Average is Over (4) Revolt

Unlike other social commentators, Tyler Cowen does not expect a revolt from the poor in response to their permanently declining incomes.

For all the prognostication about the American future, the most important single fact, and the easier to predict, is simply that we will be a lot older. That will make us more conservative. Revolutions and protests are the endeavours of young hotheads, not sage (or tired) sixty-four year olds (251).

People will be set in their ways, aid to the elderly will soak up a large part of the government budget, and wealth earners will be the dominant economic social, and political influence.

Commentators often suggest that wage polarization will mean the end of liberalism—meaning a broadly tolerant society with lots of liberty and a protected personal sphere—or the end of democracy. We can imagine the lower-wage individuals toppling the proverbial Bastille and taking away the goodies of the higher earners. These are tempting conclusions, but there’s not much evidence of support them. Societies have a strong status quo bias, particularly, if they have high relative to other parts of the world.

If you are trying to measure the scope or potential for social disorder, look at the rate of crime. In the United States crime rates have been falling for decades and in present times they have surprised researchers by falling even faster than expected. Yet over those same decades income and wealth inequality have been rising significantly in the United States. It seems that whether we like it or not, increasing inequality and growing domestic peace are compatible. Very often I read warnings about how income inequality will lead to a society where the poor take by force what they cannot earn in the market place. Yet these predictions run aground on the simplest of empirical tests, namely crime rates (253).

Cowan suggests the last time that America had serious demonstration and riots was in the 1960s and early 1970s, which were a golden age of income equality and American manufacturing. He claims that Occupy Wall Street was tame by comparison to the 1960s, despite rising inequality.

Look where Occupy Wall Street has been strong as a movement. It holds great appeal for well-educated young people from the upper middle class, especially if they are under-appreciated liberal arts majors who do not have the option of stepping into the highest paying or most upwardly mobile jobs. It is not a broader American phenomenon that is catching fire on the docks of Elizabeth, New Jersey, or in the ailing Appalachian regions of Ohio or with religious homeschoolers in Idaho (256)

If we think about it, we really shouldn’t expect rising income and wealth inequality to lead to revolution and revolt. That is for a very simple psychological reason: Most envy is local. At least in the United States, most economic resentment is not directed towards billionaires or high-roller financiers—not even corrupt ones. It is directed at the guy down the hall who got a bigger rise. It is directed at the husband of your wife’s sister, because he earns 20 percent more than you do. It is directed at the people you went to high school with. And that’s why a lot of people aren’t so bothered by income or wealth inequality at the marco level: Most of us don’t compare ourselves to billionaires.... Right now the biggest medium for envy in the United States is probably Facebook, not the yachting marinas or the rather popular televisions shows about the lifestyles of the rich and famous (257)