Review: Four new books, including Joseph Stiglitz's The Great Divide, look at economic inequality
Special to The Globe and Mail
Published
The Great Divide: Unequal Societies and What We Can Do About Them
Joseph E. Stiglitz, WW Norton, 384 pages, $34.95
A Better Place on Earth: Among the Haves and Have Nots in Super Unequal British Columbia
Andrew MacLeod, Harbour, 256 pages, $22.95
The Globalization of Inequality
François Bourguignon, Princeton University Press, 224 pages, $34.95
Inequality: What Is to Be Done?
Anthony B. Atkinson, Harvard University Press, 400 pages, $37.78
Once
upon a time, not altogether too long ago, we talked about something
called “class.” There was a lower and working class. There was an upper
class. It was understood that these were different groups, with
different amounts of power and different, often conflicting interests.
Eventually, in the industrializing West, the chasm between these classes
grew so great that something had to be done. In 19th-century Europe,
workers formed unions and the modern welfare state was born. In the
U.S., in the wake of the Great Depression, the New Deal massively
expanded public-sector employment. After the Second World War, for the
first time in history, the gap between the rich and poor shrank. These
were essentially conservative developments. The minimum wage, the
eight-hour workday, progressive taxation – all this arose, in part, to
ward off the threat of revolution as the Soviet Union loomed and
anarchists set off bombs. For the upper class, it was adapt or die,
possibly literally.
We don’t talk much
about class anymore. Beginning under Richard Nixon, Republicans in the
U.S. launched the culture wars, decoupling class from income.
Working-class values, oddly, became right-wing values. “Elite” came to
denote aesthetics rather than wealth.
In
the Reagan-Thatcher years, the assault on the welfare state, the war on
organized labour and the dawn of neoliberal globalization began to undo
the fleeting progress of the postwar era. This model was exported to
most of the West. Now, the only class we mention is the middle class,
because, as polls indicate, nearly everyone, no matter how rich or poor,
considers herself a part of it. Instead, we use another term: “income
inequality.”
There have been a lot of
books about inequality lately. This can be traced to three
interconnected phenomena: first, the Great Recession; second, the Occupy
movement, after which mentions of “income inequality” spiked in the
news media; and third, last year’s English-language publication of
Thomas Piketty’s Capital in the Twenty-First Century, a dense
tome that became an unlikely bestseller. Everyone now understands that
the gap between rich and poor is widening, that low and median incomes
have stagnated or declined, and that the vast majority of wealth is
concentrated at the very top.
In the
United States, as Piketty famously documented, economic disparity has
returned to levels not seen in a century; in places such as China and
India, it has skyrocketed even as standards of living have improved,
with the fruits of growth going to a select few. But there is a curious
tenor to this discussion. In a recent New Yorker essay, the historian
Jill Lepore identified it: “In the first Gilded Age, everyone from
reporters to politicians apparently felt comfortable painting plutocrats
as villains; in the second, this is, somehow, forbidden.” Our tale has
no bad guys.
Is this starting to
change? The language of Occupy – the 99 per cent versus the 1 per cent –
avoided the supposedly Marxist overtones of “class” even as it divided
the rich from the rest of us. Former chief economist of the World Bank
and Nobel Prize-winner Joseph Stiglitz unwittingly gave birth to this
slogan in a 2011 Vanity Fair essay called “Of the 1%, by the 1%, for the
1%,” which is included in his new collection, The Great Divide: Unequal Societies and What We Can Do About Them.
Early
in the book, he describes a party hosted by “a bright and concerned
member of the 1 per cent.” The host had brought together an assortment
of plutocrats worried about inequality – but not too worried. “I
overheard one billionaire – who had gotten his start in life by
inheriting a fortune – discuss with another the problem of lazy
Americans who were trying to free ride on the rest,” Stiglitz writes.
“Soon thereafter, they seamlessly transitioned into a discussion of tax
shelters, apparently unaware of the irony.”
For
Stiglitz, this encapsulates the problem. Here, the chief villains are
the plutocrats whose astronomical wealth have isolated them from the
realities of daily life, as well as a political class that has not just
allowed this concentration of wealth, but actively encouraged it. But
none of this would have been possible without a broader ideological
shift, which, in the US at least, resulted in truly poisonous measures:
tax cuts for the rich so extreme that they actually became regressive; a
deregulated banking sector that turned profits from predatory lending
practices into galling CEO performance pay; and, of course, a financial
crisis from which the country has yet to fully recover.
“As has been repeatedly observed,” Stiglitz points out, “all of the economic gains since the Great Recession have gone to the top 1 per cent.”
The
U.S. is the most economically disparate developed country in the world,
and discussions about inequality naturally tend to focus on it. So what
about Canada? In the lively and well-reported A Better Place on Earth: Among the Haves and Have Nots in Super Unequal British Columbia, Andrew MacLeod takes us to the province that is, by most measures, the most unequal in the country.
“Since
1982, after-tax income for the top 1 per cent of British Columbians has
grown by 60 per cent,” he writes. “For pretty much everyone else, the
bottom 90 per cent, that number has remained essentially flat.” This is
the dark side of Western Canada’s runaway growth, and the strength of
MacLeod’s book comes from its attention to life at the bottom of the
pyramid: the almost unfathomable difficulty of surviving on social
assistance; the disproportionate impact of government cuts on women,
people with disabilities and aboriginal peoples.
In The Globalization of Inequality,
François Bourguignon, another former chief economist of the World Bank,
turns his focus even wider, to the paradox of an interconnected world:
even as rising incomes chip away at inequality between countries, inequality within
countries continues to rise. For Bourguignon, globalization’s
ambivalent legacy is the key to understanding the challenge we face: “It
is the background for almost all that has happened. It has changed the
international climate for all national economies and profoundly modified
their structures.”
For an orthodox
economist, this is a dramatic admission: Free trade, technological
innovation and market deregulation have not been the panaceas we were
promised. “In a majority of countries,” he writes, “the conjunction of
these effects has resulted in a significant rise in wage and income
inequality.”
The best of the new crop of books, however, is Anthony B. Atkinson’s Inequality: What Is to Be Done?
Not unrelatedly, it is also the most solutions-oriented. Atkinson, a
distinguished British academic and pioneer of inequality studies, is 70
years old, and at times he sounds fed up. “A number of the proposals
involve the classic measures of progressive taxation and social
protection,” he writes of his ideas, “and I can already hear critics
dismissing them as either boringly familiar or wildly utopian.”
It’s
true that Atkinson’s prescriptions are at once timeworn and, in today’s
ideological climate, almost radical. They amount to social democracy: a
generous welfare state, support for the most vulnerable and limits on
the concentration of wealth and political power.
Atkinson
rattles off 15 worthwhile proposals, but a few stand out. One is that
the state become an employer of last resort, guaranteeing minimum-wage
work to anyone who needs it. Another is a universal inheritance: the
state doling out a set amount of cash to all upon reaching adulthood.
Atkinson’s most compelling idea, however, is something called basic
income. The concept of universal basic income – the government providing
a monthly payment to every citizen, regardless of employment status –
has recently caught fire in policy circles. Atkinson tweaks the idea,
calling it a “participation income” and insisting that it require some
kind of productive activity, such as employment, volunteer work or
education. Other thinkers, however, believe it should be implemented
with no strings attached – a paycheque just for existing in the world.
The
obvious knock against basic income is that it would act as a
disincentive to work. But, during a basic-income experiment that took
place in a small Manitoba town called Dauphin in the 1970s,
labour-market participation decreased only slightly, while key social
indicators, such as high school enrolment and hospitalization rates,
improved substantially. That seems a worthwhile trade-off.
Basic
income is a noble goal and would eliminate extreme poverty as we know
it. But class is a two-way street. Reducing income disparity must not
only involve eliminating poverty; it will also require showing the rich
what it’s like down here, in the real world. To that end, there is an
inverse to basic income that, though discussed less often, is no less
worthy: not only guaranteeing the poor a paycheque, but also limiting
how much top earners can make. “We’ve had minimum-wage laws in much of
the developed world for ages,” MacLeod writes, “so why not set a
maximum?”
In Laws, Plato
declared that no man should be more than four times wealthier than the
poorest member of society. (One can only imagine what he would think of
Canada’s current average CEO-to-worker pay ratio, which stands at
206:1.) “In a state which is desirous of being saved from the greatest
of all plagues – not faction, but rather distraction; – here should
exist among the citizens neither extreme poverty nor, again, excess of
wealth, for both are productive of both these evils,” he said. However
one feels about Plato’s suggested order of magnitude, it is worth asking
how much is too much – what each of us really needs in order to live a
good life.
Extreme wealth is just as
pernicious as extreme poverty; it distorts the political process,
undermines social stability and dampens aggregate demand, since the rich
spend a smaller fraction of their income than the poor. It doesn’t make
the wealthy any happier, and it doesn’t make society any more
productive or just. As Stiglitz points out, today’s superrich largely
earn their money through what economists call rent-seeking; it is no
coincidence that the two richest men in the world, Bill Gates and Carlos
Slim, got that way by creating de facto monopolies, or that the
developed countries with the highest levels of inequality, such as the
U.S. and the U.K., are also those whose economies have become dependent
on the kind of speculative financial activity that led to the 2008
crisis. The existence of obscene wealth in an unequal world is an
affront to any reasonable sense of fairness, and implementing a
100-per-cent tax rate on earnings above a given threshold – one to be
determined by democratic consensus – is the simplest and best way to
rectify this. If no one deserves to be poor, then perhaps no one
deserves to be rich, either.
