Equality in Britain: why and how

People use the terms ‘right’ and ‘left’ in different ways. For me, to be on the left is, loosely, to think that many of the inequalities we live with are both damaging and unnecessary. For those on the left, ‘equality of opportunity’ as the right understands it is not enough: inequalities due to luck, ability or inheritance – which the right is happy to accept – are also, in principle, to be reduced.

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Why care about equality ? Answers differ. From my perspective, the freedom that matters most is the freedom to find, develop and follow things one passionately wants to do for their own sake. Equality matters because it can help to make that freedom possible, not only for a privileged or gifted minority, but for everyone. (The subjective counterpart to the aim of equality in objective conditions is the egalitarian wager that everyone is capable of finding such passions. There may be natural followers, but there are no natural slaves).

This conception of equality, based as it is in freedom, allows differences in outcomes due to different inclinations to work. If some people want to earn more money by working harder – for instance, because they have something they want to do for which they need the money, this is not the kind of inequality we should object to. Similarly, some activities are characterised by competitive excellence; there is nothing wrong with some people being better scientists, artists or athletes than others, though ideally such excellence would not need special remuneration; it would be its own reward.

It also raises kinds of inequality that statistics don’t catch. Two people may have the same job and the same income when one person loves their work and the other is miserable in it. That’s a form of inequality that matters hugely but won’t be spotted in the economic data.

There are many egalitarianisms. This is one of them.

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Why equality not just growth ? There is an argument that says: redistribution may produce a one-of jump in incomes for the poor, but growth increases them steadily, without limit: so in the long run growth will deliver more to the poor than redistribution.

I don’t believe it’s necessary to sacrifice growth to equality: a more equal society could be a fast-growing one (though there might be some cost from the process of transition). I cannot prove this, but I can say that there is no reason at all to claim that the particular level of inequality we live with is good for growth.

And inequality, I believe, contributes to the distortion of choices. Passions for doing things for their own sake get crowded out by competitive consumption. Preferences adapt to social inequality. (Note also: even if measured income inequality doesn’t change, prices may move against the poor. Rents, in particular, tend to outpace other prices during economic growth). So that even if growth were to raise low-level incomes as much as redistribution, it might not improve lives as much.

Increased incomes in rich countries have done less for wellbeing than they should have done. Why ? because, I suggest, they have not improved people’s relations to the activities they perform. And why is this ? In part, I suspect, because of inequality. Young people in rich countries now feel the same pressure to ‘sell out’ – to make themselves safe by renouncing their most interesting aspirations – that they faced forty years ago.

Also: inequality is both different and worse than economic data suggest. One can look at measures of income and see a continuum. As if rich people lived in nicer houses and went on better holidays but basically lived much the same lives as everyone else. And that is, roughly, what the right would have us believe (except when they get onto the ‘underclass’). But people’s relation with their work generates a difference in kind that is not fully captured by any quantitative measure. And that is not, I think, getting better.

In Britain, measures of income inequality jumped in the early years of Margaret Thatcher and show no clear trend since then. I suspect (though I’ve not checked) that this is because governments have used taxes and benefits to protect lower incomes from an underlying increase in pretax inequality. The current government shows every sign of wanting to change this. One caveat is that measures of income inequality usually do not factor in the effects of changing relative prices. The spending of the poor is concentrated in food, fuel and housing and if the prices of these things rise they can get relatively worse off even with no change in measured income inequality. (For renting households in London this is painfully obvious).

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If you care about inequality in general, should you care about inequality within a rich country, given that poor people in rich countries have more than most people in poor ones ? This question is often ignored, but deserves an answer. Four thoughts here. First, our political institutions are still mainly national; this is the domain where our politics has most immediate purchase. Secondly, we are better placed to understand the inequality in our own society than elsewhere. Thirdly, whether we like it or not, the actions of rich countries tend to serve as a model elsewhere: an internally egalitarian politics here can inspire similar things elsewhere. And fourthly, nothing stops us thinking about the international effects of our internal policies as well as the local ones. We should promote equality internally, but not at the expense of international inequality.

But note one catch: those who benefit from equality within a rich country may stand to lose from international equality. Bare class interest (or indeed generational interest) is never a sound foundation for egalitarianism.

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The victory of the right in this election, where 50% of the voters chose clearly right-of-centre parties, might suggest equality is out of fashion. But many opinion polls suggest people mind quite a lot about inequality, and want to see it reduced. The most egalitarian policies of the Labour party reportedly had widespread support. But too many people don’t trust the left to reduce inequality without damaging the economy, or the constitution, or something. The concern about inequality is masked by the Ukip vote: Ukip are, in most respects, clearly a right-wing party, but they have managed to convince many people that they stand for the interests of the indigenous working class.

I think part of the problem is that the left speaks in code. Tony Blair’s discouragement of talk about equality may have helped to soften the voice of the left, but it left the left unable to articulate what it actually believed. The left needs to speak explicitly and clearly about equality and be imaginative in the approaches it takes to promote it.

Another other part of the problem is that many people believe our existing institutions are redistributing to the wrong people; benefits are going to the lazy, feckless and recently arrived rather than the hard-working indigenous poor: and costly housing in London is being subsidised for people on benefit when others cannot afford to live in London. The right has done much to foster these beliefs, but they are not simply a product of a right-wing view; they actively push people into the arms of the right. Some of them can trouble egalitarians as well as conservatives. The left needs to address them.

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What political action might the left propose to reduce inequality in Britain ? A myriad things, of course, but it helps to have some way of organising one’s thoughts. I suggest four broad approaches.

(a) Change macroeconomic policy; either run a higher deficit, or raise both spending and taxes. In the middle of a recession, those who lose their jobs are likely to suffer most sharply, and usually they are among the less well-off. There is a pretty good argument that the cuts in public spending the Coalition introduced pushed the economy back into recession unnecessarily. The Tories ‘won the argument on the deficit’ by converting a private sector financial crisis into a panic about the public sector finances (possibly with the active help of friendly bankers) and used this as a (ropey) argument for immediate deficit reduction. The ‘monetarist’ policies of the 1980s, which combined tight public spending and right money, sharply and permanently increased inequality; the current fiscal consolidation has been accompanied by low interest rates, so things are not so clear, because the lower interest rates reduced some affluent people’s incomes quite steeply (and also because the financial crash hit a relatively affluent sector). The government’s macroeconomic performance has been poor: the recovery has been slower than it would have been under a more expansive strategy. But there are reasons for the left not to put too much weight on this. A higher debt reduces freedom of action in the future. Even higher recurrent spending can effectively bind future action. The more radical the left wants to be in the future, the less it should aim to bloat recurrent spending now.

(b) Change the pattern of spending and taxes within the budget. (I’m not sure how far those who attack ‘austerity’ are thinking of this or of (a)). The last Labour government did some good things with tax credits. The Coalition was cynical in its approach to public expenditure. A government unable to cut as much as it wanted at the centre pushed cuts onto local government in the knowledge that this would cut some of the services the poorest people depend on. Some of these services desperately need funds; if we are going to encourage people on disability benefit to do some work, then it’s going to involve putting money into actually helping them rather than the current sadistic incompetence (see here). An education system that did more to promote students’ own passions might be able to cost less and do more good, as might a health policy that focused mainly on prevention. Taxes could be much more progressive than they are; the mansion tax was a rather crude gesture in the right direction, although international action may be needed if the very rich are going to be taxed effectively.

But there is a catch here. Some of the spending that protects people against poverty is benefits. Benefits to those in work can end up subsidising low pay in the private sector. Benefits to those out of work are widely perceived as subsidising idleness and demoralising those who receive them. Housing benefit is thought to subsidise those with expensive tastes in location: why can’t the poor simply move to a cheap part of the country ?

There is no simple answer to these arguments. In some cases, they define differences between different forms of egalitarianism. The left has to do a mixture of three things. First, correct some of the prevailing misinformation; for instance, point out that most benefits are pensions or in-work payments. Secondly, make the case for some of the stigmatised groups under attack. Single mothers bringing up young children can hardly be said not to be working. Shifting the poor out of London breaks the local social bonds that have traditionally sustained people’s lives. Most immigrants work hard and contribute fiscally. Most of us might end up in the same boat. Etc. And thirdly: find ways to achieve the same objectives with different mechanisms. Which brings us to:

(c) Intervene in markets. Impose minimum wages, control rents, and freeze or control energy prices. There are good arguments for much of of this. Markets are already distorted, so that these interventions need not always create inefficiency. The minimum wage does not seem to have reduced employment much if at all, and in its absence the government effectively finds itself subsidising low-wage employers through the benefit system. The same may well hold for rent controls in an overheated housing market where councils are paying housing benefit. And some of this is popular; the minimum wage has stuck. But there are limits to how far all this can go.

A more dramatic intervention is the reduction of the working week: something that has been tried in France. I think there is quite a strong case for this in the long run. (Working hours should in the end be for individual choice: but there is a fairly strong social norm shaped around the idea of full-time work).

One thing the right proposes is to restrict immigration, with knock-on effects on the labour and housing markets. Whether or not this is effective at reducing inequality within Britain (it depends partly whose immigration is restricted) it may well increase inequality across countries. And the kinds of immigration that may harm exporting countries – like the brain drain of skilled health workers – are precisely those we can’t afford to cut now. Immigration policy already discriminates substantially against the poor – who are, for instance, not allowed to live here with their spouses if their spouses come from outside the EU. (No wonder Theresa May dislikes the protection of family rights in the Human Rights Act; the breakup of families is a daily consequence of the government’s immigration policy). I would like a world, eventually, without travel restrictions; to use immigration controls now as an egalitarian policy is basically obnoxious.

(d) Redistribute wealth. One approach here is to keep the existing structures and make a one-off transfer of assets to the poor. To do this on a large scale would require a revolution. Worse, it would not permanently solve the problem: over time similar inequalities would re-emerge.

There are other, somewhat less dramatic but more structural, approaches to redistributing wealth. Three possible models are worth pursuing:

- increase socially owned assets of direct benefit to the poor. One major example is social housing, but there are many other possibilities. One might also formally recognise the elements of property rights implicit in long-term tenancies: if these were recognised it would be harder for the poor to be expropriated.

- use taxation to buy a public stake in private enterprises, like Norway’s sovereign wealth fund, and pay every citizen an unconditional income out of the proceeds, as Alaska does with its oil revenues. This would help to free every citizen to pursue their interests and potentially transform the security and bargaining power of those in work. It would also reduce the need to pay benefits conditional on not working- an institution simultaneously demoralising for its beneficiaries, resented by others, and perverse in the incentives it creates.

- move towards worker ownership and management of most large enterprises. It is often wrongly thought that if cooperatives are efficient they will flourish in the market. But successful firms, almost by definition, generate ‘supernormal’ profits that give insiders an incentive to keep ownership concentrated. If cooperatives are indeed efficient, it may take active intervention to promote them.

Basic economic theory offers some support to this general approach; asset transfers, in the simplest economic models, are the best way to reconcile equality and efficiency. The last Labour government made a small move in this direction, in the form of child trust funds, which were abolished by the Coalition at the earliest opportunity. The Greens at the last election put the idea of a universal unconditional income on the table. I think this form of action is in the long run the most promising for the left – especially the left that takes freedom seriously.

Note that all these proposals retain a central role for markets in achieving efficiency. No society of any sophistication has done without markets; but all complex societies have both provided a framework for them and restricted their operation in certain areas – some, like the Soviet Union, more than others.

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What would all this mean for economic growth ? The changes I am advocating are designed to free people from drudgery, and there may be a one-off drop in labor supply as a result. And the process of transition could be costly. But the economy I am describing need not be any less efficient or innovative than the economy we have. Nor need it save and invest any less, though more of that investment would be socially financed (and the overall savings rate might need to become a parameter of public policy).

That said, I see two reasons why we should not only expect but want a period of low or negative growth in Britain. First, people are working much too hard at jobs they do not love. Secondly, we are living off immoral earnings. Our wealth depends on burning fossil fuels: on selling weapons to belligerent dictators: on servicing the US military: on providing financial services that may be benign (insurance), are of uncertain social benefit (much speculation) or are positively harmful (advice to international companies on tax avoidance): and on cashing in on intellectual property that should really be a public good. All of us benefit from this, through public services and often through pensions. We need to think again about what we mean by ‘the economy’. (Another reason to be cautious about public borrowing).

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What would this imply for political strategy on the left ? I suggest the following.

Time frame: we live in an incremental system. What we need is to find a way of shaping incremental actions in the light of a long-run vision. That this is possible was demonstrated by Margaret Thatcher.

Division of labour: you need a left radical enough to speak for the long-run vision, but it need not be in power (though the Thatcher example suggests it may) if the ideas themselves can percolate out. What this does require is that the left not be silenced or systematically excluded as in the Blairite project. The machine of a broad-left party must allow the more radical left to keep its vision alive. (A change in voting system could help, so that votes for parties further left are not wasted).

Scope and location: politics need not be restricted to the electoral system. The development of cooperatives may both require and foster a politics of the workplace. There is a local politics of the housing market, in which protests and resistance have had some effect. There is a politics of the school, which could expand children’s ability to pursue their own passions.

Emotions: The left has never been mainly about envy, as the right claims (just as the right is fuelled much more by resentment than it admits). But the left has at times sounded as if it was mainly about indignation. The vision outlined here has more to do with liberation and hope: not just for the poor, but for everyone whose life is alienated from them by the workings of the economic system.

Alliances: the ideas presented here can be inspired by left-wing ideals, but they are not the property of those who put themselves on the left. A universal unconditional income, for instance, might get support on the right: Milton Friedman was prepared to countenance a negative income tax – not the same thing, but related.

Language and framing: the right will immediately mock much of the above, and the left needs constantly to fight at the level of language (as the American linguist George Lakoff has argued). Why, for instance, should we fall in with the right’s equation of ‘business’ with the interests of owners rather than workers ? The left, however, needs to pick its fights carefully. The attack on’austerity’ has gained a lot of purchase, but if my argument above is right, it conflates different issues and could actually impede a more radical politics.

Lucidity: however benign and sincere individual conservatives are, their party does have an essence. The conservative party is a vehicle by which those with property protect it from those without. It is aided in this by the right-wing press and the financial institutions. Neil Kinnock, Gordon Brown and Ed Miliband were both mocked and represented as dangerous not because they were stupid, incompetent or weird, but because they represented a challenge to the interests of property. (A mild challenge in all cases: but stamping on them helps make larger challenges unthinkable). The left has not found a way to overcome this obstacle: a start, though, is the awareness of what we are up against.