BERKELEY – The Berkeley economist Barry Eichengreen recently gave a talk in Lisbon about inequality that demonstrated one of the virtues of being a scholar of economic history. Eichengreen, like me, glories in the complexities of every situation, avoiding oversimplification in the pursuit of conceptual clarity. This disposition stays the impulse to try to explain more about the world than we can possibly know with one simple model.
For his part, with respect to inequality, Eichengreen has identified six first-order processes at work over the past 250 years.
The first is the widening of Britain’s income distribution between 1750 and 1850, as the gains from the British Industrial Revolution went to the urban and rural middle class, but not to the urban and rural poor.
Second, between 1750 and 1975, income distribution also widened globally, as some parts of the world realized gains from industrial and post-industrial technologies, while others did not. For example, in 1800, American purchasing power parity was twice that of China; by 1975 it was 30 times that of China.