If the stock market's major indexes had recovered at the pace of the unemployment rate, where would we be today? By one rough reckoning, the S&P 500 would read 831, and the Dow Jones Industrial Average, 8,053. That's not how it is in real life. Both the S&P 500 and the Dow set new highs last month. At Tuesday's close, the S&P 500 stood at 1,562 and the Dow at 14,573.
It's been slow going for recovery in labor markets, and just the opposite on Wall Street. This raises a question: If the stock market were recovering as slowly as the labor market, would the policy response have been different? The answer is surely yes. It's hard to imagine Washington tolerating it. Recall the panic that gripped Congress when the stock market tanked in 2008. The result was a rush to action.
In contrast, high unemployment has become strangely acceptable. Bear in mind, the numbers would be even grimmer if we looked at a better indicator, such as the employment-population ratio of people of working age. We don't trouble ourselves with such details. It's odd: Stockholders get one vote per share in company meetings, but only one vote per person in elections to public office. You'd think democracies would respond more sensitively to high unemployment than the state of equity portfolios. Evidently, you'd be wrong.
It isn't that voters aren't complaining; it's that they aren't being heard. Larry Bartels, a political scientist, quantified the deafness in a study of voting patterns in Congress. "In almost every instance," he wrote, "senators appear to be considerably more responsive to the opinions of affluent constituents than to the opinions of middle-class constituents, while the opinions of constituents in the bottom third of the income distribution have no apparent statistical effect on their senators' roll call votes [his emphasis]."
Bartels was writing in 2005. The consequences of Washington's selective hearing are bound to be worse in a period of slow economic recovery and fiscal austerity. If a spending program falls on Capitol Hill, and nobody is there to hear, did anyone make a sound? The poor will feel the blow nonetheless. Sequestration's cuts to unemployment benefits, food stamps and housing assistance happened in virtual silence.
The work of another academic suggests an even more depressing conclusion. "[H]igher levels of income inequality," writes Frederick Solt, a professor at the University of Iowa, "powerfully depress political interest, the frequency of political discussion, and participation in elections among all but the most affluent citizens, providing compelling evidence that greater economic inequality yields greater political inequality." Solt's paper suggests a vicious circle: Inequality makes the poor quieter; Congress turns away from policies that aid the poor; inequality worsens....
Up to a point, you'd expect the labor market to recover more slowly than the stock market -- unemployment is a "lagging" indicator. Yet the difference we see now isn't just an issue of timing. It's a reflection of economic and political inequalities that have made the past four years a recovery for some, but not for most.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
To contact the author on this story:
Evan Soltas at email@example.com