04 August 2005

It's the Inequality Stupid!

Tackling Poverty In Britain (Part 1)

I think it is impossible to tackle poverty without tackling wealth and income inequality.

To tackle this inequality is to tackle the poverty of opportunity; in education, careers, healthy lifestyle choices, healthcare etc.

In a global market, I also believe that we need to tackle inequality worldwide if we are to truly tackle poverty in Britain. This is to protect against 'social dumping'. See also my article on why the french are right on social protection.

The easiest solution to inequality is redistribution through the tax and benefit system, allowing more spending on health, education, transport, other welfare and infrastructure.

The right will attack this as 'the politics of envy', they will argue that inequality is good, because it is the result of a 'free market' and to limit this leads to economic inefficiency and mediocrity.

I believe their arguments are wrong for the following reasons;

Lets look at how the wealthy will benefit from a more equal society.

There will be a reduction in crime and disease (strongly linked to unequal societies). These benefit everyone.

The 'free market' the right so eulogise is a perversion of the truth, a disingenious argument. Basic economics informs us that a 'free market' requires perfect competition which needs an infinite number of firms operating with perfect knowledge amongst consumers. This is of course impossible and to stop a market degenerating into monopolistic tendencies requires the very regulation that the right argue against.

A lot of markets are dominated by monopolies, and this not only distorts prices, it distorts wages, hence inequality and the restrictions on social mobility. When the right argue for 'free markets' they are really arguing for the status quo, to protect this privileged position for the rich few, who control these monopolies. This is anti-competition and anti free market!

Also quality of life does not equal the amount of possessions you have. As Epicurus correctly deduced, once a decent threshold of healthcare, food, shelter and clothing has been achieved, then money has no effect on happiness or quality of life.

This realisation frees us to consider the importance of the environment, whose neglect has seriously damaged our quality of life.

Also equality, contrary to what the right claim, will increase economic efficiency not decrease it. A good analogy is tennis.

Why has Britain so few decent tennis players compared to say countries like Sweden? The answer is only a small percentage of the population have access to the facilities and training necessary compared to Sweden, which has a bigger pool of tennis players to pick from because people have more access to courts and training.

The same is true of economies, those with the most widely educated population have the most innovative and competitive economies.

In part II, I will explain how best to tackle inequality in society.

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