(Bloomberg View) — Last week, we reported the ungodly sums of money the top executives at Pimco made. We also noted the obsession we have with tracking other people's wealth.
Perhaps I painted with too broad a brush when I described this as an American pastime; to be more accurate, it is a hobby of the moneyed classes in general and on Wall Street in particular. My apologies to the rest of America, onto whom I unfairly projected this unseemly preoccupation.
Still, endeavoring to understand how the current circumstances evolved is a worthwhile undertaking. Wealth, public policy and economic inequality developed along two very different paths in Europe and the U.S. That is where we begin our discussion this morning.
I'm going to overly generalize and exaggerate a bit here to make a point about how society evolved in the U.S. and on the Continent. Modern Europe had a 1,000-year head start on America. By the time the first European explorers were taking tentative steps on the shores here, Europe had become a well-developed feudal society. If you want to consider extreme levels of income inequality, consider the distribution curve of property ownership in that system.
Typically, the feudal lord or king owned, well, everything. Serfs were allowed to work the land, and most of the bounty went to the crown. They could hunt in the royal fields and forests, providing the appropriate tax was paid. The king provided some sort of justice as well as protection from marauding hordes. In exchange for these royal gifts, one only had to promise undying fealty, a willingness to be conscripted into the military for both needed defense and the occasional foreign involvement, or anything else at His Majesty's or His Lordship's discretion. Let's not even discuss the right of primae noctis.
Hence, the Continent's long and storied tradition of massive income inequality pre-dates that of America, and on a scale not seen anywhere else. Forget the 1 percent versus the 99 percent, this was a case "the 0ne" versus everyone else.
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In the U.S., things began with a somewhat opposite set of circumstances (at least for the relocated Europeans; I expect the native occupants might have a different perspective). The new arrivals began by largely throwing off their fealty to a central authority — and heading to a new world. Once here, they lived on their wits, skill and hard work. Taxes were viewed within the context of less in their pockets, as opposed to more services.
