Americans live in Russia, but think they live in Sweden

By Chrystia Freeland
March 22, 2011

Americans actually live in Russia, although they think they live in Sweden. And they would like to live on a kibbutz. This isn’t the set-up for some sort of politically incorrect Catskills stand-up joke circa 1960. It is the takeaway from a remarkable study by Michael Norton and Dan Ariely on how Americans think about income inequality.

The right likes to argue that income inequality as an issue doesn’t win elections because Americans don’t begrudge the rich so much as they want to join them. The Norton and Ariely study suggests otherwise. Given a choice, the authors find, Americans would prefer to live in a society more equal than even highly egalitarian Sweden.

Another popular view is that income inequality isn’t experienced as acutely by most Americans as the numbers suggest because of how much can be “consumed” by the lower rungs of the nation’s socioeconomic ladder. No less a figure than Alan Greenspan, the maestro himself, once made this case at the Federal Reserve’s annual Jackson Hole conference, presenting data on the consumption of dishwashers, microwaves and clothes dryers showing that if measured by the possession of these goods – as opposed to the huge and growing income divide — inequality was decreasing.

That interpretation is not without merit. But it turned out that allowing Americans to prosper by using their homes as A.T.M.’s and maxing out on their credit cards was maybe not such a great idea.

Personally, I lean toward two other theories. Americans are mistaken about income inequality because of national self-confidence and the lottery effect.

By national self-confidence, I mean the widespread conviction that the American way is probably right because all those other ways don’t seem to work out so well. This is a wonderful national quality and one of the reasons America has such resilience. But confidence in the American way can make it hard for the country as a whole to recognize when things aren’t working.

Take, for instance, the health care debate, when a politically effective criticism of what has come to be known as Obamacare was to argue that it would destroy the “best” health care system in the world. Mary Meeker, a Silicon Valley guru of impeccably capitalist and American credentials debunked that idea in her recent USA, Inc. presentation, in which she pointed out that “U.S.A. per capita health care spending is 3x OECD average, yet the average life expectancy and a variety of health indicators in the U.S. fall below average. But if you spend way more than everyone else, shouldn’t your results (a.k.a. performance) be better than everyone else’s, or at least near the top?”

Aside from faith in American national excellence, the other main reason Americans seem so unperturbed by the widening chasm between the rich and everyone else is what I like to call the lottery effect. Buying lottery tickets is clearly an irrational act — the odds are hugely stacked against us. But many millions of us do, because we see the powerful evidence that an ordinary person, someone just like us whose only qualifying act was to buy a ticket, wins our favorite lottery every week.

For many Americans, the nation’s rowdy form of capitalism is a lottery that has similarly bestowed fabulous rewards on the Everyman. The current leading exemplar of self-made billions is Facebook’s Mark Zuckerberg, and he may soon be outstripped by the even more instant cyber-star Andrew Mason, the founder of Groupon.

But the problem with lotteries is that there are only a few winners. That is the story the numbers tell us about American capitalism today — and unless that underlying reality changes, at some point all those folks who think they already live in Sweden will realize they live in a winner-take-all society, and that most of us aren’t winning.

This originally appeared on the New York Times’ Room for Debate on “Rising Wealth Inequality: Should We Care?”

5 comments

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Dear Comrade Chyrista,

You don’t look to be old enough to have been in the CCCP in the ’70s. I was, most of Moscow, the part where ordinary people lived was run down and depressing. There were long lines to buy everything and most non-food items were sold on a pay now and you will get it some day basis. Restaurants required that you order your entire meal when you made your reservation and only served a single party per table per night. The Russian equivalent of a food court here in the U.S. required that you leave your identy card (everyone had one it told where you were allowed to live) if you wanted a steel knife with your meal.

That was how the average Russian lived, the poor Russians. The favored of the Party and us foreigners with hard currency were allowed to shop at the hard currency stores(березка) where there were no lines and the shelves were full. That was where the real party members shopped too. As for restaurants I knew some people in one of those agencies with initials, when we often went out for dinner and drinks (not in that order) we were always seated first, given menus, and the person from the agency always paid for the dinner ( 10-15 people)(yes, they did have expense accounts and the 7 vodka dinner in the workers paradise).

So if you think that was wonderful for the average Russian then or that is America today go ahead and do so. While you are at it ask yourself why the European part of the CCCP had a large negative population growth rate and why the suicide rates today in your Socialist parts of Nothren Europe, especially male suicide rates are so much higher than here in the bad old Capitalist U.S., yes Canada is higher too, check the W.H.O. Stats.

Posted by Richard.USA | Report as abusive

I think Richard missed the point about using Russia and Sweden as examples. It is exactly the huge disparity between the haves and have-nots that he experienced in Russia that Ms. Freeland was highlighting. By analogy our own income inequality rivals Russia, tho we do not have empty shelves.

I think she makes an excellent case, as I ponder how it is that there is so little outrage amongst my middle class peers over the “rape and pillage” by America’s newest corporate robber barons.

Posted by CardinalBiggles | Report as abusive

Richard.USA did indeed miss the point. Chrystia made no reference whatsoever to the old Soviet Union (USSR), but in stating that our society is more like Russia than Sweden, she is referring to the huge disparity in wealth common to both the modern Russian oligarchy and our own modern would-be feudal lords. She stated no opinion on the quality of life under the Communists there, which Richard goes on about.

Chrystia’s observation about the lottery mentality here in the USA is spot-on among too many people. Even while the “American Dream” in which anyone who worked hard could eventually own their own home, raise a family, and provide a decent life for their kids is slipping away from more and more of us, an “American Delusion” has taken hold. This delusion states that if you work hard and smart, anyone can be wealthy in America.

The reality is that the system simply won’t allow more than a small percentage of people to achieve that, no matter how hard the rest of us work. And increasingly, those that achieve this do so by muscling past the rest of us, with the complicity and encouragement of wannabe-rich poor and middle class people (a.k.a. “dupes”) who will never be allowed to join that club, no matter how hard they strive.

Posted by LeeDittmann | Report as abusive

Lee, thank you. It is rare to see a comment describe an article with greater clarity and eloquence.

Posted by thinkintoit | Report as abusive

No, I think all of you miss the point, the U.S. Is like nether Russia nor Sweden and by the reference to the current state of governance in Russia in the negative She longs for the “good old days” of the worker’s paradise. Those days never were, most European Russians feel that the current system is for all it’s short comings better than Communism or the Tsar. Nor is Sweden a “workers paradise” today.

The “wealth inequity” crowd never mind when it’s the government that holds the wealth, and never address why in the Northern European Social Democracies, and France the Male Suicide rates are so high. Happy fulfilled workers don’t kill themselves, people that feel trapped in a bad system do. The proof is in the numbers and the U.S. Numbers are much lower even after you allow for the American love of guns.

Posted by Richard.USA | Report as abusive

[...] Despite what Faux News would like you to believe, a recent study by Michael Norton and Dan Ariely on how Americans think about income inequality concluded “given a choice, Americans would prefer to live in a society more equal than even highly egalitarian Sweden.” [...]

[...] Despite what Faux News would like you to believe, a recent study by Michael Norton and Dan Ariely on how Americans think about income inequality concluded “given a choice, Americans would prefer to live in a society more equal than even highly egalitarian Sweden.” [...]