Monday, April 12, 2010

Inequality and New Labour

The Government's own National Equality Panel produced a report called Anatomy of Economic Inequality in the UK.

It shows:

  • The households in the top tenth of the UK wealth distribution have total wealth 100 times those in the bottom tenth

  • The share of wealth of the top 0.05% of the population declined from 1937 until the 1970s – but by 2000 this was higher than it had been in 1937

  • In the 1990s the top tenth increased its share of national wealth – but all of this was due to the increased wealth of the top 0.1%

This is not an inevitable consequence of globalisation or the market economy, or any other such bullshit. In other European countries the share of the top 1% did not increase, as it did in the UK (it declined from 1937 to the 1970s there just the same).

Britain is a more unequal society than our European counterparts. It has become more so during the thirteen years of 'New Labour' government. All the drivel about 'fairness' or 'an aspirational society' cannot hide this. If I needed reminding why I wasn't going to vote Labour, now I don't.

Peter Mandelson's famous dictum that New Labour was "intensely relaxed about people getting filthy rich" is the real face of New Labour; what we are seeing at the moment is the one that they dust off every few years for elections.


Ori Pomerantz said...

What is the problem? Is the top 0.1% people like the founders of Google who earned it, or is it wealthy heirs who don't squander their money quickly enough?

Jeremy Green said...

Like Fermat, I have a proof that you are wrong but don't have time to write it all down just now. But let's start like this. Either you accept that however wealth and income are distributed by the market is fine, and that there is no other objective or standard by which it can be judged, or you don't. At least the market-based approach is consistent with itself. Once you start making distinctions between wealth that is 'honestly' earned and that which is obtained in some not-quite-right way, you've accepted that there is some other basis by which distribution can be measured. Like Churchill in the joke, you are just haggling about the details.

Ori Pomerantz said...

I accept that having a hereditary aristocracy run society is a bad idea. It doesn't matter if they inherit a title and a castle or a trust fund.

However, that doesn't mean that having a meritocracy, where the wealth and power are earned, is bad. Especially when the people who earn those things do so by providing a benefit for the rest of us. I don't mind if other people are wealthier than I am. Their wealth doesn't impoverish me.

Jeremy Green said...

Ori, actually a meritocracy where wealth and power are distributed very unevenly is bad. There is empirical evidence to demonstrate this - for a start have a look at this

Something like common sense (not always a reliable guide, I admit) also tells you this. Our democracies are not perfect, so people with more wealth have more of a say in the priorities of the government. This is obviously true, and not how democracy is supposed to work; so we spend a lot of time pretending it is not true, and a little bit of time tinkering around the edges to make it a bit less true.

And since not everything in our civilisation is subject to the control of the government, the rich people exert an even greater influence on other aspects of life - what gets made, for example. A simple thought experiment: imagine a society with a hundred people, one of whom is much richer than all the others put together. That person has more 'votes' in the economic marketplace than all the others. If they want scarece resources of production to be focused on Lear Jets in multiple colours and flavours, then it will be. If the other ninety-nine want something else (orthopedic shoes), tough luck.

There are arguments in favour of economic and wealth differentials in terms of incentives -- though nothing that would justify the enormous differentials that exist. Since Rupert Murdoch is no longer working or innovating to earn money for the purposes of consumption, a smaller return would provide him with just as much incentive.

There are arguments, too, that say even if equality is better -- well, that interferes with a more important right that people have for the state not to interfere in the enjoyment of property (the original formulation from the US Constitution, before the spin doctors got to work). Almost everybody agrees that this 'principle' should be subject to moral limitations - that rich people should not be able to buy the livers of the poor in order to eat them, for example, even if the poor give their consent through free exchange in the marketplace. There's just a dispute about where the limitation should sit. I vote in favour of allowing the state to affect the distribution of wealth.

Ori Pomerantz said...

Several points:

1. For income equality, it's a question of cause and effect. For example, do teenagers have babies because they are poor, or do people who for cultural reasons have babies as teenagers end up being poor because they didn't learn a profession before having kids?

If it's the first, then by giving money to people who had babies as teenagers we'll encourage their children to do better. If the second, then we'll just encourage them to continue to act irresponsibly.

2. The incentives for Rupert Murdoch don't matter anymore. But the incentives for the next Rupert Murdoch do. If that guy knew his wealth would eventually be confiscated by the government, he wouldn't work so hard.

3. I don't know about the UK, but in the US the government appears to be owned by rich interest groups. Maybe the UK government can be trusted to take from the rich to give to the poor. The US government can be trusted to take from the middle class, give a bit to the poor, and use the rest for the politically well connected, who are usually rich.

For example, the tuition assistance programs in the US have three big effects:

1. Prolong adolescence by requiring college education for more jobs.

2. Increase the cost of college tuition, making universities richer.

3. Put young adults in debt for decades.