Posts Tagged ‘politics’

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As is often the case in the United States, the current election campaign in the United Kingdom appears to be centered on the question, “are you better off today?”

Well, the answer is much like it would be in the United States: not the majority of people. Sure, the tiny minority at the top are doing fine.

Britain’s richest 1% have accumulated as much wealth as the poorest 55% of the population put together, according to the latest official analysis of who owns the nation’s £9.5tn of property, pensions and financial assets. . .

A rush to save among richer households as the recession deepened boosted the nation’s total wealth and ensured Britain’s long-established financial inequality remained in place, with the top 10% laying claim to 44% of household wealth – while the poorest half of the country had only 9%.

But not so much for everyone else. Wages, according to Wells Fargo [pdf], are growing at less than two percent on an annual basis.

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And, according to the Guardian, both GDP per capita and net disposable income per capita (especially the latter) remain below their 2008 levels.

Ed Balls, the shadow chancellor, said the Tories were wrongly telling voters they have “never had it so good” even though Britain is experiencing the slowest recovery in a century.

Speaking during a campaign visit to Swindon, Balls said: “This is a government which has presided over five years when wages have not kept pace with rising prices and family bills.

“George Osborne and David Cameron want to spend the next six weeks going round the country saying you are better off. I say ‘bring it on’ because working people are really struggling in our country and we can do better than this.”

Indeed, in both the United States and the United Kingdom, working people are really struggling and we can certainly do better than this. The problem is, while people are correctly questioning the policies offered by the political parties in power, they’re not convinced the challengers are offering a real alternative.

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In a now-famous study (and video-gone-viral presentation by Colin Gordon), Dan Ariely and Michael I. Norton showed both that Americans underestimate the current level of wealth inequality in the United States and that they prefer a much more equal distribution than exists right now.

In a more recent study, Shai Davidai and Thomas Gilovich [pdf] used a similar approach to assess perceptions of economic mobility within the United States. Their work is important because, as they explain, “a core tenet of the American ethos is that there is considerable economic mobility.” In other words, even as various forms of inequality have grown over time, Americans can still argue the situation is not so bad if people can move up the ladder, making the transition “from rags to riches.”*

However, what Davidai and Gilovich found is that (1) people believe there is more upward mobility than downward mobility, (2) people overestimate the amount of upward mobility and underestimate the amount of downward mobility, (3) poorer individuals believe there is more mobility than richer individuals, and (4) political affiliation influences perceptions of economic mobility, with conservatives believing that the economic system is more dynamic—with more people moving both up and down the income distribution—than liberals do.

Their findings are important because the belief that upward mobility is more prevalent that downward mobility serves to justify the existing economic system. It reinforces the idea that capitalism is fair, legitimate, and just—that is, one can “make it” with appropriate effort. If they can’t, then existing inequalities look even harsher and more unfair.

If, however, the actual story is rags to rags and riches to rags—that is, it’s highly unlikely to move from the bottom to the top, and also unlikely to be able to stay at the top—it becomes much more difficult to justify the growing disparities between the top and the bottom. To put it differently, if the rungs of the ladder have grown further and further apart and people understand their misperceptions of actual rates of upward and downward mobility, they’re going to be less prone to accept the empty promises of increased opportunity offered by academics and politicians. What that means is they may become more open to the possibility of imagining and creating alternative economic institutions, in which the ladder of inequality is rendered less important.

 

*Although, as I often explain to students, even if workers can become capitalists, it is still the case that, qua capitalists, they find themselves in the position of exploiting others who occupy the position of workers.