There is little surprise that Bernie Sanders in his book, It’s OK to Be Angry About Capitalism, has blamed unfettered capitalism for an unprecedented level of income and wealth inequality. The Vermont Senator recently came up with a radical idea: the U.S. government should confiscate 100% of any money that Americans make above $999 million. “I think people can make it on $999 m. I think that they can survive just fine,” he said.
But who says that having money is just for “survival”? Does not money buy many things? Take “happiness” for instance. Daniel Kahneman and Angus Deaton, Economics Nobel laureates in 2002 and 2015, respectively, hypothesised in 2010 that happiness increased steadily with income up to an annual income of $75,000, but that there was a monetary “happiness plateau” beyond that point.
Matt Killingsworth of the University of Pennsylvania, however, found no evidence of such a plateau. Well-being improves with money, according to his 2021 study. Recently, in an “adversarial collaboration,” Kahneman, Killingsworth, and Barbara Mellers reanalysed the experience sample data and discovered that the flattening pattern only affected 20% of the population, who were the least happy. One could certainly argue that by “happiness” they mean “well-being”.
Money and influence
Does money’s power end there? Rich people might have a lot of influence over policy changes in many places, as one may perceive. But where is the evidence?
In a recent work that was published in April in the British Journal of Political Science, Mikael Persson and Anders Sundell, two Swedish researchers from the University of Gothenburg, showed that having money increases your odds of achieving your goals. They examined survey data on the preferences for around 3,000 policy proposals from 30 European countries during a 38-year period, which included information on whether or not each policy proposal was implemented. The policy proposals covered topics such as welfare, immigration, foreign policy, and the environment. In all, but two European countries, they found that the rich consistently have a higher likelihood of getting what they want from policy and politics over the course of decades. Now, it is evidence-based conclusion, at least. The average proportion of rich households supporting policies was 57.1%, compared to 53.7% for low-income households. It is interesting that there was no proof that variations in unequal congruence were connected with economic inequality, campaign finance regulations, voter turnout, or union density.
Policy outcomes and the affluent
This was already known in the American context. Political scientist Martin Gilens found in his ground-breaking study in 2012, that in the U.S., actual policy outcomes strongly reflect the preferences of the most affluent but exhibit little relationship to the preferences of Americans with poor or middle incomes. Many believe that significant economic transactions between wealthy individuals and the political elite in the U.S. may forge a link that influences politicians to act in accordance with the views of the wealthy. Nobel laureate economist Paul Krugman, for example, stated in an opinion piece in The New York Times, in 2020, that the wealthy have historically dominated campaign contributions in the U.S., which is related to their influence in policymaking.
Then, in a paper in 2014 published in the journal, Perspectives on Politics, Martin Gilens and Benjamin I. Page examined data sets that included measures of the key variables for 1,779 policy issues and discovered that while average citizens and mass-based interest groups have little or no independent influence, economic elites and organised groups representing business interests do. However, neither majoritarian electoral democracy nor majoritarian pluralism as a key fact was supported by the results; only theories of economic-elite domination and biased pluralism did.
Paul Krugman attempted to address the question of “Why Do the Rich Have So Much Power?” in the opinion piece. “Tax rates on corporations and high incomes have gone down, unions have been crushed, the minimum wage, adjusted for inflation, is lower than it was in the 1960s. How is that possible?” Krugman ponders.
Well, is the campaign contribution the only factor? Certainly not. In an egalitarian welfare state such as Sweden, where campaign contributions are generally low, Mikael Persson also looked at the relationship between public opinion and policy and discovered that high-income citizens continue to receive the most policy responsiveness. Studies for Germany, the Netherlands, and Norway, influenced by Gilens’ work, came to similar findings.
“[O]ne might get the impression that policy outcomes resemble a coin toss — essentially random,” said Persson and Sundell in the European context. “But there remains an imbalance: for some reason, the coin tends to fall more often on the side of the affluent.” Now, Bernie Sanders (or Elizabeth Warren, Alexandria Ocasio-Cortez, or others) ought to be aware of who actually governs and who truly rules. Contrary to popular belief, billionaires may not be policy failures; often, they are instrumental in creating policies instead. Although you might be “angry about capitalism”, rest assured that money is about more than just “survival”.
Atanu Biswas is Professor of Statistics, Indian Statistical Institute, Kolkata