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26 May 2015

How do you solve a problem like inequality?

A new book suggests how the struggle against inequality might survive the defeat of Ed Miliband. 

By Max Harris

Anthony Atkinson’s new book, Inequality: What Can Be Done?, is an effort to keep the issue of inequality on the agenda of politicians, economists, and citizens alike.  This is an important academic contribution to the debate, especially timely in light of Ed Miliband’s statement in his resignation speech on 9 May that “the issue of our unequal country will not go away” following the Conservative Party’s victory in the 2015 UK election. 

Atkinson has been described in recent reviews of his new book as Thomas Piketty’s role model, but he deserves to be discussed in his own terms.  He has an inequality index named after him, and has pioneered the study of issues of inequality and poverty within economics.  He has been mentioned on multiple occasions as a possible recipient of the Nobel Prize for Economics.

Inequality: What Can Be Done? is explicitly solutions-oriented, as the title suggests.  It begins with a diagnosis in Part I of the current economic context and an overview of the approach to inequality in economics.  In Part II attention turns to specific policy proposals, relating to competition law, the changing nature of work, taxation, and other areas.  Part III addresses common objections to such policy proposals – the argument that the proposals might be inefficient, the view that globalization prevents proactive government measures, and the notion that the proposals are unaffordable. 

In style, the book seems to be written for an informed general audience.  At times, it is a little technical: it dives early on into an explanation of household equivalised disposable income, and in chapter 2 talks about ways inequality can be measured – including through household surveys, income tax data, and data on earnings.  But generally, the language is lucid and the chapters are put together well, with summings-up and italicized policy prescriptions allowing readers to be clear about the points to take away from the book.

Substantively, the book offers a number of original policy suggestions.  Atkinson argues, for example, that the rise of technology is not inevitable, and is a product of policy choices; in this context, he says that the State should carefully consider the benefits of technological innovation against the costs of reduced “human contact” and unemployment.  In another unorthodox proposal in the same chapter, he calls for competition policy to be understood as being concerned less with efficiency and more with inequality – since profits from market power affect overall distribution.  He also recommends, amongst other things, the creation of a Social and Economic Council (which might represent trade unions, employers and others); guaranteed public employment; a top tax rate of 65% (a rate that Atkinson says may well be the optimal rate); a substantial child benefit for all children; and a participation income (a form of basic income). 

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Atkinson admits to the solutions being UK-focused, but hopes that they might spur debate in other countries, too.  Some commentators might argue that Atkinson is old-fashioned in approach, in calling for high taxes and a return to union power.  But these proposals emerge after nuanced discussion by Atkinson of the present-day context, and the changing nature of work, business, and government.  Atkinson is plainly not out of touch with contemporary societal developments.

Atkinson’s reasoning throughout the book, in support of these proposals and arguments, is for the most part compelling.  At times he is a little shorthand in the reasons he gives, perhaps because the book is a summary of much of his life’s work.  (He also uses sources that some scholars might frown upon, quoting Wikipedia and working papers that have not been peer reviewed.) But he raises relatively fresh lines of argument: for example, he argues that globalization is not new, and that therefore the limited policy space for governments is not a novel challenge.  And his mastery of detail and comfort with costings mean that his proposals seem not only imaginative but also practically feasible. 

A further merit of the book’s reasoning is that it responds to criticisms of Piketty’s Capital in the Twenty-First Century, such as the claim that Piketty ignores consumption or the view that Piketty gives insufficient weight to declines in global inequality.  Atkinson’s book therefore develops and deepens the debate about Piketty’s findings, inviting the critics of Piketty to respond.

Atkinson ends the book with a plea for “political leadership”, a call for action to be taken across government to address inequality, and a note that the book has been written “in a positive spirit” – with the belief that there are “grounds for optimism”. 

Does the resounding defeat of Ed Miliband’s Labour Party in the election, despite considerable focus in the election on inequality, undermine Atkinson’s optimism?

The election results certainly make it less likely that some of Atkinson’s bolder proposals will be adopted in the short-term.  However, inequality is now an issue that political parties, on all parts of the ideological spectrum, cannot dismiss.  And that is partly because of the work of academics such as Thomas Piketty and Anthony Atkinson. 

The books by Piketty and Atkinson have prompted renewed attention to matters of economic distribution, and have strengthened a public movement that has put pressure on governments to tackle inequality.  That public movement needs to keep growing, as the election results in the UK demonstrate.  But Atkinson’s Inequality: What Can Be Done? deserves credit for contributing considerable intellectual resources to that important struggle.

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