Wednesday, February 24, 2010

Musing on class economics

The floodgates have been opened and the Maas river has become muddy and swift as the winter runoff drains north. There’s a whoosh to the current this morning, tugging at the channel markers and swirling around the bridges.  Floating birds are outpacing flying ones.

I’ve been catching up with the news on banking reform; what once seemed to be a similarly irresistible current of reform now seems spent; populist anger has degenerated into fringe movements. 

I’m surprised that there isn’t a more lasting outcry when so many people were directly affected by the problems.

In the US, I lost 20% of home value, 40% of retirement savings.  I’m ready to see someone held to account.  Dutch friends lost their jobs, then their IceSave accounts in a rapid two-step.  Many of my UK friends are struggling for jobs and worrying about their bank stability.

So, why no clamor for more substantive change?

In part, I wonder whether the cause is cultural.  If the pain feels systemic rather than personal and nobody else seems to be making money from the mess,  then it’s hard to point fingers.

The figures on income disparity in the CIA Factbook are shown below and, perhaps, everyone here was more equally affected.  The economic class distinctions are certainly less pronounced here  than the US, so there’s less of a group that’s done well out off the crisis.  This mirrors my experiences: I don’t see wide differences in lifestyle between the Dutch’s wealthy and middle-class people that I’ve seen elsewhere.  I’m sure that the Netherlands is not class-less, but it does feel less so, and may suggest that the pain is more evenly spread.

Yet, even in the US where the differences are more extreme, people don’t protest.  Their strong belief in class mobility may be a factor, the middle class genuinely believes that efforts to rein in the wealthy may limit their own rise.  While there’s a bias against windfall profits, people still believe in individual initiative and won’t penalize those whose riches are perceived to come from hard work.  Only Wall Street bankers have really drawn fire.

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Population below poverty line:

  NL: 10.5%      UK: 14%      US: 12%

Income disparity (Gini Index: Number (world rank))

  NL:  30.9 (108)       UK: 34 (92)     US: 45 (43)

Household consumption (percentage share of total spend)

  Lowest 10%     NL:  2.2%    UK: 2.1%    US:  2%

  Highest 10%     NL: 22.9%    UK: 28.5%    US: 30%

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In another part, the causes may be rooted in willingness to let the government sort it out.  In the Netherlands, I think that there is a perception that the government has dealt well with the crisis, shrinking banks, holding Iceland to account.  In the US, people simply don’t trust the government and aren’t likely to demand more action from it (witness in the concerns about socializing banking, health care, or automakers).

And, since the NL, UK, and US will all have major elections this year that are likely to change their governments, citizens may feel less reason to demand changes from the present crowd running things.

Of course, it could be that the first blooms of recovery are sprouting as the crisis thaws.  Optimism may return with warmer weather and fatter investment portfolios, yielding a sense that the worst is over without having to make any reforms. 

After all, why fix what no longer seems broken?

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