Tim Worstall

Michael Meacher on Inequality

Something of a surprise here, Michael Meacher is actually quite cogent. I’m not saying that I agree with him, rather that he builds a logical case, there is indeed some evidence to support it and it is all in general less fruit loopy than his normal output.

In a nutshell his argument is that:

…the Government’s ideological commitment to unfettered market forces,
neo-liberalism and globalisation has certainly let inequality rip.

…and that such a rise in inequality within UK society increases crimes, reduces health care outcomes (ie, Polly’s inequality kills !) and in general militates against a decent society.

It’s possible to have a few minor quibbles, for example, he really doesn’t make clear whether he’s talking about the pre- or post- tax in comes of the top groups (as an aside, it looks like someone has redone the Picketty and Saez figures for the UK)…something really quite important as tax rates have risen in recent years. Also, he’s perilously close to stating that because the poor have gained at a lesser rate than the rich (ie, inequality has increased) that the poor have not gained at all. That latter is not something I believe is true, real incomes have in fact risen across the board (although I’m happy to be corrected there).

However, let’s accept his case. Free markets, globalization and neo-liberalism have indeed increased inequality within the UK (something I’m perfectly happy to believe BTW). We are also told, in other places (Xavier Sala i Martin for example, Paul Ormerod another) that global income inequality is falling, as that trio of free markets, globalization and neo-liberalism drive growth in the poor parts (although alas as yet not in Africa) of the world. Chinese manufacturing wages have been  rising by 14% a year for the past 8 in real terms….hundreds of millions of Indians and Chinese are moving into the middle classes,  absolute poverty (less than $1 a day, less than $2 a day, take your pick of the measurement) is falling both in gross numbers and as a percentage of global population.

That latter bit we probably think is a good thing, don’t we?

So we can then ask two questions: the first, which problem do we want to solve more? The absolute poverty of hundreds of million, even billions, of our fellow human beings, or the relative poverty (the inequality) of the few tens of millions who share our Isles? We’ve already agreed that the same process will solve one at the expense of the other, so which should we aim for?

The second is really rather putting the same question into a more objectionable form. The desire to see an equality of outcomes is, at least as far as I am concerned, one of the defining elements of socialism. So are we to be good international socialists, acknowledging that all humans are indeed our brothers and sisters, all are indeed of equal moral value? Or is it that those geographically closer to us have a superior call upon the common weal?  That is, that we not only all have to be socialists now, but that we all have to be national socialists?

In

6 responses

  1. Barry Bethel Avatar
    Barry Bethel

    Boom tish!
    Merry Winterval, comrade.

    Reply
  2. Kit Avatar
    Kit

    If we look at the poor they mostly share the same characteristics: illiterate, unskilled, poor health, and trapped in ghettoes. Remind me who is responsible for education, health, and social housing? So naturally the blame lies with the rich not with government miss-management.

    Reply
  3. Jim Avatar
    Jim

    “absolute poverty (less than $1 a day, less than $2 a day, take your pick of the measurement) is falling both in gross numbers and as a percentage of global population.”
    Er, no. You really need to acquaint yourself with the actual facts on this subject. According to the most widely accepted stats (Ravallion and Chen’s “How have the world’s poorest farest since the early 1980s?”), the number of people living on $2 or less a day rose globally and in every region of the world except East Asia between 1981 and 2001, including a pretty steady rise of around 200 million in India. Numbers in $1 a day poverty has fallen a bit in India but not very much. Percentages in poverty are down but everyone agrees that if you take China (especially) and India out of the calculation then the reduction in global poverty rates mostly if not entirely disappears. This is important for your argument because only a madman would describe China and India in the 1980s and 1990s as ‘neoliberal’ – in fact, poverty has been reduced more slowly or not at all in more liberalised countries.
    Secondly, trends in true global inequality are unclear (see Branko Milanovic on this point) and Sala-i-Martin gets cited by free-marketeers because he is pretty much the only expert who thinks inequality is unambiguously falling, never mind the rather interesting methodological assumptions he has to make in order to arrive at this result.
    More importantly, inequality isn’t just rising in rich countries (in fact, I’m not sure there really has been a particularly clear trend in the UK in the last ten years), it’s also rising, in fact seems to be rising quicker, in poor ones. This is important for two reasons – first, the rise in inequality in poor countries has been pretty strongly linked with globalisation, and secondly this rise has put a big dent in poverty reduction because it means less people are lifted out of poverty for each dollar increase in average income. China has experienced a huge increase in inequality, which is probably why poverty reduction seems to have slowed so much despite enormous growth – Ravallion and Chen say the $1 a day poverty rate fell from 33.0% in 1990 to 17.4% in 1996 but to just 16.6% in 2001.
    So in summary it looks like neoliberalism hasn’t brought higher growth to most countries and the more countries like China seem to be moving in that direction the more unequal they become and the slower poverty is falling. That’s why even the World Bank is now saying that you need to tackle inequality head on with more redistribution and more state investment in education, infrastructure and so on. I suggest we finance all this with a global tax on the super-rich wherever they are – USA, UK, Bahamas, Brazil, South Africa. There’s globalisation for you.

    Reply
  4. Kit Avatar
    Kit

    Jim, what is wrong with having inequality? Poverty is terrible but inequality is just a product of more people becoming wealthier.

    Reply
  5. Gene Miller Avatar
    Gene Miller

    Jim,
    “Percentages in poverty are down but everyone agrees that if you take China (especially) and India out of the calculation then the reduction in global poverty rates mostly if not entirely disappears.”
    If we are going to play fantasy land and exclude approximately 40% of the global population when looking at individuals rising out of poverty, ok.
    Let’s look at future oil production and supply without including OPEC countries.
    Let’s look at climate change schemes without worrying about including those pesky Americans.
    How about a look at tsunami aid without including contributions from North America and Europe?
    Discounting reality, let’s see what the situation is……
    Kudos for not being afraid to call for a global tax regarding your income redistribution scheme.
    From each according to their ability, to each according to their need?

    Reply
  6. Haute Monde Avatar
    Haute Monde

    Singing from the same hymnal ?

    Tim Worstall takes a look at ‘inequality’ brought about by globalization and delivers up quite the set of questions for the socialist elite among us:

    Reply

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