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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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What do Labour's lost voters make of the Labour leadership candidates?

What does Newsnight's focus group make of the Labour leadership candidates?

Tonight on Newsnight, an IpsosMori focus group of former Labour voters talks about the four Labour leadership candidates. What did they make of the four candidates?

On Andy Burnham:

“He’s the old guard, with Yvette Cooper”

“It’s the same message they were trying to portray right up to the election”​

“I thought that he acknowledged the fact that they didn’t say sorry during the time of the election, and how can you expect people to vote for you when you’re not actually acknowledging that you were part of the problem”​

“Strongish leader, and at least he’s acknowledging and saying let’s move on from here as opposed to wishy washy”

“I was surprised how long he’d been in politics if he was talking about Tony Blair years – he doesn’t look old enough”

On Jeremy Corbyn:

"“He’s the older guy with the grey hair who’s got all the policies straight out of the sixties and is a bit of a hippy as well is what he comes across as” 

“I agree with most of what he said, I must admit, but I don’t think as a country we can afford his principles”

“He was just going to be the opposite of Conservatives, but there might be policies on the Conservative side that, y’know, might be good policies”

“I’ve heard in the paper he’s the favourite to win the Labour leadership. Well, if that was him, then I won’t be voting for Labour, put it that way”

“I think he’s a very good politician but he’s unelectable as a Prime Minister”

On Yvette Cooper

“She sounds quite positive doesn’t she – for families and their everyday issues”

“Bedroom tax, working tax credits, mainly mum things as well”

“We had Margaret Thatcher obviously years ago, and then I’ve always thought about it being a man, I wanted a man, thinking they were stronger…  she was very strong and decisive as well”

“She was very clear – more so than the other guy [Burnham]”

“I think she’s trying to play down her economics background to sort of distance herself from her husband… I think she’s dumbing herself down”

On Liz Kendall

“None of it came from the heart”

“She just sounds like someone’s told her to say something, it’s not coming from the heart, she needs passion”

“Rather than saying what she’s going to do, she’s attacking”

“She reminded me of a headteacher when she was standing there, and she was quite boring. She just didn’t seem to have any sort of personality, and you can’t imagine her being a leader of a party”

“With Liz Kendall and Andy Burnham there’s a lot of rhetoric but there doesn’t seem to be a lot of direction behind what they’re saying. There seems to be a lot of words but no action.”

And, finally, a piece of advice for all four candidates, should they win the leadership election:

“Get down on your hands and knees and start praying”

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.