The Rich Are Hogging Our Common Inheritance -- We Must Take It Back

By Gar Alperovitz and Lew Daly, The New Press. Posted December 8, 2008.

What is the primary cause of such vast gains if individuals do not really "improve"? The answer is obviously more productivity -- more output from the same level of input. And self-evidently what this means is that we are more productive as a society. But how does a society become more productive if individual effort and intelligence remain relatively constant? Clearly, it is largely because on the whole the scientific, technical, and cultural knowledge available to us, and the efficiency of our means of storing and retrieving this knowledge, have grown at a scale and pace that far outstrip any other factor in the nation's economic achievement. "The central phenomenon of the modern age," economic historian Joel Mokyr observes, is quite simply "that as an aggregate we know more."

A half century ago, in 1957, the future Nobel Prize-winning economist Robert Solow calculated that nearly 90 percent of productivity growth in the first half of the twentieth century (from 1909 to 1949) could only be attributed to "technical change in the broadest sense."

The supply of labor and capital -- what workers and employers contribute -- appeared almost incidental to this massive technological "residual." Subsequent research inspired by Solow has continued to put a spotlight on "advances in knowledge" as the main source of growth. Another highly respected economist, William Baumol, argues that "nearly 90 percent ... of current GDP was contributed by innovation carried out since 1870." Baumol judges that his estimate, in fact, understates the cumulative influence of past advances: even "the steam engine, the railroad, and many other inventions of an earlier era still add to today's GDP."

Looked at another way, if today's high earners are typically highly educated, this is clearly not primarily because they are more intelligent or work harder, and it is not mainly because they were lucky in the "birth lottery," as some argue. Above all, they are highly educated because there is more knowledge for them to obtain and more opportunity to do so. "A college-educated engineer working today and one working 100 years ago have the same human capital," Stanford economist Paul Romer observes. But the engineer working today is far, far more productive. The reason, again, is self-evident: "He or she can take advantage of all the additional knowledge accumulated as design problems were solved during the last 100 years."

Today a society's "stock of knowledge" and its "technological state" are the subject of intense discussion by scholars and policy makers. An obvious truth that emerges from their work is also clear and lies at the foundation of the following study: All of this knowledge -- the overwhelming source of all modern wealth -- comes to us today through no effort of our own. It is the generous and unearned gift of the past. In the words of Mokyr, it is a "free lunch."

An obvious question arises from these facts: if most of what we have today is attributable to advances we inherit in common -- what another economic historian, Nathan Rosenberg, has termed a "huge overhang of technological inheritance" -- why, specifically, should this gift of our collective history not more generously and broadly benefit all members of society? Once the modern understandings are fully grasped, today's distributive realities become much harder to ignore: the top 1 percent of U.S. households now receives more income than the bottom 120 million Amercans combined.

The richest 1 percent of households owns nearly half of all individually owned investment assets (stocks and mutual funds, financial securities, business equity, trusts, non-home real estate). The bottom 90 percent of the population owns less than 15 percent; the bottom half of the population -- 150 million Americans -- own less than 1 percent.

If America's vast wealth is mainly a gift of our common past, how, specifically, can such disparities be justified? Although a great deal of research has been done on knowledge and economic growth -- and although one can find related moral reflections scattered throughout the work of many writers -- very few have dealt directly with the equity issues posed by our scientific and technological knowledge inheritance. We seek to remedy this large-order gap in public understanding. We hope thereby also to contribute to shaping new policies appropriate to the era of the knowledge economy.

Copyright New Press, 2008.

Click on the link to buy a copy of "Unjust Deserts: How the Rich Are Taking Our Common Inheritance and Why We Should Take It Back"

See more stories tagged with: wealth, inequality, shared inheritence, gar alperovitz, lew daly

Gar Alperovitz is the Lionel R. Bauman Professor of Political Economy at the University of Maryland. His previous books include The Decision to Use the Atomic Bomb and America Beyond Capitalism. He lives in Washington, D.C. Lew Daly is a senior fellow at Demos and the author of God and the Welfare State. He lives in New York City.

Liked this story? Get top stories in your inbox each week from AlterNet! Sign up now »