Robin Hood took from the rich to give to the poor. Fixing inequality within the local surrounds of Nottinghamshire was clearly achievable. All it took was a straightforward system of mandatory redistribution enforced by a band of merry men. But today it is often said that foreign aid programmes take from the poor in rich countries, to give to the rich in poor countries. Inequality between countries is therefore a complex thing to fix. Poor people in poor countries are increasingly better off as they close the global inequality gap, but poor people in rich countries (so, not poor poor in a global sense but poor by rich-country standards) are falling further behind their wealthy neighbours in the local inequality stakes.
Measuring executive pay ratios is an enormous waste of time and effort, especially when you consider that we could, instead, decide to measure something much more enlightening such as corporate productivity. Then at least our metrics would give us something to celebrate. Instead, the equality industry expends a huge amount of energy measuring the multiple by which CEOs earn more than the average worker so that they can regale us with shocking reports about how much other people earn.
There are two kinds of equality – formal equality and substantive equality. The idea that all men are born equal expresses formal equality, and everybody agrees with that. No problems there. But the idea that everybody should have the same amount of wealth expresses substantive equality, and not everybody agrees with that. Why should people be equal in relation to the amount of stuff they have? Why is it unfair for someone else to have more stuff than you?
Basic human liberties such as freedom of speech, freedom of conscience and freedom to acquire and hold private property are more important than economic prosperity in an abstract sense.
Early last year one of my academic colleagues emailed me with an update about conditions in the UK today being worse than the Black Death which killed up to 60% of Europe’s population. Because inequality. This was in the aftermath of news headlines announcing the advent of tough times ahead: ‘UK workers set for worst pay growth decade since the Napoleonic Wars.’
One of the most interesting features of the inequality debates is that one side puts forward rational arguments while the other side puts forward emotional arguments. Saying that you already have a lot of stuff but you feel bad that someone else has much more stuff than you is an emotional argument, and it cannot be met with rational replies. Appeals to ‘fairness’ in this context are just a way of expressing feelings (feeling very angry about all the unfairness) – if people feel that something is unfair there is no rational argument on earth that will make them stop feeling that it’s unfair.
Capitalist free markets do not generally create a situation where everyone has the same amount of stuff. Sadly, progress tends to yield unequal outcomes. Enter the welfare state, a creature of most modern capitalist economies. The idea is that taxes will be collected to create a repository of public funds to provide a safety-net for the poorest and most vulnerable in society. Thus the welfare state would be expected to meet the costs of unemployment insurance and pensions for those who found themselves cast on the heap when the company they worked for goes bust.
When people support notions of economic equality it's not always clear exactly what they have in mind. In Capitalism and Freedom Friedman challenges us to think about the meaning of 'equality' in the context of a market economy. If we are to translate the ideals of equality into reality we'll need a conceptual framework that's a bit more sophisticated than 'everyone having the same amount of stuff' or 'paying everyone the same wage'.
It's official. The Economist reports that America is the country where people care the least about inequality. Many Americans care about inequality, sure, just not as high a proportion as, say, the number of people in Sweden or just about any other rich country where people care very much about inequality and have the high taxes to prove it.
The real meaning of poverty is not having enough money to allow you to participate in the social life of your community. These days poverty does not mean having no food to eat; it's more about having no money to keep up with the Joneses. The idea of social inclusion as a fundamental human right introduces a whole new meaning of Deprivation and Want.
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