Weekend reading: Wealth and politics

6 minute read

Here’s another in an intermittent series of posts on articles I found interesting; this one focuses on issues related to wealth, politics, and how they interact in various ways.

  • Democracy and the Policy Preferences of Wealthy Americans” (Benjamin I. Page, Larry M. Bartels, and Jason Seawright). An intriguing glimpse into the political preferences of the 1% and above, based on a survey of wealthy individuals in the Chicago area. The results reinforce stereotypes for the most part: Compared to Americans in general, the wealthy put a higher priority on reducing budget deficits, and favor cutting social spending like Social Security, reducing regulations on business, lowering taxes, and so on; they are less supportive of public education and taxpayer-funded national health insurance. However they are in fact concerned about levels of economic inequality and supportive of better wages for lower income Americans, they just don’t believe government can or should do anything about this. The authors conclude: “On many important issues the preferences of the wealthy appear to differ markedly from those of the general public. Thus, if policy makers do weigh citizens’ policy preferences differentially based on their income or wealth, the result will not only significantly violate democratic ideals of political equality, but will also affect the substantive contours of American public policy.” (Note that I found this paper via a post on the political science blog The Monkey Cage.)

  • Why the Rich Don’t Give to Charity (Ken Stern). Summarizes some studies on charitable giving by the wealthy: The bottom 20% by income give at a rate more than double that of the top 20% by income, despite receiving little or no tax benefits from charitable giving. Wealthy people also give relatively more to universities, arts organizations, and the like: “Of the 50 largest individual gifts to public charities in 2012, … [not] a single one … went to a social-service organization or to a charity that principally serves the poor and the dispossessed.” This not necessarily a function of the wealthy being more stingy or less empathetic by nature; some of the difference appears to be driven by the wealthy not having close exposure to the problems of those at the lower end of the income scale: “Wealthy people who lived in homogeneously affluent areas … were less generous than comparably wealthy people who lived in more socioeconomically diverse surroundings. It seems that insulation from people in need may dampen the charitable impulse.” (Note that Stern has written a book on U.S. charities, With Charity for All: Why Charities Are Failing and a Better Way to Give. See also my past post on the question of balancing charitable giving with perceived need.)

  • Is Capitalism Moral” (Steven Pearlstein). The core thesis: The recent financial crisis and long-tern trends in income, employment, etc., “are forcing free-market advocates and their allies in the Republican Party to pursue a new strategy. Instead of arguing that free markets are good for you, they’re saying that they’re good—mounting a moral defense of free-market capitalism.” Although it’s an opinion piece, the article is somewhat in the “view from nowhere” mode of critiquing arguments on both sides of the question and urging advocates to do better. Pearlstein’s conclusion: “In our current debate over capitalism, too much attention is focused on whether, how or how much to redistribute the incomes that markets have produced, with too little focus on the institutional arrangements that determine how that income is divided up in the first place.”

  • The Administrative State vs. the Social Insurance State (Jason Brennan). Speaking of institutional arrangements, here’s what seems to be an emerging theme among some people libertarian by nature but also sensitive to considerations of social justice: “We could imagine a political-economic regime in which there is a completely or largely unregulated free market but in which the government taxes people to provide social insurance and some other welfare benefits. On its face, this regime seem much congenial to classical liberalism than a regime that provides no welfare benefits, but which regulates most enterprises, sets prices, controls entry into markets, and imposes licensing rules.” Real-world examples cited include Canada, Denmark, and others that have European-style social welfare and insurance systems but score better than the U.S. on many measures of economic freedom.

  • Return of the Oppressed” (Peter Turchin). A physicist turned social scientist and advocate of “cliodynamics” looks at the history of economic inequality in the U.S. and elsewhere, and sees it being driven by long-term cycles: “Upward trends in variables (for example, economic inequality) alternate with downward trends. And most importantly, the ways in which other parts of the system move can tell us why certain trends periodically reverse themselves. … Unequal societies generally turn a corner once they have passed through a long spell of political instability. Governing elites … realise that they need to … switch to a more co-operative way of governing, if they are to have any hope of preserving the social order.” Turchin sees the present trend in economic inequality peaking around 2020, along with other trends relating to political and social stability: “In other words, we are rapidly approaching a historical cusp, at which the U.S. will be particularly vulnerable to violent upheaval.”

I usually just post these articles with a minimum of editorial comment, but this time I thought it was worth adding a few of my own thoughts:

The political attitudes of the wealthy as surveyed by Page, et.al., match up pretty closely from what you might conclude reading Wall Street Journal editorials and Heritage Foundation think pieces, or just listening to Mitt Romney’s infamous “47%” remarks. Thinking along Peter Turchin’s lines, it’s easy to see how this could be a self-reinforcing tendency: As more and more income flows to top earners, they will bear an increasingly greater share of the tax burden, and that in turn will lessen their willingness to support government spending on benefits for the poor and middle-class. At the same time the growing social, economic, and geographical isolation of the wealthy will likely lessen support for charitable giving directed at the poor, at least those in the U.S., whom many see as having it pretty good compared to the rest of the world.

As Pearlstein notes, this will all be accompanied by renewed debate over the moral foundations of capitalism. The second half of the 20th century saw a revival of classic liberal and libertarian political philosophy (e.g., by Friedrich Hayek, Robert Nozick, and—in a more idiosyncratic way—Ayn Rand). This was followed by the revival of free-market politics in the U.S. and elsewhere, with Barry Goldwater as the harbinger and Ronald Reagan and Margaret Thatcher as the realization, with the last 30 years seeing the working out of the resulting policies. The “bleeding heart libertarian” school of political philosophers, and the idea of promoting the “social insurance state” at the expense of the ”administrative state”, can be seen as an attempt to rework classic liberal and libertarian thought in the face of economic trends that might weaken popular support for the current economic system.

Given structural factors at work in U.S. politics, including the out-sized influence of small states seen in the Senate and the combination of gerrymandering and geographical clustering by party affecting the composition of the House of Representatives, I don’t see any major political shifts happening in the near term. Whether 2020 will mark a turning point, as Peter Turchin thinks, is an open question.