Economics Equality Politics

Beyond ‘The Spirit Level’ – Tackling Inequality

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What we generally do not accept is that those with potential who can contribute their talent to society and receive that level of reward appropriate to that contribution are not prevented from doing so through circumstances apart from that potential, such as race, parental circumstances and place of birth. Clearly society benefits from matching individuals to their best role of contribution because this both maximises their value to society and minimises the support/defensive expenditure required to deal with the negative effects to the individual of poor satisfaction/fulfilment of potential/low access to resources.

The latter suggests the issue of ‘social mobility’ – the extent to which an individual can move according to their ‘talent’ and independently of other circumstances. There are various measures of this but the basic problem is that equal opportunity is pretty meaningless when divorced from concerns about overall inequality. A more equal share of a small probability of advance is little consolation.

Incentivising the Rich

The income/wealth inequality debate therefore continues to hinge on the issue of incentives. It is always possible to argue theoretically that reducing the potential for the rich to earn or accumulate wealth will reduce the effort applied to initiating and/or enhancing economic activity which creates employment, incomes and the provision of new goods and services or the more efficient provision of existing goods and services.

According to this argument limiting the wealth of the richest and transferring it to the poor will not benefit the middle/lower income groups – indeed may even make them worse off. Yet there must surely be some limit to this. It’s a morally dubious state of affairs, as the political philosopher Jerry Cohen pointed out. Effectively the rich are blackmailing the rest of us; to continue to work for the common good they demand an ever greater share of total wealth. Given that it’s unlikely this additional share is necessary for them to provide this extra effort or to compensate them for the uncongeniality of their work, were this demand made explicitly, face to face, it would be hard to justify. And as Cohen argues ‘…we do not make policy together if we make it in the light of what some of us do that cannot be justified to others’.

Conclusion – It’s the Politics…

Even if the incentive argument is accepted, the evidence is overwhelming that the very rich and their proxies are doing more than simply demanding payment over the odds for their role in generating economic activity. They are now gaming markets for their own profit, manipulating the political process and spreading disinformation through the media outlets they overwhelmingly control. As the Scottish-born Princeton economist Angus Deaton, himself a ‘Spirit Level’ sceptic, points out,

The very rich have no need of national health insurance, of disability or income support schemes, of public education, or of public policy that will limit the inheritance of deprivation from parents to children. They do not wish to pay taxes to support such schemes, and their immense wealth and political influence provides them with a potent weapon to prevent them having to do so.

The distribution of political wealth, unlike economic wealth, is zero-sum. If one person gains influence everyone else must lose some. The time has come to accept that there is unlikely to be a ‘soft’ solution to the problem of widening inequality. Political courage of a high order is required if the accelerating shift of resources, welfare and power from poor and middle-earners to the rich and very rich in both public and private spheres is to be halted and then reversed.

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