Ethics and psychology of inequality

Source: Agenda Global.

Economic heterodoxy is reducing inequality in South American countries while the gap between rich and poor widens in the United States, with even psychological consequences. Recent studies have concluded that income does not contribute to people’s happiness, but equity indeed does, wrote Social Watch coordinator Roberto Bissio in his last article for Agenda Global.  

There follows the article by Bissio, also executive director of the Third World Institute.

Rich, poor, unhappy…

by Roberto Bissio

The gap between rich and poor shortens in South America and widens in the United States. The independent think tank Economic Policy Institute, based in Washington, has just published a study showing that the US richer one per cent, which held 34.6 of wealth before the 2008 financial crisis, holds now 35.6 per cent, “the highest figure ever registered since statistics started being collected”.

Meanwhile, in Buenos Aires, the Institute of Statistics and Censuses announced on Tuesday, June 28, that the gap between the income of the richest and poorest Argentinians had fallen one percentage point since the previous year, thus ranking Argentina as less unequal than the United States.

The universal child benefit is the main factor accounting for the increased income of the poorest in Argentina, while economic reactivation explains the overall increase in workers’ income, with better salaries and lower unemployment rates. However, in the United States, economic recovery has been focused on sectors that fail to create employment, unemployment has not decreased and rich people have been favoured by means of tax exemptions while social services are being cut for the purpose of a balanced budget. 

The tendency to reduce inequality is not exclusive of Argentina: “Brazil has lifted 30 million people out of poverty, Chile has created state care homes for children and working women, Uruguay provides Internet access to primary and secondary school students, and Argentina offers the universal child benefit and the programme for the protection of pregnant women”, explained economist Bernardo Kliksberg, co-author of the book “The People First”, together with Nobel prize winner Amartya Sen, in an interview for the newspaper Página 12.

“Orthodox economics have been intellectually defeated. Fundamentalism is down in Wall Street. Orthodoxy is a synonym of bad economy; wherever it is implemented, it destroys. It destroys in the short and medium term, and concentrates the economy on just a few beneficiaries”, stated Kliksberg, who investigates poverty and inequality for the United Nations Development Programme (UNDP). Nevertheless, these policies continue to be implemented because “the ones being favoured seek alibis to maintain those ideas”.

Meanwhile, in South America, orthodox economics are being consolidated owing to the positive results and the electoral support of the majorities that have been benefited, in spite of the ongoing “ethics scandals” in the continent. The continent’s major scandal, according to Kliksberg, is the malnutrition of 16 per cent of its children, when food production is enough to meet the needs of a population three times larger than the South American one. 

In the meantime, the problem of inequality in the United States is no longer the exclusive topic of economists and sociologists; now, it is also of interest to psychologists. A study to be published in the upcoming issue of the prestigious academic journal Psychological Science analyzes four decades of economic and psychological statistics and concludes that “people seem to be happier when there is more equality”.

In the last 40 years, the average US income has doubled. Nevertheless, answers to the question if one feels happy or not indicate that people felt better in the 1970s. Studies about the subjective sensation of happiness are becoming increasingly popular in academic environments, but this is the first one of its kind to collect data for the same country over a period of 40 years, and therefore eliminates cultural factors and important differences for the sensation of wellbeing such as temperature or the amount of sunlight.            

Researchers Shigehiro Oishi, Selin Kesebir and Ed Diener, of the universities of Virgina and Illinois, have concluded that “US people are undoubtedly happier when national wealth is more evenly distributed and are less happier when distribution is unequal”, notwithstanding the fact that total wealth has increased.

In spite of the individualist philosophy proclaimed by the United States, for US citizens, the link between social inequality and personal happiness would lie in the feelings of trust and fairness, which are essential for people’s wellbeing. In recent years, together with the rise in inequality, US people have become less trustworthy and “perceive the world to be unfair, since only the rich get richer”. For the richest 20 per cent, however, this link is non-existing, they do not feel that unfairness has increased nor feel unhappier in times of more inequality.

Could not the poorest feel unhappy because they earn less? Researchers tested this hypothesis and reached a negative conclusion. In years in which they have earned a greater income, people feel less happy, less trustworthy and unfairly treated if inequality has increased.

It is true then that money does not contribute to happiness…but equity indeed does.  ,          

More information

Happiness and equality, the missing link: http://bit.ly/laUTeW