aren’t solutions to this problem. Maybe the great American middle class is just not coming back. We are now six years into an economic recovery that has seen next to zero wage growth. As Monica Potts shows in this issue’s cover story (“The Post-Ownership Society,”), even highly educated Millennials in booming Washington, D.C., are having a hard time seeing a path to middle-class financial stability. Millennials generally are also finding it difficult to start businesses, despite their eagerness to do so (see “The Lost Entrepreneurial Generation?” by Matt Connolly), or to buy homes, with some exceptions (see “The Young and the Rentless” by Jordan Fraade). The mass downward mobility Millennials are experiencing is not a new phenomenon, either. As Phillip Longman documents (“Wealth and Generations”), every generation born after 1953 has done less well than the one that preceded it.

Looking back at that record, and looking forward, to an economy where globalization and computer algorithms continue to eat away at middle-class jobs while Thomas Piketty’s famous equation “r > g” (returns on capital exceed economic growth) continues to favor the rich, it’s hard to be optimistic. Sure, generational upward mobility was a defining reality for most of American history. But all good things come to an end, right? Perhaps two centuries of egalitarian prosperity is about all a democracy can sustain.

Glastris quells this specter by examining evidence that a growing, middle-class-based economy is not just some quirk of the modern age. Indeed, in Josiah Ober’s The Rise and Fall of Classical Greece, he finds evidence that stable, democratic political institutions and a competitive but-rules based economic system produced benign patterns of growth and wealth distribution for something like a half-millennium.

[A]ccording to calculations by Ober’s Stanford colleague Ian Morris, per capita consumption in ancient Greece grew somewhere between 50 percent and 95 percent from 800 to 300 BC. That works out to an annual per capita growth rate of between .07 and .14 percent. Ober makes the case that the upper range of that estimate is more likely. If so, Greece’s per capita growth rate exceeded Rome’s and would not be matched again until the rise of Holland in the sixteenth century AD.

Of course, lots of other civilizations during this period—Egypt, Persia, Carthage—were wealthy, too. The difference was in the distribution. Though we lack the kinds of detailed economic records for these societies that we have for Greece and Rome, everything we know about them suggests that their wealth was overwhelmingly controlled by a narrow elite who lived in splendor while the masses living meagerly

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Not so in the Greek world. Home sizes…give an indication. Greek settlements “were never characterized by a few mansions and many huts,” Ober writes, but instead were clustered tightly around a mean size, and over time their size grew in lockstep. By 300 BC, he writes, “houses in the 75th percentile of the distribution were only about one fifth again … as large as those in the 25th percentile.”

Greece was far from a classless society. Ober cites the work of Geoffrey Kron of the University of Victoria, who looked at census reports for Athens in 322 BC and other records and calculates that the richest 1 percent of that city’s population owned about 30 percent of all private wealth, with the top 10 percent owning 60 percent. From there, Kron derives a Gini index—the standard measure of inequality—for Athens of 0.708. That is roughly comparable to the United States in 1953-54. To the extent, then, that America was a middle-class society in the 1950s, so too, apparently, was ancient Greece.

If Ober is correct, there are lessons for today’s efforts to achieve growth with equality equality, notes Glastris:

One lesson conservatives will like is that Greece achieved its amazing mass prosperity with no interference from some distant, centralized government. Each city-state set its own policies, often within voluntary alliances of other city-states.

A couple other lessons liberals will like. First, the most democratic and economically successful poleis kept taxes on average citizens low and put heavy burdens on the rich, through both direct taxation and strong social pressure on the wealthy to make “gifts” to the commonweal, like building warships. Second, these poleis also had extensive social programs, from grain price stabilization to welfare for invalids to state support for the widows and orphans of those who died in war. These programs were crucial, Ober says, in incentivizing citizens to take calculated risks for their own and the community’s benefit.

This is a fascinating discussion of a distant mirror in which we may be able to see some of our own challenges–and choices. Check it out.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.