Post an IRA (Insights, Resource, and Application) in the Discussion Board as follows: Insights: As you read the resources, create bullet points that capture what you have learned about the relationship between equality and social equity, and critical insi

Discussion: The Concepts of Equality and Social Equity

H. George Frederickson, expert in the field of public administration, coined the term “social equity,” which urges public administrators not to view individuals within one environment as the same but instead to view them against a backdrop of social and economic factors before assuming equality.

Ideals of equality and social justice form the basis of political philosophy. However, enforcing principles of equality across society often infringes on the liberal concept of social justice. Tensions within social and political relations have led to the creation of international government and nongovernment organizations that seek to maintain ethical standards of equality throughout the world. These ethical standards allow reasonable individuals to maintain their philosophical differences without jeopardizing the greater good of global society.

In this Discussion, you will compare the concepts of equality and social equity, and the role of public administrators in promoting social equity.

Post an IRA (Insights, Resource, and Application) in the Discussion Board as follows:

Insights: As you read the resources, create bullet points that capture what you have learned about the relationship between equality and social equity, and critical insights you gained from each article. Summarize these key points and insights by using APA format.

Resource: In addition to the assigned readings, share one other resource that amplifies the themes for this week, such as the relationship between equality and social equity. Note a book, article, news items, website, or film with similar ideas, thoughts, and themes. Cite your resource by using APA format, and explain, in no more than three sentences, how this resource is relevant to the assigned readings.

Application: Provide an example from current or past experience (about one paragraph) on a threat to equality or equity. (Multicultural and/or international examples are welcome but not required.) Then, explain a strategy you believe that a public administrator might use to promote equality and equity in this example and explain why you chose this strategy.

Required Readings

Cooper, T. L. (2012). The responsible administrator: An approach to ethics for the administrative role (6th ed.). New York, NY: Jossey-Bass.

Chapter 9, “Applying the Design Approach to Public Administration Ethics” (pp. 243–254)

Frederickson, H. G. (2005). The state of social equity in American public administration. National Civic Review, 94(4), 31–38.

Note: Retrieved from Walden Library databases.

Glaser, M. A., Bartley Hildreth, W., McGuire, B. J., & Bannon, C. (2011). Frederickson’s social equity agenda applied: Public support and willingness to pay. Public Integrity, 14(1), 19–37.

Note: Retrieved from Walden Library databases.

Hacker, J. S., & Pierson, P. (2010). Winner-take-all politics: Public policy, political organization, and the precipitous rise of top incomes in the United States. Politics and Society, 38(2), 152–204.

Note: Retrieved from Walden Library databases.

Required Media

Ted Conferences (Producer). (2011). Frans de Waal: Moral behavior in animals [Video file]. Retrieved from http://www.ted.com/talks/frans_de_waal_do_animals_have_morals

Note: The approximate length of this media piece is 17 minutes.

Optional Resources

Gospath, S. (2007). Equality. In E. N. Zalta (Ed.), The Stanford encyclopedia of philosophy (Spring 2011 ed.). Retrieved from http://plato.stanford.edu/archives/spr2011/entries/equality/

Fleurbaey, M. (2008). Economics and economic justice. In E. N. Zalta (Ed.), The Stanford encyclopedia of philosophy (Summer 2012 ed.). Retrieved from http://plato.stanford.edu/archives/sum2012/entries/economic-justice/

3 1W i n t e r 2 0 0 5

The State of Social Equity in
American Public Administration
O v e r t h e y e a r s , public administrators have con-
tributed much in helping to create a more equi-
table, fairer, and more just America. Yet we have
much more to contribute. As a core value in public
administration, social equity is no longer novel or
new. Nevertheless, during the past thirty years, as
social equity has grown in importance in public
administration, there is an irony: Americans have
become less equal in virtually all aspects of social,
economic, and political life. In our literature, in
our classrooms, and in our administrative practices
we have learned to talk the social equity talk. But
if the data on the growing gap between the haves
and have-nots in American are any clue, we are not
walking the social equity talk. In this essay, I
attempt to describe the changing terrain of public
administration and sketch the challenges adminis-
trators face as they navigate both the theory and
the reality of that terrain. Finally, I offer some sug-
gestions for walking the social equity talk in the
years ahead.

The Evolution of Social Equity in American Public
Administration

In his seminal essay of almost a century ago,
“General Principles of Management,” Henri Fayol
listed equity as one of fourteen general principles.
His description of equity was entirely internal, hav-
ing to do with equitable or fair treatment of employ-
ees. Fayol put it this way: “Desire for equity and
equality of treatment are aspirations to be taken into
account in dealing with employees. In order to satis-
fy these requirements as much as possible without
neglecting any principles of losing sight of the gen-
eral interest, the head of the business must frequent-
ly summon up his highest faculties. He should strive
to instill a sense of equity throughout all levels of the
scalar chain” (p. 58).

Though claiming equity to be a primary principle of
management, Fayol did not consider the details of
how to achieve equity in the context of the “scalar
chain,” or hierarchy, which contains such obvious
inequalities as difference in pay, authority, and
responsibility. Furthermore, because his founding
essay had primarily to do with business organiza-
tion, Fayol did not wrestle with the unique public
administration challenges of equity in public policy
or service delivery. Except for an essay by Woodrow
Wilson, none of the other founding documents con-
sider what we now call social equity in public
administration.

Wilson pointed out that it is “harder to run a con-
stitution than to frame one” and claimed that
“administration lies outside the proper sphere of
politics”; nevertheless, he describes a form of public
administration social equity. Consider these words
from his founding essay, “The Study of
Administration”: “The ideal for us is a civil service
cultured and self-sufficient enough to act with sense
and vigor, and yet so intimately connected with the
popular thought, by means of elections and constant
public counsel, as to find arbitrariness or class spir-
it quite out of the question” (p. 24).

Aside from these glancing blows, and the more con-
sidered treatment of justice in the early literature, for
the first several generations of the field of public
administration it was simply assumed that good
administration of government was equally good for
everyone. It was during the 1960s that it became
increasingly evident that the results of governmental
policy and the work of public administrators imple-
menting those policies were much better for some
citizens than for others. Issues of racial and class
inequality and injustice were everywhere evident

B Y H . G E O R G E F R E D E R I C K S O N

3 2 N a t i o n a l C i v i c R e v i e w

and the subject of open anger, indignation, outrage,
and passion. Riots in the streets over racial injustice
and an unpopular war tend to concentrate the mind.
It was in this state of concentration that the phrase
social equity entered the literature and later the
practices of public administration. Certainly there
had always been concern for fairness in the better
practices of public administration, but it was not
until the 1960s that the phrase social equity became
a feature of public administration with an attendant
set of concepts and a cluster of shared values.

In a brief and summary form, the initial elements of
the concept of social equity are found in the claim
that justice, fairness, and equality have everything to
do with public administration. First, laws do not
carry out themselves; implementation is our work.
As one of the early leaders of our field wrote, “pub-
lic administration is the law in action.” Second, if
public administrators implement the law, can we not
bring the law simply and precisely to life as it is writ-
ten? No, we cannot. The law is seldom so clear, so
precise, or so evident that it can uniformly be
applied from case to case to case. Third, in the early
years of our field it was written that public adminis-
tration should be neutral implementation of law and
policy. We know that this is not strictly possible.
Public administration is the law in action and
involves, indeed requires, interpretation of that law
and discretion in its application. Fourth, our public
institutions are the setting in which our elected lead-
ers, working in our system of democratic self-
government, struggle with issues of fairness, justice,
and equality. But because public administrators are
responsible for carrying out the laws and policies,
we too have important struggles with fairness, jus-
tice, and equality. As a nation, we are not as fair, as
just or equal, as we should be. Public administrators
cannot say that these problems belong only to law-
makers.

In the early stages of the development of social equi-
ty in public administration, it was assumed that
other academic fields or disciplines and other bodies

of professional practice were also developing and
embracing self-aware concepts of social equity. We
now know that this was not the case. Only in recent
years have other fields, disciplines, and bodies of
professional practice stepped up to consideration of
social equity.

So it could be said that, at least with respect to social
equity, public administration has led the way.

In the early years of applying concepts of social
equity to public administration, emphasis was on
issues of race and gender in employment, democrat-
ic participation, and service delivery. Efficient and
economical management of government agencies
characterizes the ethics that guided much early rea-
soning in American public administration. The logic
of those ethics allowed public administrators to
assume that the effects of good management, effi-
ciency, and economy would be evenly and fairly dis-
tributed among our citizens. Gradually, however,
public administration began to acknowledge that
many public programs were implemented much
more efficiently and effectively for some citizens
than for others. Indeed, public administrators could
not logically claim to be without responsibility for
some practices that resulted in obvious unfairness
and injustice, so an argument emerged for social
equity as an added ethic in public administration.
Eventually, social equity took its place along with
efficiency and economy as the “third pillar” of pub-
lic administration. Indeed, by the late 1990s these
words were in Shafritz and Russell’s standard text:

Because public administrators are responsible for
carrying out the laws and policies, we too have
important struggles with fairness, justice, and
equality. As a nation, we are not as fair, as just or
equal, as we should be. Public administrators
cannot say that these problems belong only to
lawmakers.

3 3W i n t e r 2 0 0 5

“The ethical and equitable treatment of citizens by
administrators is at the forefront of concerns in pub-
lic agencies. Reinforced by changing public atti-
tudes, the reinventing government movement and
civil rights laws, the new public administration has
triumphed after a quarter century. Now it is
unthinkable (as well as illegal), for example, to deny
someone welfare benefits because of their race or a
job opportunity because of their sex. Social equity
today does not have to be so much fought for by
young radicals as administered by managers of all
ages” (p. 436).

Over the years the phrase social equality has come
to encompass the many complex issues associated
with fairness, justice, and equality in public admin-
istration. Shafritz and Russell list three qualities of
social equity:

First is the obligation to administer the laws they
work under in a fair manner. It is hard to believe
today that this first obligation was once contro-
versial.

The second way of interpreting obligations to
advance social equity is to feel bound to proac-
tively further the cause—to seek to hire and
advance a varied workforce. The attitude
requires a specific approach: It is not enough to
go out and find qualified minorities. You must go
out, find them, and then qualify them. This is
why the U.S. armed forces have been so much
more successful in their affirmative action efforts
than the society as a whole.

Third, government can go only so far in forcing
social equity. But there is no limit to the amount
of inspiration it can provide to encourage people
to do the right, decent, and honorable thing. This
encouragement has a name. It is called moral
leadership. [pp. 436–437]

Over the years both the subject of social equity and
its language have changed. Equity is now more
broadly defined to include not just race and gender
but ethnicity, sexual preference, certain mental and

physical conditions, language, and variations in eco-
nomic circumstances. The words multiculturalism
and diversity are now often used to suggest this
broader definition of social equity.

There is little doubt that inequality in America
would be worse were it not for pubic administra-
tors dedicated to social equity in their practice, but
there is no question that the broader context of
American politics has tilted the playing field
toward the privileged and away from the under-
privileged, making contemporary commitment on
the part of public administrators to social equity
particularly difficult.

Some Examples of the Widening Social Equity Gap

The growing acceptance of social equity in public
administration over the past thirty-five years has
occurred during a time when the actual status of
social equity in America has been in steady decline.
Although we have been promoting democracy
abroad and even fighting to bring it to others,
democracy at home is in trouble. The recent report
of the Task Force on Inequality in America of the
American Political Science Association puts it this
way: “Our country’s ideals of equal citizenship and
responsive government may be under growing
threat in an era of persistent and rising inequality.
Disparities of income, wealth, and access to oppor-
tunity are growing more sharply in the United States
than in many other nations, and gaps between races
and ethnic groups persist. Progress toward realizing
American ideals of democracy may have stalled, and
in some arenas reversed” (p. 651).

At the time of the emergence of social equity in pub-
lic administration, racial and gender inequality and
discrimination were widespread. But in our time
“the scourge of overt discrimination against African
Americans and women has been replaced by a more
subtle but still potent threat—the growing concen-
tration of the country’s wealth and income in the
hands of the few” (p. 651). Rising economic
inequality is accompanied by other forms of demo-

3 4 N a t i o n a l C i v i c R e v i e w

cratic privation—highly unequal voices in political
affairs and government processes that are much
more responsive to the privileged than to other
Americans. “Disparities in participation,” the task
force goes on to say, “mean that the concerns of
lower- or moderate-income Americans, racial and
ethnic minorities, and legal immigrants are system-
atically less likely to be heard by government offi-
cials. In contrast, the interests and preferences of the
better-off are conveyed with clarity, consistency, and
forcefulness” (p. 658). In addition to the gap
between the poor and the rest of society, there is a
growing gap between privileged professionals, man-
agers, and business owners on the one hand and the
middle strata of white, African American, and
Latino workers and blue-collar employees on the
other. Put bluntly, despite our claimed commitment
to social equity, important elements of professional
public administration are part of the problem. All of
the contemporary social equity research and data
seem to indicate that the terrain of social equity has
shifted from more-or-less exclusive concentration on
the equity issues of minorities to broad considera-
tion of how to achieve social equity in the context of
growing disparity between the haves and have-nots,
recognizing that minorities constitute a dispropor-
tionate percentage of the have-nots.

The APSA task force concludes their report with
these words:

The Declaration of Independence promised that
all American citizens would enjoy equal political
rights. Nearly every generation has returned to
this promise and struggled to elevate the perfor-
mance of American democracy to its high ideals.
The promise of American democracy is threat-
ened again. The threat is less overt than the bar-
riers of law or social custom conquered by
earlier generations. Today the risk is that rising
economic inequality will solidify longstanding
disparities in political voice and influence, and
perhaps exacerbate such disparities. Our govern-
ment is becoming less democratic, responsive

mainly to the privileged and not a powerful
instrument to correct disadvantages and look
out for the majority. If disparities of participa-
tion and influence become further entrenched—
and if average citizens give up on democratic
government—unequal citizenship could take on
a life of its own, weakening American democra-
cy for a long time to come. [p. 662]

In the manner of political science, the APSA Task
Force on Inequality in America report calls for
research on matters of social equity and for “the
engagement of political science with improving
American democracy through scholarship” (p. 661).
For two reasons, however, those identified with pub-
lic administration, either as a field of political science
or as a freestanding academic field and body of pro-
fessional practice, are inclined to a less passive and
more engaged approach to the problems of inequali-
ty in America. First, the argument that issues of
inequality belong to politics and policy and not to
public administration must be rejected. Virtually all
empirical research in the field indicates that public
administration is highly influential in policy making
and implementation. Second, as an academic field, a
body of research, and a field of professional practice,
public administration has always been applied. After
all, how can we run the constitution and carry out
the laws if we do not get our hands dirty? Because
our work tends to be applied, it is not a surprise that
public administration wrestled with issues of social
equity for thirty years before our political science col-
leagues looked into it. It is also not a surprise that
our political science colleagues have chosen to
attempt to improve democracy through scholarship,

“If disparities of participation and influence
become further entrenched—and if average citi-
zens give up on democratic government—unequal
citizenship could take on a life of its own, weaken-
ing American democracy for a long time to come.”

— A P S A T A S K F O R C E O N I N E Q U A L I T Y I N A M E R I C A

3 5W i n t e r 2 0 0 5

a distinctly “clean hands” approach to the subject.
This is good. Let political scientists and others keep
their hands clean and study in minute detail exactly
how unequal America has become. We need their
good work. But in public administration, I insist that
we engage with the problem of inequality, that we
dirty our hands with inequality, that we be outraged,
passionate, and determined. In short, I insist that we
actually apply social equity in public administration.

Walking the Social Equity Talk

It is easy, of course, to exhort one and all to apply
social equity in all aspects of public administration.
But how should it be done?

First, like our environmental friends, when it comes
to social equity we should think globally and act
locally. Indeed I argue that all important matters of
social equity are local, in the sense of consequences.
The results of national policies are all manifest local-
ly, in our neighborhoods, our families, our cities and
our work places.

Many of the elements of inequality are influenced by
the unique patterns of jurisdictional fragmentation
in American metropolitan areas. The concentration
of poor African Americans, and to a lesser extent
Latinos, in low-income urban areas has had a spi-
raling effect on inequality as the basic elements of
opportunity—access to good schools, jobs, trans-
portation, housing, and safety—have become large-
ly unavailable to residents of these neighborhoods.
Large-scale federal government policies such as pub-
lic housing, transportation, welfare reform, and edu-
cational reform have tended either to be ineffective
or to exacerbate the problems of inequality. Census
data now indicate that poverty is moving into the
suburbs and our metropolitan areas are becoming
more geographically diverse. Public administrators
at the local level are increasingly in a position to
either influence policies or implement already estab-
lished policies in a way that ameliorates some of the
effects of poverty and opens opportunities.
Metropolitan migration is so pronounced that the

us-versus-them patterns of an inner city and its sub-
urbs is giving way to “us and us” patterns of simi-
larity between inner cities and suburbs. Like-minded
public administration professionals should be work-
ing together on their collective social equity issues
because it is increasingly evident that few jurisdic-
tions can claim to be isolated from the consequences
of poverty and inequality.

Second, it is time for everyone in public administra-
tion to be engaged in the war of ideas. We are, as
Weir explains, still citizens: “Ceding the ideological
terrain to antigovernmental messages like ‘the era of
big government is over’ is not good enough in a poli-
ty in which simple media messages are not counter-
balanced by organizational politics. In fact, simple
antigovernmentalism amounts to endorsing
unchecked inequality. A strong, big message about
how government is ‘on your side’ or is ‘here to help
you’ is essential to counteract antigovernment mes-
sages” (p. 680). Americans may be philosophical
conservatives, but they are programmatic liberals, in
the sense of support for rural electrification, envi-
ronmental protection, Medicare, Social Security, and
so forth. The problem is that simple defense of the
programmatic status quo is defensive and bereft of
new ideas. It is time for public administrators of all
kinds to relentlessly ask the so-called second ques-
tion. The first question is whether an existing or
proposed public program is effective or good. The
second question is more important: For whom is this
program effective or good? Answer any class-
warfare charge immediately with the understanding
that the second question can be deferred if it can be
demonstrated that a program is universally good. If
that doesn’t work, try this retort: “You say that I am
practicing class warfare. Nonsense. I am engaged in
the war of ideas, and my idea is fair and yours is not.
Stop tossing around class-warfare slogans and
engage me in the war of ideas.” To effectively engage
in the war of ideas requires knowledge, courage, and
a quick wit. We public administrators have the
knowledge and most of us have a quick wit. But do
we have the courage?

3 6 N a t i o n a l C i v i c R e v i e w

Third, it is important to remember that it isn’t nec-
essarily good ideas that win the war of ideas.
Determination, organization, money, and persist-
ence behind an idea are likely to win the war. Public
administrationists know how to organize, and we
are determined and persistent. We are natural social
equity warriors. We are passionate advocates for
policy specialization and we can be equally passion-
ate advocates for fairness in implementing it. Those
of us committed to social equity should pick our
cause and enlist in the organizations most likely to
turn the levers of policy in the direction of fairness
and justice.

Fourth, when public administration is practiced at
the street level it employs a form of social equity. As
Steven Maynard-Moody and Michael Musheno sug-
gest in their book Cops, Teachers, Counselors, social
service officers, cops on the beat, and teachers in the
classroom all live in a world of scarce resources, lim-
ited time, ambiguous expectations, and conflicting
rules. To manage their way through these limita-
tions, street-level bureaucrats apply a form of public
service delivery and distribution based on what the
authors describe as “client worthiness.” Client wor-
thiness is based on stories and master narratives that
enable street-level workers to affix particular identi-
ty to their clients. The day-to-day practices of street-
level public servants is all about the search for
fairness, equity, and justice. “Fixing and enforcing
citizen-client identities forms the premise for street-
level workers’ judgments,” they write:

Their stories reveal how street-level decision
making is complexly moral and contingent

rather than narrowly rule-bound and static.
Cops, teachers, and counselors first make nor-
mative judgments about offenders, kids, and
clients and then apply, bend, or ignore rules and
procedures to support the moral reasoning.
Identity-based normative judgments determine
which and how rules, procedures and policies
are applied. Morality trumps legality in terms of
which rules, procedures, and policies are acted
on; who gets what services and who is hassled or
arrested; and how rules, procedures and policies
are enacted. [p. 155]

Maynard-Moody and Musheno describe street-level
bureaucrats as the coal miners of policy: they do the
hard, dirty, and dangerous work of the state.
Sometimes they get it all wrong, as in examples of
racial profiling and police abuse. Still, most of the
time and in most street-level settings “small acts of
normative improvisation by forgotten streetwise
workers sustain the state; they are acts of statecraft
on which the institutions of governing depend.” (p.
165) When it comes to social equity in action, super-
visors, managers, and super grades could take some
lessons from street-level bureaucrats.

Fifth, like it or not, senior public administrators and
those of us who study public administration are part
of the elite, the privileged. In much of our literature
and ideology there is a distinctly patronizing tone to
social equity. A commitment to social equity obliges
us to look after the interests of those who are denied
opportunities or are disadvantaged regardless of
their competence. At the intermediate and upper lev-
els of public administration, we tend to avoid the
uncomfortable issue of competence, although street-
level workers have no illusions about competence. I
am partial to the blunt words of Lawrence M. Mead
on this subject. In an article in Perspectives on
Politics, he wrote: “To recover democracy, govern-
ment must assume greater competence in lower-
income Americans than the elite finds comfortable.
We would rather lay the burden of change on our-
selves than on the less fortunate. We believe in our

It is time for public administrators of all kinds to
relentlessly ask the so-called second question. The
first question is whether an existing or proposed
public program is effective or good. The second
question is more important: For whom is this pro-
gram effective or good?

3 7W i n t e r 2 0 0 5

own abilities; we are less sure about theirs. But,
unless some minimal capacities are expected of the
less privileged, change becomes unimaginable, and a
caste society will emerge” ( p. 674).

There are two interesting lessons on this subject.
One is the lesson and life of Mohandas Gandhi, who
insisted in collective nonviolent expression of
demands for fairness on the part of the least advan-
taged acting together. Another is the lesson of the
Roundheads or Puritans, British citizens below the
elite who asserted a belief in the individual, inde-
pendent of class; insisted on egalitarian politics; and
were suspicious of elites in their hierarchical polity.
The founding of the United States of America was a
denial of aristocracy and the triumph of Roundhead
reasoning. In much of social equity there is demo-
cratic rhetoric but aristocratic assumptions. We
search still for versions of social equity that are truly
from the bottom up.

Sixth, it is high time for moral indignation, for pas-
sion and anger. The moral high ground, often put
passionately as Christian doctrine, has tended
toward those interested in issues such as abortion,
gay marriage, human cloning, stem-cell research,
and euthanasia, and those mobilized in pursuit of
these issues have proven to be formidable. Issues of
poverty, at least from the biblical Christian perspec-
tive, are at least as central to doctrine as are these
other issues. But it is far more difficult to bring
indignation and passion to matters of poverty. Still,
this is what needs to be done. Describing “sinful
inequalities,” John DiIulio writes in Perspectives on
Politics, “Bible-believing Christians are supposed to

heed the call to ‘be not afraid’ of any worldly chal-
lenge. . . . Inequality is a moral problem, and [if] you
are convinced that it is a real problem in America
today, you should not be afraid to say so—and not
be afraid to recommend whatever policies or pro-
grams you believe might make a real lasting differ-
ence. . . . It is liberals, not conservatives, who have
normally lacked the courage of their true convic-
tions, some for fear of being accused of favoring ‘big
government’ or having other thoughts out of sea-
son” (p. 669). Persistent and grinding poverty is a
profoundly moral issue, and social equity is part of
a moral stance on that issue. But how shall we most
effectively put the social equity of public adminis-
tration in practice?

In addition to applying social equity in our day-to-
day public administration work, I suggest that we
more broadly engage issues of racial, gender, and
ethnic inequality and issues of inequality in econom-
ic opportunity, jobs, housing, transportation, and
health care. I respect those who are working on
social equity indicators, social equity benchmarks,
and other forms of statistics, but the prospects of
such labor for success seem to me to be limited.
Furthermore, statistics and data lack passion and
smother indignation. It does the cause of social equi-
ty little good to be able to know exactly how poor
the poor are.

Instead we should turn to the media most likely to
stir an interest in social equity. Think of the statistics
regarding the grossly disproportionate percentage of
incarcerated African Americans. We know those
appalling statistics forward and backward, and it
seems to make little difference. Stories, films, videos,
essays, and personal descriptions of the ravages of
an overly long sentence for a drug offence have the
power to move people, and also to move policy
makers. Stories, films, and videos of single mothers
working two jobs and still falling behind hold some
prospect for moving watchers and readers. There is
a desperate need to dramatize social equity issues, to
bring them to life. I am convinced that if the gener-

“To recover democracy, government must assume
greater competence in lower-income Americans
than the elite finds comfortable. We would rather
lay the burden of change on ourselves than on the
less fortunate.”

— L A W R E N C E M . M E A D

3 8 N a t i o n a l C i v i c R e v i e w

al population understood more fully the effects of
discrimination and poverty on American lives they
would respond by supporting candidates committed
to social equity. Through their neighborhoods,
churches, and social groups, mobilized citizens who
understand poverty and inequality would personal-
ly do their part to even up the economic and politi-
cal playing field.

If politics is all about majority rule—and it is—then
public administration should be all about seeing
after the interests of minorities and the poor. It
seems to me we are long past needing to defend this
proposition. It is time to walk the social equity talk.

R E F E R E N C E S
DiIulio, J. J. “Attacking ‘Sinful Inequalities.’” Perspectives
on Politics, 2004, 2(4) 671–675.

Fayol, H. “General Principles of Management.” In C. Storrs
(trans.), General and Industrial Management. London:
Pitman, 1949. (Original work published 1916). Reprinted in
J. M. Shafritz, J. S. Ott, and Y. S. Jang. Classics of
Organizational Theory. Belmont, Calif.: Wadsworth, 2005.

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Counselors: Stories from the Front Lines of Public Service.
Ann Arbor: University of Michigan Press, 2003.

Mead, L. M. “The Great Passivity.” Perspectives on Politics,
2004, 2(4), 671–675.

Shafritz, J. M., and Russell, E. W. Introducing Public
Administration. Upper Saddle River, N.J.: Pearson
Education, 2005.

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Science Association). “American Democracy in an Age of
Rising Inequality.” Perspectives on Politics, 2004, 2(4),
651–663.

Weir, M. “Challenging Inequality.” Perspectives on Politics,
2004, 2(4), 677–681.

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Quarterly, 1887, 2, 197-222. Reprinted in J. M. Shafritz and
A. C. Hyde, Classics of Public Administration. Belmont,
Calif.: Wadsworth, 1992.

H. George Frederickson is the Edwin O. Stene Distinguished
Professor of Public Administration at the University of
Kansas.

For bulk reprints of this article, please call (201) 748-8789.

Public Integrity, Winter 2011–12, vol

14, no. 1, pp. 19–37.
© 2012 ASPA. All rights reserved.

ISSN 1099-9922/2012 $9.50 + 0.00.
DOI 10.2753/PIN1099-9922140102

Frederickson’s
Social Equity
Agenda Applied
Public Support and Willingness
to Pay
Mark a. Glaser, W. Bartley
HildretH, Brandon J. McGuire,
and corinne Bannon

abstract

This study uses the case of urban public education, and input from more than 5,500
people, to assess citizens’ willingness to follow leaders intent on advancing social
equity. The evidence indicates that when vague notions of social welfare are replaced
by actions focused on the creation of opportunity, there is broad support for social
equity, including a willingness to pay increased taxes to support this agenda. Con-
sistent with this understanding, public officials must engage citizens and encourage
them to reject simplistic solutions to complex problems and to support policy that
attacks the root causes of these concerns.

keywords: citizen engagement, disadvantaged, public interest, social equity, will-
ingness to pay

Public education is sometimes referred to as the great leveler because it is instru-
mental to the creation of opportunity and socioeconomic mobility (Sawhill 2006).
Unfortunately, urban public schools, disproportionately burdened with children
living in poverty, often lack the capacity to overcome deficits that contribute to and
are the product of systemic societal inequality. Concerns about intergenerational
inequality prompted Isabel Sawhill (2006, 2) to facetiously counsel young Americans
“to pick their parents well. Circumstances of birth matter a lot, and the advantages
and disadvantages of birth persist.”

This study builds on the work of H. George Frederickson (1974, 1990, 1994

2005), who has long encouraged public administrators to provide moral leadership
that places social equity on an equal footing with other measures of performance.
More specific to the purpose of this study, Frederickson acknowledges that educa-

20 • p u B l i c i n t e G r i t y Winter 2011–12

Mark A. Glaser, W. Bartley Hildreth, Brandon J. McGuire, and Corinne Bannon

tional inequality, including differences within and between school districts, contrib-
utes to a growing socioeconomic divide that does not bode well for the future of the
United States. This article uses survey responses from more than 5,500 voters in
a midwestern urban community to gauge their predisposition to respond to moral
leadership that advances social equity. Table 1 provides a chronological outline of
Frederickson’s understanding of social equity. Guidance for moral leadership as
related to the study begins with an intimate understanding of the community ethos
in support of social equity. The discussion that follows defines the content of and
logic behind a social equity agenda, tests public understanding of contributors to and
strategies for addressing social inequity, and assesses support for the advancement
of social equity, including willingness to pay increased taxes.

community ethos and social equity

All too often, a community’s predisposition toward social equity is driven by vague
notions about the origins of and contributions to disadvantage. Many are disinclined
to support social equity because of the negative connotations of social welfare. If
public leaders are to garner support for social equity, they must encourage citizens
to introspectively examine public education and its capacity to create opportunity
for disadvantaged children to become productive members of the community. Public
leadership can expect to encounter resistance to attempts to advance social equity
because, in the abstract, it invokes images of social welfare. This study sheds light
on how public leaders can reshape these images and can encourage the community
to rise above self-interest, creating opportunity for all schoolchildren.

Perceptions of self-interest often cloud vision, making it difficult for those who
are advantaged to fully appreciate the plight of the disadvantaged, including the
insidious nature of social inequality. Those who believe that all schoolchildren
have the same capacity to learn, reason that failure to learn is a conscious choice
and therefore deserving of its consequences. Thus, when parents fail to meet their
obligation to coproduce the education of their children, they and their children must
be held accountable. While some children from all socioeconomic classes have
parents who are unwilling or unable to assist them with their schoolwork, those
who are economically disadvantaged are disproportionately burdened (Wong 1994).
This study focuses on the children and the creation of opportunity regardless of the
behavior or capacity of their parents. Therefore, the message from public leaders
must be one that encourages the community not to punish children for the behavior
of their parents.

Social equity, as it is defined here, focuses on socioeconomic disadvantage and
recognizes that the viability of urban education also depends on the creation of edu-
cational opportunity for intellectually and educationally advantaged schoolchildren.
Opportunity is lost and the competitiveness of a community is damaged anytime
students fail to reach their educational potential. When advantaged children’s needs
are not met, including educational performance and public safety, they are more
likely to abandon urban public schools, contributing to the decline of urban com-
munities and the schools that serve them.

Some forms of disadvantage are more likely than others to garner broad-based
support. For example, children with mental or physical limitations are more likely to
be deemed worthy of community support, including disproportionate investment to

Frederickson’s Social Equity Agenda Applied

p u B l i c i n t e G r i t y Winter 2011–12 • 21

improve their societal functioning. Frederickson (1990) sees this form of disadvan-
tage as the normative benchmark for social equity. In this case, moral leadership to
advance social equity could mean providing an improved understanding of genetic
vulnerability and, therefore, community obligation. Conversely, one could argue
that opportunity costs associated with investment in students with limited capacity
keep those with greater capacity from realizing their potential. In any case, this
study uses support for mentally and physically disadvantaged schoolchildren as
the benchmark for commitment to social equity because it is witnessed by broad
public support.

Public leadership intent on advancing social equity must encourage individu-
als to focus less on their personal well-being and more on community well-being,
including the creation of educational opportunity for all students. Therefore, when
children, for whatever reason, fall behind their classmates or fail to reach their capac-
ity, the community must be prepared to work with and through their public schools
to create opportunity. The first section of the findings includes a number of measures
that define the ethos or community predisposition to various forms of social equity.
Leadership intent on advancing social equity can use this understanding to devise a
strategy for enlisting commitment. Senior administrators should take special note of
how those who are committed to social equity see issues of urban education, because
these individuals will provide the foundation for meaningful change. Leadership
intent on advancing social equity must become proficient at rejecting positions of
self-interest and supporting actions that promote community well-being. Contextual
details about the community examined here are found in Table 2.

taBle 1
Frederickson’s “Moral leadership”

Introduces social equity as a concern that should guide the behavior of public administra-
tors (1971).

Argues that social equity is a dimension of performance much like responsiveness (1980).

Argues that citizens are “groping” for public institutions that serve the public interest
(1982).

Rejects the legitimacy of the policy-administration dichotomy, arguing that administrators
are not neutral in decision-making processes and have a responsibility for actions focused
on the well-being of the underclass (Frederickson and Hart 1985).

Warns against simplistic fiscal solutions, such as “cutback administration,” and urges pub-
lic leaders to engage citizens to guide institutional change (1982).

Urges public administrators to reach out to community through participative democracy
and “benevolent patriotism” (Frederickson and Hart 1985).

Identifies “underclass hypothesis” as a concern (i.e., service delivery neglect of disadvan-
taged) and challenges public administrators to particularly address inequality in public
education (1990).

Develops “compound theory” of social equity that recognizes multiple “equalities” deserv-
ing consideration when evaluating impact on community (1990).

Identifies “intergenerational equity” as a concern and encourages public administrators to
balance concerns of present-day and future generations (1990, 1994).

Intensifies the call for moral leadership that enlists broad public support to advance social
equity (2005).

22 • p u B l i c i n t e G r i t y Winter 2011–12

Mark A. Glaser, W. Bartley Hildreth, Brandon J. McGuire, and Corinne Bannon

answering the challenges of urban education

The challenges associated with urban education are considerable and include per-
formance- and discipline-related concerns that contribute to and are the product of
an educationally diverse student body. This research proposes a two-part strategy
to create educational opportunity for all students. Success for the first part of this
strategy focuses on the extent to which public leaders have the capacity to help the
community understand the challenges associated with serving an educationally het-
erogeneous population. Educational heterogeneity of the student body is a challenge
for all schools but is particularly burdensome for urban public schools, and there
are legitimate questions about whether these schools can reasonably be expected
to meet these challenges (Bohte 2001; Smith and Larimer 2004). Variation in the
strength of family-support systems is an important contributor to educationally het-
erogeneous student bodies. Weak family-support systems mean that disadvantaged
children are particularly likely to enter kindergarten with social and educational
deficits that compound over time.

Economic and cultural differences tend to interact and evolve into behavioral
concerns that interfere with performance and raise questions about student safety
(Verdugo 2002). The second part of the strategy focuses on actions taken to recruit
and retain schoolchildren from advantaged households, so that urban public schools

taBle 2
an urban public school system and the community it serve

Midwestern urban community with more than 650,000 people living in metropolitan area.

Approximately 50,000 schoolchildren attend urban public schools.

Two-thirds of school attendees receive free or reduced-price lunches.

Prior to passage of 2000 bond referendum, community made no significant investments in
public educational facilities for several decades.

Community experienced decades of flight from urban public schools to suburban schools
driven by concerns about educational quality and safety.

Suburbanization of tax base diminished capacity of urban schools.

Prior to 1999, public school leadership narrowly defined its constituents to be households
with schoolchildren. Beginning in 1999, school leadership began engaging the broader
community, strengthening ownership of urban public schools.

Community conducted its first large-scale citizen survey as vehicle for community engage-
ment involving a large cross-section of citizens.

Community survey was followed by face-to-face engagement of citizens and community
stakeholders to strengthen community support and articulate investment priorities.

In 2000, a $244.5 million bond referendum was passed to fund investment in facilities.

In 2005, a large citizen survey was conducted assessing public support for investment in
additional facilities and to confirm that public dollars generated from first referendum were
invested consistent with agreed-upon priorities. A section of the survey confirmed that the
school district had fulfilled its investment promises.

Following the survey, a second large-scale citizen engagement process was used to directly
engage citizens to articulate the next steps in facilities investment, including building and
refurbishing neighborhood schools.

Second bond referendum for $340 million was passed in 2008 to fund investment in facilities.

Frederickson’s Social Equity Agenda Applied

p u B l i c i n t e G r i t y Winter 2011–12 • 23

can be said to be “owned” by the whole community. This part of the strategy seeks
to restore the tax base needed to fund urban schools. This means that the creation
of educational opportunity involves students who are in many cases polar opposites
in academic preparedness.

Classroom behavior is both the problem and a manifestation of larger societal
concerns and consequently defies simplistic solutions. All too often, community
disenchantment with behavioral concerns contributes to public support for simplis-
tic solutions. These solutions often include
punitive agendas focused on extinguishing
unacceptable behavior or the expulsion of
students with behavioral problems. While this
approach benefits the students who remain, it
exacerbates the divide between advantaged
and disadvantaged classes of citizens and
often seals the fate of economically disad-
vantaged children. Conversely, it is equally
unacceptable to retain dysfunctional school-
children at the educational expense of their
advantaged classmates. Dysfunctional students contribute to the exodus of teachers
and advantaged children, concentrating disadvantaged children in urban public schools
without the tax base necessary to address these concerns.

Long-term solutions to these concerns are facilitated by early childhood interven-
tion. It is critical to close the educational gap between advantaged and disadvantaged
children. Intervention becomes increasingly expensive, and educational gains become
more improbable as schoolchildren advance in grade but not in education. Therefore,
cost-effective solutions necessarily must give consideration to early childhood educa-
tion (Magnuson and Waldfogel 2005). However, it is not clear that communities are
willing to pay now for societal benefits realized sometime in the future.

It is one thing to indicate support for social equity delivered through public schools
and quite another to be willing to pay increased taxes to honor that commitment.
Lasting and comprehensive solutions to the concerns of urban public education
require broad-based community ownership of schools. Even when the vast majority
of taxpayers are advantaged or do not have children in public schools, they must
be willing to accept responsibility for the well-being of other people’s children in
order to preserve the community and its schools. The final section of the findings
assesses public awareness of the challenges and willingness to invest increased tax
dollars to create opportunity.

research Methods

Overall, 25,366 registered voters were selected to participate in the survey proj-
ect. The sampling frame included all those who voted in the most recent election
and who lived within the jurisdictional boundaries of the Unified School District.
Initially, a proportional, stratified random sample of 22,000 registered voters was
drawn from six districts. In an effort to boost survey participation, 100 percent
samples, 3,366 cases, were drawn from six precincts with high concentrations of
people of color. An estimated 10 percent (2,533) of the voter registration list was
expected to have mailing address errors. Ninety-eight of the returned surveys were

Even when the vast majority of
taxpayers are advantaged and do not
have children in public schools, they
must be willing to accept responsibility
for the well-being of other people’s
children in order to preserve the
community and its schools.

24 • p u B l i c i n t e G r i t y Winter 2011–12

Mark A. Glaser, W. Bartley Hildreth, Brandon J. McGuire, and Corinne Bannon

removed from the analysis because of reliability concerns, such as missing data. A
total of 5,685 voters completed surveys and are included in the analysis. The profile
of the respondents found in the Appendices matches the community profile fairly
closely, with a couple of exceptions (see Appendix 1). First, as is often the case,
older citizens responded disproportionately. Second, low-income households are
underrepresented in the sample.

Findings

Support for Social Equity, Including Willingness to Pay

There is broad public resistance to spending for social welfare, and, by extension,
it is not too difficult to understand how confusion surrounding this concern can
dampen support for actions on the part of public agencies to advance social equity.
After decades of disinvestment in urban public school facilities, it is important that
leaders effectively argue that the future of the community is intertwined with its
schools. Therefore, the community must embrace the schools and be willing to in-
tervene to rescue them from the negative spiral formed from the interaction between
socioeconomic and educational disadvantage.

The Likert-type items in Table 3 assess level of agreement with the table’s
statements and consequently provide relative rather than absolute assessments of
support. In an effort to establish the upper end of public support for the benchmark
as proposed by Frederickson, the first item presented in Table 3 assesses support
for providing assistance to physically or mentally challenged children. Much as ex-
pected, nearly 84 percent of the respondents feel that the community is responsible
for making sure that children get the assistance they need when they have mental
or physical impairments that make learning difficult. There is broad support for the
creation of opportunities for these children, although it is unlikely that respondents
fully appreciate the financial implications of this commitment.

The second and third measures of social equity focus on the long-standing model
that assumes parental coproduction of public education. If respondents are focused
on the child and the long-term well-being of the community, logically there should
be no difference in the willingness of the community to accept responsibility for
children who are victims of weak family-support systems. More than three-quarters
(76.5 percent) of the respondents feel that the community is responsible for making
sure that schoolchildren get the assistance they need when they have parents “unable”
to help them with schoolwork. In contrast, fewer than 62 percent believe that the
community has the same responsibility to children whose parents are “unwilling” to
assist. In other words, some respondents are prepared to punish “undeserving” par-
ents and their children for failure to uphold their part of the parent-teacher contract.
In this case, moral leadership means that public leaders must help the community
understand the necessity of focusing on the creation of opportunity for children with
weak family-support systems.

Items 4 and 5 in Table 3 assess support for community intervention when children
fail to keep pace with their classmates. Clearly, socioeconomically disadvantaged
children are more likely to face difficulties related to educational pace than their
advantaged counterparts. In spite of obvious differences in educational challenges,

Frederickson’s Social Equity Agenda Applied

p u B l i c i n t e G r i t y Winter 2011–12 • 25

taBle 3
public support for social equity agenda

“The community is responsible for
making sure that schoolchildren get
the assistance they need
when they . .

.”

Percentages

Undeserving Deserving

SD D A SA

social equity baseline: accepted
community responsibility
. . . have mental or physical impairments
that make learning difficult

3.0 13.2 60.0 23.

Weak family-support systems
. . . have parents who are unable to help
them with their schoolwork

4.4 19.1 59.2 17.3

. . . have parents who are unwilling to
help them with their schoolwork

9.8 28.6 45.6 16.0

educational disadvantage
. . . have fallen behind their classmates 4.6 24.4 53.2 17.8
socioeconomic disadvantag

. . . come from low-income families and
have fallen behind their classmates

4.8 22.7 53.6 18

. . . come from low-income families
and enter kindergarten behind their
classmates

4.5 20.7 55.3 19

retention, recruitment, and
tax-base restoration
. . . are ahead of their classmates and are
capable of learning at a faster pace

3.6 17.9 54.3 24.2

Notes: SD = Strongly Disagree, D = Disagree, S = Agree, SA =Strongly Agree; Range of N =
5,543–5,567.

it is difficult to predict willingness to accept responsibility for those who fall behind.
The evidence indicates that the community is equally likely to accept responsibility
for schoolchildren who are economically disadvantaged (72.5 percent) and those who
are not disadvantaged (71.0 percent) but who have fallen behind their classmates.

The reality is that without intervention, socioeconomically disadvantaged school-
children tend to start behind and will likely stay behind their advantaged classmates.
In this case, the creation of opportunity means that the community must be willing
to create opportunity through early childhood intervention. Three-quarters (74.5
percent) of the respondents support the creation of opportunity by providing assis-
tance to schoolchildren who come from low-income families and enter kindergarten
educationally disadvantaged. In spite of indicated community support, it is important
for officials to articulate the challenges that disadvantaged schoolchildren face and
how responsible actions on the part of the community can transform them from
community liabilities to assets.

The last item in Table 3 focuses more directly on the recruitment and retention of
academically advanced schoolchildren. Urban school districts commonly use gifted
programming and accelerated learning to attract educationally and socioeconomically
advantaged schoolchildren. The findings indicate that there is broad-based support

26 • p u B l i c i n t e G r i t y Winter 2011–12

Mark A. Glaser, W. Bartley Hildreth, Brandon J. McGuire, and Corinne Bannon

(78.5 percent) for accepting responsibility for providing assistance to those who are
educationally advanced and are capable of accelerated learning.

The seven items reported in Table 3 are summed (Strongly Disagree = 1, Disagree
= 2, Agree = 3, Strongly Agree = 4), forming an index (Cronbach’s α = 0.923) that
characterizes community support for the advancement of social equity. The ANOVA
results reported in Table 4 assess overall commitment to social equity based on
household income. Economically disadvantaged households are expected to be more
supportive of social equity in public schools because they are more likely to iden-
tify with these concerns. Consistent with expectations, households with the lowest
income are the strongest supporters of social equity, but the differences in support
are not large. Accordingly, there is room for optimism for public leadership that is
capable of logically articulating the role of schools in the creation of opportunity
and the advancement of social equity.

While there are probably many avenues for improving the cost-effectiveness of
public education, many, if not most, urban public schools will require additional tax
dollars to make important advances in social equity. It is one thing to commit to social
equity and quite another to be willing to pay increased taxes to support that commit-
ment. This study uses three measures to assess willingness to pay: two measures of
early childhood education (disadvantaged students and an overall assessment) and
a third measure that focuses on the second part of the strategy, the development of
educational opportunities for academically advanced students to progress at an ac-
celerated pace. Two-thirds or more of the respondents indicated that they probably or
definitely are willing to pay increased taxes to support these investments. An index
has been created from the combined scores on the three items (Definitely Not Willing
to Pay = 1, Probably Not Willing to Pay = 2, Probably Willing to Pay = 3, Definitely
Willing to Pay = 4), summarizing willingness to pay (Range of Scores = 3–12,
Cronbach’s α = 0.746) (see Appendix 2). Surprisingly, the ANOVA results reported
in Table 4 indicate that there is no significant difference in willingness to pay based
on household income. In other words, support for the advancement of social equity
is not primarily driven by self-interest on the part of the disadvantaged.

Table 5 displays partial correlation coefficients that illuminate connections in the
minds of citizens between selected conceptual themes (i.e., support for a social equity
agenda, understanding of strategies for addressing inequity, support for policy options,
willingness to pay) while statistically controlling for rival explanations associated with
income. Statistical controls for the influence of household income have been intro-
duced because the findings reported in Table 4 indicate that low-income households,
those most likely to benefit, are particularly supportive of advances in social equity.
The diagonal in the correlation matrix separates scores based on respondents who
have children in urban public schools (above the diagonal) versus households that do
not (below the diagonal). Discussion of the findings reported in Table 5 concentrates
on the partial correlations (controlling for household income) for the larger body of
taxpayers, those without schoolchildren (correlations below the diagonal).

It is one thing to express support for social equity, but of little consequence if
supporters are unwilling to financially back this agenda. The findings reported in
Table 5 indicate that the index measuring willingness to pay is strongly correlated
(r

xz·y
= 0.51, without schoolchildren) with the index measuring social equity. In

other words, those who believe that the community has an obligation to create op-
portunity for schoolchildren are more likely to be willing to pay increased taxes to

Frederickson’s Social Equity Agenda Applied

p u B l i c i n t e G r i t y Winter 2011–12 • 27

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00
1.

28 • p u B l i c i n t e G r i t y Winter 2011–12

Mark A. Glaser, W. Bartley Hildreth, Brandon J. McGuire, and Corinne Bannon
t
a
B
l

e
5

p
u
b
li
c
s
u
p
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or
t
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r
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oc
ia
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ar

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or

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de

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11
–4

,1
04

Frederickson’s Social Equity Agenda Applied

p u B l i c i n t e G r i t y Winter 2011–12 • 29

fund investments that advance this agenda. Accordingly, leaders must be willing to
delineate the content of social equity, focusing on the creation of opportunity and
making clear the distinctions between social equity and social welfare. Government
agencies will also need to develop better vehicles for engaging citizens in impor-
tant public decisions if they want taxpayers to be willing investors in social equity
(Glaser, Bruckner, and Bannon 2010).

social equity strategy part 1: development of disadvantaged
schoolchildren

Part 1 of the two-part strategy focuses on closing the educational divide within urban
schools that stems from differences in family-support systems. More specifically, Table
6 sheds light on community awareness of weaknesses associated with the parent-teacher
model and the assumption of strong family-support systems. Nearly three-fourths of
the respondents recognize that performance and discipline problems stem from parents
who are unwilling or unable to uphold their parental obligations involving coproduction
of education. There is no statistical difference in propensity to see parental involve-
ment as a key contributor to performance and discipline concerns based on household
income (see Table 4). Surprisingly, the partial correlation coefficient reported in Table
5 indicates that there is no statistical connection (r

xz·y

= 0.02) between support for social

equity and the recognition that performance and discipline concerns are driven by
parents who are unwilling or unable to assist their children with schoolwork.

The majority of the respondents (55.9 percent, see Table 6) do not recognize that
performance- and discipline-related concerns usually begin in kindergarten, and
that without special assistance, many of those who start behind will never catch
up. In other words, most respondents fail to recognize that children who are socio-
economically disadvantaged tend to enter schools educationally disadvantaged and
that without early intervention, this will, in many cases, translate into a lifetime of
disadvantage. Evidence found in Table 3 indicates that there is no statistical con-
nection between household income and perceptions that performance and discipline
concerns are linked to educational disadvantage stemming from unequal starting
points. Respondents without children in the public school system (Table 5, r

xz·y

= 0.28) are somewhat more likely than those with children (r
xz·y

= 0.18) to report
connections between support for social equity and an improved understanding that
students with performance and discipline problems usually are children who start
behind and stay behind. Leadership hoping to advance social equity must help the
community, regardless of its level of commitment to social equity, to better under-
stand the origins of performance- and discipline-related concerns.

social equity strategy part 2: recruitment and retention of
advantaged schoolchildren

The second part of the social equity strategy focuses on closing the divide between
urban and suburban schools in an effort to stem the tide of suburban flight. More
specifically, the results reported in Table 6 test public understanding of concerns that
detract from recruitment and retention of advantaged schoolchildren. The findings
in this section are particularly important, because perception and reality interact in
ways that make it difficult to address one without changes in the other.

30 • p u B l i c i n t e G r i t y Winter 2011–12

Mark A. Glaser, W. Bartley Hildreth, Brandon J. McGuire, and Corinne Bannon
t
a
B
l

e
6

p
u
b
li
c
a
w
ar
en
es
s

of
p

er
fo

rm
an

ce
/d

is
ci

p
li

n
e
c
on

ce
rn

s
an

d
s

u
p

p
or

t
fo

r
p

ol
ic

y
o

p
ti
on
s

S
ec

ti
o
n
/

“
S

d
en

ts
w

it
h
p

er
fo

rm
a
n
ce

a
n
d
d

is
ci
p
li
n
e
p
ro

b
le

m
s

.
.
.”

P
er

n
ta

ge
s

S
D

D
A

S
A

s
oc
ia
l
eq
u
it
y
st
ra
te
gi
es
p
ar
t
1.
c
lo
se
e
d
u
ca
ti
on
al
d
iv
id
e
w
it
h
in
u
rb
an
s
ch
oo
ls

1
a.

W
ea

k
f

am
il

y-
su

p
p
or
t
sy
st

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s

.
. .

g
en

er
al

ly
h

av
e

pa
re

nt
s

w
ho

a
re

u
nw

il
li

ng
o

r
un

ab
le

t
o

as
si

st
t

he
m

w
it

h
th

ei
r

sc
ho

ol
w

or
k

3.
4

24
.1

55
.0

17
.5

1
b.

c
h

il
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re
n

s
ta

rt
b

eh
in

d
/s

ta
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b
eh

in
d

.
. .
g
en
er
al

ly
a

re
c

hi
ld
re
n
w
ho

e
nt

er
k

in
de

rg
ar

te
n

be
hi

nd
t

he
ir

c
la

ss
m

at
es

a
nd
w
it

ho
ut

s
pe

ci
al

a
ss

is
ta

nc
e

w
il

l
ne

ve
r

ca
tc

h
up

6.
6

49
.3

37
.8

6.
3

p
ar
t
2.
r
ec
ru
it
a
n
d
r
et
ai
n
:
c
lo
se
d
iv
id
e
b
et
w
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n
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rb
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a
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.
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m
ak

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it

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lt
t

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cr
ui

t
an

d
ke

ep
q

ua
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t

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s

3.
9

25
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.
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i
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1.

2
11

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64

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23

.5
.
. .
m
ak
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it
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if
fi
cu

lt
f

or
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th
er

s
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ea

rn
a

nd
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ed
uc

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th

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it

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7
10

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56

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31

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p
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ic
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op
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3
a.

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im
p
li

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ic

o
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to
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s

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ov

ed
f

ro
m

s
ch

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t

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rs
c

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rn

11
.9

47
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28
.8

11
.6

.
. .
s
ho
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be
k

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t

in
s
ch
oo

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9.
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3
b.

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oc
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s

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c
om

m
u

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w

el
l-

b
ei

n
g

.
. .
s
ho
ul
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be
p

ro
vi

de
d

sp
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ia
l
as
si

st
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t

o
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cr
ea

se
c

ha
nc

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t

ha
t

th
ey

w
il

l
be

co
m

e
pr

od
uc

ti
ve

m
em

be
rs

o
f

co
m

–
m

un
it

y
up

on
g

ra
du

at
io

n
2.

9
11

.3
56

.3
29

L
eg

en
d
:

S
D

=
S

tr
on
gl
y
D
is
ag
re
e
=
1
, D

=
D

is
ag
re
e
=
2

, S
=

A
gr

ee
=
3
, S

A
=

S
tr

on
gl

y
A

gr
ee

=
4

;
R

an
ge

o
f
N
=

5
,4

11
–5

,5
76

Frederickson’s Social Equity Agenda Applied

p u B l i c i n t e G r i t y Winter 2011–12 • 31

Teaching quality is instrumental to education. Generally speaking, urban and subur-
ban public and private schools draw from the same regional pool of teachers. However,
if urban schools are viewed as an unfavorable teaching environment for one reason or
another, it will become increasingly difficult to recruit teachers who are willing to ac-
cept the challenge. Nearly three-quarters of the respondents (70.5 percent) appreciate
the challenges of recruiting and retaining quality teachers in urban schools.

Items 2 and 3 directly assess concerns about safety and the quality of the learning
environment. If the community perceives that schools pose public safety concerns,
these images damage student recruitment and retention and pose formidable barri-
ers to improved education. Such concerns are also closely tied to flight from urban
schools. The vast majority of the respondents feel that students with performance
and discipline problems increase concerns about safety (87.7 percent) and make it
difficult for others to learn (87.5 percent), reducing the quality of public education.
These issues commingle in the minds of the average citizen, and actions taken to
transform urban education must treat these concerns as coequal.

An index has been created (Cronbach’s α = 0.782; Strongly Disagree = 1, Disagree
= 2, Agree = 3, Strongly Agree = 4; range of scores = 3–12) that summarizes the
level of concern (higher scores registering higher levels of concern) that performance
and discipline problems represent an important barrier to recruitment and retention
of students. The evidence found in Table 4 indicates that lower-income households
are somewhat less concerned with issues that might interfere with recruitment and
retention, compared to their higher-income counterparts. As long as advantaged
households perceive that urban schools have performance and safety concerns, they
will continue to abandon urban schools and migrate to suburban schools.

Once again, Table 5 provides evidence that commitment to a social equity agenda
is unrelated (r

xz·y
= 0.03) to views that performance and discipline problems have

negative implications. Stated differently, support for a social equity agenda may be
driven more by issues embedded in a person’s basic values system and less by an in-
timate understanding of the implications of performance and discipline concerns.

policy options: simplistic solutions vs. social equity

The items in the final section of Table 6 place respondents in the uncomfortable
position of public officials by asking them to advise the school system on how best
to handle performance and discipline concerns. If they view students with perfor-
mance and discipline problems as a threat to student safety and learning, and also
see them as a threat to the community, what would they have educators do with
these schoolchildren? While 40.4 percent of the respondents indicate support for
policy that removes students from school, the majority recognize that removal from
school has long-term consequences for troubled children and the community in which
they live. Support for removing students with performance and discipline problems
tends to increase with household income (see Table 4). Similarly, slightly more than
half of the sample (see Table 6) feels that schools should retain troubled students
to avoid problems for the community. Support for retention tends to decrease as
household income increases (see Table 4). A majority of the community recognizes
that simplistic solutions have unacceptable consequences.

The vast majority of the respondents (85.6 percent, see Table 6) support a social
equity option that provides special assistance to students with performance and dis-

32 • p u B l i c i n t e G r i t y Winter 2011–12

Mark A. Glaser, W. Bartley Hildreth, Brandon J. McGuire, and Corinne Bannon

cipline problems to increase the chances that they will become productive members
of the community upon graduation. Households with incomes of $60,000 and above
are somewhat less supportive of the special assistance option (see Table 4).

Table 5 explores the connections between support for social equity and the
policy options. Partial correlations indicate a moderate to weak inverse relation-
ship (r

xz·y
= –0.22) between support for a social equity agenda and support for

policy that removes troubled students to promote learning. Findings also indicate
a weak direct relationship (r

xz·y
= 0.21) between support for a social equity agenda

and retention of troubled students to protect the community. Table 5 reveals a mod-
erately strong direct relationship (r

xz·y
= 0.46)

between support for social equity and policy
that retains troubled students and offers them
special assistance. There is also a moderately
strong partial correlation (r

xz·y
= 0.40) between

those who support a social equity option and
willingness to pay increased taxes.

Table 7 provides an assessment of how
much latitude public leaders have in creating
support for social equity. This assessment

begins with an improved understanding of the extent to which those who advocate
the removal option might be persuaded to consider the alternative of retention and
investment. Nearly 56 percent (lower-left quadrant) of the respondents who initially
rejected student removal support the provision of special assistance. Nearly 30
percent (lower-right quadrant) of the respondents who support the removal option
are potentially amenable to a retention and assistance option if it were available.
Approximately 10 percent (upper-right quadrant) feel that that those with problems
should be removed and do not support the special assistance option. About 4 percent
(upper-left quadrant) support the retention option without additional assistance.

The second section of Table 7 provides a better reading of the extent to which
those who support special assistance to students with problems are prepared to back
a social equity agenda through increased taxes. Approximately 58 percent of the
respondents who support special assistance are also willing to pay more taxes (see
Table 7, lower-right quadrant). Less than 9 percent of the respondents indicated
that they do not support assistance to these students and would not pay more taxes
to support early childhood education (see Table 7, upper-left quadrant). Approxi-
mately a quarter of the respondents report that they support the provision of special
assistance but are not willing to pay for that assistance.

Generally, then, when citizens are provided legitimate options to complex prob-
lems, they are more likely to reject simplistic solutions and support intervention that
is consistent with the gravity of the situation. These findings also provide evidence
that citizens can be engaged in meaningful ways in important public decisions,
although there is no consensus about appropriate vehicles for engagement.

conclusions

If the United States is to prosper in a rapidly globalizing world, it must create ways
of socially and economically integrating disadvantaged segments of the community,
and quality public schools are an essential first step in the creation of opportunity.

When citizens are provided legitimate
options to complex problems they
are more likely to reject simplistic
solutions and support intervention
that is consistent with the gravity of
the situation.

Frederickson’s Social Equity Agenda Applied

p u B l i c i n t e G r i t y Winter 2011–12 • 33

t
a
B
l

e
7

p
ol
ic
y
o
p
ti
on
s
fo
r

p
er

fo
rm
an
ce
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is

ci
p

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on
ce

rn
s

an
d

W
il

li
n

gn
es

s
to

p
ay

(
ce

ll
p

er
ce

n
ta

ge
s)

“
S
tu
d
en
ts
w
it
h
p
er
fo
rm
a
n
ce
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n
d
d
is
ci
p
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b
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m
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sh
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ld

b
e

re
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ov
ed

f
ro

m
s

ch
o
o
l

so
t

h
a
t

o
th

er
s

ca
n
l

ea
rn
.”

A
S
S
IS

T
S
D

D
A
S
A

“S
tu

de
nt

s
w

it
h

pe
rf

or
m

an
ce
a
nd

d
is

ci
pl

in
e

pr
ob

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m

s
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ld

b
e

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ed

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pe
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al
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th
at

t
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w

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be
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m
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pr
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uc
ti

ve
m

m
be

rs
o

f
co

m
m
un
it
y
up

gr
ad

ua
ti

on
.”

**
*

R
em

ov
e:

N
o

R
em
ov
e:

Y
es

S
tr
on
gl

y
di

sa
gr

e
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ss
is

t:
N

o
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4
0.

6
1.

6
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is
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re
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ss

is
t:

N
o

0.
5

3.
0

5.
4

2.
5

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gr
ee
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ss
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t:
Y

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2.

9
30

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6
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tr
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ss
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t:
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8.

0
14

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4.

2
2.
8
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34 • p u B l i c i n t e G r i t y Winter 2011–12

Mark A. Glaser, W. Bartley Hildreth, Brandon J. McGuire, and Corinne Bannon

Currently, public schools are forced to address weighty social and educational
challenges, often with weak community support. Therefore, public leadership must
develop improved methods of encouraging the community to accept responsibil-
ity for its public schools. This leadership challenge is considerable, since the vast
majority of taxpayers are middle- and upper-income Caucasians and the children in
urban public schools increasingly are low-income children of color. The evidence
examined here indicates that while these challenges may be considerable, they are
not insurmountable.

Building support for urban public education necessarily begins by reframing how
citizens see social equity. Public leadership must work to change images in the minds
of citizens from social welfare and handouts to the undeserving to investments that
create opportunity for children to become productive members of the community.
This means that public leaders must become more adept at working with the com-
munity to create the opportunity for educationally disadvantaged children to reach
parity with their advantaged classmates. Social equity also means that educationally
advantaged students must be provided an opportunity to advance at an accelerated
pace. This research finds that when social equity focuses on the creation of op-
portunity, and when opportunity is extended to both advantaged and disadvantaged
students, there is broad-based community support, including willingness to pay
increased taxes to support investment.

Urban schools are commonly criticized on grounds of performance- and disci-
pline-related concerns. The media are instrumental in shaping a community’s image
of public education, and, consequently, public leaders would be well advised to
address issues of performance and discipline through collaborative public debate.
The first part of the proposed two-part strategy advanced here focuses on closing
the educational divide within urban schools by creating opportunity for those who
are disadvantaged. This part of the strategy recognizes that issues of performance
and discipline are influenced by the strength of family-support systems, but holds
that public leadership is instrumental in encouraging the community to focus on
the creation of opportunity for children—the future of the community—regardless
of how undeserving their parents might be. Findings indicate that the community
generally understands the significance of weak family-support systems but fails to
fully grasp that without early childhood education, socioeconomic disadvantage
typically translates into educational disadvantage. In other words, children raised
in households with weak support systems are likely to start behind and stay behind.
When these children recognize that they are hopelessly lost in their educational
pursuits, they often respond by disrupting the education of their classmates and in
some cases bring disruptive behavior into the classroom, raising concerns about
public safety. It is not difficult to understand how this chain of events raises legiti-
mate questions about the viability of urban education.

In most cases, citizens who are committed to social equity can be assumed to
offer much-needed community support for public leadership focused on advancing
such an agenda. This research provides evidence that individual commitment to
social equity is not necessarily tied closely to an intimate understanding of con-
tributors to inequality. For example, those who are most willing to support social
equity are only slightly more likely to understand that children from disadvantaged
households begin formal education socially and educationally unprepared and that
without special assistance deficits become cumulative and eventually insurmount-

Frederickson’s Social Equity Agenda Applied

p u B l i c i n t e G r i t y Winter 2011–12 • 35

able. Therefore, public leadership necessarily involves processes that engage and
inform.

The second part of the proposed strategy involves restoration of the tax base
through the recruitment and retention of economically and educationally advan-
taged households. The primary goal of this strategy is to restore the tax base that
funds urban public education. This strategy also seeks to discourage the creation
of separate and unequal schools where the advantaged attend suburban public or
private schools and the disadvantaged are relegated to urban public schools. The
findings indicate broad-based recognition that performance- and discipline-related
concerns commingle in the minds of citizens and contribute to perceptions that are
inconsistent with the recruitment and retention of advantaged students. Conversely,
the findings indicate that low-income households are slightly less likely to appreci-
ate these concerns. Leadership is instrumental in engaging both advantaged and
disadvantaged households and establishing behavioral norms that are consistent
with quality education. When the community is actively involved in the definition
and enforcement of behavioral norms in the classroom, this helps teachers draw the
line between acceptable and unacceptable behavior and lays the contextual founda-
tion for quality education.

Citizens who lack knowledge of the challenges of urban public education are
vulnerable to the counsel of those who argue for simplistic solutions to complex
problems. This study places citizens in the unenviable position of having to advise
officials on the appropriate policy response by forcing them to choose between
equally unattractive and simplistic policy responses. When forced to choose, re-
spondents to the survey were placed in the same quandary that school officials face
daily: whether to retain and damage the education of classmates, or to dismiss and
destroy opportunity and the future. Alternatively, when citizens are given a social
equity option, one that creates opportunity for students with performance and dis-
cipline problems, the vast majority of citizens in general, and of those committed
to social equity in particular, are supportive of retention and the provision of special
assistance to students to create opportunity. Even more convincing, a majority of
citizens agree that special assistance is necessary to help troubled students and are
willing to pay increased taxes to create opportunity. Generally, then, these findings
indicate that the door is open for public leadership to encourage commitment to
social equity focused on the creation of opportunity, including willingness to pay
to fund this agenda.

reFerences
Bohte, John. 2001. “School Bureaucracy and Student Performance at the Local Level.”

Public Administration Review 61, no. 1:92–99.
Frederickson, H. George. 1971. “Toward a New Public Administration.” In Toward a

New Public Administration: The Minnowbrook Perspective, edited by Frank Marini,
pp. 309–331. Scranton, Pa.: Chandler.

———. 1974. “Introductory Remarks.” Public Administration Review 34, no. 1:1–2.
———. 1980. New Public Administration, pp. 1–47. Tuscaloosa: University of Ala-

bama Press.
———. 1982. “The Recovery of Civism in Public Administration.” Public Administra-

tion Review 42, no. 6:501–508.
———. 1990. “Public Administration and Social Equity.” Public Administration

Review 50, no. 2:228–237.

36 • p u B l i c i n t e G r i t y Winter 2011–12

Mark A. Glaser, W. Bartley Hildreth, Brandon J. McGuire, and Corinne Bannon

———. 1994. “Can Public Officials Correctly Be Said to Have Obligations to Future
Generations?” Public Administration Review 54, no. 5:457–464.

———. 2005. “The State of Social Equity in American Public Administration.” Na-
tional Civic Review 94, no. 4:31–38.

Frederickson, H. George, and David K. Hart. 1985. “The Public Service and the Pa-
triotism of Benevolence.” Public Administration Review 45, no. 5:547–553.

Glaser, Mark A., Maria P. Aristigueta, and David R. Miller. 2003–2004. “Willingness
to Pay for Capital Investment in Public Education.” Public Integrity 6, no. 1:39–61.

Glaser, Mark A., Misty R. Bruckner, and Corinne Bannon. 2010. “Building Sustain-
able Communities.” Government Finance Review 26, no. 5: 24–30.

Glaser, Mark A., John Wong, and Corinne Bannon. 2009. “Symbiosis Between Gov-
ernment and Community: Community Attachment, Trust, and Willingness to Pay.”
Paper presented at the Fifth Transatlantic Dialogue, Washington, D.C.

Magnuson, Katherine A., and Jane Waldfogel. 2005. “Early Childhood Care and
Education: Effects on Ethnic and Racial Gaps in School Readiness.” The Future of
Children 15, no. 1:169–196.

Sawhill, Isabel. 2006, Fall. “Opportunity in America: The Role of Education.” The
Future of Children: A Policy Brief. Washington, D.C.: Brookings Institution.

Smith, Kevin B., and Christopher W. Larimer. 2004. “A Mixed Relationship: Bureau-
cracy and School Performance.” Public Administration Review 64, no. 6:728–736.

Verdugo, Richard R. 2002. “Race-Ethnicity, Social Class, and Zero-Tolerance Policies:
The Cultural and Structural Wars.” Education and Urban Society 35, no. 1:50–75.

Wong, Kenneth K. 1994. “Governance Structure, Resource Allocation, and Equity
Policy.” Review of Research in Education 20:257–289.

acknoWledGMents
An earlier version of this paper was presented at the Social Equity and Leadership

Conference, sponsored by the National Academy of Public Administration, Newark,
New Jersey, in June 2009.

The authors thank Sierra Jackson and Frances Majors for their editorial comments.

aBout tHe autHors
Mark A. Glaser is a professor of public administration at the Hugo Wall School of Urban
and Public Affairs at Wichita State University. His areas of study include citizen engage-
ment, community attachment, willingness to pay, and collaborative networks. He earned
his doctorate in 1981 from the University of Texas at Arlington.

W. Bartley Hildreth, professor of public management and policy at the Andrew Young
School of Policy Studies at Georgia State University in Atlanta, is a recipient of the
Aaron Wildavsky Award for lifetime scholarly achievement in budgeting and financial
management.

Brandon J. McGuire is a management fellow for the city of Wichita, Kansas. He received
his bachelor’s in music in 2008 from Wichita State University and his M.P.A. in 2011
from Wichita State University.

Corinne Bannon is a budget analyst for the city of Wichita. She received her B.A. in
sociology and religious studies from Tabor College in 2008 and her M.P.A. in 2010 from
Wichita State University. She recently coauthored an article on building sustainable com-
munities published in Government Finance Review.

Frederickson’s Social Equity Agenda Applied

p u B l i c i n t e G r i t y Winter 2011–12 • 37

appendix 2
Willingness to pay

Questionnaire Items

Respondents were asked to indicate willingness to pay (1 = Definitely Not Willing to Pay,
2 = Probably Not Willing to Pay, 3 = Probably Willing to Pay, 4 = Definitely Willing to Pay)
for the following investments.
1. Increase the number of pre-kindergarten and early childhood programs for DISADVAN-
TAGED children to ensure they are prepared to start school.
2. Increase the number of pre-kindergarten and early childhood programs for ALL children
to ensure they are prepared to start school.
3. Develop educational opportunities for academically advanced students to progress at a
faster pace.

Predictive Validity of Willingness to Pay

Indications of willingness to pay do not necessarily mean that individuals will accept
increased taxation to support expenditure. However, there is evidence that measures similar
to the ones employed here do have predictive validity. Research finds that when registered
voters are queried using willingness to pay indicators much like those used here they were
found to have predictive validity as witnessed by the passage of a referendum by a two-to-
one margin for $284.5 million by voters in 2000 (Glaser, Aristigueta, and Miller 2003–4). In
November 2008, the community passed a second referendum (capital investment in urban
public schools) for $340 million. Once again, measures of willingness to pay, including
some of the measures reported here, correctly predicted to outcome. Generally, then, these
cases provide evidence that measures of willingness to pay do have predictive validity (Gla-
ser, Bruckner, and Bannon 2010; Glaser, Wong, and Bannon 2009).

appendix 1
respondents profile: 5,685 cases

Frequency Percent Frequency Percent

Race Age
Caucasian 4,632 83.7 Below 25 136 02.5
African-American 475 08.6 25–35 606 10.9
Hispanic 135 02.4 36–45 799 14.4
Native American 91 01.6 46–55 1,222 22.1
Asian 59 01.1 56–65 1,158 20.9
Mixed Race 71 01.3 Above 65 1,620 29.2
Other 69 01.2

Education
Member of household attends Some high

school
201 03.6

Yes 1,315 23.7 High school 1,023 18.3
No 4,231 76.3 Some college 1,682 30.1

College 1,248 22.3
Some graduate
study

449 08.0

Graduate degree 983 17.6

to multiple sites or posted to a listserv without the copyright holder’s express written permission. However,

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Politics & Society
38(2) 152 –204

DOI: 10.1177/0032329210365042
http://pas.sagepub.com

Winner-Take-All Politics:
Public Policy, Political
Organization, and
the Precipitous Rise
of Top Incomes in
the United States*

Jacob S. Hacker1 and Paul Pierson2

Abstract

The dramatic rise in inequality in the United States over the past generation has occasioned
considerable attention from economists, but strikingly little from students of American
politics. This has started to change: in recent years, a small but growing body of political
science research on rising inequality has challenged standard economic accounts that
emphasize apolitical processes of economic change. For all the sophistication of this
new scholarship, however, it too fails to provide a compelling account of the political
sources and effects of rising inequality. In particular, these studies share with dominant
economic accounts three weaknesses: (1) they downplay the distinctive feature of
American inequality –namely, the extreme concentration of income gains at the top of
the economic ladder; (2) they miss the profound role of government policy in creating
this “winner-take-all” pattern; and (3) they give little attention or weight to the dramatic
long-term transformation of the organizational landscape of American politics that lies
behind these changes in policy. These weaknesses are interrelated, stemming ultimately
from a conception of politics that emphasizes the sway (or lack thereof) of the “median
voter” in electoral politics, rather than the influence of organized interests in the process
of policy making. A perspective centered on organizational and policy change –one that
identifies the major policy shifts that have bolstered the economic standing of those

1Yale University, New Haven, CT, USA
2University of California, Berkeley, Berkeley, CA, USA

Corresponding Author:
Jacob S. Hacker, Department of Political Science, Yale University, New Haven, CT 06520, USA
Phone: (203) 435-5554
Email: jacob.hacker@yale.edu

*This article is part of a special issue on “Winner-Take-All Politics” that consists of a substantial article by
Jacob Hacker and Paul Pierson, six comments on their piece, and a final rejoinder by Hacker and Pierson.

Hacker and Pierson 153

at the top and then links those shifts to concrete organizational efforts by resourceful
private interests –fares much better at explaining why the American political economy
has become distinctively winner-take-all.

Keywords

inequality, American politics, business, power, public policy, political organization

Amid the greatest economic crisis since the Great Depression, the growing gap between
the middle class and the rich has moved from the periphery to the center of political
debate. Revelations about the Wall Street excesses that fueled the present crisis—
excesses often promoted by public officials—have led many to conclude that those at
the top have benefited from a rigged system that has allowed privileged insiders to
make fortunes while shifting the negative effects of their activities onto the broader
public.1 Although the current crisis has given the issue new urgency, the distributional
tilt that it highlights is hardly new. Fueled by the outsized gains of the affluent, inequal-
ity has been increasing for more than a quarter century, fundamentally reshaping the
distribution of income in the United States.

The dramatic rise in inequality has prompted a huge outpouring of commentary and
analysis. Until recently, however, most of this discussion has focused on the hypothe-
sized economic roots of rising inequality: increasing global integration, rising returns to
education, changing technology, heightened domestic competition, and so on. The rela-
tionship between American politics and the sharp rise in inequality, by contrast, has
been notable for its absence.

This has started to change. The past few years have seen a small but prominent wave of
books and articles on rising inequality by students of American politics.2 These valuable
works suggest that politics and public policy have played a more central role in the rise in
inequality than economic accounts suggest, and they have begun to investigate the previ-
ously neglected links between growing inequality and the actions of public officials.

Yet these works, too, are incomplete. They rightly depart from standard economic
accounts that focus on depoliticized processes of economic change. Yet they have not
produced a convincing political analysis of the political roots of rising inequality that
can rival the dominant economic perspective on the issue that casts inequality as a
political—in large part because they approach the politics of U.S. inequality with a
relatively narrow analytic frame that embodies a number of constraining features of
contemporary American politics research.

By a “convincing political analysis,” we mean an analysis that meets two tests.
First, it must be consistent with the known facts about inequality. In particular, we
argue that it must be consistent with the fact that American inequality is “winner-
take-all,” with a very small slice of the population becoming dramatically richer and
the rest largely holding steady. Second, a convincing analysis must show how political
processes and government policy are causally related to the known facts about eco-
nomic inequality. In other words, it must identify the correct set of outcomes and
explicate their relationship to Americans politics and public policy.

154 Politics & Society 38(2)

Economic accounts generally falter on both these tests. Most have downplayed the
highly concentrated nature of economic gains, emphasizing instead the general widen-
ing of the gap between those with advanced degrees and skills and those without them.
And even those economic accounts that have recognized the top-heavy quality of
American inequality have had surprisingly little to say about the role of government
policy in fostering it. This would be unproblematic, of course, if public policy had
really played as limited a role as many of these economic accounts imply. But, as we
will show, there is very strong evidence for a central role for public policy, particularly
with regard to the run-up of incomes at the very top.

The new wave of political accounts fares much better, but still falls short on both
tests. For the most part, these accounts neither accurately describe the distributional
changes that have occurred nor offer plausible accounts of the political and policy
processes behind those changes. Yet the shortcomings of existing political accounts
stem from a different source than the shortcomings of existing economic accounts.
Economic accounts tend to ignore American politics entirely, to their considerable
detriment. Recent political science studies instead miss the mark because of a commit-
ment to a particular vision of American politics that we call “politics as electoral
spectacle.” In this perspective, the driving force behind policy changes is the ability of
the so-called median voter—the swing voters in the middle of the distribution of opin-
ion and income among voters—to discipline politicians through the “electoral
connection.”3 As we demonstrate, however, the sharp upward skew of income since
the 1970s is exceedingly hard to explain with models that revolve around the strength
or limits of median-voter influence. Instead, it calls for an alternative perspective—
which we call “politics as organized combat”—that emphasizes the role of organized
interests in shaping large-scale public policies that mediate distributional outcomes.

We make this argument in five steps. First, we present the evidence that American
economic inequality has been winner-take-all, with the gains at the top highly concen-
trated, sustained for a generation, and accompanied by few trickle-down benefits for
the rest of the population. Next, we show that existing economic accounts are largely
inconsistent with this pattern, and that existing political accounts, while stronger in
identifying the political roots of rising inequality, neglect some of the most important
policy foundations of winner-take-all inequality and some of the most fundamental
political mechanisms that have brought it about.

We trace this failure to a view of American politics that overemphasizes the voter–
politician nexus while neglecting the role of organized interests and the profound effects
of government on the distribution of market rewards. In place of this conventional view,
we develop an alternative organizationally minded and policy-focused perspective. This
alternative becomes the lens through which we examine how major organizational shifts
in the 1970s tilted the balance of political power sharply in favor of those at the very top
of the economic ladder, paving the way for America’s winner-take-all inequality. Finally,
we bring these analytic elements together to show that winner-take-all inequality is sub-
stantially rooted in fundamental shifts in four core areas of U.S. public policy—related
to financial markets, corporate governance, industrial relations, and taxation—that have
been powerfully driven by this political-organizational transformation.

Hacker and Pierson 155

The Rise of Winner-Take-All Inequality

That income inequality has grown substantially over the past thirty years is no longer
in dispute. Yet persistent confusion remains about the exact nature of this change and
its main causes. Indeed, these two sources of confusion are linked, since properly
identifying the character of American inequality is essential to offering convincing
explanations of its rise.

As we show in this section, the three crucial features of growing U.S. inequality are
that (1) economic gains have been highly concentrated at the very top; (2) these lop-
sided gains have been sustained, growing virtually without interruption since around
1980; and (3) these gains have resulted in few “trickle-down” benefits for most of the
population. Together, these three features call into question standard economic
accounts of rising inequality that focus on gaps between broad groups based on rising
returns to education and skills. They also call into question the leading political sci-
ence accounts of rising inequality taken up in the next section, which also tend to
focus on the growing distance between the top and bottom thirds of the population
rather than the pulling away of the very affluent.

1. Gains Have Been Highly Concentrated
Many observers have mistakenly characterized rising inequality as simply a general
stretching of the distribution, with the rungs on the economic ladder remaining more or
less evenly spaced as they move apart. This portrayal is often grounded in general survey
data on incomes (such as the Census Bureau’s March Current Population Survey).
Survey data, however, are notoriously poor at capturing trends at the top of income
ladder. A much more accurate and revealing picture is provided by studies based on tax
statistics, such as the well-known series on U.S. inequality compiled by Thomas Piketty
and Emmanuel Saez.4 These data—based on incomes actually reported by tax filers—
allow us to look with considerable accuracy at the very top of the distribution.

What these statistics show is that while gaps have grown across the income spec-
trum, the real action is at the top, especially the very top.5 The share of pretax income
earned by the richest 1 percent of the U.S. population, for example, has increased from
around 8 percent in 1974 to more than 18 percent in 2007. Including capital gains like
investment and dividend income, the share has gone from just over 9 percent to 23.5
percent. Moreover, the top 1 percent are not the most fortunate beneficiaries of the
post-1980 income explosion at the top. The more exclusive the group, the more strato-
spheric the gains have been. The top 0.1 percent (the richest 150,000 or so families)
have seen their slice of the pie grow from 2.7 percent to 12.3 percent of income—a
more than fourfold increase. Meanwhile, the top 0.01 percent (the richest 15,000 or so
families) have seen their share of income rise from less than one in every one hundred
dollars in 1974 to more than one of every seventeen—or more than 6 percent of
national income accruing to 0.01 percent of families. This is the highest share of
income going to this rarified group ever.

156 Politics & Society 38(2)

2. Gains Have Been Sustained

The income tax data also reveal that the shift of income toward the top has been sus-
tained, increasing steadily (and, by historical standards, rapidly) since around 1980.
Figure 1 shows the share of national income that goes to the top 1 percent of house-
holds. The only reversals apparent in the post-1980 upward trend occur during the
dives in the stock market that occurred in the late 1980s and around 2000. (This is
even more apparent when capital gains are included in income, but since capital gains
fluctuate from year to year, excluding them makes sense when examining over-time
trends.) In short, the growing share of national income captured by the richest of
Americans is a long-term trend that does not appear to be obviously related to either
the business cycle or the shifting partisan occupation of the White House.

3. Gains Have Resulted in Few Trickle-Down Benefits for the Nonrich
Finally, these massive gains at the top were not accompanied by major gains on lower
rungs of the income ladder. This is a more controversial point than the first two, since it
concerns both relative gains (which unquestionably favor those at the top) and trends in

Figure 1. The richest 1 percent’s share of national pretax income, 1960–2007
Sources: Thomas Piketty and Emmanual Saez, “Income Inequality in the United States, 1913–1998,” Quarterly
Journal of Economics 118, no. 1 (2003): 1–39; and Thomas Piketty and Emmanual Saez, updated tables and
figures for Piketty and Saez 2003, http://elsa.berkeley.edu/~saez/TabFig2007.xls (accessed December 2009).
Note: Excluding capital gains.

Hacker and Pierson 157

the absolute standing of the nonrich (which is the subject of greater dispute). To accu-
rately assess these broader effects of rising inequality requires including government
taxes and benefits in our measure of family income, since government benefits can be a
substantial source of income for middle- and low-income Americans. The Congressio-
nal Budget Office (CBO) has developed these broader indicators.6 Although available
only back to 1979—unlike the Piketty and Saez pretax income series, which goes back
to the early twentieth century—this augmented income dataset is widely considered the
gold standard for studying family income trends, providing as accurate a picture as we
can currently get of trends in household income at various points in the distribution.

This picture turns out to be stark: The bottom of the distribution went nowhere, the
middle saw a modest gain, and the top ran away with the grand prize. While the overall
economy expanded substantially between 1979 and 2005, the average incomes of the
poorest fifth of households increased by only around 6 percent and the middle quintile
of households saw their incomes rise just 21 percent, even when inflation and govern-
ment taxes and benefits are taken into account. Meanwhile, the average after-tax incomes
of the richest 1 percent of households rose nearly 230 percent. And, again, the gains
enjoyed by the top 1 percent pale in comparison to those received by the top hundredth
of 1 percent. Between 1979 and 2005, the CBO numbers show, the average after-tax
income of households in the top 0.01 percent increased from just over $4 million to
nearly $24.3 million—an almost sextupling in a little more than a quarter century.

Based on the CBO data, Table 1 shows how little trickle-down seems to have
occurred. It compares how much each income group actually received with what their
incomes would have been if incomes had grown at equal rates across the class spec-
trum between 1979 and 2005. In other words, what if overall growth had been the
same, but the share of income received by each income group had remained constant?
The first column shows the average effect on household income for households in
each group. The second column shows the total income change for that the group,
which is simply the average income times the number of households in the group.

The first column drives home that few of the benefits of economic growth at the top
between 1979 and 2005 trickled down. Note that the bolded figures apply only to the
top 10 percent of households. These are the households that did better than average.
Turned around, every income group below the top 10 percent saw their incomes rise
more slowly than average household income between 1979 and 2005. The average
income of the middle fifth of households would be $10,000 higher in 2005 if they had
experienced the average growth of household income, rather than their actual income
growth, over this period.

In the aggregate, as the second column shows, the income gap between the two
scenarios (average vs. actual) is largest for the middle fifth of households—a group
that we will see is at the center of the “median-voter” models popular in political sci-
ence. But as the table demonstrates, the gains of equal growth would have been
broadly distributed among the bottom 80 percent of Americans, which would have
collectively gained by more than $700 billion. Remember, this would be the size of the
transfer each and every year. No less striking, that $700 billion is only slightly more
than what the top 1 percent gives up under the equal-growth scenario ($673 billion).

158 Politics & Society 38(2)

Essentially, then, the losses of the more than ninety million households in the bottom
80 percent that are implied by the move from average to actual experience equal the
gains of the slightly more than one million households in the top 1 percent.

Another way to see the same set of trends is to examine how well families in the
fourth quintile (the sixtieth to the eightieth percentile) did relative to two contrasting
groups: those in the bottom quintile and those in the top 10 percent. Was the post-1979
economic trajectory of the solidly middle-class sixty–eighty group closer to the aver-
age experience of those lowest on the economic ladder or those highest on it? After all,
even if middle-class Americans would have been better off had they experienced the
average growth of household income over this period, they might still see their fate as
intertwined with the fate of the affluent if those at the bottom slipped away from the
top much more rapidly than they did.

This is not, however, what happened. The bottom fifth (zero–twenty) did experi-
ence slower income growth than the fourth quintile (sixty–eighty), but the gap in
growth between these two groups is dwarfed by the gap in growth between the fourth
quintile and the top 10 percent. Among the bottom fifth, real income increased by a
vanishingly small 6.25 percent between 1979 and 2005, compared with a more robust
but still modest 29.47 percent among the sixty–eighty group. But real income more
than doubled (103.22 percent) among the top 10 percent (and, as already noted, it
more than tripled among the top 1 percent). To return to the thought experiment in
Table 1, it would have required an aggregate transfer of $80 billion from the sixty–
eighty segment of the distribution to the bottom fifth in 2005 to equalize the post-1979
growth in income between the two groups. The aggregate transfer from the top 10
percent that would have been required to equalize income growth between the sixty–
eighty group and the top 10 percent would be more than $1 trillion. If income growth
is the only criterion, the middle-class sixty–eighty group has far more in common with
the poor than the rich.

Table 1. Inequality by the Numbers

How much more (or less) would each income group have received in 2005 if post-tax-and-
transfer household income had grown at the same rate for all groups from 1979 to 2005?

Income group Difference in average per household ($) Total income difference for group ($)

Bottom fifth 5,623 richer per household 136 billion richer as a group
Second fifth 8,582 richer 189 billion richer
Middle fifth 10,100 richer 224 billion richer
Third fifth 8,598 richer 194 billion richer
Next tenth 3,733 richer 43 billion richer
Next 5 percent 4,912 poorer 29 billion poorer
Next 4 percent 29,895 poorer 140 billion poorer
Top 1 percent 597,241 poorer 673 billion poorer

Source: Authors’ calculations based on Congressional Budget Office (CBO), Historical Effective Federal Tax
Rates (Washington, DC: CBO, December 2007).
Note: Negative numbers in bold.

Hacker and Pierson 159

A critic of this interpretation might question the implicit portrayal of the economy
as a zero-sum game and argue that the gains of the rich did not come at the expense of
other income groups, because the economy would have grown more slowly if the
gains of growth had been more broadly distributed. An important test of this argument
is whether growth rates were higher in the United States than in Europe, where
inequality did not rise as sharply. The answer is no. On average, between 1979 and
2005, the American economic engine ran just about as hot as the European economic
engine.7 What is more, Americans households increased their work hours substantially
over this period. In fact, this increase turns out to account for about two-thirds of the
household income gains among the middle fifth.8 By contrast, the rise in work hours
(the product of average hours worked per active worker and the rate of labor-force
participation) was much more modest in Europe. As a result, GDP per hour worked
actually rose faster in Europe than in the United States between 1979 and 2005.9 This
lends credence to the view that the gains of the well off came at least partially at the
expense of those lower on the income ladder. So, of course, do the huge costs for
middle-class families associated with the current economic crisis, which itself is
closely related to many of the trends discussed in this article.

Why Winner-Take-All? The Weaknesses of Existing
Accounts
The three salient trends discussed in the last section—that income has become hyper-
concentrated at the top, that the increase in income hyperconcentration has been
sustained, and that this hyperconcentration has produced few, “trickle-down” benefits
for the vast majority of American households—raise difficult problems for standard
economic analyses of rising inequality that emphasize autonomous market changes
that have widened the gap among broad skill and educational groups. They also, how-
ever, call into question some central features of recent works that move beyond this
economic emphasis to bring in politics.

Economic Accounts
By far the dominant economic explanation for rising inequality emphasizes “skill-
biased technological change”—a shift toward greater emphasis on specialized skills,
knowledge, and education—that has fueled a growing divide between the highly edu-
cated and the rest of American workers.10 The evidence just reviewed on the changing
income distribution shows, however, that American inequality is not mainly about the
gap between the well educated and the rest, or indeed about educational gaps in gen-
eral. It is about the extraordinarily rapid pulling away of the very top. Those at the top
are often highly educated, but so too are those just below them who have been left
behind. Put another way, the distribution of educational gains over the last twenty-five
years—who finishes college or gains advanced degrees—has been much broader than
the distribution of economic gains. Only a very small slice of the new educational elite
has entered the new economic elite.

160 Politics & Society 38(2)

Another problem for the standard economic account is that the United States looks
distinct from other nations, despite the fact that all these nations have presumably been
buffeted by similar market and technological forces. American inequality is the high-
est in the advanced industrial world. Yet gaps in skills are not measurably larger in the
United States than they are in other affluent nations. And while the return to schooling
is higher in the United States, this explains only a trivial portion of American inequal-
ity relative to inequality in other nations.11

American distinctiveness is particularly pronounced when it comes to the hypercon-
centration of income at the top. Figure 2 shows the share of income, excluding capital
gains, going to the top 1 percent in twelve rich nations. The first bar shows the share in
the mid-1970s (1973–75); the second shows the share around the millennium (1998–
2004). As the figure makes clear, the United States leads the pack with regard to both
the level (16 percent) and increase (virtually a doubling) of the top 1 percent’s share of
income. Note that half of the nations in Figure 2—France, Germany, Japan, the Neth-
erlands, Sweden, and Switzerland—experienced little or no increase. Note, too, that the
United States was similar to many of these nations in terms of the share of income
going to the top 1 percent in the 1970s—indeed, the shares in the United States and
Sweden track very closely until around 1980.

It is true that the other English-speaking nations in this group—Australia, Canada,
Ireland, New Zealand, and the United Kingdom—have followed a path more like the
United States’s, suggesting overlapping policy and political trends. Still, the United

Figure 2. The top 1 percent’s share of national income, mid-1970s versus circa 2000
Source: Andrew Leigh, “How Closely Do Top Incomes Track Other Measures of Inequality?” Economic
Journal 117, no. 524 (2007): 619–33, http://econrsss.anu.edu.au/~aleigh/pdf/TopIncomesPanel.xls.

Hacker and Pierson 161

States stands out even among these nations, experiencing a doubling of the income
share of the top 1 percent between the mid-1970s and 2000, compared with around
half that in percentage terms in the other five nations. (The difference is smaller if
1980 is used as the base year, rather than the mid-1970s, but the United States still
experienced a larger percentage increase—despite starting from a higher base.)

Moreover, the trajectory of the two countries that are most often compared to the
United States’s, the United Kingdom and Canada, cannot be viewed as wholly inde-
pendent of the rise of America’s winner-take-all economy. As we will see, the rise in
the compensation of the highest earners, especially corporate executives and financial
managers, drives much of the outsized gains at the top in the United States. Compa-
nies in English-speaking Canada and the United Kingdom compete for these workers,
and thus have faced the most pressure to match the massive salaries on offer in the
United States. There is substantial evidence that much of the (considerably smaller)
rise in executive compensation in Canada is driven by American developments, rather
than reflecting an independent example of the same phenomenon.12 The same argu-
ment may apply to Britain as well, although this is harder to establish. While the
contagion effect of the United States is difficult to quantify, some (and perhaps much)
of the increase in top incomes in other English-speaking nations may reflect competi-
tive pressure to match the more dramatic rise in the United States—a rise that we shall
see has a great deal to do with U.S. public policy.

Some economists have accepted that American inequality has been distinctly
top-heavy, but insist that the market still rules. The economist (and former Bush
administration official) Gregory Mankiw has evocatively likened the American super-
rich to the winners of the golden ticket in Charlie and the Chocolate Factory.13 Most
of the educated receive only the chocolate bar; a lucky few find a ticket to vast riches
within the bar’s wrapper. But Mankiw’s analogy is silent on the question of how the
tickets were placed in the chocolate bar and why some of the educated get the ticket
and others do not. It implies that both the presence of the tickets and the selection is
market-driven, when in fact, as we shall see, Mankiw’s “golden tickets” were in sub-
stantial part created by government, and their distribution has been deeply shaped by
the political clout of their beneficiaries.

To be sure, market processes and technological changes have played a significant part
in shaping the distribution of rewards at the top. Revolutionary changes in information
technology have fostered more concentrated rewards in fields of endeavor—such as sports
or entertainment—where the ability to reach large audiences is the principal determinant
of economic return.14 Computers, increased global capital flows, and the development of
new financial instruments have made it possible for savvy investors to reap (or lose) huge
fortunes almost instantaneously. Other examples of such technologically driven winner-
take-all inequality can be found. But these accounts do not come close to explaining the
concentrated gains at the very top of the American economic ladder, especially those
driven by rising executive pay and financial market compensation. They do not explain
why these trends have been much more pronounced in the United States than elsewhere.
Nor do they explain why market structures conducive to such outcomes arose when they
did, much less why, as we show, those structures were fostered by government.

162 Politics & Society 38(2)

Political Accounts

This brings us to the small but growing number of political explanations of the rise of
inequality in the United States.15 Not surprisingly, these accounts—which have not
converged on a preferred explanation to the same degree as has occurred in economics—
place greater emphasis on politics. Yet they still suffer from four notable weaknesses:
(1) a neglect (shared with economic accounts) of the growing concentration of income
at the top; (2) an overemphasis on the “median voter” as the crucial constraint on or
source of inegalitarian policy trends; (3) an extremely thin consideration of the policy
sources of rising inequality, focusing narrowly on direct tax-and-transfer programs;
and, finally, (4) a striking lack of attention to the role of organized interests. These
weaknesses, we argue, have a common source—a view of politics dominant in Ameri-
can politics research in which elections and voter preferences are the main focus. We
call this view “politics as electoral spectacle” and contrast it with a view that more
accurately captures the politics of rising inequality, “politics as organized combat.”

1. Neglecting winner-take-all inequality. In common with economic accounts, existing
political analyses tend to emphasize the broad spreading out of the income distribu-
tion, rather than the hyperconcentration of income at the top. This misplaced focus is,
in some ways, even more problematic for political accounts than economic accounts.
This is because the top-heavy quality of American inequality poses a stark puzzle for
standard models of politics that emphasize the preferences of the median voter. Put
simply, it is much easier for these models to account for a modest upward income
skew than extreme concentration at the top.

At the same time, most opinion data—the sine qua non of behavioral political
science—does not reach enough citizens at the top to form a reliable picture of how
their views or political activities differ from those lower on the economic ladder. (In
this respect, opinion data share the problem of survey data on incomes—they miss the
very top of the distribution.) Thus, both theoretical inclinations and available data
push political scientists to treat rising inequality as essentially a growing gap between
the bottom third and top third of the income distribution, precisely the conception that
we have argued has led commentators and analysts astray.

An example will serve to illustrate the point. In a much-discussed and justly influ-
ential book, Unequal Democracy, Larry Bartels argues that since World War II,
Republican presidents have more or less consistently abetted inequality while Demo-
cratic presidents have more or less consistently reduced it. Because Bartels relies on
survey data on income that are topcoded, however, he has very little to say about the
spectacular rise of high-end incomes. In fact, Bartels’s main measure of inequality is
the eighty–twenty ratio, the ratio of income at the eightieth and twentieth percentiles.
Yet the eighty–twenty ratio leaves out most of the story of rising inequality. According
to the CBO post-tax-and-transfer data, the eighty–twenty ratio rose from just over 3 in
1979 to 3.77 in 2005—an almost 25 percent increase. Over the same period, however,
the ratio of the ninety-ninth percentile to the twentieth percentile rose from 9.62 to
17.18—an almost 80 percent increase (Figure 3). Obviously, the ninety-nine–twenty
ratio is going to be bigger than the eighty–twenty ratio. But there is no mathematical

Hacker and Pierson 163

reason why the percentage increase should be so much greater; it is a reflection of the
extremely skewed income growth of the past generation.

As it turns out, when Bartels looks at the relationship between the eighty–twenty
ratio and the partisan identity of the president, the association he finds is driven by the
growth of income at the twentieth percentile under Democratic presidents, not by the
positive effects of Republican presidents on growth at the top. (In fact, the ninety-fifth
percentile—the highest income group he looks at—seems to do about as well under
either party, and in his regressions, Bartels never finds statistically significant partisan
differences in income growth above the fortieth percentile.) In other words, Bartels’s
argument about partisanship boils down to the claim that those on the bottom portions
of the income ladder do much worse under Republicans than under Democrats. This is
an important insight—leaving open the question of whether it actually reflects the dif-
fering policies of Republican and Democratic presidents, as we discuss in a
moment—but it does not directly address the issue of why growth has been so skewed
toward the very top since the late 1970s.

Once we shift our gaze to the biggest fact about American inequality—the steady
upward rise of the share of income going to the top 1 percent shown in Figure 1—a
simple partisan story becomes much harder to sustain. Instead, something happened
around 1980 that resulted in a fairly consistent upward trend in the fortunes of those at
the very top, regardless of the partisan identity of the president.16 Bartels’s analysis has

Figure 3. Eighty–twenty and ninety-nine–twenty ratios, post-tax-and-transfer income,
1979–2005
Source: Authors’ calculations based on Congressional Budget Office (CBO), Historical Effective Federal Tax
Rates (Washington, DC: CBO, December 2007).

164 Politics & Society 38(2)

little to say about this trend, which we have shown is the crucial one for understanding
the rise in American inequality. Not only does he focus on the eighty–twenty ratio; his
analysis is also, by his own admission, much stronger at explaining the ebb and flow of
the eighty–twenty ratio before 1980—that is, before most of the stunning rise in inequal-
ity. In other words, Bartels’s analysis is pitched at explaining a measure of inequality that
systematically understates the growth of inequality at the very top, and his explanation
works much better during the period before the big run-up in inequality occurred.

2. Overemphasizing the median voter. Voters and their preferences are seen as at
the center of existing political accounts of rising inequality. Indeed, it is not too
much of an exaggeration to say that the central problem for these accounts is
trying to explain how rising inequality is consistent with competitive electoral
politics. In a competitive system, after all, rising inequality—especially rising
inequality that makes most citizens relatively worse off—should create pressures
for a government response, as politicians vie to attract majority support. The lack
of such a response is thus deeply puzzling in standard median-voter models of
redistribution, which argue that greater inequality in the distribution of market
income (typically operationalized as the ratio of median income to mean income)
should lead to greater median-voter support for redistribution and, thereby, more
redistributive public policy.17 And, indeed, in virtually every affluent democracy, gov-
ernments have adjusted taxes and benefits to at least partly mitigate rising inequality
in pre-tax-and-transfer incomes.18

But not in the United States, where precisely the opposite pattern can be seen. Between
1980 and 2003, according to a recent analysis using the Panel Study of Income Dynam-
ics, the amount by which government taxes and benefits reduced inequality (as measured
by the Gini index, a common inequality standard) fell substantially.19 Inequality in what
people earned rose. But instead of offsetting this rise, government taxes and benefits
actually exacerbated it. And when we take into account the myriad ways in which gov-
ernment has abetted the rise in market incomes at the top to be discussed later, it is even
clearer that government policy has increased, rather than offset, rising inequality.

Political scientists committed to the “politics-as-electoral-spectacle” view have taken
one of two tacks to explain runaway inequality: they have endeavored (unsuccessfully)
to show that the median-voter model really works; or they have offered amendments
to the model that show why voters have not been as effective a check on politicians
as the model predicts. The former arguments fail on their face. The latter raise the
question of where, if not from voters, pressure for inequality-abetting policies comes
from—a question that these accounts, with their focus on the voter–politician nexus,
are poorly equipped to answer.

The first response is exemplified by Nolan McCarty, Keith Poole, and Howard
Rosenthal’s important book, Polarized America. Working within the median-voter
model, McCarty, Poole, and Rosenthal argue that pressures for redistribution amid the
era of rising inequality have been muted by the influx of low-income immigrants.
Immigration has two effects that decrease the median voters’ demand for redistribu-
tion. First, it brings a substantial number of nonvoters into the lower part of the income

Hacker and Pierson 165

distribution, pushing up the income of the median voter relative to the average income
of all U.S. residents. Second, immigration pulls down average income, once again
increasing the income of the median voter relative to the average. The net effect, they
argue, is that “voters are doing as well as they have ever done.”20 And because the
“relative income of the median voter in the United States is in fact not worse today
than it was thirty years ago,” pressure for redistribution on politicians has been muted
despite rising overall inequality.21

McCarty, Poole, and Rosenthal’s argument that the relative position of the median
voter has held steady has received a good deal of attention and, if true, would at least
partially account for failure of a strong government response to rising inequality—“at
least partially,” because it would still leave unexplained why policy abetted inequality.
But we are convinced it is not true. Indeed, in light of the winner-take-all trends in
income already discussed, it would take a truly massive influx of low-income immi-
grants to preserve the median voter’s relative position—far more than the actual
increase in the foreign-born population from 4.7 percent of the U.S. population in
1970 to 10.4 percent in 2000.22

In reality, our own analyses of decennial census samples—which allow us to look
at the relationship between citizenship and income using very large samples—indicate
that the relative position of the median citizen has declined dramatically since the
1970s. As Figure 4 shows, taking into account immigration (the contrast between the
dark line, which excludes noncitizens from the numerator, and the dotted line) makes
only a minor difference in the relative standing of Americans in the middle of the
income distribution.23

The second response to the inherent difficulties faced by the median-voter model
is to amend the model. This is how we see much of Bartels’s innovative argumenta-
tion in Unequal Democracy. Bartels claims that voters recognize and are concerned
about rising inequality (and, indeed, care more about economic issues than in the
past), but have only a hazy idea of how inequality and policies pertaining to it affect
them. He argues, for example, that Republicans have been able to win in spite of their
presidents’ harmful effects on most voters because they are better at timing the busi-
ness cycle, producing growth just before elections, for which myopic voters reward
them. Yet because Bartels focuses so heavily on amending the median-voter model
(with varying persuasiveness), he leaves largely unanswered the question of where
the political pressure for less egalitarian policy outcomes come from. In other words,
if voters do not run the show, who does, and how have those who do engineered such
a profound policy shift? We will return to this question in discussing the source of
political pressure that he and other political scientists who have examined rising
inequality have largely overlooked—namely, shifts in the relative power and demands
of organized interests.

3. A thin conception of policy. The third hallmark of existing political accounts is that
they consider a very narrow range of policies—taxes, the minimum wage, perhaps
fiscal and monetary policy—and make limited effort to assess the relative significance
of particular policy instruments in generating distributional outcomes. As a result,

166 Politics & Society 38(2)

political accounts often have little to add to economic ones with regard to the role of
government in influencing inequality.

To take a concrete example, one of the few policies that has received significant atten-
tion in these recent treatments of inequality is the minimum wage.24 But while the
declining value of the minimum wage certainly has distributional consequences and is
clearly linked to politics, it is hard to see how an account of change in the minimum wage,
no matter how persuasive, will get us very far in understanding the main distributional
outcome that needs to be explained: the hyperconcentration of income at the top.

To be sure, in claiming that inequality ebbs and flows with the changing partisan
identity of the White House, Bartels opens the door to an arresting argument about
policy. We have already noted that Bartels’s presidential partisanship story has serious
problems explaining the sustained hyperconcentration of income since 1980, which
has continued apace under both Republican and Democratic presidents. And it argu-
ably ascribes to presidents more independent influence over macroeconomic policy
than they actually enjoy in our system of checks and balances in which the president
must vie with Congress and the Federal Reserve for influence. But the objection most
relevant to the current discussion is that Bartels does not identify policies that can be
plausibly linked the sustained run-up of top incomes. He suggests that the key tool

Figure 4. Citizenship and the median–mean ratio of family income, 1970–2000
Source: Authors’ analysis of the 1970–2000 decennial census samples.
Note: To account for changing income topcodes, we cap family income at the ninety-ninth percentile—a
level that is unaffected by the topcodes across this full period. All results are weighted to be representa-
tive of the population as a whole.

Hacker and Pierson 167

presidents use to change the income distribution is fiscal and monetary policy. Demo-
crats prime the pump, so to speak, with the consequence that working-class income
growth is higher under Democrats than under Republicans.

Such contractionary and expansionary initiatives, however, seem better candidates
for explaining short-term fluctuations and patterns of income growth than long-term
changes in the income distribution, especially sustained gains at the top rather than
growth at the bottom. It is doubtful, for example, that the expansive fiscal and mone-
tary policies that bump up lower income workers’ employment and incomes could be
sustained indefinitely. (Indeed, Bartels’s argument about Republican success in pro-
ducing growth just before elections rests on exactly this kind of short-term dynamic.)
By contrast, long-term shifts in the income distribution are more plausibly linked to
changes in the structure of the economy than to whether or not the economy is operat-
ing at peak output levels at any particular time. And yet the role of government policy
in creating these larger structural changes is absent in Bartels’s account (as it is in
McCarty, Poole, and Rosenthal’s).

4. Where are organized interests? Perhaps most telling of all given their broad aspira-
tions, these recent efforts of political scientists to explain rising inequality pay
strikingly limited attention to organized interests. In the two ambitious book-length
analyses we have been discussing—books that represent the state of the art in contem-
porary American politics research—unions and corporations are hardly mentioned.
(Unions have four references in the index of Bartels’s book—two related to the mini-
mum wage—while the National Election Study has twenty.) The idea that the shifting
balance of organized interests might be relevant is almost altogether absent.

This near-complete absence is linked to another common feature of these analyses:
none pays any real attention to comparative material as a source of insight or evidence.
Although this is standard in contemporary research on American politics, it is highly
revealing and consequential. When explaining change over time within American
politics, analysts are drawn to the most obviously fluid features of a political environ-
ment: election outcomes, shifting public opinion, and so on. Broader features of the
environment—systems of interest intermediation or what comparativists might call
the “regime” of policy arrangements that structure the political economy—are essen-
tially invisible. Lacking any reference to the often starkly contrasting circumstances in
other affluent democracies, these features slip into the background.

In the next section, we outline an alternative political account that places organized
interests and policy development at the center of the story. In doing so, we draw on
extensive work in comparative political economy, as well as an older tradition of
American political economy that has received limited attention within mainstream
political science in recent decades.25 Comparative scholarship has long insisted that
conflict among organized interests is central to explaining the enormous cross-national
and longitudinal variation in political and policy outcomes.

Yet while we build on prior this work in calling for renewed attentiveness to
organized interests, we move beyond it in at least two key respects. Much of the
comparative work has treated the United States as little more than a foil—a

168 Politics & Society 38(2)

distinctly “liberal” political economy in which policy efforts to ensure egalitarian
outcomes are and have always been virtually nonexistent. But what we show is that
these striking winner-take-all outcomes are of surprisingly recent vintage and reflec-
tive not only of longstanding features of U.S. politics and public policy, but also of
substantial changes in policy that reflect equally substantial changes in the land-
scape of American politics.

In similar fashion, although we are indebted to work on American politics that has
emphasized the influence of business power and the weakness of organized labor, we
go beyond this work—which often portrays American politics as a more or less stable
oligarchy of the wealthy—in identifying some of the key sources of variation in the
power of organized interests, including the broader erosion of the organizational might
of the middle class on economic issues. We also go beyond this work in carefully speci-
fying the public policies that have resulted in growing inequality. The transmission of
the influence of organized interests into distributional outcomes is not automatic; it
runs through public policy—the ways in which government authority is exercised.
Only through careful attention to policy and the process by which it is made can we
understand how the power of organized interests is exercised and conditioned.

An Organizational-Policy Perspective
on Winner-Take-All Inequality
To sum up the main implications of the argument thus far: A convincing political
account of American inequality must explain the defining feature of American inequal-
ity, namely, the stunning shift of income toward the very top. Equally important, it
must explain how public policy has contributed to this trend. This means not only
identifying public policies that can be linked to large increases in inequality; it also
means providing an account of the political processes that have led to the generation
of those policies.

These are not easy tasks. They require an understanding of the connections, often
subtle, between policy structures and economic outcomes. Moreover, they require
close examination of the political forces behind policy change. Depending on the
policy involved, the relevant decision makers may be legislators, regulators, or presi-
dents. New enactments may be required to shift policy. As we will see, however,
policy change often occurs when groups with the ability to block change effectively
resist the updating of policy over an extended period of time in the face of strong con-
trary pressure and strong evidence that policy is failing to achieve its initial goals—what
we call policy “drift.”26 These complex connections between political action and
social outcomes are not likely to be established without sustained attention to the
evolving content of public policies.

As we argued in the previous section, existing political accounts—while a vast
improvement over the standard economic diagnosis—are not particularly successful
in identifying plausible links among politics, policy, and rising inequality. McCarty,
Poole, and Rosenthal focus on the way in which gridlock has prevented policy

Hacker and Pierson 169

updating in a few areas (the minimum wage, public assistance policies, the estate tax),
but for the most part say little about how public policy has influenced rising inequal-
ity—and virtually nothing about how it has fueled the meteoric rise of top incomes.
Bartels, for his part, fails to show how partisan control of the executive by itself could
plausibly be connected to the dramatic rise in winner-take-all outcomes that has
occurred since the late 1970s.

At the root of these weaknesses, in our view, is a conception of politics that focuses
overwhelming on the voter–politician relationship—a view we call “politics as elec-
toral spectacle.” By contrast, we believe the rise of winner-take-all inequality can only
be convincingly explained with a very different perspective—which we call “politics
as organized combat.” This alternative perspective is built around three central claims
about how to understand the nature and politics of policy change. The first two specify
more clearly how patterns of governance contribute to changes in key economic out-
comes. The last indicates the critical political developments that drive changes in
these patterns of governance over time.

1. Government Involvement in the Modern Economy Is Broad and Deep
One of the reasons that political accounts are often greeted with skepticism is because
they fail to identify policies that can be plausibly linked to large increases in inequal-
ity. More specifically, these accounts fail to identify policies that can be plausibly
linked to large increases in inequality before government taxes and transfers take
effect. As already noted, much of the rise in inequality at the very top has occurred in
market incomes, or what income specialists (misleadingly) call “pre-tax-and-transfer
inequality”—that is, income that people earn from their labor and capital prior to the
effect of government taxes and benefits. The conclusion often taken from this is that
market changes, not public policy, are driving the trend. On the conservative side, for
example, Mankiw writes that while “some pundits are tempted to look inside the Belt-
way for a cause” of rising inequality, “policy makers do not have the tools to exert
such a strong influence over pretax earnings, even if they wanted to do so.”27 On the
liberal side, UC Berkeley economist Brad DeLong says, “I can’t see the mechanism
by which changes in government policies bring about such huge swings in pre-tax
income distribution.”28

These conclusions overlook two crucial facts. First, as we will see, there is strong
evidence that direct government tax-and-transfer policy is abetting inequality, espe-
cially at the very top of the income ladder. Second, and more important, this conclusion
conflates pre-tax-and-transfer inequality with pregovernment inequality. The implicit
view is that the market autonomously produces the distribution of economic rewards
and only then does government step in to redistribute income. Yet government actually
has an enormous range of tools for affecting the distribution of earnings before taxes
and benefits take effect. Over the long run, government policies do not simply redis-
tribute what labor and financial markets produce; they structure those markets in ways

170 Politics & Society 38(2)

that shape both economic outcomes and the capacity for organized action among eco-
nomic interests. Policy helps to set the basic contours of the economy, the “variant of
capitalism,” if you will.29

Most observers have paid little attention to the indirect ways in which government
shapes the distribution of income—through what Nathan Kelly calls “market-
conditioning” policies.30 And even those scholars who, like Kelly, have noted the
influence of government on the pre-tax-and-transfer distribution of U.S. market
income have done little to investigate the specific ways in which government struc-
tures the economy. Yet, as we show later in this article, the rise of winner-take-all
inequality in the United States is directly linked to the evolution since the 1970s of key
areas of public policy governing corporate structure and pay, the functioning of finan-
cial markets, and the framework of industrial relations.

2. The Transformation of Policy Occurs through Both Enactments and “Drift”
A second oversight of existing political accounts is the presumption that if government
played a central role in rising inequality, then a host of new laws and policies must have
been created over the past thirty years to drive the upward distribution of income. Very
important inequality-inducing laws and policies have in fact been created. But it is also
important to recognize that major legislative initiatives—what David Mayhew, in his
landmark study of divided government, calls “enactments”—are but one of the two
principal mechanisms through which politics can reshape how an economy works.31

A second mechanism, which we call “drift,” is equally, if not more, important.32
Drift describes the politically driven failure of public policies to adapt to the shifting
realities of a dynamic economy and society. Drift is not the same as simple inaction.
Rather, it occurs when the effects of public policies change substantially due to shifts
in the surrounding economic or social context and then, despite the recognition of
alternatives, policy makers fail to update policies due to pressure from intense minor-
ity interests or political actors exploiting veto points in the political process. Thus,
drift requires (1) policies whose effects change due to shifting circumstances, (2) rec-
ognition of this change, (3) availability and awareness of viable alternatives, and (4)
nonmajoritarian reasons why those alternatives are not adopted.

A prominent recent example of drift is the favorable treatment of the income of
hedge fund managers. Remarkably, the astonishing fees these managers receive for
investing other people’s money are taxed at a low capital gains rate rather than a much
higher income tax rate. The basis for this favorable treatment is a set of obscure IRS
rules adopted before hedge funds became a prominent part of the economy. Despite
broad agreement that giving ultrawealthy hedge fund managers billions of dollars in
tax breaks makes little policy sense, the financial industry has so far been able to resist
efforts to update the rules to reflect new realities.

Three factors make drift an especially salient feature of the modern American polit-
ical economy. The first is that the design of U.S. political institutions makes policy
enactments especially difficult, while maximizing opportunities to pursue policy

Hacker and Pierson 171

agendas based on the exploitation of drift. Although there are multiple institutional
obstacles to major policy reform, the most important in the last quarter century has
been the Senate’s requirement of sixty votes to cut off debate on proposed legislation.
Between 1919 and 1969, 56 motions were filed to end a Senate filibuster. Between
1969 and the end of 2009, more than 1,100 were, with the overwhelming majority of
these filed after 1991. The increasing use of the filibuster for partisan ends on left-
right issues has allowed relatively small minorities (representing, at the extreme, just
11 percent of the population due to Senate malapportionment) to block action on
issues of concern to large majorities of Americans.33

The second factor enhancing the prominence of drift is the increasing polarization
of the two major political parties, which has fostered partisan stalemate even on issues
that once featured cross-party bipartisan coalitions. Pundits often see gridlock as
equal-opportunity stalemate, as deadly to attacks on existing programs as to calls for
new public initiatives. But gridlock is not so neutral. First, the polarization of the two
parties has been driven more by the move of the Republican Party to the right than the
movement of the Democratic Party to the left, thus shifting the balance of partisan
conflict to the right—despite little evidence of increasing conservatism in American
public opinion over the period of rising polarization.34 Second, in a context of dra-
matic economic change, polarization helps the cause of those who want to block
reform, adding to the bias against government efforts to moderate rising inequality or
respond to other emerging challenges in the private sector. In the American context,
polarization has favored policy drift, and policy drift has encouraged the rise of
winner-take-all.

A third factor in the rising significance of drift is that it provides an exceptionally
valuable tool for policy makers seeking to be responsive to organized interests rather
than disorganized voters. Compared with alternative mechanisms, drift allows policy
change to occur through “nondecisions.”35 It is thus less likely to attract the notice of
those who pay only sporadic attention to politics and have limited information about
policy. Conversely, it is quite easily seen and used by organized interests, such as the
financial industry lobbyists defending the hedge fund tax break. We will have more to
say about this important feature of drift shortly.

A convincing study of the American political economy, in sum, must pay central
attention to the neglected but crucial process of policy drift. Understanding drift
allows us to see how patterns of government action and inaction are integral to the
development of the economy—the structuring of markets—over time. Equally impor-
tant, an appreciation of the significance of drift helps us to get a handle on political
processes behind the over-time transformation of public policy.

3. Shifts in the Balance of Organized Interests
Are a Major Driver of Policy Change
To analyze the political sources of rising inequality is to focus, first and foremost, on
the exercise of authority. Politics is a contest where some gain the authority to make

172 Politics & Society 38(2)

decisions of fundamental significance for others. Especially in the modern era of
activist government, those in positions of power can have an enormous influence on
the distribution of economic rewards.

Given this, the center of the story is not elections but policy. For most of those
engaged in politics over sustained periods, elections are only a means to an end: con-
trol over authority, or the capacity to make policies.

Gaining and using control over political authority requires organization. Influenc-
ing the exercise of government power in modern democracies necessitates a range of
formidable capabilities: the capacity to overcome collective action problems, mobilize
resources, develop extensive expertise, focus sustained attention, coordinate actions
with others, and operate flexibly across multiple domains. By and large, these are the
attributes of organizations, not discrete, atomized voters.

To be sure, voters wield real power thorough the ballot box. As the research of Bar-
tels and many others has shown, however, voters’ attention to the highly complex
matter of what government actually does is limited, superficial, and typically brief. In
our fragmented political system, victories without enduring organization are almost
always fleeting. Struggles over policy—over what the government actually does for
and to its citizens—are usually long, hard slogs. These are struggles that involve drawn-
out conflicts in multiple arenas, extremely complicated issues where only full-time,
well-trained participants are likely to be effective, and stakes that can easily reach hun-
dreds of billions of dollars. Inevitably, organized groups are crucial actors, and usually
the crucial actors, in these struggles.

Organized groups care deeply about elections, of course, and they try very hard to
swing them their way. But they also are shrewd enough, and experienced enough, to
place the competition for votes in proper perspective. This explains why only a small
fraction of the billions that corporations spend on politics is directly connected to
electoral contests. Most of the rest goes to lobbying expenditures—expenditures that
have doubled in just the past decade.36 For powerful groups the center of action is in
Washington, not the swing states.

Once we are more attentive to the importance of organized interests and their
relentless focus on what government actually does, it helps us to think differently
about another crucial feature of modern politics: the two major parties, including their
internal composition and the relationships between them. As Bawn and her coauthors
argue, parties are not exclusively, or even primarily, marriages of convenience for
teams of election-minded politicians seeking to appeal to voters.37 They are also vehi-
cles for carrying the concerns of coalitions of interest groups into policy making.
Again, interests care about government because they care about the policies it pro-
duces. In turn, politicians (and parties) care about groups because they can mobilize
resources that elected officials need. Moreover, groups combine these resources with
intense preferences and substantial information. This combination of assets gives
them unique capacities to reward and punish.

That interest groups seek to influence policy through the parties has two important
implications for the study of political economy. First, major shifts in the overall

Hacker and Pierson 173

balance of organized interests are likely to exert effects on both major parties, although
often in different ways. To be successful, politicians cultivate the support of organized
interests that are capable of providing financial and other valued political resources.
If the balance of power among interests shifts, politicians are likely to adjust their
strategies and support coalitions.

The role of government in the political economy is not, therefore, just a question of
the balance between the two parties, as Bartels’s argument about the effects of partisan
control of the presidency would suggest. Equally important is the matter of where the
two parties situate themselves with respect to the most important issues of gover-
nance. This in turn is likely to depend on the shifting balance of organized interests.
For instance, and again contrary to Bartels, we would emphasize that important ele-
ments of the Democratic Party have responded to the shifting balance of organized
power by repositioning themselves on a number of critical issues, including taxation
and deregulation, in ways that have undercut the party’s traditional commitment to
egalitarian policies.

The second implication is that parties often seek to be responsive to the concerns of
policy-demanding interest groups even when this threatens to conflict with the prefer-
ences of the median voter. Indeed, this tension—as parties in government try to mediate
the cross-cutting pulls of voter and organized interests—is central to modern gover-
nance.38 The art for policy makers is not to respond to the median voter; it is to minimize
the trade-offs when the desires of powerful groups and the desires of voters collide.

Because of the connection between electoral success and continuing access to
authority, parties and interest groups have incentives to minimize the tension by find-
ing low-cost/high-impact ways to support the demands of organized groups. Once
again, this suggests careful attention to the distinct mechanisms linking policy making
and policy outcomes. Precisely because the interests of groups are often in acute ten-
sion with the interests of voters, the effectiveness of groups is likely to be least evident
in high-profile political episodes (although it may show up there as well). Instead,
their effectiveness will be greatest in elements of the policy-making process that are
unlikely to rouse the ire of inattentive publics while providing opportunities for these
groups to exploit their organizational prowess, such as regulatory decisions and
implementation.39

Organized groups will also be extremely active in the critical but understudied area
of agenda setting, both to foster issues and frames that advance their interests and to
keep troublesome issues off the table or at least block them before formal consider-
ation. And groups will focus with similar intensity on what John Kingdon called
“alternative specification.” They will seek to substitute symbolic actions for real ones,
for example, or manipulate complex policy designs to produce more favorable yet
opaque distributional outcomes.40

Perhaps most important, interest groups will seek to exploit drift to enshrine their
preferences in policy. When the economic world is changing in ways that undercut
undesired policy arrangements, they will encourage policy makers to simply sit on their
hands. The benefits for interest groups can be massive, but the absence of action is

174 Politics & Society 38(2)

unlikely to attract sustained attention from voters or clear attribution to particular policy
makers. Typically all sorts of reasons can be offered for why action failed to take place.
For politicians, drift is generally the cheapest way to abandon the median voter.

Voters are hardly ignorant bystanders in American politics. But the role of voters
is powerfully circumscribed and shaped by the organizational context within which
their interests are formed and acted on. Voters need strong organizational mooring to
recognize and respond to changes in public policy. Yet, as we will see, the organiza-
tional transformation that has strengthened business and weakened labor has been
accompanied by an atrophying of the organizations that once brought less affluent
Americans into politics and informed them about public policy debates. In the
absence of these organizations, many voters are reliant on the media or parties them-
selves for basic information and cues, leaving them with much less reliable signals
about which policies or candidates reflect their interests. It is revealing that, in opin-
ion polls, Americans seem much less well informed about the distribution of income
than citizens of other rich democracies, and in particular vastly understate the incomes
of those at the very top.41

Especially important in this perspective is changing public trust in government and
public officials. For many Americans, the sticking point in tackling inequality is not
that they view inequality as good or necessary, but that they lack confidence in public
officials’ willingness or ability to address it effectively. Republican electoral inroads
among moderate-income voters have occurred alongside not just declining organiza-
tional representation for these voters, but also declining public trust in government
and a growing perception that politicians are excessively responsive to “special inter-
ests.” We would argue that these voter perceptions, while having deep roots in American
political culture, are also a reflection of the failure of public policy to respond consis-
tently to the majority of voters on economic issues, due to the pull of organized
interests, the increase in political polarization, and the fragmentation of American
political authority. A set of findings that is broadly supportive of this argument has
been produced by behavioral political scientists, including Bartels, who have shown
that the votes of members of the Congress as well as the direction of national policy
change are vastly more likely to reflect the preferences of higher income voters (as
measured by polls) than those of voters lower on the economic ladder.42 Another com-
plementary finding is that the political participation and engagement of less affluent
voters is generally lower in advanced industrial democracies in which economic
inequality is greater (and in counties of the United States that are more economically
disadvantaged).43

In emphasizing organized interests and the evolving structure of American political
authority, we do not wish to deny that changes in ideas have played an important
independent role in the restructuring of public policy over this period. The rise of
neoclassical economics and increased emphasis on market-based policy prescrip-
tions—as well as the broader ideological backlash against activist government—have
clearly shaped the policy trends we describe. The rising prominence of these ideas,
moreover, was in part the result of serious declines in economic performance

Hacker and Pierson 175

and corporate profitability in the 1970s that fueled doubts about existing policy
arrangements and galvanized conservatives and business elites while lending credence
to their concerns and proposed reforms.

As the force of the economic troubles of the 1970s suggests, however, the rise of
conservative prescriptions did not occur in a political or organizational vacuum. Like
Weber’s “switchmen” on the tracks of history, we see the main role of promarket ideas
as helping to provide intellectual backing for demands already voiced and to channel
the shifts in the organized landscape of Americans politics just discussed into concrete
policy changes. Indeed, a good number of the policy changes that we chart—such as
the steep decline in marginal income tax rates beginning in the 1970s—occurred before
the development of strong intellectual rationales for them. In many other instances
(such as the example of hedge fund taxation), policies have been sustained or extended
in the absence of any credible intellectual case or evidence. Thus, without denying the
significance of the ideological developments of the 1970s and after, we give priority to
the shifts in organized interests that both prompted and helped sustain many of these
intellectual developments.

We return then to the central points of this section. To explain winner-take-all
inequality requires attention to the specific features of public policies that have shaped
not just explicit redistribution but also the distribution of seemingly natural market
rewards, particularly at the top of the economic ladder. It also requires careful consid-
eration of drift as well as major enactments. And it requires looking closely at the
mechanisms through which organized groups try to influence the exercise of authority
on all these fronts. In the next two sections, we offer an account of the rise of winner-
take-all inequality that incorporates these elements. We begin with the restructuring of
organized political activity in the United States over the last generation—a restructur-
ing at the heart of the contemporary politics of inequality.

The Organizational Transformation of American Politics
The emergence of the winner-take-all economy coincided with two widely recognized
political shifts: the rise of a more powerful and conservative Republican Party and the
dramatic increase in political polarization.44 Another transformation has received far
less attention: the balance of organized economic interests has shifted decisively in
favor of employers and the affluent. Yet it is this profound organizational shift that
may be of greatest significance for the politics of inequality.

The Surge of Business Organization
The decade of the 1970s brought a transition from a broad-based postwar settlement
to a new politics of winner-take-all. The clearest marker of this shift was a remarkable
expansion of business power. Always a major part of American political life, employ-
ers had encountered a series of unexpected defeats in the 1960s and early 1970s.
Washington undertook a very dramatic expansion of regulatory power on issues from

176 Politics & Society 38(2)

the environment to occupational safety to consumer protection, driven in part by the
emergence of new “public interest” organizations seeded by foundations.45 As David
Vogel summarizes, between 1969 and 1972 “virtually the entire American business
community experienced a series of political setbacks without parallel in the post-war
period.”46 By 1971, future Supreme Court justice Lewis Powell felt compelled to
assert, in a memo that was to help galvanize business circles, that the “American eco-
nomic system is under broad attack.”47

The organizational counteroffensive was swift. The number of corporations with
public affairs offices in Washington grew from 100 in 1968 to over 500 in 1978. In
1971, only 175 firms had registered lobbyists in Washington, but by 1982, 2,445 did.
The number of corporate PACs increased from under 300 in 1976 to over 1,200 by
the middle of 1980.48 Of greater political significance was the expansion of the col-
lective capacities of employers, allowing them to mobilize more proactively and on
a much broader front. The Chamber of Commerce—for whom Lewis Powell, as chair
of the Chamber’s Education Committee, penned his influential memo—doubled in
membership between 1974 and 1980. Its budget tripled. The National Federation of
Independent Business doubled its membership between 1970 and 1979. The Business
Roundtable, designed to mobilize high-level CEOs for the advancement of shared
interests, formed in 1972. The National Association of Manufacturers moved its main
offices to Washington. As its chief observed,

We have been in New York since before the turn of the century, because we
regarded this city as the center of business and industry. But the thing that
affects business most today is government. The interrelationship of busi-
ness with business is no longer so important as the interrelationship of
business with government. In the last several years, that has become very
apparent to us.49

The role of the business community not only grew, but expanded. Employers and
wealthy families poured vast new resources into politics—not just to lobby on
particular bills, but to shape the broader political climate. Especially prominent in these
efforts were wealthy Sunbelt activists. Staunch economic conservatives and fiercely
critical of the basic contours of the post–World War II domestic settlement between
labor and industry, they nurtured an interlocking system of new foundations and think
tanks—organizations that saw their role as shifting public opinion and public policy in
a conservative direction through aggressive communication efforts.

Recognizing that lawmaking in Washington had become more open and dynamic,
business groups remade themselves to fit the times. Ironically, the expanding network
of business organizations hoisted the public interest groups on their own petards. Using
rapidly emerging tools of marketing and communications, they developed their capac-
ity to generate mass campaigns. Building networks of employees, shareholders, local
companies, and firms with shared interests (e.g., retailers and suppliers), they could
soon flood Washington with letters and calls. Within a few years, these classically

Hacker and Pierson 177

top-down organizations were to thrive at generating bottom-up-style campaigns that
not only matched the efforts of their rivals, but surpassed them.

These emerging “outside” strategies were married to “inside” ones. Business orga-
nizations developed lists of prominent executives capable of making personal contacts
with key legislative figures. In private meetings organized by the Conference Board,
CEOs compared notes and discussed how to learn from and outmaneuver organized
labor. In the words of one executive, “If you don’t know your senators on a first-name
basis, you are not doing an adequate job for your stockholders.”50

From 1965 to 1975, the pendulum swung away from business. In the next few
years, it swung back. In the following quarter-century, however, it stayed firmly in
place. There have been occasional zigs and zags. Environmental groups, for
instance, gained new members on the strength of reaction to Reagan’s policies. The
right, including Christian conservatives, mobilized in response to the Clinton
administration. But the increasing political capacity of business continued for a
generation and, indeed, has only intensified. The scale of lobbying—a sector of
political life that is overwhelmingly the territory of corporations—has dramatically
increased since the mid-1990s, dwarfing the amount contributed to campaigns. But
campaign giving is also a major part of the story, with differing implications for the
two parties.

Business Political Giving and the Parties
As its organizational clout grew, business also massively increased its political giving.
Moreover, it did so at precisely the time when the cost of campaigns began to sky-
rocket (in part because of the ascendance of television). The insatiable need for cash
gave politicians good reason to be attentive to those with deep pockets—and business
had by far the deepest.

Business gave generously to politicians of both parties from the mid-1970s to the
mid-1980s. But as the journalist Thomas Edsall has observed, this should not be
treated as an indication of nonpartisanship, because business was actually treating the
two parties very differently.51 What money business gave to Democrats went almost
exclusively to incumbents, especially moderate-to-conservative ones. Republican
incumbents got money too, but the GOP also received a great deal of corporate money
for party-building efforts. Individual Democratic incumbents could finance their
reelection bids, but the difference in the financial resources—and hence the organiza-
tional capacities—of the parties as organizations became massive in this period.

The targets of business largesse in the two parties differed because the donations
served different purposes. Financing the GOP was an investment. Business money
nurtured a cadre of elected officials committed to advancing a deregulatory and tax-
cutting agenda. It also increased the capacity of the Republican Party to gain power
and make the case for free markets. Corporations and wealthy individuals bankrolled
a party infrastructure committed to advancing a business agenda, refining messages
for public consumption, and marketing them energetically.

178 Politics & Society 38(2)

Fueled in part but not exclusively by business support, the Republican Party’s
key organizations built a massive advantage over their Democratic counterparts
beginning in the mid-1970s.52 Within a decade, the GOP had built what Gary
Jacobsen, a leading scholar of congressional elections, called “by far the stron-
gest national party organization in American history.”53 By the mid-1980s,
Republican national party organizations could outspend Democratic ones five to
one. Among other things, this organizational and financial edge allowed them to
target money effectively in campaigns. As Robert Kuttner has noted, “[B]etween
1978 and 1984, the heyday of the Republicans’ technological lead, there were
twenty-four U.S. Senate races where the winner squeaked in with 51 percent or
less. Thanks to superior targeting techniques and the ability to pour in late money
selectively, the Republicans won nineteen of these, or nearly 80 percent.”54 In
1982, a deep recession threatened to produce a backlash election that might have
stopped the “Reagan Revolution” in its tracks. According to Jacobson, the GOP’s
financial and organization edge played a critical role in reducing Republican
losses in the House from a disastrous potential loss of sixty to a manageable
twenty-six.55

The need of the Democrats to respond to this formidable organizational machine
encouraged them to adopt a more accommodative stance toward business. And busi-
ness money did flow to Democrats, though in different ways and for different reasons.
If money to the GOP was an investment, money to Democrats was a form of insurance.
Revealingly, the money went largely to individuals rather than to the party as an orga-
nization. It was destined for the powerful and “moderates.” As the prominent business
lobbyist Charls Walker put it, corporate PACS were “very important in affecting ideo-
logical balance in Congress. Members now have alternative places to look for campaign
contributions.”56

The main goal of channeling money to influential or swing Democrats was to
minimize any prospect of distasteful legislation. Put more precisely, these efforts
were designed to facilitate policy drift. Carefully targeted contributions could effec-
tively exploit the multiple channels American political institutions make available for
diversion, dilution, or delay. Even grudging or quiet support from a handful of
Democrats—particularly well-placed ones—could make a huge difference. Such
allies could help keep issues off the agenda, substitute symbolic initiatives for real
ones, add critical loopholes, or instigate unnecessary compromises with the GOP.
Willing Democrats could also provide valuable bipartisan cover for business-friendly
Republican initiatives.

In short, the newly mobilized business groups understood that Democrats and
Republicans could play distinct but complementary roles in fostering the politics of
winner-take-all. Clifton Garvin, chairman of both Exxon and the Business Roundtable
in the early 1980s, summarized the attitude toward partisanship this way: “The Round-
table tries to work with whichever political party is in power. We may each individually
have our own political alliances, but as a group the Roundtable works with every
administration to the degree they let us.”57

Hacker and Pierson 179

The extraordinary increase in the political capacities of business organizations was
the central story in Washington in the mid- to late 1970s. In a few short years, business
went from panic to preeminence. Cries of anguish from the corporate elite gave way, in
the words of a Newsweek reporter, to sounds of “purring.” Tellingly, the reversal in
governance—defeat of health care and labor law reform, the crushing of efforts to
establish a consumer protection agency and index the minimum wage to inflation, the
beginnings of the deregulation revolution, and, most dramatically, a major tax bill
anchored by steep cuts in the capital gains tax—all occurred during the late 1970s, at a
time when Democrats held the White House and had large majorities in both houses of
Congress. The broad advance of this business agenda prior to Reagan’s victory pro-
vides telling evidence that much of governance is a matter of organized combat rather
than electoral spectacle.

The Decline of Middle-Class Organization on Economic Issues
The shifting contours of organized combat were not exclusively a matter of corporate
mobilization. While the new clout of business represented the biggest development, it
was just one of a number of transformations within the universe of organizations con-
testing for political influence. These developments were diverse, and flowed from a
variety of forces in American society. They included everything from the continuing
growth of public interest groups in areas like the environment, feminism, and civil
rights to the rise of Christian conservatism. Yet there was a common theme linking
these disparate trends: all of them worked to diminish the presence of organized voices
addressing the economic concerns of ordinary Americans in Washington.

We focus here on three primary causes of this transformation: the decline of labor,
the shift away from mass-membership, locally rooted political organizations toward
centralized mailing-list, D.C.-based groups (with the notable but revealing exception
of Christian conservatism), and the increasing importance of money in American
political life.

Second only in importance to the ascent of business was the continuing decline of
organized labor. Of course, by international standards the United States has long been
distinguished by weak unions. Even from a relatively modest starting point, however,
the scale of their decline over the past few decades remains astonishing, and far more
severe than what has transpired in the majority of market economies. In the decade
after World War II, more than one-third of wage and salary workers in the United
States were in unions. By 2009 the share had dropped to 12.3 percent, and just 7.2
percent in the private sector.58

Economists often focus on unions’ contribution to greater equality through their
bargaining over wages. This is a mistake. It is the political role of organized labor on
issues of economic and social policy that matters most in the political economy.
Indeed, the political consequences of union power are difficult to exaggerate. Social
scientists have consistently shown that the strength of organized labor has a very large
impact on the development of social policies across nations. Strong labor unions are

180 Politics & Society 38(2)

closely associated with low levels of inequality and more generous social programs.59
In the American context, unions represent by far the most significant organized inter-
est with a sustained stake in the material circumstances of those with modest means.
The decline of organized labor has greatly diminished the pressure on policy makers
to sustain or refurbish commitments to social provision made in the middle decades of
the last century.

This profound organizational shift, with labor declining at the same time that busi-
ness greatly expanded its reach, receives remarkably limited discussion among students
of American politics. Moreover, the impact of the change on the American political
economy has been reinforced by other developments in the organizational universe.
Labor union decline has been just one component (although probably the most impor-
tant one) of what Theda Skocpol has demonstrated was a broader transformation of
political organizations since the 1960s: a shift from “membership to management.”60

With one major exception that we will discuss in a moment, mass-membership
organizations with true grassroots presence have atrophied. In their place have arisen
Washington-based advocacy groups with professional management teams and mailing-
list memberships. Some of these are “Astroturf” organizations, purporting to be broad
based but in actuality run by industry lobbyists. Others may have memberships in the
hundreds of thousands, but the participation of these members is limited to writing a
check in response to expertly designed solicitations from headquarters. Organizations
that once carried the economic concerns of ordinary citizens to Washington—not
just unions, but fraternal societies, broad civic organizations, and strong local party
operations—have largely lost their role in national politics.

To be sure, the shift from “membership” to “management” has not pushed politics
consistently in one ideological direction.61 New “public interest” organizations, orga-
nized around the environment and other single-issue causes associated with the left of
the political spectrum, have proliferated.62 But it is not just an issue of “left” versus
“right.” Rather, it is an issue of the capacity of working- and middle-class citizens to
find organized expression of their economic interests. The shifts on both the left and
right have worked to mute that expression.

On the left, the ascendant organized groups within the liberal coalition have become
a critical base of support for the Democratic Party. For instance, the group Emily’s List,
which supports women candidates for elective office, has become one of the single
largest sources of financial support for Democratic candidates. Yet with respect to gov-
ernance, these groups have almost never focused their attention on the economic issues
that most powerfully affect the working and middle classes. Their concerns, such as
environmentalism, women’s rights, and civil liberties, are instead largely those of the
most affluent members of the Democratic Party.

Even where the potential for a strong focus on economic disadvantage seems evi-
dent, as with groups advancing the concerns of minorities and women, D.C.
organizations have tended to give such matters low priority. The authors of a recent
comprehensive study of lobbying marvel at “the relative paucity of issues relating to
the poor and to the economic security of working-class Americans” on the lobbying

Hacker and Pierson 181

agenda of even public interest groups. They conclude that while lobbyists for the
affluent “do not always win, corporate, professional, and trade interests have a distinct
advantage in setting the lobbying agenda” and “that the inequities of social class are
sharply exacerbated by the organizational bias of interest-group politics.”63 We would
only add that this exacerbation has grown considerably more pronounced in the era of
winner-take-all inequality.

We mentioned that there was one exception to the trend away from grassroots orga-
nization with a solid footing in the working and middle classes. That exception—and
it is a very big one—is the rise of Christian conservatism. Yet ironically, it is an excep-
tion that has strongly reinforced the overall trend. By engaging these voters in politics
on explicitly nonmaterial grounds and aligning a large group of moderate-income
voters with a political party highly attuned to the economic interests of the wealthy,
this development has intensified the broad organizational shift in American society
away from middle-class economic concerns.

Of course, the impact of this development can be exaggerated. As Bartels and
others have convincingly argued, the rise of a more conservative American political
establishment does not seem to reflect an eclipse of economic concerns by “moral
issues.”64 Instead, voting has become more class stratified than it was in the long
period of prosperity that followed World War II. Yet it is still the case that the votes of
evangelicals “tip” to the Republican column at a much lower income level than similar
voters who do not identify as evangelicals. They do so, in part, because the groups that
help bring Christian conservative voters to the polls do so explicitly around moral
issues rather than economic ones. The leaders of the Christian right have formed an
alliance, through the Republican Party, with powerful interests deeply committed to
advancing a winner-take-all economy—another example of how the group basis of the
parties profoundly matters for the choices of voters.

One final shift in the organizational terrain has also been critical: the organizational
routines of American politics have been monetized. Campaigns have become more
focused on media and advertising, and thus more preoccupied with the huge sums of
funds needed to make such efforts. In response, politicians have turned to affluent
donors and organized interests as never before to finance these spiraling costs. The
parties, for example, now contact between one-quarter (Democratic Party) and one-
third (Republican Party) of the wealthiest of Americans directly during campaign
seasons, up from less than 15 percent of these high-income voters in the 1950s.65

Moreover, this has happened at exactly the same time that American society has
grown much more unequal. As donors to campaigns and causes and political activists
in their own right, America’s growing class of superrich simply cannot be ignored.
And while they can be found at all points on the political spectrum, the rich have dis-
tinctive policy preferences on economic issues. Though few surveys reach enough
truly rich Americans to form reliable inferences about the political preferences of the
extremely well-off, what evidence there is suggests that the rich are more conservative
economically—less supportive of economic redistribution and measures to provide
economic security—and, on average, better informed about policy than are ordinary

182 Politics & Society 38(2)

Americans.66 One survey regarding the 2003 tax cuts, for example, found that the
wealthiest were both more supportive of and more informed about the dividend and
capital gains tax cuts.67

The growing influence of money in politics has generally been helpful to
Republicans. The money chase reinforces the GOP’s low-tax, limited-government
message. For the Democrats on the other hand, it introduces major cross-pressures,
giving them a strong incentive to reduce their focus on issues of redistribution and
economic security to appeal to affluent voters and moneyed groups as sources of
campaign cash.

The marked changes in the organizational universe over the past generation contain
many complexities. Yet the net effect of these diverse organizational shifts—the
increasing organizational capacity of business, the decline of unions, the replacement
of grassroots organizations with Washington-based managerial ones appealing to the
affluent, the growing organizational clout of Christian conservatives, and the ever-
increasing presence of big money in political life—is actually straightforward: they
have dramatically weakened the organized political voice of ordinary citizens on eco-
nomic issues. Mass-membership organizations representing the economic interests of
voters from the middle to the bottom of the economic ladder, always weak, have atro-
phied further, while the capacity of employers, other business-linked interests, and the
affluent in general has greatly increased. In the next section, we suggest that these
changes have had a substantial impact on public policy.

Government’s Reshaping of the American Economy
If the politics of electoral spectacle is about winning elections, the politics of orga-
nized combat is about transforming what government does. Did the shifting balance of
organized interests lead to major changes in the governance of the American political
economy? The answer is yes, and in this section, we document these changes in four
crucial policy arenas: taxation, industrial relations, executive compensation, and finan-
cial markets.

Although this effort is preliminary, we seek to make a plausible case for two claims.
First, there is substantial evidence that policy developments of the past three decades—
through both enactments and drift—have made a central contribution to the surge of
winner-take-all economic outcomes in the United States. Second, there is also sub-
stantial evidence that organized interests were highly motivated, mobilized, and
involved in many of these developments.

Taxes
Any political analysis of rising inequality must be attentive to tax policy. Taxes repre-
sent perhaps the most visible way in which policy makers influence the distribution of
income. Furthermore, even casual observers are aware that policy since the Reagan
administration has often involved significant tax cuts for the well-to-do. Yet crucial

Hacker and Pierson 183

questions remain unanswered—questions we will address with regard to all four of the
policy areas we examine. How big has the policy shift been? Has it made a significant
contribution to rising inequality? Who exactly has benefited? Moreover, what does the
pattern of policy change suggest about political dynamics? When, and through what
mechanisms, has policy changed?

Thanks to extremely important work by Thomas Piketty and Emmanuel Saez, we
are now in a much better position to answer some of these questions.68 Building on their
research on changes in outcomes at the top of the income distribution, Piketty and Saez
have generated stunning data on the changing structure of federal taxation. Their data
make it possible to parse outcomes for relatively small groups within the top 1 percent.
Moreover, the data cover all of the major federal taxes—income, payroll, estate, and
corporate—generating a much broader view of policy change than previously possible.
Perhaps most important, the data allow Piketty and Saez to investigate tax incidence—
not just changes in the marginal rates in the tax code (which have figured prominently
in the discussions of political scientists) but the actual tax levels that households pay
once deductions and other maneuvers are taken into account.

Piketty and Saez’s results, presented in Figure 5, are striking in several respects.
First, they suggest that the role of taxes in rising inequality is much more pronounced
if one concentrates on the very top income groups. As they put it, “[I]t is important to
decompose the top of the income distribution into very small groups to capture the
progressivity of the tax system.”69 The changes of the tax rate for those at the ninetieth
percentile, and even the ninety-eighth percentile, have actually been quite modest over
the past four decades. By contrast, there have been startlingly large changes for those
in the top 1 percent. This is mostly because of the declining role of the corporate
income tax and the estate tax. Progressivity used to be very pronounced at the very top
of the tax code; now it is almost entirely absent. As Piketty and Saez summarize their
findings, “The 1960 federal tax system was very progressive even within the top per-
centile, with an average tax rate of around 35 percent in the bottom half of the top
percentile to over 70 percent in the top 0.01 percent.”70

Second, not only has the shift in policy been highly concentrated on the very afflu-
ent, the magnitude of the shift is quite large. Again, Piketty and Saez,

[T]he pre-tax share of income for the top 0.1 percent rose from 2.6 percent in
1970 to 9.3 percent in 2000. The rise in after-tax income shares was from 1.2
percent in 1970 to over 7.3 percent in 2000. In percentage point terms, the
increase in pretax incomes is slightly greater than the increase in posttax
incomes. But in terms of observing what those with very high incomes can
afford to consume, the after-tax share of income for those in this income group
multiplied by a factor of 6.1, while the pretax share of income multiplied by a
factor of 3.5. The tax reductions enacted in 2001 and 2003 have further weak-
ened the redistributive power of the federal income tax today.71

One can ask, counterfactually, what if the gap between pre- and posttax income of the
top 1 percent had not declined since 1970? According to Piketty and Saez, the top 0.1

184 Politics & Society 38(2)

percent had about 7.3 percent of after-tax income in 2000. If the gap between their
pre- and posttax income had remained what it was in 1970, they would have had about
4.5 percent of after-tax income. In other words, changes in tax incidence account for
roughly one-third of the total gains in income share for the top 0.1 percent in the last
four decades. (Moreover, this is just the direct effect of the decline in effective
taxation at the top. Many experts believe the rise in executive pay that we will discuss
in a moment has been fostered indirectly by the decline, which has increased the
confidence of compensation boards that executives will reap much of the astronomical
salaries that boards grant.)

Equally striking is the enduring nature of the policy shift. Although the early years
of the Reagan administration figure prominently, the change began in the 1970s. The
initial drop came through large cuts in the capital gains tax and other taxes on the
well-to-do passed, after very intense business lobbying, by a Congress composed of
large Democratic majorities in both chambers and signed into law by a Democratic
president.

Moreover, it is difficult to trace these developments to any straightforward shift in
public opinion regarding taxation.72 Research on both the tax cuts of the early 1980s
and those of the past few years suggest that organized interests have played a promi-
nent role, both in keeping tax cuts on the agenda and shaping policy to focus the gains

Figure 5. Average tax rates for top income groups, 1960–2004
Source: Thomas Piketty and Emmanual Saez, “How Progressive Is the U.S. Federal Tax System? A Historical
and International Perspective,” Journal of Economic Perspectives 21, no. 1 (2007): 3–24.

Hacker and Pierson 185

of tax-policy changes on those at the very top of the income distribution.73 The rise of
supply-side economics, with its emphasis on the negative effects of high marginal tax
rates on the well-off, surely helped the progress of tax cuts. Yet the supply-side ratio-
nale actually gained credence only after the initial flurry of tax cuts in the 1970s, and
it was largely exhausted as a serious intellectual force by the time the Bush administra-
tion and congressional Republicans slashed upper-income taxes in the early 2000s.

A number of specific developments within the broad arc of tax policy making sug-
gest an impressive focus on directing benefits not just to the very well-to-do (say, the
bottom half of the top 1 percent) but to the superrich. David Cay Johnston provides
copious evidence, for example, that there has been a steep decline, encouraged by Con-
gress, in IRS oversight of high-income returns, combined with a politically induced
shift of resources to oversight of Earned Income Tax Credit returns of the poor and
lower middle class.74 Studies of specific battles over the estate tax and the alternative
minimum tax have suggested that policy makers repeatedly chose courses of action that
strongly advantaged the very wealthy at the expense of the much larger group of the
merely well-to-do.75 In all these accounts, the influence of organized interests—par-
ticularly lobbyists representing business and the wealthy, conservative antitax groups
such as Americans for Tax Reform, and free-market think tanks like the Cato Insti-
tute—loom much larger than the sway of voters or pull of general public sentiment.

The shift toward a much more favorable tax regime for the wealthy has occurred
largely through policy enactments. The bulk of these have occurred under Republican
congressional majorities and Republican presidents (although often with significant
Democratic support). However, there have been revealing cases of drift as well, such
as the aforementioned protection of extremely favorable tax rules for hedge fund man-
agers. Although their extraordinary incomes are at the very top of the distribution
these financiers have been able to exploit features of tax law that predate the rise of
hedge funds. “Carried-interest” provisions allow these managers to treat the spectacu-
lar fees they are paid as capital gains, subject to only a 15 percent tax rate. Although
this loophole is widely viewed as indefensible, it has been successfully protected for
years through the strong backing of Wall Street supporters like Senator Chuck Schumer
of New York.76 President Obama’s 2010 budget proposal calls for repeal of the carried-
interest provisions, but crucial Democrats such as Max Baucus, chair of the Senate
Finance Committee, have already indicated that they are in no hurry to act on this
suggestion.

Industrial Relations
The evolution of industrial relations in the United States provides the second crucial
chapter in the tale of winner-take-all inequality’s rise. Research in comparative politi-
cal economy has long maintained that the organization of relationships between
employers and workers is of fundamental significance for a wide range of economic
interactions. For good reason: there are wide and highly consequential differences in

186 Politics & Society 38(2)

these arrangements within the universe of affluent democracies that have been repeat-
edly linked to major distributional and market differences across nations.

The United States has always stood out on measures of union strength as a nation
with a weak organized labor movement. Nonetheless, over the past three decades, the
structure of American industrial relations has changed profoundly. Union density—
the share of the workforce covered by collective bargaining—has fallen precipitously,
especially in the private sector. From organizing roughly one-third of the workforce,
union organization has fallen to under one-tenth of private sector employees.

Although an enormous body of work in comparative politics suggests that such a
transformation should have dramatic consequences, the subject receives little atten-
tion in the emerging literature on American inequality—especially and most strikingly
in works that focus on politics. Typically, the virtual collapse of private sector union-
ism is dismissed as nonpolitical, relatively modest in its impact, or both.

To be clear, some scholarly observers have forcefully argued that the decline of
unions plays an important role in growing wage inequality. At least among men, union
workers earn higher wages than their otherwise similar compatriots.77 Wage inequality
is greater in the lower half of the income distribution in the United States than it is in
any other affluent democracy.78 Yet comparative analyses suggest that such a narrow
empirical focus is likely to drastically understate the impact of unions. Organized
labor’s role is not limited to union participation in wage-setting. Much more funda-
mental is the potential for unions to represent an important organizational counterweight
to economic and political power at the top.79 Indeed, in the American context it is
worth stressing again that while there are many “liberal” groups in the universe of
organized interests, labor is the only organized interest focused on the broad economic
concerns of those with modest incomes.

A broader view highlights at least two important ramifications of union power.
First, unions have the capacity to play an important role in corporate governance.80 At
least under certain institutional conditions, they have the resources and incentives
necessary to provide a check on the scale of executive compensation, and to push for
compensation designs that align executive incentives more closely with those of their
firms. Indeed, even with their current weakness, American unions (through operations
like the AFL-CIO Office of Investment) represent one of only two organized interests
providing a potential check on managerial autonomy—the other being “investor col-
lectives” like public employee pension systems and (more problematically) mutual
funds.

Second, unions may play a significant role in political conflicts related to the dis-
tribution of income. On the one hand, they may push policy makers to address issues
of mounting inequality. On the other, they may recognize, highlight, and effectively
resist policy changes that further inequality. Consider just one example of how the
contemporary weakness of organized labor shows up in recent policy developments.
Well over a thousand registered lobbyists in Washington identify taxes as one of their
areas of activity. Yet during recent fights over the estate tax—a policy issue with large
and obvious distributional consequences—organized labor could supply only one

Hacker and Pierson 187

union lobbyist to address the issue.81 Amazingly, even this lobbyist was available only
quarter-time to work on all tax issues. In fact, the biggest organized opposition to
estate tax repeal came not from organized labor but from a group of billionaires led by
William Gates Sr. (Bill Gates’s father). It is hard to imagine a more telling illustration
of the existing organizational inequalities in Washington on economic issues.

Even if one accepts labor’s potential significance for politics and policy making,
however, there is the issue of how to account for union decline. Many would maintain
that the decline of unions in the United States is almost exclusively a market phenom-
enon. Unions are fading, it is often suggested, because of changes in the global
economy that relentlessly send their jobs overseas. Yet as in so many aspects of the
subject of inequality, a comparative view casts doubt on the idea that market impera-
tives are the only story, and that extreme union decline in the private sector is inevitable.
While unions have declined in significance in many Western nations, their presence
has fallen little or none in others.82 And one of those nations has the virtue for com-
parative analysis of being otherwise quite similar to the United States—namely,
Canada. Once more limited in reach than their American counterparts, Canadian
unions now enjoy much broader membership (about one-third of the nonagricultural
workforce) and have seen little decline—despite similar worker attitudes toward
unions in the two nations (Table 2).

The contrast with Canada suggests the possibility that fall in union density has been
in significant part a political process. And indeed there is considerable evidence this is
the case. Popular advocates of this view would stress events like Ronald Reagan’s
efforts to break the strike by air traffic controllers (PATCO), as well as changes in the
composition of the National Labor Relations Board after his election. As Henry Farber
and Bruce Western have cogently argued, however, a heavy emphasis on these overt
initiatives is difficult to reconcile with a close examination of the timing and patterns
of union decline.83

Our own account would emphasize alternative policy mechanisms and focus on
the consequences of government inaction rather than action. During the recent trans-
formation of the American political economy, the evolution of industrial relations is
perhaps the most consequential instance of policy drift. The absence of an updating
of industrial relations policy has had brutal effects on the long-term prospects of
organized labor. It is well understood that the American industrial relations system
contained certain structural features that gravely threatened unions after the 1960s.84
Well established in certain manufacturing industries in particular states, unions were
acutely vulnerable to the movement of manufacturing jobs to states where labor
rights were more limited, as well as shifts in employment to sectors that had not pre-
viously been organized.

An updating of industrial relations policy could have addressed some of these weak-
nesses. Careful comparison with Canada is revealing. As Table 2 suggests, the two union
movements diverged dramatically in their capacity to cope with a shifting economic
environment. The Canadian economist W. Craig Riddell has found that little of the
divergence can be explained by structural differences in the two nations’ economies, or

188 Politics & Society 38(2)

even by differing worker propensities to join a union.85 Rather, the difference is due to
the much lower (and declining) likelihood in the United States that workers who have an
interest in joining a union will actually belong to one. There is considerable evidence
that differences in labor law are a major part of the explanation. Prominent institutional
differences include Canadian practices that allow for card certification and first-contract
arbitration, ban permanent striker replacements, and impose strong limits on employer
speech.86 Meanwhile, aggressive antiunion activities by employers in the United States
have met little resistance from public authorities.

Union leaders during this period are often portrayed as having had their heads in
the sand. In fact, initial complacency gave way to aggressive attempts to seek reforms.
The emerging system of winner-take-all politics, however, responded with paralysis
and policy drift. The most prominent political struggle surrounded a major labor law
reform bill in 1978. Unions made this their top political priority. As Vogel recounts,
employers energetically countermobilized.87 Reform passed the House and com-
manded majority support in the Senate, but in a sign of the gridlock that would soon
seem normal, the bill’s opponents were able to sustain a filibuster. This occurred
despite the presence of large Democratic majorities in the House and Senate as well as
a Democratic president, as many Democrats supported the Senate filibuster.88

Labor’s defeat in this pitched battle had major ramifications, as participants drew
the appropriate lessons. It made it more difficult for labor to rally political support in
future struggles. In Frank Levy and Peter Temin’s words, it sent “signals that the third
man—government—was leaving the ring. From that point on, business and [labor]
would fight over rewards in [a] free market with most workers in an increasingly weak
position.”89 Even before Reagan took office, business adopted a much more aggres-
sive posture in the workplace, newly confident that government would not intervene.
Strike rates plummeted, and many of the strikes that did occur were acts of desperation
rather than indicators of union muscle.90

In short, the severe decline of organized labor in the United States was in part a
political outcome, driven by new antiunion enactments as well the failure to update

Table 2. Union Share of Wage and Salary Workers in the United States and Canada

United States (%) Canada (%) Percentage point difference

1960 30.4 32.3 1.9
1970 26.4 33.6 7.2
1980 22.2 35.7 13.5
1990 15.3 34.5 19.2
2000 13.5 32.4 18.9
2005 12.5 32.0 19.5

Sources: David Card, Thomas Lemieux, and W. Craig Riddell, “Unionization and Wage Inequality:
A Comparative Study of the U.S., the U.K. and Canada” (Working Paper 9473, National Bureau of
Economic Research, Cambridge, MA, 2003); Sylvia Allegreto, Lawrence Mishel, and Jared Bernstein, The
State of Working America (Ithaca, NY: Cornell University Press, 2008); and Statistics Canada. Labour Force
Historical Review 2008 (Table Cd3T09an). Ottawa, Statistics Canada, 2009 (Cat. No. 71F0004XCB).

Hacker and Pierson 189

policy to reflect the increasing relative strength of employers in a more global, service-
oriented economy. There were policy alternatives that would have reduced the decline,
and that had advocates within the United States. The opponents of such reforms, pos-
sessing formidable and growing organizational resources, mobilized effectively to
stop them. They then used their organizational resources to exploit the resulting drift
and launch a vigorous assault on American labor, with effects felt not just in the eco-
nomic sphere but also in American politics.

Corporate Governance and Executive Compensation
While changes in taxation and the reach of unions are obviously germane to inequality,
the case for discussion of corporate governance requires some defense. No one disputes
that rising executive pay has played a central role in mounting American inequality.
Although it is difficult to generate precise numbers, Piketty and Saez suggest that per-
haps half of the pretax gains of the top 1 percent reflect the explosion of executive
compensation.91 Figure 6 shows the development of total compensation for the top
three executives at the nation’s largest firms since the mid-1930s. As the figure shows,
executive pay skyrockets after 1980, with the largest increases coming in the 1990s.

Here we enter a sphere that Americans have typically treated as outside of politics,
but which comparative evidence suggest is strongly influenced by patterns of political
contestation.92 Cross-nationally there is tremendous variation in corporate governance
practices and in economic outcomes. Rising executive compensation is much more
evident in Anglo countries than in other rich democracies, and most evident of all in the
United States. Compensation structures remain much different in most of the advanced
industrial world than they are in the United States. For instance, where stock options
are used, they are often linked to long-term rather than short-term performance, as well
as to firm performance relative to industry norms. Thus, for example, when a rising
price of oil drives up the share price of energy companies, CEOs would receive extra
compensation only if their firm’s performance exceeded industry averages.

The rise in executive pay seems related to a broader shift in structures of corporate
governance, ostensibly toward maximization of “shareholder value” but arguably
toward what Peter Gourevitch and James Shinn call “managerism,” in which opportu-
nities for well-positioned elites to extract resources increase. The hypothesis to
consider is that the capacity of managers to engage in such extraction has increased.93
The issue, as the financier John Bogle has recently put it, is whether the United States
moved toward an “ownership society” in which managers serve owners or an “agency
society” in which managers serve themselves.

A school of thought (prominent in the field of law and economics) sees the United
States’s and other systems of diffused ownership as representing the best protections
for stockholders.94 That view relies heavily on a principal–agent analysis that sees
boards of directors as protecting shareholders through “arm’s-length negotiations”
with executives. Yet in many cases, boards are not playing the role outlined in this
theory. Lucian Bebchuk and Jesse Fried provide many findings more consistent with
a “board-capture” view, in which boards are so beholden to managers that they offer

190 Politics & Society 38(2)

little countervailing authority.95 Perhaps most telling, the design of CEO compensa-
tion often varies markedly from what one would expect if it were intended to encourage
good performance. Indeed, in much the same way that our view of interest groups
suggests opportunities to outflank disorganized “outsiders” (exploiting structural
advantages under conditions of asymmetric information), Bebchuk and Fried demon-
strate the prominence in corporate arrangements of what they call “camouflage.”
Patterns of executive compensation seem designed to mitigate public outrage rather
than limit excessive pay or link it more closely to value.

Most accounts of American inequality, if they touch on these issues at all, regard
them as matters of markets, not politics. At a minimum, however, policy makers (like
police officers who studiously look the other way) have done little to constrain the
dramatic shift that has taken place. This is in sharp contrast to the experience abroad,
where—even though executive pay is much lower—there have been substantial efforts
to monitor and impose limits on executive pay, and where sources of countervailing
power appear to be much stronger. Again, the comparative evidence of American (or
at least Anglo) exceptionalism with regard to executive pay suggests that there is noth-
ing about the structure of modern capitalism that makes such extraordinary increases
in executive salaries inevitable or even likely.

In fact, one can see strong links between American policy making and the explo-
sion of executive compensation. The most direct, and consequential, concerns the
development of stock options. This constitutes another highly significant example of

Figure 6. The evolution of executive compensation (mean pay of top executives)
Source: Carola Frydman and Raven Saks, “Historical Trends in Executive Compensation, 1936–2003”
(Working paper, Massachusetts Institute of Technology, Cambridge, MA, 2005).
Note: Sum of salaries, bonuses, long-term bonus payments, and the Black–Scholes value of stock option
grants for the three highest-paid officers in the largest fifty firms in 1940, 1960, and 1990.

Hacker and Pierson 191

policy drift. During the 1990s, stock options became the central vehicle for enhancing
executive compensation—indeed, roughly 50 percent of executive compensation
came through stock options by 2001. Although ostensibly a vehicle for linking pay to
performance, these options were almost always structured in ways that lowered the
visibility of high payouts (by removing them from financial accounts at the time they
were granted). Moreover, options were granted without creating strong connections
between payout and managerial effectiveness, even though instruments for establish-
ing such links were well known and widely used abroad.96 The value of options simply
rose along with stock prices, even if stock price gains were fleeting, or a firm’s perfor-
mance badly trailed that of other companies in the same sector. In the extreme but
widespread practice of “backdating,” option values were reset retroactively to provide
big gains for executives—a practice akin to repositioning the target after the fact to
make sure the archer’s shot hits the bull’s-eye.

To its credit, the Financial Accounting Standards Board (FASB), which oversees
accounting practices, recognized the distorted incentives early on. In 1993, it
announced plans to require the expensing of stock options. At the time options were
issued, firms would be required to estimate the likely costs of this form of compensa-
tion. Adopting the practice would have forced firms to acknowledge the true (large)
cost of issuing stock options in advance, and would almost certainly have diminished
their meteoric rise.

It never happened. Managers, especially in the rapidly growing tech industry,
mobilized opposition against the change.97 Led by Senator Joe Lieberman, Democrat
of Connecticut, elected officials moved quickly to block the proposed reform.98 By
overwhelming margins, the Senate passed a resolution expressing its disapproval.
Facing clear indications that action could lead elected officials to strip FASB of its
authority, the regulators backed off.99 This is a clear and important example of drift—
where organized political action effectively prevents the updating of policy in response
to changing market outcomes that were advantageous to the wealthy and powerful.

More broadly, policy making in the recent past has been unfriendly to the general
concept of encouraging countervailing powers that might have the resources needed to
check and monitor managers’ actions (including decisions related to executive pay). In
many nations, organized labor has served as a crucial institution that plays this coun-
tervailing role, both within firms and as a large shareholder through pension funds.
But while American unions have tried to challenge corporate pay prerogatives, their
comparative weakness has hampered and distracted them in this effort. Another pos-
sible check on managerial autonomy, private litigation, was significantly curtailed in
1995. That was the year in which a bipartisan coalition passed the Private Securities
Litigation Reform Act (PSLRA) over President Clinton’s veto, “making it much more
difficult for shareholders to win lawsuits against corporations or underwriters who
deliberately falsified information.”100 Republican Chris Cox, who President Bush
would later appoint as head of the SEC, was a major architect of the bill. In 1998, a
bipartisan coalition passed important amendments to the PSLRA, requiring all class-
action lawsuits for securities fraud to be brought in federal court, making it more
difficult to prove breach of fiduciary duty.

192 Politics & Society 38(2)

Political conflicts over recent efforts to increase board independence and capacity
for shareholders to offer an effective check on managers reveal a similar story. After a
series of massive scandals involving CEO enrichment that often wiped out the assets
of their shareholders and employees, elected officials faced strong pressure to reform
structures of U.S. corporate governance in the early 2000s. High levels of public out-
rage made opposition difficult. Still, analysts suggest that Sarbanes–Oxley would
have been blocked had not the collapse of WorldCom as the 2002 elections approached
made further obstruction too risky. Even then, policy makers were able to resist the
kinds of reforms that comparative analysis suggests would have put the most effective
checks on managerial autonomy.101 Indeed, the nature of the compromise embodied in
Sarbanes–Oxley is revealing. Managers accepted efforts designed to modestly increase
transparency and regulate some of the most blatant conflicts of interest. At the same
time, they quite effectively resisted efforts to increase the capacity of shareholders to
influence the governance of firms, including compensation practices.

The structure of American corporate governance—and its associated, distinctive
patterns of executive compensation—is a prime contributor to American winner-
take-all inequality. To a considerable if largely unrecognized extent this is a political
outcome. The policy alternative is not just hypothetical; other countries, including
ones with market systems relatively similar to the United States,’ have moved to
facilitate organized countervailing powers to managers.102 Yet in the United States,
even after Sarbanes–Oxley, huge differences remain in the relative capacity for orga-
nized action of managers and shareholders. And there is substantial evidence that
political authorities remain far more attentive to the interests of the former than the
latter. Consider former SEC chief Arthur Levitt’s telling depiction of the political
environment of the mid-1990s—one in which concentrated, highly organized inter-
ests wielded extensive power over agendas and policy design, preventing the updating
of policy to reflect changing realities:

During my seven and a half years in Washington . . . nothing astonished me
more than witnessing the powerful special interest groups in full swing when
they thought a proposed rule or a piece of legislation might hurt them, giving
nary a thought to how the proposal might help the investing public. With laser-
like precision, groups representing Wall Street firms, mutual fund companies,
accounting firms, or corporate managers would quickly set about to defeat even
minor threats. Individual investors, with no organized labor or trade association
to represent their views in Washington, never knew what hit them.103

Financial Deregulation
With the pillars of high finance now battered, it is easy to forget how dramatic the rise
of the American financial sector has been. Wages and salaries in U.S. financial ser-
vices roughly doubled their share in the economy over the past three decades,
expanding from 5 percent to nearly 10 percent of all wages and salaries between 1975
and 2007. The percentage of the economy composed of financial industry activities

Hacker and Pierson 193

exploded—from less than 2 percent just after World War II to more than 8 percent
(Figure 6). Between 1980 and 2007, financial service companies expanded their pro-
portion of company profits from around 13 percent to more than 27 percent. (In the
early 2000s, the share nearly reached one-third of all corporate profits—despite the
fact that employment in the sector was lower than it was thirty years ago.) Even staid
corporate giants got into the act. In 1980, GE earned 92 percent of its profit from
manufacturing. In 2007, more than half of GE’s profits came from its financial busi-
nesses. The home address of the winner-take-all economy has been neither Hollywood
nor Silicon Valley, but Wall Street.

The rise of finance is virtually synonymous with the rise of winner-take-all, since
in no major sector of the economy are gains so highly (and increasingly) concentrated
at the top. In part, this is just a chapter of the broader rise of executive pay. But the
other part is the runaway rewards that have flowed into the pockets of the rich out of
America’s widening range of exotic new financial institutions—from boutique hedge
funds to massive financial conglomerates crossing once-inviolable regulatory bound-
aries. These rewards have involved the development of complex new financial
products that, for most Americans, offered limited benefits—and sometimes real eco-
nomic risks—but which held out the prospect of big returns from every financial
transaction and spectacular incomes for those within the industry.

At the very top, the gains were mind-boggling. In 2002 it took $30 million to make
it to the top twenty-five hedge fund incomes; in 2004, $100 million; in 2005, $130
million. That year, five hedge fund managers made $500 million or more. These were
just the biggest of the big winners, however: in the two years before they began report-
ing losses that dwarfed the profits of prior years and brought many of their stockholders
to ruin, the venerable firms of Goldman Sachs, Merrill Lynch, Morgan Stanley,
Lehman Brothers, and Bear Stearns paid their employees bonuses of $75 billion. As
chronicled in popular accounts from Bonfire of the Vanities to Wall Street, wages in the
financial sector took off in the 1980s. But what were considered princely sums at that
time simply set the floor for what was to follow. The pace of the rise actually acceler-
ated in the 1990s, and again after the millennium. Current revelations about Wall
Street excesses make abundantly clear that the central chapter in the chronicle of
winner-take-all inequality is a tale of American finance.

As with executive compensation, attempts to discuss the political roots of this
economic transformation were long dismissed out of hand. Until a few years ago,
high finance was depicted as the purest of markets. When analysts referenced the
preferences of “Wall Street,” it was taken as almost a synonym for economic rational-
ity itself, rather than as a set of specific economic interests. Yet financial markets,
like others, are not prepolitical. Our financial system has always rested on an exten-
sive set of government interventions. Public policy establishes the legal environment
for financial transactions, including such crucial issues as what constitutes insider
dealing or an unacceptable conflict of interest, how much monitoring and transpar-
ency there will be in major financial transactions, and what levels of leverage and
risk are acceptable given the potentially massive externalities associated with

194 Politics & Society 38(2)

large-scale speculation. In response to market failures on all these dimensions in the
run-up to the Great Depression, extensive new federal regulations were designed
during the New Deal to ensure investor confidence and align private ambitions more
closely with broad economic goals such as financial stability. Regulations sought to
limit conflicts of interest, encourage transparency, and discourage reckless risk taking
that placed the desire for private gain in conflict with the integrity and security of the
financial system.

Over the last three decades, these relatively quiet and stable financial markets gave
way to ones that were both far more dynamic and—for good or ill—had far more
pervasive effects on the rest of the economy. Some of this dramatic shift was clearly
driven by changes in the nature of economic activity and the possibilities for financial
intermediation. Technological innovation made possible the development of new
financial instruments and facilitated spectacular experiments with securitization.
Moreover, as Robert Gordon and Ian Dew-Becker note, technology helped “shift Wall
Street from million-share trading days in the 1980s to billion-share trading days since
the late 1990s,” which “must also have contributed to the multi-fold increase in real
incomes of investment bankers and share traders.”104

Nonetheless, the gradual shredding of the post–New Deal rulebook for financial
markets did not simply result from the impersonal forces of “financial innovation.”
Titans of finance are wont to airbrush the role of government out of their tales of indi-
vidual economic success. Sanford Weill, the former chairman of Citigroup, put it this
way: “People can look at the last 25 years and say this is an incredibly unique period
of time. We didn’t rely on somebody else to build what we built.”105 But Weill and the
other financial chieftains who prospered so greatly during this “unique” period relied
a great deal on supportive politicians in government. Weill, for example, helped lead
the industry assault on the Glass–Steagall Act, stripping away key conflict-of-interest
and transparency rules. These “reforms” legalized powerful financial conglomerates,
such as the one produced by Weill’s merger of Travelers Insurance and Citibank to
form Citigroup (an entity that would become a ward of the American taxpayer only a
decade later).

Weill’s efforts were part of a massive increase in the political leverage of Wall
Street. The aptly labeled category “FIRE” (finance, insurance, real estate) has become
a huge and rapidly growing part of the lobbying and campaign finance world. Accord-
ing to the Center for Responsive Politics, political action committees and individual
employees of the financial services industry have contributed $2 billion to federal
campaigns since 1989. If one looks at the one hundred biggest contributing firms since
1989 the financial sector (finance, insurance, and real estate) totals more than the fol-
lowing sectors combined: energy, health care, defense, and telecoms. Twenty-five of
the sixty-five largest business contributors come from the financial sector.106

Individuals associated with financial firms are extremely well represented among
the big bundlers who now provide the majority of financing for many presidential cam-
paigns. Hedge funds have become increasingly prominent, and increasingly lean
Democratic. In the past few years, for example, the financial services industry has
“contributed nearly a third of all the campaign money that has flowed to the chairmen

Hacker and Pierson 195

of the House and Senate committees overseeing the [bank] bailout.”107 No nonpresi-
dential candidate has ever been as successful a fundraiser for the Democratic Party as
Charles Schumer, senator from New York. Schumer’s spectacular record in funding the
Democratic Senate Campaign Committee (as well as his own campaign war chest) was
made possible by his access to Wall Street, which in turn was facilitated by his emer-
gence as a prominent, reliable guardian for the financial industry.108 Countering this
remarkable array of organizational clout on issues related to regulatory finance was,
essentially, nothing beyond a scattering of critics inside and outside government.

Assessing the contribution of specific public and private initiatives to the gradual
restructuring of financial markets is a matter of considerable controversy. That public
action played a vital role, however, is less in doubt. A recent careful historical study by
Thomas Philippon and Ariell Reshef, for instance, suggests that regulatory restrictions
on banking had been reduced below their pre–New Deal levels by the late 1990s.109
Deregulation of bank branching (facilitating mergers and acquisitions) occurred grad-
ually. The separation of commercial and investment banking enforced by Glass–Steagall
was relaxed in 1987, 1989, and 1997, before finally being repealed by the Gramm–
Leach–Bliley Act of 1999. Ceilings on interest rates were deregulated in the early
1980s, especially through the Garn–St. Germain Depository Institutions Act of 1982.
Separations between banks and insurance companies required by the Bank Holding
Company Act of 1956 were repealed in 1999.

Other political efforts were geared to keeping regulators away from emerging areas
of financial activity—a classic form of policy drift. Robert Kuttner has recounted the
case of Wendy Gramm, George H. W. Bush’s chair of the Commodity Futures Trading
Commission (CFTC). Only a few days before leaving office in early 1993, she “issued
a midnight order sought by Enron allowing it to make over-the-counter trades in exotic
derivatives of its own creation, exempt from CFTC supervision.”110 A few weeks later
Mrs. Gramm received a seat on Enron’s board. Her husband, Phil Gramm, was an even
more prominent performer in the financial deregulation movement. As chair of the
Senate Banking Committee, he was instrumental in passing a little-noticed but milestone
piece of deregulation, the Commodity Futures Modernization Act, during the lame-duck
fall 2000 session of Congress. The 262-page bill was slipped as an amendment into a far
larger appropriations bill, and signed into law by President Clinton. It essentially
exempted derivatives and other exotic instruments from regulation by the agencies that
regulated more conventional financial assets. Gramm was also a constant and effective
opponent of those advocating a greater regulatory response to the rapidly evolving
financial marketplace. Then SEC chair Levitt, who was one of those advocates, later
recounted the ferocity of that opposition. According to Levitt, Gramm offered some
pointed and inadvertently prescient advice: “Unless the waters are crimson with the
blood of investors, I don’t want you embarking on any regulatory flights of fancy.”111

In the crucial 1990s, the pursuit of financial deregulation through both enactments
and drift was an all-Washington affair, advancing at both ends of Pennsylvania
Avenue and with help from Democrats like Schumer as well as Republicans like
Gramm. Many figures in the Clinton administration were as receptive as their Repub-
lican predecessors to requests for limited intervention. Treasury Secretary Robert

196 Politics & Society 38(2)

Rubin was a key actor in gaining administration approval for Gramm–Leach–Bliley.
In 1998, Clinton’s chair of the CFTC, Brooksley Born, raised the issue of regulating
derivatives. Greenspan, Rubin, and Levitt issue a joint statement denouncing her
initiative and forcing her to pull back. Rubin even actively sought to curtail CFTC’s
jurisdiction.

It is no longer controversial to say that high finance profited at the expense of
sensible regulations. But Philippon and Reshef have suggested just how intimate the
intertwining of rewards and rules has been.112 For decades after the stock market
crash of 1929, their research shows, working in finance was neither all that glamor-
ous nor all that lucrative. Financial jobs were pretty much run-of-the-mill white-collar
positions—a dramatic fall from grace for a sector that had once topped the national
pay charts. Indeed, the decline in financial pay in the wake of the stock market crash
of 1929 tracks almost perfectly the decline in the share of income going to the richest
1 percent during this period, just as the increase in financial pay since the 1980s
tracks almost perfectly the post-1970s ascent of the top 1 percent.

It also turns out to track the rise and fall of the regulatory framework that once
contained financial excesses. During the New Deal and after World War II, regulations
kept finance on a relatively short leash, and the pay of financial professionals in line
with white-collar norms. But the wave of financial deregulation since the 1980s fun-
damentally reversed this trend. Suddenly, and increasingly, financial professionals
were earning much more than similarly educated workers. Perhaps as much as half of
this expanding financial pay premium, Philippon and Reshef calculate, can be linked
to the deregulatory wave of the era.

Policy—both what government has done and what, as a result of drift, it has failed
to do—has played an absolutely central role in the rise of winner-take-all economic
outcomes. It is not the only thing that has mattered, but it has mattered a lot. More-
over, in the main areas where the role of government appears most significant, we see
a consistent pattern: active, persistent, and consequential action on the part of orga-
nized interests that stood to gain from a transformation of government’s role in the
American economy. A winner-take-all politics accompanied, and helped produce a
winner-take-all economy.

Conclusion
Explaining the remarkable rise of winner-take-all requires a true political economy—
that is, a perspective that sees modern capitalism and modern electoral democracies as
deeply interconnected. On the one side, government profoundly influences the econ-
omy through an extensive range of policies that shape and reshape markets. On the
other side, economic actors—especially when capable of sustained collective action
on behalf of shared material interests—have a massive and ongoing impact on how
political authority is exercised.

Recent economic accounts have missed the first side of this relationship. Concep-
tualizing government’s role in an excessively narrow way, they have attributed highly

Hacker and Pierson 197

concentrated gains to impersonal technological forces. While this interpretation has
some basis, neither the American experience nor comparative evidence suggests it can
bear the weight that economists have placed on it.

Recent political accounts have missed the second side of this relationship. Concep-
tualizing politics and policy in excessively narrow ways, they have sought to sustain
an explanatory focus on the median voter. Yet once the hyperconcentration of gains is
recognized, and the policy dynamics more clearly outlined, appeals to the median
voter look less and less like a plausible line of argument and more and more like a kind
of deus ex machina.

Perhaps surprisingly, the limits of these accounts flow from a similar source. Too
many economists and political scientists have treated the American political economy
as an atomized space, and focused their analysis on individual actors, from voters and
politicians to workers and consumers. But the American political economy is an orga-
nized space, with extensive government policies shaping markets, and increasingly
powerful groups who favor winner-take-all outcomes playing a critical role in politics.
Finding allies in both political parties, organized groups with a long view have suc-
cessfully pushed new initiatives onto the American political agenda and exploited the
opportunities created by American political institutions to transform U.S. public
policy—through new enactments and pervasive policy drift. In the process, they have
fundamentally reshaped the relative economic standing and absolute well-being of
millions of ordinary Americans. Politics and governance have been central to the rise
of winner-take-all inequality.

Acknowledgments

So many generous colleagues have assisted with this article that we would have to write
another to enumerate all our debts. Given the length of the present essay, we think it prudent
to limit our expressions of gratitude and add one of regret: We are sorry we cannot justly
thank by name the many people who, through their own work or through their reactions to or
support of ours, made this article possible. Nonetheless, we must thank Lee Drutman, Chloe
Thurston, and Sophie Rasmussen for their inspired research assistance, and David Karol, Bob
Kuttner, Frank Levy, Suzanne Mettler, and Philipp Rehm for their valuable comments and
sage advice. David, Bob, and Suzanne were among the distinguished thinkers who joined us
at a workshop in late spring of 2009, from which most of the commentaries in these pages
originate. We are deeply grateful to Fred Block for coordinating and funding this workshop
(as well as for his own comments), the Politics & Society editorial board for supporting it,
and everyone who participated in those two wonderful days for making it a high point of our
careers. Jacob S. Hacker and Paul Pierson are the authors of the forthcoming book, Winner-
Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the
Middle Class (New York: Simon & Schuster, 2010).

Declaration of Conflicting Interest

The authors declared no conflicts of interest with respect to the authorship and/or publication of
this article.

198 Politics & Society 38(2)

Funding

The authors received no financial support for the research and/or authorship of this article.

Notes

1. Robert Kuttner, The Squandering of America: How the Failure of Our Politics Undermines
Our Prosperity (New York: Knopf, 2007).

2. Lawrence R. Jacobs and Theda Skocpol, Inequality and American Democracy (New York:
Russell Sage, 2005); Martin Gilens, “Inequality and Democratic Responsiveness,” Pub-
lic Opinion Quarterly 69, no. 5 (2005): 778–96; Nolan McCarty, Keith Poole, and Howard
Rosenthal, Polarized America: The Dance of Ideology and Unequal Riches (Cambridge, MA:
MIT Press, 2006); Larry Bartels, Unequal Democracy: The Political Economy of the Gilded
Age (Princeton, NJ: Princeton University Press, 2008); and Nathan Kelly, The Politics of
Income Inequality in the United States (Cambridge, UK: Cambridge University Press, 2009).

3. David Mayhew, Congress: The Electoral Connection (New Haven, CT: Yale University
Press, 1974).

4. Thomas Piketty and Emmanual Saez, “Income Inequality in the United States, 1913–
1998,” Quarterly Journal of Economics 118, no. 1 (2003): 1–39; and Thomas Piketty and
Emmanual Saez, updated tables and figures for Piketty and Saez 2003, 2009, http://elsa.
berkeley.edu/~saez/TabFig2007.xls.

5. Paul Krugman, The Conscience of a Liberal (New York: Norton, 2007).
6. Congressional Budget Office (CBO), Historical Effective Federal Tax Rates (Washington,

DC: CBO, December 2007).
7. Real GDP per capita, adjusted for purchasing power parity, increased by 61.5 percent

between 1979 and 2005 in the United States and 60.5 percent in the EU fifteen (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, Sweden, and the United Kingdom). Calculated from Organi-
sation for Economic Co-operation and Development (OECD), OECD Stat (Paris: OECD),
http://puck.sourceoecd.org/rpsv/dotstat.htm, accessed May 8, 2008.

8. Jared Bernstein and Karen Kornbluh, “Running Faster to Stay in Place: The Growth of
Family Work Hours and Incomes” (Research paper, New America Foundation, Washing-
ton, DC, June 2005).

9. Calculated from OECD, OECD Stat. Also see Jonas Pontusson, Inequality and Prosperity:
Social Europe versus Liberal America (Ithaca, NY: Cornell University Press, 2005), 5.

10. Eli Berman, John Bound, and Stephen Machin, “Implications of Skill-Biased Technologi-
cal Change,” Quarterly Journal of Economics 113, no. 4 (1998): 1245–79; and Claudia
Goldin and Lawrence F. Katz, The Race between Education and Technology (Cambridge,
MA: Harvard University Press, 2008).

11. Richard Freeman, America Works: Critical Thoughts on the Exceptional U.S. Labor Mar-
ket (New York: Russell Sage, 2007).

12. Perhaps most telling, there is little sign of the same meteoric rise at the top among French-
speaking portions of Canada, where executives do not appear to be competing in the same
common labor market that has allowed American pay levels at the top to diffuse to the

Hacker and Pierson 199

rest of Canada. Emmanuel Saez and Michael R. Veall, “The Evolution of High Incomes in
Northern America: Lessons from Canadian Evidence,” American Economic Review 95, no.
3 (2005): 831–49.

13. Gregory N. Mankiw, “The Wealth Trajectory: Rewards for the Few,” New York Times,
April 20, 2008.

14. Phillip J. Cook and Robert H. Frank, The Winner-Take-All Society (New York: Free
Press, 1995).

15. See Gilens, “Inequality and Democratic Response”; McCarty, Poole, and Rosenthal,
Polarized America; Bartels, Unequal Democracy; and Kelly, Politics of Income Inequality.

16. Lane Kenworthy, “How Much Do Presidents Influence Income Inequality?” Challenge
(forthcoming)

17. Thomas Romer, “Individual Welfare, Majority Voting and the Properties of a Linear
Income Tax,” Journal of Public Economics 4 (1975): 163–85; Allan H. Meltzer and Scott
F. Richard, “A Rational Theory of the Size of Government,” Journal of Political Economy
89, no. 5 (1981): 914–27; and Kevin W. S. Roberts, “Voting over Income Tax Schedules,”
Journal of Public Economics 8, no. 3 (1977): 329–40.

18. Vincent A. Mahler and David K. Jesuit, “Fiscal Redistribution in the Developed Countries:
New Insights from the Luxembourg Income Study,” Socio-Economic Review 4 (2006):
483–511.

19 Thomas L. Hungerford, “Income Inequality, Income Mobility, and Economic Policy: U.S.
Trends in the 1980s and 1990s” (Report to Congress RL34434, Congressional Research
Service, Washington, DC, April 8, 2008).

20. McCarty, Poole, and Rosenthal, Polarized America, 118.
21. Ibid., 119.
22. U.S. Census Bureau, Profile of the Foreign-Born Population in the United States: 2000

(Washington, DC: Government Printing Office, 2001).
23. These data do not take into account changes in the distribution of voting, but McCarty,

Poole, and Rosenthal find little evidence of changes in the class distribution of voting in
their own analyses, which use the November Current Population Survey (CPS), so this
cannot be the explanation for our divergent findings. A recent analysis of the November
CPS by Jan Leighley and Jonathan Nagler finds a rise in class bias in voting. But this
increase seems to be driven by the stagnation of voting rates in the bottom quintile. Trends
in voting rates for the middle three quintiles—which are most crucial for the median-voter
approach—appear to track the top quintiles closely. Leighley and Nagler, “Class Bias in
the U.S. Electorate, 1972–2004” (paper, American Political Science Association annual
meeting, Philadelphia, August 31–September 3, 2006).

24. McCarty, Poole, Rosenthal, Polarized America; and Bartels, Unequal Democracy.
25. Fred Block, Richard Cloward, Barbara Ehrenreich, and Frances Fox Piven, The Mean Sea-

son: The Attack on the Welfare State (New York: Pantheon, 1987); Thomas Ferguson and
Joel Rogers, Right Turn: The Decline of the Democrats and the Future of American Politics
(New York: Hill & Wang, 1987); Charles Lindblom, Politics and Markets (New York: Basic
Books, 1977); and Frances Fox Piven and Richard Cloward, The New Class War: Reagan’s
Attack on the Welfare State and Its Consequences (New York: Pantheon, 1982).

200 Politics & Society 38(2)

26. Jacob S. Hacker, “Privatizing Risk without Privatizing the Welfare State: The Hidden
Politics of U.S. Social Policy Retrenchment,” American Political Science Review 98, no. 2
(2004): 243–60.

27. Mankiw, “Wealth Trajectory.”
28. Brad DeLong, “The Primacy of Politics for the Income Distribution?” http://delong

.typepad.com/sdj/2006/08/the_primacy_of_.html.
29. Peter A. Hall and David Soskice, eds., Varieties of Capitalism: The Institutional Founda-

tions of Comparative Advantage (Oxford, UK: Oxford University Press, 2001).
30. Kelly, Politics of Income Inequality.
31. David Mayhew, Divided We Govern: Party Control, Lawmaking, and Investigations,

1946–1990 (New Haven, CT: Yale University Press, 1991).
32. Jacob S. Hacker, “Privatizing Risk without Privatizing the Welfare State: The Hidden

Politics of Social Policy Retrenchment in the United States,” American Political Science
Review 98:2 (May 2004): 243-60.

33. Calculated from data at http://www.senate.gov/pagelayout/reference/cloture_motions/
clotureCounts.htm. For recent analyses of the filibuster, see Gregory J. Wawro and
Eric Schickler, Filibuster: Obstruction and Lawmaking in the U.S. Senate (Princeton,
NJ: Princeton University Press, 2006); Wawro and Schickler, “Legislative Obstruction-
ism,” in Annual Review of Political Science, vol. 13: forthcoming; Gregory Koger,
“Filibustering and Majority Rule in the Senate: The Contest over Judicial Nomina-
tions, 2003–2005,” in Why Not Parties? Party Effects in the United States Senate, ed.
Nathan Monroe, David Rohde, and Jason Roberts (Chicago: University of Chicago
Press, 2008), 159–77.

34. Jacob S. Hacker and Paul Pierson, Off Center: The Republican Revolution and the Erosion
of American Democracy (New Haven, CT: Yale University Press, 2005).

35. Peter Bachrach and Morton S. Baratz, “Decisions and Non-Decisions: An Analytical
Framework,” American Political Science Review 57:3 (September 1963): 632-42.

36. Lee Drutman, “The Business of America Is Lobbying: Explaining the Growth of Corporate
Political Activity in Washington, D.C.” (Unpublished manuscript).

37. Kathleen Bawn, Marty Cohen, David Karol, Seth Masket, Hans Noel, and John Zaller,
“A Theory of Political Parties” (Unpublished manuscript, University of California, Los
Angeles Political Science).

38. Hacker and Pierson, Off Center; and Bawn et al., “Theory of Political Parties.”
39. Douglas R. Arnold, The Logic of Congressional Action (New Haven, CT: Yale University

Press, 1990).
40. John Kingdon, Agendas, Alternatives and Public Policies (Boston: Little, Brown, 1984).
41. L. Osberg and T. M. Smeeding, “Fair Inequality? An International Comparison of Attitudes

to Pay Differentials,” American Sociological Review 71, June (2006): 450–73; Lawrence
Jacobs and Benjamin Page, Class War? What Americans Really Think about Economic
Inequality (Chicago: Chicago University Press, 2009).

42. Bartels, Unequal Democracy; Lawrence Jacobs and Benjamin Page, “Who Influences U.S.
Foreign Policy?” American Political Science Review 99, no. 1 (2005): 107–23.

43. Frederick Solt, “Economic Inequality and Democratic Political Engagement,” American
Journal of Political Science 52, no. 1 (2008): 48–60; Joe Soss and Lawrence R. Jacobs,

Hacker and Pierson 201

“The Place of Inequality: Non-participation in the American Polity,” Political Science
Quarterly 124, no. 1 (2009): 95–125.

44. Paul Pierson and Theda Skocpol, eds., The Transformation of American Politics (Princeton,
NJ: Princeton University Press, 2007).

45. R. Shep Melnick, “From Tax and Spend to Mandate and Sue: Liberalism after the Great
Society,” in The Great Society and the High Tide of Liberalism, ed. Sidney M. Milkis
(Amherst: University of Massachusetts Press, 2005), 387–410.

46. David Vogel, Fluctuating Fortunes: The Political Power of Business in America (New York:
Basic Books, 1989), 59.

47. Lewis Powell, “Confidential Memorandum: Attack on the Free Enterprise System,” August
23, 1971, quoted in Kim Phelps-Fein, Invisible Hands: The Making of the Conservative
Movement from the New Deal to Reagan (New York: Norton, 2009), 160.

48. Ibid.
49. National Journal, January 5, 1974, 14.
50. Quoted in David Vogel and Leonard Silk, Ethics and Profits (New York: Simon &

Schuster, 1976), 65.
51. Thomas Edsall, The New Politics of Inequality (New York: Norton, 1984).
52. Philip A. Klinkner, The Losing Parties: Out-Party National Committees, 1956–1993

(New Haven, CT: Yale University Press, 1994).
53. Gary C. Jacobson, “The Republican Advantage in Campaign Finance,” in John E. Chubb

and Paul Peterson, eds., The new Direction in American Politics (Washington, D.C.:
Brookings, 1985), 154.

54. Robert Kuttner, The Life of the Party (New York: Penguin, 1988), 86.
55. Gary C. Jacobson, “Party Organization and the Distribution of Campaign Resources:

Republicans and Democrats in 1982,” Political Science Quarterly 100:4 (Winter 1985/86):
603-25.

56. Charles Walker quoted in Sidney Blumenthal’s The Rise of the Counter-Establishment
(New York: Harper & Row, 1988), 81.

57. Sidney Blumenthal, “The Rise of the Counter-Establishment: The Conservative Ascent to
Political Power” (New York: Times Books, 1986), 70.

58. U.S. Bureau of Labor Statistics, “Union Members Summary,” 2010, http://www.bls.gov/
news.release/union2.nr0.htm.

59. See, e.g., Evelyne Huber and John Stephens, Development and Crisis of the Welfare
State: Parties and Politics in Global Markets (Chicago: University of Chicago Press,
2001).

60. Theda Skocpol, Diminished Democracy: From Membership to Management in American
Civic Life (Norman: University of Oklahoma Press, 2004).

61. Ibid.
62. Jeffrey Berry, The New Liberalism: The Rising Power of Citizen Groups (Washington, DC:

Brookings Institution, 2000).
63. Frank Baumgartner, Jeffrey M. Berry, Marie Hojnacki, David C. Kimball, and Beth L.

Leech, Lobbying and Policy Change: Who Wins, Who Loses, and Why (Chicago: University
of Chicago Press, 2009), 255–58.

202 Politics & Society 38(2)

64. Bartels, Unequal Democracy; also see Andrew Gelman, Red State, Blue State, Rich State, Poor
State: Why Americans Vote the Way They Do (Princeton, NJ: Princeton University Press, 2008).

65. Andrea Louise Campbell, “Parties, Electoral Participation, and Shifting Voting Blocs,” in
The Transformation of American Politics, ed. Paul Pierson and Theda Skocpol (Princeton,
NJ: Princeton University Press, 2007), 68–102.

66. Martin Gilens, “Preference Gaps and Inequality in Representation,” PS: Political Science
& Politics 42 (2009): 335–41.

67. Hacker and Pierson, Off Center.
68. Thomas Piketty and Emmanual Saez, “How Progressive Is the U.S. Federal Tax System?

A Historical and International Perspective,” Journal of Economic Perspectives 21, no. 1
(2007): 3–24.

69. Ibid., 12.
70. Ibid., 12.
71. Ibid., 15
72. Hacker and Pierson, Off Center, chap. 3.
73. For tax cuts of the early 1980s, see Edsall, New Politics of Inequality, 226–33; Ferguson

and Rogers, Right Turn, 119–24; and David Stockman, The Triumph of Politics: Why the
Reagan Revolution Failed (New York: Harper & Row, 1987). For tax cuts in the past few
years, see Hacker and Pierson, Off Center, chap. 3.

74. David Cay Johnston, Perfectly Legal (New York: Portfolio Books, 2003).
75. Michael J. Graetz and Ian Shapiro, Death by a Thousand Cuts: The Fight over Taxing

Inherited Wealth (Princeton, NJ: Princeton University Press, 2005). Hacker and Pierson,
Off Center.

76. See Eric Lipton and Raymond Hernandez, “A Champion of Wall Street Reaps the Ben-
efits,” New York Times, December 14, 2008, A1.

77. David Card, Thomas Lemieux, and W. Craig Riddell, “Unionization and Wage Inequality:
A Comparative Study of the U.S., the U.K. and Canada” (Working Paper 9473, National
Bureau of Economic Research, Cambridge, MA, 2003).

78. Pontusson, Inequality and Prosperity.
79. Frank Levy and Peter Temin, “Inequality and Institutions in the 20th Century America”

(Working Paper 07-17, Massachusetts Institute of Technology, Department of Economics,
Cambridge, MA, May 1, 2007).

80. Peter A. Gourevitch and James Shinn, Political Power and Corporate Control: The New
Global Politics of Corporate Governance (Princeton, NJ: University of Princeton Press, 2005).

81. Graetz and Shapiro, Death by a Thousand Cuts.
82. According to the ICTWSS Database (Institutional Characteristics of Trade Unions, Wage

Setting, State Intervention and Social Pacts), of the nineteen rich democracies for which
data are available from the early 1970s through the mid-2000s, union density increased
in four (Finland, Belgium, Denmark, and Sweden) and declined by less than 15 percent
in four others (Norway, Canada, Italy, and Luxembourg). In seven nations (Switzerland,
the United Kingdom, Denmark, Ireland, the Netherlands, Japan, and Austria), the decline
was between one-third and one-half. In four more, it was greater than 50 percent: Australia
(55 percent), New Zealand (59 percent), France (63 percent), and the United States

Hacker and Pierson 203

(57 percent). Only France had lower union density at the end of the period, though in
France, unlike in the United States, the effects of statutory bargaining extend to nearly
the whole workforce. Jelle Visser, University of Amsterdam, http://www.uva-aias.net/208.

83. Henry Farber and Bruce Western, “Ronald Reagan and the Politics of Declining Union
Organization,” British Journal of Industrial Relations 40 (2002): 385–402.

84. Nelson Lichtenstein, State of the Union (Princeton, NJ: Princeton University Press, 2002);
and Paul Osterman, Securing Prosperity—The American Labor Market: How It Has
Changed and What To Do about It (Princeton, NJ: Princeton University Press, 1999).

85. W. Craig Riddell, “Unionization in Canada and the United States: A Tale of Two Coun-
tries,” in Small Differences that Matter: Labor Markets and Income Maintenance in Can-
ada and the United States, ed. David Card and Richard Freeman (Chicago: University of
Chicago Press and National Bureau of Economic Research, 1993), 109–48.

86. John Goddard, “Do Labor Laws Matter? The Density Decline and Convergence Thesis
Revisited,” Industrial Relations 42, no. 3 (2003): 458–92.

87. Vogel, Fluctuating Fortunes.
88. A similar saga is currently playing out on Capitol Hill, where a major labor law reform

will pass the House but almost certainly fail to overcome a Senate filibuster supported by
a number of Democrats.

89. Levy and Temin, “Inequality and Institutions,” 33.
90. Farber and Western, “Ronald Reagan and the Politics of Declining Union Organization.”
91. Piketty and Saez, “How Progressive Is the U.S. Federal Tax System?” Also see Ian

Dew-Becker and Robert J. Gordon, “Where Did the Productivity Growth Go? Inflation
Dynamics and the Distribution of Income,” Brookings Papers in Economic Activity 2
(2005): 67–150; and Robert J. Gordon and Ian Dew-Becker, “Controversies about the
Rise of American Inequality: A Survey” (Working Paper 13982, National Bureau of Eco-
nomic Research, Cambridge, MA, May 2008).

92. Mark Roe, Political Determinants of Corporate Governance: Political Context, Corporate
Impact (Oxford, UK: Oxford University Press, 2003); and Gourevitch and Shinn, Political
Power and Corporate Control.

93. As noted earlier, there is a connection between the previous discussion of tax policy and
the current discussion of executive compensation. The sharp fall in true tax rates on very
high incomes may have stimulated the rise in executive pay since the recipients capture so
much more of any rise in compensation. Carola Frydman and Raven Sax estimate that “had
tax rates been at their year 2000 level for the entire sample period, the level of executive
compensation would have been 35 percent higher in the 1950s and 1960s.” “Executive
Compensation: A New View from a Long-Term Perspective, 1936–2005” (Working Paper
W14145, National Bureau of Economic Research, Cambridge, MA, June 2008), http://ssrn.
com/abstract=1152686.

94. Kevin J. Murphy, “Politics, Economics, and Executive Compensation,” University of
Cincinnati Law Review 63 (1995): 714–46.

95. Lucian Bebchuk and Jesse Fried, Pay without Performance: The Unfulfilled Promise of
Executive Compensation (Cambridge, MA: Harvard University Press, 2004).

96. Arthur Levitt, Take on the Street: How to Fight for Your Financial Future (New York:
Vintage, 2002).

204 Politics & Society 38(2)

97. Ibid.
98. Lieberman received strong backing from other Democrats in the Senate, including Califor-

nia’s two members who drew heavily on the support of interests in Silicon Valley.
99. After more than a decade of delay, and following a wave of options-related scandals, the

Financial Accounting Standards Board finally introduced expensing in 2004. Even then
there was fierce, bipartisan opposition in Congress.

100. Kuttner, Squandering of America, 78.
101. John W. Cioffi, “Building Finance Capitalism: The Regulatory Politics of Corporate Gov-

ernance Reform in the United States and Germany,” in The State after Statism: New State
Activities in the Age of Liberalization, ed. Jonah Levy (Oxford, UK: Oxford University
Press, 2006), 185–229.

102. Gourevitch and Shinn have an interesting argument about why the British system (similar
in important respects to the American one) seems to be less vulnerable to regulatory cap-
ture by managers. They stress the majoritarian structure of political institutions, which puts
greater checks on the political influence of highly concentrated interests.

103. Levitt, Take on the Street, 250.
104. Gordon and Dew-Becker, “Controversies about the Rise of American Inequalities,” 25.
105. Louis Uchitelle and Amanda Cox, “The Richest of the Rich, Proud of a New Gilded Age,”

New York Times, July 15, 2007, A1.
106. Center for Responsive Politics, “Finance/Insurance/Real Estate-Long-Term Contribution

Trends,” http://www.opensecrets.org/industries/indus.php?ind=F.
107. Fredreka Schouten, Ken Dilanian, and Matt Kelley, “Lobbyists in Feeding Frenzy,” USA

Today, September 25, 2008.
108. Lipton and Hernandez, “Champion of Wall Street.”
109. Thomas Philippon and Ariell Reshef, “Wages and Human Capital in the U.S. Financial

Industry: 1909–2006” (Working Paper W14644, National Bureau of Economic Research,
Cambridge, MA, January 2008).

110. Kuttner, Squandering of America, 77.
111. Levitt, Take on the Street.
112. Philippon and Reshef, “Wages and Human Capital.”

Bios

Jacob S. Hacker (jacob.hacker@yale.edu) is the Stanley B. Resor Professor of Political Sci-
ence at Yale University. He is the coauthor, with Paul Pierson, of Off Center: The Republican
Revolution and the Erosion of American Democracy. His other books include The Great Risk
Shift: The New Economic Insecurity and the Decline of the American Dream, The Divided Wel-
fare State: The Battle over Public and Private Social Benefits in the United States, and The
Road to Nowhere: The Genesis of President Clinton’s Plan for Health Security.

Paul Pierson (pierson@berkeley.edu) is the John Gross Professor of Political Science at the
University of California, Berkeley. He is the coauthor of Off Center and the author of Politics in
Time: History, Institutions, and Social Analysis and Dismantling the Welfare State? Reagan,
Thatcher, and the Politics of Retrenchment.

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