Opinion

The Great Debate

What exactly do we mean by ‘inequality’?

September 11, 2012

What do we mean by “inequality,” and why exactly is it bad for American democracy? Are we discussing inequality of wages within a given firm or industry? Or inequality in household income — i.e., the difference between the poor and the middle class, or between the rich and everyone else? What about political inequality — is it a cause or an effect of economic inequality?

These are not idle questions, and to contemplate even incomplete answers appears, on the basis of these two books, to reveal a kind of knowledge inequality. Unless you’ve got a PhD in economics or political science and what Princeton University political scientist Martin Gilens calls “a virtual army of research assistants,” there’s not much chance that you’re going to reach airtight answers on your own.

Gilens and James K. Galbraith are among the few experts who’ve been working on the subject for more than a decade. Their conclusions reinforce the fears of those of us who’ve suspected that inequality is a blight on American society. Indeed, the damage to democratic values is not in some distant dystopian future: Gilens states plainly that the relationship between the policy desires of the wealthiest 10 percent of the population and actual federal public policy over recent decades “often corresponded more closely to a plutocracy than to a democracy.”

Yet both books offer some glimmer of hope, as well as findings that will surprise partisans on any side of the inequality debate.

If Galbraith is correct, the overwhelming majority of Americans have not experienced inequality directly. It’s not really the case that the poor or the middle class are getting poorer; rather, the rise in inequality comes from a very small number of rich people becoming ultrarich. Galbraith maintains that just five U.S. counties — three in northern California, one in Washington State where Microsoft is located, and New York County, aka Manhattan — are responsible for about half of the rise in inequality through the late 1990s, and just 15 counties — out of 3,143 counties nationwide — are responsible for all of it.

Galbraith believes that recent volatility in inequality levels stems almost entirely from the increased accumulation of wealth among those working at the top of the technology and finance sectors.

The biggest problem, he insists, is that in recent decades, we seem to have forgotten how to grow the economy except by increasing inequality. The result has been a series of bubbles, and bubbles always cause damage when they pop. Galbraith also trains his lens on Europe, and finds that the common assumption that Europe is “more equal” than the U.S. is untrue; precise measurements reveal that, aside from the handful of northern European social democracies, the opposite is true.

Gilens’s concerns are different, more pessimistic. He maintains that the poor and middle class have precious little representation in federal policymaking. Surveying a 40-year period, he finds that legislative outcomes almost never correspond to the public opinion preferences of the poor (at least when their expressed interests differ from those of the rich), whereas they much more frequently match the policy preferences of the wealthiest 10 percent. He does not flinch from the harsh conclusion: “The complete lack of government responsiveness to the preferences of the poor is disturbing and seems consistent only with the most cynical views of American politics.”

He could be underestimating the problem. Gilens looks at public opinion surveys, and whether or not a given policy is enacted. It’s entirely possible, though, for a law to pass that superficially pleases the poor and middle class, and then be implemented in ways that actually serve the interests of the rich. Such “wealth drift” would not show up in Gilens’s dataset. Moreover, he acknowledges that he cannot reliably measure the public policy preferences of the top 1 percent or one-tenth of a percent of the population, and it seems plausible that elected officials are even more responsive to the desires of that upper echelon than to the top 10 percent.

Gilens’s explanations are hardly surprising. Compared with the poor (and to a lesser extent the middle class), the affluent are more likely to vote; to volunteer for a campaign; and, crucially, to donate to campaigns, political parties and political action committees.

One reason why political inequality fails to generate much outrage is that the preferences of the economic elite do not uniformly correspond to policies of either left or right. Yes, wealthy Americans are more likely than their poorer fellow citizens to favor cuts in personal and capital gains taxes, and to oppose protectionist measures. At the same time, they are more likely to support gay rights, abortion and gun control, and are more likely to want to maintain or even increase foreign aid.

Gilens finds other reasons to avoid declaring democracy dead. Federal policy tends to mirror overall public opinion a bit more during presidential election years. And while political gridlock is much derided by commentators of all stripes, he argues that it can sometimes force policy outcomes that correspond more closely to public wants.

It’s also worth remembering that when Galbraith’s groundbreaking book Created Unequal was published in 1998, almost no one in America — from Congress to the media to the public square — was publicly discussing inequality. Now, at least, we are, and these two fascinating books will make that discussion better informed.

This book review was originally published in Pacific Standard magazine.

Comments
10 comments so far | RSS Comments RSS

Half of the country has gone nuts and supports a party that has driven this inequality going back to Reagan. This party is beyond irresponsible, it’s gone bananas.

The other half of the country is so deluded that they refuse to see that their party too turned enabler to this massive transfer of wealth upwards. That their party in many ways has adopted the other party’s language and economic policies, not to mention civil liberties (for this they were rewarded by ridiculously being tagged socialists by the nitwits on the other side who know how to rile their members up with nonsense catch phrases). This party is weak, has no backbone and has compromised its principles. People forget Clinton went corporate and that’s why he won. They’re caught up in the back and forth extreme mudslinging that is nothing more than a distraction and patting themselves on the back for being the good guys. Ignoring the fact that their party is continually dragged to the right, that the other party is still in control of the conversation.

“The Left moved Right, and the Right moved into the nuthouse.”

There is nowhere to go but down for a good while. Possibly a generation at least before the people wise and see that neither party is serving their country, that a plutocracy has been enabled and pushed as policy.

Posted by TheUSofA | Report as abusive
 

This is an important Op-Ed. The fact that people like Kenneth Gailbraith continue to be ignored let’s you know how dishonest our nation has become.

First there was the “New Economy,” a millennial fever dream predicated on the twin idea’s of a people’s stock market and an eternal silicon prosperity; it collapsed eventually under the weight of its own fatuousness. 2nd was the Iraq war, an endeavor whose launch depended for its success on the turpitude of virtually every class of elite in Washington, particularly the tough-minded men of the media; an enterprise that destroyed the country it aimed to save and that helped to bankrupt our nation as well. And then Wall Street blew up the global economy. Empowered by bank deregulation and regulatory capture, Wall Street enlisted those tough-minded men of the media again to sell the world on the idea that financial innovations were making the global economy more stable by the minute. Central banks puffed an asset bubble like the world had never seen before, even if every journalist worth his byline was obliged to deny its existence until it was too late.

These episodes were costly and even disastrous, and after each one had run its course and duly exploded, I expected some sort of day of reckoning for their promoters. And, indeed, the last two disasters combined to force the Republican Party from its stranglehold on American government-for a time.

But what rankles now is our failure, after each of these disasters, to come to terms with how they were played. Each separate catastrophe should have been followed by a wave of apologies and resignations; taken together-and given that a good percentage of the pundit corps signed on to two or even three of these idiotic storylines -themy mandated mass firings in the newsrooms and op-ed pages of the nation. Quicker than you could say “Ahmed Chalabi,” an entire generation of newsroom fools should have lost their jobs.

But that’s not what happened. Plenty of journalists have been pushed out of late, but the ones responsible for deluding the public are not among them. Neocon extraordinaire Bill Kristol won a berth at the NYT (before losing it again), Krauthammer is still the thinking conservative’s favorite, George Will drones crankily on, Thomas Friedman remains our leading dispenser of nonsense neologisms, and Niall Ferguson wipes his feet on a welcome mat that will never wear out. The day Larry Kudlow apologizes for slagging bubble-doubters as part of a sinister left-wing trick is the the the world will start spinning in reverse. S&P’s first leads the parade of folly (triple A’s for everyone!), then decides to downgrade US gov’t debt, and is taken seriously in both endeavors.

And the prospect of Fox News or CNBC apologizing for their role in puffing war bubble and financial bubbles is no better than a punch line: what they do is the opposite, launching new movements that stamp their crumbled fables “true” by popular demand.

The real mistake was my own. I believed that our public intelligentsia has succumbed to an amazing series of cognitive failures; that time after time they had gotten the facts wrong, ignored the clanging BS detector, made the sort of mistakes that would disqualify them from publishing in a HS newspaper, let alone the WaPo. What I didn’t understand was that these were moral failures, mistakes that were hardwired into the belief systems of the organizations and professions and social classes in question. As such they were mistakes that- from the point of view of those organizations or professions and classes- shed no discredit on the individual chowderheads who made them. Holding them accountable was out of the question, and it remains off the table today.

These people ignored every flashing red signal, refused to listen to the whistleblowers, blew off the obvious screaming indicators that something was going wrong in the boardrooms of the nation, even talked us into an unnecessary war, for chrissake, and the bailout apparatus still stands ready should they eff things up again.

Posted by paddletoe | Report as abusive
 

My aim here isn’t to take some kind of victory lap or to get in the granite faces of our eternal pundit corps one more time-honestly, who really wants to read a twenty-part takedown of the social philosophy of, say, Jim Cramer?

Nor is it to blame Republicans for our problems. It is true that, from the scandal of CEO pay to the scandal of lobotomized regulators, each of the really monumental mistakes of our time arose from the trademark doctrines of the political right. And, yes, it was the Bush admin. that installed as National Archivist a scholar much criticized for his questionable research methods, that muzzled gov’t scientists, and that declared war on organized intelligence in a hundred other ways.

But the problem goes far beyond politics. We have become a society that can’t self-correct, that can’t address its obvious problems, that can’t pull out of its nosedive. And so to our list of disasters let us add this fourth entry: we have entered an age of folly that- for all our Facebooking and the twittling tweedle-dee-tweets of the twiterati- we can’t wake up from.

Here Dean Baker, one of the few people who attempted a grand theory of folly, had this to say:

“We have people who have literally been wrong about everything having to do with the economy over the last 5 years. They totally missed the $8trillion housing bubble, the largest asset bubble in the history of the world…Then they underestimated the severity of the downturn, telling us the economy was going to bounce right back. And, they got the interest rate story wrong. They told us the large budget deficits caused by the downturn would lead the bond vigilantes to send interest rates through the roof. Instead they fell through the roof.”

“So who gets listened to in national debates,” Baker continues, “those who have been consistently right on all the key points, or those who have gotten things as wrong as you possibly can?”

It is not merely a matter of “who gets listened to” but WHY they get listened to. Recall in this connection the peculiar comment of White House Press Secr. Jay Carney in Dec. 2011 as he scrambled to get the Obama admin. off the hook for its tepid response to the slump: “There was not a single mainstream, Wall Street, academic economist who knew at the time, in Jan. of 2009, just how deep the economic hole was that we were in.”

Of course there were plenty of economists who knew how bad things were. That one was easy to call. But if you limited your inquiries-as Carney is confessing the admin. did-to the statements of economists who are “mainstream” and “Wall Street” you would not have encountered such economists. You would have been counting on the wisdom of people who had been “wrong about everything,” as Dean Baker put it.

On the other hand you would’ve been listening to the greatest names of professional economics. And this, we know, is in keeping with Pres. Obama’s deepest instincts: trust the experts.

But what happens when the experts are fools? What happens when their professions are corrupted, their jargon has become a shield against outside scrutiny, their process of peer review has been transformed into a device by which a professional faction can commandeer the discipline, excommunicate rivals, and give members of the “us” group endless pardons for their endless failures?

The economist James K. Galbraith, who was right about many of the disasters of our age but who is neither “mainstream” nor “Wall Street,” once wrote that something very much like this had happened to his discipline:

“Leading active members of today’s economic profession…have formed themselves into a kind of Politburo for correct economic thinking. As a general rule-as one might generally expect from a gentleman’s club-this has placed them on the wrong side of every important policy issue, and not just recently but for decades. They predict disaster where none occurs. They deny the possibility of events that then happen…No one loses face, in this club, for having been wrong. No one is dis-invited from presenting papers at later annual meetings. And still less is anyone from the outside invited in.”

Posted by paddletoe | Report as abusive
 

Where does this leave the premature market skeptics, the ones (like Galbraith) who were right all along? The answer is, by and large, nowhere. These people have remained at the out-of-the-way universities, the do-it-yourself blogs, and the impotent think tanks where they began.

They were ignored in 2008 and they are ignored today because an extremely convenient corollary to the reigning dogma of the consensus reminds us that it is impossible to see a disaster of the 2008 variety coming. Of course, there were plenty of people who did see it coming, but this corollary defines their work away as a series of lucky guesses, dismisses their methodology as not worth listening to-all of which “we” can prove using equations.

“The main lesson we should take away from the E[fficient] M[arket] H[ypothesis] for policymaking purposes is the futility of trying to deal with crises and recessions by finding central bankers and regulators who can identify and puncture bubbles,” announced Chicago school economist Robert Lucas from amid the ruins in 2009. “If these people exist, we will not be able to afford them.”

And the main lesson we should take from the Efficient Market Hypothesis for OUR purposes is the utter futility of economics departments like the one that employs Robert Lucas.

A 2nd lesson: if economists-and journalists, and bankers, and bond analysts, and accountants-don’t pay some price for egregious and repeated misrepresentations of reality, then markets aren’t efficient after all. Either the gentlemen of the consensus must go, or their cherished hypothesis must be abandoned. The world isn’t gullible enough to believe both of them any longer.

Or maybe it is. Maybe this state of affairs can go on for years. As you watch the anointed men of the Washington consensus shuttle through the CNN green room or relax comfortably at the $10,000 Halloween party the neighbors are throwing for their third grader, you being to wonder what kind of blunder it will take to shatter this city’s epic complacency, its dazzling confidence in its own stupidity.

We will assuredly find out soon. And when we do, we can be just as assured that the fools who let it happen will walk away once again without feeling any consequences.

Posted by paddletoe | Report as abusive
 

Since there is differences in drive and other things equality must be limited to equal opportunity. Obviously inherited wealth or privileges in the opposite. Therefore free higher education, conscript army and high estate taxes is equality.

Posted by Samrch | Report as abusive
 

Leaders of both major parties want to preserve their existing power and influence with little, if any, accountability. That gives the “big contributors” almost total sway on issues whose outcome matters little to politicos.

Their big priority over time has been advancing their own interests above those of “we, the people” they purportedly serve. Their salaries, health care and retirement “packages” assure them lives of ever-increasing wealth and privilege.

More and more of those elected to federal, state and local office come from the legal field. These “look after their own”. Recently in local court I heard it argued, apparently successfully, laws adopted by the various legislatures mean nothing until interpreted by a judge. But judges are the ones who frequency lecture ordinary citizens that “ignorance of the law is no excuse”.

Well excuse me, but I fail to see how people can be expected to “follow” a law based on the words in it, yet a judge is not. Equity demands they pick one way or the other such that it is predictable. Oh, I forgot. If the law is predictable, society doesn’t need as many judges and lawyers!

The greatest American “inequality” today is in America’s courtrooms. Those with the “money” will almost always prevail, regardless of right or wrong. There are many, many legal tactics that are commonly employed to assure such outcomes, yet no one seems to recognize or document what is happening day after day, week after week, month after month, and year after year.

Posted by OneOfTheSheep | Report as abusive
 

Inequality and wealth disparity existed long time ago. In ancient China about 2000 to 4000 years ago, the governments usually tried their best to let and help people making and maintaining their living; and to preach resting content and accepting destiny. European type of slavery was abolished about 2500 to 3000 years ago.

Snice the Han dynasty about 2200 years ago, the government began to give chances and hope to the populace by introducing imperial examination open to all people. It resulted in public content and most important of all harmony among the populace.

Whatever they did, the emperors must acted or at least showed their care of the people’s livelihood. Until Qing dynasty the emperor actually kneeled before God at the Temple of Heaven twice a year wishing good weather for agriculture.

As we cannot get away and solve this social problem fundamentally, we may look into the ancient Chinese governance wisdom as a reference.

Posted by Kailim | Report as abusive
 

The destruction of the American Middle-Class is all part of the plan to ensure the bondage of the people in perpetuity as wage slaves. These people will be more desperate for work than ever. It doesn’t have to stay this way. End market-capitalism, NOW!

Resist.

zeitgeistmovieDOTcom

Posted by Lord_Foxdrake | Report as abusive
 

Inequality means, most of all, inequality of power, inequality of rights, and inequality of importance.

If we move toward a social order more similar to the France of the 18th century Bourbon monarchy, we move toward an poisonous inequality. That is what we have been doing. A citizen’s future is more determined by birth than by talent or by effort or by education. Increasingly the powerful and the rich are determined by corruption and self-dealing rather than by talent. This is neither healthy nor stable and places the well being of everyone at risk for the benefit of untalented privilege.

All the other verbiage is mere cover for maintaining the status quo worked out by the self-proclaimed “Greatest” generation. Let’s all pretend it is 1960 again and that we are now being “saved” by “enlightened” policies that will bring beauty and truth to the forefront, and just incidentally concentrate all benefits in the hands of the currently powerful.

Our current system will in time collapse of its own lunacy, and is not able to adapt constructively in any case. We live in a Gooney Bird Republic. Here today, history tomorrow.

Posted by usagadfly | Report as abusive
 

paddletoe is refreshing to read. Another man called this, even earlier, though not in as much detail: John Ralston Saul, writing in 1991 (thereabouts) in Voltaire’s Bastards.

It is not the big money contributors that set policy, and in that I differ from OneOfTheSheep. it is that our policymakers are the same class of oligarchs as the big money contributors. These people don’t influence government, they ARE government. And it is not a conspiracy, they all just think alike, as paddletoe says very well.

Economics is not a science, it is a swindle, and the numbers can be made to say whatever you want them to say.

Posted by Benny27 | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •