ZOiS Spotlight 32/2018

Perceptions of income inequality in Central and Eastern Europe

by Alice Lackner 26/09/2018

Central and Eastern European economies underwent a massive shift from socialism to capitalism during the 1990s. This upheaval affected not only previously state-managed companies but also the lives of ordinary citizens. Some profited economically from the shift towards a free market, while others viewed this radical change critically, as it meant not only more freedom but also rising insecurity. People’s assessments may have differed both within a country and depending on the country-specific strategies through which transition was pursued.

Today, such national differences may still be reflected in people’s views of political parties, politicians, and policies.1 For example, the propensity to support populist movements in certain Eastern European countries may arguably be a result of the negative impact the economic transition had on people’s daily lives.

How did the change in the economic system affect people’s attitudes towards income inequality? Did they perceive a change in income inequality, and if so, how was this change connected to their country’s prosperity? For instance, did people start to accept higher inequality levels in return for other benefits offered by a market economy?

There is evidence that people living in socialist economies think differently about income inequality from those in capitalist countries. Not only may different ideology play a role, but so too may people’s general tendency to believe in what they are accustomed to. One of the prime goals in socialist economies was the reduction of income inequality; however, when the Cold War ended, the era of low levels of income inequality also came to an end in Eastern Europe. For example, inequality rose between 1992 and 1999 by around 47 per cent in Slovakia, 38 per cent in Russia, and 23 per cent in Poland. In many long-term capitalist countries, meanwhile, inequality levels increased during this timeframe by no more than 5 per cent, for example in the Great Britain, the United States, and Canada.

Differences between East and West

My recent quantitative analysis of data from 1992 to 1999 from eight post-socialist countries or regions (the Czech Republic, Slovakia, Slovenia, East Germany, Hungary, Poland, Russia, and Bulgaria) and eight long-term capitalist ones (the Great Britain, the United States, West Germany, Sweden, Norway, Australia, Canada, and New Zealand) revealed that the difference in the change of attitudes towards income inequality between the two groups was not as pronounced as might have been expected. While people in post-socialist countries on average perceived a greater increase in income inequality, this was not true for the level of inequality they were willing to accept: no significant difference could be found between Eastern and Western countries in the change of preferred levels of inequality from 1992 to 1999.

Disparities between East and West were due not only to factually different changes in inequality levels but also to diverse rates of economic progress. An increasing inflation rate in Eastern countries was associated with a smaller increase in the amount of perceived inequality, as well as with a higher level of accepted inequality; in Western countries, no such connection between changes in the inflation rate and in inequality attitudes could be found.

In addition, a greater increase in unemployment was connected to a lower increase in preferred levels of inequality in Eastern countries, while in Western countries almost no connection between these two variables could be found. Only in one aspect were transition and capitalist countries similar: with rising GDP levels, people in both country groups perceived and preferred a smaller increase in inequality. So when the economy is performing well, people perceive and prefer less inequality than when it is performing poorly—regardless of other historical factors such as the economic transition in Eastern European countries.

Finally, in both country groups and in both years of the survey, people would have preferred a lower level of inequality than they actually perceived. Therefore, no matter what the political system, the culture, or the economic situation in a country, people wished for a more egalitarian world than the one they were living in.

Wishing for less inequality

To sum up, attitudes towards income inequality depend not only on the actual income distribution in a country but also on other factors such as economic prosperity, stability, and wealth. Furthermore, normative views (as expressed in preferred levels of inequality) were a less flexible phenomenon than perceptions of reality. This may explain certain critical Eastern European attitudes towards capitalism or Western values: as the increase in perceived income inequality did not go hand in hand with a similarly strong increase in the level of preferred inequality, this may have caused painful cognitive dissonance for people in transition countries.

Yet, such critical views may not be set in stone. Attitudes towards income inequality are flexible and can vary across countries and over time. So it can be expected that the more Eastern European countries stabilise and prosper economically, the more people will support the free market and its less convenient consequences such as high income inequality.

For investigating the changes in attitudes towards inequality, data from the International Social Survey Programme were used. This survey asked people worldwide in cross-sectional polls in 1992 and 1999 about their perceptions and preferences regarding income inequality. Macroeconomic country-level data from various sources such as the World Bank, OECD, UNU-WIDER, and state statistical offices were also used. The macroeconomic data were analysed for 1992 and 1999, as well as before and within this timeframe.

[1] This text is based on a master's thesis titled Do macroeconomic changes explain changes in attitudes towards income inequality? A comparison of 16 countries during the 1990s, which was finished by the author in 2018.

Alice Lackner is a research assistant at ZOiS. In 2018, she finished her Master of Arts “Sociology – European Societies” at the Free University Berlin.