The Interplay of Economic, Social and Political Fragmentation

Abstract

We develop a model of the social fragmentation along communitarian vs. individualistic values. The endogenous adoption of social values hinges on whether people choose to derive more utility from comparisons with others (materialistic but universalist values) or derive relatively more utility from membership of a group with its distinguishing characteristics (communitarian but exclusive values). Those more well-off, socioeconomically, gravitate towards individualism while those of lower status gravitate towards communitarianism. Crucially, those at the lower end of the middle classes are predicted to align more and more with communitarian values when the status advantage of those at the top increases, holding their own income constant (i.e. rising socioeconomic inequality). Conversely, those at the higher end of the middle classes are predicted to align more and more with individualist values, polarising society. These shifts also increase size of the political constituency for enacting protectionist policies, which act as a stabilising force against socioeconomic polarisation. The model therefore predicts political realignments from the incidence of income growth and the importance of status-oriented (conspicuous) consumption.