Populist Backlash Will Keep Increasing as Inequality Continues to Rise

Listen to a typical center-left Democrat, and you’ll hear rosy things about the economy. GDP growth is is solid, unemployment is low, and even wages are starting to rise. The Clinton campaign and the Democratic Party generally will be touting these achievements even as they focus on issues of structural racism and sexism while offering government support in areas like childcare.

But there’s a big problem: overall, inequality is still rising at an astonishing rate to unprecedented levels:

Financial inequality became even wider in the United States last year, with average income for the top 1% of households surging 7.7% to $1.36 million.

Income for the richest sliver rose twice as fast as it did for the remaining 99% of households, according to an updated analysis of tax data by Emmanuel Saez, an economics professor at the University of California, Berkeley.

It’s true that the 99% is doing better than it has since the 1990s, but the gains are relatively modest. Furthermore, basic cost of living has gone way up, particularly in the areas of tuition and housing. Housing in particular is a major problem driven by inequality itself: with accumulation of capital comes the need for places to store it, and real estate is a popular piggybank for wealthy investors. This in turn drives up the cost of housing, making it more difficult to afford housing in the urban areas where most jobs are located.

The bigger problem is that America already tried the 1990s approach to prosperity, assuming that rising inequality isn’t a problem as long as everyone is doing OK. What does it matter if the rich are getting much much richer, if the fortunes of the poor and the middle class are also improving even if at a slower rate?

The answer is that it’s unsustainable in both the short and long term. Over the long term high rates of inequality shrink the middle class and increase political instability. In the short term, too much capital in too few hands leads to speculative bubbles, that in turn lead to big recessions. Recessions tend to wipe out the wealth of the middle class in a much more devastating way than that of the wealthy who have more ways to protect their money. More importantly, the wealthy recover their position much more quickly as asset values balloon back, but the jobs that sustain the middle class and the poor return more slowly–often at permanently lower wage levels when adjusted for inflation.

Automation and globalization are likely to inexorably drive the trend toward rampant inequality, exacerbated by tax policy designed to protect the wealthy and overgrown financial sector. Merely tackling structural racist and sexist inequalities will do good in their own ways for women and minorities, but they will do little to address the overall problem. Targeted government programs to help citizens with childcare and other needs will help somewhat but won’t do much to fix what’s fundamentally wrong.

Only much more aggressive policies that give workers a greater say in how companies are run to “pre-distribute” wealth, as well as much more progressive graduated tax policies that distribute uneven gains more equitably, will ultimately tilt the balance back toward the middle class where it belongs. Until then, expect to see increasingly virulent strains of populist backlash from both the right and the left until something changes. Incrementalism may be all that is possible politically, but it’s not an answer for the problems that beset us and give rise to anxious backlash. As long as inequality rises, Donald Trump, Brexit and ISIS will be just the beginning of the world’s back-to-basics nativist woes.

People don’t just want the 99% to do better. As the 1% continues to outpace everyone else, a great many people in America and the world actively want the 1% to do worse. And it’s hard to blame them for that sentiment.

David Atkins

David Atkins is a writer, activist and research professional living in Santa Barbara. He is a contributor to the Washington Monthly's Political Animal and president of The Pollux Group, a qualitative research firm.