Why the poor don’t soak the rich
To ask why there is so much inequality in modern-day democracies is to ask a loaded question.1 Why should we expect there to be less?
Such an expectation was nevertheless widely shared in the nineteenth century, both among conservatives who feared the economic implications of democracy and among socialists who welcomed democracy precisely because of its apparent economic implications. The Left and Right agreed: if majority rule and universal suffrage were introduced into a society marked by massive inequality, then most voters, being relatively poor, would inevitably favor taxing the rich and transferring the proceeds downward. I will call this the redistributive thesis.
This is one thesis that history has roundly refuted. Although there have been redistributive eras in capitalist democracies since the advent of a universal franchise, there has been no systematic relationship between democracy and downward redistribution–not even a detectable relationship between the expansions of the franchise and episodes of downward redistribution.2
Indeed, expanding the franchise has sometimes been accompanied by regressive redistribution. In the United States, economic inequality rose sharply between the early 1970s and the mid-1990s, despite the passage of the Voting Rights Act of 1965 and the lowering of the voting age to eighteen in 1971. Similarly, in the post-communist world, the advent of democracy has been accompanied by the ostentatious growth of inequality. No doubt these developments owe at least as much to the introduction of capitalism as they do to democracy. Still, if the redistributive thesis is of interest, it must surely predict that a representative democracy will reverse–or at least retard–the regressive implications of market capitalism. Yet in practice, democracies often seem willing to tolerate growing inequality.
There are several ways that social scientists have tried to explain this apparent anomaly. A number of them have pointed to the logic of democracy, the logic of capitalism, and the ways in which they interact. Such analysts argue that the propensity to demand downward redistribution would be realized were it not for unexpected dynamics unleashed by the institutions of democracy and capitalism and their interaction.
My purpose here is not to criticize this kind of institutional account, but rather to raise doubts about some assumptions behind it. No doubt part of the intuitive plausibility of the redistributive thesis is that it seems supported by a number of common assumptions about human psychology. If individuals in general were rational in the pursuit of self-interest, or rational in their pursuit of class interests, then we would expect most people in a democracy to support downward redistribution–if not to the point of perfect economic equality, then at least to something a lot closer to it than what we now have.
The expectation that democracies will redistribute downward is often motivated by the observation of poverty amid opulence. It seems reasonable to anticipate that the greater the manifest opulence of the few, the stronger will be the redistributive pressure from below. Paradoxically, however, something closer to the opposite may often be the case.
Why this discrepancy? An important part of the answer, I think, lies in exposing a number of dubious assumptions about human psychology. Those who adhere to the redistributive thesis, be they Marxist, liberal, or conservative, usually assume that people in general keep themselves well informed about their place in the distribution of income and wealth, that the poor and middle classes compare themselves to the wealthy when thinking about what is feasible or just, and that those toward the bottom of the income distribution are like coiled springs–were it not for various external forces that are pressing them down, they would leap into action and demand a greater share of the economic pie.
Every one of these assumptions is questionable–and every one of them deserves to be questioned.
. . .
- 1An expanded version of this essay, including extensive discussion of the literature on which it is based, can be found at <http://pantheon.
- 2Inequality in the United States remained comparatively stable throughout the nineteenth century and only began to drop in the 1930s; yet during this period a number of voting reforms expanding the franchise were enacted. See Jeffrey G. Williamson and Peter H. Lindert, American Inequality: A Macroeconomic History (New York: Academic Press, 1980), 62–63; and Michael Levin, The Spectre of Democracy (Hampshire, U.K.: Macmillan, 1992), 3–9.