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How a new aristocracy’s self-segregation puts stress on society

Growing class division is destabilizing our society, argues author and philosopher Matthew Stewart in a provocative Atlantic magazine cover story. He says there's a group in between the top 0.1 percent and bottom 90 percent that plays an important role in running the economy, while setting up barriers that prevent most from realizing the American dream. Economics correspondent Paul Solman reports.

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  • Judy Woodruff:

    Now a look at a group that one writer is dubbing a new American aristocracy and the problems it poses for our society.

    No, it's not the billionaires in the top 0.1 percent of the population, but the group that sits right below them, the 9.9 percent.

    Our economics correspondent, Paul Solman, has more.

    It's part of our weekly series Making Sense, which airs Thursdays on the "NewsHour."

  • Matthew Stewart:

    The United States is going down a path. It's a path of class stratification, growing inequality. And the consequences of that are more potentially damaging than I think most people appreciate.

  • Paul Solman:

    In a provocative "Atlantic" magazine cover story, "The Birth of a New Aristocracy," author and philosopher Matthew Stewart argues that growing class division is destabilizing our society.

  • Matthew Stewart:

    All right, so it turns out that the concentration of wealth in the United States has really been focused on the top 0.1 percent, not the top 1 percent. But that doesn't mean that everybody below them lost money.

    In fact, only the bottom 90 percent did. So there's this group in between, the 9.9 percent, that have managed to keep pace. They play a very important role in on the one hand positively running the economy, on the other hand basically setting up barriers that prevent people from below to realize the American dream.

  • Paul Solman:

    So how much wealth do the people in the 9.9 percent have?

  • Matthew Stewart:

    Right now, you need roughly $1.2 million to make it into the 9.9 percent. And the median is around $2.4 million.

  • Paul Solman:

    Net worth, this is?

  • Matthew Stewart:

    Yes, I'm sorry. This is all net worth. And it includes all forms of assets. So that would include homes. In the numbers I have seen, it also includes things like cars.

    It's very important to understand that our wealth is not just financial. We — in the 9.9 percent, we all enjoy better health. We tend to live in better neighborhoods, which means we have less crime to deal with. We have better education.

    So, all of these non-financial forms of wealth turn out to be critical. They don't only make us basically able to generate more economic wealth, but they also consolidate our position. We can then pass them down to our kids.

  • Paul Solman:

    It's obviously not good for people who are stuck below, but your argument is, it's not good for people who are lucky enough to be above.

  • Matthew Stewart:

    Yes, that's right, because, as the classes pull apart, the people on the upper strata have to work harder to keep their position.

    They have farther to fall if they make a mistake. So they invest more in preserving their position. And I don't think we have appreciated how that ramifies throughout society, the way it locks them in place, draws battle lines, creates distrust.

  • Paul Solman:

    And what's driving this?

  • Matthew Stewart:

    The basic driver is something that we're all familiar with. We all know the story of rising inequality.

    It creates a kind of rigidity, an instability. It also removes fact and reason from our discussions, that we're not able to have a meaningful basis for discussion among all Americans.

    Inequality feeds on itself to some degree. So the greater the concentration of wealth, the more that the people with that wealth can use it to consolidate their position by investing it in non-financial forms of wealth.

  • Paul Solman:

    I have heard this referred to as transactional capital now.

  • Matthew Stewart:

    It can also be just physiological capital in a certain sense.

    So it turns out that not only are the wealthier getting healthier, but the people in the lower deciles are actually getting less healthy in many respects. So, for example, for white, middle-aged people with high school education and less, life expectancy has gone down.

  • Paul Solman:

    Part of what's driving this is something that you and others call assortative mating.

  • Matthew Stewart:

    So, assortative mating is just when like marries like.

    In the past 50 years, we have seen a significant increase in this kind of marriage pattern. There are some studies that suggest that as much as a third of the growth in concentration of wealth is due to decisions connected with mating, essentially.

  • Paul Solman:

    Just like in the olden days, noble families, kings, queens, they would intermarry to consolidate their power or their wealth.

  • Matthew Stewart:

    Well, it reminds me of Jane Austen, to be honest, because we are returning to a world in which individuals seeking mates are frankly frantic. They can't find true love in someone who is of the adequate social status.

    The benefit that you get from matching social status is tremendous, and the price you pay for failing to do that, for failing to find a high-status mate has gone up. It's gone up dramatically.

    If you're low-status and you marry a low-status mate, marriage is actually harder. It's harder because you're working harder probably, or you have greater risks, greater stresses. You have worse health. And, consequently, you, statistically, are much less likely to have a stable household.

  • Paul Solman:

    So, what do you want the 9.9 percent to do?

  • Matthew Stewart:

    We have to start thinking about how we can live in integrated communities that are open to everybody, where geography is not an economic and class barrier.

    Our geography is killing us. We are setting up a system where we concentrate educational resources, the schools in a particular area. We concentrate economic power.

  • Paul Solman:

    That's why people move to areas like where you live, Brookline, Massachusetts, which has this great educational system, right?

  • Matthew Stewart:

    Yes. It's great. We have a quasi-private system of education that we call public. Right?

    I move to Brookline, I send my kids to public schools, they're terrific schools. That's why you move there. And you can too. You just have to buy a home that's worth $2 million. Now, that's a colossal, colossal blunder.

    In American history, public education was absolutely essential in building the middle class. That's how we got the productive economy in which everyone participates, and we had a reasonable degree of stability.

    We're now setting up a system where we — you get the education you pay for. And that means you get a bunch of citizens who are uneducated. And that's a recipe for disaster.

  • Paul Solman:

    I think that's what's so difficult for somebody like myself to hear or people in our audience. What we're doing is what comes absolutely naturally to us, that is, investing in our kids, moving to a neighborhood with a good school for our children or grandchildren.

    You don't want me to stop doing that, right?

  • Matthew Stewart:

    Just because our individual actions are blameless when we look at them very narrowly, that doesn't mean it's all going to work out for the best.

    I lived in Mexico, I lived in the U.K. for a number of years. I have seen versions of this process going on. Everybody involved is nice. But at the end of the day, they participate in this thing that leads you to a point where you have got a distinct class of wonderful people that a lot of other people are very unhappy with.

  • Paul Solman:

    And the people in that distinct class, at least in places like Mexico, they have actual gunmen in their big, fancy houses. Right?

  • Matthew Stewart:

    Right.

    And there's a natural progression from gated communities to armed and gated communities. And we're sort of working through that now. And if we keep going down this path, yes, we will have the armed and gated communities. And none of us will have done anything wrong.

    But that's where we will be.

  • Paul Solman:

    For the "PBS NewsHour," this is economics correspondent Paul Solman outside Boston.

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