The evils of inequality

Cover of The spirit level: Why more equal societies almost always do betterThe gap between the rich and the poor has become one of the most topical issues in many countries post GFC (Global Financial Crisis) and post Neo-Liberal economic reforms. More and more people seem to feel that the rich (particularly the super-rich) don’t pay enough tax and have managed to sneakily get away with taking no responsibility for the GFC while the rest of us languish in our lacklustre lifestyles working squillions of hours per week…and all the while paying our fair share to keep society running! Or so the Russell Brand sentiment goes.

So its against this backdrop that The Spirit Level should be read, I guess…

The Spirit Level: Why Equality is Better for Everyone is among a handful of cornerstone works for anyone who is interested in 21st century political and economic thought. I reckon. In fact, I’d almost argue that it is a grand thesis which seeks to give policy advice on how to solve (or markedly reduce) a catalogue of society’s ills through its recommendations and findings.

Inequality = poor outcomes

The key message that authors (and epidemiologists) Richard Wilkinson and Kate Pickett want to drive home is that the more “unequal” a society is, the more likely that society is to manifest higher degrees of illness, mental illness, drug abuse, widespread poor educational outcomes, obesity, social mobility and cohesion, violence, teen pregnancy, among other societal ills such as rapacious consumerism.

The focus on “inequality” is really on Income Inequality – the income gap between those at the top, middle and bottom. The argument being that countries with larger income gaps experience more societal ills.

International research

Their claims with regard to what drives poor outcomes in terms of societal well-being are backed up by some quite robust research comparing and contrasting various developed countries (and comparing States to States in the USA). Lots of graphs, statistical data etc drawn from reputable organisations such as the United Nations and the World Bank (among many others).

However, not all variables are taken into account which might frustrate some people – claiming rates of obesity are higher in the USA compared to Japan because of the USA’s rough private healthcare system is a bit unfair when you leave out factors such as Japan’s healthy and entrenched culinary traditions, and genetic factors (skinny genes).

More tax…good?

But, it also seems that countries which have higher income taxes and high levels of wealth redistribution (i.e gather large amounts of tax revenue to pay for generous education, welfare, healthcare and maternity leave programmes) are more “equal” than countries which have low taxes and far less social spending – we see less of the aforementioned health and well-being problems if we practice the former!

However, the authors seem more concerned about Income Inequality (even if the average income is quite good but the top income markedly better), not so much tax. But what is outstanding is that pretty much all of the “most equal” countries have really high income tax regimes (Japan, Sweden, Finland, Denmark, Norway).

So you are kind of left to draw your own conclusion about which is the most important – income equity or high tax rates, or both?

Sadly, New Zealand and Australia rank really highly in terms of inequality according to the authors, and therefore, this is what drives a variety of problems here and in Oz. Not just “people being lazy” etc.

Don’t be put off the by the academic sounding nature of the book, it’s really well written which makes all the technical sounding stuff really palatable.

6 thoughts on “The evils of inequality

  1. ruby2shoesnz 22 May 2015 / 7:29 am

    Great blog Ben, definitely food for thought. Cheers Dianne

    • bibliobishi 22 May 2015 / 9:02 am

      Great blog Ben. If it’s as readable as you say I will have a crack

    • benccl 2 July 2015 / 10:51 am

      Hi Mr White, interesting comment and link. I personally don’t espouse everything in the Spirit Level as there are critical variables they leave out (the most obvious being migration flows in and out of certain countries etc and how this puts pressure on various services). However, I don’t feel that the IEA is especially balanced, as ideologically they are Neo-liberal and this influences much of what they publish. They brought themselves into disrepute taking money from big tobacco for research grants and then basically lobbying against plain packaging etc – this is problematic when Think-tanks claim to conduct un-biased research. Anyway, in fairness I do believe that Christopher Snowdon (the author of that article) makes some fair points: the Spirit Level authors seem to cherry pick certain countries and leave others out, and there is a problem with the regression analysis because if you leave out certain “exceptional” (outlier) countries (such as Japan) from those scatter graphs, then the regression line shows something a lot different on the graphs – leading us to draw different conclusions. Thanks.

      • Graham Richard White 2 July 2015 / 11:49 am

        I take your point about the political aspect of IEA. My concerns are focussed on the flawed statistics as I have been tutoring students in level 3 NCEA Maths and Statistics for the last few years. We use TSL to illustrate many of the pitfalls with bivariate analyses. My students have little trouble noticing that most of the scatterplots in TSL have Japan and the USA as “outliers” and that when these 2 countries are removed the correlations between income inequality and the selected indicators of social harm disappear (except in the case of infant deaths). Its a pity that Wilkinson and Pickett didn’t seek advice from a statistician particularly when defining their “Index of health and social problems” in figure 2.2. This particular plot isn’t true bivariate analysis but a mathematical contruct derived from bout 10 correlations each with a coefficient of 0.4 or above. The correlation coefficient of 0.87 for this index is simply an artifact from this process. I am personally concerned about income and wealth inequality but regrettably this book doesn’t add much to the debate given these weaknesses. Perhaps this explains why Piketty has ignored TSL in his popular text.

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