The big issue of the last election year, 2010, was the debt and deficits. It is a testament to both the multiplicity of our problems and short attention spans that inequality is emerging as the country’s focus in 2012 — a year when the debt has exceeded the size of the entire national economy and the annual deficit is projected to remain over $1 trillion. Both Republicans and Democrats need to understand the change to be successful.
Democrats must resist their obsession with unequal outcomes. We certainly have these. The Gini coefficient that measures the dispersion of income across a country’s population is, at around .47 in the United States, the highest ever recorded here and considerably greater than in other advanced industrialized democracies — such as Canada, France, and the United Kingdom, where it is in the low .30s and Germany and the Scandinavian countries where it is in the .20s.
Most Americans, however, are not particularly upset by this. In a December 2011 Gallup poll, 54 percent of respondents believed income inequality was an “acceptable part of our economic system.” The same poll found that 82 percent felt it was “extremely” or “very” important for the government “to grow and expand the economy,” whereas only 46 percent felt the same way about reducing income differentials between the rich and poor.
According to International Social Survey studies, on average about 70 percent of citizens of foreign countries believe “it is the government’s responsibility to reduce differences in income,” whereas about only one-third of us share this sentiment.
What does concern Americans is the decline in mobility, or the fact that an individual’s place on the economic ladder is determined more by an accident of birth than his or her talent and industry. Today, the Economic Mobility Project estimates that about half of the advantages of being born of parents with high incomes are passed directly on to children.
Put differently and in comparative perspective, when measured against the economic standing of their parents, Germans are 1.5 times more mobile than today’s American working adults, Canadians nearly 2.5 times more mobile. Economic mutability is an obvious indicator of dynamic and competitive societies.
Americans want the chance to get ahead. The December Gallup poll found that 70 percent believed it was important for the government to expand opportunities for personal advancement.
They also increasingly attribute stagnation to a government run by the wealthy and connected for the wealthy and connected. According to a January Pew Research Center poll, more Americans now believe the rich are where they are because they “know the right people or were born into wealthy families” rather than work hard and acquire skills. The assessment may be inaccurate and a function of “class envy,” but it should not be ignored.
A lack of mobility grates on American sensibilities. For those of us who believe this should be the most meritocratic society on the planet, it is tremendously worrying that the station into which you were born is increasingly the one you leave when you die. It was to prevent such stratified outcomes, for example, that the Founding Fathers wrote in Article I, Section 9 that “No title of Nobility shall be granted by the United States.”
Immobility is a national economic problem because it reduces greatly the incentives for productive and socially valuable behavior. We all understand how regulation and taxes discourage investment and cause businesses to spurn opportunities to generate wealth. Social ossification has a similarly nefarious effect. If what you can do with your life is largely predetermined, then what is the point of getting out of bed in the morning?
The presidential candidates of both parties should take note. Americans desire a fluid, transparent, and competitive society. President Obama seems frequently to value simplistic and punitive redistribution and, as such, embraces a different vision. More regulation and higher taxes on some do not increase the chances of advancement for all.
If the Republican nominee truly embraces individual liberty and abundant opportunities, he must think of the status quo as an institution that, like government, can impede personal freedom and squelch socially valuable and wealth-creating behavior.
Barriers to entry and exit into jobs must be reduced. We need to reward people for what they can do, not who they know and what they look like. The election is likely to be won by the candidate who convinces the public he is a meritocrat, not a protector of privilege or social engineer.
Andy Taylor is a professor of political science in the School of Public and International Affairs at N.C. State University.