What are the political effects of increasing inequality?

by on November 23, 2013 at 3:53 pm in Political Science | Permalink

Kevin Lewis reports some new research to us:

Economic Inequality and Democratic Support

Jonathan Krieckhaus et al.
Journal of Politics, forthcoming

Abstract:
Does economic inequality influence citizens’ support for democracy? Political economy theory suggests that in a country with high inequality, the majority of the population will support democracy as a potential mechanism for redistribution. Much of the survey and area-studies literature, by contrast, suggests that inequality generates political disillusion and regime dissatisfaction. To clarify this disagreement, we distinguish between prospective versus retrospective evaluations as well as between egocentric versus sociotropic evaluations. We test the resulting hypotheses in a multilevel analysis conducted in 40 democracies. We find that citizens are retrospective and sociotropic, meaning that higher levels of economic inequality reduce support for democracy amongst all social classes. We also find a small prospective egocentric effect, in that the reduction in democratic support in highly unequal countries is slightly less severe amongst the poor, suggesting they believe that democracy might increase future redistribution.

I do not see an ungated copy, but the data for the paper are available here.

S November 23, 2013 at 4:52 pm

Sweet! Lets import some more poor people

Steve Sailer November 23, 2013 at 7:44 pm

What America needs is an even less sophisticated electorate.

Ray Lopez November 23, 2013 at 9:08 pm

Unsophisticated would describe SS SS. ZZZZZzzzzzzzzzz u bore me xeno.

The Anti-Gnostic November 26, 2013 at 8:35 am

Oh come on. You’re in a position to observe up close and personal what sort of stew results after the Spanish imperialists are done chewing up and spitting out the Indigenous hunter-gatherers.

Everyone swears we’re getting Placido Domingo and classical gutar. The reality is Sabado Gigante and rims. You probably sneer at white trash culture, what the hell do you think we’re adding?

ummm November 23, 2013 at 6:22 pm

‘democracy’ is a very broad term

maybe they would me more inclined to support social democracy which has elements of socialism than liberal democracy. at least that is how Obama got elected when the economy began to circle the drain.

Alexei Sadeski November 23, 2013 at 7:39 pm

This paper is obviously wrong.

The only political effects should be that Krugman wins another Nobel or three and Democrats become a permanent majority. Any other prediction is obviously foolish.

dirk November 23, 2013 at 7:53 pm

Makes sense that increasing inequality would lead people to believe that democracy has failed. It may even be a correct interpretation.

So if growth vs. democracy is a tradeoff on which side of the trade does a libertarian lean? Or do libertarians even necessarily believe in democracy at all?

Brian Donohue November 25, 2013 at 8:35 am

You should read the US Constitution. It’s a republic. There are democratic elements to it.

Chip November 23, 2013 at 8:00 pm

I always wonder what us the actual point if these studies on income inequality.

If:

1) IE is typically tied to dynamic open economies in which talent and hard work is rewarded and;

2) the richest 5% in one year are usually not the same richest 5% in later years due to one-off gains and;

3) and the above two points are associated with decent income mobility

What, then, is our real concern with IE if not the politics if envy?

And if it’s just envy, is this a sufficient reason to restructure society with greater govt coercion that in turn diminishes the dynamism of said economy?

Guest November 24, 2013 at 9:39 am

It’s not envy. The economy works better when there is a mass market of people who can afford what the economy can produce. If 1 percent of the population controlled all of the income and wealth then companies wouldn’t have enough revenue to survive. The more wealth is shared the better. If the top 1 percent of income earners earned 10 percent of total income intead of 20 percent then the bottom 99 percent would have hundreds or even thousands more dollars to spend. If I’m selling anything other than luxury goods I want the biggest mass market possible.

Colin November 24, 2013 at 4:10 pm

The economy works better when there is a mass market of people who can afford what the economy can produce.

Of course you can also have a highly unequal economy where there is a mass market of people who can afford what the economy can produce — the US is a prime example — so I don’t understand the point of this comment.

Guest November 24, 2013 at 5:00 pm

I don’t understand what you don’t understand. If one person has 1000 dollars and 9 people have 10 dollars then almost all of the 11 dollar products will go unsold. If all 10 people equally shared the pool of money then the economy would sell more items . We are moving from a bell curve of income distribution with a fat middle to an hourglass distribution with concentrations at the poor and rich areas. If you were the company Nest would you prefer the fat bell curve or the hourglass?

Guest November 24, 2013 at 5:06 pm

Eh – Nest is a bad example – it’s a luxury item. But if you were selling televisions would you prefer the bell curve or the hourglass?

Bill November 23, 2013 at 8:52 pm

Ask Hitler.

Ray Lopez November 23, 2013 at 9:14 pm

let me quickly explain inequality

I have to see a Pay-per-view fight involving Pacman (he’ll probably win but I wish he would retire, the blows to his head will haunt him later in life I’m afraid), so let me summarize what I have found in original research of the kind I often do, and will only be seen years from now when some PhD confirms the same:

inequality is constant throughout the ages, and peaks and troughs are not that much

Throughout history I have found the top 1% own 30% to 50% of the society’s wealth (not nominally either like the Pharaoh in Egypt, who owns 100%), and the top 10% own 70% to 90% of wealth, be it in income share, assets or net worth. So this fluctuation from 30% to 50% is what makes the Gini coefficient “intolerable” or not, and sometimes the fluctuation between net worth and income is another ‘intolerable’ factor, for example, Sweden has very flat income (low Gini) but higher asset inequality (that is, bosses make the ‘same as’ workers in Sweden, but bosses own ‘all’ the shares).

You read it here first, please don’t forget that, and I bill several hundred dollars an hour to my clients. You’re welcome.

Alexei Sadeski November 23, 2013 at 9:48 pm

Sweden and the US don’t have *that* different of Ginis: .426 vs .486. Sure it’s different, but it’s not like the US is as high as Italy (.534) or Germany (.504) or something. Finland is right between Sweden and the US, (.465) but no one talks about them “disintegrating”.

http://en.wikipedia.org/wiki/List_of_countries_by_income_equality#Gini_coefficient.2C_before_taxes_and_transfers

prior_approval November 24, 2013 at 1:58 am

Another fine use of choosing data just so, thus showing how the U.S. isn’t really all that bad. Though at least this time, the adjustment is in the link itself – ‘Gini coefficient, before taxes and transfers’

Of course, scrolling just one table down, the numbers look just a bit different. With the 0.378 of the U.S. being not exactly the same as Italy’s 0.337 or Germany’s 0.295, not to mention Sweden’s 0.259.

And since that second set of numbers is based on how a society actual deals with itself in terms of inequality, there might just be a reason why the U.S. could be considered in worse shape.

Alexei Sadeski November 24, 2013 at 5:01 am

The adjustments are done in a manner which doesn’t account for many transfers in the US nor accounts for the most regressive taxes in EU: It leaves out state level transfers and VAT and excise taxes.

The before numbers are more accurate representations of actual society.

Bill November 24, 2013 at 11:42 am

Alex, Prior’s does account for taxes and transfers, so I don’t get your point.

Alexei Sadeski November 24, 2013 at 12:11 pm

Bill,

The methodology that they use only accounts for national transfers, and mostly income taxes (it ignores VAT, excise, all state/provincial/local taxes, etc).

Countries like Sweden don’t have a whole lot of province level transfers, whereas the US states do. Countries like Sweden don’t have a lot of province level income taxes, whereas US states do. And finally, countries like Sweden have extremely harsh regressive VATs and excise taxes, the US does not.

None of this is accounted for in their “taxes and transfers” numbers. Seriously!

Matt November 24, 2013 at 7:42 am

I’d be cautious about trying to understand and compare distributions via a single number rather than a function or a graph…

Doug November 24, 2013 at 4:04 am

The most interesting thing about Sweden isn’t the level of inequality, but the type of inequality. Specifically the findings by Greg Clark that the rich people in Sweden today are pretty much all the descendants of the aristocrats from 1700. A century of socialist ultra-egalitarian ethnically and culturally homogenous social democracy and the same people are in charge as feudalism. If there’s no hope in Sweden, there’s no hope anywhere. Man will naturally segregate himself into nobles and peasants, whether society acknowledges it or not.

http://www.econ.ucdavis.edu/faculty/gclark/papers/Sweden%202012%20AUG.pdf

Danish November 24, 2013 at 5:07 am

Wow. What a fascinating paper, thanks for posting it!

Bill November 24, 2013 at 11:52 am

One tenth of one percent of the population constitutes those with these family names. I don’t know how can overlook greater mobility in the other 99.9%. This does point to the significance of initial conditions, and maybe the need for inheritance taxes.

Alexei Sadeski November 24, 2013 at 12:12 pm

Or it points out the importance of genetics.

Kristijan November 24, 2013 at 7:30 am

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Matt November 24, 2013 at 7:42 am

So how does this link up to the democratisation process in 19th and early 20th century USA and Britain?

Inequality increased in those states, yet sufferage and democracy expanded.

One way to explain this is that, although the majority became disillusioned, a “hard core” became increasingly committed and able to fight for democratisation (composition shift).

Another way is that “the people” didn’t really “want” democracy, but the powerful thought it was a way they could buy them off, offsetting their political demise, or thought they could use popular support to gain power or money (more of a goal in a high inequality nation where there the “carrot” or “trough” is in front of your nose). Thus an unlinking (or inverse correlation) of attitudes and change, but a link with inequality.

The remaining is that inequality just isn’t much of a driver for democratisation one way or another.

E.g. for instance, the powerful actually did not give democracy as a sop to changing public opinion, against a threat of violent revolution or to enhance their own political power, but due to personal ideological commitment to “the cult of democracy” rather than the cults of autocracy, aristocracy and meritocracy (by my lights a better cult, at least).

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Dave November 24, 2013 at 12:18 pm

*What are the political effects of increasing inequality?*

The guillotine, the firing squad. Coming soon to a town square near you.

boxing fight November 25, 2013 at 5:05 pm

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Mike Morgan December 4, 2013 at 11:29 am

What ever happened to Stiglitz’s The Price of Inequality. No armchair bullshit, all (or nearly all) assertions are supported by empirical studies. I’ve noticed a pattern – Nobel Prize winners writings are not near the top of everyone’s reading list.

My own thought is that we could start from the basic utilitarian argument that all incomes should be equal (Jeremy Bentham, 1700′s). But, let there also be pipelines of money (and attention) to support the work of geniuses and the engineers who implement their ideas.

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