The widening of class-based financial inequalities

'Class and Inequality in the Time of Finance: Subject to Terms and Conditions', by Niamh Mulcahy (Routledge), reviewed by Jing Zhang.

Covid-19 has made personal incomes and household finances more unstable for more people, with those on a low income most affected. Some policymakers blamed the increase in Covid infection rates on people’s failure to comply with social distancing, just as some researchers believe that the root cause of poverty is individuals’ lack of capacity or effort. However, a crucial factor affecting both is often overlooked: the effects of socioeconomic conditions on human behaviour. Working-class children are less likely to attend higher education and more likely to drop out if they do go, which means they are more likely to end up in poverty. Crowded living spaces and greater reliance on often busy public transport made it more difficult for people on a low income to social distance.

In this context, Niamh Mulcahy’s book Class and Inequality in the Time of Finance provides a robust theoretical basis for better understanding these factors and how to reduce the adverse effects of class inequality more effectively. The book focuses on the impact of the liberalisation of capitalist markets and the relaxation of lending restrictions on consumer credit on relatively poor households in the UK. Mulcahy draws on Michel Foucault and Louis Althusser’s ideas of subjectivity and class to show how low-income individuals and families are subject to financial demands, financial planning, and the restructuring of government welfare.

Sigmund Freud described individuals as driven and manipulated by desire, and said that only by relying on external influences – especially from the family – can we each acquire an identity. For Foucault and Althusser, individuals are subject to the construction of strict social rules. In other words, individuals exist in a set of relations that make certain types of behaviours possible while making other types of strategies or actions impossible. Mulcahy adopts this understanding of subjectivity to illustrate how class-based inequalities persist and affect low-income households in the contemporary British financial environment.

For Mulcahy, the immediate audience for this book is likely to be sociologists interested in neoliberalism, economic austerity, consumer credit, and debt issues. However, psychologists reading this book will be confronted with the effects of class and socioeconomic inequality on human cognition and behaviour. Critical social psychology recognises that traditional psychological research on social class has had severe flaws. It is biased in attributing outcomes such as poverty simply to individual factors like intelligence, attitudes, cognition, motivation and behaviour. However, these factors are not the cause. As Mulcahy points out in the book, cutting or freezing benefits leads to reduced incomes in the poorest households, which, combined with the increased cost of living, makes people in those households rely on loans and take on more debt. 

According to Mulcahy, the gap between the elite and the working class widened further during Covid-19. To make things worse, relative position affect perceptions and judgements about taxes and benefits. A 2015 study conducted by Brown-Iannuzzi and colleagues and published in Psychological Science, for example, indicated that simply telling people whether they were doing better or worse in a given task compared to others can significantly affect their judgements. Participants in the better-than-average group agreed more with the rationality of meritocracy, and approved of tax cuts for the rich while reducing benefits for the poor. 

We might think that poverty inspires political behaviour, sparks protest and even leads to change. The truth is that feeling inferior brings shame, causing people to avoid the dissatisfactory systems and thus become socially forgotten and passively affected by class and socioeconomic inequality. Besides, studies indicate that income inequality leads people to believe they need more resources to be satisfied, which motivates them to take more risky behaviours like gambling to seek satisfaction. These poor decisions – not taken through lack of capacity or motivation – often lead to worse outcomes.

As psychologists, we may not be able to change material inequality directly, but we can reduce the mental inequality caused by material inequality through our efforts.

- Reviewed by Dr Jing Zhang, Cognitive Psychologist, Institute of Psychological Health, Hangzhou Dianzi University, China

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