Opinion: Poverty, equality and solutions

Politicians talk constantly about “lifting people out of poverty”, mending our “broken society”, giving people “equality of opportunity” and, more rarely “creating a more equal society”.

What none of them seem to be prepared to face is the fact that people are poor principally because they have less money than others; and that when poverty goes along with a feeling that it is not going to be possible, whatever one does, to get out of poverty, it does not matter what “opportunities” are provided – poor people will see through the pretence that the opportunities apply to them and will continue to feel themselves a neglected and despised under-class.

Middle class people can be motivated by the prospect of buying a house, traditionally the route to prosperity. They are often helped along the way by parents and grand-parents who, in their day, made money out of house-ownership.

Poor people don’t get parental help. If they have a job, it may well be at or around minimum wage level. Whatever they do, their prospects of getting on to the property ladder are zilch, unless they happen to win the lottery. So they manage as best they can, leave nothing to their children, and exist, in many cases, in a cycle of deprivation from which escape seems impossible. And their noses are rubbed in their plight when they read about the fabulous sums earned by people like bankers, Chief Executives and Premier League footballers.

From time to time we get governments which say they are going to tackle the problem. I believe the present government would quite like to do so. But, terrified by the prospect of upsetting the middle class voter, they run away from the real problem and rely on snake-oil solutions like “trickle-down” (an approach which many political scientists and development economists saw through when it was applied in countries like Pinochet’s Chile) or palliatives like SureStart.

“When I was young, I saw that there are rich people and there are poor people. When I grew up, I realised there are rich people because there are poor people.” These words from the perhaps unlikely source of Evita Peron, seem to me to sum it up pretty well.

So how can we deal with embedded poverty?

It would take a bolder man than I to claim to have a complete solution. But it seems pretty obvious that it has to include raising the minimum wage to a level which would allow poor people to feel a bit more like citizens; raising, rather than lowering the level of inheritance tax, to avoid embedding both privilege and poverty down the generations; and narrowing the gap between high and low earners ( I wonder how long it would take for revolution to break out if all companies were obliged to publish the earnings of the top five per cent of their employees, expressed as a multiple of the lowest salary paid by the company and also as a multiple of the national minimum wage?). That’s for starters. Ending the obscenity that the fees at top public schools are more than the average earnings of ordinary working people might come next, which would mean ending the obfuscatory approach which pretends that all parents will eventually be able to exercise choice in education.

And if all this sounds like bad old class warfare, take a look at that marvellous work The Spirit Level, in which Richard Wilkinson and Kate Pickett show, in a properly argued and footnoted work of real scholarship, that there is compelling evidence that more equal societies produce greater achievement, greater satisfaction and more happiness for all sectors of society. So, fascinatingly, reducing privilege and equalising wealth would probably benefit even those currently enjoying a privileged life. What are we waiting for?

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7 Comments

  • Liberal Eye 11th Mar '10 - 5:43pm

    While I don’t disagree with your basic objective of a more equal society the suggested solution of increasing the minimum wage is surely tackling symptoms rather than causes – treating the spots rather than the fever that causes them. While this might modestly alleviate the discomfort in the short term it is not a cure. Worse than that, by distracting attention from the underlying problem, it allows the problem pathology to continue so the disease gets worse even as the spot cream is appplied ever more thickly.

    This is why Labour has failed so badly measured against its own most basic objectives. Unfortunately Lib Dems also seem curiously reluctant to think about underlying problems. Absent good analysis ‘Good Ideas’ (which we generate by the truckload) are just ideas, as likely to be bad as good.

    Why do so many firms pay their senior staff such eye-watering amounts and their junior staff minimum wage – assuming that their jobs have not been outsourced completely?

    There are many reasons, but one big one is that in too many sectors we have allowed dominant firms to emerge without any justification which enjoy a monopoly or, more commonly, an oligopoly with no meaningful oversight by shareholders. Directorsare then free to pay themselves as they see fit but they don’t actually have to be good managers, only skilled at climbing the slippery corporate pole which is a quite different ability. With politicians not willing for whatever reason to call time on this practice high pay has inevitably evolved into wholeale looting. Thus, as bankers have payed themselves record amounts, they have racked up losses greater than the total cumulative profits of banking throughout the 20th Century.

    Another big problem is the obscene growth in the public sector payroll. In the short term this has addressed Labour’s desire to create jobs, but too many are not real wealth-creating jobs – merely an inefficient way of distributing a shrinking pool of national wealth to a growing class of apparatchiks.

    So, a big part of our thinking needs to be directed to how to shrink the public sector on the one hand and how to make commerce and industry more competitive and vibrant on the other. Do that and a great many other problems will shrink as if by magic. Cure the fever and the spots will go.

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