NEGATIVE EFFECTS OF EXTREME INEQUALITY

There is an abundance of research on economic inequality and it’s effect on the quality of life and social relations within countries of the world. Many studies have shown significant relationships between economic inequality and crime rates, community involvement, political participation and polarization, health, and even trust and happiness. Political unrest and terrorism may also be closely related to extreme economic inequality.

One particularly distressing side effect of increasing economic inequality is its impact on the safety and cohesion of society. As Richard Wilkinson said, “How cohesive a society is, how much people trust each other and are involved in community life, is an important social asset that makes a very substantial contribution to the quality of life.”

Studies show that people actually trust each other much less in countries with larger income differences. One study plots trust levels (based on % who say “Most people can be trusted”) and the income inequality of countries on a graph. The study found that that Brazil, a country with high income inequality, had the lowest levels of trust, while Sweden, which has a very equal income distribution, had the highest level of trust.

Along with being less trusting, unequal societies are also likely to have more crime. It might seem appropriate to associate high levels of violence in a society with rates of absolute poverty, but the evidence points to relative poverty as the true origin of violent societies. As Wilkinson explains, “If we were, for instance, to ask why areas such as Harlem in New York had such high levels of violence, the answer is less likely to be that the absolute level of poverty in Harlem is the true cause rather than the fact that people in Harlem are poor in relation to people in the rest of the United States.” Studies of violent crime and homicide provide convincing evidence for a relationship between income inequality and the safety of society. More than 50 studies have shown that a tendency towards violence is more common in societies with larger differences in income.

In one study done in 2002 using international data for 37-39 countries; Pablo Fajnzylber, Daniel Lederman, and Norman Loayza found a significant statistical relationship between homicide/robbery rates and income inequality. By plotting on a graph the Gini coefficient of the 37-39 countries, along with the homicide rates of those countries, they found that there is a positive correlation between homicide and income inequality. Moreover, the countries with the most unequal income distributions have the highest rates of homicide. Another study found that U.S. states with more equal income distribution to be much safer, with significantly lower rates of homicide.

It should now be clear that extreme economic inequality is detrimental to the cohesion and safety of societies and also of the international community. As Wilkinson put it, “What the relationship with inequality actually demonstrates is that societies that tolerate the injustices of great inequality will almost inescapably suffer their social consequences: they will be unfriendly and violent societies, recognized more for their hostility than for their hospitality.”

Another concerning feature of economic inequality is it’s impact on health and happiness. In the U.S. the gap in life expectancy has dramatically widened as inequality has grown. In 2000 for example, men in deprived counties had an average of 10 years’ shorter life expectancy than women of affluent counties, and poor black men lived almost 14 years less than affluent whites. Another study in 2007 showed that people with incomes less than $50,000 a year have a significantly shorter lifespan than those with incomes above $50,000. Furthermore, a study conducted by the Pew Research Center finds that happiness may be linked in inequalities. In the study, 50% of people earning more than $150,000 a year described themselves as, “very happy,” while only 23% of people earning less than $20,000 a year responded as, “very happy.” In a comparison of nations, Iceland and Norway, some of the most equal nations, were found to be the happiest. Altogether, the evidence suggests that more equal societies will be healthier and happier.

Perhaps the most worrisome effect of extreme economic inequality is that it reduces political equality and polarizes policy-making. What does this mean? Essentially, there is a distinct gap in policy preferences between the rich and the poor. As economic inequality grows, the policy gap widens. Furthermore, the political power of the rich increases as they become relatively more wealthy, even if the poor achieve absolute gains. This enables the rich to become even more effective in capitalizing on their policy preferences. As the U.S. has one of the highest levels of economic inequality, and has been widely studied, it will provide excellent empirical evidence for the effect of economic inequality on politics.

Since the 1960s, election turnout rates for the U.S. have declined by almost 15%.Election turnout rates are now at their lowest levels since 1924, when income inequality was as wide as it is today.The reduction in participation that has occurred is an effect of a widening gap between the rich and the poor in the United States. This is simply because money, rather than time, is the most powerful method of participation in the political system. For example, the top two income groups form less than 10 percent of the population but donate more than half of all money that goes to political campaigns. Political campaigning and advertising is expensive in almost every country in the world now. As Verba, Scholzman and Brady wisely note, “When money replaces time at the principal form of political currency, the playing field is no longer level.”

Measures of polarization, in both the house and the senate, have also shown dramatic increases since the late 1960s. The foundational cause of both the reduction in participation and the increase in polarization is the increasing gap between the rich and the poor. When plotted on a graph, the change in the Gini index of family income, highly correlates with the polarization index. Beginning in the late 1960s, the gap between rich in poor began to dramatically widen reaching its highest levels since the 1920s. The polarization index also shows notable increases since the 1960s. The most obvious explanation for the link between income inequality and polarization is that the gap in income between rich and poor has created a gap in economic policy preferences.

Clearly, the effect of economic inequality on politics is unethical and should be undesirable for a democracy. Political voice should be equally shared by all. Polarization prevents meaningful policies from being considered and harms the political cohesion of a country. Political engagement is the foundation of every Nation-State and should, therefore, it should be extremely distressing that economic inequality in increasing world-wide.

Date: 2015-12-11; view: 659