Rising Wealth Inequality: Should We Care?
Why do Americans seem unperturbed about the growing gap between the rich and the poor?The Lottery Mentality
Updated March 22, 2011, 01:37 PM
Chrystia Freeland is the global editor-at-large at Thomson Reuters.
Americans actually live in Russia, although they think they live in Sweden. And they would like to live on a kibbutz. This isn’t the set-up for some sort of politically incorrect Catskills stand-up joke circa 1960. It is the takeaway from a remarkable study by Michael Norton and Dan Ariely on how Americans think about income inequality.Americans are mistaken about income inequality because of national self-confidence and the lottery effect.
The right likes to argue that income inequality as an issue doesn’t win elections because Americans don’t begrudge the rich so much as they want to join them. The Norton and Ariely study suggests otherwise. Given a choice, the authors find, Americans would prefer to live in a society more equal than even highly egalitarian Sweden. Another popular view is that income inequality isn’t experienced as acutely by most Americans as the numbers suggest because of how much can be “consumed” by the lower rungs of the nation’s socioeconomic ladder. No less a figure than Alan Greenspan, the maestro himself, once made this case at the Federal Reserve’s annual Jackson Hole conference, presenting data on the consumption of dishwashers, microwaves and clothes dryers showing that if measured by the possession of these goods – as opposed to the huge and growing income divide -- inequality was decreasing.
That interpretation is not without merit. But it turned out that allowing Americans to prosper by using their homes as A.T.M.'s and maxing out on their credit cards was maybe not such a great idea.
Personally, I lean toward two other theories. Americans are mistaken about income inequality because of national self-confidence and the lottery effect.
By national self-confidence, I mean the widespread conviction that the American way is probably right because all those other ways don’t seem to work out so well. This is a wonderful national quality and one of the reasons America has such resilience. But confidence in the American way can make it hard for the country as a whole to recognize when things aren’t working.
Take, for instance, the health care debate, when a politically effective criticism of what has come to be known as Obamacare was to argue that it would destroy the “best” health care system in the world. Mary Meeker, a Silicon Valley guru of impeccably capitalist and American credentials debunked that idea in her recent USA, Inc. presentation, in which she pointed out that “U.S.A. per capita health care spending is 3x OECD average, yet the average life expectancy and a variety of health indicators in the U.S. fall below average. But if you spend way more than everyone else, shouldn’t your results (a.k.a. performance) be better than everyone else’s, or at least near the top?”
Aside from faith in American national excellence, the other main reason Americans seem so unperturbed by the widening chasm between the rich and everyone else is what I like to call the lottery effect. Buying lottery tickets is clearly an irrational act -- the odds are hugely stacked against us. But many millions of us do, because we see the powerful evidence that an ordinary person, someone just like us whose only qualifying act was to buy a ticket, wins our favorite lottery every week.
For many Americans, the nation’s rowdy form of capitalism is a lottery that has similarly bestowed fabulous rewards on the Everyman. The current leading exemplar of self-made billions is Facebook’s Mark Zuckerberg, and he may soon be outstripped by the even more instant cyber-star Andrew Mason, the founder of Groupon.
But the problem with lotteries is that there are only a few winners. That is the story the numbers tell us about American capitalism today -- and unless that underlying reality changes, at some point all those folks who think they already live in Sweden will realize they live in a winner-take-all society, and that most of us aren’t winning.
http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care/the-lottery-mentalityre
According to the Norton and Ariely study, " Americans would prefer to live in a society more equal than even highly egalitarian Sweden" (Freeland). However, what do Americans consider equal? Equality of opportunity is a chance for all Americans to have fair opportunities. This would be great. If equality of outcome is what Americans are referring to, the equal world could be a problem. Society needs different classes in order to function. If all Americans had the same status, the United States would be a mess. Wealth inequality creates opportunites. For example, a wealthy person wants to build a pool in her yard. This creates jobs for lower income people. If that wealthy person had less money, she would not have the ability to build a pool. This would mean the lower income person did not have a job. Inequality is key to the functionalism of the United States. It is part of life. The key is to make sure that inequalities are not in the area of opportunities!
ReplyDeleteIt is definitely true that Americans are to blinded by their own national pride to see any issue with their current systems. This explains why changes to any major policies are met with such fierce resistance and opposition. Americans aggressively defend the previous policy with the staunch belief that it has been working for them when it has in fact seriously harmed them. This sentiment is fed by sly data like the information given by Alan Greenspan who argued that increased spending on consumer goods reflected a decrease in inequality. He slithered around the issue of class inequality by stringing together too ideas that have little relation to each other. Now I wonder, how many millions of americans saw this data, dumbly nodded their heads like a bunch of fools, and did absolutely no research for themselves? Obviously a lot since Americans remain in their silly ignorance. Studies like these are fodder for the masses, feeding their hunger to defend the policies that make the rich rich an themselves poor.
ReplyDeleteThis article shows that America is like a lottery. To be successful is a gamble and less make it financially than those that do. As the article stated, there are not many winners. This shows that the distribution is messed up in the United States. The gaps between the wealthy class and lower class is growing every day and there are too many members of the lower classes that cannot financially support themselves and this is not fair. Some Americans believe that the United States is like Sweden with its distribution of wealth, and until the time comes where individuals will realize that the United States is flawed than the gaps will continue to grow and the financial situations of many will also continue to get worse and worse.
ReplyDeleteIt is very sad to see that even though America has the second highest GDP purchasing power in the world, according to the CIA World Fact Book; America does not have the life expectance to prove it. You would think that the more money you have the better health care you would be able to afford but the problem is that only the top 10% of America's population can afford the best health care. This is why Obamacare was a great idea; the rich would be assisting the poor in a very small way that would help advance America in the long run. America has a lot of gaps when it comes to our economy, there should never be such a difference between rich and poor especially in a country that prides its self on the equality.
ReplyDeleteIn this article I especially agreed with the idea that America tends to be like a lottery. You either win or lose. This truly demonstrates the large gap in the economy between the rich and the poor. Everybody hopes to be lucky enough to win the lottery, but very select do. Americans fail to realize how absurd the idea of a hand full of people winning millions actually is, especially when people are suffering. People are becoming more and more aware of how corrupt the economy is in the United States, and it will continue to get worse if it remains unnoticed.
ReplyDeleteThe reason that Americans believe that the gap is not as large as it truly is is because the richer people are the people who speak and make decisions for our country. Because in this country, being "poor" is looked down upon, the richer people's opinions matter to people. We want to ignore the fact that there are countless families in our country struggling to survive, because it looks bad to iur society.
ReplyDeleteThis article presents the theory that luck is necessary to succeed in society. A one dollar lottery ticket buys you the chance to win millions of dollars. Americans do not even consider the chances of being the winner; they gamble for a new lifestyle. It is sad that people are so concerned about being the one person who wins the lottery instead of working hard to earn their way to the wealthy class. I know its challenging to move up in society but a person has a better chance earning their own money than winning the lotery. Some people do get lucky, which makes others feel that they have the same opportunity.
ReplyDeletePeyton Bromley said...
ReplyDeleteSociety is a game of luck just like the lottery: you win or you lose; no in between options. Due to this more people are losing than winning. Our society is blinded by the prospect of winning to the point that they ignore the inequality of few having millions while others in our society are extremely poor. We pride ourselves on equality when in reality we have huge gaps in our society that won't be filled until people acknowledge the corrupt side of our government.
It’s interesting to examine just why Americans are seemingly oblivious to the inequality in income. This article suggests that it is partly because of national self-confidence. This confidence that Americans have in their country is patriotic, yet it can blind the people from realizing the faults in the country. Freeland cites the health care debate as a specific example of such. Many people argue that “Obamacare” will destroy the best health care system in the world, yet Mary Meeker debunks this point in a presentation when she says “U.S.A. per capita health care spending is 3x OECD average, yet the average life expectancy and a variety of health indicators in the U.S. fall below average.” This is both disheartening and enlightening. One would expect that if exorbitant amounts of money being spent that it would be reflected in higher life expectancy and other health related facts.
ReplyDeleteAmericans agree to financial equality in theory, but they may not actually follow through with those ideals when they are given their shot to be at the top of the financial pyramid. There is a disconnect from the ideal and the reality in terms of financial practices in America today. The competitive spirit that in part created the problem is still present. People would love to be able to say that America is financially equal because equality is one on the words that people believe the country to be built on, but along with the idea of equality, America is full of a strong competitive spirit that can have negative effects on those who can't keep up, resulting in an ever-widening gap of wealth.
ReplyDeleteI agree with Shannan. The rich do not want the lower classes to become angered by the inequality and try to fix the situation. Since they hold most of the power in society these people are able to keep the lower classes in the dark about how large the gap is between the wealthy and the poor. Many people underestimate how big the gap is. The rich people want to keep it that way.
ReplyDeleteI thought it was interesting that Lexie would make this reference in her comment "Americans would prefer to live in a society more equal than even highly egalitarian Sweden" (Freeland). I find this intriguing because Sweden is a socialist nation and many Americans are weary of the idea of socialism in America. Freeland writes, "confidence in the American way can make it hard for the country as a whole to recognize when things aren’t working". Then why is there so much resistance from Americans to adopt some socialist policies?
ReplyDeleteThat national confidence seems to be getting the U.S. in a lot of trouble. The rich want to keep what they have, and the rest hope that one day they too can be wealthy, and have the power that comes with money. This socialist and egalitarian mind set clearly seem to be the best option for the most people, and what most people, according to the article, want. Yet because of labels people are afraid of that system and those in power who could make it happen are the ones who have something to lose.
ReplyDeleteThis article raises a valid point, that most Americans do not realize how much inequality there is because they are more focused on making themselves rich. They do not look up to the rich with anger or resentment, but rather with idolization - that is where most people want to be. Also, the fact that people have so much faith in their country contributes to the lack of outward anger and realization about the economic inequality. So many people trust that nothing bad will happen to them, or that they will be that one person to defeat the odds and rise to economic power. Americans have not yet realized that they are not winning the economic struggle
ReplyDeleteI am so glad that I am not the only way that feels the following way about American attitudes and government: "By national self-confidence, I mean the widespread conviction that the American way is probably right because all those other ways don’t seem to work out so well. This is a wonderful national quality and one of the reasons America has such resilience. But confidence in the American way can make it hard for the country as a whole to recognize when things aren’t working". Americans seem to be convinced that everything American is good and right and better than anything in any other country. This is not a new attitude; consider the attitude of the nation towards communism in the 1970s and 80s. The U.S. became convinced that democracy was right, and everyone in the world had to follow it because we were following it. As a result, we invaded many countries, disrupted political systems across the globe, helped millions to die, and facilitated many wars. The recession and all of our recent political meltdowns have been excellent, in my opinion, because they have shown Americans that we are not infallible, and our government and society is not perfect. Our pride and "national confidence" needs to return to normal levels, because if not, our country will continue to rot from the inside out.
ReplyDeleteIt is sad to see that buying a lottery ticket is the way people see fit to become rich. America believes someone who is less fortunate is not socially acceptable. We choose to believe that there are not many problems between lower class and upper class because we see the upper class affording to handle their issues. Meanwhile the lower class is not being helped out. However, being less fortunate creates character because they are forced to work hard for every dollar they earn, and aren't just given, and can truly realize the value of a dollar. It is crazy to think that people who win the lottery are going to become more socially acceptable because they now have money. It is upsetting to see that having money means someone is the power of America; the power of America comes from people who work hard daily.
ReplyDeleteThis article honestly scared me. What people see is what the believe, typically. So when people see that they have a microwave and a big screen TV, they must be financially sound. This statement is becoming more and more false. "If measured by the possession of these [tvs, microwaves, etc.] goods, inequality was not decreasing." How can this occur? Well, credit cards are the culprit here. Americans are "using their homes as A.T.M.'s and maxing out their credit cards" just to make themselves look like they are financially sound, while digging themselves deeper in debt. This is causing people to be blind to the inequality and allowing it to increase even more.
ReplyDeleteI like how this article states that America is like a lottery ticket. Playing the lottery a person has a 1/1000000 chance of winning although people play the lottery every single day. The people playing the lottery are normally poor trying to get out of their situation. But, they cant, in America it takes a long time and some people never move up out of their social class. Americans were blinded by the huge gap in wealth and now since the recession people are starting to realize especially the middle class that it is very hard to make ends meet when there is no money for anyone except huge executives and CEOs.
ReplyDeleteI agree with holly when she said that america is like a lottery. i think americans do gamble with their wealth these days to come to realize that their own system isnt as great as they though. Our government is actually blinded themselves of the big difference in the economic gap between social classes.
ReplyDelete