Why Income Inequality Matters

So what if the rich get richer faster, as long as the bottom of the income scale makes incremental gains? Because the consolidation of wealth translates to consolidation of political power. That's why.

As Anne Krueger of the International Monetary Fund said in 2002, "[I]t seems far better to focus on impoverishment than on inequality." Americans seem to agree; polls suggest that most people in the United States aren't bothered by inequality per se, so long as everyone has a reasonable chance to move up the income ladder through hard luck and a bit of ingenuity.

Not everyone does get that chance, of course—upward mobility in the United States is nothing to brag about—but that's another story. What's interesting is that, to judge by the polls, the only kind of inequality that really bothers Americans is political inequality—that is, if the government isn't representing everyone equally. And over time, the public has increasingly felt that to be the case: Between the 1960s and 1990s the percentage of Americans who felt that "the government is run by a few big special interests looking out only for themselves" doubled to reach 76 percent.

Yet few people seem to consider the connection between economic inequality and political inequality. Why is the government being run by a "few big special interests"? Is it because those interests are particularly tenacious and clever? Or is it because, increasingly, a tiny portion of the population has an inordinate amount of wealth—and therefore influence? Political scientists are converging around the latter view, and in a recent symposium entitled "Inequality and American Democracy," laid out the full array of evidence to support it.
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Indeed, in the 2000 election, 95 percent of all campaign contributions came from households making over $100,000. With some exceptions, political influence generally isn’t a straightforward matter of slipping across a few hundreds in exchange for a vote; outright bribery is relatively rare. But those who contribute do have a better chance of ensuring that those candidates sympathetic to their concerns will make it into office. Mega-contributors lucky enough to win an audience with a Senator or member of Congress, meanwhile, can't demand specific votes, but they can make sure their concerns are heard—while, say, advocates for the homeless are left picketing outside the gates. That counts for a lot. George W. Bush once reportedly told the Rev. Jim Wallis, "I don't understand how poor people think." Presumably he doesn't hear much on the subject during face time with key donors.

Back in the postwar era, the working classes at least had unions to fight for their concerns, some of the time. But thanks to the decline of manufacturing and the assault on organized labor over the past three decades, union density has shriveled—from 24 percent in 1973 to 12.5 percent today. Meanwhile, in the late 1970s, in response to inflation that was eating away at the wealth of the top 1 percent, "business refined its ability to act as a class, submerging competitive instincts in favor of joint, cooperative action in the legislative arena," as the journalist Thomas Edsall wrote in his 1986 book, The New Politics of Inequality. And it worked. The leveling forces of the 1970s were overturned by the Reagan revolution, and the upper classes did very well from there on out.