What are the political consequences of rising inequality? December 8, 2011 at 7:02 am

I don’t know, but I think it is an interesting question. These musing follow from a conversation I had with a man who knows a lot more than I do earlier in the week.

Consider:

  • “The rich getting richer while the poor keep getting poorer. This effect in America saw people produce more for less wages. Since 1973 in the US, median family income rose by just 0.6% a year, falling far behind their output per hour, which jumped 2.6% annually. In the quarter of the century before that, ordinary households saw pay packets rise 2.8% a year, “rising lockstep” with their productivity.” (From the Guardian, in a piece about Jared Bernstein.)
  • “The gap between rich and poor in OECD countries has reached its highest level for over over 30 years, and governments must act quickly to tackle inequality,” according to a new OECD report.

    Divided We Stand: Why Inequality Keeps Rising “finds that the average income of the richest 10% is now about nine times that of the poorest 10 % across the OECD.”

  • Social mobility is falling as inequality is rising. As Obama said yesterday: “over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk. You know, a few years after World War II, a child who was born into poverty had a slightly better than 50-50 chance of becoming middle class as an adult. By 1980, that chance had fallen to around 40%. And if the trend of rising inequality over the last few decades continues, it’s estimated that a child born today will only have a one-in-three chance of making it to the middle class – 33%.”

Now, regardless of what you think the answer to this is – even regardless of whether you think it needs an answer – this set of facts has political consequences. The Occupy movement and its slowly forming demands are one early result, but I suggest that it is possible that this is the tip of the iceberg. A state of affairs that cannot continue, won’t. Enough people – enough people with votes – are unhappy enough with the fact that their real income is falling while the 1% are making out like bandits that they will do something about it. And if voting doesn’t work, then maybe rioting will. It certainly might feel like a chance to get even.

I’m not saying this is justifiable. I’m not saying it would be a good thing. But I am saying that these economic facts have political consequences and if they are not managed, there is the possibility that things might get really ugly.

We are approaching the Europroblem in a dangerous way. Disenfranchisement is the flipside of technocracy: sure, if all those wise men really do fix the problems, then the rich can go back to crashing their Ferraris in peace. But if it doesn’t, then either we are going to need solutions with democractic legitimacy, or it will be a really good time to invest in companies that make riot shields.

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