Thursday, 21 March 2013

Notes On The Spirit Level - why more equal societies always fare better

Last summer I read The Spirit Level and took notes from it. I can highly recommend it. There are a lot of graphs and so probably not best for bedtime reading. That's why I decided to write a blog about some of the highlights.  At the end of the book the authors have added a chapter to answer their critics.

The writers Richard Wilkinson and Kate Pickett outline extensive research in their book to show that more equal societies always do better than unequal ones.  Not only do smaller income differences help the poor, they also help everyone in society.

They looked at all the wealthiest societies and found that it isn't so much inequalities between different societies that do so much harm as inequalities within societies.

Both Japan and Sweden do well on equality. ‘Sweden does it through redistributive taxes and benefits and a large welfare state. As a proportion of national income, public social expenditure in Japan is, in contrast to Sweden, among the lowest of the developed countries. Japan gets its high degree of equality of market incomes, of earnings before taxes and benefits.' 


‘Greater equality can be gained either by using taxes and benefits to redistribute very unequal incomes or by greater equality in gross incomes before taxes and benefits, which leaves less need for redistribution.’

Wilkinson and Pickett, looked at a variety of measures such as: the number of teenage pregnancies, health factors including mental health, friendship and trust,  violence and the consequences of crime eg the prevalence of prisons etc.

Obesity is an interesting one. ‘…In poorer societies both obesity and heart disease are more common among the rich, but as societies get richer they tend to reverse that social distribution and become more common among the poor.’

They found that ‘Friendship and involvement in social life are highly protective of good health, while low social status or…more inequality, are harmful.’  They found that social status and friendship represent the two opposite ways in which human beings can come together. On the one hand, social status stratification is ‘fundamentally ordering based on power and coercion, on privileged access to resources, regardless of others’ needs’.  Friendship on the other hand is ‘about reciprocity, mutuality, sharing, social obligations, co-operation and recognition of each other’s need’.

‘Less hierarchical societies are less male-dominated…and the position of women is better. Similarly the quality of social relations in more equal societies is less hostile. People trust each other more and community life is stronger, there is less violence and punishment is less harsh.’

Wilkinson and Pickett found that ‘dominance strategies are almost certainly pre-human in origin. They would not have been appropriate to life in the predominantly egalitarian socities of Stone Age human hunters and gatherers’ and that 'the current highly unequal societies are exceptional. For over 90% of our existence as human beings we highly egalitarian societies…modern inequality arose and spread with the development of agriculture’.

‘Hunter-gatherer societies maintained equality through food sharing and reciprocal gift exchange and counter-dominance strategies’ 

'Dominance hierarchies are about self-advancement and status competition. Individuals have to be self-reliant and other people are encountered mainly as rivals for food and mates. At the other extreme is mutual interdependence and co-operation…sense of self-worth comes… from the contribution made to the wellbeing of others.’  Ring any bells?  This government's whole Welfare strategy is based on the survival of the fittest.

The authors compare eg Cuba and the States: Cuba, despite its much lower income levels, has life expectancy and infant mortality rate almost identical to those in the United States.

Closer to home, egalitarian policies were implemented by Britain during the Second World War. ‘To gain public co-operation in the war effort, the burden had to be seen to be fairly shared.’ 
 The economist Herman Daly first proposed 'the steady-state economy'.

The authors claim that ‘It would be a mistake to think that a steady-state economy would mean stagnation and lack of change. Parodoxically the transition to a sustainable steady-state economy would create huge demands of innovation and change.’ 

It’s often suggested that invention and innovation go with inequality however evidence shows that more equal societies tend to be more creative. More patents are granted per head in more equal societies.  ‘Whether this is because talent goes undeveloped or wasted in more unequal societies, or whether hierarchy breeds conformity is anyone’s guess.’  

'Working hours vary in relation to inequality.  More unequal countries tend to have longer working hours and also differences in working hours changed in line with changes in inequality over several decades…people in more unequal countries do the equivalent of 2 or 3 months’ extra work a year.’  

The authors also show that ‘inequality weakens community life…the weakening of community life and the growth of consumerism are related.’ 

‘…more equal countries tend to pay a higher proportion of their national income in foreign aid…more unequal societies also seem to be more belligerent internationally.  Inequality is related to worse scores on the Global Peace Index which combines measure of militarization with measures of domestic and international conflict, and measures of security, human rights and stability.’  

‘Politics was once seen as a way of improving people’s social and emotional wellbeing by changing their economic circumstances. But over the last few decades the bigger picture has been lost.’ 

In Britain & US, inequality increases peaked in the early 1990s and have changed little since then. ‘In both countries inequality remains at levels almost unprecedented since records began…' Indeed income differences are now ‘not far short of 40% greater than they were in the mid-1970s’.

Widening of income differences occurred particularly during 1980s and early 1990s in Britain and the USA. Paul Krugman, Nobel Prize winning economist, analyses reasons for rising inequality in the USA…one of the main features was runaway income at the top eg CEOs. Krugman argues that  rising inequality was driven by “changes in institutions, norms and political power”. He emphasises 'the weakening of trade unions, the abandonment of productivity sharing agreements, the influence of the political right, and government changes in taxes and benefits. He could also have added the failure to maintain adequate minimum wage legislation.'

'In USA inequalities rose to a peak just before the Great Crash of 1929, then narrowed so dramatically in the late 1930s and early 40s that the period is sometimes referred to as the ‘Great Compression’. Income differences then remained narrower until the late 1970s or mid 1980s. Then they started to widen rapidly again until just before the recent financial crash where they reached levels of inequality not seen since just before the 1929 crash.'

‘If “market forces” were the real drivers of inequality, it is unlikely that the post-war settlement would have remained intact for 3 or 4 decades…the ending of that consensus was very clearly related to a rightward shift in political opinion. The triumph of the new right extolling the benefits of the free market and the dominance of monetarist economics were enshrined in the political leadership of Reagan in the USA and Thatcher in Britain. Communism had ceased to be a realistic threat and many governments privatised what had been state owner public utilities’

'In Japan there is often a much closer relationship between management and unions…the Japanese Federation of Employers Association found that 15% of the directors of large companies were former trade union officials. In the countries of the European Union the earnings of some 70% of employees are covered by collective agreements, compared to 15% in US. At 35% the UK is among the lowest in the EU.'

‘If you fail to avoid high inequality, you will need more prisons and police, have higher rates of mental illness, drug abuse and every other level of problem…if keeping taxes and benefits down leads to wider income differences, the need to deal with the ensuing social ills may force you to raise public expenditure to cope’. It is perhaps telling that since 1980, in the US, public expenditure on prisons increased six times as fast as education.

In Britain over the last 20 years polls have shown that around 80% of the population has thought that income differences are too big (rarely dipping below 75%) even though most people underestimate how big income differences actually are. 

'It is in institutions where we are employed that we are most explicitly placed in a rank-ordered hierarchy, superior and inferiors, bosses and subordinates.'

'In 2007 chief executives and the largest US companies received well over 500 times the pay of their average employee and these differences were getting bigger. In many of the top companies, the chief executive is paid more each day than the average worker is in a year.’ 

'Denationalization of major industries and the privatization of large numbers of friendly societies, mutuals, building societies, provident societies and credit unions, which had been controlled by their members, may have made a substantial contribution to widening income differences.'

Here is a sobering thought: ‘Numerous corporations are now bigger than many nation states....Other estimates suggest that half the world’s largest economies are multinationals, and that General Motors is bigger than Denmark, that Daimler Chrysler is bigger than Poland; Royal Dutch/Shell bigger than Venezuala, and Sony bigger than Pakistan…these productive assets remain effectively in the hands of a very few, very rich people..’

‘Democratic employee-ownership not only avoids concentrating power in the hands of the state but evaluations suggest it has major economic and social advantages over organizations owned and controlled by outside investors in whose interests they act.’

Studies of how work affects health show that …'people seem to thrive when they have more control over their work. Having control at work was the most successful single factor explaining threefold differences in death rates between senior and junior civil servants working in the same government offices in Britain..probably to do with a sense of autonomy and not feeling so directly subordinated…there is growing evidence that a sense of unfairness at work is an important risk factor for poor health.'

'Employee-ownership increases equality – it is bottom-up rather than top-down…employees might agree that the CEO of the company could be paid a salary several times as big as their own – maybe three or perhaps even ten times as big as their own. But unlikely that they would say several hundred times as big… such huge differences can only be maintained by denying any measure of economic democracy .'

‘Who, apart from the super-rich would vote for multi-million dollar bonuses for the corporate and financial elite while denying adequate incomes to people who undertake so many essential and sometimes unpleasant tasks – such as caring for the elderly, collecting the trash, or working in emergency services?…Modern inequality exists because democracy is excluded from the economicsphere..’ 

'If Britain became as equal as the four most equal rich countries: Japan, Norway, Sweden and Finland, levels of trust might be expected to be two thirds as high again as they are now, mental illness might be halved, everyone might get an additional year of life, teenage birth rates could fall to one third of what they are now, homicide rates could fall by 75%, everyone could get the equivalent of 7 weeks extra holiday a year and the government could be closing prisons all over the country.'

But this has to take the biscuit:

In a major speech at the end of 2009 David Cameron said ‘The Spirit Level’ showed ‘that among the richest countries it’s the more unequal ones that do worse according to almost every quality of life indicator…per capita GDP is much less significant for a country’s life expectancy, crime levels, literacy and health than the size of the gap between the richest and poorest in the population…we all know, in our hearts, that as long as there is deep poverty living systematically side by side with great riches we all remain the poorer for it.’ 

So what happened, Dave?


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