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Work, Productivity and Pay

Wanjiru Njoya, PhD (Cantab.) MA (Oxon.) LLM (Hull) LLB (Nairobi) PCAP (Exeter)
​Fellow of the UK Higher Education Academy

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Inequality, capitalism and freedom

13/7/2017

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If you begin by denouncing capitalism, the problem of inequality becomes quite easy to fix as it is pretty obvious what governments have to do. They must use tax laws to take from the rich and give to the poor.
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Matters become slightly more complex if you begin instead by acknowledging that 'the degree of freedom enjoyed by the community' is very important, and if you therefore take 'the view that wherever possible people should make their own decisions about their lives.' That is where Frank Field begins his discussion of inequality in Britain, and that's a much more interesting starting point than the simplistic 'banish all the bankers' style of commentary you get these days. It introduces an element of nuance and maybe complexity into the discussion, because the very mention of freedom implies that it is not a simple matter of taxing rich people as much as possible and then distributing the spoils.

The notion of freedom is, of course, central to capitalism. The most important feature of capitalist societies is not that there are so many greedy people, but that these societies value individual freedom. In fact, societies where greedy people abound and exploit everyone else with no regard for the law tend to be 'command and control' rather than free market. So while hating on rich people might be highly entertaining and deeply satisfying because it allows us to feel like morally superior Champions of the Poor, the moment freedom is upheld as an important value the debate becomes slightly more complex. Because oddly enough, freedom is for everybody, whether rich or poor. Yes, I know, shocking. This is why Milton Friedman's book is called Capitalism and Freedom not 'Capitalism and How to be Richer than Everyone Else'.

Capitalism is not about how to get rich quick. It's about how to be free.

It is perhaps unfortunate that freedom tends to lead to wealth creation rather than increasing levels of poverty, but the trouble is that the alternatives are worse. Societies that are unfree descend inevitably into chaos and anarchy (Zimbabwe, if you need an example, plus all the other kleptocratic African states ruled by despotic warlords). Conversely, societies that value freedom are among the most prosperous on earth (the United States for most of its history, if you need an example).

The problem with freedom and capitalism and wealth creation is that some people remain poor, and then what? It's difficult to know what to do. The obvious solution is to take from the rich and give to the poor as demonstrated by the great hero Robin Hood, but pause for thought if doing so would undermine the very freedom that produced the wealth in the first place. You can see this playing out on a smaller scale with the Uber debate - people stridently calling for more and more regulation but then suddenly getting a bit confused about where to stop with all the regulation because they don't want Uber to actually be driven out of the market by too much regulation because then who will supply all the jobs? This is a typical example of the 'have your cake and eat it' theory of life which was fictionalised to great effect in Atlas Shrugged.

This is why even those committed to socialism and redistributive social justice would do well to think about the implications for freedom:​

Those who propose major reforms must also address themselves to a central political issue. What effect would their proposals have, if carried out, on the degree of freedom enjoyed by the community? Inequality in Britain takes the view that wherever possible people should make their own decisions about their lives, and not surrender their rights to third parties. But this assertion amounts to nothing more than empty sloganizing unless measures are taken to ensure that all citizens have the resources to choose from a full range of options. 

​Frank Field, Inequality in Britain.
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Absolutely. But public discourse has now become so polarized that it is virtually impossible to discuss both inequality and freedom. Those concerned about inequality care nothing about freedom, while those concerned with freedom care nothing about inequality. Yet there is a way, by trying just a little bit to think about this intelligently, to write about both inequality and freedom.
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