Editor’s Note: This guest post was written by Levin Nock, PhD, PMP, a research analyst and project manager who lives in Portland, Oregon.
If you follow Sightline, you probably believe what I do: that measurement matters. You probably appreciate that Sightline compares the Northwest’s performance on key sustainability indicators to other places in the world—the places that have done best at achieving robust human health, for example, or prospering with efficient energy and land use. But what if there’s a mystery indicator out there? Some important-but-overlooked variable that could explain many of the other variables?
If so, focusing on that single variable could open the way for policy to improve multiple measures at the same time. Rather than addressing each “dependent variable” independently, perhaps at great expense and with limited success, policymakers could address the root cause of many of the performance differences between the Northwest and the most successful places in the world.
Let’s call this single mystery variable ‘E’. Extensive peer-reviewed research indicates that many (though not all) of our problems are strongly affected by it. Here is a chart showing a composite index of wellbeing, with data points for the forty richest countries on earth.
Here are some charts of a few individual performance measures. Some charts have more data than others, depending on the availability of particular measurements in each country.
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While ‘E’ doesn’t explain everything, it appears to play an important role. There’s a general trend: countries with higher values of ‘E’ tend to perform better in various measures of wellbeing. Countries with the lowest values of ‘E’ appear to be relegated to low performance, with a few exceptions such as infant health in Singapore. Similar charts of other measures are available—these are just some samples.
So what is ‘E’? Drum roll, please, while scrolling to the answer:
‘E’ represents Economic Equality—the balance between the folks lower on the socioeconomic ladder, and the folks higher up. In Sweden, for example, people in the poorest quintile of the nation’s population are more than 25% as rich as people in the richest quintile. In the USA, which is the worst performer in most of these charts, people in the poorest quintile of population are less than 12% as rich as people in the richest quintile. In these examples, “rich” refers to household income after taxes and benefits, adjusted for the number of people per household. But the charts are not sensitive to the exact definition of “equality” that is chosen.
These charts are adapted from the book “The Spirit Level” by epidemiologists Richard Wilkinson and Kate Pickett. Their charts have more numbers, labels, definitions, explanations and statistical confidence levels, if you want details. Additional information, including a slideshow and original data, is available on their website, www.equalitytrust.org.uk. By the way, a spirit level is a carpentry tool, with an air bubble encased in a curved glass tube of alcohol, used to check whether a surface is level.
Wilkinson and Pickett devote a substantial portion of their book to the question of correlation versus causality. In my opinion, many of their arguments for causality are compelling. Even if the authors are only right about causality for half of the measures that they claim, this would still constitute a dramatic step forward in evidence-based policymaking.
The book is full of evidence that in a more unequal society such as the US, there is more stress on most participants—not just those on the bottom rungs of the socioeconomic ladder. Compared to a more equal society, we spend more effort competing and correspondingly less effort cooperating. This has broad implications, from physiology to public safety to economics. To quote from “The Spirit Level”, p. 181:
Rates of mental illness are five times higher in the most unequal compared to the least unequal societies. Similarly, in more unequal societies people are five times as likely to be imprisoned, six times as likely to be clinically obese, and murder rates may be many times higher. The reason why these differences are so big is, quite simply, because the effects of inequality are not confined just to the least well-off: instead they affect the vast majority of the population.
Various options exist to promote greater income equality, in policy and in business practices. Among the top performers, Sweden has a high income tax and high expenditures for social welfare, while Japan has equalitarian pre-tax salaries, low income tax and low welfare expenditures. In the various states of the USA, Vermont and New Hampshire are both top performers for income equality. Vermont has a high income tax and high social benefits, while New Hampshire has egalitarian pre-tax incomes and no income tax. A business that is owned and managed by workers offers some of the benefits of an equal society to those workers, in a microcosm of the larger society. The particular policies and historical paths leading toward economic equality appear to be less important than the actual result.
This is not a moral argument that society should be more fair economically. Nor is it a utopian argument that society should abolish all income differences. This is a practical argument, for how the Northwest can copy the success of actual, present-day, democratic states and countries. If the Northwest hopes to achieve top global performance in sustainability, it appears that the region must first address economic equality as a root cause of performance differences.
The relationship between economic equality and societal well being is not a new revelation. The debate, such as it is, is how best to achieve that goal. This is particularly salient considering that economic equality is meaningless without economic prosperity. Also, I would note that the countries the USA is being compared to here are more of an apples to oranges comparison. Where are Brazil, Indonesia, Mexico or Russia? As a result of America’s large and ethnically diverse population, as well as its vast geographic size, there are very few countries that compare. Many have one of those three traits but only a handful have all three and it is those whom America is best compared to.
Not to be gruesome, but E on these charts would also look to correlate pretty closely with suicide rates in Japan, Sweden, Canada, United States, and Singapore as well.
Matt the Engineer
[Nick] I highly recommend Robert Reich’s book Aftershock. He makes very strong arguments that increased economic equality is the best way to achieve prosperity. Not only that, but argues that our current economic problems are a symptom of our current financial imbalance and a much larger crash is on its way.
The two times in our history when the rich were taxed the lowest was before the Great Depression and before the Great Recession. Money sitting in a rich man’s pocket goes to capital, not spending, and we end up with overvalued stock prices, and a slow economy. Money sitting in a poor man’s pocket doesn’t sit there for long – much of it goes to services that employ others.
To Nick: As you say, economic equality is meaningless without economic prosperity. The book is focused on ‘rich’ countries with national income per person above ~$25,000. Below this level, increases in average national income tend to increase life expectancy, while above this level, life expectancy is no longer affected by national income. The national income per person is more than $40,000 in the US, but less than $12,000 in Brazil, Indonesia, Mexico and Russia. I agree that the US is large and diverse. The book includes analysis among the 50 states of the US, and also historical analysis of the US across the past 50 years, where similar conclusions are evident about the effects of inequality. On pp.178-179 concerning the relationship between ethnic divisions and income inequality, most published reports have found that ethnic divisions alone cannot account for the tendency of more unequal societies to be less healthy. To compare 2 different large, rich, ethnically & geographically diverse regions that have multiple member states, you could compare the EU as a whole to the US. I do not recall seeing this comparison in the book.
To SSH: Suicide is the one problem that the authors have found that is worse in societies that are more equal. On p.175, they note that suicide is often inversely related to homicide.
Thanks for the breakdown and I would like to see a comparison between the EU as a whole against the US. I don’t think we’d look any better than we do when compared to its member states but it would be a fairer comparison and perhaps give evidence for the need for greater federalism.
Jeffery J. Smith
How do we achieve economic equality? Not by redistribution but by predistribution — that is, by distributing the commonwealth before it gets siphoned away into private fortunes. Specifically, we’d reform the flow of public revenue and institute the green tax shift and the green subsidy shift. The key feature is to share the immense flow of society’s spending for land and resources and government-granted privileges like corporate charters. We’re talking trillions each year in America that now fuel a ruling class but could provide a more level playing field. The Alaska oil dividend is a model. The Basic Income movement in Europe gives hope. And the Mongolians demand for a dividend does, too. If only Americans could become cutting-edge again!
It seems to me the countries most likely to reach sustainability goals are ones with a homogenous population, like the Scandinavian countries, Japan, and Bhutan, for example. Populations with a similar heritage have a strong sense of national identity and unity. See the example of the Baltic nation, I forget which one, during WWII Russian occupation, featured in the documentary about the singing nation. Their national song gave them strength and unity against the occupiers.
Such a sense of unity, awareness and communication are completely lacking, I believe, in most parts of the U.S. Without that common purpose…it is perhaps easier to divide and conquer a geographical area, especially in increments. I think in the U.S., the latest occupier is the corporation.
Could an indicator of sustainability be an ethnically homogenous population? One that has been able to fight off the corporation because the decision makers put the interests of their ‘brethren’ ahead of such an entity. I’ve come to think so.
Do you know of any research looking at possible links between ethnic homogeneity, corporations, and income disparity?
To followup on my comment above to Nick, Europe is a large, diverse, rich region comparable to the US, while other large, diverse nations such as Mexico, Russia, Brazil, China, India have lower incomes. However, as you say, many of the European states are each more socially cohesive than each US state.
While the book didn’t address the role of corporations, I doubt there’s a simple link. As far as I know, corporations are alive and well in Japan and in Scandinavia. I’d be curious if there are major differences in corporate structure in other countries vs. the US? For instance, do any countries have automatic expiration dates for corporate charters, or requirements for benefits to society?