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Leader: Inherited inequality in the age of meritocracy

Thomas Piketty’s book Capital in the 21st Century has had a rapturous reception. 

Not since John Rawls’s A Theory of Justice in 1971 has a work of political theory been as rapturously received on the left as Thomas Piketty’s Capital in the 21st Century. The book having reached the summit of the Amazon sales chart in the United States, its 43-year-old French author, who visited London last week and whom the New Statesman was the first British publication to profile, has become that rarest of things: a celebrity economist.

In this supposedly superficial and anti-intellectual age, his 690-page treatise on inequality, rich in empirical research, has resonated because it speaks to one of the central anxieties of our time: that society is becoming ever more fragmented as the very rich pull away from the rest. As Mr Piketty elegantly demonstrates, as long as the rate of return on what he calls capital continues to exceed the growth rate of the economy (as it has done since the 1970s), inequality will widen to levels unknown since the Victorian era.

It is the United Kingdom that best embodies the troubled future he sketches out: “a society even more inegalitarian than that of the 19th century, because it will combine the arbitrariness of inherited inequalities with a meritocratic discourse that makes the ‘losers’ responsible for their situation”. Britain is the land of the baronet and the banker, the landed aristocrat and the asset-stripper. It combines the worst of capitalism with the worst of feudalism. The result is a society in which both income and wealth are grossly mal­distributed, innovation is stifled and equality of opportunity remains a myth.

To date, Mr Piketty’s critics on the British right have chided him for his focus on inequality, contending that an alternative metric, such as GDP, is a better measure of a country’s long-term success. Yet, as meticulously charted in 2009 by Richard Wilkinson and Kate Pickett in their book The Spirit Level, after a certain point of development, how well a society performs is dependent not on how wealthy it is but on how equal it is. More egalitarian countries, such as the Nordic states and Japan, enjoy higher levels of social mobility, trust and educational performance and lower levels of crime, obesity and mental illness than their divided counterparts, notably the US and the UK. Mr Piketty, who, despite his book’s allusion to Marx, is a mainstream social democrat, not a revolutionary socialist, concedes that some degree of inequality is necessary to stimulate enterprise. But the US and the UK long ago exceeded this point.

If we accept the premise that inequality is a social ill, the question becomes how to reduce it to the benefit of all. After the Scandinavian countries, Britain has one of the most redistributive tax and benefit systems in the world. National Insurance, VAT, income tax – the government already takes a lot of our money. Yet so great is the initial gap between rich and poor that the divide persists.

The solution is twofold. First, policymakers should look to embrace what the Yale political scientist Jacob Hacker calls “predistribution”: seeking to stop inequality before it starts. By pledging to spread the use of the living wage, raise educational standards, build more affordable homes, improve lending to small and medium-sized businesses and expand free childcare, Ed Miliband is trying to develop a programme to do so.

Second, the next government should be bold and secure a more resilient tax base. It should seek to bring the super-rich into taxation. One way to do this is to tax so-called unearned income and inherited wealth, most obviously land and property (and other static assets), which in Britain is even more unequally distributed than income. Wealth taxes are progressive and hard to avoid in an age when capital is so mobile; they benefit the economy by shifting investment away from housing and into more productive industries.

Rather than a society in which birth determines destiny – or “parentage dictates progress”, as the Education Secretary, Michael Gove, puts it – our politicians should seek to build one in which reward is once again linked to contribution.

This article first appeared in the 08 May 2014 issue of the New Statesman, India's worst nightmare?

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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

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Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.