Economic Inequality Silence

Where is the outrage, the indignation, the protesting over the enormous gap between the rich, especially the very rich and the rest of us? What ever happened to the spirit of Occupy Wall Street? Why is the country at large so serenely quiet about the rising economic inequality in this country, the outrageous annual pay of some CEOs and Hedge Fund managers? Other than a very few economic scholars and media commentators, there is scarcely any effort to confront the problem head on.

In a review of Pierre Rosanvallon’s new book The Society of Equals, Paul Starr writes (5/22/14): The passive consent to inequality is the point of departure for the French historian and political theorist Pierre Rosanvallon in his new book, The Society of Equals. As Rosanvallon writes, there is a generalized sense that inequalities have grown too large or even become scandalous, but that sense coexists with tacit acceptance of many specific forms of inequality and with silent resistance to any practical steps to correct them.

Even the President, who professes to find it the defining issue of our time, doesn’t do much about it. Of course, he is constrained, cannot apply the major remedies without the consent of Congress. And that isn’t going to be possible for the unknowable future.

Perhaps Americans don’t fully appreciate the magnitude of the enormous gap between the rich, including the very rich, and the poor. If they did, there might be less silence and more outrage. To find out Michael Norton and Dan Ariely undertook a study (Perspectives on Psychological Science, 6, 2011) of popular beliefs and the distribution of wealth in this country.

They asked a nationally representative sample of 5,222 individuals, equally divided between males and females, to estimate the current distribution of wealth in the US and then their ideal level of inequality. Before beginning the survey they asked each person to read the following definition of wealth:

“Wealth, also known as net worth, is defined as the total value of everything someone owns minus any debt that he or she owes. A person’s net worth includes his or her bank account savings plus the value of other things such as property, stocks, bonds, art, collections, etc., minus the value of things like loans and mortgages.”

The individuals in the study vastly underestimated the actual level of wealth believing that the wealthiest “quintile” held 59 percent of the wealth when the actual percentage is close to 84 percent. Perhaps this divergent perception from reality accounts for the lack of widespread public outcry to the enormous and growing economic inequalities in this country?

Norton and Ariey also asked their subjects to state their ideal distribution of wealth in the US. They found a slight preference for some inequality, rather than perfect equality, but by no means close the degree currently present in this country

When given examples of the distributions in other countries, they expressed a preference for the distribution that most closely resembled Sweden’s, where the top wealth quintile holds 36 percent of that countries wealth and the lowest 11 percent.

Finally, Norton and Ariely noted there was a considerable, and, to them, surprising consensus among different demographic groups in this country--gender, income level, voting history, etc. in both their estimates of actual and ideal wealth distribution in this country.

Thomas Piketty, the now well-known, highly-praised author of Capital in the Twenty-First Century, claims, in light of his data, that the great gap between the rich and poor will continue unless major policy changes are made in taxing wealth, income, and inheritance.

He admits, the future looks bleak, yet it often can surprise us. Picketty is a scholar, not an advocate and while we need both, I think it is well beyond time for widespread advocacy to take hold in this land.

Note: Results from a recent survey in France are consistent with the public’s perception of economic inequality in the United States. Nearly 90 percent of the French respondents said income disparities ought to be reduced, yet 85 percent said the differences are acceptable to reward individual achievement.