Political Economy

Polarization and Inequality

Oct 18 '11

John’s post on polarization and broken politics is great. One thing to add, though, is to link polarization to the issue of the day: inequality in wealth and income. Nolan McCarthy, Keith Poole, and Howard Rosenthal (my dissertation mentor) document in Polarized America how inequality feeds into polarization and how polarization, in turn, sets the stage for policies that further increase inequality.

Their evidence comes both from surveys (i.e. how individuals vote based on their incomes) as well as from looking at long swats of American history. The graph below tracks the Gini index, a widely used measure of economic inequality, and the polarization measure John used. The correlation is staggeringly high.  In the post World War II period, they find an almost identically high correlation between the share of income earned by the top one percent and polarization.

Patterns in polarization also move in tandem with the percentage of the American population that is foreign born. Immigrants tend to be disproportionally poor and less likely to (be able to) vote.  If the lower portion of the income distribution contains large numbers of non-voters, then this reduces pressures for redistributive policies that might decrease inequality.

Finally, polarization seems to move with trends in education and wages in the financial services relative to other industries (see below).

I took the graphs from Keith Poole’s page, which has more info on data and background. The causal stories are not always clear and clean. Surely the various social and economic trends reinforce each other. Polarization may well be both a cause and consequence of all these trends. A simple blog post cannot do justice to these complexities. Nonetheless, I wished that the current debates about broken politics focused more on these bigger socio-economic questions and less on immediate causes.