Review: The politics of anti-inequality

April 24, 2015

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Income inequality is a hot economic and political topic. But Anthony Atkinson, an academic at Oxford, was into it long before it became trendy. He published his first paper on the topic in 1970. Since then he has collected a knighthood and 19 honorary degrees, earned for a distinctive combination of ethical, statistical and practical analysis. His latest book – “Inequality: What can be done?” – is mostly practical.

Atkinson does not hide his bias in favour of greater equality. The book is an unabashed call to reverse the increase in British income inequality over the last three decades. Sensibly, there is more emphasis on helping the poor than on soaking the rich. Of the book’s 15 policy suggestions, 10 are entirely aimed at reducing relative poverty and two others have both pro-poor and anti-rich elements.

The proposals take up most the book, and describing their background and defending them against potential objections occupy almost all the rest. Anyone with a left-of-centre political orientation will find most of the ideas congenial.

Some are familiar, for example more progressive taxes, a living minimum wage and a generous universal child benefit. Others seem to have been hauled out from the back of the old left’s intellectual closet: stronger unions, government-guaranteed employment for all, a state-run investment authority and government savings bonds with guaranteed interest rates. Atkinson also offers a few more contemporary notions: a universal capital endowment, technology policy aimed explicitly at employment, and higher levels of government aid to poor countries.

Despite his personal preferences, Atkinson’s presentation is fair-minded. He provides the arguments both for and against each of his ideas. He also emphasises that what works in the UK, with its particular history and institutions, might not work elsewhere. Still, the book’s universal-sounding title is not really justified by the almost exclusively British discussion.

The bigger problem with “Inequality”, though, is that it fails to address fully some big questions. The first is statistical. Where is the inequality problem? Atkinson’s own data does not show a massive increase in poverty in most developed countries. Even the most basic measure of inequality, the Gini coefficient, has not increased by an amount that he considers salient in Italy, Canada and Japan. It has fallen in France.

The big increases in the Gini coefficient are limited to the United States and the UK. Most of that, as the exhaustive data mining by French economist Thomas Piketty has shown, comes from the extraordinary rise in pay for top executives. If that is the case, Atkinson’s list of 15 suggestions could probably be boiled down to two: higher tax rates on top incomes and some sort of limit on the ratio of highest to average or lowest incomes in any organisation.

The next unanswered question is about the correct role of the welfare state. Atkinson notes that elected politicians in many countries have become warier about ambitious government programmes that redistribute incomes. He does not, though, seem concerned that voters are not demanding a change of course.

The electorate may be blind or selfish, but it is possible that as the threat of dire poverty has receded people want different things from their government. Similarly, unions may have declined simply because many employees find their earnings and treatment at work are satisfactory without recourse to a fairly expensive lobby group.

Finally, Atkinson spends at least 85 percent of this book dealing with inequality within nations that account for about 15 percent of the world’s population. Such an insular approach seemed normal when he started his career and is still standard practice among many of his peers.

But as Branko Milanovic of the City University of New York has pointed out, poor residents of rich countries are much better off than all but the richest residents of poor countries. In such a world, a global perspective is ethically vital to the study of inequality. British politicians could learn much from Atkinson’s book, but a broader approach could bear richer fruit.

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Too much reverence is given in America to the ultra rich. We tend to believe that they are smarter, or harder working people than regular working people. But usually, people that rich are just people who inherited or stole money. Not really all that special. Take them down a notch where ever you find them.

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