The Political Dimension of Inequality
Combating inequality is more than a question of justice. Unequal distribution of wealth goes hand in hand with democratic deficits and a decline in the acceptance of liberal democracies.
PUBLISHED22. OCTOBER 2023
READING TIME6 MIN
In the public debate, inequality is often treated as an ethical problem. Is it fair, for example, that the top one percent owns one third of the wealth, while the bottom half owns practically nothing? Depending on the political camp, the different answers are then justified with either meritocracy and personal responsibility (yes), or with equality and participation (no). This treatment of inequality, however, ignores a central political dimension of the problem: Combating inequality is not only a question of justice, but essentially one of democracy.
One reason for this is that economic inequality also results in political inequality. Numerous studies show that political decisions are skewed in favour of the socially better off (see for example Gilens 2012, Milanovic 2019, Gilens & Page 2020). Most of the studies focus on the US political system, where the problem is particularly serious due to the financing of election campaigns through private donations. Nevertheless, the political influence of an economic elite is by no means a purely US-American problem. Elsässer et al. (2018) show for example that despite institutional differences a similar picture emerges for Germany.
As Joe Stiglitz recently wrote in an Op-ed the flip side of economic inequality is the erosion of democracy, as political underrepresentation translates into the electoral successes of authoritarian and right-wing populist forces.
While there are many explanations [for the rise of populism], one that stands out is the growth of inequality, a problem stemming from modern neoliberal capitalism, which can also be linked in many ways to the erosion of democracy. Economic inequality inevitably leads to political inequality, albeit to varying degrees across countries. In a country like the United States, which has virtually no constraints on campaign contributions, “one person, one vote” has morphed into “one dollar, one vote.”
In addition, disruptions caused by technological change and globalisation not only reinforce individual and regional inequalities, but also contribute to a general economic uncertainty, which forms a fertile breeding ground for populism (Gold 2022). In the context of the AfD’s recent polling high, the results of the Friedrich Ebert Foundation’s latest disparities report are therefore particularly relevant, showing high regional wealth inequality between East and West Germany.
The differences in wealth transfers are considerable, especially between the eastern German states (excluding Berlin) and the southern German states as well as Hamburg. It must therefore be feared that this very unequal distribution of wealth transfers will exacerbate future individual and spatial inequalities in Germany, the unequal distribution of wealth and poverty as well as services of general interest. It will become a considerable problem for the goal of equal living conditions in Germany. The catching-up effects of the past years will be inhibited by the unequal distribution of income and poverty, and the unequal distribution of wealth will foreseeably hinder the further convergence of the regions.
Limiting inequality should therefore be in the interest of all democratic parties. Independent of fairness considerations and beyond the ideological conflict line between supporters of meritocratic or egalitarian convictions.
Which measures would work best against wealth inequality in Germany is also the topic of our next New Paradigm Workshop on 10 November in Berlin. The focus will be on the presentation of a new interactive simulation calculator, including its own website, which can be used to compare different tools such as a wealth tax or social inheritance. Participants will include one of the world’s leading inequality researchers Branko Milanovic and the Chief Economist at the Federal Ministry of Economics, Elga Bartsch.