How bad is social inequality?

  How Bad is Social Inequality?

       Paul Johnson (director of  the 'Institute for Fiscal Studies') gave a talk at Clare College, Cambridge, on Thursday 2nd May 2024, titled:

 "Inequalities: what they are, why they matter, and how to address them". 

I was disappointed. I did not think he showed at all clearly why inequalities are bad. And he provided few ideas on how to sort them. 

He presented many inequalities; of income, education, wealth, health, inheritance, ethnicity, gender, geography. And he showed correlations; the unhealthy are poor, and the poor are unhealthy. But he was neither curious nor analytical about the causes of these inequalities, and their correlations. He seemed to assume a mechanism – the usual suspects; poor people are badly educated, are sick, die young and live in the north. It seemed to me insufficiently analytic; more like journalism than academia. And he scarcely touched on remedies.

It is not self-evident to me that inequality itself is a 'bad thing'. Some inequality could be called variety. Some people are tall, some short, some fast, others slow, some numerate others literate. 

Some inequality may be by choice. Some people may choose to live on a croft on Raasay, keep a cow and fish for lobsters. Some seek paid work, others may choose to remain unemployed in the north east of England, preferring that life to any alternative that they can imagine. After all, I do not want to make money on the Stock Market, nor by flying planes, nor by cutting people open. We should beware of making choices for other people. 

We are not all born equal. Inequality is inevitable. It can often seem 'unfair', and that unfairness can be painful to contemplate. Our idealism feels let down. Some people feel we have an inherent right to two legs, etc.; and that society has a duty to level up. I do not. But we do have an opportunity to correct the oversights of providence. Inequality can be mitigated, but not abolished. 

What, then, is positively bad for society about this God-given inequality, and how far should we go to lessen it? Does inequality simply indicate a wrong, or does it actually cause damage? Does it indicate cruelty; or actively breed indifference; or lead to bad government?

I believe that great disparity of wealth is bad for society in two different ways. The existence of very poor people dehumanises us. Their poverty hurts and rebukes us, unless we look away.  The very rich can also offend by causing envy in the less fortunate, as man is susceptible to envy. But envy alone is not enough reason to dispossess the rich. 

We are beginning to see how the very rich can cause positive harm. They can be hard to control. They can corrupt. Money confers power in so many ways. We are careful to give each adult an equal vote, but pay little attention to the fact that some voters can deploy a thousand or a million times the resource of the average voter. We are governed by the rich, as well as guided; we buy their newspapers, and watch their television channels. 

In particular, excessive wealth provides excessive means of making more wealth. Without explicit limits, the situation is mathematically explosive. Most people will use most of their resource most of the time. A billionaire will not; his wealth does not trickle down, significantly, to his hairdresser, or butler; it is salted away for his heirs. An inheritance tax (like the feudal 'fee') is essential. Unspent wealth should revert to the state. This has been said many times before. 

At a more mundane level, we should look for action points? Perhaps identify a metric that would indicate where state interference with the free market could be beneficially applied – for example we could monitor 'the increase in GCSE grades per GB£ spent, on the grounds that a pound spent in Ashington, Northumberland, would yield more marginal benefit than a pound spent in Haslemere, Surrey. Perhaps implement a focussed improvement of the transport infrastructure, e.g. in areas remote from London?

I was hoping Paul Johnson would have thought himself into such territory. He must be well informed on all aspects of taxation, and could, I am sure, make a significant contribution. I hope he can be encouraged to do so.

Sincerely, Ian West

(See also my post of 12 Mar 2012 –– "Taxing the Wealthy")

Inequality: good or bad?

 Inequality: good or bad?

       This post has been revised. Please see the new version at:

https://occidentis.blogspot.com/2025/02/how-bad-is-social-inequality.html 

Stakeholder Rights

Stakeholder Rights.

Professor Sir Tony Atkinson(*) has made 15 proposals for reducing inequality; and for good measure added 5 further ideas that he thinks could be worked up to become proposals. His thoroughness is impressive. But is he perhaps carrying things too far. He seems to have made it his objective that everyone in the country have the same spending power. I see in Britain a great variety of abilities and tastes, and conclude that this is natural; something to work with, rather than against. To level out the wealth of citizens completely would be highly artificial and constitute a massive interference. 

I believe our first objective should be to halt the slide towards inequality. There are too many ways (see below **) in which the rich (or smart) can take from the poor (or simple). I feel impelled to intervene, just as you would if you saw a big bully pounding a weakling. We clearly cannot rely on the ‘bullies’ having a sense of generosity or fairness. In Britain, though it is still regarded as unacceptably bad form to kill a person and take his goods, even that sense of justice may soon be challenged; and bare-faced theft become normal. We already accept taxes on alcohol, the promotion of gambling, tolerate lethal drugs, allow extortionate interest rates, and accept as inevitable the ‘collateral’ bombing of innocent citizens.  

So, leaving aside (for the present) the reasons why we must combat inequality, let us pass on to consider the means. I would like, here, to comment on only one of Professor Atkinson’s proposals. 

“Proposal 2: Public policy should aim at a proper balance of power among stakeholders, and to this end should:

(a) introduce an explicitly distributional dimension into competition policy;

(b) ensure a legal framework that allows trade unions to represent workers on level terms; and

(c) establish, where it does not already exist, a Social and Economic Council involving the social partners and other nongovernmental bodies.”

Stakeholders presumably include Labour and Capital as major players, with perhaps customers and government as minor players. For two centuries we have witnessed the tug of war between Capital and Labour. The public can see both sides of the argument, though dimly, and in tiny glimpses; and has made some attempt to maintain a balance  by siding at times with Labour and at times with Capital. This is a most unsatisfactory arrangement. The fair (or “proper”) balance is too ill-defined, too subjective, the mechanism too unwieldy and slowly-responding. Professor Atkinson may have cracked it with his “explicitly distributional dimension”, “level terms” and his “Social and Economic Council”, but I see these as little more than giving ponderous names to the agonising conflicts we all feel during a prolonged strike. What is the proper balance? How do we define it? How do we achieve it? 

In order to “aim at a proper balance of power”, we must first define it.  Of course, the market can decide one type of proper balance, when some businesses fail and others succeed. But that is destructive and painful to watch. 

Some years ago I suggested [1] looking, for each business in turn, at the ‘annual cost’ of Labour and the ‘annual cost’ of Capital. In many employments these are approximately in the ratio 1:2. It would be logical, and just, to have worker participation on management boards in a similar ratio.[2] At the very least this would lead to workers understanding better the economics of the business, and would foster a spirit of common purpose.  

    

Some decades ago the Germans introduced a law requiring some level of co-determination on the boards of large companies, and currently a majority of OECD countries and similarly of EU countries have a degree of such participation.[3] However, not the United Kingdom, nor the United States. Do you think this if from their superior wisdom, ignorance or arrogance?

    

References.

[1] https://occidentis.blogspot.com/2010/07/labour-versus-capital_01.html 

[2] https://www.blogger.com/[http://occidentis.blogspot.co.uk/2012/09/pre-distribution.html

[3] https://en.wikipedia.org/wiki/Worker_representation_on_corporate_boards_of_directors

*  Sir Tony Atkinson died 1st Jan 2017. Many good obituaries of this good man can be found at: https://www.tony-atkinson.com. 

** The rich can buy up the competition, or the food supply, or, with deep pockets, they can simply wait. They can sometimes even subvert justice.