One of the root causes behind Egypt protests is income inequality and lack of economic opportunity in the youth-bulging country under Mubarak’s rule. But what I find most fascinating is that Egypt’s Gini coefficient is far from abnormal relative to other countries. In fact, the U.S.’s Gini coefficient is higher than Egypt’s. This raises an interesting question: why don’t we see similar uprisings of the poor against the rich right here in the United States? Or in other words, why don’t the poor soak the rich in the U.S.?
This morning, Harvard Kennedy School Professor Tarek Masoud, who is basking in his 15 seconds of fame as one of the foremost academics on politics in Egypt, attempted to answer that very question this morning.
According to traditional logic, one might think that poor people would vote in support of redistributive economic policies if they believe that the policies will one day benefit them. What is puzzling to Masoud is that it is the very people that would benefit from redistributive policies such as the inheritance tax that are voting against them! Why is this so? He posed a few different explanations:
Second, Masoud posed that people in the U.S. may harbor irrational beliefs about their own upward mobility. It’s not me who will need to cash in food stamps soon, it’s the Jones’s next door. Or I am not going to be one of those uninsured Americans Obama keeps talking about, so Obamacare is not something I support. 55% of Americans identify themselves as “middle class” according to a Pew Research Center. 41% of Americans making less than $20,000 identify as “middle class”, as well.
Finally, another reason the poor may not be inclined to collectively organize and riot against the rich in the U.S. despite massive inequalities is that there is a general belief that the free market is a fair distributive instrument. Both household-level and country-level economic growth requires individuals to shift some of their output from consumption to investment. This is very distinct from a subsistence economy, where the majority of the population consume all available output. The U.S. has done a fairly effective job of providing a tax and regulatory framework that incentivizes investment over consumption, and thus fuels growth.