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2022 Tu Stone Lecture

jLUULninu

"TOWARDS UTOPIA

J. Bradford De Long

Bechtel Sibley Auditorium, UC Berkeley

Tuesday Nowmber 29,5:10 - 6:30 pm

Stone Lecture :: 2022-11-29 Tu


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I want to thank Gabe. I want to thank the Stones. I want to thank the Stone Foundation. I want to 
thank the production team for this very nice opportunity to deliver my thoughts on how inequality 
is a Gordian knot of a socio-economic problem that has us as a species pretty completely 
flummoxeda€”even though human progress across the 20th century is, in many
I will divide my thoughts tonight into four parts:

1. Rebalancing the University, the Strike, & What We Deserve

The first part of this talka€”the current strike. We are, here and now, in the third week of a 
strike by our graduate students, who teach so much for this university and who find themselves 
under great stress, as they can see the lives stretching ahead of them, falling wildly short of the 
lives, they anticipated when they decided to enter graduate school. They are complaining not so 
much about inequality per sea€”they are among the richer half of Americans,
certainly; but rather that they are not receiving what they think they deserve.

Such questions of what you deserve, and its relationship with inequality, are knotty onesa€!
What do we deserve? And how does it tie into issues of inequality?

A story:

Back when I was finishing up college at the start of the 1980s it was the Volcker disinflation. 
Leaving the university to enter the highest unemployment job market since the Great Depression 
seemed hazardous. I did not want to do what my father, sister, brother-in-law, brother, 
sister-in-law, and wife, all round up doinga€”go to law school. But what would our lives be like if 
we went to graduate school? I noted, even then, that people applying  for assistant
professorships in economics were 26 with 1/2 written article and extravagant praise from their 
advisers, while people applying for jobs as assistant professorships in history were 35 with one 
book published to good reviews, and another well on the way. So it was going to be economics.

My close friend Andrei Shleifer and I then went to the archives and went through the list of all 
those receiving Ph.D.s in economics from Harvard ten and fifteen years before. We found two people 
we had heard much ofa€”Steve Marglin and Bob Barro. We found that about 1/3 of those 15 years out 
were tenured professors, overwhelmingly at state universities, and liberal arts colleges. We found 
that about 1/3 were bank or corporate senior vice presidents, doing
forecasting and similar chores. We found the rest scattereda€”but looking as though they were doing 
interesting economics-related things in government, for international agencies and businesses, and 
elsewhere, and making enough money to hold body and soul together. All in all, it seemed likely to 
be a path to a very nice lifea€”with an economics Ph.D. at least, history seemed dicier.

So I took the plunge, and things have turned out vastly better than the principal of mediocrity 
would have led me to expect, overwhelmingly because of good luck in the small and also the very 
largea€”born in the mida€“1900s United States with a prenatal and neonatal nutritional environment 
that kept my brain from being protein-deprived during its development, and raised and molded into a 
personality with many great flaws and some excellences which are
as-if fine tuned to give me great social power in the particular society in which we live.

Most recently, my book published early this fall, a€oeSlouching Towards Utopia: An Economic History 
of the 20th Centurya€D is an instant a€oeNew York Timesa€D bestseller, peaking at #6 on the 
nonfiction list that hasa€”so fara€”sold approximately 25,000 all-format copies worldwide.

But let me return to the strike, and to the University of Californiaa€™ s graduate students. Even 
as I went through graduate school and beyond, things were changing, and the gap between we 
economists and what was going on elsewhere in the university was growing. The maid of honor at my 
wedding, married a very smart and hard-working man my age who went and got his PhD in history, 
starting graduate school when I did. I was promoted to full professor
here at Berkeley in the same year that he got his first tenure-track assistant professor job. And 
here in economics job prospects for our graduate students are still very good: tenured professors 
do sometimes retire, and their slots are usually filled with new tenure-track appointments; 
International agencies and business schools are still expanding rapidly, and greatly value Ph.D. 
economists; Silicon Valley thinks our students have a great deal of utility. Here in
economics, we professors can say: your lifestyle while in graduate school will be relatively 
spartan, but your pay will ramp up very fast afterwards: dona€™t worry.

In other departments in this university, professors cannot now say this to the graduate students. 
In facta€”given that American universities by and large ceased to grow a generation ago, and the 
absence of business-school and international-organization demand for the Ph.D.a€™ s of other 
non-STEM disciplinesa€”they have not been able to say that your post-Ph.D. prospects for a 
fulfilling life and job a€”in your Ph.D. discipline- are bright for a generation. For
a generation, in the humanities and social sciences (and I know many Ph.D.a€™ s in math and physics 
now doing things like financial arbitrage and computer game design), becoming a graduate student 
has been starting a low-paying job as a teacher, with the attached opportunity to write a 
dissertation that might, with very low probability, put you on the path to a tenured professorship 
somewhere someday. Becoming a graduate student has not been entering a
phase as an apprentice with a spartan lifestyle leading to a relatively secure career path.

For a generation university administrations nationwide have noted this transformation and failed to 
deal with it.

I cannot judge any individual administrator harshly. California Hall starts each month hoping to 
take bold action to fix the problems of and tackle the opportunities open to the universitya€”but 
three days into the month it finds it must focus all of its attention on senior-faculty retention 
cases, as universitieswith much larger endowmentsseek to attract us senior professors. Plus there 
is theiron logic of a successful bureaucracy that accumulates for generations,
undisrupted by either market forces, partisan-political circulation of elites, charismatic renewal, 
or clear and obvious substantive failure. C. Northcote Parkinson told a parable of this iron logic: 
A a€oecivil servant, called A, finds himself overworkeda€C. At the end of the story A has six 
subordinates C through H, is more overworked than before, and yet the seven of themaccomplish less 
than A did on his own, as most of their time is spent cancelling each other
out.

But I can judge the administrative system as a whole that has brought us to our current position 
harshly. There is no vision. And we are told in Proverbs 29:18 that King Solomon said: a€oe Where 
there is no vision, the people perisha€D.

And that is the end of the first part. The takeaway? Our current strike is not merely a short-run 
contest at the margin over the distribution of the universitya€™ s resources, but rather the 
surfacing of a very difficult problem of how the university of the future is to be organized for 
our collective benefit.
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2. Since 1980: The Rising Inequality Surprise

The second part of this talk is how my self of 40 years ago that I talked about beforea€”my 
twenty-year-old selfa€”would be very surprised to find his elder self here, talking about 
inequality as a first-order problem for human society.

That twenty-year-old self confidently expected his lifetime to see a great narrowing of income and 
productivity differentials across nations. Roadblocks formed by imperialism and 
colonialisma€’’external to a country and internala€”by distance, and by blinkered ideologies had 
greatly widened income and productivity differentials since 1800. But those historical forces were 
passing away. Global development was on the agenda. And the profits to be made from
raising productivity worldwide to Global North standards were so great that every exertion would be 
made to make it happen.

But, of course, that convergence has not happened.

Looking across nations, the world today is about as unequal as it was when I was born in 1960, 
albeit somewhat less unequal than at the moment of peak international income and productivity 
inequality in 1975.

Moreover, that twenty-year-old self confidently expected income and status differentials inside 
America to fall, not rise, over his lifetime. Racism and patriarchy seemed to be in retreat, and 
the underlying framework of social democracya€’’the New Deal Order, as historian Gary Gerstle likes 
to call ita€”gave us on the one hand full employment and rapidly increasing investment in education 
which gave market power and productivity to labor, and on the other
the social-insurance state and progressive taxation which significantly leveled pre-fisc inequality 
and disrupted plutocratic dynastic accumulation. The dominant political-economic understanding of 
how this New Deal Order had come about had been most compactly set out by the great Simon Kuznets, 
with his heuristic of the a€oeKuznets Curvea€D. As my teacher Jeffrey Williamson summarized it in 
his Yale Kuznets lectures:

• As an agrarian economy industrializes, inequality rises simply because the modern-industrial 
sector pulls away from the traditional-agrarian one.

•  More important, however, is that, at least in the early stages of industrialization, 
technological progress is labor-savinga€”makes capital a substitute for rather than a complement to 
labora€”and so boosts returns to capital while lowering returns to  labor.

•  Moreover, a largely agrarian poor class, not yet through the demographic transition cannot 
afford the human-capital investments in their children needed to rescue the next generation from 
poverty.

•  And last comes the substantial amplification of wealth disparities from the rewards to market 
position in increasing-returns and high fixed-costs industries.

The consequence? As industrialization takes place, income and wealth inequality rise, very 
substantially, producing a Gilded Age that the rich of later generations see as a Belle A%opoque.

All of these factors, however, are reversed in the later stages of industrialization. After the 
demographic transition is completed, resources to invest in human capital are ample. Rural-urban 
wealth gulfs are steamed away bythe market. Technological progress becomes more labor-complementing 
than labor-substituting. Easier technological diffusion makes first-mover advantages of less 
important. Plus there is more: even an oligarchic political society can believe
in antitrust to curb its plutocracy; and, most important, literate working class can organize and 
flex its political muscles for first political democracy, and then social democracya€’’steeply 
progressive taxes and an ample social insurance state

Simon Kuznets thus envisioned, and the near-consensus back when I was 20 or so agreed, that 
post-WWII social democracya€’’the New Deal Ordera€”was very much a Fukuyama-like a€oeend of 
historya€U. Yes, there were historical survivals from a worse past: the economic consequences of 
racism, sexism, past wealth dynasties and the transmission of wealth inequality. But those were all 
ebbing away. Robber barons were replaced by corporate techno
structures. Political democracy made wealth, the servant of rather than the master of society.

Once again, it did not happen.

Or, rather, it happeneda€”and then, with 1980, came the Neoliberal Turn. It turned out that social 
democracy a€”the New Deal Ordera€”was in no sense an a€oeend of historya€D. The future after 1980 
did not see increasing equality of opportunity that continued to reduce inequality of result. 
Instead, we entered into the Second Gilded Age, in which we are now enmeshed.. And that is the end 
of the second part. The takeaways? The failure of post-colonial
convergence, and the Neoliberal Turn of the early 1980s and the consequent coming of our Second 
Gilded Age, were great surprises to the supposed wise of previous generations.

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3. Why the Neoliberal Turn?

And now I get to my third part: Why? Why the Neoliberal Turn?

Let me start this third part by focusing down, and dropping international income and wealth, 
disparities from my subject. They are probably the most important part of global inequality from 
the perspective of the human race as a whole. But I have limited time and limited knowledge. So let 
me focus on the reasons for the coming of the Neoliberal Turn, and our consequent Second Gilded 
Age.

Let us first PO back to the davs of 150 and more vears apoa€”the vears when humanitv was 
ensorcelled bv the Devil of Malthus. Slow nroductivitv prowth .novertv. and the natriarchal 
reoiiirement that one have survivinp sons if one were to have social nowera€”those all meant that 
nonulation nressed nnon the limits of subsistence. There was simnlv no wav that humanitv could 
nossiblv bake a sufficientlv larpe economic nie for evervone to have enouph.




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Available for iOS and Android

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