Public economics

This assignment is a general analysis of the attached article, assignment is approximately 6-8 pages double spaced. You should present the argument of the article, critically evaluate it, and place it with in context of policy economics. If the argument is wrong state why- it wrong,

Introduction Income inequality can very simply be defined in terms of a gap between the haves and the have-nots. When applied to a country’s income distribution it means that those at the top of the distribution hold a greater share than those in the middle and those at the bottom. Over the last couple of decades there has been a considerable increase in income inequality in much of the western industrialized world. Generally speaking, income inequality in the United States has been greater than other industrialized countries as measured by Gini coefficients, the ratio of the top quintile of family income to the bottom quintile, and the share of wealth held by those at the top relative to that held by those at the bottom. And yet, inequality in underdeveloped and developing countries lacking in sophisticated welfare state programs and where economic reforms, including land reforms, have not occurred, tends to be much higher than in the industrialized ones, including the United States.  Inequality, however, may be greater in countries that are in the process of transitioning to market economies. China serves as a good example where inequality was relatively low during the first years of Communist rule, especially when land reform was introduced. But it rose precipitously during what has been referred to as the Great Leap Forward and Great Famine from 1957-196, reaching an all-time high in 1966. Though it declined afterwards, it began to rise again in 1987 after the government began undertaking market reforms (Kambur & Zhang 2001; Benjamin

et al 2005). Wang Xiaolu (2006) notes that the Gini coefficient was 32.0 in 1980, dropped to 25.7 during the initial stage of economic reform between 1980-1984, but increased to 35.5 in 1990 and then 44.7 in 2001.  Although free markets may be viewed as the source of inequality, the question remains: why is it greater in some countries than others? The simple answer is that the politics of a nation and the public policies that it pursues has much to do with the level of inequality. Short of adopting socialist policies, there is no way to really end it. But inequality can be lessened when a country seeks to pursue policies that bolster the least advantaged members of society.  This essay will explore trends in inequality and the various measures of it, and will also look at its impact on the distribution of power. While income inequality is a problem inherent to all capitalist economies, it tends to be greater in those countries with less of a social safety net. Indeed, it has risen in those countries where as a matter of deliberate public policy the social wage has decreased.  Income inequality, however, is more than a matter of distribution; rather it has serious repercussions for democratic theory because to the extent that it results in some having more resources than others it seriously affects the distribution of political power and ultimately the outcomes of a democratic political process. The privileged participate more than others and tend to be better organized to press their demands on government (Jacobs & Skocpol 2005). The reality, however, is that one cannot have true democracy amidst rising income inequality because in the end not all in the political process are equal.




Measuring Income Inequality Measuring income inequality is really no easy task. Four widely used measures of income inequality are the Gini coefficient, the Atkinson inequality index, the Theil inequality index, and the coefficient of variation.  The gini coefficient is a summary statistic ranging from 0 when all individuals are equal to 1 where there is complete inequality, and it tends to be very sensitive to changes around the median. Developed by the Italian statistician Corrado Gini in 1912, the index represents a percentage which is equal to the Gini coefficient multiplied by 100. A coefficient of .70, for example, would suggest extreme inequality, whereas a coefficient of .13 would suggest relatively low levels of inequality. How do countries compare using this index? Whereas most developed European nations have Gini coefficients between .24 and .36, the United States tends to have a coefficient above .4. And many Central and South American countries, as well as African countries, have Gini coefficients close to .60 and in some cases exceed it. The Gini coefficient, however, may not be the best measure when comparing large countries to small countries. Moreover, because benefit systems vary from country to country, comparisons of inequality between countries may also be difficult using this measure.  The Atkinson index explicitly incorporates normative judgments about social welfare and is derived from calculating an equity-sensitive average income based on a per capita income that would result in the total welfare being exactly equal to the total welfare generated by the actual income distribution if everybody enjoyed the same per capita income. The Atkinson index is sensitive to inequality changes in the lowest part of the

income distribution. Therefore, as equity sensitive income rises, more social weight is attached to income transfers at the lower end of the distribution. The Atkinson index in economics is specifically used to quantify income inequality. And more specifically, it is used to gauge movements in different segments of the income distribution. The Theil inequality index, derived from the econometrician Henri Theil, ranges from 0 to infinity with higher values representing greater equality. It is essentially a mathematical formula:


N (1)   T= 1/N  Xi (xi/x. 1n xi/x)                          i=1


In the formula, xi is the income of the ith person, x is the mean income, and N is the number of people. The first term inside the sum represents the individual’s share of aggregate income, with the second term representing that person’s income relative to the mean. When everybody has the same mean, the index is equal to zero, but when one person has all the income, the index is equal to 1nN. An advantage to the Theil index over say the Gini coefficient is that it is the weighted sum of inequality within subgroups. As an example, inequality in the U.S. would be the sum of each state’s inequality weighted by the state’s income relative to the entire country. And the coefficient of variation is simply a statistical measure of the deviation from the mean. It measures dispersion of a probability distribution, defined as the ratio of the standard deviation σ to the mean μ. As a number without dimensions, the coefficient of variation allows for a comparison of populations that have significantly different mean values. This measure is often used to discuss the normal


distribution for positive mean values that have a standard deviation significantly less than the mean. The coefficient of variation, as is also the case with the Theil index, tends to be very sensitive to changes at the top part of the income distribution.  Depending on which measure is used, the degree to which there is inequality will vary. All of these measures belong to groups of relative inequality measures that are not necessarily sensitive to relative changes in income scale, but do imply some a priori value judgment about the distribution itself. On the basis of data from the Luxembourg Income Study (LIS) Brigitte Buhmann, Lee Rainwater, Guenther Schmaus, and Timothy Smeeding (1988)) found that when using the Atkinson index, the United States had the highest inequality in disposable income, followed by the Netherlands and Australia. Sweden and Norway, by contrast, had the most equally distributed income. And yet, on the basis of both the Gini coefficient and the coefficient of variation, the Netherlands actually had more equality relative to other countries.  To these four measures may be added yet another: the ratio of say the mean or median income of those at the top of the distribution to the mean or median of those at the bottom of the income distribution. This can be done through a quintile analysis or perhaps even a decentile one. The problem with measuring inequality, regardless of which approach is taken, is data. Researchers often rely on official income figures from say a national census. In the United States, for instance, this can be quite problematic because the U.S. Census bureau top-codes the income variable usually at $1 million, whether it be personal, household or family. This means that in a city like New York City, for instance, where there may be a disproportionate number of those earning

more than $1 million, the extent to which there is income inequality is understated (Levin-Waldman 2001). Various researchers have tried to get around this problem by using 10-50-90 percentile levels to analyze the distribution rather than quintile distribution. This avoids the top-coding problem largely because it excludes those over the 90 percentile level. And yet, most of the skew comes from that top 1 percent that has now been eliminated. Even though these techniques will avoid understatement of income inequality, the fact remains that a comparison of the 10-90 percentiles of the income distribution still eliminates the top 10 percent where a disproportionate share of family income happens to be. As Table 1 makes clear, those countries with high Gini coefficients also have significant proportions of wealth and/or income held by the top 10 percent. An example of inequality using this approach for OECD countries during the mid 1980s can be seen in Table 2. Again on the basis of the ratio of the 90 percentile to the 10 percentile, the United States has the highest rate of inequality at 5.94 compared to Finland with the lowest rate of 2.59.


Rising Income Inequality To talk about income inequality is somewhat problematic because it isn’t entirely clear just what we mean by it. What does it mean to say things are unequal in terms of distribution? Income inequality is often viewed as a problem in a market economy, which allocates income on the basis of several factors including education, experience, innate abilities, incentive, and risk. On the contrary, when these factors are considered income is by and large distributed on the basis of desert. More educated individuals, and those possessing greater abilities, are entitled to earn higher


incomes than those who do not. That one is poor, especially in a society where everyone is presumed to enjoy equal opportunity, is ultimately that individual’s responsibility. And yet, the capacity to have greater income exists if there is a willingness to obtain the requisite education and training to command it. Although there may be some agreement that a more equitable distribution of income ought to involve a move to greater equality of income and greater equality of opportunity, the prevailing view, at least in the United States is that there is equality of opportunity (Robinson & Dervis 1977). According to Leslie McCall (2001), the problem is that we tend to look at the income distribution in more absolute terms whereby we compare those at the top of the distribution to the bottom. In reality, there is what she calls “configurations of inequality” in which race, gender, and class intersect in a variety of ways depending on underlying economic conditions in local economies. There is in fact no local economy in which all types of wage inequalities are systematically and simultaneously lower or higher; rather the norm is a complex intersection of various dimensions (p 6). Therefore, inequality needs to be conceptualized as the outcome of both economic restructuring and gender and racial divisions of labor. Inequality will also vary among age cohorts. Income inequality and poverty are both greater in the U.S. than elsewhere. On the basis of the LIS, Smeeding and Dennis Sullivan (1998) explored differences in economic well-being across cohorts of the population in four modern nations: Canada, United Kingdom, Sweden, and the United States. Using adjusted disposable income (ADPI) as the household’s principal measure of well-being, both the U.S. and U.K. were found to have experienced between 1974-94

rapid secular increases in inequality and in relative poverty. Inequality increased less in Canada and Sweden, where poverty levels were also lower. As they observe, overall levels of inequality differ markedly across these nations, and the differences are reflected in their poverty rates.  While the U.S. has had the highest relative poverty rates, Sweden has had the lowest. Younger households (under age 30) in the U.S. are not doing as well as older ones (over 65), but both the young and the old have higher poverty rates than other nations. Those with the highest incomes and the lowest poverty rates in every nation are middle-aged (40-54) families. John Coder, Lee Rainwater and Timothy Smeeding (1989) found that in a comparison of ten modern nations, the most equally disposable income was in Sweden and Norway, and that the highest degree of inequality was in the U.S., Australia, and Canada. Newer countries like the U.S., Australia and Canada tend to have more poverty and fewer people in the middle class than do older nations, and the Scandinavian countries tend to have the least poverty and the largest middle class. But among the elderly, the U.S. while it ranks behind the U.K. and Israel, has the highest poverty rate. It also had a higher fraction of children living in poverty.  Despite a consistent increase in inequality in the U.S. since 1979, the rate of increase has not been constant. The sharpest increase occurred during the early 1980s and was followed by a flattening during the later 1980s. Then during the 1990s income inequality began to re-accelerate (Bernstein & Mishel 1997). The average weekly wages of men, for instance, increased by about 20 percent between 1963 and 1989, but these gains were not spread equally. Wages for the least skilled, as measured by the 10th percentile of the wage distribution, fell by


about 5 percent while the wages of the most skilled, as measured by the 90th

percentile, increased by about 40 percent (Juhn et al 1993). The net result of this divergence was an enormous increase in wage inequality. At the same time, many of the jobs that were created were at the low end of the wage scale. The majority of these low-wage workers in the U.S. have no educational credentials beyond a high-school diploma, and many, including a large number of immigrants, lack even this credential. Eileen Appelbaum et al (2003) refer to these workers as frontline workers. At the same time, a college education and low-wage work are not necessarily mutually exclusive.

Sources of Inequality The theory of perfectly competitive markets blames rising inequality on structural changes in the economy that have resulted from a mismatch between good paying jobs and the skills available to workers. The main culprit is technological change biased towards those with higher levels of education and skills (Juhn et al 1993). According to this school of thought, the labor market is divided into a primary market where high premiums are placed on skilled workers, and a secondary market where unskilled workers are trapped in the lowest-wage service sector of the economy. The growth in wage inequality between the primary and secondary labor markets has been caused by increasing skills differentials between the two (Katz & Murphy 1992; Katz & Krueger 1992). Increasingly, greater attention in the literature is paid to institutional factors like wage-setting institutions and social norms. Institutionalists hold rising wage inequality to be due to a shift in public policy and a corresponding decline in labor market institutions like unions and the minimum

wage in the U.S. and wage councils in Britain (Piore 1995; Gordon, 1996; DiNardo & Lemieux, 1997; Fortin & Lemieux 1997; Lee 1997; Machin 1997; Galbraith 1998; Palley 1998; Lemieux 1998; Howell 1999; Wallerstein 1999; Craypo and Cormier 2000). During the late 1970s, the United States began experiencing a sharp ideological shift towards a preference for competitive market outcomes and solutions, and this ideological shift did have direct effects on bargaining in the workplace (Moody 1988).  Examining trends in overall wage inequality in the United States labor market on the basis of data from the Current Population Survey (CPS), David Card and John DiNardo (2002) attributed overall wage inequality in the U.S. at least during the early 1980s to trends in the minimum wage and declining unionization. And in data on worker literacy in OECD countries, David Howell and Friedrich Huebler (2001) found that while there was a positive association between skills differentials and changes in wage inequality, there was also a strong association between labor market institutions and changes in wage inequality. This would suggest a global role for institutions to affect inequality. Peter Gottschalk (1997) suggests that income inequality increases when the growth of income is greater among those at the top than among those at the bottom, even though bottom incomes have improved in absolute terms. While mean wages grew rapidly during the 1950s and 1960s in the U.S., the dispersion around the growing mean changed very little. But as mean wages grew slowly during the 1970s through the 1990s inequality rapidly increased. So long as those at the bottom of the income distribution gained along with everyone else from secular growth in the mean, it was a


foregone conclusion that poverty rates would be kept down. Moreover, countries with the greatest increases in income inequality were also those that had the most decentralized labor markets. On the contrary, those countries with centralized wage-setting institutions tended to have less income inequality. And as data from the LIS demonstrates, those countries with greater welfare provision and other welfare state institutions that serve to boost the incomes of those at the bottom tend to have lower levels of income inequality (Kenworthy 1999).


Social Effects of Inequality The most visible effect of income inequality is perhaps poverty, but because poverty isn’t something that affects most people we may not easily see the connection between inequality and poverty. And yet, as Mark Rank (2004) argues, poverty, just like income inequality, results from failings in economic and social structures. Much of the current research does establish that individual and family characteristics do have an effect on whether one is likely to experience poverty during one’s lifetime. There are particular attributes and characteristics that place individuals at a disadvantage in the labor market.  Kathryn Neckerman (2004) argues that economic inequality by itself would of course be a cause for concern, but its impact is only compounded by its social consequences. There has been a rise in social inequality in many different realms such as family life, education, or civic engagement. Social inequality in these realms only magnifies the burden of rising poverty for the most vulnerable, and thus sustains for a long time the effects of inequality. Neighborhoods with high concentrations of poverty and scarce social resources have

been linked to developmental problems for children living in them. Educational inequality has its most immediate consequences in the labor market with new workers being sorted into good jobs and bad jobs. Then there are perhaps effects of economic inequality on the political system. Between the 1970s and the 1990s, in the U.S. for example, at a time when social and economic inequality was increasing, there was also a divergence of family patterns across social and economic strata. A well known changing family pattern was a shift in family structure. There was a dramatic increase in single-parent families, and it is this particular shift in family structure that has been identified as a factor exacerbating income inequality. Single parenthood appears to be most common among socially disadvantaged groups, and single parenthood also appears to compound social disadvantage in numerous ways (Martin 2004).  According to David Ellwood and Christopher Jenks (2004) not only has family structure changed from 1900 through the late 1960s, but it has changed very differently depending on parents’ education and race. From an economic perspective, the most bewildering feature of family change has been the spread of single-motherhood, which in turn has played a major role in the persistence of poverty. Single-parent families have less income than two-parent families. Although children living with stepparents in adolescence have about the same family income as those living with their biological parents, they are also more likely to drop out of high school or to have a child while still a teenager. In this vein, children living with a stepparent are at least as disadvantaged as children living with a single parent. Mothers’ educational attainment rose substantially between 1960


2000, but during the first score of that period the percentage of mothers who were unmarried also rose sharply throughout the educational distribution.  Traditional economic models treat marriage as a contract from which both husbands and wives expect to reap economic benefits. Structural changes in the economy no doubt affect those expectations. One of the popular explanations for the rise of single-motherhood is that women are less willing to “put up with” the way men treat them (p.52). But in virtually all models and samples, weaker economic performance is associated with reduced or delayed marriage, and they do find some evidence that improving job opportunities for men has somewhat increased marriage and reduced single-parenthood. Theoretical and empirical literature for women, however, has been far more ambiguous about the effects of female labor market opportunities. But improved opportunities for women may have led them to postpone childbearing. Steven Martin (2004) suggests that delayed family formation may actually be most common among socially advantaged groups, and it may thus confer comparative advantage in numerous ways. Those who delay family formation tend to be better educated and when they do decide to form families, they are in better financial positions to pay for high quality child care and thus greatly reduce their lost career time, which also carries with it a deficit in income. Economically successful women in particular tend to have a smaller wage penalty associated with having children. Although increases in income inequality have not been the sole, or even the primary, cause of declining early adult marriage and marital childbearing, it does nonetheless appear to be an important factor in how

families adapt to new opportunities and constraints. Rising income inequality may have been affecting social inequality by increasing residential segregation along income lines as well as ethnicity. Recent research on the neighborhood effects of income inequality suggest that neighborhood characteristics such as poverty, crime, and residential turnover influence several interrelated aspects of the neighborhood environment, which in turn affect families and children. Advanced industrial countries have gone through a process of economic restructuring assumed to be strongly associated with the process of globalization. As a consequence of these larger economic trends which have exacerbated income inequality, there has been social polarization, which also varies from country to country (Musterd & Ostendorf 1998; Hammett 1998). Similarly, Andrew Beer and Clive Forster (2002) note that during the 1980s and 1990s, the Australian government embraced international processes of economic change designed to transform the economy and hasten the emergence of the new economic order. As a consequence, income inequality between 1976-1981 increased as income of the poor fell, but after 1981 it increased as the wealthy became wealthier.  These trends have a particular effect on European cities, where spatial segregation tends to be more visible. European cities have generally been experiencing a growing problem of social exclusion, aggravated by spatial segregation, especially concentrated among disadvantaged groups. These disadvantaged include the unemployed, the young and the unskilled. As much as there may be any number of explanations for social exclusion, a common underlying factor is change in economic structure, stemming from global competition and


technological innovation. Changes in economic structure have resulted in both simultaneously an under-representation of unskilled workers—the most rapidly declining group—and an increase in jobs requiring greater skills (Slouten 2000). And yet, in Western societies polarization tends to be mediated by the structure of welfare provision and taxation.  Sako Musterd and Wim Ostendorf (1998) note that in Amsterdam, social exclusion related to the lack of social participation is especially a problem. Social exclusion, then, is one of the most important potential consequences of many of those processes related to social problems. In Sweden disadvantaged people tend to cluster voluntarily or involuntarily, in isolation from mainstream social and economic activities. Addressing income inequality has long been an overarching political goal. The government has also attempted to mix different groups of households in ‘integrated housing’—ideally a mix of households with different demographics, socio-economic and ethnic characteristics. Swedish welfare policy has also been focused on economic resources. An ideological cornerstone of the Swedish welfare state has been equality between households, despite demographic, socio-economic and ethnic characteristics, as well as residential patterns (Borgegard et al 1998).  Mechanisms of segregation fall into four categories: child and family related institutions; social organization and interaction; normative environment; and labor and marriage markets. Child and family-related institutions include schools, child care providers, public libraries, recreational programs and activities, parks, religious institutions, and social service providers. Economic models, of course, suggest that labor and marriage markets are

key elements in the neighborhood effects on families and children. The normative environment includes neighborhood norms that may be a consequence of characteristics of people who live in the neighborhood such as their income level, ethnic background, education, or immigrant experience.  Norms may also be affected by social organization and interaction and also by marriage and labor markets. The central idea in the normative environmental literature is “that the greater the concentration of likeminded people, the stronger the normative climate and the greater the exposure of neighborhood residents to these norms” (Pebley & Sastry 2004:122). The central question may well be whether children who grow up in poor neighborhoods are worse off than other children. And are disparities in children’s welfare by neighborhood poverty level due to differences in their family characteristics, or do neighborhood conditions themselves play a role? Robert Haveman et al (2004) maintain that as family income inequality increases, those families below the median are further from the social norm than before. Similarly, those at the top of the distribution see a larger gap between themselves and the rest of the population. Many fear that the growth in income disparities among families has had a variety of adverse consequences for both families and communities. The question is how changes in overall income inequality may affect children’s attainment. What is clear is that the growing economic distance between people can reduce common interests and increase social separation.  Families at the bottom of the distribution may end up drifting further from the mainstream, and thus may also experience greater alienation as those with greater resources may come to see them as both more distinct and undeserving. This may


also have consequences for how citizens in turn view the potential role and functions of government. Haveman et. al. argue that when studying the potential effects of growing family income inequality, it is particularly important to consider trends in the level and inequality of inputs in children’s attainments, and also the trends in those attainments. Looking at three key indicators of family inputs—parental education, family structure, and family size—they conclude that the situation for children has improved substantially on both parental education and family size but worsened on family structure.  The standard assessment of labor market performance uses employment and earnings over time, but these indicators combine both opportunities in the labor market that are open to people and their choices regarding labor supply and work. While they found evidence that both the level of family resources and the level of attainment of young people have improved over time, they also found limited evidence that better quality of what might be thought of as social capital, i.e neighborhood quality and school quality, is associated with better outcomes. Insofar as schools are financed through property taxes, residential patterns along income lines will also result in unequal schools. Schools with well-stocked libraries, for instance, may because of their symbolism attract higher quality teachers and educationally involved parents who can convey the importance of reading to children. Moreover, inequality increases at the margins every time a high-achieving student, a very involved parent, or highly qualified teacher moves from a poor or predominately minority school district into a whiter or richer one (Phillips & Chin 2004).  Inequality in social capital will consequently further exacerbate inequality to

the extent that it affects access. As a consequence of inequality different groups will be socialized differently. Pierre Bourdieu couches the relationship in terms of what he refers to as habitus, a pattern of beliefs and behavior based on the experiences of living among certain classes or groups. As Pekka Sulkunen (1982) explains, “the habitus of a group or a class defines a symbolic order within which it conducts its practices—in everyday life as well as in the feast. It provides a common framework within which the members of the group understand their own and each other’s action” p. 108). Based on habitus, the styles of working class individuals, particularly in France, are functional, which is the polar opposite from intellectuals—say university professors—and those in highly educated liberal professions. The importance of this lies in the ability of those in higher socio-economic classes, i.e. those at the top of the income distribution, to reproduce themselves. Consequently, those at the bottom are placed at a comparative disadvantage. Rudolf Richter (2002) notes that in their analysis of French educational institutions, Bourdieu and his colleagues found that elites reproduce themselves through the control they exercise over institutions. An elite interacts with others among the elite, and through this interaction it reproduces. Habitus in this sense means that the system reproduces itself, because those with power reproduce themselves and thus separate themselves from the masses. Deeply rooted habitus gives rise to all specific tastes in food, clothing, art, and so on. David Gartman (1991) suggests that a bourgeois taste for freedom is defined in opposition to a working-class taste for necessity. The class structure of society, which no doubt can be perpetuated through


inequality, becomes embodied in the respective habitus of each class because that structure determines the exposure of individuals to different material conditions. As Roy Nash (2003) notes, habitus means that social structures arise from the process of socialization, which in turn create as prism through which we view the world. Therefore, if as a result of income inequality different groups are socialized differently, the effect will be for the social structure— unequal ones at that—to reproduce themselves.  Rising income inequality has also had an impact on access to healthcare. The strongest evidence appears to show that those with low levels of income have poorer health than those with higher levels. Nevertheless, income inequality per se is not the main factor affecting health status either in the United States or other countries (Mullahy et al 2004). While there is a strong positive relationship between individual income and individual health, there is less evidence of a relationship between aggregate income and aggregate health (Eibner & Evans 2004).


Political Effects of Inequality Because income inequality affects resources, the central question is to what extent those without may be inclined to opt out of the political system. A bedrock principle of democratic theory is the notion that all individuals as citizens enjoy the same consideration of their preferences and interests. All citizens have the same access to governing institutions, and at the most nominal level, this access finds expression in one-person one vote, equality before the law, and equal rights when it comes to speech, press and assembly. Voter turnout, for instance, is much higher among the wealthy than among the poor. But as Sidney Verba et

al (2004) note, the participation gap between income groups is even higher among those who take a more active role in electoral politics, whether it be working as a volunteer in a campaign or making campaign contributions. Although the affluent are somewhat more likely to give time to a political campaign than the less well-off, they don’t systematically give more time to the poor when they do actually get involved in a campaign. Voter turnout in the United States is lower than elsewhere, in part because it is more difficult to register to vote. But among registered voters, turnout in the U.S. is closer to that in European countries. Some have even suggested that this could be remedied through a policy of mandatory voting, which is the case in some European countries (Lijphart 1997).  The most important individual and contextual factors influencing the extent to which one participates in the political system is the socioeconomic (SES) model of participation, which stresses a strong association between political activities and an individual’s income, participation, and especially education. And the single most important source of participation inequality is the cumulative effect of educational differences. Richard Freeman (2004) notes that on a world scale the U.S. ranks 138th in turnout among countries holding elections. Cross-country comparisons suggest three reasons for low turnout in the bottom parts of the U.S. distribution. First is the weakness of American trade-unions, and unions usually organize low-income workers to vote. Second, the U.S. has a first-past-thepost two party system, which elicits smaller turnover than proportional representative systems of voting in which minority opinion votes so as to have a voice in legislation. And third, the congressional-presidential system elicits smaller turnout than a


parliamentary system. While the fact that Americans have become more educated, work in high-status occupations, and have higher family income than in the past works to raise turnout, the rising proportion of the adult population who cannot legally vote works to lower turnout. Moreover, increased time constraints on people as a result of work and family commitments may also be a factor in reducing voter turnout.  Ian Shapiro (2003) suggests that it is better to think of democracy as a means of managing power relations so as to minimize domination. The challenge, then, is to devise ways to manage power dimensions of human interaction that limit domination while minimizing interference with non-power dimensions. In modern times democratic control suggests an independent activity that is subjugated to democratic constraint. What differentiates government’s activities from those of other social actors involved in activities such as responding to market failure, building infrastructure, providing education, insuring banks, and providing welfare, is the specter of legitimate coercive force. If democracy is about structuring power relations so as to limit domination, it then becomes unnecessary to think of questions about citizenship as different from questions about any other superordinate constraints. At the same time, a conception of democracy predicated on reducing domination must also pay attention to the relationship between the political system, i.e participation, and the distribution of income and wealth. The question of particular concern is whether, and under what conditions, democracy redistributes to the bottom quintile of the population those who are living—or are in danger of living—in poverty.  Shapiro argues that we have become accustomed to the coexistence of democracy

with substantial inequality. And yet Nineteenth century elites initially opposed the expansion of franchise out of fear that the newly enfranchised electorate would exert political pressure to redistribute downward. But there has been no demonstrable relationship between expanding democratic franchise and downward redistribution. Intuitively one might think that the greater the inequality the more likely it is that there will be effective demand for downward redistribution, but the opposite would actually appear to be true. As inequality rises and passes a certain threshold, downward redistribution becomes less likely, which no doubt has something to do with the poor being less likely to participate in the process in the first place. And yet, the more extreme the income inequality, the greater the psychic distance between the haves and the have-nots. Such psychic distance, of course, speaks to the anomie that the less affluent are likely to experience out of a sense that because they are distinctly different, the system will simply be unresponsive.  For many contemporary democratic theorists, however, there cannot be real political equality unless there is a measure of economic equality. Unequal distribution of wealth and income may adversely affect individuals’ ability to participate in the democratic process on the same footing as equals. Unequal distribution in wealth and income may result in procedural inequality to the extent that those lacking in wealth and income may not enjoy the same access to political and policy officials as those who possess wealth and income may enjoy. With greater concentration of wealth at the top, those at the top are in a better position to use their wealth toward the attainment of their political and other ideological objectives (Bachrach & Botwinick 1992:4-5). Unequal


distribution in wealth and income, then, results in unequal access. To the extent that this is true, the democratic state cannot possibly be treating its citizens as though they were on an equal footing. Consequently, inequality affects our ability to be free, as unequal distribution will effectively result in some being able to make choices that others cannot. Those with more resources may be better positioned to pursue their goals and objectives, while those with fewer resources may find that their ability to pursue their goals and objectives is limited as a result.    Is Income Inequality Really a Problem?  To the extent that income inequality leads to various social inequalities and distorts the distribution of power in the political realm, it becomes a policy issue that perhaps needs to be addressed. Aside from the obvious material reasons for alleviating abject poverty, it would also appear that steps perhaps need to be taken when there is an obvious threat to the democratic process. Timothy Gaffaney (2000) maintains that a democratic polity operates on the premise that individuals will be politically autonomous—that they indeed will be citizens. A democratic society does not necessarily have to entail economic equality, but it does have to ensure that conditions for participation are available to all individuals, because only when it does so does it guarantee a universal application of citizenship. In fact, the state must guarantee conditions for full citizenship, which might suggest that it has an obligation to pursue those policies that result in a more equitable distribution of income. Elizabeth Anderson (1999) suggests that equality is about individuals’ relations to others. The aim, then, is not to ensure that people necessarily get what they morally

deserve, but to ensure that they are in relations of equality to one another. The point of equality is to in essence ensure that individuals cannot be exploited and oppressed by others. In theory, then, equality prevents one with greater resources from receiving better treatment than the one with less because both are equal in terms of their respective moral worth. According to her conception of “democratic equality,” all lawabiding citizens are entitled to effective access to the social conditions required to maintain their freedom, i.e. their ability to make choices. Therefore, democratic equality seeks to abolish socially created oppression. It views equality as a social relationship. Moreover, individuals are regarded as equals when each accepts the obligation to justify his/her actions according to principles acceptable to others.  Democratic equality, then, does not require the elimination of income inequality once all citizens enjoy a sufficient set of freedoms to function as equals in society. Society does not have to compensate for inferior natural endowments, but it does have to ensure that conditions are such that individuals can function as equals. The state merely needs to pursue those policies and establish a condition necessary to function as equal and autonomous citizens. Citizenship requires more than the functioning as a political agent; it requires participation as an equal in civil society. Although democratic equality does not require the elimination of income inequality per se, it does suggest limits. These limits would be the point at which income could be converted into status inequality. Which is to say, that considerable income inequality could be a threat as it might result in status inequality. But at the same time, policies that limit income inequality, albeit they will never eliminate them altogether, serve to preserve the


necessary conditions for the maintenance of equal social relations among people. Societies prizing real political equality ultimately have to be concerned with growing income inequality. Still, the question remains with regards to how income inequality could be reduced. Many have noted that countries with more generous welfare provisions do tend to have lower levels of inequality. This would suggest that short of eliminating free markets, the remedy, though by no means perfect, is for an active welfare state that serves to compensate for the failures of the market place, of which income inequality might be one example. More specifically, there is reason to believe that institutions such as unions and wage floors also reduce income inequality, especially if the effect is for incomes of those at the bottom of the distribution to increase at a higher rate relative to those at the top of the distribution (Gottschalk 1997). On the punitive side, inequality could be reduced through higher taxes on the wealthy. This, of course, raises its own political problems. In the end, however, it is important to distinguish between policies that reduce inequality and those that reduce the effects of inequality.  What is clear, as the example of China suggests, is that countries undergoing economic reforms are more likely to see a widening of income inequality. And only if they are prepared to invest in education and the social safety net, as well as having redistributive taxation, may inequality be expected to be reduced (Benjamin, Brandt, Giles and Wang 2005). Growth in inequality arises from economic transformation, and the ability to constrain that growth is a function of a government’s commitment through policy to alleviate the burdens of that transformation.

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Oren M. Levin-Waldman Metropolitan College of New York New York City



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