Smog and the Social Contract

Rising incomes are pretty good at buying quiescence. But what causes people to say: “You can’t buy us off this cheaply”?


SEOUL — On a clear day, from atop a tall building in the center of the Korean capital, you can easily see a dozen of the many bridges that stretch across the Han River. On a day when the haze of pollution hangs over the city like a veil — and there are a lot of them — you can barely spot three or four, let alone the mountains that surround this metropolis of roughly 10 million people. In a country that has gotten so rich so quickly, what does it mean that air quality, such a fundamental contributor to wellbeing, has lagged behind?

Although Seoul’s air has improved since the mid-2000s, it’s still often rated as “unhealthy” for the presence of fine particulate matter. Indeed, the air quality here is surprisingly poor for a high-income country. South Korea’s 2014 GDP per capita was roughly $28,100 — similar to Spain’s — but its air quality was much worse, ranking 166 out of 178 countries in the Environmental Protection Index compiled by Yale University and Columbia University. (The other big outliers were Kuwait and China.)

There are some obvious explanations: South Korea has a big manufacturing base, densely populated cities, and a unique geography that traps pollution in natural valleys. The air in Seoul tends to be clearer on weekends and outside of working hours, when there’s less traffic on the streets and some of the nearby factories take a break. But bad air is no joke — both indoor and outdoor pollution contribute to millions of deaths every year worldwide, and a recent Greenpeace report found that the particulate matter generated by coal plants in South Korea kill up to 1,600 people annually. In terms of the health impact of pollution, South Korea looks more like a post-Soviet industrial state than an advanced Western economy.

Beyond the easy answers for the smog in Seoul, a deeper and subtler dynamic may be at work — one that cuts to the core of the economic story being told in South Korea, China, and other economic powerhouses. The citizens of these countries may be trading higher incomes for other aspects of living standards, ranging from human and civil rights to consumer and environmental protection. It’s a special kind of social contract where the establishment says, “We’ll keep raising your incomes, as long as you don’t complain about all this other stuff.”

This contract has held for decades in Singapore, which has some of the highest incomes in the world but constrains civil rights including political activism and freedom of the press. It has also worked, albeit in a different way, in the Gulf states that bring in millions of guest workers under conditions similar to indentured servitude; the workers still arrive every year, implicitly agreeing to swap their basic rights for a paycheck.

Is the paycheck really the only thing that matters? There is evidence that money makes people happier even into the highest strata of income that most workers will ever experience. Research by economists Betsey Stevenson and Justin Wolfers suggests that the relationship between money and happiness endures from subsistence wages to over $100,000 per year in household income. This relationship holds between countries but also within them; in other words, higher incomes make people happier holding the level of rights and protections constant, whatever that level happens to be.

Nevertheless, the money-for-rights social contract has started to fray in some places. In the Chinese territory of Hong Kong in 2014, locals rebelled with peaceful demonstrations against non-democratic rule by mainland China. In November, a small group of migrant laborers in Qatar went on strike, despite the threat of arrest and deportation. And in March in Vietnam — which is largely following China and South Korea’s path to economic development — thousands of factory workers stopped work for days to protest a law restricting their use of social insurance funds.

Why did this happen? Why did people say, “We won’t be bought off anymore”?

In each case, the answer was probably quite different. The students who led protests in Hong Kong hadn’t been in the workforce for most of the territory’s enormous rise in living standards; they might only have seen restrictions on their freedom and opportunities in an economy dominated by big companies with links to the mainland. In Qatar, living and working conditions for migrant workers may have been so bad that going back home was as good as staying for a higher paycheck. And in Vietnam, the new legislation may have felt out of step with the government’s increasing tendency to base its legitimacy on the rule of law.

Yet whether it was the government crossing a line, citizens facing a lack of opportunity, or simple desperation, the cause of a rupture in the social contract might well have been corrected by more money — it just has to go to the right people. Distribution clearly matters; stagnant incomes mean stagnant happiness.

Fortunately for South Korea, distribution is not one its problems. Inequality is low and steady by the standards of rich countries; the rising tide continues to lift most boats. But that’s not the case in the United States, where a version of the same social contract exists and may well be disintegrating.

For decades, workers in the United States have accepted weaker social protections and likely lower wages — thanks to the decline of unionization and other sources of labor’s bargaining power — out of the belief that this situation will somehow lead to much higher wages in the future. Yet this happens only rarely; for people whose parents’ earnings fell into the bottom 80 percent of the income distribution, the chance of ending up in the top 20 percent is only roughly 16 percent.

Unsurprisingly, things are coming to a head. The United States has been gripped by debates about inequality, as well as a raft of embarrassing statistics about hunger and the wellbeing of children and the elderly. The presidential candidates for the 2016 elections will undoubtedly touch on these issues during their campaign. But they must wonder from time to time, as people in South Korea, China, and Vietnam surely do as well, “Will the social contract hold?”

ED JONES/AFP/Getty Images

 Twitter: @altmandaniel

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