Over at the Economist, Jason Furman worries about the long-term implications of growing societal inequality:
Regardless of the cause of rising inequality, lefties, utilitarians, Rawlsians and anyone with a deep-seated reverence for markets and the capitalist system should all be concerned. As Alan Greenspan memorably stated, "income inequality is where the capitalist system is most vulnerable. You can't have the capitalist system if an increasing number of people think it is unjust."
I'm as concerned about inequality as the next liberal. I can't help but listen to my inner Marx when some hedge fund managers makes several billions dollars a year. But I'm not convinced that growing inequality will somehow lead to the collapse of capitalism. Why not? Because the primate brain isn't bothered by inequality per se. Instead, it's bother by injustice. Furthermore, our minds come equipped with a lovely habit of rationalizing injustices away, so that we can maintain our belief in a just world. (This is known as the Just World Hypothesis.)
I'll begin by discussing a nifty experiment that demonstrates the disassociation between our need for equality and our need for justice. It was done by Franz Waals and Sarah Brosnan of Emory. They trained brown capuchin monkeys to give them pebbles in exchange for cucumbers. Almost overnight, a capuchin economy developed, with hungry monkeys harvesting small stones. But the marketplace was disrupted when the scientists got mischievous: instead of giving every monkey a cucumber in exchange for pebbles, they started giving some monkeys a tasty grape instead. (Monkeys prefer grapes to cucumbers.) After witnessing this injustice, the monkeys earning cucumbers went on strike. Some started throwing their cucumbers at the scientists; the vast majority just stopped collecting pebbles. The capuchin economy ground to a halt. The monkeys were willing to forfeit cheap food simply to register their anger at the arbitrary pay scale.
This labor unrest among monkeys illuminates our innate sense of justice. It's not that the primates demanded equality - some capuchins collected many more pebbles than others, and that never created a problem - it's that they couldn't stand when the inequality was a result of injustice. Humans act the same way. When people do something to deserve their riches nobody complains. (Well, perhaps I complain a bit about hedge fund managers...) But when they get rewarded for no reason and then refuse to fairly distribute their reward, people get furious. They begin doubting the integrity of the system, and become more sensitive to perceived inequalities. They reject the very premise of the game.
As Will Wilkinson points out, the recent rise of inequality is not predominately the result of rising injustice. I'm more likely than Wilkinson to blame various regressive policies for aspects of inequality (Bush's tax cuts, etc.), but I'm not so naive to believe that the tax code is largely responsible for the recent inequality trends:
It is worth repeatedly and forcefully emphasizing that income inequality may or may not be symptomatic of injustice. The three hypotheses for rising inequality Furman mentions are perfectly consistent with advances in justice. And if they are generating income inequality, then it may vindicate capitalism. For example, the loss of jobs, a decrease in wages, or a decrease in bargaining power for some workers may be a consequence of lifting coercive restrictions on voluntary exchange across borders -- restrictions that are themselves a form of injustice. Furman himself notes that protectionist policies could decrease inequality, though he advises against them, and rightly so, since they are unjust. But if protectionist policies are lifted, and inequality increases, that uptick in inequality is a side-effect of justice, not a symptom of injustice.
My second reason to not fear for the imminent downfall of the capitalist system concerns our depressing penchant for rationalizing away the injustices that do exist.
Disturbing evidence for this dishonest psychological mechanism comes from a series of experiments performed by the social psychologist Melvin Lerner. Several volunteers are told that they are about to watch, on closed circuit television, another volunteer engage in a simple learning paradigm. They see the unlucky subject - she is actually a graduate student, working for Lerner - being led into the room. Electrodes are attached to her body and head. She looks frightened.
Now the fake experiment begins. Whenever the subject gives an incorrect answer, she is given a powerful shock of electricity. The witnesses watching on television see her writhe in pain and hear her scream. They think she is being tortured.
One group of volunteers is now given a choice: they can transfer the shocked subject to a different learning paradigm, where she is given positive reinforcements instead of painful punishments. Not surprisingly, the vast majority of people choose to end the torture. They hate watching her suffer and quickly act to rectify the injustice. When asked what they thought of the "learner," they described her as an innocent victim - "She seems like a good person" - who didn't deserve to be shocked. That's why they saved her.
The other group of subjects wasn't given a choice. Instead, they were told a variety of different stories about the victim. Some were told that she would receive nothing in return for being tortured. Others were told that she would be paid for her participation. And a final group was given the martyr scenario, in which the victim submits to a second round of torture so that the other volunteers might gain from her pain.
How did these different narratives affect their view of the victim? All of the volunteers watched the exact same video of torture. They saw the same poor woman get subjected to painful shocks. And yet the assorted stories powerfully influenced their conclusions about her character. The less money she received in compensation for her suffering the more they disliked her. The volunteers explained the woeful injustice by assuming that it was her own fault: she was shocked because she wasn't paying attention. The martyrs fared even worse. Even though this victim was supposedly performing an act of altruism - she was suffering for the sake of others - the witnesses thought she was the most culpable of all. Her pain was proof of her guilt. Lerner's conclusion was unsettling: "The sight of an innocent person suffering without possibility of reward or compensation motivated people to devalue the attractiveness of the victim in order to bring about a more appropriate fit between her fate and her character."
This study illuminates some of the dangerous ways our reason manages to excuse acts of injustice, so that we manage to maintain a faith in some sort of cosmic justice. When the scientist doesn't allow us to prevent the electrical shocks, we find ways to justify the injustice and excuse our own complicity in the system. The abuse helped her learn. The suffering was in the name of science. The victim was hurt because she was stupid.
You have artificially separated inequality from unfairness. I think the real problem is that capitalism is coming to be viewed as rewarding some individuals more than others for the same amount of effort (or disproportionately for some given factor of work). I don't think it bothers too many people that someone who works overtime makes more than another who works no overtime, but it would bother almost anyone if some workers recived more pay for the same work that they do. The disparity in reward for employees of a company is acceptable if it's reasonable. No one expects the janitor to make as much as the CEO. But the janitor is going to get dissatisfied if the CEO makes 10,000 times as much as he does. And, for me, rightly so.
Sure, I think that inequality could reach a breaking point, where it gets so bad that a Marxist revolution becomes inevitable. But I think most people inherently believe that Warren Buffett or Bill Gates or Roger Clemens deserve their riches. That belief - valid or not - is a result, I'd argue, of our Just World Hypothesis. We tend to excuse examples of inequality (even if they are the result of injustice) because we want to believe that the world is really fair. The world has to get really unfair before we are willing to abandon that belief.
Excellent post. The missing factor, I think, is uncertainty. The monkeys were able to see other monkeys harvesting pebbles and getting compensated. In the salaried economy, it's hard to judge both outputs and rewards. You neither know who is the most productive person in your department nor how your compensation compares. (The former is hard to measure, the latter is rude to ask.)
In that environment, I think the bias toward believing in a just world will clash with the bias toward believing one's own work is above average in the absence of clear information.
I think you give too much credit to the "just world hypothesis." I suspect that some Americans might -- might -- be more inclined to think people like that deserve their incredbily great wealth than some people in other countries, but I think that's more a cultural effect than one due only to human nature. I don't expect a revolution, and I don't think anyone else does, either. But if current trends continue (increasing disparity between the wealthy and the poor, and decreasing percentages in the middle) there will be increasing dissatisfaction that will lead to results that are less violent but perhaps equally destructive to society in the long term.
A strong factor that keeps revolutionary feelings in abeyance is the Horation Alger ethic. People see themselves as being in the right place at the right time with the right application of initiative and becoming rich like Bufffett or Gates. Or winning a lottery. Since theyt can percieve themselves in a super-wealthy category, they are less resentful. This, of course goes aganst the real trends in income mobility in the US, compared with many other western societies. When [and if] this realization sets in, there will be a greater response than many Americans feel now, when they know they were duped about Iraq.
...we find ways to justify the injustice and excuse our own complicity in the system. The abuse helped her learn. The suffering was in the name of science. The victim was hurt because she was stupid.
This is not much different than the everyday going-ons in Iraq.
1. Democracy is messy and needs to be earned. Bloody abuse helps one to value freedom.
2. Suffering is necessary. Some collateral damage (elsewhere) is inevitable.
3. They refuse to take responsibility for governance. It's their own fault they keep dying in droves.
But I'm not convinced that growing inequality will somehow lead to the collapse of capitalism.
Well, we'll see, and climate change will allow us to see it firsthand. Will the global poor give up the goals of attaining "the good life" if the rich remain in gated communities with armed guards protecting the unequal strata? I think they won't stop pumping carbon into the atmosphere if it benefits the rich disproportionately.
What would be their motivation? To barely survive while the privileged maintain inequality (and through power manipulation continue to make matters worse)?