Inequality trumps poverty for voters

Last weekend, as European economists and commentators got into an increasingly heated debate about the statistical integrity of Thomas Piketty's bestselling book on rising inequality, millions of citizens across Europe were registering a protest vote in the EU elections.

A few days later, IMF chief Christine Lagarde warned delegates at a high-profile conference on "inclusive capitalism" that one of the greatest problems confronting the global economy remained the fact that many banks were simply too large and contributing to a form of capitalism that was more extractive than inclusive.

According to reports in the UK's Financial Times, Lagarde believes that the lack of meaningful reform in the banking sector is owing to fierce industry fightback and that the size and complexity of the megabanks mean that, in some ways, they could hold policymakers to ransom.

Voting in the EU elections is generally not regarded as a serious political matter. This is largely because of the lack of power enjoyed by the 751 members of the European Parliament - although each one comes at a cost of à2.5million (about R35.5-million) a year - and also because of the political distance between the real decision-makers in the EU and its 505 million citizens.

So when millions of those voters decide to vote for parties such as the UK's Independence Party or France's National Front, it is lightly dismissed as a "populist backlash". "Populist backlash" appears to be what happens when citizens are frustrated that they only have access to their politicians once every three or four years instead of the daily access assumed by bankers, who are able to hold them to ransom.

Most commentators are attributing this "backlash" to a growing resentment of the impact of the so-called economic reforms that have been imposed in the wake of the crisis created by the banks in 2008. That resentment has been fuelled by the increasing inequality that is described in detail in Piketty's Capital in the Twenty-First Century.

It might be some months before we know whether the debate on Piketty's statistics deals with substance or is tantamount to arguing about the number of angels dancing on a pin.

The bankers and politicians might be a tad frustrated and even confused by all the fuss that's being made about inequality, given that Europeans are not exactly poor. The definition of poverty takes into consideration the ability to afford a week's annual holiday "away from home," to face unexpected financial expenses, not being able to afford a cellphone, washing machine, colour TV, car or to keep a home warm.

Fifty years ago, only the very rich would have been able to afford this standard of living; now you are considered severely deprived if you can't. The poor almost anywhere in the world are probably materially better off today than any time previously. Their seeming lack of gratitude reflects the crucial fact that it is inequality, not poverty, that angers people.

And it is growing inequality, not poverty, that stirs citizens in this powerful and wealthy democracy. It might be that the millions of Europeans who face a considerably grimmer future now than they did before 2008 would be prepared to knuckle down and cope with austerity if they didn't sense the inequality with which that austerity is being dished out.

Brussels and the Irish government gloat over 70000 new jobs recently created in Ireland as a sign that all is, if not well, at least getting better. But the EU results indicate that Irish voters were more concerned about the previous 250000 jobs lost and the impact of spending cuts on hospitals, schools and social services needed to repay the banks' extremely wealthy bondholders.

There is no doubt that the European political establishment is concerned about the results of the election, but they will take comfort from the fact that only 43% of the eligible 388million voters bothered to vote. They and the bankers holding them ransom will also know, as Matt Taibbi noted in Rolling Stone magazine, that in a society governed "by free markets and free elections, organised greed always defeats disorganised democracy".