Monday, April 23, 2012

Resentment: A Post Created Because Three Things Converged

At Slate, big boy bloggers, Matt Yglesias and Timothy Noah are discussing Noah's book The Great Divergence: America's Growing Inequality Crisis and What We Can Do about It.
Noah makes three points about inequality.  First, he concedes it's necessary in a capitalist system.  Second income inequality is growing.
Why is it necessary to reward so much more today than in 1979 the effort and skill (and dumb luck) that gets you into the top 1 percent of incomes (i.e., above about $350,000)? In 1979 the top 1 percent consumed about 10 percent of the nation’s collective income. In 2010 it consumed about 20 percent. (That includes capital gains.) Sure, the economy was in lousy shape in 1979. But the top 1 percent contented itself with 9-12 percent of the nation’s collective income for three decades prior to 1979, during the great post-World War II economic boom. Indeed, income share for the top 1 percent fell a little during that period. From the early 1930s through the late 1970s incomes in America didn’t become more unequal; they became more equal. So clearly the top earners can get by on much less without undermining capitalism.
Growing inequality matters, according to Noah, because it produces resentment.
So that’s why growing inequality isn’t necessary. Why is it worrisome?
Because it creates alienation. I worry less about the 99 percent (which, let’s face it, includes a lot of pretty affluent people) than about the bottom 60 or 50 percent. Income earners at the median have not shared in America’s prosperity. They’ve actually seen their incomes go down (after inflation) during the past decade, and over the past three decades their increases seem pitiful compared both with people earning top incomes (and here I mean not just the top 1 percent but the top 10 and even 20 percent) and with people at the median during the postwar era. For a long time economists said: Wait until productivity rebounds. Then working families will get their share. But when productivity rebounded like crazy in the aughts, working families saw no reward.
What this means is that if you’re at the median you have no positive reason to care how the economy does. Your only motivation is fear—if the economy does really badly you may lose your job. But there’s no upside.
Noah's conclusion seem to echo the findings Cory blogged about this morning at the Madville Times: the perception of unfair treatment produces resentful workers and dangerous results.  The Chrystia Freeland column that prompted Cory's post seems to support Noah's conclusions.
Does our perception of fairness influence how hard we work? Their answer is yes - workers who are underpaid don't work as hard.
The two professors' conclusion was based on the responses of experimental subjects. In his Berlin talk, Dr. Falk also cited an American real-world example that points to the same conclusion. A bitter fight between workers and management at Bridgestone/Firestone's plant in Decatur, Illinois, in the mid-1990s, including a long strike and the hiring of scabs, coincided with the production of poorer-quality tires.
"Looking before and after the strike and across plants, we find that labor strife at the Decatur plant closely coincided with lower product quality," a paper on the subject by Alan B. Krueger, a Princeton economist who is now the head of the U.S. president's Council of Economic Advisers, and Alexandre Mas, also of Princeton, reports. "Monthly data suggest that defects were particularly high around the time concessions were demanded and when large numbers of replacement workers and returning strikers worked side by side."
Workers who feel they are being treated badly aren't just unproductive; they can be downright dangerous.
The last little item about resentment causes me to think that those who have the money and make the rules should know better.  During a class discussion about Othello, I started comparing Iago to Machiavelli and was reminded that Machiavelli counselled his prince to avoid the excessive resentment of his citizens.
Nevertheless a prince ought to inspire fear in such a way that, if he does not win love, he avoids hatred; because he can endure very well being feared whilst he is not hated, which will always be as long as he abstains from the property of his citizens and subjects and from their women. But when it is necessary for him to proceed against the life of someone, he must do it on proper justification and for manifest cause, but above all things he must keep his hands off the property of others, because men more quickly forget the death of their father than the loss of their patrimony. Besides, pretexts for taking away the property are never wanting; for he who has once begun to live by robbery will always find pretexts for seizing what belongs to others; but reasons for taking life, on the contrary, are more difficult to find and sooner lapse. But when a prince is with his army, and has under control a multitude of soldiers, then it is quite necessary for him to disregard the reputation of cruelty, for without it he would never hold his army united or disposed to its duties. . . .
Returning to the question of being feared or loved, I come to the conclusion that, men loving according to their own will and fearing according to that of the prince, a wise prince should establish himself on that which is in his own control and not in that of others; he must endeavour only to avoid hatred, as is noted.
It's rare that three different items from three different sources come together with a similar conclusion: creating resentment is dangerous and should be avoided,  What's frightening is that no one seems to care.

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