Occupy Returns: How Do We Really Feel About Inequality?

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Wealth inequality New York
On Monday, the Occupy Wall Street movement celebrated its first birthday amid a flurry of glitter and a spate of arrests. The attendance numbers are way down from last year's occupation, and the protesters don't seem to have come any closer to determining a coherent goal or list of demands. In this regard, at least, Occupy's moment seems to have passed: while demonstrators were arguing over the meaning of the group and battling a Wall Street-area church, the debate over America's economic woes moved on.

This year, the country's battle over class warfare isn't being fought in lower Manhattan, but on the campaign trail. Far from merely being a contest between Republicans and Democrats, this fall's election promises to be a war between "socialists" and "fat cats," "anti-colonialists" and "one-percenters." (On the bright side, while Occupy's influence seems to have faded, its favorite dividing line seems to have become permanently entrenched in the national lexicon).

It's easy to see why politicians and pundits have been so quick to draw battle lines over class warfare. Over the past few years, lingering unemployment, conflicts over tax increases and questions over the personhood of corporations have fueled fury on both sides of the economic and political divide. Many of the rich feel unjustly blamed for the economy's woes; meanwhile, the struggling feel like they've been locked out of the American dream. For politicians on both sides, platitudes about class warfare are a great way of rallying the faithful.

But while the battle lines are clearly drawn between the haves and the have-nots, a recent study shows that all Americans -- rich and poor alike -- actually want to live in a more equitable country, where wealth is more evenly divided across the economic spectrum.

Figuring Out the Ideal Wealth Distribution

In a recent piece in The Atlantic, behavioral economist Dan Ariely suggests that, beneath the rhetoric and reproach, Democrats and Republicans alike envision a more just America. The key, he asserts, lies in getting beyond the "hot-button terms, misconceptions, and the level of wealth people currently possess."

To do this, Ariely and fellow researcher Michael Norton broke America's population into five sections, which could be loosely defined as poor, working class, middle class, upper middle class, and rich. They then asked 5,522 people to outline what they thought America's wealth distribution is, as well as what they thought it should be.

Respondents could break up the wealth pie any way they wished, from a winner-take-all division that would give 100% to the top 20% of the population, to a communist-style distribution in which each group got exactly one fifth of the pie. Class warfare rhetoric aside, America prides itself on competition, so it's hardly surprising that survey participants created an uneven distribution that encouraged citizens to work hard to move up the economic ladder.

According to the study, the "ideal" distribution gave the richest 20% of the population about 36% of the wealth. The upper middle class and middle class each got about 21%, the working class got about 15%, and the poor got about 10%. Republicans and Democrats disagreed somewhat about the distribution -- Democrats favored giving the poor a slightly larger share of the pie, while Republicans skewed the scale a bit more toward the rich -- but the difference between the two groups was a relatively tiny 3.3%. In other words, a vast number of Americans believe in a more equitable distribution of wealth, regardless of their political leanings.

But What Is the Reality?

The wealth distribution suggested by Ariely and Norton's research is actually quite radical; as Ariely wrote, it was "dramatically more equal than exists anywhere in the world." In fact, the model that the survey's respondents envisioned was even more equitable than that of Sweden, a country whose "socialist," "big-government" policies are regularly vilified by conservative commentators and politicians.

Lest the point be lost, Ariely and Norton explicitly asked their respondents to compare America's wealth distribution to that of Sweden. Their Sweden-style economy, titled "Equalden," gave 11% to the poorest fifth of the population, and rose incrementally up to 36% of the economic spoils for the richest fifth. Not surprisingly, in a head-to-head battle between Sweden and the U.S., Sweden won by a landslide: 93.5% of Democrats and 90.2% of Republicans claimed that they would prefer to live in "Equalden."

A big part of Sweden's popularity probably lay in some serious confusion about America's actual wealth distribution. When asked to guess how much of America's wealth was held by the richest 20% of the population, respondents estimated that it was just below 60%; in reality, the richest Americans control 84% of the country's wealth. On the opposite end of the spectrum, they assumed that the lower class and poor control a combined 9% of America's wealth. In reality, the two groups share 0.3%.

And What Does It Mean?

It's easy to interpret Ariely and Norton's research as a call for radical wealth redistribution -- in fact, Ariely himself moves in this direction, claiming that "the vast majority of Americans prefer a distribution of wealth more equal than what exists in Sweden." In reality, it seems more likely that most of the survey's respondents don't really know what a more generous wealth distribution would look like on the ground. In other words, as Steven Mazie, a political science professor at Bard College, suggests in The Economist, they don't realize that a world that looks equal on paper might look like a constrained nanny-state in reality.

This isn't to say that Ariely and Norton's research isn't valuable. To begin with, it demonstrates that Americans are unaware of the vast chasm between the rich and the poor. Respondents consistently underestimated how much wealth the rich control while vastly overestimating how much money the poor actually have. When compared to other countries, this chasm is even more stunning. Based on the Gini coefficient, an equality measure that compares the wealth of the richest and poorest 20% in a given country, the U.S. lands between Uruguay and Cameroon, with a wealth distribution that is far less equitable than most of the industrialized world.

world map

The second lesson that Ariely and Norton offer lies in the difference between what their respondents perceived as America's wealth distribution, and where they want its wealth distribution to be. While the notion that 90.2% of Republicans really want the U.S. to be more equitable than Sweden is clearly poppycock, it's hard to ignore the fact that the majority of respondents wanted to more than double the wealth of the poorest Americans by taking more than a quarter of the holdings of America's richest households. The question, of course, is whether the best path to equality lies through tax breaks for "job creators" or tax increases on "fat cats." Ariely and Norton aside, that question is the one that will plague voters this November.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.


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