American believe in equality, but they don't want equality

The Tea Party movement and its supporters are all about the capitalism. They accuse President Barack Obama of believing in an agenda in which wealth is redistributed in such a way that the U.S. will become some sort of strange neo-Marxist amalgam. They believe he wants to take taxpayer dollars and dole them out to the poor, to his pals on Wall Street, the auto companies (so that they may become federal clients), third-world green energy concerns (via a tax on carbon), and, of course, to a "world government" that they envision as the ultimate endgame of his evil plans. Tea Party people, on the other hand, prefer that the rich stay rich, and that the poor pull themselves up by their bootstraps and take care of themselves.

All of this makes a recent study by scholars at Duke and Harvard Business School, as reported in Businessweek, all the more intriguing. According to the study, Americans believe that wealth is distributed much more evenly along class lines than is the reality. Even more surprising than this, they believe that income distribution should be even more equal to what they perceive. Here is how Businessweek describes it:

It might be surprising to learn that Americans are in broad agreement on the need for a more equal distribution of wealth. Yet that's what a forthcoming study by two psychologists, Dan Ariely of Duke University and Michael I. Norton of Harvard Business School, has concluded. First, Ariely and Norton asked thousands of Americans what they thought the nation's actual wealth distribution looks like: how much is owned by the wealthiest 20 percent of the population, the next-wealthiest 20 percent, and on down. The researchers then asked people what, in an ideal world, they would like the nation's wealth distribution to be.

Ariely and Norton found that Americans think they live in a far more equal country than they in fact do. On average, those surveyed estimated that the wealthiest 20percent of Americans own 59 percent of the nation's wealth; in reality the top quintile owns around 84 percent. The respondents further estimated that the poorest 20 percent own 3.7 percent, when in reality they own 0.1percent.

And when asked to give their ideal distribution, they described, on average, a nation where the wealth distribution looks not like the U.S. but like Sweden, only more so—the wealthiest quintile would control just 32 percent of the wealth, the poorest just over 10 percent. "People dramatically underestimated the extent of wealth inequality in the U.S.," says Ariely. "And they wanted it to be even more equal."

The United States, according to this study, is a nation of people who would like to spread the wealth around. They just don't know it.

Here is a chart borrowed from the Businessweek website that makes this clearer:



So if Americans were more aware of these numbers, would a socialist revolution be in the offing. Here is Businesweek's take on the situation:

It's possible that if more people understood how deeply unequal American society has become they would support measures to combat it. The U.S. now has the world's second-lowest level of income mobility between generations, after England, according to research by economist Miles Corak at the University of Ottawa. Yet studies have also shown that voters have an impressive ability to absorb information that contradicts their beliefs without letting it change their minds. People support the abstract goal of equality, it seems, while staunchly opposing specific government measures—whether increasing tax rates or limiting executive pay—designed to impose it. Getting there, in other words, is what starts the political arguments, even at a moment of widespread bipartisan anger at Wall Street.

This is a rather balanced analysis, but I believe that it fails to truly capture how the average American really feels. Businessweek claims that "people support the abstract goal of equality". But is this really true?

The fact is that the theory of supply-side economics, closely associated with "trickle-down economics", still holds great sway in America. Fox News pundits such as John Stossel are never shy to praise its supposed virtues:

Taxes discourage wealth creation. That hurts everyone, the lower end of the income scale most of all. An economy that, through freedom, encourages the production of wealth raises the living standards of lower-income people as well as everyone else.

A free society is not a zero-sum game in which every gain is offset by someone's loss. As long as government keeps its thumb off the scales, the "makers" who get rich do so by making others better off. When the government allocates capital or creates barriers to competition, however, all bets are off.

Many Americans, at least on the right side of the spectrum, generally see no problem with living in an unequal society. That does not mean that they enjoy the fact that poverty is still rampant. Rather, they believe that the unequal distribution of wealth is necessary to raise the poor to a higher living standard. The rich own much of the wealth, but if they didn't, so the theory goes, then there would be no mechanism by which additional wealth could be created.

Of course, there are many pundits - and a good deal of data - that refute such ideas. But that's a debate for another time. Let's just say for the time being that, despite what Businessweek thinks, many Americans see inequality as a virtue, not a problem.