Inequality: a missing perspective

The debate about inequality comprises, to a large extent, two camps. In one there are those like Martin Wolf who believe inequality is a problem which can be solved. In the other are those who doubt that inequality is a problem - either because "material equality has no intrinsic value" or because, as Tyler says, "what might appear to be static blocks of wealth have done a great deal to boost dynamic productivity."

This division, though, overlooks what seems to me a reasonably tenable position, which goes something like this:

Yes, inequality is a problem. This is partly because it is often a sign of market failure - as in banks' "too big to fail" subsidies or in an agency failure in CEO pay. But it also threatens to undermine democracy, social harmony and equality of respect.

However, sometimes, the solution is more costly than the problem. And inequality might be one of these times. There might be some efficient ways of reducing inequality - such as land value taxes, stronger trades unions or more worker ownership - but these lie outside the Overton window. Pretty much the only means of reducing inequality that is on the agenda is higher income tax. And in a country where tax morale is already low, higher taxes might have disincentive effects; they deter entrepreneurship as well as rent-seeking. What's more high taxes might cause what Assar Lindbeck calls (pdf) "norm drift"; in the long-run they might undermine pro-work and pro-entrepreneurship attitudes; this possibiliy is not captured by the IMF's finding (pdf) that moderate redistribution doesn't hurt near-term growth.There might be a good reason why to tax rates have fallen around the world since the 70s.

What's more, we can do a lot to help the worst off without worrying about the 1%. A citizens' basic income, serious job guarantee programme and better fiscal policy can be implemented whether we do something or not about the 1%. Indeed, given the political power of the mega-rich, social democrats might have more chance of success if they don't poke that particular hornet's nest.

Now, I don't believe this myself; I suspect it takes too pessimistic a view about Laffer curves. But it seems to me a position which reasonable people might take; it's close to Blairism.

This poses the question: why is it so little heard? It could be because it gets drowned out by the tribalism of the inequality debate; it breaks the first rule of political writing because it tells both sides of the debate they don't want to hear.

But there might be another reason. The weakness of this view might be related to what I've called the death of conservatism - the demise of the Oakeshottian melancholy tendency which sees some problems as insoluble, and its replacement with a managerialist faith that problems can be "addressed" as soon as we see them as such.

Personally, I find the loss of such a disposition a matter of regret, as it impoverishes our political debate.

Comments

[Wpaul63]

I also see a third camp (the alpha males, the Bundys, the Viennese, the natural-born-predators, etc) that insists on needing a losing side of chumps, justified by the assumption that someone *has* to lose (the flip side of entitlement, basically, but even more arrogant), and it may as well be the prols.
Solutions besides taxation? What about "really free" markets? Abolition of big industry lobbying, abolition of political funding campaigns, a fully enforced planetary income and property tax with no loopholes, no SPVs (and trusts, etc), no Delawares and Caymans and Jerseys? What about corporations finally paying their full dues to the rest of society?
And no, at the end of the day inequality cannot be abolished altogether, but we can surely improve by smoothing out the playing field and by applying an equal set of rules for all players.

[Peter K.]

I'm the same age as Piketty (42ish) and my sense (and maybe Wolf who is older shares this) is that things worked from WWII until the 70s. And there's nothing fundamental that is preventing things from being that way again. In a sense the Oakeshottian pessimists were proven wrong.

What has happened is that things have reverted to the mean. The history is from the 80s onwards, inequality widened and politics moved rightwards. The welfare state was parred back more and more. Taxes cut. And we have a feedback loop as the one percent have more to spend on politics, the politics leans more in their direction. And so on.

In the U.S. there are plenty of low-hanging fruit policies we could enanct that would easily return us to the 30 Glorious Years society, but the rightwing is blocking them in Congress.

[Dave Timoney]

I don't think the Oakeshottian tendency is quite as moribund as you suppose. A growing number of conservative thinkers (including Tyler Cowen) accept that some form of basic income is inevitable as a quid pro quo for inequality and capitalism, and preferable to a jobs guarantee.

The problem is presenting this in positive terms rather than as the indulgence of skivers. You can see glimmers of this in current policy: a basic income can be a spur to entrepreneurialism (hooray for self-employment); it can enable the shrinking of the state bureaucracy (finally); and it can remove high marginal tax rates at the bottom (as does the increase in the tax-free allowance).

The Oakeshottian influence will be in the pessimism over affordability, i.e. to justify a low income level.

[bellisaurius]

Posts like this are why I love this site. Thank you.

[aragon]

https://en.wikipedia.org/wiki/Overton_window

"The Overton Window is an approach to identifying which ideas define the domain of acceptability within a democratic republic's possible governmental policies. Proponents of policies outside the window seek to persuade or educate the public in order to move and/or expand the window. Proponents of current policies, or similar ones, within the window seek to convince people that policies outside it should be deemed unacceptable."

By definition people have to advocate the moving of the Overton window, the argument that these solutions are unacceptable are attempts to defend the status quo.

Any proposed increases in tax are marginal. (e.g. 50p rate, Bonus Tax) and their impact will be trivial. And fail to address the structural problems you identified (Market Failure etc).

Far more serious than Tax Morale is Political Morale, where people find the political class unacceptable.

Political dissatisfaction is evident in UKIP's current success.

http://www.telegraph.co.uk/news/worldnews/northamerica/usa/10769041/The-US-is-an-oligarchy-study-concludes.html

"The central point that emerges from our research is that economic elites and organised groups representing business interests have substantial independent impacts on US government policy, while mass-based interest groups and average citizens have little or no independent influence."

The potential cost - Revolution.

[Keith]

Yes America is run by and for elites. So? That was the whole idea, the Authors of the Constitution did their work well. No mob rule here thank you.

[aragon]

Keith:

American claims to be a Democracy, and apparently Abraham Lincoin got it wrong in the Gettysburg Address!

https://en.wikipedia.org/wiki/Gettysburg_Address

"Government by the people, of the people, for the people"

Whose Overton Window are we discussing?

Also the wealth gap has been different in the past, and different between countries. So why would anyone think it cannot be at least partially addressed in the future (See Wpaul63 above).

FATE:
Jobs provide more than an income, but purpose, social contact and status etc.

Video from the ONS explaining the wealth of the wealthiest in the UK.

https://www.youtube.com/watch?v=oGdRM3C_wjc

Bottom 50% wealth £2,807,000

Physical wealth (possessions) represent 30% for the bottom half and 5% for the top 10%.
With three quarters of the top 10%'s wealth in property and private pensions.

ONS and poverty
https://www.youtube.com/watch?v=CRN5_sDA0oI

Overton Window in the UK
https://www.youtube.com/watch?v=aOJ93tAbPP0

Overton Window in America.
https://www.youtube.com/watch?v=LlYojsi3Zqw
https://www.youtube.com/watch?&v=KENaWXPmBr0

What is politics if not the anticipation of a better future?

What impoverishes political debate is distribution of power (clearly not to the people) and claiming ownership of the Overton Window.

And what about ITV's Tonight's claim that a third of all current jobs could be automated in 15 to 20 years. Not a long time to adjust to such a dramatic change.

[aragon]

That should be:
Bottom 50% wealth less than £13,000
Top 1% wealth greater than £2,807,000

[George Hallam]

"There might be some efficient ways of reducing inequality - such as land value taxes, stronger trades unions or more worker ownership - but these lie outside the Overton window."

And whatever we do we mustn't mess with the Overton window.

For goodness sake, the whole point of the concept of an 'Overton window' was to show that we don't have to put up with things as they are.

[George Hallam]

aragon

My apologies, you already pointed this out and with more elegance than I'm capable of:

"By definition people have to advocate the moving of the Overton window, the argument that these solutions are unacceptable are attempts to defend the status quo."

[Dave Timoney]

@aragon, "Jobs provide more than an income, but purpose, social contact and status etc." That's just ideology, and little better than "the nobility of labour".

I don't see many inheritors of great wealth complaining that they lack purpose, social contact or status. Of course, while they lack a job, what they do have is money.

[aragon]

FATE:
You are clearly don't read the right publications!

http://www.theguardian.com/commentisfree/2014/apr/25/super-rich-perfection-anxiety-poverty-ennui

"In this month's Vanity Fair AA Gill examines the phenomenon of "perfection anxiety", a condition whereby the super rich enter a state of "panicked ennui" because, essentially, they have run out of things to spend their money on."

[...]

"In the real world, ordinary people struggle daily with bedroom tax, unemployment and benefit cuts."

http://journals.cambridge.org/download.php?file=%2FPSM%2FPSM12_01%2FS0033291700043221a.pdf

"Six benefits of having a job may be identified: the provision of money, activity, variety, temporal structure, social contacts, and a status
and identity within society's institutions and networks."

[...]

"Research over many decades has indicated that the large majority of people say they would continue to work even if they could afford not to, so that it would appear that the psychological benefits of
employment outweigh the costs. On this basis those who become unemployed may be expected to suffer."

http://psychcentral.com/blog/archives/2013/07/24/the-benefits-of-work-for-helping-with-mental-illness/

"Freud stated that "love and work are the cornerstones of our humanness.""

[George Hallam]

@aragon Well said.

Affluenza is now recognised as a legal defence.

[BruceK]

Re the Oakeshottian tendency - what about John Gray?

[Dave Timoney]

@aragon, the boredom of the rich is a cultural trope with a long history. It is a characteristic of capitalism that mixes equal parts old money's disdain for new and hyper-aesthetic sensibility as a class identifier. You need the security of independent means to be truly bored.

The well-known research finding that people like to be occupied and sociable does not mean that people want jobs, merely that they want to be occupied and sociable. The issue is not what you do with your time, but the need to sell it in the labour market. Arbeit does not macht frei.

[George Hallam]

"the boredom of the rich is a cultural trope with a long history"

You seem to have forgotten this when you wrote:

"I don't see many inheritors of great wealth complaining that they lack purpose, social contact or status."

[aragon]

Godwin's Law!

The Guardian Article (Rhiannon Lucy Cosslett) ends with:

"Ecclestone and Stunt may have had to resort to Flemish paintings, but they should take comfort in the knowledge that for mind-numbing tedium, there's nothing like being poor."

If the Super-rich can't make it work, with activities like shopping, travel, sport, socialising and education which are severely subscribed by an income of 71pw, where heating and eating become problematic, what hope for the rest?

Are gangs the model of the future, as they allow people to be occupied and socialise, and provide an income etc?

https://en.wikipedia.org/wiki/Gang
"Usually, gangs have gained the most control in poorer, urban communities and the Third World in response to unemployment and other services.[63] Social disorganization, the disintegration of societal institutions such as family, school, and the public safety net enable groups of peers to form gangs.[64]"

Work is the current social norm for keeping people occupied, socialising and determining income etc, altering this will require considerable political and social change.

And we may have less than two decades implement change.

http://www.dailymail.co.uk/news/article-2613586/Computers-middle-class-jobs-White-collar-posts-law-medicine-accounting-increasingly-threat-says-ex-No-10-adviser.html

"White collar posts in areas such as law, medicine and accounting are increasingly being replaced by computers, according to Rohan Silva, an ex-Number Ten strategist."

[Dave Timoney]

@george hallam, a cultural trope is an expression of ideology, not an accurate representation of reality. Most rich people aren't bored, but it serves their purpose to occasionally claim that they are, or to indulge a minority who pursue it as a full-time hobby.

@aragon, prior to the 1960s, "computers" were people who did calculations. The impact of IT on the workplace has not been to replace accountants with machines, but to expand the scope of accountancy and create supernumerary roles to keep the key electoral bloc (e.g. DM readers) employed.

The roles now being automated are non-qualifieds and para-legals. Meanwhile, marketing execs and CSR managers proliferate. There are jobs, and there are sinecures. The reality of these "two nations" is why I find the praise of work laughable.

[aragon]

Godwin's Law
https://en.wikipedia.org/wiki/Arbeit_macht_frei

End of work.
I grew up reading Asimov, robots taking over work and the consequences.

A Harry Harrison short story (Text and Audio):
http://www.gutenberg.org/ebooks/29204
https://librivox.org/arm-of-the-law-by/

We have been here before:
http://www.amazon.com/Microchips-With-Everything-Consequences-Information/dp/0906890322 (1988)

Mrs Thatcher put people on Disability Benefits, will the same trick work this time how few people can give the Tories (or pseudo Tories) a majority in a democracy?

Working will no doubt be used to justify vast differences in Wealth and Income in the future. Even if it is only trading 'Flemish Paintings'.

http://www.washingtonpost.com/opinions/review-the-second-machine-age-by-erik-brynjolfsson-and-andrew-mcafee/2014/01/17/ace0611a-718c-11e3-8b3f-b1666705ca3b_story.html

"The big winners in this new era will be consumers"

"Brynjolfsson and McAfee are hardly the first to come upon the idea that new technology can lead to higher unemployment and rising inequality."

"Until now, the consensus among economists was that these developments would have only a minor or temporary impact on the economy. Now they are not so sure."

"To deal with what they see as the inevitable increase in income inequality, the MIT duo would turn to a negative income tax, with which the government would assure a minimum income to anyone who works — an old idea now gaining popularity on both the left and the right."

How do you work without jobs? The unemployed disenfranchised?

"In some ways, Brynjolfsson and McAfee practice an older style of economics based more on logic, history and observation than on data and mathematical models. But in other ways, they are pioneering a fundamentally new economics, one based not on the old reality of scarcity but on a new reality of abundance that we are only just beginning to comprehend."

http://www.theguardian.com/technology/2014/apr/27/no-joke-robots-taking-over-replace-middle-classes-automatons

"Put these together and you have technologies that have an in-built tendency towards monopolistic power. They are shaping the world into which we are heading. The inflection point of which David Grossman spoke might actually be the edge of a precipice."

The distribution of power and two nations is not likely to change.

We need to make life acceptable for the people in the second nation, pitch forks at the ready.

Remember we can't afford the poor!

[Socialism In One Bedroom]

Close to where I live, junction 35 on the M1, they are planning to build a motorway service station on a wooded area which is used by the community to walk the dog and wonder at nature. No one wants the service station, hundreds turned up to protest, car users beeped their horns in approval.

But somehow a beautiful wooded area is less valuable than a service station selling shit.

The point is that Marxists should be challenging the very basis of bourgeois economics, not pandering to its differing shades.

“what might appear to be static blocks of wealth have done a great deal to boost dynamic productivity”

Then nationalise the whole bloody lot and direct productivity along Stalinist lines!