Economic lie number 4; inequality is good for the system…

The whole Capitalist system is dependent on aspiration, or so we are told. Our Chancellor of the Exchequer has just heralded his 2013 budget as something for an ‘aspiration nation’- seeking to help those who want to help themselves- those who want to own their own houses.

Without the wealth creators (business entrepreneurs) there can be no long term prosperity. All that you will have is stagnation- look what happened in the old soviet bloc countries.

Without greed we have bad cars, cabbage soup and bureaucrats in stone washed denim.

Except that the rich are getting richer, even WITHIN our western economies. This from The Telegraph;

The world’s rich are getting richer. The Forbes billionaire list was published this morning (there are now 1,426 of them globally in dollar terms, with 210 new entrants in the last year), and collectively they are $800bn richer than they were a year ago. Each billionaire is, on average, $100m richer than in 2011, with an average wealth of $3.7bn.

And the poor poorer; The Institute of Fiscal Studies forecasts that, as a result of UK tax and benefit policies, there will be significant increases in child poverty in the coming years. In Scotland alone forecast trends would suggest between 50,000 and 100,000 more children being pushed into poverty by 2020. (See here.)

And what is more, the argument can be questioned even by people on the inside;

There is the opposite argument too- that the more equal societies are in terms of income, the better its citizens seem to do. This from here;

In The Spirit Level Wilkinson and Pickett base their analysis on data from 23 rich countries as well as data from the 50 American states. They say that in the main this shows that the following problems are much more pronounced in countries with higher levels of income inequality.

Health inequalities: At the end of the 1990s there was an average gap of 7.3 years in mortality between rich and poor people in unequal societies. This can rise to as much as 28 years in some American states. They argue that research shows these differences cannot simply be explained by differences in health behaviours.
Mental illness: They argue that ‘inequality is  causally related to mental illness’; that rates of mental illness are five times higher in the most unequal societies compared to the least unequal.  Illegal drug taking is also higher.
Obesity: Unequal societies are more likely to have higher levels of obesity, with poor people most at risk, partly because of the attractions of ‘comfort eating’.  Indeed the rate of obesity is six times higher in the most unequal, compared to the least unequal, societies.
Divorce rates: There have been larger rises in more unequal societies. This then creates more stress for children.
Teenage pregnancy: This is more prevalent in unequal societies. Indeed in the USA the rate of teenage pregnancy is four times the EU average.
Violence: Wilkinson and Pickett argue that the strongest evidence or the negative effects of inequality is violence figures. The reasons for this are explored below.
Imprisonment: Unequal societies are more punitive. People are five times more likely to be imprisoned in the most unequal societies than the least unequal.
Social mobility: Inequality leads to less social mobility. Inequality ‘solidifies the social structure’ and also depresses educational attainment for the poor.
Women’s position: In general women are less likely to be in higher status jobs in unequal societies and they also have worse health than women in more equal societies.

Wilkinson and Pickett argue that the problem of inequality is not just for poor people: everyone suffers. The life expectancy figures even for rich people is lower in unequal societies than more equal ones. The reason they advance for this is that unequal societies have lower levels of trust than more equal societies. This lack of trust leads to more hostility, fear and lower levels of community participation. In this way everyone suffers.

In the data they present the societies which are most unequal, and have the biggest health inequalities and social problems, are the USA, the UK, Portugal, Australia and New Zealand. The least unequal are the Scandinavian countries and Japan.


2 thoughts on “Economic lie number 4; inequality is good for the system…

  1. Pingback: Economic lie no.6; inequality of wealth creates incentive and effort… | this fragile tent

  2. Pingback: Individualism, inequality and your mental health… | this fragile tent

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