Thomas Piketty drew attention to the increasingly unequal distribution of income and wealth in many countries in his best selling book ‘Capital in the Twenty First Century’. His explanation was that it was the result of a conspiracy of the rich to take an increasing share of the cake.
He is not entirely wrong. But he misses out on much more plausible explanations like globalisation and technology and particularly their interaction.
If inequality were merely a conspiracy of the greedy, it would be fairly easy to deal with the problem. Unfortunately, it largely isn’t. And one of the processes that has increased inequality the most, globalisation, has also been associated with a huge reduction in poverty in emerging economies. This is the ‘Inequality Paradox’ that forms the title of my new book released in the UK today.
Inequality is endemic in our current economic system which is shaped by the forces of globalisation and technological progress. The problem could, however, worsen dramatically in the coming years as we experience the effects of advanced automation and A.I. on the labour market. The late Sir Antony Atkinson, the real guru on inequality, warned of this and, though his solutions are somewhat otherworldly, his explanations are to the point.
Because the emerging inequality is a real world problem, not a conspiracy, we will have to use a range of measures to prevent it from making our society unliveable.
First and most important, we need to ensure that our schools lean into the wind to ensure that those with least advantage get the best education. That is why I am so glad that Rt Hon Nick Gibb MP, Minister for Schools under 3 different Prime Ministers, is speaking at the launch of the book today about education and inequality.
Second, we need to be much more aggressive than hitherto in ensuring that there is sufficient competition to prevent monopolies and oligopolies, particularly among the technology giants, from exploiting customers. We need a new Teddy Roosevelt to bust the trusts.
Third, in the West we have developed a high cost lifestyle. Bringing the cost of living down helps the living standards of those whose earning power is being depressed by globalisation or technology.
Finally, in many countries we are near the limit of redistributing income through tax and benefits. But we can and should do more to redistribute wealth, ideally through inheritance taxation. And tax paying should become a badge of pride for people, rather than something people try to avoid.
There is already a strong anti-capitalist or anti-trade backlash from people who don’t think the system works for them. The attitudes are understandable but the likes of Corbyn or Trump would actually make things much worse.
It is vital that we deprive those who think this way of ammunition by dealing with those problems with which we can deal – by taxing inheritance, stopping anti competitive practices, cutting the cost of living and improving the education of the worst off.
The Inequality Paradox, by Douglas McWilliams, published by the Abrams Press, £21.99, released 3 September 2019. https://www.amazon.co.uk/Inequality-Paradox-Capitalism-Work-Everyone/dp/146831498X
Contact: Douglas McWilliams email@example.com phone: 07710 083652