Like climate change, inequality is a global, systemic problem. Both are long-term and because they unfold in such slow motion, are easily pushed off the agenda by more obviously urgent things. And like climate science, our understanding of inequality is moving fast.
It’s been an interesting debate to track over the past few years on the blog, and there have been several key moments. One was the book The Spirit Level, which described correlations between inequality and a host of social problems, from alcohol abuse to depression to teenage pregnancy or obesity. It caused its fair share of controversy, but it started all kinds of discussion. It turned out that inequality couldn’t be safely ignored, as the New Labour project had assumed. There are consequences that affect us all.
The financial crisis also took us a step forward in our understanding. While the economy was growing, the realities of income disparity didn’t seem too pressing. Superficially at least, the trickledown effect appeared to be working. Once the economy stalled and austerity became the order of the day, inequality was suddenly thrown into relief. The richest in society bounced back far more quickly from the crisis, if they were affected at all, while wages stagnated and real wealth declined for most of us. Joseph Stiglitz coined the phrase that caught the imagination, an economy run by and for the richest 1%.
By then it was apparent that inequality could be a serious risk to political stability, as protest movements sprung up around the world. In places like Egypt, where a decade of booming economic growth ended with more people below the poverty line than at the start, the turmoil resulted in full blown revolution. ‘Severe income disparity’ began to feature prominently in The World Economic Forum’s annual survey of global risk.
Inequality was now squarely back on the agenda and attracting some serious attention. The IMF studied it, looking at the links between inequality and growth. Extreme inequality undermines growth, they found – and anything that threatens growth gets attention in a growth economy. A long-standing objection was swept away by an unlikely source. IMF researchers also identified inequality as a major factor in the financial crisis.
Over at the World Bank, analysts were studying inequality in the context of development and finding that inequality slows poverty reduction. Countries with lower levels of inequality were able to lift more people out of poverty faster. The prevailing wisdom that rising inequality was an inevitable aspect of development started to look rather shaky.
This year came Thomas Piketty’s surprise bestseller Capital in the 21st Century, which argues that wealth in a free market economy will inevitably concentrate in the hands of a few, unless government intervention can keep it in check. Again, the book is not without its critics, but if offered important new evidence.
It’s now generally accepted that a) inequality is systemic, b) it has consequences, and c) it can be addressed. Like climate change, the big debate now is about what to do about it.
There’s some positive news on that front. As that evidence has mounted, the number of people discussing inequality has broadened. Importantly, it is no longer a concern heard exclusively from the traditional left side of the political divide. That has opened up new ways to respond to the problem, finally putting to bed the Thatcherite notion that acting on inequality would make everyone poorer.
Proof of that comes in the form of the Confederation of British Industry, not exactly a champion of socialist thinking, whose conference this week is all about sharing the benefits of growth. Their accompanying report, Better off Britain, is a case study in the shifting debate around inequality. It acknowledges the problem, but notes that “traditional ‘answers’ to the question of inequality are not likely to be effective… Instead the goal must be creating a society where growth has the potential to benefit all through a concerted effort to create more opportunities for people to increase their earnings and by growing the economy.”
Obviously the CBI are as wedded to the growth imperative as ever. They’re also trying to get ahead of a Labour government that wants to raise the minimum wage. But my point is not to highlight their solutions so much as their presence in the debate. They recognise that inequality needs action, and that just redistributing wealth is not enough by itself – we need to create an inclusive economy that doesn’t leave people behind in the first place. On that front, they’re entirely right.
As Oxfam’s Even it Up campaign underscored last week, the world remains dramatically unequal and many countries are getting worse. But we know far more than we did a decade ago. We know the consequences of inequality, and we know that we can do something about it. We have actually come a long way in the last decade.
What remains is the fight for change, overcoming the vested interests that protect an economy that serves the richest first. That will not be easy, but today, if you still believe extreme inequality is acceptable, unavoidable and necessary, you are in a dwindling minority.