Opinion, Berkeley Blogs

Wealth and an American paradox

By Claude Fischer

The liberal blogosphere is currently atwitter over a new study produced by Michael Norton and Dan Ariely ( pdf ) showing how much Americans underestimate economic inequality in America. Scale A 2005 on-line survey asked thousands of respondents to estimate what proportion of all the total wealth in the country was owned by the richest one-fifth of Americans, the next richest one-fifth and so on. On average, the respondents guessed that the richest one-fifth owned about three-fifths of the nation’s wealth; in reality the richest one-fifth own over four-fifths of it. The survey also asked respondents for their ideal distribution; on average, they preferred a society in which the richest one-fifth owned about one-third of the national wealth.

(Although dramatic, these findings are not surprising. Americans have been shown, for example, to underestimate how wide the gaps are in earnings between jobs. And Americans generally cannot provide accurate statistical descriptions of America. For example, they tend to guess that minorities such as blacks and Jews form substantially larger proportions of the population than they really do.)

According to the new study, then, Americans not only think that wealth is much more equally distributed than it really is, they want an America that is much more equal than they imagine it is today. And yet, Americans are notably opposed to the government doing anything to move the distribution of wealth in that direction. Why the contradiction?

America the Unequal

The United States has the greatest inequality of income and wealth among affluent western nations. And that inequality has been increasing pretty steadily since about 1970 — more so than in other western nations – with a slowdown in the late 1990s and a few short-term fluctuations in wealth inequality due to swings in the stock market. This is pretty much understood by serious scholars (with a few outlying voices in dissent). It looks like Americans have been sensing rising inequality, too.

For example, Gallup has periodically asked Americans whether they thought of the nation as divided between “haves” and “have-nots” [Note 1]. The blue line in the figure below shows the percentages between 1988 and 2008 who said yes, America was divided. (It is plausible that the percentage would be yet higher now, two years after the last point.) Then, Gallup asked which category respondents would place themselves in [Note 2]. The red line shows an increase in the percentage who said they thought of themselves as “have-nots.”

Haves and have nots

Hands Off

And yet, Americans, studies have shown, are more opposed to having the government do anything about this inequality than are citizens of other western nations. (And, of course, the United States in fact does less than other western nations to address inequality.) The Gallup Poll has periodically asked its interviewees whether they think the distribution of wealth is “fair” or whether it should be “more evenly distributed” [Note 3]. The balance between those answers hardly changed – about 32% said “fair” – between 1984 and 2009, even as inequality widened.

Surveys asking whether the government should do something major (on the order of what European nations do) show continuing opposition from many, if not most, Americans. For example, the General Social Survey has asked questions about what the government should do about unemployment. The figure below shows the trends in answers during the recent years of growing inequality. The top, blue line, tracks support for whether the government should sponsor job-creating projects (presumably like road-building) [Note 4]. It shows a moderate upswing, particularly in 2006. The lower, red line tracks the percentage who agree with the broader principle that the government should be responsible for guaranteeing everyone a job [Note 5]: No change.

Public opinion re government jobs


So, it appears that Americans have noticed growing inequality, but they haven’t really changed their general opposition to the government doing anything dramatically different about it (beyond perhaps financing “shovel-ready” projects). Why?

One implication of the Norton-Ariely paper cited above is that, were most Americans to appreciate how unequal their society is and how much greater that inequality is than their ideal, their political views would shift.

Perhaps, but perhaps not. The other evidence suggests that increasingly many Americans have been aware of growing inequality, but that has not changed their resistance to explicit economic “leveling.”  Research on Americans’ hostility to the estate (the “death”) tax, for example,  shows that it is impervious to information, for example, that vanishingly few Americans ever pay that tax. (See Larry Bartels on this here .)

Versions of this paradox have perplexed social scientists for decades. (See also this earlier post .) Here are a handful of plausible explanations forwarded by scholars:

  • “Anti-statism.” Americans have been historically suspicious of and hostile to government (although they have accepted many pragmatic programs, like Medicare). Therefore, they may wish that inequality was much less than it is, but they will not empower the government to do something serious about it.
  • Opportunity, not outcome . Survey data show that many Americans generally do support government actions that widen opportunities for economic advancement, especially through education. Most Americans may believe, then, that in a society of equal opportunity, unequal outcomes can be reduced or at least tolerated. (Unfortunately, the belief that the U.S. is particularly open to upward mobility is empirically incorrect.)
  • Race trumps: In the U.S., issues of economic inequality have been tangled up with issues of race, because blacks have disproportionately been poor and the likeliest recipients of government assistance. Research suggests that this prospect leads whites to resist government action, even action that might benefit themselves.
  • Ideology of self-reliance : Americans have been historically committed to emphasizing individual independence and self-reliance; increased government action threatens to create dreaded “dependency.” In practice, Americans have comprised that ideology when conditions demanded – in the Great Depression, for example; or in accepting disaster relief. But these values make for deep resistance to any major new initiatives.
  • Constricted horizons: Some have argued that political discussions here are so narrowly bounded that Americans may see and resent great inequality but cannot really imagine that things could be (and are elsewhere) different. When, for example, the free-enterprise Obama health plan is seen by so many as an extreme, socialistic program, when our tax rates on the wealthy are described as confiscatory, or when Sweden is depicted as some sort of totalitarian state, it would seem that Americans are operating with blinders on.
  • The latest Norton-Ariely paper provides a vivid picture of just how unaware Americans are of how unequally distributed wealth has become in the United States. It still leaves us with the puzzle of why most Americans, even when they are aware of that imbalance, oppose major efforts to rebalance it.

    NOTES: Question wording……..

    [1] “Some people think of American society as divided into two groups — the “haves” and “have-nots,” while others think it’s incorrect to think of America that way. Do you, yourself, think of America as divided into haves and have-nots, or don’t you think of America that way?”

    [2] If you had to choose, which of these groups are you in, the haves or the have-nots?

    [3] Do you feel that the distribution of money and wealth in this country today is fair, or do you feel that the money and wealth in this country should be more evenly distributed among a larger percentage of the people?

    [4] Here are some things the government might do for the economy. Circle one number for each action to show whether you are in favor of it or against it. d. Government financing of projects to create new jobs.

    [5] On the whole, do you think it should or should not be the government’s responsibility to . . . a. Provide a job for everyone who wants one?

    Cross-posted from Claude Fischer’s blog, Made in America: Notes on American life from American history .