Press enter to search

How Inequality Corrupts Society

Research & Commentary
March 29, 2013

by Salvatore Babones

Imagine you are a politician facing a tough reelection campaign. You sincerely believe in low taxes for corporations and investors. Your opponent wants to raise taxes on the rich in order to pay for quality social services for everyone.

In the middle of the election cycle, corporations spend millions of dollars on dishonest attack ads against your opponent. Your opponent’s campaign crumbles. You are reelected in a landslide.

Once in office, you push through tax breaks for profitable corporations and their CEOs. You serve out your term, then retire. The day after you retire you are appointed to the boards of directors of eight different corporations.

Each board position pays you a salary of $150,000 a year for attendance at six meetings per year, for a grand total of $1.2 million a year for less then 50 days’ work. You spend the rest of your life living well and playing golf.

Is that illegal? Certainly not. Quite the contrary. It’s business as usual.

Is that corruption? Well, it depends what you mean by corruption.

Very few wealthy people or corporations literally pay cash bribes to politicians, so if your definition of corruption is bribe-paying, American politics is probably not that corrupt. But let’s face facts. It’s corruption.

High levels of inequality in society create enormous incentives for corruption. In the low-inequality America of yesterday there were also incentives to be corrupt, but they were much smaller.

It used to be that only the most powerful corrupt politicians could become millionaires upon retirement. With today’s higher levels of inequality, any Congressperson can retire after two terms into a million dollar a year private sector “consulting” position.

[pullquote]The corrupting influence of inequality isn’t confined to politics. It is everywhere.[/pullquote]

The corrupting influence of inequality isn’t confined to politics. It is everywhere. For example, federal employees oversee bidding for big defense contracts. Will they perform their oversight in good faith?

When defense contractors offer former federal employees sweetheart jobs with 5% or 10% raises, federal employees will likely stand firm in their service to the people.

When defense contractors offer former federal employees double their former salaries, many federal employees might be tempted.

When defense contractors offer former federal employees ten times their former salaries, it’s a rare — one might say crazy — federal employee who resists temptation and refuses to give in to corruption.

We all know that evil pays better than good. But we live in a world of degrees, not a world of absolutes. Inequality is corrupting because it raises the rewards for being evil to the point where almost no one continues to resist.

Should a corporate chief executive allow his or her company to pollute the environment in a way that leads to hundreds of people dying of cancer decades down the road?

For $100,000 a year, few of us would be willing to take decisions that we know will bring horrible deaths to other people.

For $1,000,000 a year, you’ll find volunteers.

For $10,000,000 a year, almost any high-achieving corporate executive can find ways to rationalize the evil that his or her company commits, convincing himself or herself that the blame really lies with someone else.

For $100,000,000 a year, you can easily find people who will knowingly kill hundreds or thousands of people just to keep their own profits flowing.

A world in which CEO salaries were capped at 500,000 a year would be a much more moral world.

Inequality corrupts. It corrupts society at all levels. At the top, otherwise normal people will do morally despicable things if the payoff is high enough. A million dollars a year compensates for a lot of cognitive dissonance.

At the bottom, inequality also forces people to make choices they would never otherwise make. When people have stable, well-paying jobs with full health insurance, sick pay, and vacation time they are very unlikely to steal from other people.

They are very unlikely to deal drugs, mug people at gunpoint, or steal cars.

Even when inequality is low, there are corrupt politicians and depraved criminals. But when inequality is high the incentives at both ends of the spectrum become much stronger. Inequality doesn’t make people behave badly, but it encourages people to behave badly.

There are lots of reasons to reverse America’s enormous economic inequality. Economic justice alone demands that the rich not be so rich and the poor not be so poor.

Nonetheless, the morally corrupting influence of inequality is equally troubling.

Would you sell your soul for $10? Certainly not. But would you sell your soul for $10 million, or $10 billion? No one should be faced with that choice. In a low-inequality society, no one is.

Explore More


A New Labor Goal for the CEO-Worker Pay Gap

March 30, 2013


Wall Street

The Great Cyprus Bank Robbery

March 24, 2013

by Salvatore Babones

Stay informed

Subscribe to our weekly newsletter