July 28, 2025
This is Part IV of Stone Center Senior Scholar Paul Krugman’s series “Understanding Inequality,” which originally appeared on his Substack newsletter.
By Paul Krugman
Share of the top 0.01% in total wealth, from the GC Wealth Project.
Who said this?
If there are men in this country big enough to own the government of the United States, they are going to own it; what we have to determine now is whether we are big enough, whether we are men enough, whether we are free enough, to take possession again of the government which is our own.
No, it wasn’t Bernie Sanders or Alexandria Ocasio-Cortez. It’s a quote from The New Freedom, Woodrow Wilson’s campaign platform in the 1912 presidential election.
Wilson was a vile racist, even for his time, and his reputation has suffered appropriately. But he was also a progressive on economic policy. And I’ve always been struck by the fact that in the early 20th century a politician could declare that great concentrations of wealth were a threat to democracy without being considered a radical, un-American Marxist. Wilson won that election!
Politicians, even progressives, are far more timid these days. Yet we are once again living in an era in which there are men big enough to own the U.S. government — and to a large extent they do. For a while Elon Musk exerted more power over the operations of the U.S. government than any cabinet member or elected official short of Donald Trump himself. Musk is currently on the outs, but the Trump administration is stuffed full of billionaires and people who take their marching orders from billionaires. Congress appears to be about to enact legislation, the One Big Beautiful Bill Act, that billionaires love even though the broader public hates all its main provisions. (Ed.’s note: that bill has since passed.)
How did we get here?
This is my latest entry in a series of primers on inequality; here are Part I, ;Part II, and ;Part III. Today my focus will be on extreme wealth concentration — the rise of an American oligarchy. I will address the following:
- Tracking the rise of extreme wealth
- How did our modern oligarchs get so rich?
I’ll eventually want to talk about the political and social consequences of extreme wealth concentration, and how it undermines democracy. But that will have to wait for later posts.
Extreme wealth
Ten people are sitting in a bar. They’re more or less median Americans, that is, people whose income and wealth is close to the middle of the overall distribution, so their average net worth is around $250,000.
Then Elon Musk walks in. The people who were already there haven’t gotten any richer, but the average wealth of the people in the bar has now risen to around $40 billion.
The moral of this parable is that looking at average wealth tells you very little about the state of America, because so much of that wealth is concentrated in the hands of a relative handful of people.
Just to be clear, I’m talking about wealth — the value of one’s assets — rather than income — the amount one takes in over the course of a year, which for most people consists mainly of their wages. Income is also unequally distributed, much more so than it was a few decades ago. But wealth is really concentrated in a few hands. Even middle-class Americans typically own the equity in their houses, the money in their 401(k)s, and not much else. But a large part of the nation’s wealth is held by a few thousand people.
And the share of wealth held by that super-elite has soared since the 1980s.
The chart at the top of this post shows the percentage of U.S. wealth held by the richest 0.01% of Americans. The solid line is an estimate from the World Inequality Database, Thomas Piketty’s group in Paris. The shaded lines are other estimates assembled by the GC Wealth Project — an international research effort centered at the Stone Center on Socio-Economic Inequality at CUNY’s Graduate Center, which happens to be where I sit. As I will explain shortly, estimating the wealth of the very rich is a tricky endeavor. There’s some spread in the estimates, but almost all studies agree that not only have the wealthy become much wealthier since 1980, but that their wealth has grown much faster than that of ordinary households.
By the way, the lines on the chart that show relatively small increases in wealth concentration arrive at that conclusion by adding some pension benefits, including Social Security, to estimates of lower- and middle-class wealth. That’s a methodological debate not worth having here. In any case it’s irrelevant to the point that there has been a vast rise in the wealth of the vastly rich.
Back to the chart: It’s important to realize that this is a chart for the 0.01% — one ten thousandth of the population. Some people still use “the one percent” as shorthand for the wealthy, but it only takes a few million dollars to put you in the top 1 percent. That may sound like a lot to most people, but it’s barely pocket change for the truly wealthy. The big action in wealth inequality has involved just a few thousand, maybe even a few hundred people.
Estimating the wealth of the superrich is tricky, for a couple of reasons. One is that the number of superrich is very small, and this poses a problem for the survey methods we mostly rely on to measure income inequality. Survey methods don’t work well for tracking a very small group that nonetheless controls a large percentage of national wealth. Survey 10,000 people and you might — might — reach one member of the .01%. A much larger sample will probably only capture a few of the very wealthy, not enough to provide any confidence that the sample is representative of the true state of wealth inequality in the U.S.
Statisticians who work on this issue are well aware of this problem and use a variety of strategies to overcome it. Nonetheless, estimates of very large fortunes are less reliable than we’d like.
Furthermore, some of the superrich evade taxes by hiding much of their wealth in offshore tax havens. Gabriel Zucman, one of the top experts in this field, wrote an eye-opening book about this subject titled The Hidden Wealth of Nations.
While there are some differences on just how much the concentration of wealth has increased in the United States since 1980, everything we see around us points to a world in which a handful of oligarchs are wealthy on a scale that would have been unimaginable a few decades ago. And they don’t mind flaunting it.
Not so long ago, many on the right tried to deny that American inequality was rising. At the same time some of the superrich tried to keep a low profile — when Forbes introduced its first report on the 400 richest Americans, some people pleaded to be left off the list. But now we live in a world of proliferating superyachts and “super-weddings,” with Jeff Bezos renting large parts of Venice for his upcoming nuptials. More important, it’s a world in which there are, as Woodrow Wilson warned, men big enough to own the government.
Are we living in a repeat of the Gilded Age, the era between the Civil War and the First World War when railroads, mining, industry and banking created a new class of superrich? Yes. Granted, the available data suggest that the very biggest Gilded Age fortunes, adjusted for inflation, were probably larger than their modern counterparts. That is, John D. Rockefeller was probably richer than Elon Musk and Andrew Carnegie richer than Jeff Bezos. Yet as best we can tell the richest few hundred or few thousand Americans control more or less the same share of the nation’s wealth as their counterparts did circa 1900. And as I’ll argue in future posts, the political and social impact of our modern oligarchs may be even more malign than that of the robber barons in their heyday.
What happened?
The winner-take-all economy
The story of how America became an oligarchy is complex and hasn’t been studied nearly as thoroughly as the subject deserves. While I admit that I am not an expert on the subject, I do read and talk to actual experts. So I may be somewhat more willing than these true experts to tell a simplified — possibly oversimplified — story.
As I see it, there have been two phases in the rise of extreme wealth since the 1980s. The first phase, from the mid-80s until the mid-2010s, largely involved financial engineering, especially corporate takeovers and leveraged buyouts. It was the era of Gordon Gekko or, if you prefer your characters nonfictional, of Henry Kravis and Barbarians at the Gate.
The second phase of the rise of oligarchy in America has been centered on technology, specifically on the way network effects (which I’ll explain in a minute) create quasi-monopolies that are, in a meta sense, akin to the monopolies that underlay the biggest Gilded Age fortunes.
What was wealth like in the 1980s, before the big surge at the very top of the distribution? While there were some very rich Americans in the 1980s, they weren’t remotely as rich as today’s superrich. And the sources of wealth at the top were relatively diverse and, I’d say, prosaic.
Here’s Forbes’ list of the 10 richest Americans in 1987, together with the sources of their wealth:
- Sam Walton (retail)
- John Kluge (media)
- Ross Perot (technology)
- David Packard (technology)
- Samuel Newhouse (media)
- Donald Newhouse (media)
- Lester Crown (manufacturing)
- Rupert Murdoch (media)
- Warren Buffet (investing)
- Leslie Wexner (retail)
Of the top 10 in 1987, two fortunes were founded on old-fashioned retail, four were founded on old-fashioned media (newspapers, magazines, and advertising), two were founded on old-fashioned technology (computer manufacturing and data processing), one from old-fashioned investing and one arose from manufacturing.
Notably, in the years that followed the sources of extreme wealth, at least in the United States, became both less diverse and more exotic. And the reason is clear. In 2016 Caroline Freund and Sarah Oliver published a systematic study titled simply The Origins of the Superrich. One section of their paper was bluntly titled “Extreme wealth is driven by finance in the United States.”
They noted in particular the extraordinary growth in the number and wealth of hedge-fund billionaires like Carl Icahn and Paul Tudor Jones:
Source: Freund and Oliver
How did financial wheeling and dealing make a few people so rich? Different people tell different stories. The financiers themselves and their defenders say, of course, that they were bringing new efficiency to corporations that had gotten fat and lazy. “Greed is good.” There is, however, no sign of these purported efficiency gains in, say, U.S. productivity growth. That is, there is nothing in overall economic data substantiating the claim that corporate raiders made U.S. companies more efficient.
I’ve always been more persuaded by an argument made by Andrei Shleifer and Larry Summers in a 1988 paper titled “Breach of trust in hostile takeovers.”
What Shleifer and Summers argued (my summary, not theirs) was that for a generation or more after World War II U.S. corporations were not simply mechanisms for maximizing shareholder value. They were, instead, the kind of institutions Peter Drucker described in his classic book Concept of the Corporation: organizations that balanced the interests of various “stakeholders” that included customers, workers, and suppliers as well as shareholders.
But then came the Gordon Gekkos, who were able to increase short-term profits by, in effect, breaking the implicit contracts corporations had with their various stakeholders, notably by slashing wages and benefits. They were able to do this in part because of a changed political environment that disempowered workers in particular.
Since the early 2010s, however, the story of extreme wealth has changed. Here’s the Forbes top 10 for 2024, with their companies:
- Elon Musk (Tesla)
- Jeff Bezos (Amazon)
- Mark Zuckerberg (Facebook)
- Larry Ellison (Oracle)
- Warren Buffett (Berkshire Hathaway)
- Larry Page (Google)
- Sergey Brin (Google)
- Steve Ballmer (Microsoft)
- Bill Gates (Microsoft)
- Michael Bloomberg (Bloomberg)
Except for Buffett, these are all information-technology-based fortunes. (Yes, Bloomberg has some media activities, but its position depends on those must-have Bloomberg machines.)
Why have some technology companies made their founders incredibly rich? The answer, as I’ve already suggested, is network effects: people have an incentive to buy from these companies because so many other people buy from them.
Thus, if you have a busy life, it takes a lot of effort not to order stuff from Amazon, which offers fast delivery on a huge range of products. The reason it’s able to do this is that it maintains an immense system of distribution centers near major markets. And it can maintain that distribution system because it has so many customers.
In a slightly different way, it’s hard not to use Microsoft Office, because everyone else does. To exchange information, you have to be facile with Excel, PowerPoint, and Word, which makes it natural to use them yourself (even though I don’t know anyone who loves them.)
The point is that many, probably most of today’s superrich owe their wealth to their ownership stakes in companies that are de facto monopolies thanks to network effects.
I should say that Elon Musk is, in a way, the odd man out here. Tesla has not built the kind of self-sustaining market dominance enjoyed by Amazon or Microsoft. Its stock, however, is priced as if it has achieved that kind of position, or will any day now, presumably thanks to Musk’s genius.
Color me skeptical. People don’t accumulate vast fortunes without some kind of talent for business, but genius is probably a lot less important than luck — being in the right place, with the right idea, at the right time. Which raises the question of how we can maintain the incentives for innovation without creating so many oligarchs. But that, too, will have to wait for future posts.
One more point: Tech empires built on network effects are subject to their own form of the “breach of trust” that Shleifer and Summers argued played a key role in the creation of financial megafortunes. Cory Doctorow has coined the term “enshittification” to describe the process, which he describes as follows:
First, companies are good to their users. Once users are lured in and have been locked down, companies maltreat those users in order to shift value to business customers, the people who pay the platform’s bills. Once those business users are locked in, the platform starts to turn the screws on them, too — extracting more and more of the value generated by end-users and business customers until all that remains in the meanest residue, the least amount of value that can keep everyone locked into the platform.
I think everyone who makes extensive use of information technology can attest to the accuracy of this description. Amazon, for example, is currently being sued by the FTC for anti-competitive practices that harm both consumers and third-party sellers.
Right now, however, I’m less concerned by the way tech oligarchs are enshittifying the user experience than I am with the way they’re enshittifying our democracy. And that will be next week’s topic.
Read More:
