Society? Economics? Politics? Personality? What causes inequality?

What Drives Inequality?

by Jon D. Wisman (American)

Abstract Over the past 40 years, inequality has exploded in the U.S. and significantly increased in virtually all nations. Why? The current debate typically identifies the causes as economic, due to some combination of technological change, globalization, inadequate education, demographics, and most recently, Piketty’s claim that it is the rate of return on capital exceeding the growth rate. But to the extent true, these are proximate causes. They all take place within a political framework in which they could in principle be neutralized. Indeed, this mistake is itself political. It masks the true cause of inequality and presents it as if natural, due to the forces of progress, just as in pre-modern times it was the will of gods. By examining three broad distributional changes in modern times, this article demonstrates the dynamics by which inequality is a political phenomenon through and through. It places special emphasis on the role played by ideology – politics’ most powerful instrument – in making inequality appear as necessary.

Source: http://EconPapers.repec.org/RePEc:amu:wpaper:2015-09

Distributed by NEP-HIS on 2015-10-04

Reviewed by Mark J Crowley

This paper was circulated by NEP-HIS on 2015-05-05.  It explores a topical issue in political discourse at present, in which the debate has largely been categorised into two major camps.  First, the Conservative argument, stretching back to Margaret Thatcher in Britain (and simultaneously championed by Ronald Reagan and Charles Murray in the USA) was that inequality was good and accepted by the populace as a way of categorising and organising the nation.  Their argument, it so followed, ensured that those who were at the lower part of society would be inspired to work harder as a means to lessen their inequality.  The second argument that has now experienced resurgence in the UK following the election of the left wing veteran Jeremy Corbyn to the leadership of the opposition Labour Party is that inequality is an evil in society that punishes the poor for their poverty.  The counter argument is that the richer, which have the broadest shoulders, should bear the heaviest burden in times of hardship, and that austerity should not hit the poorest of society in the hardest way.  Thus a political solution should be sought to ensure a fairer distribution of wealth in favour of the poorest in society.  Similar arguments have been made in the US by proponents of increased state welfare.  It is in this context that the debates highlighted in this paper should be seen.

Thatcher and Reagan were the major architects of a change in economic policy away from state welfare.

Thatcher and Reagan were the major architects of a change in economic policy away from state welfare.

This meticulously researched article demonstrates that inequality as a phenomenon has long roots.  Citing that inequality has virtually been omnipresent in the world since the dawn of civilisation, Wisman couches the argument concerning inequality within the wider organisation and economic hierarchy of society.  Building on the argument of Simon Kuznets that inequality, at the beginning of economic development shows vast differences between rich and poor but subsequently stabilises, he looks at other factors beyond economics that contribute to the growing inequality in society.  The heavy focus on political literature examining the impact of politics on rising inequality is especially interesting, and takes this paper beyond the traditional Marxist arguments that have often been proposed about the failures and flaws of capitalism.  Other arguments, such as the impact of the industrial revolution, are explored in detail and are shown to be significant factors in defining inequality.  This runs as a counter-exploration to the work of Nick Crafts who has explored the extent to which the industrial revolution, especially in Britain, was ‘successful’.

Despite the arguments and debates about why inequality exists, there still appears to be no conclusive answer about its cause.

Despite the arguments and debates about why inequality exists, there still appears to be no conclusive answer about its cause.

Ideology is also a factor that is explored in detail.  The explanations for inequality have often been provided with ideological labels, with some offering proposals for eradicating inequality, while others propose that individuals, and not society, should change in order to reverse the trend.  The latter was forcefully proposed by Margaret Thatcher and Milton Friedman, whereas the former was commonly the battle-cry of post-war socialist-leaning parties (most notably the largely out-of power Labour Party of Britain in the post-war period, with the exception of 1945-51 and brief periods in the 1970s).

The religious argument about helping people who are less fortunate than yourself has now become more tenuous in favour of using religion as a form of legitimizing inequality.

The religious argument about helping people who are less fortunate than yourself has now become more tenuous in favour of using religion as a form of legitimizing inequality.

The exploration of religion as a factor is also particularly interesting here.  Wisman argues that providing state institutions with religious foundations thus legitimises their status, and hereby ensures that inequality has a stronger place in society.  This point, while contentious, has been alluded to in previous literature, but has not been explored in great depth.  The section in this paper on religion is also small, although such is its significance, I am sure the author would seek to expand on this in a later draft.

Critique

This paper is wide-ranging, and shows a large number of factors that have contributed to inequality in the western world, especially the USA.  It highlights the fact that the arguments concerning inequality are more complex than has possibly been previously assumed.  Arguing that politics and economics are intertwined, it effectively argues that a synthesis of these two disciplines are required in order to address the issue of inequality and reduce the gap between rich and poor in society.

I found this article absolutely fascinating.  I can offer very little in terms of suggestions for improvement.  However, one aspect did come to mind, and that was the impact of inequality on individual/collective advancement?  Perhaps this would take the research off into a tangent too far away from the author’s original focus, but the issue that sprung to mind for me was the impact of the inequality mentioned by the author on aspects such as educational attainment and future employment opportunities?  For example, in the UK, the major debate for decades has been the apparent disparity between the numbers of state school and privately-educated students attending the nation’s elite universities, namely Oxbridge.  Arguments have often centred on the assumption that private, fee-paying schools are perceived to be better in terms of educational quality, and thus admissions officers disproportionately favour these students when applying to university.  While official figures show that Oxbridge is made up of a higher proportion of state school student than their privately-educated counterparts, this ignores the fact that over 90% of British students are still educated in the state system.  Furthermore, so the argument goes, those with an elite education then attain the highest-paying jobs and occupy the highest positions in society, thus generating the argument that positions in the judiciary and politics are not representative of the composition of society.  These are complex arguments.  This paper alludes to many of these points concerning the origins of inequality.  Perhaps a future direction of this research would be to apply the models highlighted and apply them to certain examples in society to test their validity?

References

Dorey, Peter, British Conservatism: the Politics and Philosophy of Inequality (London, I. B. Tauris, 2011)

Thane, Pat (ed.) The Origins of British Social Policy (London: Croom Helm ; Totowa, N.J.: Rowman & Littlefield, 1978).

Thane, Pat, The Foundations of the Welfare State, (Harlow: Longman, 1982).

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