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Tuesday
Nov062012

Redistribution of wealth is a good idea - for both sides of the aisle

Distribution of wealth is one of the important issues of this year's US elections. One could also say it is one of the key issues that defines whether you are a Democrat or a Republican - and in most other countries, whether you vote for a left-wing or a right-wing candidate. For people who vote on the left side of the political spectrum, reducing inequality feels like the ethical thing to do, for those on the right, redistribution of wealth sounds like communism or socialism and they won't hesitate to refer to the obvious historical failures of those models. At first sight it sounds like a clear-cut ideological divide where it really depends on your personal beliefs and background. However it seems that more and more scientific research comes available that argues there can only be one sensible answer.

An increasing number of countries starts looking at other factors than simply Gross Domestic Product as an indicator for success of governmental policy, as it does not adequately reflect human happiness and well being. Bhutan famously started this movement in the 70s by reporting their yearly Gross National Happiness. In April this year, the UN General Assembly organized its first Conference on Happiness, featuring the prominent US economist Jeff Sachs, pointing out that although the US' GDP has tripled since 1960, the happiness of its citizens has not increased. Once you start to include the ecological footprint that is required to achieve a certain level of happiness, as done by the Happy Planet Index, one can easily see that the US' performance has even dropped significantly over the last 50 years. Yet despite the fact that it is really hard to argue against using happiness rather than GDP as our fundamental human goal (provided that "happiness" is calculated correctly, which is a different argument), it remains far from the agenda of most political leaders.

Happy Planet Index Rating

Of course is having a reasonable income an important means to achieve personal happiness. You need it to feed yourself, to provide shelter, healthcare and education for yourself and your family. A Princeton study done by Nobel laureate Daniel Kahneman has shown that your happiness does increase with increasing income, but it levels off at a (stable) salary of 75,000 USD per year. Beyond that threshold, "individuals' emotional well-being is constrained by other factors in their temperament and life circumstances." 

What are some of the factors, besides achieving that stable income of 75,000 USD/year, that affect our happiness? Nobody can deny that issues like the life expectancy, crime rate, the literacy rate, the levels of trust in society, obesity, mental illness, stress etc. are important elements that affect our average happiness. It turns out that all of these factors directly correllate with the level of inequality of a society, as explained by Richard Wilkinson in his TED talk.

Countries with a high level of inequality (US, Singapore, UK, Australia) are doing worse on all of these factors compared to countries with a relatively low level of inequality (Norway, Finland, Denmark, Netherlands). Wilkinson even demonstrates that not only is it better to reduce inequality for the happiness of society as a whole, also it is better for the happiness of the individuals in the highest income percentile. Note that reducing inequality doesn't mean making everybody equal and turning to communism (as Republicans like to phrase it), it just means making the differences in income less extreme than they are now.

In order words, research shows that reducing inequality is a good thing for everyone, whether you are rich or poor, whether you are a Republican or a Democrat.

 

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