Psychology of wealth: Do rich people deserve to be rich?

Although inequality is growing in many western countries, concern about it is not

Rhymer Rigby


Increasingly we are less likely to meet people in neighbourhoods who are not like us © Getty


Here’s a topical question. Do rich people deserve to be rich? If so, how rich?

You might think this is worth asking because concern about inequality is growing everywhere.

But actually, this is not true. Although inequality is growing in many western countries, concern about it is not. In fact, according to new research by Jonathan Mijs, a sociologist at the International Inequalities Institute at the London School of Economics, inequality and belief in meritocracy may go hand in hand. The more unequal a society, the more likely people are to believe the rich have earned it.

Such thinking is hardly new. “Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires,” is a quote popularly attributed to John Steinbeck, the author of The Grapes of Wrath.

This is probably an oversimplification of what Steinbeck actually said. But it is often cited as a reason for the persistence of the American Dream. The poor are OK with enormous inequality, the thinking goes, because they believe — or hope — that one day they will be rich too.

Mijs suggests there are other factors at work here also. One is the extent to which people have self-segregated in the past few decades. We increasingly spend time with our own economic kind in places ranging from neighbourhoods to workplaces (education has been a key driver here), meaning we are less likely to meet people who are not like us.

Thus, if we are rich, our idea of a poor person may simply be someone further down the social strata who may one day earn what we do. If we are poor this may mean that we are unaware of the structural barriers that prevent us from climbing the ladder.

Meanwhile, thanks in part to the cult of Silicon Valley entrepreneurs, we now see businesspeople treated like athletes. You’re either a superstar or a nobody and the super-rich deserve it because they are the brilliant innovators our economy relies upon. Without them we would all be poorer.

But would we really? In his 2018 book Winners Take All: The Elite Charade of Changing the World, Anand Giridharadas writes: “A successful society is a progress machine. It takes in the raw material of innovations and produces broad human advancement. America’s machine is broken.” The fruits of recent change, he adds, have been largely captured by the very fortunate — in a way that would not have occurred 30 years ago. So perhaps, without them, we would all be a bit better off.

One place where the problem of inequality is arguably at its starkest is chief executive pay. In the US, the ratio of chief executive to average worker pay has risen from about 30 times to more than 300 times, according to the Economic Policy Institute, a Washington DC think-tank.

This raises several questions. First, does what the individual is being paid reflect what they bring to the table? Or are they simply in a position where they marshal the efforts of others? Is corporate endeavour about superstars or group effort? Is Tim Cook worth the $136m he took home in 2017?

The mutability of the notion of being paid what you are worth is also illustrated by national differentials. According to Willis Towers Watson, a consultancy, median chief executive compensation in large companies in 2016 was around $1.2m in Japan, compared with $11.7m in the US and $5.3m in the UK. As chief executives often argue that theirs is a global market for talent, it is hard to see why a Japanese boss “deserves” a 10th the pay of their American counterpart.

This is before we even look at inherited wealth and advantage. According to the OECD, a child born into a poor UK family would take five generations to get to the average income.

Conversely, the UK’s top tier shows that many of its members haven’t had far to climb. Here, the idea of pure meritocracy is sometimes held up as an ideal. But really? As the coiner of the word warned, an effect of meritocracy can be to make those at the top think they deserve it.

In Capital in the Twenty-First Century, Thomas Piketty says the way these factors work together can create the worst of all worlds for those who are neither top income earners nor top successors: “They are poor and they are depicted as dumb and undeserving.” Referring to the French Revolution, which was partly driven by inequality, he notes tartly that “at least, nobody was trying to depict Ancien Régime inequality as fair”.

So does this mean western societies are nearing a breaking point? Pointing to the CIA’s World Factbook, Mijs argues: “You only have to look at Latin American countries to see how much further inequality can go.”

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