Ed Miliband’s equality delusion

He didn’t mention the book by name. He didn’t need to. When Ed Miliband used his first speech as Labour leader to declare that “the gap between rich and poor doesn’t just harm the poor, it harms us all”, his audience knew exactly what he was referring to.

More explicit was his Swedish opposite number Mona Sahlin, leader of the Social Democratic Party. When asked to define her political ideology, she gave a one word answer: “Jämlikhetsanden.” Jämlikhetsanden is the Swedish title for The Spirit Level, a book which has had a profound influence on the Left since being published last year. Its subtitle – to which the younger Miliband alluded – is “Why Equality is Better for Everyone”.

The support of two political leaders will be seen as a feather in the cap for the book’s authors, Richard Wilkinson and Kate Pickett, who run the left-wing campaign group The Equality Trust. They argue that what makes or breaks a society is not its wealth, but its level of inequality. The two epidemiologists illustrate this with a series of scatter-plots, showing the “less equal” nations to have the most health and social problems, while the “more equal” countries – particularly the Nordic states – are happier, healthier, slimmer, more trusting, more charitable and more socially cohesive.

The mechanism behind this phenomenon is never adequately explained, and the claim that income equality is “better for everyone” and not just the poor is asserted rather than demonstrated. Above all, the empirical evidence presented suffers from serious methodological flaws and selection bias. Third variables were ignored because, as Pickett told the BBC’s More or Less programme, they did not “believe” there were “potential alternative explanations” beyond inequality. Inconvenient countries like the Czech Republic and Hong Kong are missing. Sources are chopped and changed. When the data fail to comply with the theory, different measures are employed. And numerous social problems – suicide, alcoholism, divorce, crime and many others – are excluded when the egalitarian countries fail to “do better”.

None of which will have concerned Ed Miliband’s audience at the Labour Party conference. A rallying cry for income equality would have received a round of applause even without the belief that their political views had been “proven” by science. Nor will it concern Miliband himself, who has defended the book in the pages of New Statesman.

But perhaps it should. Bad science makes for bad policy and The Spirit Level poses two particular dangers. Reducing inequality does not necessarily translate to making the poor richer. Wilkinson and Pickett are openly disdainful of economic growth and seem indifferent to how inequality is reduced. By their rationale, society would improve if the poor got 5% poorer so long as the rich got 20% poorer. Perhaps there are those who view the psychological impact of inequality as so ruinous that a levelling down of this kind would improve society, but the flimsy statistics of The Spirit Level don’t justify making such a leap of faith.

Perhaps the greater threat is to the intellectual climate. If we choose to believe in a simple, monocausal explanation for all societal ills, we risk overlooking the real causes and, therefore, the real solutions. Wilkinson and Pickett are hardly the first people to have noticed that rates of infant mortality, murder and obesity vary between countries. All the issues dealt with in The Spirit Level are academic fields in their own right and experts have a good understanding of the real reasons why some countries do better than others. So long as we understand the issues, we can do something about them. But if we take the view that adjusting one economic variable will solve all other problems, there is a real danger that we divert our time, energy and resources away from what will actually work.

As Labour draws backs into its left-wing comfort zone, the easy answers being peddled in The Spirit Level will continue to hold a certain allure. Buttressed by soft science and sold under the guise of equality, the reheated policies of the Michael Foot era can almost appear new and exciting. In truth, reducing income inequality is easily achieved, if there is a will to do so and if one is prepared for the unintended consequences. There are no such easy answers for reviving the economy and tackling complex social problems.

The electorate understands this. Across Europe, the economic crisis has failed to provoke the backlash against capitalism that was predicted (and hoped for) in some quarters. Even in Sweden, voters have condemned the Social Democratic Party and its Spirit Level-loving leader to an unprecedented second successive electoral defeat. If he wants to avoid the same fate, Labour’s new leader will have to draw on more than populist paperbacks and wishful thinking.

Christopher Snowdon is the author of The Spirit Level Delusion

One ‘inequality’ that does concern me is between the resources of the state and the resources available to anyone else (except the fabulously wealthy).One of my ex-students was once accused (with others) of a serious financial crime, mainly (I believe) for political reasons. His employers paid for the defence of the others, but he was sacked. He had been a ’star’ in the City, but even he didn’t have the (after-tax) resources to afford legally expert defence. He did his best to defend himself in court, but suffered a nervous breakdown.In this case there was a (fairly) happy ending: his trial was stopped and he recovered his health.But the State is over-mighty: it needs to shrink.

Ever stopped to wonder if the cited numerous social problems: suicide, alcoholism, divorce, crime are but a product of the less egalitarian society, as well as just isolated symptoms, caused by lack of access to economic rent?

In my experience the poor do not resent the happily rich as much as they resent the patronising middle class b******* who always treat the lower levels of society as if they are basket cases who could not survive without the nanny state.Actually they’ve been surviving since well before the Norman Conquest.

This reminds me of Mrs Thatcher rebuffing Simon Hughes, I think, in one of her best outings – “they’d rather the poor were poorer, provided the richer was less rich”.It is the economic equivalent of heat death. If everyone earns about the same, why strive? If you cannot be sacked, if unemployment means housing and money, if working hard means more taxes and little extra money, but more scrutiny? Work can get done when there is a temperature gradient in physics. In the economy, if the earnings gradient is there, then someone will do the work to climb it. We get wealthier due to work and ingenuity, period. Discourage it and we (non state souls) are all poorer. Let it go free and all gain.

My heartiest approval of Christopher Snowdon (et al.) for showing – in the face of much personal invective etc – that the Spirit Level (et al.) are nonsense. I see various means of rebuttal:
1) Dispute the evidence – as has been done quite successfully I think but it needs repeating and updating as more ‘evidence’ is presented.
2) Even if we allow the hypothesis we need to ask what is the best way of achieving greater equality (many people will support equality out of sheer prejudice)? Does state action really deliver greater equality? Plenty of evidence says that free markets/civil society do.
3) Make an argument for the benefits of equality e.g. that it allows innovation and change…

4) Show that it is absolute rather than relative wealth which delivers real improvement to people. The Nordics are rich countries, regardless of equality. The difference between a C17th poor Brit and a C21st poor Brit are surely greater than the difference between the rich and poor C21st Brit (stripping out govt aid as well).
5) Special attention needs to be paid to the Nordic ‘model’ as it is usually cited as an argument for equality without proper criticism.

The incentive problem, that equality reduces incentives to generate wealth, spurious, and even represents a wilful misreading of the evidence. Did Edison invent the lighbulb for the money? No. Was the internet created for money? No. Innovation is largely not driven by the profit motive. Financial services are the exception, and not even a good one — cf. Reinhart and Rogoff’s This Time is Different, showing (among other things) that financial crises and deregulation are close relations. Many activities are not driven by a desire for wealth, and are therefore not impacted by greater inequality.

Some say the Nordics do well because they have higher levels of redistribution via taxation, but lower levels of regulation. I’d be interested to hear what other people have to say on the topic.

@BenR – it’s not whether something was invented for money – but it’s the profit motive which makes distribution possible and makes others enter the market and compete which drives improvements. Thus without the profit motive the lightbulb would still just be a fantastic invention, not something we have in every home which is being improved on and diversified in order to secure profit to the manufacturers! Ditto, the internet expanded when there were profits to be made, otherwise it would still just be military/academic. FS is no exception. No profit = no distribution. The FS industry has never been ‘deregulated’ as the existence of the Bank of England, FSA, Basel etc etc prove.

@TimCarpenter http://www.freedomandprosperity.org/econ101/sweden/sweden.shtml will give you some pointers on this if required, note the sources at the end. The 1970s still saw the relative decline of the Nordics’ economic performance. However, Sweden is now a less redistributive than it used to be and its economy has improved as a result. We should also note that they are special cases – resource-rich, small, homogenous economies with good institutions which benefitted from WWI and WWII. It’s still the case that they would perform better with less redistribution in their economies.

@TimeCarpenter, Redistribution or narrow wage spreads seem not to matter, most important thing is that people do not *feel* like they are missing out.
@Whig, distribution is irrelevant for the internet. Also, distribution is driven by demand, not necessarily profit, the two are distinct, although often go parri passu; Amazon make comparatively small profits off the back of phenomenal demand. Profit/growth motive driving FS poor example; long-run ineficiencies cancel out gains (3 busts to match 3 booms in UK in last 30 years). I can live without more distribution of CDSs. Also most inventions not created for the purpose they end up serving (eg. gramophone), so profits haphazard anyway.

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