Arguments Blog
Thursday, Jan 15, 2015, 10:45 AM

When Does Inequality Threaten Democracy?

Nathan Pippenger

From a purely intellectual perspective, one of the fascinating things about the emergence of inequality as a top-tier political issue is the relatively inchoate nature of the debate. It’s not that inequality is a new problem in American life, or that American thinkers have had nothing to say about it. Rather, it’s that our accumulated thinking on inequality can now be paired with detailed, reliable data on income and social mobility, in a political climate where these issues are suddenly prominent. Just take a look at the newest political terms to surface in the last few years: the 1 percent, the 99 percent, the 47 percent; Occupy; r > g. Income and social mobility in post-2008 America is an extreme and distinctive twist on an old problem—and so the contours of the debate are not wholly formed.

This is both exciting and worrisome. Exciting, because it presents an opportunity for fresh thinking; worrisome, because our first stabs at thinking through this problem are likely to be crude and misguided. As I noted last October, things aren’t helped by refusing to take inequality seriously, a problem which is all too common on the American right. Dismissing concerns about inequality with glib questions about whether critics would rather live in Cuba—which was, more or less, the Manhattan Institute’s response—is not terribly clarifying. That’s why some recent remarks from Harvard economist N. Gregory Mankiw are more promising. Mankiw, in a paper on Thomas Piketty, concludes with some reflections on inequality and democracy:

A final possibility is that wealth inequality is somehow a threat to democracy. Piketty alludes to this worry throughout his book. I am less concerned. The wealthy includes supporters of both the right (the Koch brothers, Sheldon Adelson) and the left (George Soros, Tom Steyer), and despite high levels of inequality, in 2008 and 2012 the United States managed to elect a left-leaning president committed to increasing taxes on the rich. The fathers of American democracy, including George Washington, Thomas Jefferson, John Adams, and James Madison, were very rich men. With estimated net worth (in today’s dollars) ranging from $20 million to $500 million, they were likely all in the top 0.1 percent of the wealth distribution, demonstrating that the accumulation of capital is perfectly compatible with democratic values.

Re-reading this passage, I’m left wondering what Mankiw means by “democracy” when he pooh-poohs the threat posed by inequality. Consider his reassurance that there are “right” and “left” among the wealthy—both the Koch Brothers and George Soros. The implication here is that these billionaires don’t present a special class of the ultra-powerful that threatens democracy—either because their opposing views cancel each other out, or because, coming from the right and left, they represent the full spectrum of political opinion in America. Neither assumption is plausible, and the second assumption misses a key argument behind criticisms of economic inequality: that the Koch Brothers and George Soros, by virtue of their extraordinary wealth, have shared interests that go beyond right-left ideology. As recent scholarship has shown, the affluent do have distinct policy preferences (although they aren’t consistently liberal or conservative), and the political system almost always follows their preferences when they conflict with those of the less well-off. Or, as the political scientist E.E. Schattschneider once pithily remarked: “The flaw in the pluralist heaven is that the heavenly chorus sings with a strong upper-class accent.”

Next, Mankiw notes that “despite high levels of inequality, in 2008 and 2012 the United States managed to elect a left-leaning president committed to increasing taxes on the rich.” The suggestion here is that one might expect an unequal polity to produce conservative leaders—in other words, that if the rich were really in control, they’d select a president to advance their economic interests. But this didn’t happen, Mankiw says, proving that inequality isn’t threatening American democracy. Billionaires, he suggests, have not managed to drag the country to the right in order to advance their own class interests. This is an odd argument coming after the preceding sentence: at first, Mankiw had allowed that billionaires like the Koch Brothers and George Soros are politically powerful, but he denied that they’re mostly conservative, and he didn’t consider the idea that they could be united by a set of class interests that transcend ideological differences. Now, he’s suggesting that they are mostly conservative and united by class interests, but that it doesn’t matter, because they’re politically impotent. Which is it?

Mankiw’s final argument invokes the Founders. The immense wealth of figures like Washington and Jefferson, he argues, demonstrates that “the accumulation of capital is perfectly compatible with democratic values.” Dylan Matthews has already made the only possible response to this argument, which is to point out that much of the Founders’ capital was in the form of slaves. The political system they created upheld that economic arrangement—a shared interest among the ultra-wealthy that, in some cases, transcended other ideological differences. This shared interest is precisely what Mankiw initially implied did not exist, then claimed does exist, but doesn’t matter. As his example unintentionally shows, history demonstrates precisely the opposite.

 

 

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