"It was the best of times, it was the worst of times ""
The neoliberal revolution, which began in the 1970s, has produced inequality not seen since the gilded age.1 From circa 1942 to 1978, the top 10% of households held around 33% of the nation's wealth. Currently, the wealth share of the top 10% stands at 47%. Even more strikingly, the top 0.1% (1 in 1,000) of households increased their share of income from less than 1% in 1978 to roughly 5% in 2008.2 The policies that produced this wealth disparity, including privatization, deregulation, and the promotion of macroeconomic stability, have attracted the opprobrium of critics and the plaudits of apologists. In mainstream discourse, free market encomia and anti-government pabulum are virtual necessities.3 It is considered a badge of virtue to harbor mystical beliefs about the thaumaturgical properties of the free market. Of course, leaving the platonic ether, both progressives and conservatives desire a powerful regulatory apparatus and interventionist state. Progressives prefer that these tools be used to create greater equality; conservatives that they allow income to flow upward.4
Critics of neoliberalism have penned countless works detailing the negative economic and social consequences associated with neoliberal policies.5,6,7 Most progressives are familiar with these critiques and utilize them in discussions, blogs, articles, and books. Unfortunately, there remains a lacuna in progressive critiques which allows apologists to remain untarnished defenders of the faith: the psychological consequences of neoliberal policy have not been rigorously assessed--outside of specialist journals.8 The results are straightforward: the neoliberal enthusiast concedes economic facts but asserts that increased freedom, individualism, and prosperity more than outweigh the costs. Sure, low and non-skilled workers are worse off than they were 30 years ago, but who cares? The apologist then waxes effusive over the unparalleled consumer goods that are available for purchase. He (or she) concludes with a yarn about his working-class neighbor who owns 2 cell phones and a flat screen TV. What if such an argument has validity? If data collected over the past 40 years provided evidence that U.S. citizens are happier and healthier than ever, it would make an outright condemnation of neoliberalism more difficult. Conversely, if the data provided evidence of increasing psychological and physical malaise, this would render it difficult to tout the salubriousness of neoliberalism
The pathologies of Neoliberalism
"Happiness is the meaning and the purpose of life, the whole aim and end of human existence."
Neoliberalism and Happiness
Neoliberal advocates often point to increased prosperity, freedom, and consumer choice to justify their brand of market fundamentalism. Inherent in this argument is the assumption, left conspicuously untested, that consumer choice and wealth are, by necessity, conduits of happiness. Turning to the scholarly research, it is true that higher levels of income cross-nationally are associated with increased happiness. For example, researchers have found moderate to strong correlations (between .50 and .70) between per capita income and average well-being across nations.9 However, once income reaches a moderate level (roughly U.S. $10,000 per capita), the effects of additional income on happiness are marginal or nonexistent.10,11 In the U.S., mean happiness has remained flat since the end of World War II, while the percentage of Americans reporting being very happy stagnated in the 1960s (see figure below).12,13,14
Myers, D.G., & Diener, E. (1995). Who is happy? Psychological Science, 6, 10-19. pg 13. Reprinted with APA permission.
Neoliberal advocates are correct in asserting that a sense of freedom increases subjective well-being; they are wrong in assuming that neoliberal policies maximize perceived freedom.15 Neoliberal policies increase inequality which decreases perceived freedom and is associated with a host of social ills (detailed below). Further, nations possessing the highest life satisfaction--Denmark, Netherlands, Norway, and Switzerland--are all more egalitarian and collectivist than the United States.16 This is consistent with research demonstrating that more generous welfare state policies are associated with higher levels of happiness.17 There are a couple of reasons that relatively collectivist countries with generous welfare policies tend to be happier than the U.S. First, in a hyper-individualistic, competitive social milieu, income becomes a salient social desideratum causing individuals to overrate its importance in generating well-being and to lose sight of more important factors.18 Second, while people generally prefer choice, there is evidence that too much choice is deleterious to well-being. This phenomenon has been given the felicitous label the paradox of choice.19 For an example of the paradox of choice, think of your last trip to the supermarket. Were you overwhelmed by the sundry toothpastes? What is the difference between advanced vivid fluoride and iso-active fluoride? Should you use fluoride or peroxide or baking soda or all three? The paradox of choice occurs because we wish to make rational choices but have limited time and resources. It is often impossible to gather sufficient information for optimal choice. Thus, we are glutted by consumer goods that do little to increase happiness and much to increase anxiety. To the extent that neoliberalism promotes consumerism, it is likely to decrease subjective feelings of well-being.
"An imbalance between rich and poor is the oldest and most fatal ailment of all Republics." Plutarch
Inequality and Psychological Functioning
Inequality has increased dramatically in the neoliberal era--even the most insouciant apologist admits this much. Pollyannaish pundits argue the inequality is irrelevant so long as society is getting richer in absolute terms. They also argue that inequality is the price paid for the freedom to pursue one's talents. The scientific research, however, tells a drastically different tale. Hundreds of studies demonstrate that inequality is destructive socially and psychologically.20,21,22 The table below presents an overview of the effects of inequality on select social and psychological outcomes.
References 23-27. Note: up arrow = indicator increases with greater inequality. down arrow = indicator decreases.
A quick glance at the table reveals that inequality is associated with lower overall population health and mental health as well as a host of social ills. Even social mobility, the cause celÃ¨bre of neoliberal aficionados, is negatively correlated with inequality (i.e., the more equal the society, the greater the social mobility). These data further help to understand the lack of a relationship between per capita income and happiness: It is not the income that matters so much as its relative distribution.