Inequality: it will take more than bestsellers to break the spell

Photo credit:   glennshootspeople

May 2, 2014 // By: Faiza Shaheen

It happened when the 2009 book, The Spirit Level, became a bestseller; when the Occupy movement sparked protests in 951 cities worldwide; when President Obama named inequality ‘as the defining challenge of our time’. Now, yet again, I’ve found myself holding my breath – wondering whether the message has finally got through, and governments are actually going to do something about inequality.

You may have guessed what’s got me worked up: Thomas Piketty’s new book, Capital in the Twenty-First Century*. The epic read puts a final nail in the coffin of trickle-down theory, and the ‘rags to riches’ mythology. It sold so many copies last week that even Amazon ran out of stock.

Back in 2008 my manager (also an economist) suggested I stop harping on about income and wealth inequalities because “nobody cares about inequality, its only growth that matters”. Seeing Piketty trending on twitter next to the likes of George Clooney made me realise that a smug email to my ex-manager is long overdue. But I know just what he’d say in a reply: that people may well be interested in inequality, but for all the protests, speeches, bestseller, what’s actually changed? No real policy action has resulted from all the talk and posturing and why should Piketty’s book be any different?

And he’s got me there. The inequality challenge is so huge, so systemic to our economy, that action to tackle it will naturally need to be bold and require a dramatic shift in the status quo. And as such, every time somebody puts forward a proposal – it is automatically labelled an unrealistic pipedream. Just look at the reaction to Piketty’s argument for a global tax on wealth. Most feel a global wealth tax is just too impractical and politically infeasible.

I too have my misgivings: although a wealth tax of some kind could provide part of the solution, I favour strategies aimed primarily at creating a better distribution of capital in the first place rather than relying on state centred, ‘quick-fixes’ afterwards. But the point is, whether it’s global wealth taxes or, as I’d  support, a dramatic ramping up of co-operatively owned businesses and workers’ rights, almost every  proposal out there is likely to be greeted with the same political cynicism and inertia as we’ve seen time and time again in this field.

Is it strange that while the majority accept economic inequality is a huge problem, those in power are still unwilling to take radical action?

Not when you think about it. Addressing inequality is by definition in the interest of the majority, but as we know – inequality also begets inequality. Huge disparities in wealth and power mean that rich and big corporations can affectively make sure the economic system benefits the minority (see Stiglitz on this point). And if action to change the system is labelled a pipedream, it’s because those doing the labelling are precisely those who want the system to stick. After all, the other disturbing outcome of higher levels of inequality is that people, especially poor people, don’t vote.

At a surprisingly quiet launch event at the London School of Economics (LSE) last month I heard the findings of a mammoth 30-country study looking at the socio-economic impacts of economic inequality. One of the key findings, and indeed the point that speakers emphasised over all others, was that higher levels of inequality are strongly associated with lower levels of voter turnout among the poor and wider civic disengagement.

So how can we ensure action on economic inequality is taken? I’m increasing recognising that one vital precondition is to get as many people – particularly the poorest – to vote. This could happen through greater engagement, a door-knocking programme in deprived areas for instance or maybe its even time to consider a Belgium or an Australian style compulsory voting system. If the lower end of the income spectrum voted in greater numbers politicians would be under a lot more pressure to consider policies to address gross inequalities. Without a re-balancing of voter turnout or some sort of wider public push for change, the vicious and self-perpetuating cycle of inequality will persist, no matter how many clever books are written about the subject.

* Everyone who’s anyone involved in socio-economic commentary has been tripping over themselves to review Piketty’s book, so I won’t bother here. But if you want to read a good overview there’s Krugman’s in The New York Review of Books, or Wolf in the FT who provides a useful take on why inequality matters for the economy. James Galbraith outlines the problems with the data and arguments Piketty has used, or for something a little more light-hearted see the cartoon depicting the reaction to the book and this article providing tips on how you could write your very own Piketty review!

Issues

Inequality, Macroeconomics

Inequality: it will take more than bestsellers to break the spell

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