THE POOR ARE IN THE MAJORITY IN ALL SOCIETIES, SO WHY ARE THEY ALWAYS GOVERNED BY THE “RICH”?

In a frontier land which has seen multiple influences, Gilat Levy talks about the redistribution of public assets as an indication of democracy

Welfare services are better in homogeneous democratic societies, whereas they are declining in heterogeneous societies. Gilat Levy explained why, starting from Indonesia

Gilat Levy, a young economist born in Tel Aviv, currently a lecturer at the London School of Economics with an enviable background of studies, research and publications behind her, immediately got into the atmosphere of the 2008 Festival of Economics: «I have been asked to explain complex concepts using simple words that everyone can understand: this is the challenge of this Festival and I shall try!» With this premise, Gilat Levy’s speech this morning at Buonconsiglio Castle, within the context of the events entitled “At the Frontier”, had the scope of explaining the economic and political mechanisms behind the construction of modern society, referring to the system of economic and political relationships and the redistribution of wealth. “In every type of society” – Gilat Levy began, following the presentation of Paola Villa, Lecturer in Labour Economics at the University of Trento – “we have differentiations in terms of income level, age, ethic or geographic origin, religion etc., which develop and are consolidated By way of example, these differentiations give rise to three major social groups: the “rich”, who also hold the reins of economic power; the “poor with specific interests to defend”, namely the middle classes, who have interests (for example religious, ethnic or geographical) to safeguard; and finally the “poor”, the third class, who have nothing in particular to defend except their own survival”. It is clear to everyone that the “poor with specific interests”, added to those who are simply “poor” make up the majority in most societies existing today. “So why, in the construction of the various governments, do the “rich” predominate?” – Gilat Levy asked. – “Why are the poor, taken as a whole, in the majority, whereas in the end it always the rich, namely the minority, who govern?” Because the interests of the “poor” and the “poor with specific requests” rarely coincide; because the poor are divided and thus the rich have the chance to break up the opposition; because it is more likely that the “rich” and the “poor with specific interests” agree rather than the “poor” as a whole. This is why today we see the proliferation of heterogeneous democratic societies, in which the interests of the “rich” and of the “poor who defend specific social contexts” produce compromises, “middle courses” and “soft” welfare situations. To support her analysis, Gilat Levy gave as an example the situation in Indonesia, “a large nation where different situations coexist: oligarchies, in which the rich control society, heterogeneous democracy (at ethnic, religious and geographical level) and homogenous democracy (villages with common and generalised interests). We have tested the social situation and reached some conclusions. By analysing and comparing homogenous and heterogeneous democracies, we have seen that in villages where there is homogeneous democracy there is also better health and education, school fees are lower, the teacher/pupil ratio is higher and there is less need for security, whereas as regards the infrastructures there are no significant differences with other living conditions. On the other hand in situations characterised by heterogeneous democracy, where ethnic, religious and economic diversity is more marked and where we see a compromise between the “rich” and the “poor with specific interests” we have poorer health and education, the relationship between the number of doctors and inhabitants is lower and it is necessary to set up better services to guarantee the security of the community”. What does all this mean? It means that the “rich” benefit from the divisions existing between poorer classes; it means that if the poor could agree among themselves, we would have perfect societies in terms of the provision of public services but, for example, lower productivity; it means that political coalitions tend to be established between the richer classes and poorer classes that nevertheless have specific interests to defend, at the expense of the poor majority without specific interests to safeguard. It also means that democratic societies characterised by homogeneity are generally small: it is true that the level of welfare increases, but due to the lower “critical mass” the costs for ensuring a decent level of care for all also increase. In short, everyone has their own interests to defend: the “rich” want to pay as few taxes as possible and to invest the indispensable minimum in welfare; on the contrary, the “poor” wish to increase taxation of high incomes and to guarantee themselves a very high level of public care. Between them there is the “middle class”, which has its own interests (economic, cultural, religious, ethnic and racial) to safeguard. The “middle class” frequently allies itself with the “rich”, with whom it is easier to find a compromise “however the stability of coalitions”– Gilat Levy wisely recalled – “depends on continuously evolving interests. What is acceptable today may not also be valid for tomorrow...” If we wished to respond to the question which lies at the foundation of the 2008 Festival of Economics, namely whether democracies can influence the economic policy of nations, the answer (“Clearly simplistic and perhaps reductive“ the speaker recalled) is a consequence of everything which has been said up to now: «Democracy expects and succeeds in having a positive influence on homogeneous societies, but it does not have much effect on heterogeneous societies or at all events not the effect that we would all expect». Why? “Because it is not enough to give the poor a voice in order to solve the problem, given that the poor themselves often have conflicting interests and the rich exploit these divisions among the opposition”. It is true, the “poor” could establish a coalition with the middle class, but this would be very instable, because from time to time it would depend on the specific interests of one or the other... So for some time to come we will continue to live in democratic societies where the poor are in the majority but which are always governed by the “rich”, in alliance with classes that have specific interests to defend. This is also a good yardstick for understanding many of the choices made in the context of Italian politics.