Re: Inequality

Will Wilkinson raises some characteristically interesting and useful questions related to the politics of inequality in a recent post.

Will asks:

Take the group that voted for Obama and the group that voted for McCain. Calculate the Gini coefficient for each of those two groups. I’ll bet $1000 dollars that income inequality is higher in the Obama-voting group. If Matt doesn’t want to take this bet, then he needs to explain why divergence in material circumstances poses more of a political problem for Republican coalition-building than it does for the Democrats–the more economically unequal coalition.

While I haven’s seen analysis at the individual level, I’ve done analysis at the county level that indicates Will is almost certainly right about the higher level of income inequality among Democratic than Republican voters. I think the reason this indicates that inequality poses “more of a political problem for Republican coalition-building than it does for the Democrats” is, to simply greatly, that if inequality of condition causes a preference for Democratic policies, then as inequality increases, you will get more Democrats. If it’s a marker for other causes of Democratic voting, then it’s a marker for things that make more Democrats. The idea of a coalition of aristocrats and the proletariat against the petite bourgeoisie and yeoman farmers is not a new one.

Will goes on to ask:

Here’s something people haven’t been talking about. How much has the recent runup in income inequality reversed due to the financial collapse and general economic slowdown? If it turns out to be a lot, will Democrats (and Republican inequality hawks like Jim Manzi) accept that the grounds for redistribution have weakened?

There is likely to be a significant reduction in inequality if we head into a major recession. There was between 1928 and 1932, for example. Though another big decline in inequality occurred between 1932 and 1942, whereupon inequality remained at historically low levels through the 1970s. Here’s a long-term trend chart:

Inequality will presumably become less salient if almost everybody gets a lot poorer and has expectation of getting poorer still. This might be due to a reduction in the friction caused by inequality, or alternatively, that friction could stay the same or go up, but other economic problems could just be even worse. I understand that there was a little grumbling about inequality during the 1930s.

But of course using a major recession to reduce inequality is like using a major recession to reduce the price of oil – the cure is worse than the disease. I have always argued that the challenge is to continue to get good economic growth while containing extreme inequality. I have always argued against redistribution as a way to attack this problem.

Why does a person with whom I agree about so much find inequality to be much less troubling than I do? I’ve thought a lot about this, and I believe that ultimately it’s because I see the world as a much more dangerous and violent place than Will does. I think that living in an extended, law-bound, commercial society is deeply unnatural, and the product of many generations of work. Aspects of human nature are an acid that constantly undermines its foundations. Hordes of violent men are always outside the city gates ready to sack it, and those inside always threaten to turn into a mob and destroy it from within. One of many bulwarks against these threats is social cohesion, which is undermined by extreme inequality.