Ed Miliband is right and wrong about poverty

There is now a consensus—not a belief, not an hypothesis, nor a policy position—but a consensus among informed observers that excessive social and economic inequality is a danger to society. There is a further consensus that, while a certain degree of inequality is desirable to encourage enterprise, wide inequality is not an inevitable outcome of economic processes, but the result of conscious choice in economic policy. If both are right, it follows that the threat to society posed by excessive inequality can be averted by public policies designed to reduce it. So the answer to the question “Can we render inequality less iniquitous?” is, as someone once put it, “Yes we can.” It is a matter of political will.

Note that considerations of inequality are not the same as considerations of poverty. Its dangers do not arise in a society where everyone is equally poor, nor where income disparities are relatively modest. In a society where those on the lowest incomes are not poor in absolute terms, yet where income disparities are enormous, the problems of inequality still arise. It is the gap, not the top and bottom rates, that is the cause of the problem.

Writing about inequality in the London Review of Books 4th February issue, Ed Miliband, the former Labour leader, cited well known studies by both the International Monetary Fund and the Organisation for Economic Co-operation and Development showing that inequality inhibits economic growth. The explanations offered differ and have the disadvantage that as soon as talk of inequality begins, the assumption is made that it exists because those on the lowest incomes are low-paid. As noted, that need not be true. But the conflation of inequality with poverty means that the solutions offered—higher minimum wages, more redistribution through taxes and benefits—only address part of the problem.

It is not an inconsiderable part, of course; investing in the provision of opportunities for everyone through good basic health, education and justice services, institutionalising equal concern for the rights of everyone in these respects, and ensuring that wealth cannot magnify itself by buying exemptions from making a proportional contribution to the general good, speak for themselves. But there is also an ethical argument, and it is the one that should carry greatest weight.

In their examination of the question, The Spirit Level (2009), Richard G Wilkinson and Kate Pickett make an unanswerable case for saying that excessive inequality heightens levels of distrust, anxiety, illness and over-consumption. They tabulate the effects: in unequal societies there are more mental health and drug abuse problems, higher levels of obesity, larger proportions of the population in prison and less community life. It would be wrong to specify inequality as the sole cause of these things, but at the very least it greatly exacerbates them.

That is why the ethical consideration presses on us. How can it be justified, given what fellow-members of a society share in the way of their humanity, that the distribution of access to social goods and opportunities should be so massively skewed in favour of a minority? There need be no utopian desire for equality, nor to deprive the talented and hard-working of their rewards, in the desire to oppose arrangements that hugely amplify the outcomes for a tiny minority. In recent years half of global wealth has come to be held by the wealthiest 1 per cent of the world’s population: there is a siphoning effect, by the way policy regimes work, channelling money to the few, and the other 99 per cent are having to share the remaining 7 per cent in ways that are no more equitable even there.

The destabilising effect of this is a direct outcome of that most dangerous of sentiments: a profound sense of unfairness. Individuals might feel that they are unfairly disadvantaged by the gap forced between them and the far-off minority by the economic framework they inhabit, but they will also feel the same on behalf of the majority of their fellows. That is where collective animus, resentment and disengagement begin to play their corrosive part, stirring unrest.

Money is a means to experiences, opportunities and much else besides, which is why any rational person wants it. When matters are so arranged that a valve operates to direct most of it to a tiny minority, that sense of injustice raises its crested head. Levels of social fragmentation and unease rise with the growth of the income gap, and reduce with its reduction: that is the lesson of economic history. The problems identified by the authors of The Spirit Level are costly—one reason why less inequality equals greater prosperity no doubt—but whereas economic cost is bad enough, the attrition of human sentiment is worse. Inequality equals discontent: it is unhappy in every sense of the term; and that unsettles the social balance, with the potential to be disastrous.