To engage students, I sometimes ask "who thinks income inequality is a good idea?" When no one raises their hands, I follow up with "who thinks incentive pay is a good idea?" Almost everyone raises their hands. Then I ask "who thinks incentive pay leads to inequality?" At this point, debate turns passionate, and my only role is to ensure that it stays civil.
I spent the morning searching for an old Economist article on this topic, and came up with these citations:
AMERICANS
do not go in for envy. The gap between rich and poor is bigger than in any
other advanced country, but most people are unconcerned. Whereas Europeans fret
about the way the economic pie is divided, Americans want to join the rich, not
soak them. Eight out of ten, more than anywhere else, believe that though you
may start poor, if you work hard, you can make pots of money. It is a central
part of the American Dream.
The
political consensus, therefore, has sought to pursue economic growth rather
than the redistribution of income, in keeping with John Kennedy's adage that “a
rising tide lifts all boats.” The tide has been rising fast recently. Thanks to
a jump in productivity growth after 1995, America's economy has outpaced other
rich countries' for a decade. Its workers now produce over 30% more each hour
they work than ten years ago. In the late 1990s everybody shared in this boom.
Though incomes were rising fastest at the top, all workers' wages far outpaced
inflation.
…
Other
rich countries are watching America's experience closely. For many Europeans,
America's brand of capitalism is already far too unequal. Such sceptics will be
sure to make much of any sign that the broad middle-class reaps scant benefit
from the current productivity boom, setting back the course of European reform
even further.
Views of income inequality are divisive.
Leftists blame uneven distribution on outside factors, such as poor education
and corporate misconduct. Conservatives, meanwhile, tend to view these
differences as a fair consequence of an individual’s choices and abilities.
These beliefs have little to do with personal wealth: Mr Tuschman cites a
California survey in which the poorest respondents were the most likely to say
people get what they deserve, and were also the most religious. Yet he fails to
explain properly why this might be.
Elsewhere, there is
often great reluctance to believe that people are—or should be—motivated much
by money. “Britain”, says Hermes's Mr Ross Goobey, “is a smaller, more enclosed
society than America, and people still work for position, status, to be part of
the great and the good.” Countries, like companies, will remain free to engineer
greater or lesser degrees of equality. But there will be a price—as Sweden is
discovering, and as Germany has already noticed. As the market for top talent
grows more international, so it may force greater tolerance for inequality on
countries that have spent half a century trying to root it out.
A second reason Americans may differ in their
view of inequality is that they seem not to trust the government to fix the
problem—or to believe that this is part of its job. The researchers from
Dalhousie University suggest that American respondents tend to be more
sceptical about the role played by government in reducing inequality. And when
Jan Zilinsky at the University of Chicago randomly exposed a sample of
Americans to information about inequality in America, it made them depressed
about the issue but no more likely to support cash transfers to the poor. Most
Americans may dislike a tax bill that increases inequality. But that does not
mean they would support one that did the opposite.
Look around the world and the supremacy of
“the American model” might seem assured. No other rich country has so
successfully harnessed the modern juggernauts of technology and globalisation.
The hallmarks of American capitalism—a willingness to take risks, a light
regulatory touch and sharp competition—have spawned enormous wealth. “This
economy is powerful, productive and prosperous,” George Bush boasted recently,
and by many yardsticks he is right. Growth is fast, unemployment is low and
profits are fat. It is hardly surprising that so many other governments are
trying to “Americanise” their economies—whether through the European Union's
Lisbon Agenda or Japan's Koizumi reforms.
