Equality Matters, Inequality is Bad…
Welcome to any new readers of Liberalism5, a blog where over time I hope to set our new ideas for liberalism. This is just my fourth blog, and I am still setting out the foundation of ideas to inform principles to inform policies and thinking. So bear with me…
To recap, so far I have suggested that, having had roughly four ages of liberalism, we need a fifth. I have hinted at why we need a new age, but will return to that in due course. I’ve set out the importance to a liberal of people having the basic freedoms required to choose their own path through life, the ability to chose for themselves, to have a life plan, even when this means in practice poorer outcomes for them and less rational choices.
I’ve suggested that a liberal analysis of 2016 suggests both that people are being too pessimistic, and also that conversely they are not worried enough. I’ve said that to really attack vested interest, to promote freedom and opportunity we need to look at the basic structures of society (1) , following John Rawls and his thinking.
And finally, at the end of my last post, I suggested that,contra what many believe, for liberalism of the sort I believe in, equality matters hugely, and just as much (if not more) than freedom/liberty. In this post I want to try and set out why.
Here is an early hint- when George Osbourne suggested that we were all in this together, many people reacted with a mixture of laughter, anger, disgust and resentment. But why? Why didn’t that happen (largely) when Churchill suggested something similar in the midst of war?
We Live In An Unequal World…
People know that we live in an unequal world, where some people have much more income, wealth and power than others, both within societies and across societies, between nations and across continents. But many don’t realise just how unequal things are. This video explains the position for the US and this for the UK . It seems to me both tell an important story about how little people appreciate the true position regarding wealth and inequality. That’s an important finding I think and one I will return to eventually.
An Oxfam report from 2016 suggested that just 62 people own as much wealth as half the world. Most poorer people have no wealth at all. Most middle income people have some combination of modest savings, wealth from their house, and a pension. However many rich people rely on capital rather than income from salaries. This capital includes housing and property, stocks and shares, government and corporate bonds, rents, dividend income and so on.
Shares of income and wealth for the top 10%, top 1% and top 0.1% have been rising steadily since the 1980s, though with differences in exactly how these play out across countries. Thomas Piketty in his fascinating Capital in the Twenty First Century (2) , points out that the number of billionaires has risen from 140 in 1987 to 1400 in 2013, an increase by a factor of 10. This translates to 5 billionaires per 100 million adults in 1987 but 30 per 100 million in 2013 (p433).
In popular criticism, we attack the 1% (see here for example). However we would sometimes be better to look at the 0.1% and above to see the real astonishing an frankly immoral increases happening.
Piketty also talks in fractions of percentiles, where the inequality and growth in wealth is even more astonishing. The richest twenty-fifth millionth of the world’s population, about 150 adults in the 1980s, and 225 in the early 2010s, has increased in average wealth from $1.5 billion in 1987 to an average of $15billion in 2013, a growth rate 6.3% per annum above inflation. If we then consider the wealthiest one-hundredth million of the world’s population, 30 people or so in the 1980s and 45 in the early 2010s, Piketty reports their average wealth has grown from just over $3 billion in 1987 to almost $35 billion, a growth rate of 6.8% per annum above inflation (p434).
However we look at it, inequality of wealth and income has been rising, and rising fast since the 1980s and we are approaching levels of inequality last seen in the 1880s. At the very highest income and wealth levels of society, these people (especially the super- or mega-rich) are seeing a growth in their fortunes that is simply astonishing.
A Conservative Response- Honestly, So What? You’re Just Jealous…
Now an obvious response to all this is, er, so what? Why does it matter that some people are much richer than others? Why does it matter that there is some statistical measure of inequality that is getting worse. Why don’t we celebrate success and stop whining? After all, this very blog started by pointing out how well the world is doing in many areas of measurement, compared to history. If society has been less equal in the past but overall less wealthy, but we’re doing better now, we should be happy shouldn’t we? This is just typical hand-ringing, liberal/lefty nonsense isn’t it?
I have some sympathy. At first sight, too many progressive thinkers are too concerned with redistribution, with public spending and with their next piece of legislation or policy making, to worry about the dirty business of creating wealth and success, or how to change the system. They should think harder, as the much mocked Ed Miliband tried to do with his comments on pre-distribution. (Pre- distribution, Wikipedia, Accessed 14th January 2017). (3)
But sorry, conservative thinkers, you are just wrong. Inequality does matter. Equality is important. Peter Mandelson (remember him?) now admits he was wrong to say he was ‘intensely relaxed’ about people getting filthy rich’.
But why so?
Why Equality Matters Hugely, Inequality Is Bad and We Need to Change
Many others have written on this so I will state my case using the great work of others. Firstly we know on pure economic grounds that societies that have large patterns of inequality of wealth and income tend to do worse economically in the long run. Joseph Stiglitz, the nobel-prize winning economist, writes on this in his 2012 book The Price of Inequality. (Wikipedia The Price of Inequality accessed 14th January 2017)(4) . Another nobel-prize winning economist Paul Krugman considers inequality a defining (economic) issue. The basic point seems to be that wealth distributed more widely is more likely to drive economic growth, jobs, incomes and productivity, than a very unequal distribution.
Along with population growth and technological change, equality is important historically for economic performance. At least, I’d argue history teaches us this lesson- the dead hand of absolutism, dictatorship and feudalism all tended to produce less growth in economic wealth than more equal societies (except when they stole others’ wealth through war!)
But the reasons why equality matters and inequality is bad go much further. Wilkinson and Pickett in their famous book The Spirit Level (5) take a canter through actual societal outcomes- happiness, health, educational attainment, crime and so on, and clearly find that more equal societies do better than unequal ones. Now their findings are controversial and its not always clear to them as statisticians what the underlying reasons for their fundings are, but I find their number crunching compelling. They updated their 2009 thinking a little more here.
But there is yet more, dear reader. So far when discussing inequality I have talked about income and wealth only. There is much more to life than money and wealth of course. But wealth is an excellent proxy for power in our current society and so a further insidious effect of rising inequality is political and systematic.
When we allow a handful of people at the top so much wealth, we hand them power to influence all kinds of things, unless we work damn hard to put in place controls and restrictions. We see this in the UK and the US with the power of a few to set the tone for much of our media- what our newspapers say, what our TV screens show us- but also how our political parties think and are influenced. We see it in the hidden funding behind think thanks, too often explicitly or (more dangerously) having honestly held opinion but in thrall to ‘obvious’ limits on political choices or citizen led changes.
The power of think tanks, lobbying and cultural messages from the media is very strong, and with too much of that left in the hands of the rich and powerful, our public discourse, our political and tax and public spending choices, and our very thinking risk being distorted. Distorted away from choices for the common good, and towards narrower choices that advance or at least protect vested interests of the rich and the powerful.
A further bad effect of inequality comes from the disconnect of the very rich, and ‘ordinary’ people of society. In a reasonably equal society, the top 1% and the average person may actually interact and know each other- going to the same schools, using the same hospitals, occupying the same physical and even mental spaces. But with the levels of inequality we see now, the very rich tend to split off from the rest of us- and when you add in the effects of wealth on power and politics and public choices as above, this separation is bad to the point of dangerous. It is a cultural, a physical and a mental separation that signals danger and all the ills of rentier behaviour.
So, to sum up- inequality is bad for the economy, bad for societal outcomes we care about, bad for the political process, and even threatens the basic fabric of society by divorcing the very rich and powerful from the rest of society.
But there is one more thing I want to discuss, more important than any of this.
Equality is Fundamental to Human Dignity and Agency
I suppose we could just about live with all of the bad effects above. After all, an unequal society can conceivably still create more average wealth than a more equal one, even given the distortions, the poorer outcomes from being less equal and the corrosive effects of separation. After all -this is one of the conservative arguments from above that I have yet to address.
This argument can be summarised as ‘a rising tide raises all boats’– better to be poor in a rich society than equal in a poorer one.
But sorry- Wilkinson and Pickett are able to show that this often isn’t the case.
But the objection goes deeper than a statistical objection based on outcomes. It does to the heart of what it is to be human, and to be a social being, and to have the freedom to pursue your own life plan. Equality matters because ultimately, people need dignity and respect, they need the ability to execute their life plan, they need a sense of fairness in all of the rules and institutions and processes of society. Too often rich people fail to understand that basic fact about poorer people. But people are people, regardless of income and resources.
When people don’t have that (dignity and access to resources), as clearly many feel they do not at the moment, we get the reaction to Osbourne I mentioned at the start of this post. We see cynicism and resignation, we see chaotic families descending into despair and abuse and fatalism. We see turning away from political processes, or a turn to nationalism, popularism or worse. A lack of what people call agency has been shown to drive all kinds of negative impacts on health, on life choices, on life expectancy and on wellbeing.
So, it is not just the absolute wealth that I have that matters (beyond a minimum) as per the conservative argument- it is fundamentally whether I feel I am an equal citizen of equal worth, with all the dignity, freedom and ability to execute my life plan that I expect.
It is this fusion of freedom with equality which is distinctively liberal I believe. It is this combination which is fundamentally radical, and drives (or should drive) changes to how we structure society. Both John Rawls and equally Ronald Dworkin have written extensively on this and what it means.
It was a lack of appreciation of this by Blair and Mandelson, despite their many achievements, that I believe ultimately corroded people’s faith in them. It is why, for example, the SNP are to this observer, merely synthetic progressives really seeking a change in constitutional arrangements whilst leaving many other aspects of the system intact. Because as soon as you accept this need for fundamental liberty and equality, you need to accept the need for radical change.
It is this radical change that I want to turn to as the blog develops further. Thanks for reading.
(1) Standard Encyclopaedia of Philosophy John Rawls accessed 14th January 2017 https://plato.stanford.edu/entries/rawls/
(2) Thomas Piketty Capital in the Twenty First Century Belknap Harvard ISBN 978-0-674-43000-4
(3) ‘Pre-distribution’, Wikipedia, Accessed 14th January 2017
(4) ‘The Price of Inequality’, Wikipedia, Accessed 14th January 2017
(5) Richard Wilkinson Kate Pickett The Spirit Level Penguin ISBN 978-0241954294