What's Wrong With Inequality
Getting beyond the rhetoric.
Posted Jul 23, 2014
Inequality as a moral and political issue came to prominence in the United States three years ago during the Occupy movement. After a retreat from the public stage, it returned this spring with the publication of Thomas Piketty’s Capital in the Twenty-First Century. Yet despite the forests that have been felled in analyses of Occupy and Piketty, little has been said about why we should be disturbed by inequality.
The issue is economic inequality. The Occupy movement and Piketty’s book focus on the increasing concentration of wealth and income among the top 1 percent (and, according to Piketty, even more among the top .1 and .01 percent). Most people agree that political equality (“one person, one vote”) and moral equality (“all people are created equal”) are Mom-and-apple-pie goods. Similarly with equality of opportunity—despite the lack of agreement about what it amounts to. But about economic inequality there is no such consensus.
Defenders of economic inequality sometimes suggest that egalitarians confuse it with political or moral equality. Or that the desire for equality expresses envy by the have-nots of the haves. Or that egalitarians are fomenting class warfare. Or that they simply have some kind of numerological fetish about equality. I believe these accusations don’t stand up and that there’s serious reason to worry about economic inequality. But egalitarians have done themselves (and equality) no favors by acting as if its badness were self-evident. It isn’t.
By contrast, consider poverty. Leaving aside a few ascetics, most people agree that poverty is a bad thing; its downsides are pretty obvious. Poor people are often deprived of basic needs—food, shelter, decent education, healthcare, and other important goods. But this isn’t necessarily true when people in a society are unequal. In principle even the least well-off in a society could have their basic needs met. They would just have less stuff than the better-off.
Indeed, perhaps the central claim about capitalism in our society trades on a special relationship that’s assumed to hold between inequality and poverty. Economic inequality results from free enterprise, and free enterprise is supposed to benefit everyone—to lift all boats, as the saying goes—even the least well-off. In his seminal work A Theory of Justice the political philosopher John Rawls made this a condition for the legitimacy of economic inequality: it’s justified only when it improves the situation of the least well-off.
But not all boats have risen. As Paul Krugman explains, “Real wages for most US workers have increased little if at all since the early 1970s, but wages for the top one percent have risen 165 percent, and wages for the top 0.1 percent have risen 362 percent.” That’s bad insofar as the defense of capitalism rests on the lifting all boats idea. But I want to probe a different question. Suppose wages for poorer workers had in fact increased more than negligibly but not nearly as much as wages for richer workers. The poor would then have gotten a little richer while the rich would have gotten much richer. Is that an acceptable state of affairs? To ask this question is to ask about the significance of inequality per se.
Large economic inequalities are bad in their own right because of the significance of relative deprivation: people’s well-being is determined in part by what others around them have. Think of education. Here’s a good we’re inclined to think of as having intrinsic value, bringing greater skills and appreciation of the finer things in life. But not all the benefits of education are like this. Having a college degree was a bigger economic advantage in 1954 than it is in 2014 because it was so much rarer. Unlike the intrinsic benefits of education—like learning to love Hamlet or to understand quantum mechanics—these advantages are, in the terms of economist Fred Hirsch, “positional”: they depend on what others have. The result can be an educational arms race, with more advanced degrees required by employers for jobs that might not really need them. In Hirsch’s metaphor, when everyone stands on tiptoe, no one sees any better. But if you don’t stand on tiptoe, you won’t see at all. To see better, you need stilts. But when everyone gets stilts. . .
In such cases, more isn’t necessarily more. The question is how pervasive and important the phenomenon of relative deprivation—and thus inequality—are. One realm in which they play a central role is political power. To some this claim may appear nearly self-evident: power and influence may seem inherently zero-sum, with more for some meaning less for others. A new study by Martin Gilens of Princeton and Benjamin Page of Northwestern, discussed by the authors here, confirms that “ordinary citizens have virtually no influence over what their government does in the United States. And economic elites and interest groups, especially those representing business, have a substantial degree of influence.” That’s very bad news for democracy. But it’s not surprising when we learn from Piketty (drawing on a recent survey by the Federal Reserve) that in the U.S. the top decile owns 72 percent of the country’s wealth, the bottom half just 2 percent.
Such extreme disparities have consequences far beyond political power, reaching to the most personal aspects of people’s lives. The British epidemiologist Michael Marmot has shown that socioeconomic status correlates with physical and mental health and longevity all up and down the socioeconomic ladder. Again, few will be surprised that poorer people have worse health and shorter lives than richer people. But the findings of Marmot and others shed light on these facts. The disparities remain even after controlling for environmental and behavioral factors like air quality, diet, and smoking. Marmot’s explanation is that having lower status generally means having less respect from others, less control over one’s life and work, and fewer connections to one’s community, and that these lead to worse health outcomes.
Critics may respond that if complete equality is an impossible dream, some people will always have lower socioeconomic status than others, and so such health disparities between rich and poor are ineradicable. But the degrees and magnitudes of inequality make a difference. Where inequality is less extreme than in the U.S., as in Scandinavia and other European countries, so too are health disparities. Moreover, although richer people are healthier than poorer people, richer societies aren’t necessarily healthier than poorer societies. Indeed, British epidemiologist Richard Wilkinson argues that more equal societies bring better health and other benefits, like lower rates of violence, not only for the poor but for everyone.
So what’s wrong with inequality derives from the fact that the value of what people have depends partly on what other people have. And this isn’t because of envy or some other ignoble feature of human psychology, as critics of equality like to suggest. It’s because some goods that directly affect people’s well-being and even their health, like political influence and social status, are inherently comparative or positional. We can’t entirely eliminate these disparities, but we can alleviate them by reducing economic inequality.
Defenders of large economic inequalities might offer two responses, one resting on a moral and the other on a empirical premise. The first response is that such inequalities are the price we pay for living in a meritocracy, and that the gains of the rich are deserved. Consider earnings for different workers. Today CEOs earn 331 times what the average worker earns. In 1983 CEO pay was “only” 46 times average pay—one-seventh of today’s ratio. The idea that today’s CEOs are seven times as deserving as those in 1983 is absurd. And of course, as Piketty shows, a great deal of what the rich possess and to which they owe much of their good fortune they haven’t earned at all, but have inherited or acquired without their own labor.
The other response is that the worse-off would be even worse off without these inequalities. But we’ve seen that this isn’t so: wages for most American workers have risen barely if at all since the 1970s. Workers would have had to do much better in order to offset the special disadvantages brought by inequality itself.
If there’s a problem with the new attacks on inequality, it’s that they don’t go far enough. Over the last few years we’ve come to think a lot about what’s wrong with a small segment of our society—whether it’s the top 10, 1, .1, or .01 percent—having such a disproportionate chunk of wealth and income. “We are the 99 percent” is a brilliant slogan, and one that draws in—well, almost everyone. But the 99 percent aren’t all equal to each other. It’s those at the bottom—at the very least the bottom 20 percent, but more broadly the bottom half—whose lack of power and diminished well-being we should be especially worried about.