One of the more remarkable features of modern society is how much economic inequalities vary across countries and over recent history. For example, the Luxembourg Income Study reveals that the 90th percentile household in Mexico has an income that is about ten times greater than the 10th percentile household. This extreme inequality dwarfs the United States' 90/10 ratio of 5.7 in 2004. Still, inequality in the U.S. dwarfs any other affluent democracy. The United Kingdom had a 90/10 ratio of 4.6 in 1999, and egalitarian countries like Denmark were as low as 2.8 in 2004. Even among seemingly similar former state socialist economies, one cannot help but be struck by the disparities between the Czech Republic with a 90/10 ratio of 2.8 in 1992 and 3.0 in 1996 versus increasingly polarized Russia. Russia's 90/10 ratio was already high at 6.7 in 1992, rose all the way to 9.4 in 1995, before plateauing at 8.4 in 2000. As the political scientist Graeme Robertson remarks, “Russia changed from being Finland into Mexico seemingly overnight.” This variation is not simply due to development or industrialization. For if it was, one would not find countries like Taiwan with a 90/10 ratio of 3.8 in 2000, far below the U.S. and U.K.Social scientists have been interested in this cross-national and historical variation in inequality since at least the nineteenth century. Marx, Weber, Adam Smith and many others devoted attention to why inequality rose with industrialization, and how and/or if anything could be done to address it. Within sociology, one can point to the influential work of scholars like Gerhard Lenski (1984). Yet, it may be only in the last 15 or so years that sociologists and other social scientists have truly begun to produce a field of inquiry on this issue. A host of studies have sought to explain differences among affluent democracies, trends in inequality with development, and global inequalities of between and within country trends. Scholars have compared inequality across countries, across cities, provinces and regions, across history, and pooled historical and spatial variations as well. In this fast moving field, we have reached a point where social scientists actually know a fair amount about what is associated with temporal and cross-national variations in inequality.
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Notes
- 1.
For these figures, see the Luxembourg Income Study (http://www.lisproject.org/php/kf/kf.php).
- 2.
Several sociologists have claimed that their discipline has been slow to address rising inequality. Morris and Western (1999: 649, 624) write: “[S]ociology ignored these trends” and “If you had been reading only the flagship journals in sociology, you probably would not know about these trends. Sociologists have been strangely and remarkably silent on this issue.” Also, Neckerman and Torche (2007) write, “sociologists have been relatively slow to take up the study of inequality.” Perhaps, however, this claim of neglect has been rectified since Morris and Western's review. In addition to the tradition of scholarship following Lenski, there actually has been a nontrivial sociological literature on these questions (reviewed in this chapter).
- 3.
Korpi (1989: 313) writes that power resources theory offers, “a game theoretical perspective on the analysis of interdependent actors.” See also Korpi (1985); van den Berg and Janoski (2005).
- 4.
On balance, power resources theory often considered institutions and settlements from past negotiations. Korpi (1985: 38) wrote, “The power resources approach, leads us to view societal institutions largely as the residues of previous activations of power resources, often in the context of manifest conflicts which for the time being have been settled through various types of compromises.” But, such institutions were always very secondary to the manifest class conflict that primarily drives welfare politics.
- 5.
Relatedly, power resources theory presents a rather romantic image of civil society. One of the central factors in power resources theory has always been the ability of workers to disrupt production through strikes. Yet, strikes are few, far between and ineffectual in many contemporary affluent democracries (Rosenfeld 2006a).
- 6.
Of course, one problem with this argument is the presence of welfare states that are clearly more generous than the U.S. despite having at least as much ethnically heterogeneity and immigration as the U.S. (e.g. Australia, Canada, Luxembourg, Switzerland, etc.) (Brady 2007).
- 7.
Among the individuals shown to have substantial effects are particularly effective politicians, social movement leaders, and policy intellectuals that act as institutional entrepreneurs in delivering social change (e.g. Amenta 1998).
- 8.
Link and Phelan explain that the fundamental causes of disease — like class — should get more attention than proximate risk factors. They explain that even if interventions reduce risk factors, the fundamental cause will find a new risk factor to trigger inequalities in disease. See also Lieberson's (1985) “basic” cause.
- 9.
As an example of such a configuration, business may be more in favor of the welfare state under more regressive taxation. If public social insurance is funded by taxes borne by workers, with only modest employer contributions, and those employer contributions are less costly than private insurance, business might have incentives to support public social insurance because of lower costs in the long run.
- 10.
These critiques went hand in hand with Korpi and Palme's (1998) contention that “encompassing” welfare states that uphold social citizenship rights for all universally — as opposed to those that guarantee basic economic security for those at the bottom — were more successful at reducing poverty.
- 11.
Unfortunately, their measure has never been publicly available, so scholars have been unable to replicate the analyses of Korpi and his collaborators.
- 12.
The literature has experienced a proliferation of typologies, and also refers to institutional clusters and systems. Korpi and Palme (1998) divide countries along a targeting versus universalism continuum. Huber and Stephens (2001) break welfare states into the social democratic, Christian-democratic, Mediterranean, Antipodean, and liberal types. Hall and Soskice (2001) argue that countries can be collapsed into coordinated and liberal market economies. Even before these typologies, there were classic distinctions between residual and institutionalized welfare states, or civil, political and social rights (Wilensky 2002).
- 13.
Esping-Andersen (1990: 2, 19, 58) specifically wrote: “The existence of a social program and the amount of money spent on it may be less important than what it does;” “Expenditures are epiphenomenal to the theoretical substance of welfare states;” and, “Welfare states may be equally large or comprehensive, but with entirely different effects on social structure.”
- 14.
Hicks and Esping-Andersen (2005: 511–512) summarize this prevailing view: “The sociological conceptualization of welfare states is now dominated by the idea of distinct real-world models, thus rejecting the notion that they can be compared simply along a linear dimension — such as social spending levels.
- 15.
Esping-Andersen (1990: 76–77) writes, “It is misleading to compare welfare states as merely ‘more’ or ‘less’ egalitarian. We discover, instead, entirely different logics of social stratification embedded in welfare-state construction.”
- 16.
This simulated counterfactual is probably most useful when analyzing individual employed adults. As the majority of their income comes from labor market earnings, perhaps it is not unreasonable to estimate what a working adult's pre-fisc income might have been.
- 17.
Bergh demonstrates specifically: (a) how welfare states redistribute between individuals and over the life-cycle; (b) the interdependence between pre-fisc incomes and taxes and transfers; (c) the incorrect description of the redistributive effect of social insurance that crowds out market insurance; and (d) how welfare states influence the distribution of earnings through education. People consider their expected taxes and transfers when making decisions about labor market behavior, and this biases pre-fisc estimates.
- 18.
As a final illustration of these problems, consider the Earned Income Tax Credit (EITC) in the U.S. Because the EITC is a tax refund, and pre-fisc is a simulation of one's income excluding all taxes paid and transfers received, studies treat the EITC in confusing and contradictory ways. The EITC mostly refunds labor market earnings that were taxed. So, it is pre-fisc income, but it is also “post-fisc” as the state gives it back at the end of the year after receiving some paperwork. Also, there is a transfer component of the EITC as it gives more to the bottom of the earnings distribution. Certainly, the majority of EITC recipients are aware of it, and many probably factor it into their labor market behavior. Pre-fisc income may be underestimated because people are being taxed, and alternatively redistribution might be overestimated because they are mostly just getting those pre-fisc earnings back. Very small in previous decades, the EITC has grown into the largest family assistance program in the U.S. As a result, ignoring the EITC severely undermines reliable comparisons of pre-fisc income or redistribution over time. Because the U.S. heavily relies on the EITC to alleviate poverty and other affluent democracies rely more on transfers, international comparisons of pre-fisc income or redistribution are untrustworthy.
- 19.
Framing all this as distribution may even be consistent with power resources theory. As Korpi (1983: 188) explains, “The intervention of the state in the distributive processes in society is thus not limited to measures directed towards persons with publicly acknowledged needs.”
- 20.
Of course, there is debate about whether or not welfare states have actually experienced substantial retrenchment in recent decades (Huber and Stephens 2001; Korpi and Palme 2003). This area is quite unsettled and there is equal evidence that welfare states have experienced stability or a plateau rather than a crisis (Brady et al. 2005).
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We thank the editors for helpful suggestions. Please direct correspondence to David Brady, Department of Sociology, Box 90088, Duke University, Durham, NC, 27708, (919) 660–5760, email: brady@soc.duke.edu.
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Brady, D., Sosnaud, B. (2010). The Politics of Economic Inequality. In: Leicht, K.T., Jenkins, J.C. (eds) Handbook of Politics. Handbooks of Sociology and Social Research. Springer, New York, NY. https://doi.org/10.1007/978-0-387-68930-2_28
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