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February 2 - February 11, 2024
The poorer half of the population are as poor today as they were in the past, with barely 5 percent of total wealth in 2010, just as in 1910.”8 But total wealth today is vastly greater than it was in 1910, so if the poorer half own the same proportion, they are far richer, not “as poor.”
Perhaps most people are like Igor and their happiness is determined by how they compare with their fellow citizens rather than how well-off they are in absolute terms.
In their well-known book The Spirit Level, the epidemiologists Richard Wilkinson and Kate Pickett claim that countries with greater income inequality also have higher rates of homicide, imprisonment, teen pregnancy, infant mortality, physical and mental illness, social distrust, obesity, and substance abuse.14 The economic inequality causes the ills, they argue: unequal societies make people feel that they are pitted in a winner-take-all competition for dominance, and the stress makes them sick and self-destructive.
Wealthy but unequal countries, such as Singapore and Hong Kong, are often socially healthier than poorer but more equal countries, such as those of ex-Communist Eastern Europe.
Many studies in psychology have shown that people, including young children, prefer windfalls to be split evenly among participants, even if everyone ends up with less overall.
The influence of money on politics is particularly pernicious because it can distort every government policy, but it’s not the same issue as income inequality.
What happens when a society starts to generate substantial wealth? An increase in absolute inequality (the difference between
the richest and poorest) is almost a mathematical necessity.
the Kuznets curve.24
New Deal
The explosion in social spending has redefined the mission of government: from warring and policing to also nurturing.32 Governments underwent this transformation for several reasons. Social spending inoculates citizens against the appeal of communism and fascism. Some of the benefits, like universal education and public health, are public goods that accrue to everyone, not just the direct beneficiaries.
Whether or not the social spending is designed to reduce inequality, that is one of its effects, and the rise in social expenditures from the 1930s through the 1970s explains part of the decline in the Gini.
The United States is famously resistant to anything smacking of redistribution. Yet it allocates 19 percent of its GDP to social services, and despite the best efforts of conservatives and libertarians the spending has continued to grow.
For all their protestations against big government and high taxes, people like social spending. Social Security has been called the third rail of American politics, because if politicians touch it they die. According to legend, an irate constituent at a town-hall meeting warned his representative, “Keep your government hands off my Medicare” (referring to the government health insurance program for seniors).
In reality social spending is never exactly like insurance but is a combination of insurance, investment, and charity.
Inequality undoubtedly increased—the rich got richer faster than the poor and middle class got richer—but everyone (on average) got richer.
Inequality is not the same as poverty, and it is not a fundamental dimension of human flourishing.