Misperceptions About Middle-Class Society

A new study from Germany’s IW economic institute compares perceptions of inequality across advanced nations – a big takeaway is that Americans are more likely than Europeans to believe that they live in a middle-class society, even though income is much less equally distributed here than it is in Europe.

In a comparison between the United States and France, for example, the French think they live in a hierarchical pyramid, when in reality they are mostly middle-class; Americans are the opposite (the study’s charts can be seen here).

As the study points out, other evidence also shows that Americans vastly underestimate inequality in their own society – and when asked to choose an ideal wealth distribution, they say that they like Sweden’s.

Why the difference? I and many others would argue that American exceptionalism when it comes to income distribution – our unique suspicion of, and hostility toward, social insurance and antipoverty programs – is very much tied to our racial history. This does not, however, explain in any direct way why we should misperceive real inequality: People could oppose aid to Those People while understanding how rich the rich are. There may, however, be an indirect effect: The racial divide empowers right-wing groups of all kinds, which in turn issue a lot of propaganda dismissing and minimizing inequality.

Interesting stuff.

The Euro Catastrophe

In an article for The Washington Post, Matt O’Brien recently pointed out that Europe really is doing worse than it did during the Great Depression. Meanwhile, French President François Hollande – whose spinelessness and willingness to buy into austerity doomed his presidency and quite possibly the European project – is finally, tentatively, suggesting that maybe further austerity isn’t the answer.

The Oxford economist Simon Wren-Lewis thinks that the European embrace of austerity was a historical contingency; basically, the Greek crisis strengthened the hand of the austerians at a critical moment. I don’t think it’s that easy to explain. My sense is that there was powerful anti-Keynesian sentiment in Europe even before the Greek crisis, and that macroeconomics as Anglo-Saxon economists understand it never had a real constituency in Europe’s corridors of power.

Whatever the explanation, we are now, as Mr. O’Brien points out, looking at one of the great catastrophes of economic history.