Global Agenda: Slices, slivers and crumbs

Despite Americans being richer than they were one, 10 or 40 years ago, there is evidence that most of them are not happy about it.

March 2, 2006 20:59
3 minute read.
rich and happy 88

rich and happy 88. (photo credit: )


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If you are better off than you were a year ago, considerably better off than you were 10 years ago and vastly better off than you were 30 or 40 years ago - how would you feel about it? Let's leave aside the question of whether more wealth can buy you happiness and stay with the standard assumption that more is better when it comes to income and wealth. So, if most people have more of both, they should be fairly satisfied, to say the least. Yet, despite the fact that Americans are demonstrably richer than they were - whether one, 10 or 40 years ago - there is overwhelming evidence that most of them are not happy about it. Not 'not happy' generally, which is a different matter, rather 'not happy' about their relative income and their relative financial status. The explanation for this response is that perceptions of wealth are dominated by relative considerations more than absolute ones. Since disparities in income and wealth are constantly increasing, the fact that most people are better off than they were in absolute terms doesn't cancel out the other fact - that they are less well-off relative to others. Since the world isn't perfect, there are always going to be relative losers and winners, so it's easy to dismiss the whining of relative losers who are still better off than they were, as sour grapes. But if the relative losers are not just individuals, or a small and easily identifiable sector of society, but rather the large majority of people - virtually the entire middle class, in the case of the US - then dismissing them and their complaint is not so easy or justifiable. How can the majority of people be relatively worse off, when the overall situation is improving steadily? To use the standard metaphor much beloved of economists, it has to do with cakes and how they are sliced. Economics is concerned primarily with increasing the size of the cake, on the premise that if there is more for everyone, then everyone will indeed get more and hence be happy. In this situation, even if some get more 'more' and others get less 'more,' so that the latter are relatively worse off, they haven't really got that much to cry about. But suppose the cake gets steadily bigger, but almost all the 'more' goes to a small group of people, whilst the majority of people only get crumbs of 'more' to enhance the slice they had to start with. That is clearly a problem: It is a moral problem, but it is also a social and ultimately a political problem, because the majority are likely to become increasingly disaffected and to feel antipathy toward the minority who are hogging all the 'more.' This whole scenario sounds very third-worldy, Latin America-ish. However, it applies very clearly to the US and, what's worse, the dynamics of disparity are getting steadily worse. There are, of course, endless statistics to support this idea, but perhaps the most telling is a very simple one: Thirty years ago the average annual compensation of the top 100 chief executives in the US was 30 times the pay of the average worker. Today it is 1,000 times the pay of the average worker. The same trend is at work in other developed economies and certainly in Israel. This is the season for companies to publish their results and, in Israel at least, the financial statements must include details of the pay and perks received by the top executives. This rule was introduced on the assumption that exposure would constrain extravagance by shaming or embarrassing both the companies and the executives. The result in practice has been precisely the opposite: As top executives become further detached from the rest of society and cocooned in their own islands of privilege, they look only at each other's paychecks, not at the masses pecking at the crumbs left for them. Numerous detailed analyses exist to explain how and why this situation has arisen, why it is essential that senior executives today should earn vastly more than the average wage slave and, indeed, why that is good and desirable - not just for the executives, but for the wage slaves and for society as a whole. And no, they were not all written by George Orwell. The reigning economic dogma strongly supports this approach - but economists must be the first to admit that everything carries a cost, even if that cost is not immediately apparent. In the case of increasing disparities of income and wealth, that cost was pin-pointed long ago by Louis Brandeis, who noted that You can have wealth concentrated in the hands of a few, or democracy, but you cannot have both."

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