#BAD14 #Inequality

Today is Blog Action Day, and in 2014 the theme is Inequality. I’m afraid I’m going to cheat, and post stuff I’ve written earlier. Some is a bit dated (anyone remember Michael Gove?), but I think the core message is still relevant…

It’s the equality, stupid

Published in the Church Times, 27 July 2012

YOU wait ages for a story on welfare statistics, and then, on 14 June, three come along together.

First to arrive was the publication of the latest Happy Planet Index, bringing the good news that people in the UK are better off than others in the European Union or G8 countries, based on the perceived level of happiness, life expectancy, and environmental factors – but worse off than those in many developing countries.

Then came mixed news from the Institute of Fiscal Studies’ annual report Living Standards, Poverty and Inequality in the UK, which found a sharp fall in incomes in 2010-11, but also an improvement in equality across all income levels.

And tagging along behind were announcements from the Secretary of State for Work and Pensions, Iain Duncan Smith, on child poverty. At present, the Child Poverty Act 2010 defines child poverty as children living in households that earn less than 60 per cent of median income. The UK does not suffer the squalor and starvation of previous centuries; so using a measure of relative poverty reflects levels of social exclusion: whether these children are excluded from the average family’s ordinary living-patterns and activities (Comment, 15 June). But Mr Duncan Smith wants to change the way in which child poverty is measured.

He argued that the problems of worklessness, welfare dependency, addiction, educational failure, debt, and family breakdown are causes of child poverty. On the other hand, the thesis of The Spirit Level, by Richard Wilkinson and Kate Pickett (Penguin, 2010), is that these are symptoms of inequality, and therefore it is important to retain a relative measure of child poverty, and to have policies that tackle this.

Professor Wilkinson and Professor Pickett studied rich countries, and the differences in inequality between them. They found that a smaller gap between rich and poor in terms of income equality means a happier, healthier, and more successful population (Comment, 26 March 2009).

There is no relation between income per head and social well-being in rich countries; so more economic growth will not necessarily lead to a happier or healthier population. But, if the UK were more equal, we would be better off as a population. The rich would not lose out in order to benefit the poor. The 99 per cent would benefit – perhaps, even, the 100 per cent – although poorer people would gain the most.

As well as varying from country to country, inequality also varies over time, and it can be influenced by government policy. Britain became more equal during the World Wars, as the Government saw that making people feel they were sharing the burden was a way to gain popular support for the war effort.

During the mid-1980s and early ’90s, inequality grew rapidly, almost certainly reflecting the neo-liberal economic policies of the Thatcher and Major Governments.

Professor Wilkinson and Professor Pickett argue that it would not take a revolution to reduce income inequality. All the data in The Spirit Level come from rich developed market democracies, and the analysis is only of the differences between them.

But a transformation is still required, and the authors outline two direct ways of reducing income inequality: first, reduce differences in pay before tax (as happens in Japan) – for example, by minimum-pay policies, strong trade unions, employee representation on boards, and through a public ethic intolerant of the bonus culture; and, second, redistribution by taxes and benefits (as happens in Sweden), not least through more stringent action to prevent tax-avoidance.

Other policies can have indirect influence, including education policies and the management of the national economy. There is a huge volume of evidence available to policy-makers, which they need to filter. The danger is that some evidence is played down, in order to avoid challenging the status quo.

ON THE day that Professor Bob Holman wrote about how Christians need to lead the battle for equality in Britain (Comment, 21 October 2011), St Paul’s Cathedral closed its doors to the public for the first time since the Second World War, amid fears that the Occupy demonstration posed a risk to health and safety. That, and the subsequent eviction of the camp, reflected negatively on the Church.

But Occupy has also been criticised for a perceived lack of clarity in its demands. Policy is a complex area, and dangerous to simplify. The gift of The Spirit Level is that it enables concentration on one area: reduce inequality, and see substantial improvements in murder rates, mental illness, obesity, imprisonment, teenage births, and levels of trust.

Occupy, the Church, and any organisation or individual could evaluate all government policy in terms of one question: what effect would this policy have on income equality? This question would act as a common cause, and bring clarity to the engagement.

For example, what effect would replacing GCSEs with exams akin to O levels and CSEs have on income equality? I would want to investigate whether lower-income children would be less likely to take O levels, while recruiters would prefer candidates with O levels, and hence inequality would increase indirectly.

As policy is so complex, often the indirect effects on inequality are not obvious. It is important, therefore, to enlist experts in each field and discuss, listen, and learn. Nevertheless, the Child Poverty Act puts the onus on government ministers, such as the Education Secretary, Michael Gove, to show how their policies in education, health, and social services are governed by the goal of poverty-reduction.

So, even without all the answers, we can still put the equality question to our representatives and policy-makers, and ask them to ensure that the aim of reducing income inequality underpins all policy discussions.

The website WriteToThem has information about how to contact your MP, MEP, member of devolved administration, or local councillor. You can also follow a link to TheyWorkForYou, to find out more about your MP’s interests. It helps to know whether they have spoken on an issue and how they have voted in the past, in order to target and personalise your communication.

Whichever method we choose, let us work together as the 100 per cent towards the equality and benefit of the 100 per cent.

www.equalitytrust.org.uk; www.writetothem.com; www.theyworkforyou.com; http://epetitions.direct.gov.uk

Peril of eating all the pie

Review of Joseph E. Stiglitz. The Price of Inequality. London: Allen Lane.
Published in the Church Times, 12 October 2012

“IT MAY be true that ‘the poor always ye have with you,’ ” writes the 2001 winner of the Nobel Prize for Economics, “but that doesn’t mean that there have to be so many poor, or that they should suffer so much.”

The first half of The Price of Inequality is utterly compelling. Focusing on the United States, Professor Stiglitz stacks up the evidence for growing inequality of wages, total income, and wealth, and the sharp acceleration during the Great Recession, since 2008. The bottom and middle are now worse off than in 2000, while income growth has been primarily at the top one per cent. He also, importantly, busts the great American myth of equality of opportunity (related to both income mobility and lifetime earnings), often used somehow to justify inequality.

Market forces have shaped inequality; government policies have shaped those market forces (much of the inequality that exists is the result of government policy); and the one per cent have used their power to shape policy to their own ends. The wealthy often do not so much create wealth as take wealth away from others through rent-seeking – not just in the US. Recall, for example, HMRC’s waiver of Vodafone’s potential £7-billion tax bill.

The US and other widely un-equal countries are paying a high price for this inequality. Their economies are inefficient in their use of resources, and are neither stable nor sustainable in the long term. Further, the US is staring into the abyss of a breakdown in social cohesion and trust. Democracy it-self is in peril, warped, as it has been, from one person, one vote, into one dollar, one vote. Yet, despite everything, through its ownership of the media, the one per cent has succeeded in shaping public perception, and convinced the 99 per cent that they are all in it together.

At this point, and in his description of the battle fought over the laws and regulations that govern the economy, Professor Stiglitz starts to flag. But he picks up again when he returns to economics, and the battles over fiscal policy (tax and expenditure) and monetary policy (interest rates and inflation).

In his discussion of the policies that may or may not pull the US and European economies out of the Great Recession, I find three key messages: austerity doesn’t work (George Osborne, take note); progressive taxation – that is, shifting the burden from the poor to the rich – will stimulate demand and growth, as well as reduce inequality; and addressing unemployment should be prioritised over fighting inflation.

In the final chapter, Professor Stiglitz summarises his multiple solutions to inequality and its causes, but, given the power of one per cent, he has to ask: “Is there hope?” Only, it seems, if the one per cent learn before it is too late that their welfare is bound up with the way the 99 per cent live.