US inequality and the apathy towards it

A recent paper entitled “The Economy is Rigged’: Inequality Narratives, Fairness, and Support for Redistribution in Six Countries” examined whether fairness narratives about systemic economic inequality can influence the public’s views on redistributive policies. Intuitively, media coverage built on such narratives should be a powerful tool to stimulate public interest in inequality and generate support for redistributive policy proposals.

The paper investigated whether a media treatment featuring a narrative about inequality as the result of a system rigged in favour of the rich increases preferences for redistributive policies. There were 7,426 online survey respondents in six countries: Australia, France, Germany, Switzerland, the United States, and the United Kingdom. These countries have varying levels of inequality. Comparing Gini coefficients for 2022, Figure 1 shows that the US and UK appear in the highest quartile for income inequality among OECD members, Australia appears in the second-highest quartile, and Switzerland, France and Germany are in the second-lowest quartile.

Participants were allocated to read either the rigged system article or a neutral article.

The rigged system article reports on the growing wealth gap between a small elite and the rest of society. By pointing to the stream of bailouts for bankers and tax cuts for companies that avoid paying taxes, the article makes the case that the rules of the economic game are tailored to advantage the rich and powerful, leaving everyone else behind.

The neutral article reports about the generic business practices of a large company (for example, Office Depot in the US).

After completing the reading of either the rigged article or the neutral article participants were given a questionnaire with six redistributive policies which they rates on a five-point scale ranging from “strongly disagree” to “strongly agree”. Policies included that the government should do more to reduce income differences between the rich and the poor, and specific policies such as imposing a 2% tax on all assets owned by households with a net worth above $50 million.

Results Results show that Australia, France, Germany and Switzerland, after reading about inequality, increased beliefs about inequality and supported redistributive policies. However for participants from the US it had a reverse effect – see graph. John Burn-Murdoch in the FT stated that Americans see themselves as upwardly mobile and believe in hard work. They are most likely to say that the lower income groups need to to find a job and work harder. Also there is a distrust of the government and in particular its ability to run an economy efficiently.

Ronald Reagan famously said in a campaign speech

“The president (then Jimmy Carter) is going to have more government on the backs of the people and of business and of industry, the working people, in order to try to solve the problems that were created by too much government on our backs. We can get government off our backs, out of our pockets.” Ronald Reagan

Although people talk of the American dream, when you look at the apathy towards inequality and the indifference to government intervention it is a bit of nightmare.

Sources:

“The Economy is Rigged’: Inequality Narratives, Fairness, and Support for Redistribution in Six Countries” 20-11-2023

Does the American dream foster inequality? FT 8-12-2023