Daniel Waldenstrom
Spend a few minutes browsing political commentary or scrolling social media and you will discover a seemingly settled truth: inequality in the West is soaring, the middle class is being hollowed out, and democracies stand on the brink of oligarchy. The idea is seductive because it fits everyday anxieties in many Western countries—housing has grown increasingly unaffordable, billionaire wealth mushrooms unfathomably, and the pandemic exposed yawning gaps in social safety nets. Yet the most influential claims about inequality rest on selective readings of history and partial measurements of living standards. When the full balance sheet of modern economies is tallied—including taxes, transfers, pension entitlements, homeownership, and the fact that people move through income brackets across their lives—the story looks markedly different. Western societies are not nearly as unequal as many believe them to be.
This is not a call for complacency. Concentrated economic power can distort markets and politics; pockets of deep poverty persist in rich countries; and in the United States, the top of the distribution has indeed sprinted ahead of the rest. But focusing only on the eye-catching fortunes of tech founders or hedge-fund managers obscures a quieter, broader transformation: households across the income spectrum now own capital on a scale unimaginable to earlier generations, and basic measures of well-being in Western societies—including life expectancy, educational attainment, and consumption possibilities—have improved for nearly everyone.
Getting the facts right matters because bad diagnosis breeds bad prescriptions. If governments assume that capitalism is inexorably recreating the disparities of the Gilded Age, they will reach for wealth confiscations, price controls, or ever-larger public sectors funded by fragile tax bases. If, instead, the evidence shows that free-market economies have enriched middle classes by expanding asset ownership, that entrepreneurs’ fortunes are associated with advances shared with the broader public, and that much of the post-1980 rise in recorded inequality reflects methodological quirks, then a different agenda follows: states should encourage ambition, protect competition, widen access to wealth-building, and ensure that public services complement—not smother—private prosperity. In short, before treating inequality as an existential crisis, it is worth double-checking the thermometer.
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