Monday, 26 September 2016

Is Economic Inequality Necessarily a Political Problem?

by Charlotte Phillips

So distribution should undo excess, and each man have enough” - William Shakespeare

Economic inequality is the accumulation of individual differences in economic resources across an entire country2. There is an apparent paradox when it comes to economic inequality in capitalist democracies: the majority should have the political power via their equally valued votes to reform a political system into one that treats them more equitably. Totalitarian states such as North Korea contrast this. Their political system leads to a situation whereby political inequality directly causes economic inequality, and there is no mechanism to redress this. Theoretically, democracies should have significantly lower economic inequality levels. In many cases they do. Why, then, is economic inequality so prevalent across the Western democratized world? And why does it constitute a political problem? The destructive cycle of economic inequality has been treated with relative indifference by governments across the world, despite overwhelming evidence to suggest that not only is inequality a political problem, but that there are political solutions.

But what constitutes a political problem? The word “problem” naturally implies negativity, so perhaps to fulfil the rubric of “political problem”, economic inequality needs to be having a negative effect on politics. But this demands an answer to the much less temporal question of what, exactly, is politics? This essay will focus on three of the main components of ‘politics’ as a concept: the political ideology and setup, the politicians and policy makers who run this setup, and the population whom it affects. A discussion of the ramifications of economic inequality will aim to demonstrate that economic inequality is truly a political issue, that has significant effects on each of those components.

Nobel-prize winning economist Joseph Stiglitz warned that democracy is “in peril” due to economic inequality3. It is easy to cast aside inequality as an occurrence limited to developing countries that are rife with corruption and poverty. Yet in industrial democracies, even those considered liberal, severe economic disproportion is damaging the political systems that we uphold as the fundamentally fairest form of polity.

One of the most basic demonstrations of this is the direct negative correlation between inequality and a population’s democratic engagement. Abstention levels of poorer American citizens during elections are significantly high2. The United States has the highest levels of income inequality of all the advanced, industrial states, with the bottom 40% of the population earning just 0.3% of national income. At the other end of the spectrum, the richest 0.1% (some 16000 households) earn 5% of national income4. This stratification sharply divides Americans into distinct socioeconomic groups, which are far less fluid than many politicians of the day would like to admit. The concentration of power and influence over political decisions often lies with the wealthy, because money can be used to influence the media, politicians themselves, and a host of other factors affecting the political process3. Where rich individuals are especially rich in comparison to poor individuals, the poorer citizens have comparatively less power, influence and therefore interest in their political system. Indeed, a cross-national research study found that “those in the highest income quintile are 68% more likely to participate [in elections] than the lowest-income individuals”4. Furthermore, countries with a lower Gini coefficient have far lower abstention levels. The Gini coefficient is the standard numeric measure of economic inequality in a country, calculated so that if 10% of the population earn 10% of the national income, and 20% earn 20% of the income, and so on, the Gini coefficient is 0- perfectly equal. A Gini coefficient of 1 would apply in a hypothetical situation whereby one individual earns the entirety of a nation’s income5.

‘One person one vote’ seems to be making an unhindered transition to ‘one dollar one vote’. This is not an issue limited to the United States. Across the democratized world, the preeminence of the wealthy voter against the disadvantaged voter reduces the incentive for poorer voters to use their enfranchisement. The unfortunate irony is that for many poorer citizens, or even ‘middle-class’ citizens, a more liberal or left-wing government could reverse some of these barriers and increase efficacy, through implementation of increasingly progressive taxes and policies that typically benefit those on lower incomes. But if these voters don’t vote, a government that could benefit them cannot get into power. Without sustained efforts at reducing economic inequality and reigniting political interest, one side of the political spectrum will hold an intrinsic advantage over the other. This clearly contests the elemental democratic values that are so prized by advocates of democracy.

Although disillusionment, with the consequence of unenforced disenfranchisement, is a significant issue, an alternative outlet for dissatisfaction with economic inequality is a gravitation towards the alluring promises of populist politicians. Those who are seemingly fed up with ‘the establishment’- the precise definition of which seems to be perpetually ambiguous- can be attracted towards the “unrealistic promises of change” offered by political demagogues3. The proof of this can be seen with the unexpected switch of many Labour voters and would-be Labour voters to UKIP in the United Kingdom’s 2015 general election6, the unprecedented rise of Donald Trump, and the increasing popularity of France’s answer to Nigel Farage, Marine Le Pen7. As with all politicians, but more intensely with this kind of politician, there is a huge difference between what is pledged and what can actually be delivered. Hence the people can only be disappointed, and the system can only be damaged by those who exaggerate in a ploy for power. The unlikely event of populist rule would almost inevitably lead to increases in economic inequality, after regressive policies further the immiseration of lower-income classes.

The breakdown of democratic process due to economic inequality is not limited to disempowerment and discontent amongst voters. In 2010, following the case of Citizens United v. Federal Election Commission, the American Supreme Court approved unlimited corporate campaign spending, allowing companies and businesses to support political candidates in elections. Individuals are allowed to use their own funds to this end (which also raises concerns about the undue influence of the very rich), but corporations, especially American multinational corporations, have overwhelmingly more resources than the ordinary American3. Millions, if not billions of dollars have been and will be spent taking advantage of this new law. The people who run these corporations will not be making decisions based not on what is best for the majority of Americans, but on which candidates will support policies that benefit their company. There is clear potential for a forging of a profit-motivated, highly influential elite who play politicians like puppets with their generous, or not so generous, campaign donations. This will only create further social divisions, and heighten the issue of the magnitude of a few people’s preferences far outweighing the efficacy that these preferences should have.

Making an informed political decision is highly valued amongst the democratized states of the world. A key tool for this is the media. Although it must be clear to all that there is hardly such a thing as unbiased media, the sources of these biases have serious implications in terms of economic inequality. Those members of society who are extremely rich have resources with which they can control a variety of media outlets, whether through buying them or bribing those who own them3. The heavy political biases of newspapers, for example, trickle down from the people who run and own them at the top level. If these rich and powerful people choose to spread a pro-Conservative message, or a pro-Republican message, the information that the majority of the public receive is skewed amongst spin and subliminal messages. Of course, bias in the favour of more liberal politics is present too. When we consider the influence of the rich, for example Rupert Murdoch, amongst a variety of mediums- television, social media, outright advertising campaigns9- it is clear that the views are neither accurate or representative of the majority of the public. Informed decision making is a cornerstone of our democracies: the worse economic inequality gets, the less informed our decisions will become. The result is less democratic societies.

The public perception of economic inequality itself also has important meanings for how it plays out as a political problem. Politicians have great power over this; whether or not they draw attention to inequality in election campaigns and policy making, for example, and the statements that they give out about the subject to the media. In America, we can see two contrasting politicians releasing contrasting opinions regarding inequality. Mitt Romney, runner for the Republican presidential candidacy (twice), once said that “inequality is the kind of thing that should be discussed quietly and privately”10. This is in stark contradiction to the words of Barack Obama, who said that “rising inequality and declining mobility are bad for our democracy”11. Statements such as these have significant influence over how much pressure governments are under to try and reduce economic inequalities, an action that will benefit those globally who are less well off.

The psychological concept of equilibrium fictions is relevant here. This proposes that “individuals process information that is consistent with their prior beliefs differently from how they process information that is inconsistent”12. In this context, this means that political views and information that are in line with pre-existing beliefs are less likely to be ignored and more likely to be reinforced as true. Therefore, the skewed perceptions that exist regarding income inequality in America pose a real problem for the politicians that aim to do something to abate the issue. Research reveals Americans believe that the bottom two income quintiles (40% of the population) earn 10% of the total national income. In reality, that figure is just 0.3%13. Perceptions of economic mobility are also highly inaccurate. Americans believe that they live in a far more economically mobile society than they actually reside in: they estimate a 43% likelihood of a person born into the lowest quintile moving up into the top three quintiles, when the true figure is much lower, at 30%14. In America, it is the Democrat party that are more likely to want to reduce inequality and raise it as an issue; Obama’s comments are a case in point. But if the public perceive this issue to be far less serious than it actually is, the message of the Republican party (a general feeling that economic mobility and inequality are low and that the ‘American Dream’ is alive and kicking)15 will be reinforced as the truth in the electorate’s minds, because of the preconceptions that they already have and the effects of equilibrium fictions. The illusion that anything is possible reigns, but of course for every rags-to-riches story there are millions of rags-to-rags-to-rags-again stories that aren’t publicised. Hence, again, one side of the political spectrum is at an inherent advantage to the other.
Furthermore, there is the inevitable problem of a lack of understanding about the extent of income inequality leading to a lack of drive to sort out the problem, which in turn causes inequality to carry on slipping towards, in extreme cases, third-world levels. America is the most economically unequal industrialized society2, and without serious intervention, this could worsen to a situation whereby America is known for being as economically unequal and immobile as many of the most corrupt developing countries in the world. If nothing else provides sufficient incentive to take action, the threat of losing a reputation as a free and democratic society with equal opportunity for all should be enough for any country to want to lessen economic inequality.

High levels of income and economic inequality within a country correlate with high levels of political violence. The precise nature of political violence is subject to a significant lack of consensus amongst those studying it, generally because of the ambiguities suggested by the term- is it a positive or negative occurrence? What counts as violent? Indeed, what counts as political?16 For the purposes of the analysis of the economic inequality/political violence nexus, political violence can be described as violence outside of state control that is politically motivated. This includes revolutions, civil war, riots and strikes but excludes crime and warfare17. Although a myriad of other factors means that “uncomfortable ambiguity prevails with regard to the relationship between income inequality and political violence”18, the link seems to have been steadfast for centuries. Whether we take the succession of European revolutions that occurred throughout the late 1840s as our example, or the more recent Arab Spring uprisings throughout the Middle East, it seems that less egalitarian societies are far more susceptible to political upheaval by the citizens. This is a hypothesis that has been theorized and developed greatly by political philosophers and scientists, which is arguably a reason in itself to consider the link substantial and relevant19.

Relative deprivation theory is a sociological view of social movement, in which people take action for social change with the aim of acquiring something- wealth, status, opportunity- that others have and that they believe they should also acquire. The theory proposes that it is people’s evaluations of what others have, and what they believe they should possess, that stimulates them to join social movements20. Advocates of relative deprivation argue that “relative deprivation is considered to be the necessary precondition for civil strife of any kind”21. Economic inequality almost guarantees relative deprivation. Citizens may take a “utilitarian justification” approach to taking violent action, in which they feel economic inequality is severe enough to justify violence and that this is the only effective way of achieving emancipation from economic and political restrictions18. Hence, if this relative deprivation leads to civil strife in the form of political violence, we have an undeniably political issue that has stemmed directly from the unequal allocation of income and resources.

The Marxist theory of rebellion also argues that economic inequality is prerequisite for revolution. Marx maintained that economic exploitation (“the expropriation of surplus value by capitalists from workers”) leads to immiseration of the proletariat class, which in turn increases the likelihood that impoverished workers will violently challenge the state22. Class polarization in more developed countries has receded since Marx’s time; but this does not render the theory completely obsolete. Although macroeconomic policies that attempt to redistribute incomes and the introduction of the welfare state has reduced the chances of those on lower incomes staging a form of revolution3, the principal can be demonstrated through the example of civil service and public sector cuts. When the UK government implemented austerity cuts leading to pension cutbacks and pay changes amongst NHS staff and teachers from 2010, it led to a series of strikes and demonstrations that illustrated the discontent felt by those affected23, 24.Whether or not the policies were justified is irrelevant here: what is clear to see is that those who felt they were being underpaid, had received a worsening of conditions, or were worried about their economic situation, carried out action to show these concerns. We can see here perhaps a combination of relative deprivation and the Marxist theory of rebellion, admittedly watered-down and not carried out by the capitalists who were the anathema of Marx.

In a democratic and relatively peaceful country such as the UK, strikes and peaceful protests are generally the parameters of potential political action. In more economically unequal countries, political violence can take a more damaging and extreme form. Coups, terrorism and other methods of showing political aggravation can be highly impacting for both governments and those who are governed. Political instability goes hand in hand with economic instability: a government struggling at the hands of political violence cannot effectively control an economy25. Here, then, we have another of the numerous vicious circles that apply when discussing economic inequality: the element of inequality leads to political instability and violence, which intensifies and aggravates the economy of that country, leading inexorably to a worsening of the situation of economic inequality. A worsening of the economy is not the only result of political violence. A diminished role on the world stage is inevitable: if a state cannot maintain peace within its own borders, it is unreasonable to expect it to be able to assist in maintaining and promoting international peace.

There are some counter-arguments to the proposal that economic inequality is the driving force behind political violence. It has been hypothesized, for example, that political conflict is inevitable because the factors that contribute to it are inherent in all societies26. However, this can be countered with the idea that if political conflict happens in all societies, this simply means we are yet to find a societal model that does not lead to unacceptably high levels of economic inequality. If poverty exists, the society is too unequal- we shouldn’t accept economic inequality leading to political violence as something inherent, but learn and develop each system we live in to find a better solution. Democracies are generally considered the fairest format for the running of a state. But they are by no means perfect, and the future will mean a development and refinement of the way we carry out politics27. Hopefully this evolution of society will create global systems that promote the reduction of economic inequality.

Politics, politicians and policies are the only way, globally and domestically, we can tackle rising levels of inequality that are damaging prosperity and political processes. Reducing inequality not only reduces political problems, it can bring huge political benefits. Politicians are the people with the potential to develop individual countries, and the world as a whole, to become a fairer and more economically equal community.

The favoured argument against economic inequality being a problem, trickle-down economics, is deeply flawed- it is an illusion. Trickle-down economics proposes that when those at the top of the economic pile have more wealth and income, this ‘trickles down’ to those in lower income quintiles through the creation of new jobs and the general expansion of the economy28. At least in America, despite fairly consistent positive economic growth over the past few decades, income increases have almost only benefited the top 1%. Incomes of the middle and lower earners have fallen whilst the incomes of those at the very top have risen hugely29. This is not the fault of those workers who are in the middle and the bottom. Low earners, especially those at the very lowest income quintile, are often stigmatised for not working hard enough or not trying harder to find a superior job. Economists and psychologists have worked together to show that “living under scarcity often leads to choices that exacerbate the conditions of scarcity...The stress of not having enough money...impair[s] the ability to take decisions that would help alleviate the situation”3. An example would be the decision not to vote; an action that could potentially help “alleviate” the situation of deprivation. This highlights the crucial role of social welfare and progressive, redistributive taxes in our societies.

Progressive taxation is a form of tax in which, as income rises, a higher proportion of that income is taxed5. The advocates of minimising progressive taxation argue it has a disincentive effect on workers, by discouraging them from wanting to become more productive and earn more. However, when the data is analysed, this viewpoint fails to hold credibility. Under American President Carter, the top marginal tax rate was 70%. This fell to just 28% under the Reagan administration30. Reagan justified this by claiming that tax revenues would increase as there would be higher incentive to increase income. In reality, tax revenues fell drastically and the budget deficit increased3. Progressive taxation correlates with stable levels of economic growth, showing that decreasing economic inequality through redistribution, and having an expanding economy, are not incompatible31. Brazil has been striving to reduce economic inequality through both progressive taxation and increased welfare programs to lower hunger and poverty. Brazil’s economy has grown exponentially, and although it is still a highly unequal society, it proves that concerted efforts by government can make an effective change without jeopardising economic growth32. In fact, lower inequality will mean a more productive workforce, more capable of providing the economic growth coveted by governments and economies. Poorer workers who are able to afford health care due to lower taxes will be able to spend more time at work, because they are not ill. This could partially explain why the United Kingdom hasn’t fallen quite as far into the trap of inequality as America has: the National Health Service provides free health care treatment for all, meaning that poorer citizens do not have to worry financially about falling ill or injuring themselves. Easier access to healthcare achieved through a more egalitarian society will lead to a healthier and happier population. This in turn could have a positive effect on the aforementioned problem of political disillusionment, illiteracy and disinterest. Healthier, happier, more fairly paid people are more likely to want to participate in elections and campaigns.

Progressive taxation and a rigorous system of social security are key policies that need to be implemented to tackle economic inequality. But other efficacious measures can also be taken by governments. The use of GDP- Gross Domestic Product- as a key indicator of economic strength is a decision that could be changed politically. GDP measures the total output of an economy: all goods and services produced and bought5. Although using GDP has its strengths, the weaknesses are many, notably that GDP misrepresents economic inequality. GDP could be increasing, yet the vast majority of a country’s citizens could not be experiencing any benefits- they could even be worse off3. Other disparities are also not reflected in GDP; for example, levels of education, how pleasant the environment is, and the level of healthcare provision in a country. GDP figures allow politicians and people to ignore inequality. Therefore, inequality will continue and worsen if GDP continues to be the primary measure of economic success, because it contributes to the aforementioned skewed perceptions of economic inequality that are so harmful for attempts at reducing it. Perhaps an international move towards using the Gini coefficient of a country to rate economic prosperity would trigger global stimulation to reduce inequality. Although this is unlikely in a market-driven, globalised world, it is not an idea completely incompatible with current political and economic setup. It would certainly ensure a more humanitarian attitude across international politics; an attitude that few could deny would be welcome.

Ensuring thorough anti-discrimination acts, on all bases- gender, race, class, sexuality and so on- will help to promote a culture of equality and this will help to publicly support the reduction in economic inequality that is so needed. It is against the democratic values of equality of opportunity to discriminate on any grounds, including economically. Some may argue that it is flawed morals that leads to economic inequality- people should just be more charitable. They should, but creating a global culture whereby this is the norm rather than the exception is a truly political task.

Politics is about organising an effective community. ‘Effective’ is subject to interpretation, but the belief that this means equal opportunity, democratic values, and above all social mobility is key. Some degree of wealth inequality is both inevitable and not a significant political problem. To some extent, it can act as a stimulus for mobility. But high levels of economic inequality bring huge problems to countries globally: the breakdown of political systems, political violence, and discontent amongst significant proportions of the population. The corollary here is that significant economic inequality is incompatible with running an effective community, in which all have an equal opportunity to prosper. Politics both suffers the symptoms and can provide the cure; we just need to cultivate the drive and ambition necessary to reduce economic inequality and channel it into political strategies. Economic inequality is an inextricably political issue with inextricably political approaches, as the titular message of political scientist Harold Lasswell’s book so eloquently summarises- Politics: Who Gets What, When, How33.


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