RAGING AGAINST THE WORLD
The alternative to despair is anger.
Becoming aware of the lack of social mobility does not necessarily make people more willing to support redistribution. In the study we discussed above, after eliciting the views of Americans, the researchers presented some of them with an infographic suggesting mobility was much lower than they thought (and the others with another infographic showing the same data, but with a rosier angle).
For respondents who originally identified with the Republican Party, this made them even less likely to agree that the government could be part of the solution.85An alternative is to rebel against the system, potentially at great personal cost. In an experiment in Odisha, India, when employees in a firm felt the pay varied arbitrarily, they rebelled by working less hard, and being absent more often, than in comparable firms where the wage was kept constant, and since they were paid a fixed salary for every day they came to work, they hurt themselves by doing so. Workers in firms with unequal pay were also less likely to cooperate to achieve a collective goal tied to a reward. Workers were willing to tolerate pay inequality, but only when it was clearly tied to performance.86
In the United States, there is another possible reaction. Because many believe the American market system is fundamentally fair, they must then find something else to blame. If they don’t get that job, it must be because the elites have somehow conspired to give it to an African American, a Hispanic, or at one remove, to a Chinese worker. Why would I trust the government of those elites to redistribute to me? More money for the government is more money for “those other guys.”
Therefore, when growth either fails or fails to benefit the average guy, a scapegoat is needed. This is particularly true in the United States, but is happening in Europe as well.
The natural foils are immigrants and trade. Behind the anti-immigrant views, as we argued in chapter 2, are two misconceptions: an exaggeration of how many migrants are coming in, or about to come in, and a belief in the nonfact that low-skilled immigrants depress wages.More international trade, as we saw in chapter 3, hurts the poor in rich countries. This has provoked a backlash not only against trade, but also against the existing “system” and the elites. Autor, Dorn, and Hanson found that in US electoral districts more affected by the China shock, moderate politicians were replaced by more extreme ones. In counties originally leaning Democratic, centrist Democrats were replaced by more liberal ones. In counties originally leaning Republican, moderate Republicans were replaced by conservative Republicans. Counties highly affected by trade tended to be in traditionally Republican states, and therefore the overall effect of this was to push many districts toward more conservative candidates. This trend started well before the 2016 elections.87 The problem of course is that since conservative candidates tend to be against any form of government intervention (and redistribution in particular), they then exacerbated the problem that little was done to compensate those hurt by trade. For example, many trade-affected states governed by conservative Republicans refused federal funds to expand Medicare expansion. And this in turn fueled the resentment against trade.
A similar negative cycle may emerge as people gradually understand that they live in a society that has much more inequality and much fewer opportunities than they previous believed. As in the study mentioned above, they may become even more upset with the government and even less likely to believe it can do something to help them.
This has two implications. First, the obsession with growth at the root of the Reagan-Thatcher revolution, and that no subsequent president has taken issue with, has caused lasting damage. When the benefits of economic growth are largely captured by a small elite, growth can be a recipe for a social disaster (like the one we are currently experiencing). We argued before that we should be wary of any policy sold in the name of growth because it is likely to be bogus. Perhaps we should be even more scared if we think that such a policy might work, because growth will benefit only the happy few.
The second implication is that if collectively we as a society do not manage to act now to design policies that will help people survive and hold on to their dignity in this world of high inequality, citizens’ confidence in society’s ability to deal with this issue might be permanently undermined. This underscores the urgency of designing, and adequately funding, an effective social policy.