The Social Psychology of Self-Reinforcing Inequality

By Frank Pasquale

Two recent news stories are deeply suggestive of larger US economic trends:

1) Gannett’s Wealth Transfer: I recently read this story by Jim Hightower in The Progressive Populist:

Early this year, Gannett employees were notified that, for the third year in a row, they would get no raises and also would have to take a week off without pay. The note was written with a gentle hand, however, acknowledging the hardship that such sacrifices cause for workers and thanking them for their “great work.” To soothe the pain a bit, the note added that Gannett’s two top executives would take a commensurate cut in their salaries. . . .Only two months later, bonuses totaling $3 million were very quietly bestowed on the top two, [who were] also awarded stock options and deferred pay totaling as much as $17 million.

2) Texas’s Yacht Relief: Marie Diamond describes one priority of a tax committee in Texas, where “97,000 teachers and school employees” will likely be laid off if current budget proposals pass:

[L]ast Friday, the Texas House Ways and Means Committee approved a tax break for those who want to buy yachts costing $250,000 or more. [The bill sponsor] described it as “economic development,” while Ways and Means Chairman Harvey Hilderbran (R-Kerrville) said it was “one of those things you have to do.”

Many recent books describe self-reinforcing inequality: a cycle of wealth buying power that commands yet more wealth. From Charles Lindblom’s concept of “circularity” to Hacker and Pierson’s recent Winner Take All Politics, that dynamic has been exhaustively chronicled in the highest levels of business and politics. What’s more surprising is recent evidence that unequal conditions tend to affect attitudes of the populace as well, encouraging mindsets that make egalitarian politics more difficult when it is most needed.

The exceptionally insightful economist Nancy Folbre develops the evidence:

Alberto Alesina and Eliana La Ferrara found that belonging to a group that has historically felt discriminated against or labeled “economically unsuccessful” reduces trust. As the economist Jack Hirshleifer explained in a classic article, “The Dark Side of the Force,” extreme differences in wealth and power among groups often lead to appropriation or exploitation rather than trade. Not surprisingly, humans have learned to be suspicious of those who have the capacity to do them harm. By this account, the powerless are less likely to trust the powerful than vice versa.

In an effort to explain country-level differences, the political scientists Bo Rothstein and Eric Uslaner argue that public policies play an important role. In particular, means-tested programs – those that make receipt of benefits contingent on an income or asset test – tend to foster mistrust among people. By contrast, universal programs tend to strengthen social solidarity. Professors Rothstein and Uslaner emphasize that the causality works both ways. Less social solidarity means less support for more egalitarian policies. Countries can get caught in a trust trap in which inequality and mistrust feed on one another.

This observation seems consistent with the American experience. . . Prolonged unemployment is increasing the ranks of the “economically unsuccessful,” even as corporate profits soar. This increased inequality will further increase cynicism and mistrust in America, making it even more difficult for us to collaborate effectively with one another.

Recent research by political scientists Enns & Kelly indicates that there are inequality-reinforcing trends in public opinion, too:

You might think that in a time when more money is concentrated in fewer hands and incomes vary wildly from billions to subsistence, poor people might increase their support for government policies that offer some help. . . . [But the researchers] found that as inequality rises, low income individuals’ attitudes toward redistribution become more conservative. “Once inequality starts going back up, it appears to be perpetuated by public opinion. If inequality declined in the United States, our results suggest that then the public would become more supportive of government redistribution.”

Perhaps “we the people” are more shaped by politics and economics than these social institutions are shaped by us. Identity, rights, equality, and liberty have been staples of political theory; perhaps “learned helplessness” should be an organizing idea of political science.

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