Greater Equality = Greater Democracy

Financial FAQs

A recent Gallup poll said 82 percent of respondents thought economic growth “extremely”, or “very” important, while just 46 percent said reducing the income and wealth gap between rich and poor was extremely or very important.

Yet there is growing evidence that the two are inextricably linked, because new research shows that inequality breeds all the evils that we see in societies—from high crime rates, poor health and educational institutions, to declining environmental quality. An even worse outcome may be a drop in democratic freedoms and rise of authoritarian institutions.

Paul Krugman has worried about this—specifically, the European austerity programs leading to so much economic suffering in Europe are also leading to a rise in intolerance and extremist organizations, even governments. “Nobody familiar with Europe’s history can look at this resurgence of hostility without feeling a shiver. Yet there may be worse things happening.

“Right-wing populists are on the rise from Austria, where the Freedom Party (whose leader used to have neo-Nazi connections) runs neck-and-neck in the polls with established parties, to Finland, where the anti-immigrant True Finns party had a strong electoral showing last April,” said Krugman. “And these are rich countries whose economies have held up fairly well. Matters look even more ominous in the poorer nations of Central and Eastern Europe.”

“Last month the European Bank for Reconstruction and Development documented a sharp drop in public support for democracy in the “new E.U.” countries, the nations that joined the European Union after the fall of the Berlin Wall. Not surprisingly, the loss of faith in democracy has been greatest in the countries that suffered the deepest economic slumps.”

“Taken together, all this amounts to the re-establishment of authoritarian rule, under a paper-thin veneer of democracy, in the heart of Europe. And it’s a sample of what may happen much more widely if this depression continues,” worries Professor Krugman.

We can also see it in the U.S. with the rise of right wing activism, such as the Tea Party with its anti-immigrant, anti-government credo. This is not anti-democratic on its surface, but it’s credo contains much that is undemocratic, such as government invasion of private choice in wanting to control abortion and gay marriages.

Richard Wilkinson’s TEDx lecture and book with Kate Pickett, “The Spirit Level” show the best exposure of the dire effects of income inequality on the quality of life. The most important factor, and a sign of dire consequences when inequality has approached the level of the Great Depression, is our violent crime and incarceration rates, which Wilkinson discusses at length. The U.S. is by far the most violent country in the world—worse than any other developed country.


Graph: The Spirit Level

So why aren’t such quality of life indicators discussed with economic growth? Part of it is misconceptions—that economic growth and equality aren’t compatible. The conservative position espoused by 1970s Economist Arthur Okun was that greater equality meant less market efficiencies to produce, and so fewer incentives for greater wealth since leveling the playing field meant leveling out the opportunity for large profits. But he also advocated more progressive taxation, and various other social safety net programs to alleviate the effects of income disparities on the quality of their lives.

That was before the decline of centralized planning in socialist and communist countries, of course, when the superior economics of democracies was still in doubt. The abilities of capitalist, market-driven economies to produce more and better products is no longer disputed. In fact, the various asset bubbles of recent years show a propensity for markets to overproduce. It also produces more pronounced income inequality, which leads more than ever to unequal opportunity for those at the bottom of the wealth ladder.

Studies have shown that the greatest periods of economic growth occurred during Democratic administrations, when equality was greatest, and government was not the problem. The evidence now shows the necessity for greater income equality if we want greater peace and prosperity within our own country, as well as a shared peace and prosperity with other countries.

Harlan Green © 2011

About populareconomicsblog

Harlan Green is editor/publisher of, and content provider of 3 weekly columns to various blogs--Popular Economics Weekly and The Huffington Post
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