There’s Nothing Inevitable Nor Unstoppable About Widening Economic Inequality
A great deal has been written about one of the scourges of our time, the rise of economic inequality in most parts of the world. Much of what has been written documents the phenomenon, deplores it and - as if with a shrug of the shoulders - offers little in the way to remedy it.
As the title implies, “Inequality - What Can be Done?” by University of Oxford professor Anthony Atkinson, not only documents the growing inequality gap of recent decades, but asks why we should care about it and, most importantly, what can be done about it. But the value of this book lies not so much in the recommendations but in the full frontal assault Atkinson makes on the lazy intellectual dogma that inequality is inevitable.
Atkinson hits at the heart of the myth that inequality is somehow impossible to stop
Atkinson’s views deserve special attention not only because he was studying inequality long before it became fashionable, but because he harnesses the evidence to show that political choices rather than economics are at the heart of whether governments should tackle the widening gulf between the very rich and the rest.
Atkinson hits at the heart of the myth that inequality is somehow impossible to stop. He argues that we are approaching levels of inequality not seen for close to a hundred years because of deliberate policy choices made in the 1980s. By that logic, policy can again be used to reduce the gap. Politicians will face difficulties, Atkinson argues, “these constraints leave room for choice. It is not the case that ‘there is no alternative’.”
Atkinson is an economist, and this book primarily concerns itself with economics, but the underlying message is that the path towards mitigating the rise in inequality is political. The first and driest part of the book runs through the evidence, showing that most economically developed countries have become more unequal, taking aim at some of the more popular arguments deployed by inequality sceptics, notably that technology and globalisation advance, remorselessly sweeping aside any attempts by governments to stop them.
The book then sets out 15 “proposals for action” that set “directions of movement” towards putting the UK somewhere in the middle of the world’s most unequal rich countries rather than at the top end of the spectrum. Atkinson notes that change takes time and some policies will be more effective than others.
Still, much can be achieved if we - i.e. governments - put our minds to it. A more progressive income tax system, property and inheritance taxes, establishing a living wage, the re-introduction of a universal Child Benefit would make an immediate impact. The creation of a Social and Economic Council to take into account the social impact of economic decisions, greater power for trade unions or a scheme to make the state an employer of last resort are other notable highlights. Atkinson also points to evidence that suggests that revenue-maximising top rate of income tax is just under 57% leaving “room to increase the top tax rate from its present 45%.”
The final section of Atkinson’s book is a pre-emptive strike against all those who are likely to rubbish his proposals. Armed with a wealth of economic and historical evidence, Atkinson prepares the ground for the clash of ideas or “national conversation” that he says needs to take place. For those saying that Europe can no longer hang on to its social model in this world of globalisation, mobile capital and technological change, Atkinson reminds us that a great deal of the social security measures we take for granted today were implemented between 1881 and 1913, the last great age of globalisation.
governments have the power to shape and tame economic forces that the existing consensus says are unstoppable and inevitable
Similarly, Atkinson says that there is “no smoking gun” to suggest that taking steps to tackle inequality reduces economic growth or reduces “the size of the cake.” Leaving aside the questionable mix of metaphors, Atkinson suggests that much of the existing analysis on the effects of welfare and redistribution is generally too narrow and fails to capture the full economic benefits of such measures.
Taken together, the measures that Atkinson proposes involve raising an extra £31 billion a year in tax and spending just under £29 billion year. That realignment would help take the UK back to where it was before the “inequality turn” that began in 1980. Atkinson refers to such steps as bold, but they pale in comparison to the £200 billion cost (in today’s money) of the government’s sale of local authority housing to tenants since the 1980s.
This says a lot about where the political centre of gravity is today. That voters rejected more modest proposals put forward by Ed Miliband at the last election shows that much persuasion still needs to take place despite the unfinished financial crisis that began in 2008.
Still, what Atkinson does is destroy the myths that make it impossible for us to have a conversation about whether or not we choose to do something about increasing inequality. He shows that we can do things differently if we want to and that governments have the power to shape and tame economic forces that the existing consensus says are unstoppable and inevitable.
Like it or not, we live in a world where food banks are more common than investment banks. The “solutions to the problems lie in our own hands.” Thanks to this book, we should now be able to have a conversation about whether or not we choose to do something about it.
Gonzalo works as an adviser on Oxfam’s inequality campaign. Views expressed here are his own.
About the author
Gonzalo is the founder of Disclaimer Magazine.
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