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
“Reducing privilege” would do the most towards “equalising wealth” without any of these additional interventions like raising the minimum wage (a.k.a setting a floor on employment and ensuring a steady pool of unemployment enabling capital to maintain its upper hand over labour) or publishng peoples’ incomes (what a horribly intrusive idea).
But “reducing privilege” is not achieved by increasing interventions. You see that is what privilege is, by definition. Intervention by the government on behalf of particular interest groups. So to “reduce privilege” you really need to reduce state interventions that advantage people, not allow those privileges to build up and then add yet more of the heavy hand of the state to try and redress those previous injustices.
Think “liberal“
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.
“there are rich people because there are poor people” is only true in as much as poverty is now defined such that it is synonymous with inequality. If the lowest quartile had a GDP per capita of £30,000 a year they would count as poor if the median income were over £50,000, even assuming that those sums provided the same standard of living today.
More generally, the idea that “there are rich people because there are poor people” is part of the Marxist exploitation theory that assumes that wealth-creation is a zero-sum business; that one can only profit if another loses. That is simply not true and flies in the face of 250 years (and more?) of liberal thought.
You are utterly correct, however, to note that “when poverty goes along with a feeling that it is not going to be possible, whatever one does, to get out of poverty… poor people will… continue to feel themselves a neglected and despised under-class.” It is therefore desperately important that poor people are free to improve their welfare.
That is not achieved by raising the minimum wage, however, as that merely makes the least productive members of society unemployable. If one cannot produce work of value higher than the minimum wage, one is unemployable. A particularly good example of this was when
Evan Davis found work for three unemployed people on an asparagus farm. The asparagus they picked in a day was worth less than the farmer was legally allowed to pay them, so he was losing money by employing them. Few jobs are that easy to quantify, but in general it is the least productive who suffer as a result of minimum wage laws, as a result of which they not only can’t get work but (consequently) can’t improve their productivity or gain more skills as time progresses.
On a more general note, economic freedom promotes both economic growth and equity and the poorest in society have far greater absolute wealth in economically liberal countries.
The Spirit Level is alluded to in our motion on “A fair start” that we are debating at conference this weekend. See lines 21/2, “Unequal societies function badly for all their people, with poorer standards of health and education, higher levels of crime and weaker communities and political institutions”.
Has any libertarian proposed to amend this? Maybe, but I would be very surprised. Just like the Real Women debate, the amendment to remove airbrushing was defeated overwhelming. Yet look on the internet and it seems is though the party is full of libertarians who think nothing should be done, because whatever happens in society is done voluntarily, apart only from when the state intervenes.
Well I am pleased to say that David Laws appears to take the Spirit Level a lot more seriously, partly no doubt as he has read it, and I think the vast majority of the party will accept if findings and develop policies accordingly.
Sheesh Geoffrey, you just don’t get it do you?
Why on earth would a libertarian want to amend something like “Unequal societies function badly for all their people, with poorer standards of health and education, higher levels of crime and weaker communities and political institutions”, pray tell me? Well, except for the last three words – I’m all for weaker political institutions. You think we laud an “unequal society”? The claim we make, by and large, is that it is the state, past and present, that is the biggest contributor to that “unequal society”.
You believe we think that “nothing should be done”? What nonsense. We want to thoroughly dismantle the complex web of privilege and patronage through which the state operates that “unequal society”.
The difference between our positions is relatively simple Geoffrey. You, Stephen here, and a lot of others to be sure, seem content to leave the really distortionary privileges in place, to allow the beneficiaries to take advantage of these state granted injustices, and then try to compensate I, and most, probably all, libertarians I know, have met or have read, want to eradicate these injustices that allow such vast disparities of wealth to arise in the first place because they are at the root of what enables the wealthy and well-connected to exploit the poor.
Your approach allows state protected injustices to flourish and then tries to correct the inequitable outcomes (how could they be any other than inequitable rooted in injustice) with yet more injustices – the taking of people’s property by force agnostic about how it was gained. Mine seeks to eradicate the first injustice first.
Two wrongs don’t make a right was never more true.
Yours is always going to be an uphill struggle, get more expensive and so perpetrate ever greater injustices to put right, until eventually it cannot be afforded at all, or until the pips don’t just squeak but fight back And all the while it will increase the dependency on favours from the political rulers.
Mine is liberal. It sets free from dependence. Some might even call it courageous, to threaten such entrenched privileges of immense power. But for all its claims, not even majoritarian “democratic” power has bothered even to try. We think it ought to have the power, backed by the people, to do so, but in reality it is just as hand in hand with the privileged few as ever it was. We are being conned, and you, Geoffrey, wittingly or not, are part of that con.
What I read from Libertarians is that they do not care if we live in an unequal society, although libertarians in the Lib Dems will claim as Tom does that what they do want in the UK is for an absolute increase in wealth for the poor.
What has been identified in the Spirit Level is that inequality causes a stratification of society which causes social problems and makes our society illiberal. My main argument is with those who argue that relative inequality does not matter. I believe most of the party believes it does matter. Those who do not should advocate removing those lines in the motion I referred to previously.
As far as Jock is concerned, I “don’t get it” because I do not agree with where he is coming from ideologically. Jock will know better than me because I read different book, but I am not aware that Friedman, Hayek Ludwig Von Mises, The Adam Smith Institute or the IEA have ever been at the forefront in the campaign for greater equality, and it is hard to imagine the latter 2 think tanks would have commissioned the research done by Richard Wilkinson and Kate Pickett.
And yet I am informed that I do not need to be informed of real life examples of where no-state societies have led to greater equality, it is “axiomatic” that they will. Somalia does not count as a counter-example because of the “foreign interference”, although when I Google search on this matter what I find is an inability of foreigners to interfere in that country.
So my opinion of Jock’s position is that the intention is good, but the evidence is lacking and his ideological allies do not agree with him.
Geoffrey, Geoffrey, Geoffrey, I really couldn’t give a yellow rubbery one whether you *agree* or not: it is that you *wilfully* misrepresent the libertarian position that bothers me.
Play the ball, not the man, there’s a good fellow. Tell me why you are content to see these state protected privileges flourish only to have to come up with ever more expensive and intrusive measures to redress them.
I suggest you read something like Benjamin Tucker’s “State Socialism and Anarchism: How far they agree and wherein they differ” (it’s only a few pages, not a vast burden) rather than simply make up whatever corps of bogey men you want to project us all as worshipping.