Differences in national income equality around the world as measured by the national Gini coefficient. The Gini coefficient is a number between 0 and 1, where 0 corresponds with perfect equality (where everyone has the same income) and 1 corresponds with perfect inequality (where one person has all the income, and everyone else has zero income).

Slums next to high-rise commercial buildings in Cochin, India.

Economic inequality (also known as the gap between rich and poor, income inequality, wealth disparity, or wealth and income differences) comprises disparities in the distribution of economic assets (wealth) and income within or between populations or individuals. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of equity, equality of outcome and equality of opportunity.

Observers differ on both the morality and utility of inequality, whether, and/or how much inequality is necessary in society and how it can be affected. It has been praised as necessary and beneficial^[1], and attacked as a social problem. ^[2]

Economic inequality varies between societies and historical periods; between economic structures or systems (for example, capitalism or socialism), ongoing or past wars, and differences in individuals' abilities to create wealth are all involved in the creation of economic inequality.

There are various numerical indices for measuring economic inequality. A prominent one is the Gini coefficient, but there are also many other methods.

Magnitude of inequality in the modern world[link]

A study entitled "Divided We Stand: Why Inequality Keeps Rising"^{[citation needed]} by the Organisation for Economic Co-operation and Development (OECD) reported its conclusions on the causes, consequences and policy implications for the ongoing intensification of the extremes of wealth and poverty across its 22 member nations (OECD 2011-12-05). ^[3]

• "Income inequality in OECD countries is at its highest level for the past half century. The average income of the richest 10% of the population is about nine times that of the poorest 10% across the OECD, up from seven times 25 years ago."^[4]
• In both Israel and the United States inequality has increased further from already high levels.^[5]
• "Other traditionally more egalitarian countries, such as Germany, Denmark and Sweden, have seen the gap between rich and poor expand from 5 to 1 in the 1980s, to 6 to 1 today." ^[6]

A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000. The three richest people possess more financial assets than the lowest 48 nations combined.^[7] The combined wealth of the "10 million dollar millionaires" grew to nearly $41 trillion in 2008.^[8] In 2001, 46.4% of people in sub-Saharan Africa were living in extreme poverty.^[9] Nearly half of all Indian children are undernourished, however, even among the wealthiest fifth one third of children are malnourished.^[10][11]

Over the two decades prior to the onset of the global financial crisis, real disposable household incomes increased an average of 1.7% a year in its 34 member countries. However, the gap between rich and poor widened in most nations - the OECD journalist resource (2011-05) entitled "Growing Income Inequality in OECD Countries" states that with the exceptions of only France, Japan and Spain, wages of the 10% best-paid workers have risen relative to those of the 10% least-paid workers and the differential between the top and bottom 10% varies greatly from country to country: “While this ratio is much lower in the Nordic countries and in many continental European countries, it rises to around 14 to 1 in Israel, Turkey and the United States, to a high of 27 to 1 in Chile and Mexico.”^[12]

Although a discussion exists about the recent trends in global inequality, the issue is anything but clear, and this holds true for both the overall global inequality trend and for its between-country and within-country components. The existing data and estimates suggest a large increase in international (and more generally inter-macroregional) component between 1820 and 1960. It might have slightly decreased since that time at the expense of increasing inequality within countries.^[13]

Causes of inequality[link]

There are many reasons for economic inequality within societies. "The single most important driver has been greater inequality in wages and salaries(OECD 2011-12-05)." ^[14] These causes are often inter-related. Acknowledged factors that impact economic inequality include:

• greater inequality in wages and salaries
  • highly skilled workers earn more than low-skilled/no skills
• wealth condensation
• labor markets^[15]
  • globalization^[16][17]
  • technological changes^[18]
  • policy reforms^[19]
    • taxes
• education
• computerization/growing technology ^[16]
• racism^{[citation needed]}
• gender
• culture^{[citation needed]}
• development patterns^{[citation needed]}
• personal preference for work, leisure and risk^{[citation needed]}
• innate ability^{[citation needed]}
• nepotism

The labor market[link]

A major cause of economic inequality within modern market economies is the determination of wages by the market. Inequality is caused by the differences in the supply and demand for different types of work. In a purely capitalist mode of production (i.e. where professional and labor organizations cannot limit the number of workers) the workers wages will not be controlled by these organizations, nor by the employer, but rather by the market. Wages work in the same way as prices for any other good. Thus, wages can be considered as a function of market price of skill. And therefore, inequality is driven by this price. Under the law of supply and demand, the price of skill is determined by a race between the demand for the skilled worker and the supply of the skilled worker. We would expect the price to rise when demand exceeds supply, and vice versa. Employers who offer a below market wage will find that their business is chronically understaffed. Their competitors will take advantage of the situation by offering a higher wage to snatch up the best of their labor. For a businessman who has the profit motive as the prime interest, it is a losing proposition to offer below or above market wages to workers.^[20]

A job where there are many workers willing to work a large amount of time (high supply) competing for a job that few require (low demand) will result in a low wage for that job. This is because competition between workers drives down the wage. An example of this would be jobs such as dish-washing or customer service. Competition amongst workers tends to drive down wages due to the expendable nature of the worker in relation to his or her particular job. A job where there are few able or willing workers (low supply), but a large need for the positions (high demand), will result in high wages for that job. This is because competition between employers for employees will drive up the wage. Examples of this would include jobs that require highly developed skills, rare abilities, or a high level of risk. Competition amongst employers tends to drive up wages due to the nature of the job, since there is a relative shortage of workers for the particular position. Professional and labor organizations may limit the supply of workers which results in higher demand and greater incomes for members. Members may also receive higher wages through collective bargaining, political influence, or corruption.^[21]

These supply and demand interactions result in a gradation of wage levels within society that significantly influence economic inequality.

Taxes[link]

Another cause is the rate at which income is taxed coupled with the progressivity of the tax system. A progressive tax is a tax by which the tax rate increases as the taxable base amount increases.^{[22][23][24][25][26]} In a progressive tax system, the level of the top tax rate will have a direct impact on the level of inequality within a society, either increasing it or decreasing it. Additionally, a steeper progressivity results in a more equal distribution of income across the board. The difference between the Gini index for an income distribution before taxation and the Gini index after taxation is an indicator for the effects of such taxation. Overall income tax rates in the United States are below the OECD average.^[27]

Cambridge University Lecturer Gabriel Palma finds that in any political system income inequality depends on the share of the rich. Palma's paper 'Homogeneous middles vs. heterogeneous tails, and the end of the ‘Inverted-U’: the share of the rich is what it's all about'^[28] breaks income inequality in to deciles (meaning each decile contains 10% of the population related to income level so the richest 10% would be in the top decile - 10, the poorest 10% in the bottom decile- 1). Palma then shows that there are two distributional trends taking place in inequality within a country. Palma notes: "One is ‘centrifugal’, and takes place at the two tails of the distribution — leading to an increased diversity across country in the shares appropriated by the top 10 percent and bottom forty percent. The other is ‘centripetal’, and takes place in the middle — leading to a remarkable uniformity across countries in the share of income going to the half of the population located between deciles 5 to 9." Therefore, it is the share of the richest 10% of the population that affects the share of the poorest 40% of the population with the middle to upper-middle groups staying the same across all countries. The reason that some countries are more equal than others, has to do with the amount appropriated by the rich and thus has tax consequences. This leads him to conclude, "it is the share of the rich, stupid".

There is debate between politicians and economists over the role of tax policy in mitigating or exacerbating wealth inequality. Economists such as Paul Krugman, Peter Orszag, and Emmanuel Saez have argued that tax policy in the post World War II era has indeed increased income inequality by enabling the wealthiest American workers far greater access to capital than lower-income Americans. Other economists and politicians, such as Paul Ryan, do not believe tax policy has created a chasm of wealth between the wealthy, middle, and lower class Americans.^[29]

Computerization/Innovative Technology[link]

Another factor that contributed to the already growing inequality in the 20th century was computerization and growth in technology with electricity replacing manpower. With this growing change in technology, the United States experienced increasing demand for skilled workers to use computers and operate the electrical inventions. This resulted in a rightward shift in the Demand for Skilled Labor Supply, and this created an increase in the relative wages of the skilled compared to the wages of the unskilled workers. Such a change in wages added to the inequality that was already present.

Martin Ford, author of The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future,^[30] argues that income inequality is likely to continue increasing as more jobs become susceptible to automation. As robotics and artificial intelligence develop further, even many skilled jobs may be threatened. Technologies such as machine learning^[31] may ultimately allow computers to do many knowledge-based jobs that require significant education. This may result in substantial unemployment at all skill levels, stagnant or falling wages for most workers, and increased concentration of income and wealth as the owners of capital capture an ever larger fraction of the economy. This in turn could lead to depressed consumer spending and economic growth as the bulk of the population lacks sufficient discretionary income to purchase the products and services produced by the economy;^[32] see Surplus value.

Education[link]

This section may need to be updated. Please update this section to reflect recent events or newly available information, and remove this template when finished. Please see the talk page for more information. (January 2012)

One important factor in the creation of inequality is variation in individuals' access to education. Education, especially in an area where there is a high demand for workers, creates high wages for those with this education. As a result, those who are unable to afford an education, or choose not to pursue optional education, generally receive much lower wages. During the mass high school education movement from 1910–1940, there was an increase in skilled workers which led to a decrease in the price of skilled labor. High school education during the period was designed to equip students with necessary skill sets to be able to perform at work. In fact, it differs from the present high school education, which is regarded as a stepping stone to acquire college and advanced degrees. This decrease in wages caused a period of compression and decreased inequality between skilled and unskilled workers.

Economic neoliberalism[link]

John Schmitt and Ben Zipperer (2006) of the CEPR point to economic liberalism and the reduction of business regulation along with the decline of union membership as one of the causes of economic inequality. In an analysis of the effects of intensive Anglo-American neoliberal policies in comparison to continental European neoliberalism, where unions have remained strong, they concluded "The U.S. economic and social model is associated with substantial levels of social exclusion, including high levels of income inequality, high relative and absolute poverty rates, poor and unequal educational outcomes, poor health outcomes, and high rates of crime and incarceration. At the same time, the available evidence provides little support for the view that U.S.-style labor-market flexibility dramatically improves labor-market outcomes. Despite popular prejudices to the contrary, the U.S. economy consistently affords a lower level of economic mobility than all the continental European countries for which data is available."^[33]

Globalization[link]

Trade liberalization may shift economic inequality from a global to a domestic scale.^[34] When rich countries trade with poor countries, the low-skilled workers in the rich countries may see reduced wages as a result of the competition, while low-skilled workers in the poor countries may see increased wages. Trade economist Paul Krugman estimates that trade liberalisation has had a measurable effect on the rising inequality in the United States. He attributes this trend to increased trade with poor countries and the fragmentation of the means of production, resulting in low skilled jobs becoming more tradeable. However, he concedes that the effect of trade on inequality in America is minor when compared to other causes, such as technological innovation, a view shared by other experts. Lawrence Katz estimates that trade has only accounted for 5-15% of rising income inequality. Some economists, such as Robert Lawrence, dispute any such relationship. Lawrence, in particular, argues that technological innovation and automation has meant that low-skilled jobs have been replaced by machine labor in wealthier nations, and that wealthier countries no longer have significant numbers of low-skilled manufacturing workers that could be affected by competition from poor countries.^[34]

Gender[link]

Median weekly earnings of full-time wage and salary workers, by sex, race, and ethnicity, 2009.^[35]

In many countries, there is a gender income gap which favors males in the labor market. For example, the median full-time salary for U.S. women is 77% of that of U.S. men. Several factors other than discrimination may contribute to this gap. On average, women are more likely than men to consider factors other than pay when looking for work, and may be less willing to travel or relocate.^[36][37] Thomas Sowell, in his book Knowledge and Decisions, claims that this difference is due to women not taking jobs due to marriage or pregnancy, but income studies show that that does not explain the entire difference. Men are far more likely to engage in dangerous occupations which often pay more than positions desired and sought by women.^[38] The U.S. Census's report on the wage gap reported "When we account for difference between male and female work patterns as well as other key factors, women earned, on average, 80 percent of what men earned in 2000... Even after accounting for key factors that affect earnings, our model could not explain all of the differences in earnings between men and women."^[39] The income gap in other countries ranges from 53% in Botswana to -40% in Bahrain.^[40] In the United States, among women and men who never marry or have children, women make more than men.^[36] Additionally, women who work part-time make more on average than men who work part-time.^[41]

Gender inequality and discrimination is argued to cause and perpetuate poverty and vulnerability in society as a whole.^[42] Household and intra-household knowledge and resources are key influences in individuals' abilities to take advantage of external livelihood opportunities or respond appropriately to threats.^[42] High education levels and social integration significantly improve the productivity of all members of the household and improve equity throughout society. Gender Equity Indices seek to provide the tools to demonstrate this feature of poverty.^[42]

Development patterns[link]

A Kuznets curve

Simon Kuznets argued that levels of economic inequality are in large part the result of stages of development. Kuznets saw a curve-like relationship between level of income and inequality, now known as Kuznets curve. According to Kuznets, countries with low levels of development have relatively equal distributions of wealth. As a country develops, it acquires more capital, which leads to the owners of this capital having more wealth and income and introducing inequality. Eventually, through various possible redistribution mechanisms such as social welfare programs, more developed countries move back to lower levels of inequality. Kuznets demonstrated this relationship using cross-sectional data. However, more recent testing of this theory with superior panel data has shown it to be very weak. Kuznets' curve predicts that income inequality will eventually decrease given time. As an example, income inequality did fall in the United States during its High School Movement in the 1940s and after. However, recent data shows that the level of income inequality began to rise after the 1970s. This does not necessarily disprove Kuznets' theory. It may be possible that another Kuznets' cycle is occurring, specifically the move from the manufacturing sector to the service sector. This implies that it may be possible for multiple Kuznets' cycles to be in effect at any given time.

Diversity of preferences[link]

Related to cultural issues, diversity of preferences within a society often contributes to economic inequality. When faced with the choice between working harder to earn more money or enjoying more leisure time, equally capable individuals with identical earning potential often choose different strategies. This leads to economic inequality even in societies with perfect equality in abilities and circumstances. The trade-off between work and leisure is particularly important in the supply side of the labor market in labor economics.

Likewise, individuals in a society often have different levels of risk aversion. When equally-able individuals undertake risky activities with the potential of large payoffs, such as starting new businesses, some ventures succeed and some fail. The presence of both successful and unsuccessful ventures in a society results in economic inequality even when all individuals are identical.

Wealth concentration[link]

Wealth concentration is a theoretical process by which, under certain conditions, newly-created wealth concentrates in the possession of already-wealthy individuals or entities. According to this theory, those who already hold wealth have the means to invest in new sources of creating wealth or to otherwise leverage the accumulation of wealth, thus are the beneficiaries of the new wealth. Over time, wealth condensation can significantly contribute to the persistence of inequality within society.

As an example of wealth concentration, truck drivers who own their own trucks often make more money than those who do not, since the owner of a truck can escape the rent charged to drivers by owners (even taking into account maintenance and other costs). Hence, a truck driver who has wealth to begin with can afford to buy his own truck in order to make more money. A truck driver who does not own his own truck makes a lesser wage and is therefore stuck in a Catch-22, unable to buy his own truck to increase his income.

As another example of wealth concentration, savings from the upper-income groups tend to accumulate much faster than saving from the lower-income groups. Upper-income groups can save a significant portion of their incomes. On the other hand, lower-income groups barely make enough to cover their consumptions, hence only capable of saving a fraction of their incomes or even none. Assuming both groups earn the same yield rate on their savings, the return on upper-income groups’ savings are much greater than the lower-income groups’ savings because upper-income groups have a much larger base.

Related to wealth concentration are the effects of intergenerational inequality and housing inequality. The rich tend to provide their offspring with a better education, increasing their chances of achieving a high income. Furthermore, the wealthy often leave their offspring with a hefty inheritance, jump-starting the process of wealth condensation for the next generation.

In his 1985 book Regular Economic Cycles: Money, Inflation, Regulation and Depressions, Ravi Batra argues that a growing concentration of wealth, measured as the 'share of wealth held by the richest 1 percent', is linked to bank failures and depressions. In Table 1 on page 127, there is data for this measure for the years 1810-1969, showing a rise in this measure prior to the 1929 stock market crash.

"...as the concentration of wealth rises, the number of banks with relatively shaky loans also rises. And the higher the concentration, the greater is the number of potential bank failures."

Batra predicted the same would happen if the 1% share rose again.

Inflation[link]

Some Austrian school economists have theorized that high inflation, caused by a country's monetary policy, can contribute to economic inequality.^[43] This theory argues that inflation of the money supply is a coercive measure that favors those who already have an earning capacity, disfavoring those on fixed income or with savings, thus aggravating inequality. They cite examples of correlation between inflation and inequality and note that inflation can be caused independently by "printing money", suggesting causation of inequality by inflation.

Mobility[link]

Entrenched strata of power — whether economic, political, status, ascribed, or meritocratic — can lead to decreased mobility by the assertion of that power, and lead to increased inequality.

Mitigating factors[link]

Many factors constrain economic inequality—they may be divided into two classes: government sponsored, and market driven. The relative merits and effectiveness of each approach is a subject of debate.

Typical government initiatives to reduce economic inequality include:

• Public education: increasing the supply of skilled labor and reducing income inequality due to education differentials.^[44]
• Progressive taxation: the rich are taxed proportionally more than the poor, reducing the amount of income inequality in society.^[45]
• Minimum wage legislation: raising the income of the poorest workers
• Nationalization or subsidization of products: providing goods and services that everyone needs cheaply or freely (such as food, healthcare, and housing), governments can effectively raise the purchasing power of the poorer members of society.

These provisions may lower inequality,^[46] but have sometimes resulted in increased economic inequality (as in the Soviet Union, where the distribution of these government benefits was controlled by a privileged class). Political scientists have argued that public policy controlled by organizations of the wealthy have steadily eroded economic equality in the US since the 1970s.^[47].

Market forces outside of government intervention that can reduce economic inequality include:

• propensity to spend: with rising wealth & income, a person must spend more. In an extreme example, if one person owned everything, they would immediately need to hire people to maintain their properties, thus reducing the wealth concentration.^[48]
• Unionization: although not a market force, per se, labor organizations may reduce inequality by negotiating standard pay rates (though probably increasing unemployment). As union power has declined, and performance related pay has become more widespread, economic inequality has mirrored productive inequality.^[49]

Effects of inequality[link]

Social cohesion[link]

Research has shown an inverse link between income inequality and social cohesion. In more equal societies, people are much more likely to trust each other, measures of social capital suggest greater community involvement, and homicide rates are consistently lower.

Income inequality and the social capital index in 50 U.S. states. Equality is correlated with higher levels of social capital

In a 2002 paper,^[2] Eric Uslaner and Mitchell Brown showed that there is a high correlation between the amount of trust in society and the amount of income equality. They did this by comparing results from the question "would others take advantage of you if they got the chance?" in U.S General Social Survey and others with statistics on income inequality. Similarly, a 2008 article by Andersen and Fetner finds a strong relationship between economic inequality within and across countries and tolerance for 35 democracies.

Robert Putnam, professor of political science at Harvard, established links between social capital and economic inequality. His most important studies (Putnam, Leonardi, and Nanetti 1993, Putnam 2000) established these links in both the United States and in Italy. On the relationship of inequality and involvement in community he says:

Community and equality are mutually reinforcing... Social capital and economic inequality moved in tandem through most of the twentieth century. In terms of the distribution of wealth and income, America in the 1950s and 1960s was more egalitarian than it had been in more than a century... [T]hose same decades were also the high point of social connectedness and civic engagement. Record highs in equality and social capital coincided. Conversely, the last third of the twentieth century was a time of growing inequality and eroding social capital... The timing of the two trends is striking: somewhere around 1965-70 America reversed course and started becoming both less just economically and less well connected socially and politically. (Putnam 2000 pp 359)

In addition to affecting levels of trust and civic engagement, inequality in society has also shown to be highly correlated with crime rates. Most studies looking into the relationship between crime and inequality have concentrated on homicides—since homicides are almost identically defined across all nations and jurisdictions. There have been over fifty studies showing tendencies for violence to be more common in societies where income differences are larger. Research has been conducted comparing developed countries with undeveloped countries, as well as studying areas within countries. Daly et al. 2001.^[50] found that among U.S States and Canadian Provinces there is a tenfold difference in homicide rates related to inequality. They estimated that about half of all variation in homicide rates can be accounted for by differences in the amount of inequality in each province or state. Fajnzylber et al. (2002) found a similar relationship worldwide. Among comments in academic literature on the relationship between homicides and inequality are:

• The most consistent finding in cross-national research on homicides has been that of a positive association between income inequality and homicides. (Neapolitan 1999 pp 260)
• Economic inequality is positively and significantly related to rates of homicide despite an extensive list of conceptually relevant controls. The fact that this relationship is found with the most recent data and using a different measure of economic inequality from previous research, suggests that the finding is very robust. (Lee and Bankston 1999 pp 50)

Research by Richard G. Wilkinson and Kate Pickett has also presented evidence that both social cohesion and health problems are greater in countries or states where economic inequality is highest. For instance, crime rates, mental health problems and teen-age pregnancies are lower in countries like Japan and Finland compared to countries with greater inequality such as the US and UK.^[51]

Population health[link]

Recently, there has been increasing interest from epidemiologists on the subject of economic inequality and its relation to the health of populations. There is a very robust correlation between socioeconomic status and health. This correlation suggests that it is not only the poor who tend to be sick when everyone else is healthy, but that there is a continual gradient, from the top to the bottom of the socio-economic ladder, relating status to health. This phenomenon is often called the "SES Gradient". Lower socioeconomic status has been linked to chronic stress, heart disease, ulcers, type 2 diabetes, rheumatoid arthritis, certain types of cancer, and premature aging.

There is debate regarding the cause of the SES Gradient. A number of researchers (A. Leigh, C. Jencks, A. Clarkwest—see also Russell Sage working papers) see a definite link between economic status and mortality due to the greater economic resources of the wealthy, but they find little correlation due to social status differences.

Other researchers such as Richard G. Wilkinson, J. Lynch, and G.A. Kaplan have found that socioeconomic status strongly affects health even when controlling for economic resources and access to health care.^[2] Most famous for linking social status with health are the Whitehall studies - a series of studies conducted on civil servants in London. The studies found that although all civil servants in England have the same access to health care, there was a strong correlation between social status and health. The studies found that this relationship remained strong even when controlling for health-affecting habits such as exercise, smoking and drinking. Furthermore, it has been noted that no amount of medical attention will help decrease the likelihood of someone getting type 2 diabetes or rheumatoid arthritis - yet both are more common among populations with lower socioeconomic status. Lastly, it has been found that amongst the wealthiest quarter of countries on earth (a set stretching from Luxembourg to Slovakia) there is no relation between a country's wealth and general population health^[52] - suggesting that past a certain level, absolute levels of wealth have little impact on population health, but relative levels within a country do.

The concept of psychosocial stress attempts to explain how psychosocial phenomena such as status and social stratification can lead to the many diseases associated with the SES Gradient. Higher levels of economic inequality tend to intensify social hierarchies and generally degrade the quality of social relations—leading to greater levels of stress and stress-related diseases. Richard Wilkinson found this to be true not only for the poorest members of society, but also for the wealthiest. Economic inequality is bad for everyone's health.

The effects of inequality on health are not limited to human populations. David H. Abbott at the Wisconsin National Primate Research Center found that among many primate species, less egalitarian social structures correlated with higher levels of stress hormones among socially subordinate individuals.

Utility, economic welfare, and distributive efficiency[link]

Economic inequality is thought to reduce distributive efficiency within society. That is to say, inequality reduces the sum total of personal utility because of the decreasing marginal utility of wealth. For example, a house may provide less utility to a single millionaire as a summer home than it would to a homeless family of five. The marginal utility of wealth is lowest among the richest. In other words, an additional dollar spent by a poor person will go to things providing a great deal of utility to that person, such as basic necessities like food, water, and healthcare; meanwhile, an additional dollar spent by a much richer person will most likely go to things providing relatively less utility to that person, such as luxury items. From this standpoint, for any given amount of wealth in society, a society with more equality will have higher aggregate utility. Some studies (Layard 2003;Blanchard and Oswald 2000, 2003) have found evidence for this theory, noting that in societies where inequality is lower, population-wide satisfaction and happiness tend to be higher.

Economist Arthur Cecil Pigou discussed the impact of inequality in The Economics of Welfare. He wrote:

Nevertheless, it is evident that any transference of income from a relatively rich man to a relatively poor man of similar temperament, since it enables more intense wants, to be satisfied at the expense of less intense wants, must increase the aggregate sum of satisfaction. The old "law of diminishing utility" thus leads securely to the proposition: Any cause which increases the absolute share of real income in the hands of the poor, provided that it does not lead to a contraction in the size of the national dividend from any point of view, will, in general, increase economic welfare.

In addition to the argument based on diminishing marginal utility, Pigou makes a second argument that income generally benefits the rich by making them wealthier than other people, whereas the poor benefit in absolute terms. Pigou writes:

Now the part played by comparative, as distinguished from absolute, income is likely to be small for incomes that only suffice to provide the necessaries and primary comforts of life, but to be large with large incomes. In other words, a larger proportion of the satisfaction yielded by the incomes of rich people comes from their relative, rather than from their absolute, amount. This part of it will not be destroyed if the incomes of all rich people are diminished together. The loss of economic welfare suffered by the rich when command over resources is transferred from them to the poor will, therefore, be substantially smaller relatively to the gain of economic welfare to the poor than a consideration of the law of diminishing utility taken by itself suggests. --Arthur Cecil Pigou in The Economics of Welfare

Schmidtz (2006) argues that maximizing the sum of individual utilities does not necessarily imply that the maximum social utility is achieved. For example:

A society that takes Joe Rich’s second unit [of corn] is taking that unit away from someone who . . . has nothing better to do than plant it and giving it to someone who . . . does have something better to do with it. That sounds good, but in the process, the society takes seed corn out of production and diverts it to food, thereby cannibalizing itself

Aspirational consumption and household risks[link]

Firstly, certain costs are difficult to avoid and are shared by everyone, such as the costs of housing, pensions, education and health care.^[53] If the state does not provide these services, then for those on lower incomes, the costs must be borrowed and often those on lower incomes are those who are worse equipped to manage their finances.^[53] Secondly, aspirational consumption describes the process of middle income earners aspiring to achieve the standards of living enjoyed by their wealthier counterparts and one method of achieving this aspiration is by taking on debt.^[53] The result leads to even greater inequality and potential economic instability.^[53]

Economic incentives[link]

Many people accept inequality as a given, and argue that an increased gap between rich and poor increases the incentives for competition and innovation within an economy.

Some modern economic theories, such as the neoclassical school, have suggested that a functioning economy entails a certain level of unemployment. These theories argue that unemployment benefits must be below the wage level to provide an incentive to work, thereby mandating inequality and that additionally, it is impossible to lower unemployment down to zero. Hypotheses such as socialism, dispute this positive role of unemployment.

Many economists believe that one of the main reasons that inequality might induce economic incentive is because material well-being and conspicuous consumption are related to status. In this view, high stratification of income (high inequality) creates high amounts of social stratification, leading to greater competition for status. One of the first writers to note this relationship was Adam Smith who recognized "regard" as one of the major driving forces behind economic activity. From The Theory of Moral Sentiments in 1759:

[W]hat is the end of avarice and ambition, of the pursuit of wealth, of power, and pre-eminence? Is it to supply the necessities of nature? The wages of the meanest labourer can supply them... [W]hy should those who have been educated in the higher ranks of life, regard it as worse than death, to be reduced to live, even without labour, upon the same simple fare with him, to dwell under the same lowly roof, and to be clothed in the same humble attire? From whence, then, arises that emulation which runs through all the different ranks of men, and what are the advantages which we propose by that great purpose of human life which we call bettering our condition? To be observed, to be attended to, to be taken notice of with sympathy, complacency, and approbation, are all the advantages which we can propose to derive from it. It is the vanity, not the ease, or the pleasure, which interests us (Theory of Moral Sentiments, Part I, Section III, Chapter II).

Modern sociologists and economists such as Juliet Schor and Robert H. Frank have studied the extent to which economic activity is fueled by the ability of consumption to represent social status. Schor, in The Overspent American, argues that the increasing inequality during the 1980s and 1990s strongly accounts for increasing aspirations of income, increased consumption, decreased savings, and increased debt. In Luxury Fever Robert H. Frank argues that people's satisfaction with their income is much more strongly affected by how it compares with others than its absolute level.

Inequality and economic growth[link]

The classical theory[link]

Initial theories stated that inequality had a positive effect on economic development. The marginal propensity to save increases with wealth and inequality increases savings, capital accumulation, and economic growth.^[54]

The neoclassical theory[link]

The neoclassical theory ignores the relevance of income distribution for macroeconomic analysis^{[citation needed]}. It interprets the observed relationship between inequality and economic growth as a reflection of the growth process on the distribution of income.

The modern theory[link]

The modern theory suggests that income distribution plays an important role in the determination of aggregate economic activity and economic growth.

The credit market imperfection approach, developed by Galor and Zeira (1993), demonstrates that inequality in the presence of credit market imperfections has a long lasting detrimental effect on human capital formation and economic development.^[55]

The political economy approach, developed by Alesian and Rodrik 1994) and Persson and Tabellini (1994), argues that inequality is harmful for economic development because inequality generates a pressure to adopt redistributive policies that have an adverse effect on investment and economic growth.^[56]

Evidence[link]

A study by Perotti (1996) examines of the channels through which inequality may affect economic growth. He shows that in accordance with the credit market imperfection approach, inequality is associated with lower level of human capital formation (education, experience, apprenticeship) and higher level of fertility, while lower level of human capital is associated with lower growth and lower levels of economic growth. In contrast, his examination of the political economy channel refutes the political economy mechanism. He demonstrates that inequality is associated with lower levels of taxation, while lower levels of taxation, contrary to the theories, are associated with lower level of economic growth^[57]

In their study for the World Institute for Development Economics Research, Giovanni Andrea Cornia and Julius Court published in 2001 reach policy conclusions on optimal distribution of income -- that it should be neither too high nor too low.^[58] They conclude that too much equality (below a Gini coefficient of .25) negatively impacts growth due to "incentive traps, free-riding, labour shirking, [and] high supervision costs". They also claim that high levels of inequality (above a Gini coefficient of .40) negatively impacts growth, due to "incentive traps, erosion of social cohesion, social conflicts, [and] uncertain property rights". They advocate for policies which put equality at the low end of this "efficient" range.

Later studies restricted their analysis to the reduced form relationship between inequality and growth. Forbes (2000) and Barro (2000) examined the effect of inequality on economic growth in a panel of countries.^[59] They find a positive and zero effect, respectively, of an increase in inequality on economic growth. These findings appear to have no bearing on the validity of the theories and are not very informative about the overall effect of inequality. First, these studies examine the effect of inequality beyond its effects through education, fertility, and investment. For instance, Barro (2000) has found that, once controls for education, fertility, and investment are introduced, there is no relationship between inequality and economic growth in the entire sample. His findings, therefore, suggest that inequality does not have a direct effect on growth beyond its effects through education, fertility and investment. In particular, if the control for fertility is dropped in Barro (2000), the effect of inequality on growth is significantly negative, as predicted by the theory. Moreover, these studies examine the effect of inequality in the short run (i.e., the effect of inequality on the average growth rate in the subsequent 5–10 years), while as suggested by the theories, inequality is likely to have a long-run effect (e.g., via the human capital formation).

The United Nations Research Institute for Social Development (UNRISD)’s 2010 report comes to multiple conclusions, some of which concur with and others that challenge the findings of previous research. The report claims that inequality has risen partly due to neoliberal economic policies that have made it difficult to have high rates of economic growth without increasing inequality.^[60] The report acknowledges that there has been a decrease of inequality in the Middle East, North Africa, and sub-Saharan Africa, but the level is still high in these regions overall (above a Gini coefficient of .40).^[60] It also notes that in a study done by the International Labour Organization (ILO), over two-thirds of the 85 countries surveyed experienced a rise in income inequality between 1990 and 2000.^[61]

The report looks to the functional distribution of income of a country as an indicator of inequality as well as the Gini coefficient. The functional distribution of income looks at how income is distributed between wage earners and profit earners: the larger the share of GDP wage earners share, the more equal the situation.^[60] The report notes that a high growth rate contributes to income inequality when a small portion of the population–profit earners–earns the majority of the money. This is common in situations in which a rise economic growth is caused by a specific sector, such as the technological sector. This picture becomes more muddled in developing countries when one takes into account large informal sectors; these workers earn profits rather than wages, so it’s difficult to say if an increase in the share of profit income is helping or harming income inequality.^[60]

The UNRISD report also states, in contradiction to Pagano's research, that growth and equity can be "mutually reinforcing" when supported by "well-thought-out economic and social policies".^[60] It explains that reducing poverty through growth is difficult when inequality is rampant; wealth and land tends to concentrate in small groups, which in turn excludes the poor from economic participation. The poor have less disposal income to spend and as a result effective aggregate demand lowers, limiting the size of the domestic market. This in turn makes it harder for a country to industrialize, thereby hindering its development.^[60]

A 2011 note for the International Monetary Fund by Andrew G. Berg and Jonathan D. Ostry found a strong association between lower levels of inequality in developing countries and sustained periods of economic growth. Developing countries with high inequality have "succeeded in initiating growth at high rates for a few years" but "longer growth spells are robustly associated with more equality in the income distribution." ^[62]

Disputing the claim of a Washington Post editorialist that "Western Europe’s recent history suggests that flat income distribution accompanies flat economic growth," journalist Timothy Noah, points out that redistribution policies in Europe do not seem to be correlated to economic problems of the late oughts. With the exception of Ireland, the countries at risk of default in 2011 (Greece, Italy, Spain, Portugal) were notable for their high Gini-measured levels of income inequality compared to other European countries. As measured by the Gini index, Greece as of 2008 had more income inequality than the economically healthy Germany.^[63]

Perspectives regarding economic inequality[link]

Marxism[link]

Marxism favors an eventual society where distribution is based on an individual's needs rather than his ability to produce, inheritance, or other such factors. In such a system inequality would be minimal.

Marxists believe economic equality is necessary for political freedom—saying that when there is economic inequality then political inequality is assured—in such a society currency would be eliminated, the means of production owned in common and non-labor income eliminated (rent/profit or surplus value). Marxists believe that once the means of production are owned in common and worked for utility rather than profit, that all workers receive a voice in a democratic workplace and the money incentive removed, economic equality will be achieved.

Marxist Leninists believe that, during the transitional period between capitalism and socialism, workers will be paid based on "to each according to labour" as opposed to "to each according to need".

Meritocracy[link]

Meritocracy favors an eventual society where an individual's success is a direct function of his merit, or contribution. Economic inequality would be a natural consequence of the wide range in individual skill, talent and effort in human population and, being the result of natural variation, individual effort and voluntary exchange, would not be considered ethically problematic in its own right.

Liberalism[link]

Most modern Social Liberals believe that, although the Capitalist economic system should be fundamentally preserved, the status quo regarding the 'income gap' must be reformed in order to achieve overall equality. Classical liberals and libertarians generally do not take a stance on wealth inequality, but believe in equality under the law regardless of whether it leads to unequal wealth distribution. Ludwig von Mises (1966) explains:

The liberal champions of equality under the law were fully aware of the fact that men are born unequal and that it is precisely their inequality that generates social cooperation and civilization. Equality under the law was in their opinion not designed to correct the inexorable facts of the universe and to make natural inequality disappear. It was, on the contrary, the device to secure for the whole of mankind the maximum of benefits it can derive from it. Henceforth no man-made institutions should prevent a man from attaining that station in which he can best serve his fellow citizens.

Libertarian Robert Nozick argued that government redistributes wealth by force (usually in the form of taxation), and that the ideal moral society would be one where all individuals are free from force. However, Nozick recognized that some modern economic inequalities were the result of forceful taking of property, and a certain amount of redistribution would be justified to compensate for this force but not because of the inequalities themselves. John Rawls argued in A Theory of Justice that inequalities in the distribution of wealth are only justified when they improve society as a whole, including the poorest members. Rawls does not discuss the full implications of his theory of justice. Some see Rawls's argument as a justification for capitalism since even the poorest members of society theoretically benefit from increased innovations under capitalism; others believe only a strong welfare state can satisfy Rawls's theory of justice.

Classical libertarian Milton Friedman believed that if government action is taken in pursuit of economic equality that political freedom would suffer. In a famous quote, he said:

A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.

Arguments based on social justice[link]

Patrick Diamond and Anthony Giddens (professors of Economics and Sociology, respectively) hold that

pure meritocracy is incoherent because, without redistribution, one generation's successful individuals would become the next generation's embedded caste, hoarding the wealth they had accumulated.

They also state that social justice requires redistribution of high incomes and large concentrations of wealth in a way that spreads it more widely, in order to "recognise the contribution made by all sections of the community to building the nation's wealth." (Patrick Diamond and Anthony Giddens, 27 June 2005, New Statesman)^[64]

Claims that inequality lowers social welfare[link]

In most western democracies, the desire to eliminate or reduce economic inequality is generally associated with the political left. One practical argument in favor of reduction is the idea that economic inequality reduces social cohesion and increases social unrest, thereby weakening the society.

There is evidence that this is true (see inequity aversion) and it is intuitive, at least for small face-to-face groups of people. Alberto Alesina, Rafael Di Tella, and Robert MacCulloch find that inequality negatively affects happiness in Europe but not in the United States.^[65]

It has also been argued that economic inequality invariably translates to political inequality, which further aggravates the problem. Even in cases where an increase in economic inequality makes nobody economically poorer, an increased inequality of resources is disadvantageous, as increased economic inequality can lead to a power shift due to an increased inequality in the ability to participate in democratic processes.^[66]

The capabilities approach[link]

Developed by Amartya Sen, the capabilities approach—sometimes called the human development approach—looks at income inequality and poverty as form of “capability deprivation”.^[67] Unlike neoliberalism, which “defines well-being as utility maximization”, economic growth and income are considered a means to an end rather than the end itself.^[68] Its goal is to “wid[en] people’s choices and the level of their achieved well-being”^[69] through increasing functionings (the things a person values doing), capabilities (the freedom to enjoy functionings) and agency (the ability to pursue valued goals).^[67]

When a person’s capabilities are lowered, they are in some way deprived of earning as much income as they would otherwise. An old, ill man cannot earn as much as a healthy young man; gender roles and customs may prevent a woman from receiving an education or working outside the home. There may be an epidemic that causes widespread panic, or there could be rampant violence in the area that prevents people from going to work for fear of their lives.^[67] As a result, income and economic inequality increases, and it becomes more difficult to reduce the gap without additional aid. To prevent such inequality, this approach believes it’s important to have political freedom, economic facilities, social opportunities, transparency guarantees, and protective security to ensure that people aren’t denied their functionings, capabilities, and agency and can thus work towards a better relevant income.

See also[link]

• Income inequality in the United States
• Inequality-adjusted Human Development Index
• Poverty and Cycle of poverty
• Occupy movement

References[link]

Notes[link]

1. ^ The talk page gives some criticisms of this paper.

General references[link]

Books

• Wiemer Salverda, Brian Nolan, Timothy M. Smeeding (editors, 2009): The Oxford Handbook of Economic Inequality. Oxford University Press. ISBN 978-0-19-923137-9
• von Braun, Joachim; Eugenio Diaz-Bonilla (2007). Globalization of Food and Agriculture and the Poor. Oxford University Press. http://www.ifpri.org/PUBS/otherpubs/globalpoor.asp. 
• Patrick Diamond and Anthony Giddens (2005), The New Egalitarianism, Polity Press
• A.B. Atkinsons and F. Bourguignon (1998), Handbook of Income Distribution, Elsevier
• Peter Lambert (2002). Distribution and Redistribution of Income. Manchester University Press, 3rd edition. ISBN 0-7190-5732-9
• Richard Lynn and Tatu Vanhanen (2002), IQ and the Wealth of Nations, University of Helsinki, Westport, CT: Praeger. ISBN 0-275-97510-X
• Arthur Cecil Pigou. The Economics of Welfare. I.VIII.3. <http://www.econlib.org/library/NPDBooks/Pigou/pgEW8.html>
• Benjamin I. Page and Lawrence R. Jacobs (2009), Class War?: What Americans Really Think about Economic Inequality, University of Chicago Press ISBN 978-0-226-64455-4
• Schmidtz, David (2006). The Elements of Justice. Cambridge University Press. ISBN 0-521-53936-6. 
• Amartya Sen and James Foster (1997). On Economic Inequality (Radcliffe Lectures). Oxford University Press. ISBN 0-19-828193-5.
• Richard G. Wilkinson (2005), The Impact of Inequality - how to make sick societies healthier, The New Press, ISBN 1-56584-925-6 (hc.)
• Richard G. Wilkinson and Kate Pickett (2009), The Spirit Level: Why more equal societies almost always do better, Allen Lane, ISBN-978-1-846-14039-6
• García-Peñalosa, Cecilia; Stephen J. Turnovsky (January 2006). "Growth, Income Inequality, and Fiscal Policy: What are the Relevant Tradeoffs?" (PDF). http://economics.sbs.ohio-state.edu/jmcb/jmcb/05027/05027.pdf. Retrieved 2006-12-14. 
• von Mises, Ludwig (1996). "chapter XXXV: The Welfare Principle versus the Market Principle". Human Action: A Treatise on Economics. Foundation for Economic Education. ISBN 1-57246-021-0. http://www.mises.org/resources/3250. 
• Séverine Deneulin and Lila Shahani (2009). An Introduction to the Human Development and Capability Approach. Sterling, VA: Earthscan.
• Amartya Sen (1999). Development as Freedom. New York: Anchor Books.
• Martin Gilens. Affluence & Influence: Economic Inequality and Political Power in America. Princeton University Press and the Russell Sage Foundation, forthcoming 2012.

Papers

• Kaldor, N., 1955, Alternative Theories of Distribution,” Review of Economic Studies, 23(2), 83-100.
• Galor, O., and J., Zeira, 1993, "Income Distribution and Macroeconomics," Review of Economic Studies, 60(1), 35-52.
• Alesina, Alberto; Di Tella, Rafael; MacCulloch, Robert (2004). "Inequality and Happiness: Are Americans and Europeans Different?". Journal of Public Economics 88 (9–10): 2009–2042. DOI:10.1016/j.jpubeco.2003.07.006. http://www.cepr.org/pubs/dps/DP2877.asp .
• Andersen, Robert and Tina Fetner. 2008. ‘Economic Inequality and Intolerance: Attitudes toward Homosexuality in 35 Democracies,’ American Journal of Political Science, 52 (4):942-958.
• Barro, Robert (2000). "Inequality and Growth in a Panel of Countries". Journal of Economic Growth 7 (1). http://post.economics.harvard.edu/faculty/barro/papers/p_inequalitygrw.pdf .
• Ravallion, Martin (2005). World Bank, 5 May, Policy Research Working Paper no. WPS 3579, A poverty-inequality trade-off?
• Sala-Martin, Xavier (2006)."The World Distribution of Income: Falling Poverty and... Convergence, Period," Quarterly Journal of Economics," 121(2), May, pp. 351–397.
• Uslaner, Eric.; Mitchell, Brown. (2002). "Inequality, Trust, and Civic Engagement". http://www.bsos.umd.edu/gvpt/uslaner/uslanerrussellsage.pdf 
• Fukuda-Parr, Sakiko. 2003. “The Human Development Paradigm: Operationalizing Sen’s Ideas on Capabilities.” Feminist Economics 9(2/3): 301–17.
• Kenworthy, Lane. "Rising Inequality, Public Policy, and America's Poor." Challenge 53.6 (2010): 93-109.
• Sawhill, Isabel. "Do We Face a Permanently Divided Society?" The Economics of Inequality, Poverty, and Discrimination in the 21st Century Ed. Robert S. Rycroft. The University of Mary Washington, forthcoming 2012.
• Smeeding, Timothy and Thompson, Jeffrey. "Recent Trends in Income Inequality." Who Loses in the Downturn? Economic Crisis, Employment and Income Distribution (Research in Labor Economics, 32), Ed. Herwig Immervoll, Andreas Peichl, Konstantinos Tatsiramos. Emerald Group Publishing Limited, 2011. 1-50.
• Smeeding, Timothy and Thompson, Jeffrey. "Inequality in the Great Recession - The Case of the United States." FRDB International Income Inequality Project (July 2011). Working paper.
• Voitchovsky, Sarah. "The effects of inequality on growth: perspectives from the theoretical literature." Working paper.

External links[link]

• Small Inequality Measures Calculus (and On-Line Calculator)
• The UC Atlas of Global Inequality explores some aspects of inequality using online, downloadable maps and graphics.

This paper describes the relationship between poverty and inequality and discusses some of the evidence found. Written by Fernando Bonilla.

• http://www.orbitfiles.com/download/id3633727945.html
• "Gini coefficient as a life table function: Computation from discrete data, decomposition of differences and empirical examples", which explores the correlation between length of life and Gini coefficient.
• Population Health Forum website - group seeking to improve health by addressing inequality.

• Russell Sage Foundation. "Social Inequality" (Web page). Working Papers. Archived from the original on May 29, 2006. http://web.archive.org/web/20060529093606/http://www.russellsage.org/programs/main/inequality/program_view. Retrieved March 2, 2006. 
• Leigh, A. and Jencks, C. (2005). "Inequality and Health: Long-Run Evidence from a Panel of Countries" (PDF). http://www.nber.org/%7Econfer/2005/si2005/he/leigh.pdf. Retrieved November 30, 2005. 
• Clarkwest, A and Jencks, C. (2003). "Inequality and Mortality in Rich Countries: Who Owns the Null Hypothesis?" (PDF). Archived from the original on May 28, 2006. http://web.archive.org/web/20060528042212/http://www.popcenter.umd.edu/events/rsf/papers/Jencks.pdf. Retrieved November 30, 2005. 
• The Inequality Predicament United Nations Report on the World Social Situation 2005
• The Polarization of the U.S. Labor Market, economics. Harvard.edu
• Trends in U.S. Wage Inequality, economics. Harvard.edu
• The Level and Distribution of Economic Well-Being Remarks by Federal Reserve Chairman Ben Bernanke, February 6, 2007.
• Two Americas: One Rich, One Poor? Understanding Income Inequality in the United States
• Has U.S. Income Inequality Really Increased? Accessed 2007-06-11.
• Inequality Worsens across Asia, Wall Street Journal Cheers from Dollars & Sense magazine, Nov/Dec 2007
• Measuring Trends in Leisure: The Allocation of Time Over Five Decades studies the trade-offs between earning income and enjoying leisure
• ExtremeInequality.org Website maintained by the Working Group on Extreme Inequality. Includes statistics, news and opinions on the causes and consequences of economic inequality in the U.S.
• OECD Income distribution - Inequality Statistics
• Data from the Inequality Survey
• Is Life Getting Better : What is Inequality? Pamphlet describing the basic idea of inequality, from OECD's Measuring Progress project.
• Decreasing Inequality Under Latin America's "Social Democratic" and "Populist" Governments: Is the Difference Real? from the Center for Economic and Policy Research
• Wealth and Poverty: Center for Global Studies at the University of Illinois

Jacob Stewart Hacker^[1] (born 1971) is the Director of the Institution for Social and Policy Studies and Stanley B. Resor Professor of Political Science at Yale University and has written works on social policy, health care reform, and economic insecurity in the United States.^[2] His most recent book, Winner-Take-All Politics: How Washington Made the Richer Richer--and Turned Its Back on the Middle Class (Simon & Schuster 2010), written with Paul Pierson of UC Berkeley, argues that since the late 1970s the American middle and working classes have fallen further and further behind economically because policy changes in government favor the rich and super-rich.

Early life[link]

Hacker was born and raised in Eugene, Oregon. He graduated summa cum laude in 1994 from Harvard University with a B.A. in Social Studies, and he received his Ph.D. from Yale in Political Science in 2000.^[2] His first book, The Road to Nowhere: The Genesis of President Clinton's Plan for Health Security, was published in 1996, while he was a graduate student at Yale.

Biography[link]

Hacker is a media contributor and has testified before the United States Congress. He was widely recognized as a contributor to the health care plans for three of the leading Democratic candidates — Barack Obama, Hillary Rodham Clinton, and John Edwards — in the presidential election of 2008.^[3] Hacker's plan, Health Care for America, is outlined in a report for the Economic Policy Institute. It proposes providing health care for uninsured or under-insured Americans by requiring employers to either provide insurance to their workers or enroll them in a new, publicly overseen insurance pool. People in this pool could choose either a public plan modeled after Medicare or from regulated private plans.

He is a Fellow at the New America Foundation, and in 2007 he co-chaired the National Academy of Social Insurance's conference, "For the Common Good," and oversees a Social Science Research Council project on the "privatization of risk."

The Economic Security Index (ESI)[link]

In July 2010 the Economic Security Index was launched. Developed by Hacker and a multi-disciplinary research team with support from the Rockefeller Foundation, the ESI measures the share of Americans who experience at least a 25 percent decline in their income from one year to the next and who lack an adequate financial safety net to replace this lost income.

Personal life[link]

Hacker is married to Oona A. Hathaway, a Professor of Law at Yale University and former Supreme Court clerk to Sandra Day O'Connor.^[4]

Books published[link]

• Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class. with Paul Pierson. Simon & Schuster. 2010. ISBN 978-1-4165-8869-6. 
• Health at Risk: America's Ailing Health System--and How to Heal It. Columbia University Press. 2008. ISBN 978-0-231-14602-9. 
• The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream. Oxford University Press. 2008. ISBN 978-0-19-533534-7. 
• The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement--And How You Can Fight Back. Oxford University Press. 2006. ISBN 978-0-19-517950-7. ^[5]
• Off Center: The Republican Revolution and the Erosion of American Democracy. with Paul Pierson. Yale University Press. 2005. ISBN 978-0-300-10870-5. 
• The Divided Welfare State: The Battle over Public and Private Social Benefits in the United States. Cambridge University Press. 2002. ISBN 978-0-521-01328-4. 
• The Road to Nowhere: The Genesis of President's Clinton's Plan for Health Security. Princeton University Press. 1996. ISBN 978-0-691-04423-1. 

References[link]

External links[link]

• Jacob Hacker on his new book Winner-Take-All Politics - video interview by Democracy Now!

Mitt Romney
70th Governor of Massachusetts
In office January 2, 2003 – January 4, 2007
Lieutenant	Kerry Healey
Preceded by	Jane Swift (Acting)
Succeeded by	Deval Patrick
Personal details
Born	Willard Mitt Romney (1947-03-12) March 12, 1947 (age 65) Detroit, Michigan, U.S.
Political party	Republican
Spouse(s)	Ann Romney (m. 1969) «start: (1969)»"Marriage: Ann Romney to Mitt Romney" Location: (linkback:http://en-wiki.pop.wn.com/index.php/Mitt_Romney)
Children	Taggart (b. 1970) Matthew (b. 1971) Joshua (b. 1975) Benjamin (b. 1978) Craig (b. 1981)
Residence	Belmont, Massachusetts Wolfeboro, New Hampshire San Diego, California
Alma mater	Brigham Young University (BA) Harvard University (MBA, JD)
Religion	The Church of Jesus Christ of Latter-day Saints (Mormon)
Positions	Co-founder, Bain Capital (1984–1999) CEO, Bain & Company (1991–1992) CEO, 2002 Winter Olympics Organizing Committee (1999–2002)
Signature
Website	MittRomney.com

	This article is part of a series about Mitt Romney	Mitt Romney
2012 Presidential campaign 2008 Presidential campaign Governor of Massachusetts, 2003–2007 1994 U.S. Senate election Political positions · Electoral history Public image

Willard Mitt Romney (born March 12, 1947) is an American businessman and the presumptive nominee of the Republican Party for President of the United States in the 2012 election. He was the 70th Governor of Massachusetts (2003–07).

The son of Lenore and George W. Romney (Governor of Michigan, 1963–69), he was raised in Bloomfield Hills, Michigan. In 1966, after one year at Stanford University, he left the United States to spend thirty months in France as a Mormon missionary. In 1969, he married Ann Davies, and the couple had five children together. In 1971, he earned a Bachelor of Arts degree in English from Brigham Young University and, in 1975, a joint Juris Doctor and Master of Business Administration from Harvard University as a Baker Scholar. He entered the management consulting industry, which in 1977, led to a position at Bain & Company. Later serving as Chief Executive Officer, he helped bring the company out of financial crisis. In 1984, he co-founded the spin-off Bain Capital, a private equity investment firm that became highly profitable and one of the largest such firms in the nation. His net worth is estimated at $190–250 million, wealth that has helped fund his political campaigns. Active in The Church of Jesus Christ of Latter-day Saints, he served as Ward Bishop and later Stake President in his area near Boston. He ran as the Republican candidate in the 1994 U.S. Senate election in Massachusetts, losing to long-time incumbent Ted Kennedy. In 1999, he was hired as President and CEO of the Salt Lake Organizing Committee for the 2002 Winter Olympics and Paralympics; and he helped turn the fiscally troubled games into a success.

He was elected Governor of Massachusetts in 2002 but did not seek re-election in 2006. During his term he presided over a series of spending cuts and increases in fees that eliminated a projected $1.5 billion deficit. He also signed into law the Massachusetts health care reform legislation, the first of its kind in the nation, which provided near-universal health insurance access via state-level subsidies and individual mandates.

Romney ran for the Republican nomination in the 2008 U.S. presidential election, winning several primaries and caucuses but losing the nomination to John McCain. In the following years, he gave speeches and raised campaign funds on behalf of his fellow Republicans. In June 2011, he announced that he would seek the 2012 Republican presidential nomination; as of May 2012, he has won enough caucuses and primaries to become the party's presumptive nominee.

Early life and education[link]

Heritage and youth[link]

Willard Mitt Romney^[1] was born at Harper Hospital in Detroit, Michigan,^[2] the youngest child of George W. Romney, a self-made man who by 1948 had become an automobile executive, and Lenore Romney (née LaFount), an aspiring actress turned homemaker.^[3][4][5] His mother was a native of Logan, Utah, and his father was born in a Mormon colony in Chihuahua, Mexico, to American parents.^[6][7] He is of primarily English descent, and also has more distant Scottish and German ancestry.^[8][9][10] He is a fifth-generation member of The Church of Jesus Christ of Latter-day Saints (LDS Church).^[11][12] A great-great-grandfather, Miles Romney, converted to the faith in its first decade, and another great-great-grandfather, Parley P. Pratt, was an early leader in the church during the same time.^[13]

He was preceded in birth by three siblings: Margo Lynn, Jane LaFount, and G. Scott. Mitt followed after a gap of nearly six years. He was named after family friend, hotel magnate J. Willard Marriott, and his father's cousin Milton "Mitt" Romney, a former quarterback for the Chicago Bears.^{[14][nb 1]} In 1953, the family moved from Detroit to the affluent suburb of Bloomfield Hills.^[16] In 1954, his father became the chairmen and CEO of American Motors, a company he helped avoid bankruptcy, and return to profitability.^[16] By the time Mitt was twelve, his father had become a nationally known figure in print and on television,^[17] and Mitt idolized him.^[18]

Mitt Romney began attending Cranbrook School in the seventh grade.

He attended public elementary schools^[15] until the seventh grade, when he began commuting to Cranbrook School in Bloomfield Hills, a traditional private boys' preparatory school where he was one of only a few Mormons and where many students came from backgrounds even more privileged than he.^[19][20] He was not particularly athletic and at first did not excel academically.^[18] During his sophomore year he participated in the 1962 campaign in which his father was elected Governor of Michigan.^{[nb 2]} When his parents moved to the state capitol as part of George Romney taking office, Mitt took up residence at Cranbrook's Stevens Hall.^[19] George Romney was re-elected twice; Mitt worked for him as an intern in the governor's office, and was present at the 1964 Republican National Convention when his moderate father battled conservative party nominee Barry Goldwater over issues of civil rights and ideological extremism.^[18][22] During these years, Romney had a steady set of chores and summer jobs, including working as a security guard at a Chrysler plant.^[23]

At Cranbrook he was a manager for the ice hockey team and a member of the pep squad,^[19] and during his final year joined the cross country running team.^[15] He belonged to eleven school organizations and school clubs, and started the Blue Key Club boosters group.^[19] During his final year at Cranbook, Romney improved academically, but was still not a star pupil.^[18][20] He won an award for those "whose contributions to school life are often not fully recognized through already existing channels".^[20] Romney was involved in many pranks.^{[nb 3]}

In March of his senior year, he began dating Ann Davies, two years his younger, whom he had first met in elementary school; she attended the private Kingswood School, the sister school to Cranbrook.^[27][20] The two informally agreed to marriage around the time of his June 1965 graduation.^[18]

University, France mission, marriage and children: 1965–1975[link]

Romney attended Stanford University for a year,^{[18][nb 4]} where he worked as a night security guard in order to pay for trips home to see Ann.^[28] Although the campus was becoming radicalized with the beginnings of 1960s social and political movements, he kept a well-groomed appearance and participated in pre-Big Game actions designed to protect the Stanford Axe.^[18] In May 1966, he was part of a counter-protest against a group staging a sit-in in the university administration building in opposition to draft status tests.^[18][29]

In July 1966, he left for a thirty-month stay in France as a Mormon missionary,^[18][31] a traditional rite of passage that his father and many other relatives had volunteered for.^{[nb 5]} He arrived in Le Havre with ideas about how to change and promote the French Mission, while facing physical and economic deprivation in their cramped quarters.^[33][13] Rules against drinking, smoking, and dating were strictly enforced.^[13] Most individual Mormon missionaries do not gain many converts,^[35] and Romney was no exception:^[33] he later estimated ten to twenty for his entire mission.^[36] The nominally Catholic but secular, wine-loving French people were especially resistant to a religion that prohibits alcohol.^[18][13][30] He became demoralized, and later recalled it as the only time when "most of what I was trying to do was rejected."^[33] In Nantes, he suffered a bruised jaw while defending two female missionaries who were being bothered by a group of local rugby players.^[13] He continued to work hard; having grown up in Michigan rather than the more insular Utah world, Romney was better able to interact with the French than other missionaries.^[37][13] He was promoted to zone leader in Bordeaux in early 1968, then in the spring of that year became assistant to the mission president in Paris, the highest position for a missionary.^[33][13][38] In the Mission Home in Paris he enjoyed palace-like accommodations.^[38] Romney's support for the U.S. role in the Vietnam War was only reinforced when the French greeted him with hostility over the matter and he debated them in return.^[13][33] He witnessed the May 1968 general strike and student uprisings and was upset by the breakdown in social order.^[39]

In June 1968, an automobile he was driving in southern France was hit by another vehicle, seriously injuring him and killing one of his passengers, the wife of the mission president.^{[nb 6]} Romney, who was not at fault in the accident,^{[nb 6]} became co-acting president of a mission demoralized and disorganized by the May civil disturbances and by the car accident.^[37] He rallied and motivated the others and they met an ambitious goal of 200 baptisms for the year, the most for the mission in a decade.^[37] By the end of his stint in December 1968, he was overseeing the work of 175 fellow members.^[33][40] Romney developed a lifelong affection for France and its people, and speaks French.^[42] The experience in the country instilled in him a belief that life is fragile and that he needed seriousness of purpose.^[18][37][13] It also represented a crucible, after having been an indifferent Mormon growing up: "On a mission, your faith in Jesus Christ either evaporates or it becomes much deeper ... For me it became much deeper."^[33]

While he was away, Ann Davies had converted to the Mormon faith, guided by George Romney, and had begun attending Brigham Young University (BYU).^[18] Mitt was nervous that she had been wooed by others while he was away, and she had indeed started dating popular campus figure Kim S. Cameron and had sent Romney in France a "Dear John letter", greatly upsetting him; he wrote to her to in an attempt to win her back.^[43][15] At their first meeting following Romney's return they reconnected, and decided to get married immediately but agreed to wait three months to appease their parents.^[44] At Ann's request, Romney began attending Brigham Young too, in February 1969.^{[43][nb 4]} The couple were married on March 21, 1969, in a civil ceremony at Ann's family's home in Bloomfield Hills that was presided over by a church elder.^[46][47][48] The following day, the couple flew to Utah for a wedding ceremony at the Salt Lake Temple.^[46][47]

While Mitt attended Harvard, his father George W. Romney (pictured here with Richard M. Nixon) served as United States Secretary of Housing and Urban Development.

Romney had missed much of the tumultuous American anti-Vietnam War movement while away, and was surprised to learn that his father had turned against the effort during his unsuccessful 1968 presidential campaign.^[33] Regarding the military draft, Romney had initially received a student deferment, then, like most Mormon missionaries, a ministerial deferment while in France, and then a student deferment.^[33][49] When those ran out, his high number in the December 1969 draft lottery (300) ensured he would not be selected.^[33][49][50]

At culturally conservative BYU, he remained isolated from much of the upheaval of the era, and did not join in protests against the war, or the LDS Church's policy at the time of denying full membership to blacks.^[24][33][43] He became president of, and an innovative fundraiser for, the all-male Cougar Club booster organization and showed a new-found discipline in his studies.^[33][43] In his senior year, he took leave to work as driver and advance man for his mother Lenore Romney's eventually unsuccessful 1970 campaign for U.S. Senator from Michigan.^[24][46] He earned a Bachelor of Arts in English with highest honors in 1971,^[43] and gave commencement addresses to both the College of Humanities and to the whole of BYU.^{[nb 7]}

The Romneys' first son, Taggart, was born in 1970^[46] while they were undergraduates at Brigham Young^[52] and living in a basement apartment.^[33][43] Ann subsequently gave birth to Matt (1971), Josh (1975), Ben (1978), and Craig (1981).^[46] Her work as a homemaker would enable her husband to pursue his career.^[53]

Romney still wanted to pursue a business path, but his father, by now serving in President Richard Nixon's cabinet as U.S. Secretary of Housing and Urban Development, advised him that a law degree would be valuable to his career.^[54][55] Thus he became one of only fifteen students to enroll at the recently created joint Juris Doctor/Master of Business Administration four-year program coordinated between Harvard Law School and Harvard Business School.^[56] Fellow students considered him guilelessly optimistic, noting his solid work ethic and buttoned-down demeanor and appearance.^[56][57] He readily adapted to the business school's pragmatic, data-driven case study method of teaching, participated in class well, and led a study group whom he pushed to get all A's.^[55] He had a different social experience from most of his classmates, since he lived in a Belmont, Massachusetts, house with Ann and two children.^[46][55] He was non-ideological and did not involve himself in the political or social issues of the day.^[46][55] He graduated in 1975 cum laude from the law school, in the top third of that class, and was named a Baker Scholar for graduating in the top five percent of his business school class.^[51][56]

Business career[link]

Management consulting[link]

Romney was recruited by several firms and chose to remain in Massachusetts to work for Boston Consulting Group (BCG), reasoning that working as a management consultant to a variety of companies would better prepare him for a future position as a chief executive.^{[54][58][nb 8]} He was part of a 1970s wave of top graduates who chose to go into consulting rather than join a major company directly.^[60] His legal and business education proved useful in his job^[54] while he applied BCG principles such as the growth-share matrix.^[61] He was viewed as having a bright future there.^[54][62]

In 1977, he was hired away by Bain & Company, a management consulting firm in Boston that had been formed a few years earlier by Bill Bain and other former BCG employees.^[61][54][63] Bain would later say of the thirty-year-old Romney, "He had the appearance of confidence of a guy who was maybe ten years older."^[64] With Bain & Company, Romney learned what writers and business analysts have dubbed the "Bain way",^[54][63][65] which consisted of immersing the firm in each client's business,^[54][64] and not just issuing recommendations but staying with the company until changes were put into place.^[61][63][66] Romney became a vice president of the firm in 1978,^[15] and worked with clients such as the Monsanto Company, Outboard Marine Corporation, Burlington Industries, and Corning Incorporated.^[58] Within a few years, he was one of Bain & Company's best consultants and was sought after by clients over more senior partners.^[54][67]

Private equity[link]

Romney was restless for a company of his own to run, and in 1983, Bill Bain offered him the chance to head a new venture that would buy into companies, have them benefit from Bain techniques, and then reap higher rewards than consulting fees.^[54][61] He initially refrained from accepting the offer, and Bain re-arranged the terms in a complicated partnership structure so that there was no financial or professional risk to Romney.^[54][64][68] Thus, in 1984, Romney left Bain & Company to co-found the spin-off private equity investment firm, Bain Capital.^[66] In the face of skepticism from potential investors, Bain and Romney spent a year raising the $37 million in funds needed to start the new operation, which had fewer than ten employees.^[58][64][69] As general partner of the new firm, Romney spent little money on costs such as office appearance, and saw weak spots in so many potential deals that by 1986, few had been done.^[54] At first, Bain Capital focused on venture capital opportunities.^[54] Their first big success was a 1986 investment to help start Staples Inc., after founder Thomas G. Stemberg convinced Romney of the market size for office supplies and Romney convinced others; Bain Capital eventually reaped a nearly sevenfold return on its investment, and Romney sat on the Staples board of directors for over a decade.^[54][69][70]

Romney soon switched Bain Capital's focus from startups to the relatively new business of leveraged buyouts: buying existing firms with money mostly borrowed against their assets, partnering with existing management to apply the "Bain way" to their operations (rather than the hostile takeovers practiced in other leverage buyout scenarios), and selling them off in a few years.^[54][64] Existing CEOs were offered large equity stakes in the process, owing to Bain Capital's belief in the emerging agency theory that CEOs should be bound to maximizing shareholder value rather than other goals.^[70] Bain Capital lost most of its money in many of its early leveraged buyouts, but then started finding deals that made large returns.^[54] The firm invested in or acquired Accuride, Brookstone, Domino's Pizza, Sealy Corporation, Sports Authority, and Artisan Entertainment, as well as lesser-known companies in the industrial and medical sectors.^[54][64][71] He ran Bain Capital for fourteen years, during which time the firm's average annual internal rate of return on realized investments was 113 percent.^[58] Much of this profit was earned from a relatively small number of deals; Bain Capital's overall success–to–failure ratio was about even.^{[nb 9]}

Less an entrepreneur than an executive running an investment operation,^[67][72] Romney was skilled at presenting and selling the deals the company made.^[68] The firm initially gave a cut of its profits to Bain & Company, but Romney persuaded Bain to give that up.^[68] Within Bain Capital, Romney spread profits from deals widely within the firm to keep people motivated, often keeping less than ten percent for himself.^[73] Viewed as a fair manager, he received considerable loyalty from the firm's members.^[70] Romney's wary instincts were still in force at times, and he was generally data-driven and averse to risk.^[54][70] He wanted to drop a Bain Capital hedge fund that initially lost money, but other partners prevailed and it eventually gained billions.^[54] He also personally opted out of the Artisan Entertainment deal, not wanting to profit from a studio that produced R-rated films.^[54] Romney was on the board of directors of Damon Corporation, a medical testing company later found guilty of defrauding the government; Bain Capital tripled its investment before selling off the company, and the fraud was discovered by the new owners (Romney was never implicated).^[54] In some cases, Romney had little involvement with a company once acquired.^[69]

Bain Capital's leveraged buyouts sometimes led to layoffs, either soon after acquisition or later after the firm had left.^[61][68][69] How jobs added compared to those lost due to these investments and buyouts is unknown, due to a lack of records and Bain Capital's penchant for privacy on behalf of itself and its investors.^[74][75][76] In any case, maximizing the value of acquired companies and the return to Bain's investors, not job creation, was the firm's fundamental goal, as it was for most private equity operations.^[69][77] Bain Capital's acquisition of Ampad exemplified a deal where it profited handsomely from early payments and management fees, even though the subject company itself ended up going into bankruptcy.^[54][70][77] Dade Behring was another case where Bain Capital received an eightfold return on its investment, but the company itself was saddled with debt and laid off over a thousand employees before Bain Capital exited (the company subsequently went into bankruptcy, with more layoffs, before recovering and prospering).^[74] Bain was among the private equity firms that took the most fees in such cases.^[64][70]

In 1990, Romney was asked to return to Bain & Company, which was facing financial collapse.^[66] He was announced as its new CEO in January 1991^[78][79] but drew only a symbolic salary of one dollar.^[66] He managed an effort to restructure the firm's employee stock-ownership plan, real-estate deals and bank loans, while rallying the firm's thousand employees, imposing a new governing structure that included Bain and the other founding partners giving up control, and increasing fiscal transparency.^[54][58][66] Within about a year, he had led Bain & Company through a turnaround and returned the firm to profitability without further layoffs or partner defections.^[58] He turned Bain & Company over to new leadership and returned to Bain Capital in December 1992.^[54][79][80]

Romney took a leave of absence from Bain Capital in February 1999 to serve as the President and CEO of the 2002 Salt Lake City Olympic Games Organizing Committee.^[54][81] By that time, Bain Capital was on its way to being one of the top private equity firms in the nation,^[68] having increased its number of partners from 5 to 18, with 115 employees overall, and $4 billion under its management.^[64][69] Bain Capital's approach of applying consulting expertise to the companies it invested in became widely copied within the private equity industry.^[25][69] Economist Steven Kaplan would later say, "[Romney] came up with a model that was very successful and very innovative and that now everybody uses."^[70]

Personal wealth[link]

In August 2001, Romney announced that he would not return to Bain Capital.^[81] He transferred his ownership to other partners and negotiated an agreement that allowed him to receive a passive profit share as a retired partner in some Bain Capital entities, including buyout and investment funds.^[73][82] Because the private equity business continued to thrive, this deal brought him millions of dollars in annual income.^[73] As a result of his business career, by 2007, Romney and his wife had a net worth of between $190 and $250 million, most of it held in blind trusts since 2003.^[82] In 2012, it was estimated that he had amassed twice the net worth of the last eight presidents combined,^[83] and would rank among the four richest in American history if elected.^[83][84]

An additional blind trust existed in the name of the Romneys' children and grandchildren that was valued at between $70 and $100 million as of 2007.^[85] The couple's net worth remained in the same range as of 2011, and was still held in blind trusts.^[86] In 2010, Romney and his wife received $21.7 million in income, almost all of it from investments, of which about $3 million went to federal income taxes (a rate of 13.9 percent, based upon the beneficial rate accorded investment income by the U.S. tax code) and almost $3 million to charity, including $1.5 million to the LDS Church.^[87] Romney has always tithed to the church, including stock from Bain Capital holdings.^[13][88][89] In 2010, the Romney family's Tyler Charitable Foundation gave out about $650,000, with some of it going to organizations that fight specific diseases such as cystic fibrosis and multiple sclerosis.^[90]

Local LDS Church leadership[link]

During his years in business, Romney also served in the local lay clergy (consisting of all Mormon men over the age of 12).^[13] Around 1977, he became a counselor to the president of the Boston Stake.^[91] He later served as bishop of the ward (leader of the congregation) at Belmont, Massachusetts, from 1981 to 1986, acting as the ecclesiastical and administrative head of his congregation.^[92][93] As such, in addition to home teaching, he also formulated Sunday services and classes using LDS scriptures to guide the congregation.^[94] He forged bonds with other religious institutions in the area when the Belmont meetinghouse was destroyed by a fire of suspicious origins in 1984; the congregation rotated its meetings to other houses of worship while it was rebuilt.^[88][93]

From 1986 to 1994, he presided over the Boston Stake, which included more than a dozen wards in eastern Massachusetts with about 4,000 church members altogether.^[67][94][95] He organized a team to handle financial and management issues, sought to counter anti-Mormon sentiments, and tried to solve social problems among poor Southeast Asian converts.^[88][93] An unpaid position, his local church leadership often took 30 or more hours a week of his time,^[94] and he became known for his tireless energy in the role.^[67] He generally refrained from overnight business travel owing to his church responsibilities.^[94]

He took a hands-on role in general matters, helping in maintenance efforts in- and outside homes, visiting the sick, and counseling troubled or burdened church members.^[92][93][94] A number of local church members later credited him with turning their lives around or helping them through difficult times.^[88][93][94] Some others were rankled by his leadership style and desired a more consensus-based approach.^[93] Romney tried to balance the conservative dogma insisted upon by the church leadership in Utah with the desire of some Massachusetts members to have a more flexible application of doctrine.^[67] He agreed with some modest requests from the liberal women's group Exponent II for changes in the way the church dealt with women, but clashed with women whom he felt were departing too much from doctrine.^[67] In particular, he counseled women not to have abortions except in the rare cases allowed by LDS doctrine, and also in accordance with doctrine, encouraged prospective mothers who were not in successful marriages to give up children for adoption.^[67] Romney later said that the years spent as an LDS minister gave him direct exposure to people struggling in economically difficult circumstances, and empathy for those going through problematic family situations.^[96]

1994 U.S. senatorial campaign[link]

By 1993, Romney had been thinking about entering politics, partly based upon Ann's urging and partly to follow in his father's footsteps.^[46] He decided to challenge incumbent Democratic U.S. Senator Ted Kennedy, who was seeking re-election for the sixth time. Kennedy was potentially vulnerable that year – in part because of the unpopularity of the Democratic Congress as a whole, and in part because this was Kennedy's first election since the William Kennedy Smith trial in Florida, in which Kennedy had suffered some negative public relations regarding his character.^[97][98][99] Romney changed his affiliation from Independent to Republican in October 1993 and formally announced his candidacy in February 1994.^[46] He took a leave of absence from Bain Capital in November 1993, and stepped down from his church leadership role during 1994, due to the campaign.^[100][94]

Radio personality Janet Jeghelian took an early lead in polls among candidates for the Republican nomination for the Senate seat, but Romney proved the most effective fundraiser.^[101][102] He won 68 percent of the vote at the May 1994 Massachusetts Republican Party convention; businessman John Lakian finished a distant second and Jeghelian was eliminated.^[103] Romney defeated Lakian in the September 1994 primary with over 80 percent of the vote.^[15][104]

In the general election, Kennedy faced the first serious re-election challenger of his career in the young, telegenic, and well-funded Romney.^[97] Romney ran as a fresh face, as a businessperson who stated he had created ten thousand jobs, and as a Washington outsider with a solid family image and moderate stances on social issues.^[97][105] When Kennedy tried to tie Romney's policies to those of Ronald Reagan and George H. W. Bush, Romney responded, "Look, I was an independent during the time of Reagan-Bush. I'm not trying to take us back to Reagan-Bush."^[106] Romney stated: "Ultimately, this is a campaign about change."^[107] After two decades out of public view, his father George re-emerged during the campaign.^[108][109]

Romney's campaign was effective in portraying Kennedy as soft on crime, but had trouble establishing its own positions in a consistent manner.^[110] By mid-September 1994, polls showed the race to be approximately even.^{[97][111][112]} Kennedy responded with a series of attack ads, which focused on Romney's seemingly shifting political views on issues such as abortion and on the treatment of workers at the Ampad plant owned by Romney's Bain Capital.^{[97][113][114]} The latter was effective in blunting Romney's momentum.^[70] Kennedy and Romney held a widely watched late October debate without a clear winner, but by then, Kennedy had pulled ahead in polls and stayed ahead afterward.^[115] Romney spent $3 million of his own money in the race and more than $7 million overall.^{[116][nb 10]} In the November general election, despite a disastrous showing for Democrats overall, Kennedy won the election with 58 percent of the vote to Romney's 41 percent,^[54] the smallest margin in Kennedy's eight re-election campaigns for the Senate.^[119]

2002 Winter Olympics[link]

Romney, president and CEO of the Salt Lake Organizing Committee for the 2002 Winter Olympics, speaking before a curling match

Romney returned to Bain Capital the day after the election, but the loss had a lasting effect; he told his brother, "I never want to run for something again unless I can win."^[46][120] When his father died in 1995, Mitt donated his inheritance to BYU's George W. Romney Institute of Public Management and joined the board and was vice-chair of the Points of Light Foundation (which had incorporated his father's National Volunteer Center).^[45][81] His mother died in 1998. Romney felt restless as the decade neared a close; the goal of simply making more money was losing its appeal to him.^[46][120] He no longer had a church leadership position, although he still taught Sunday School.^[92] During the long and controversial approval and construction process for the $30 million Mormon temple in Belmont, he feared that as a political figure who had opposed Kennedy, he would become a focal point for opposition to the structure.^[93] He thus kept to a limited, behind-the-scenes role in attempts to ease tensions between the church and local residents, but locals nonetheless sometimes referred to it as "Mitt's Temple".^[88][92][93]

Ann Romney was diagnosed with multiple sclerosis in 1998; Mitt described watching her fail a series of neurological tests as the worst day of his life.^[46] After two years of severe difficulties with the disease, she found while living in Park City, Utah (where the couple had built a vacation home) a mixture of mainstream, alternative, and equestrian therapies that gave her a lifestyle mostly without limitations.^[53] When the offer came for him to take over the troubled 2002 Winter Olympics and Paralympics, to be held in Salt Lake City in Utah, she urged him to take it, and eager for a new challenge, he did.^[120][121] On February 11, 1999, Romney was hired as the president and CEO of the Salt Lake Organizing Committee for the Olympic and Paralympic Winter Games of 2002.^[122]

Before Romney came on, the event was running $379 million short of its revenue benchmarks.^[122] Plans were being made to scale back the Games to compensate for the fiscal crisis, and there were fears the Games might be moved away entirely.^[123] The Games had also been damaged by allegations of bribery involving top officials, including prior Salt Lake Olympic Committee president and CEO Frank Joklik. Joklik and committee vice president Dave Johnson were forced to resign.^[124] Romney was chosen by Utah figures looking for someone with expertise in business and law and with connections to the state and the LDS Church.^[125] The appointment faced some initial criticism from non-Mormons, and fears from Mormons, that it represented cronyism or gave the Games too Mormon an image.^[30]

Romney ran the planning for the Games like a business.^[126] He revamped the organization's leadership and policies, reduced budgets, and boosted fundraising, alleviated the concerns corporate sponsors and recruited many new ones.^[120][125] He appealed to Utah's citizenry with a message of optimism that helped restore confidence in the effort.^[120][126] He worked to ensure the safety of the Games following the September 11, 2001 terrorist attacks by coordinating a $300 million security budget.^[121] Overall, he oversaw a $1.32 billion budget, 700 employees, and 26,000 volunteers.^[122] The federal government provided between approximately $400 million^{[125][127][128]} and $600 million^[126][129] of that budget, much of it a result of Romney's having aggressively lobbied Congress and federal agencies.^{[129][130][131]} It would prove to be a record level of federal funding for the staging of a U.S. Olympics, a fact Romney would cite as a selling point during his campaign for the Massachusetts governorship.^[128][130] An additional federal $1.1 billion was spent on indirect support in the form of highway and transit projects.^[132]

Romney emerged as the public face of the Olympic effort, appearing in photographs, news stories and Olympics pins.^[120] Robert H. Garff, the chair of the organizing committee, later said that "It was obvious that he had an agenda larger than just the Olympics,"^[120] and that Romney wanted to use the Olympics to propel himself into the national spotlight and a political career.^[125][133] Garff believed the initial budget shortfall was not as bad as Romney portrayed, given there were still three years to reorganize.^[125] Utah Senator Bob Bennett said that much of the needed federal money was already in place and an analysis by The Boston Globe stated that the committee already had nearly $1 billion in committed revenues.^[125] Olympics critic Steve Pace, who led Utahns for Responsible Public Spending, thought Romney exaggerated the initial fiscal state in order to lay the groundwork for a well-publicized rescue.^[133] Kenneth Bullock, another board member of the organizing committee and also head of the Utah League of Cities and Towns, often clashed with Romney at the time, and later said that Romney deserved some credit for the turnaround but not as much as he claimed:^[120] Bullock said: "He tried very hard to build an image of himself as a savior, the great white hope. He was very good at characterizing and castigating people and putting himself on a pedestal."^[125]

Despite the initial fiscal shortfall, the Games ended up clearing a profit of $100 million.^[134] His performance as Olympics head was rated positively by 87 percent of Utahns.^[135] Romney and his wife contributed $1 million to the Olympics, and he donated to charity the $1.4 million in salary and severance payments he received for his three years as president and CEO.^[136]

Romney was widely praised for his efforts with the 2002 Winter Olympics^[121] including by President George W. Bush,^[25] and it solidified his reputation as a turnaround artist.^[125] Harvard Business School taught a case study based around his actions.^[61] He wrote a book about his experience titled Turnaround: Crisis, Leadership, and the Olympic Games, published in 2004. The role gave Romney experience in dealing with federal, state, and local entities, a public persona he had previously lacked, and the chance to re-launch his political aspirations.^[120] He was mentioned as a possible candidate for statewide office in both Massachusetts and Utah, and also as possibly joining the Bush administration.^{[121][137][138]}

Governor of Massachusetts[link]

2002 gubernatorial campaign[link]

In 2002, Republican Acting Governor Jane Swift's administration was plagued by political missteps and personal scandals.^[135] Many Republicans viewed her as a liability and considered her unable to win a general election.^[139] Prominent party figures – as well as the White House – wanted Romney to run for governor,^[137][140] and the opportunity appealed to him for its national visibility.^[141] One poll taken at that time showed Republicans favoring Romney over Swift by more than 50 percentage points.^[142] On March 19, 2002, Swift announced she would not seek her party's nomination, and hours later Romney declared his candidacy,^[142] for which would face no opposition in the primary.^[143] In June 2002, Massachusetts Democratic Party officials contested Romney's eligibility to run for governor, citing residency issues involving his time in Utah for the Olympics.^[144] That same month, the bipartisan Massachusetts State Ballot Law Commission unanimously ruled that he was an eligible candidate.^[145]

He again ran as a political outsider,^[135] saying he was "not a partisan Republican" but rather a "moderate" with "progressive" views.^[146] Supporters of Romney hailed his business success, especially with the Olympics, as the record of someone who would be able to bring a new era of efficiency into Massachusetts politics.^[143] The campaign was the first to use microtargeting techniques, in which fine-grained groups of voters were reached with narrowly tailored messaging.^[147] Nevertheless, Romney initially had difficulty connecting with voters and fell behind his Democratic opponent, Massachusetts State Treasurer Shannon O'Brien, in polls before rebounding.^[148] During the election he contributed over $6 million – a state record at the time – to the nearly $10 million raised for his campaign overall.^[149][150] Romney was elected governor on November 5, 2002, with 50 percent of the vote to O'Brien's 45 percent.^[151]

Tenure, 2003–2007[link]

Massachusetts State House portrait of Governor Mitt Romney, by artist Richard Whitney

When Romney was sworn in as the 70th governor of Massachusetts on January 2, 2003, ^[152] both houses of the Massachusetts state legislature held large Democratic majorities.^[153] He picked his cabinet and advisors more on managerial abilities than partisan affiliation.^[23] Upon entering office in the middle of a fiscal year, he faced an immediate $650 million shortfall and a projected $3 billion deficit for the next year.^[138] Unexpected revenue of $1.0–1.3 billion from a previously enacted capital gains tax increase and $500 million in unanticipated federal grants decreased the deficit to $1.2–1.5 billion.^[154][155] Through a combination of spending cuts, increased fees, and removal of corporate tax loopholes,^[154] the state ran surpluses of around $600–700 million for the last two full fiscal years Romney was in office, although it began running deficits again after that.^{[nb 11]}

Romney supported raising various fees by more than $300 million, including those for driver's licenses, marriage licenses, and gun licenses.^[138][154] He increased a special gasoline retailer fee by two cents per gallon, generating about $60 million per year in additional revenue.^[138][154] (Opponents said the reliance on fees sometimes imposed a hardship on those who could least afford them.)^[154] Romney also closed tax loopholes that brought in another $181 million from businesses over the next two years and over $300 million for his term.^[138][160] Romney did so in the face of conservative and corporate critics that considered them tax increases.^[160]

The state legislature, with Romney's support, also cut spending by $1.6 billion, including $700 million in reductions in state aid to cities and towns.^[161] The cuts also included a $140 million reduction in state funding for higher education, which led state-run colleges and universities to increase tuition by 63 percent over four years.^[138][154] Romney sought additional cuts in his last year as governor by vetoing nearly 250 items in the state budget, but all were overridden by the heavily Democratic legislature.^[162]

The cuts in state spending put added pressure on localities to reduce services or raise property taxes, and the share of town and city revenues coming from property taxes rose from 49 to 53 percent.^[138][154] The combined state and local tax burden in Massachusetts increased during Romney's governorship but remained below the national average.^[138]

Romney sought to bring near-universal health insurance coverage to the state. This came after Staples founder Stemberg told him at the start of his term that doing so would be the best way he could help people,^{[163][164][165]} and after the federal government, owing to the rules of Medicaid funding, threatened to cut $385 million in those payments to Massachusetts if the state did not reduce the number of uninsured recipients of health care services.^{[23][163][166]} Although he had not campaigned on the idea of universal health insurance,^[165] Romney decided that because people without insurance still received expensive health care, the money spent by the state for such care could be better used to subsidize insurance for the poor.^[164][165]

After positing that any measure adopted not raise taxes and not resemble the previous decade's failed "Hillarycare" proposal, Romney formed a team of consultants from diverse political backgrounds.^{[23][163][166]} Beginning in late 2004, they came up with a set of proposals more ambitious than an incremental one from the Massachusetts Senate and more acceptable to him than one from the Massachusetts House of Representatives that incorporated a new payroll tax.^{[23][163][166]} In particular, Romney pushed for incorporating an individual mandate at the state level.^[21] Past rival Ted Kennedy, who had made universal heath coverage his life's work and who, over time, had developed a warm relationship with Romney,^[167] gave the plan a positive reception, which encouraged Democratic legislators to cooperate.^[163][166] The effort eventually gained the support of all major stakeholders within the state, and Romney helped break a logjam between rival Democratic leaders in the legislature.^[163][166]

On April 12, 2006, Romney signed the resulting Massachusetts health reform law, commonly called "Romneycare", which requires nearly all Massachusetts residents to buy health insurance coverage or face escalating tax penalties, such as the loss of their personal income tax exemption.^[168] The bill also establishes means-tested state subsidies for people who do not have adequate employer insurance and whose income is below a threshold, with funds that were previously used to compensate for the health costs of the uninsured.^{[169][170][171]} He vetoed eight sections of the health care legislation, including a controversial $295-per-employee assessment on businesses that do not offer health insurance and provisions guaranteeing dental benefits to Medicaid recipients.^[168][172] The legislature overrode all eight vetoes, but the governor's office said the differences were not essential.^[172] The law was the first of its kind in the nation and became the signature achievement of Romney's term in office.^{[166][nb 12]}

At the beginning of his governorship, Romney opposed same-sex marriage and civil unions, but advocated tolerance and supported some domestic partnership benefits.^{[166][174][175]} Faced with the dilemma of choosing between same-sex marriage or civil unions after the November 2003 Massachusetts Supreme Judicial Court decision legalizing same-sex marriages (Goodridge v. Department of Public Health), Romney reluctantly backed a state constitutional amendment in February 2004 that would have banned same-sex marriage but still allow civil unions, viewing it as the only feasible way to ban same-sex marriage in Massachusetts.^[176] In May 2004, Romney instructed town clerks to begin issuing marriage licenses to same-sex couples, but citing a 1913 law that barred out-of-state residents from getting married in Massachusetts if their union would be illegal in their home state, no marriage licenses were to be issued to out-of-state same-sex couples not planning to move to Massachusetts.^[174][177] In June 2005, Romney abandoned his support for the compromise amendment, stating that the amendment confused voters who oppose both same-sex marriage and civil unions.^[174] Instead, Romney endorsed a petition effort led by the Coalition for Marriage & Family that would have banned same-sex marriage and made no provisions for civil unions.^[174] In 2004 and 2006, he urged the U.S. Senate to vote in favor of the Federal Marriage Amendment.^[178][179]

In 2005, Romney revealed a change of view regarding abortion, moving from the "unequivocal" pro-choice position expressed during his 2002 campaign to a pro-life one in opposition to Roe v. Wade.^[166] He subsequently vetoed a bill on pro-life grounds that would expand access to emergency contraception in hospitals and pharmacies^[180] (the veto was overridden by the legislature).^[181]

Romney generally used the bully pulpit approach towards promoting his agenda, staging well-organized media events to appeal directly to the public rather than pushing his proposals in behind-doors sessions with the state legislature.^[166] Romney dealt with a public crisis of confidence in Boston's Big Dig project – that followed a fatal ceiling collapse in 2006 – by wresting control of the project from the Massachusetts Turnpike Authority.^[166]

During 2004, Romney spent considerable effort trying to bolster the state Republican Party, but it failed to gain any seats in the state legislative elections that year.^[138][182] He was given a prime-time appearance at the 2004 Republican National Convention, and was already being discussed as a potential 2008 presidential candidate.^[183] Midway through his term, Romney decided that he wanted to stage a full-time run for president,^[184] and on December 14, 2005, announced that he would not seek re-election for a second term.^[185][186] As chair of the Republican Governors Association, Romney traveled around the country, meeting prominent Republicans and building a national political network;^[184] he spent part or all of more than 200 days out of state during 2006, preparing for his run.^[187]

He had a 61 percent job approval rating in public polls after his initial fiscal actions in 2003, but it began to sink after that.^[188] His frequent out-of-state travel contributed to a decline in his approval rating towards the end of his term;^[189][188] at 34 percent in November 2006, his rating level ranked 48th of the 50 U.S. governors.^[190] Dissatisfaction with Romney's administration and the weak condition of the Republican state party were among several factors that led to Democrat Deval Patrick's lopsided win over Republican Kerry Healey, Romney's Lieutenant Governor, in the 2006 Massachusetts gubernatorial election.^[191][189]

Romney filed to register a presidential campaign committee with the Federal Election Commission on his penultimate day in office as governor.^[192] His term ended January 4, 2007.

2008 presidential campaign[link]

Holding an "Ask Mitt Anything" session in Ames, Iowa, in May 2007

Romneys on Mackinac Island at the 2007 Republican Convention

At a rally in Battle Creek, Michigan, in mid-January 2008

Romney formally announced his candidacy for the 2008 Republican nomination for president on February 13, 2007, at the Henry Ford Museum in Dearborn, Michigan.^[193] In his speech, he frequently invoked his father and his own family and stressed experiences in the private, public, and voluntary sectors that had brought him to this point.^[193][194] He said, "Throughout my life, I have pursued innovation and transformation,"^[194] and casting himself as a political outsider, said, "I do not believe Washington can be transformed from within by a lifelong politician."^[195]

Romney's campaign initially emphasized his résumé of a highly profitable career in the business world and his stewardship of the Olympics.^{[184][196][nb 13]} He also had political experience as governor, together with a political pedigree courtesy of his father, and had a reputation for a strong work ethic and energy level.^{[184][196][65]} Ann Romney, who had become an outspoken advocate for those with multiple sclerosis,^[199] was in remission and would be an active participant in his campaign,^[200] helping to soften his political personality.^[65] Moreover, a number of commentators noted that with his square jaw and ample hair graying at the temples, the 6-foot-2-inch (1.88 m)^[201] Romney – referred to as handsome in scores of media stories^[202] – physically matched one of the common images of what some believed a president should look like.^{[66][203][204][205]} Romney's liabilities included having run for senator and served as governor in one of the nation's most liberal states, having taken some positions there that were opposed by the party's conservative base, and subsequently shifting those positions.^{[184][196][200]} His religion was also viewed with suspicion and skepticism by some in the Evangelical portion of the party.^[206]

Romney assembled for his campaign a veteran group of Republican staffers, consultants, and pollsters.^[196][207] He was little-known nationally, though, and stayed around the 10 percent range in Republican preference polls for the first half of 2007.^[184] He proved the most effective fundraiser of any of the Republican candidates;^[208] his Olympics ties helped him with fundraising from Utahns and from sponsors and trustees of the games.^[136] He also partly financed his campaign with his own personal fortune.^[196] These resources, combined with the mid-year near-collapse of nominal front-runner John McCain's campaign, made Romney a threat to win the nomination and the focus of the other candidates' attacks.^[209] Romney's staff suffered from internal strife and the candidate himself was indecisive at times, constantly asking for more data before making a decision.^[196][210]

During all of his political campaigns, Romney has generally avoided speaking publicly about specific Mormon doctrines, referring to the U.S. Constitution prohibition of religious tests for public office.^[211] But persistent questions about the role of religion in Romney's life in this race, as well as Southern Baptist minister and former Governor of Arkansas Mike Huckabee's rise in the polls based upon an explicitly Christian-themed campaign, led to the December 6, 2007, "Faith in America" speech.^[212] He said should neither be elected nor rejected based upon his religion,^[213] and echoed Senator John F. Kennedy's famous speech during his 1960 presidential campaign in saying, "I will put no doctrine of any church above the plain duties of the office and the sovereign authority of the law."^[212] Instead of discussing the specific tenets of his faith, he said that he would be informed by it and that, "Freedom requires religion just as religion requires freedom. Freedom and religion endure together, or perish alone."^[212][213] Academics would later study the role religion had played in the campaign.^{[nb 14]}

In the January 3, 2008, Iowa Republican caucuses, the first contest of the primary season, Romney received 25 percent of the vote and placed second to the vastly outspent Huckabee, who received 34 percent.^[216][217] Of the 60 percent of caucus-goers who were evangelical Christians, Huckabee was supported by about half of them while Romney by only a fifth.^[216] Two days later, Romney won the lightly contested Wyoming Republican caucuses.^[218]

At a Saint Anselm College debate, Huckabee and McCain pounded away at Romney's image as a flip flopper.^[216] Indeed, this label would stick to Romney through the campaign^[196] (but was one that Romney rejected as unfair and inaccurate, except for his acknowledged change of mind on abortion).^[65][219] Romney seemed to approach the campaign as a management consulting exercise, and showed a lack of personal warmth and political feel; journalist Evan Thomas wrote that Romney "came off as a phony, even when he was perfectly sincere."^[65][220] Romney's staff would conclude that competing as a candidate of social conservatism and ideological purity rather than of pragmatic competence had been a mistake.^[65]

Romney finished in second place by 5 percentage points to the resurgent McCain in the next-door-to-his-home-state New Hampshire primary on January 8.^[216] Romney rebounded to win the January 15 Michigan primary over McCain by a solid margin, capitalizing on his childhood ties to the state and his vow to bring back lost automotive industry jobs which was seen by several commentators as unrealistic.^{[nb 15]} On January 19, Romney won the lightly contested Nevada caucuses, but placed fourth in the intense South Carolina primary, where he had effectively ceded the contest to his rivals.^[225] McCain gained further momentum with his win in South Carolina, leading to a showdown between him and Romney in the Florida primary.^[226][227]

For ten days, Romney campaigned intensively on economic issues and the burgeoning subprime mortgage crisis, while McCain repeatedly, and inaccurately, asserted that Romney favored a premature withdrawal of U.S. forces from Iraq.^{[nb 16]} McCain won key last-minute endorsements from Florida Senator Mel Martinez and Governor Charlie Crist, which helped push him to a 5 percentage point victory on January 29.^[226][227] Although many Republican officials were now lining up behind McCain,^[227] Romney persisted through the nationwide Super Tuesday contests on February 5. There he won primaries or caucuses in several states, including Massachusetts, Alaska, Minnesota, Colorado, and Utah, but McCain won more, including large states such as California and New York.^[229] Trailing McCain in delegates by a more than two-to-one margin, Romney announced the end of his campaign on February 7 during a speech before the Conservative Political Action Conference in Washington.^[229]

Altogether, Romney had won 11 primaries and caucuses,^[230] received about 4.7 million total votes,^[231] and garnered about 280 delegates.^[232] He spent $110 million during the campaign, including $45 million of his own money.^[233]

Romney endorsed McCain for president a week later.^[232] He became one of the McCain campaign's most visible surrogates, appearing on behalf of the GOP nominee at fundraisers, state Republican party conventions, and on cable news programs.^[234] His efforts earned McCain's respect and the two developed a warmer relationship; he was on the nominee's short list for the vice presidential running mate slot, where his economic expertise would have balanced one of McCain's weaknesses.^[235] McCain, behind in the polls, opted instead for a high-risk, high-reward "game changer", and selected Alaska Governor Sarah Palin.^[236] McCain lost the election to Democratic Senator Barack Obama.

Activity between presidential campaigns[link]

Both Mitt Romney and his wife Ann (pictured) spoke at the Conservative Political Action Conference in 2011

Following the election, Romney paved the way for a possible 2012 presidential campaign by using his Free and Strong America political action committee (PAC) to raise money for other Republican candidates and to pay his existing political staff's salaries and consulting fees.^[237][238] An informal network of former staff and supporters around the nation were eager for him to run again.^[239] He continued to give speeches and raise funds for Republicans,^[240] but turned down many potential media appearances, fearing overexposure.^[219] He also spoke before business, educational, and motivational groups.^[241] He served on the board of directors of Marriott International from 2009 to 2011 (having earlier served on it from 1993 to 2002).^[242]

In 2009, the Romneys sold their primary residence in Belmont and their ski chalet in Utah, leaving them an estate along Lake Winnipesaukee in Wolfeboro, New Hampshire, and an oceanfront home in the La Jolla district of San Diego, California, which they had bought the year before.^{[219][243][244]} The San Diego home was beneficial in location and climate for Ann Romney's multiple sclerosis therapies and for recovering from her late 2008 diagnosis and lumpectomy for mammary ductal carcinoma in situ.^{[243][245][246]} Both it and the New Hampshire location were near some of their grandchildren,^[243] who by 2011 numbered sixteen.^[247] Romney maintained his voting registration in Massachusetts, however, and bought a smaller condominium in Belmont during 2010.^{[245][248][nb 17]} In February 2010, Romney had a minor altercation with LMFAO member Skyler Gordy, known as Sky Blu, on an airplane flight.^{[nb 18]}

Romney's book, No Apology: The Case for American Greatness, was released in March 2010; an 18-state book tour was undertaken.^[255] The book, which debuted atop The New York Times Best Seller list,^[256] avoided anecdotes about his personal or political life in favor of a presentation of his economic and geopolitical views.^[257][258] Earnings from the book were donated to charity.^[86]

In nationwide opinion polling for the 2012 Republican Presidential primaries, Romney led or placed in the top three with Palin and Huckabee. A January 2010 National Journal survey of political insiders found that a majority of Republican insiders, and a plurality of Democratic insiders, predicted Romney would be the party's 2012 nominee.^[259] Romney campaigned heavily for Republican candidates in the 2010 midterm elections,^[260] raising more money than the other prospective 2012 Republican presidential candidates.^[261] Beginning in early 2011, Romney presented a more relaxed visual image, including rarely wearing a necktie.^[262][263]

2012 presidential campaign[link]

Romney making an appearance in Livonia, Michigan, days after his June 2011 formal campaign announcement

On April 11, 2011, Romney announced in a video taped outdoors at the University of New Hampshire that he had formed an exploratory committee for a run for the Republican presidential nomination.^[264][265] A Quinnipiac University political science professor stated, "We all knew that he was going to run. He's really been running for president ever since the day after the 2008 election."^[265]

Romney stood to gain from the Republican electorate's tendency to nominate candidates who had previously run for president and appeared to be "next in line" to be chosen.^{[239][266][267]} The early stages of the race found him as the apparent front-runner in a weak field, especially in terms of fundraising prowess and organization.^{[268][269][270]} Perhaps his greatest hurdle in gaining the Republican nomination was party opposition to the Massachusetts health care reform law that he had shepherded five years earlier.^{[263][265][267]} As many potential Republican candidates decided not to run (including Mike Pence, John Thune, Haley Barbour, Mike Huckabee, and Mitch Daniels), Republican party figures searched for plausible alternatives to Romney.^[268][270]

On June 2, 2011, he formally announced the start of his campaign. Speaking on a farm in Stratham, New Hampshire, he focused on the economy and criticized President Obama's handling of it.^[271] He said, "In the campaign to come, the American ideals of economic freedom and opportunity need a clear and unapologetic defense, and I intend to make it – because I have lived it."^[267]

Giving an interview at a supporters rally in Paradise Valley, Arizona

Romney raised $56 million during 2011, far more than any of his Republican opponents,^[272] and refrained from spending any of his own money on his campaign.^[273] He initially ran a low-key, low-profile campaign.^[274] Michele Bachmann staged a brief surge in polls, then by September 2011, Romney's chief rival in polls was a recent entrant, Texas Governor Rick Perry.^[275] Perry and Romney exchanged sharp criticisms of each other during a series of debates among the Republican candidates.^[276] The October 2011 decisions of Chris Christie and Sarah Palin not to run finally settled the field.^[277][278] Perry faded after poor performances in those debates, while Herman Cain's long-shot bid gained popularity until allegations of sexual misconduct derailed him.^[279][280]

Romney continued to seek support from a wary Republican electorate; at this point in the race, his poll numbers were relatively flat and at a historically low level for a Republican frontrunner.^{[277][281][282]} After the charges of flip-flopping that marked his 2008 campaign began to accumulate again, Romney declared in November 2011 that "I've been as consistent as human beings can be."^{[283][284][285]} In the final month before voting began, Newt Gingrich enjoyed a major surge, taking a solid lead in national polls and in most of the early caucus and primary states,^[286] before settling back into parity or worse with Romney following a barrage of negative ads from Restore Our Future, a pro-Romney Super PAC.^[287]

In the initial 2012 Iowa caucuses of January 3, Romney was announced as the victor on election night with 25 percent of the vote, edging out a late-gaining Rick Santorum by eight votes (with an also-strong Ron Paul finishing third),^[288] but sixteen days later, Santorum was certified as the winner by a 34-vote margin.^[289] Romney decidedly won the New Hampshire primary the following week with a total of 39 percent; Paul finished second and Jon Huntsman third.^[290]

In the run-up to the South Carolina Republican primary, Gingrich launched attack ads criticizing Romney for causing job losses while at Bain Capital, Perry referred to Romney's role there as "vulture capitalism", and Sarah Palin questioned whether Romney could prove his claim that 100,000 jobs were created during that time.^[291][292] Many conservatives rallied in defense of Romney, rejecting what they inferred as criticism of free-market capitalism.^[291] However, during two debates, Romney fumbled questions about releasing his income tax returns, while Gingrich gained support with audience-rousing attacks on the debate moderators.^[293][294] Romney's double-digit lead in state polls evaporated and he lost to Gingrich by 13 points in the January 21 primary.^[293] Combined with the delayed loss in Iowa, Romney's admitted bad week represented a lost chance to end the race early, and he decided to release his tax returns quickly.^[293][295] The race turned to the Florida Republican primary, where in debates, appearances, and advertisements, Romney unleashed a concerted, unrelenting attack on Gingrich's past record and associations and current electability.^[296][297] Romney enjoyed a big spending advantage from both his campaign and his aligned Super PAC, and after a record-breaking rate of negative ads from both sides, Romney won Florida on January 31, gaining 46 percent of the vote to Gingrich's 32 percent.^[298]

At local voting station on Super Tuesday 2012

There were several caucuses and primaries during February, and Santorum won three in a single night early in the month, propelling him into the lead in national and some state polls and positioning him as Romney's main rival.^[299] Romney won the other five, including a closely fought contest in his home state of Michigan at the end of the month.^[300][301] In the Super Tuesday primaries and caucuses of March 6, Romney won six of ten contests, including a narrow victory in Ohio over a greatly outspent Santorum, and although he failed to win decisively enough to end the race, still held a more than two-to-one edge over Santorum in delegates.^[302] Romney maintained his delegate margin through subsequent contests,^[303] and Santorum stopped his campaign on April 10.^[304] Following a sweep of five more contests on April 24, the Republican National Committee put its resources behind Romney as the party's presumptive nominee.^[305] Romney clinched a majority of the delegates with a win in the Texas primary on May 29.

Political positions and public perceptions[link]

For much of his business career, Romney did not take public political positions.^[306][307] While he had kept abreast of national politics during college,^[33] and the circumstances of his father's presidential campaign loss would irk him for decades,^[24] his early philosophical influences were often non-political, as during his missionary days when he read Napoleon Hill's pioneering self-help tome Think and Grow Rich, and encouraged his colleagues to do the same.^[13][61] Until his 1994 U.S. Senate campaign, he was registered as an Independent.^[46] In the 1992 Democratic Party presidential primaries, he voted for the Democratic former senator from Massachusetts, Paul Tsongas.^[306][308]

In the 1994 Senate race, Romney aligned himself with Republican Massachusetts Governor William Weld, saying "I think Bill Weld's fiscal conservatism, his focus on creating jobs and employment and his efforts to fight discrimination and assure civil rights for all is a model that I identify with and aspire to."^[309] As a gubernatorial candidate in 2002, and then initially as Governor of Massachusetts, he generally operated in the mold established by Weld and followed by Weld's two other Republican successors, Paul Cellucci and Jane Swift: restrain spending and taxing, be tolerant or permissive on social issues, protect the environment, be tough on crime, try to appear post-partisan.^[308][310]

Later during his time as governor, Romney's position on abortion changed in conjunction with a similar change of position on stem cell research.^{[166][nb 19]} Also during that time, his position or choice of emphasis on some aspects of gay rights,^{[nb 20]} and some aspects of abstinence-only sex education,^{[nb 21]} moved in a more conservative direction. The change in 2005 on abortion was the result of what he described as an epiphany experienced while investigating stem cell research issues.^[166] He later said, "Changing my position was in line with an ongoing struggle that anyone has that is opposed to abortion personally, vehemently opposed to it, and yet says, 'Well, I'll let other people make that decision.' And you say to yourself, but if you believe that you're taking innocent life, it's hard to justify letting other people make that decision."^[166]

Romney speaking in October 2007 to the Values Voter Summit in Washington, D.C.

This increased alignment with traditional conservatives on social issues coincided with Romney's becoming a candidate for the 2008 Republican nomination for President.^[317][318] He joined the National Rifle Association and portrayed himself as a lifelong hunter.^{[nb 22]} He downplayed the Massachusetts health care law,^{[21][308][318]} became a convert on signing an anti-tax pledge,^[61][21] and backed away from further closings of corporate tax loopholes.^[160] There was a display of aggressiveness on foreign policy matters, such as wanting to double the number of detainees at the Guantanamo Bay detention camp.^[318] Skeptics, including some Republicans, charged Romney with opportunism and having a lack of core principles.^{[166][196][308]} The fervor with which Romney adopted his new stances and attitudes contributed to the perception of inauthenticity which hampered that campaign.^[61][262]

While there have been many biographical parallels between the lives of George and Mitt Romney,^{[nb 23]} one particular difference is that while George was willing to defy political trends, Mitt has been much more willing to adapt to them.^[21][23] Mitt Romney has said that learning from experience and changing views accordingly is a virtue, and that, "If you're looking for someone who's never changed any positions on any policies, then I'm not your guy."^[324] Romney responded to criticisms of ideological pandering with the explanation that "The older I get, the smarter Ronald Reagan gets."^[200]

Journalist Daniel Gross sees Romney as approaching politics in the same terms as a business competing in markets, in that successful executives do not hold firm to public stances over long periods of time, but rather constantly devise new strategies and plans to deal with new geographical regions and ever-changing market conditions.^[308] Political profiler Ryan Lizza notes the same question regarding whether Romney's business skills can be adapted to politics, saying that "while giving customers exactly what they want may be normal in the corporate world, it can be costly in politics".^[61] Writer Robert Draper holds a somewhat similar perspective: "The Romney curse was this: His strength lay in his adaptability. In governance, this was a virtue; in a political race, it was an invitation to be called a phony."^[65] Writer Benjamin Wallace-Wells sees Romney as a detached problem solver rather than one who approaches political issues from a humanistic or philosophical perspective.^[70] Journalist Neil Swidey views Romney as a political and cultural enigma, "the product of two of the most mysterious and least understood subcultures in the country: the Mormon Church and private-equity finance," and believes that has led to the continued interest in a 1983 episode in which Romney kept his family dog on the roof of his car during a long road trip.^{[nb 24]} Political writer Joe Klein views Romney as actually more conservative on social issues than he portrayed himself during his Massachusetts campaigns and less conservative on other issues than his presidential campaigns have represented, and concludes that Romney "has always campaigned as something he probably is not."^[328]

Immediately following the March 2010 passage of the Patient Protection and Affordable Care Act, Romney attacked the landmark legislation as "an unconscionable abuse of power" and said the act should be repealed.^[329] The antipathy Republicans felt for it created a potential problem for the former governor, since the new federal law was in many ways similar to the Massachusetts health care reform passed during Romney's term; as one Associated Press article stated, "Obamacare ... looks a lot like Romneycare."^[329] While acknowledging that his plan was an imperfect work in progress, Romney did not back away from it, and has consistently defended its underpinning state-level health insurance mandate.^[329][330] He has focused on its bipartisan support in the state legislature, the absence of Congressional Republican support for Obama's plan,^[329] and has contended that it was the right answer to Massachusetts' specific problems at the time.^[329][331] While Romney has not explicitly argued for a federally imposed mandate, and as of 2010 explicitly opposes one, during his 1994 Senate campaign he indicated he would vote for an overall health insurance proposal that contained one.^[332][333] He suggested during his time as governor and during his 2008 presidential campaign that the Massachusetts plan was a model for the nation and that, over time, mandate plans might be adopted by most or all of the nation.^{[334][335][336]}

Romney's foreign policy views are rooted in a firm belief in American exceptionalism and the need to preserve American supremacy in the world.^[257] This parallels the Mormon belief that the United States Constitution is divinely inspired and that the U.S. was selected by God to play a special part in human history.^[337] Indeed, Romney's political beliefs regarding a limited role for government, a need for self-reliance, and requirements for welfare recipients, often reflect Mormon tenets adapted for the secular world.^[337][338]