Firing up the change against inequality
If you really want to reduce inequality, then one of the best ways is to ensure that no-one has too little to live on and to fund this by taking from those who have more than they need – providing people with a basic income. Its introduction is the equivalent of other preventive measures like vaccination, clean water supply and safety belts in cars – it is about stopping problems before they start, or at least softening their repercussions.
Like the idea of a tax on land value, along with many other progressive proposals, basic income schemes can attract enormous scorn, especially when it comes to the technicalities. It is important not to underestimate the degree of intimidation that can keep good ideas for greater equality in an apologetic shade.
Greater equality can scare people, especially when you are suggesting paying people to do ‘nothing at all for their handout’. But these same fears were raised when maternity pay was first introduced (‘people will have to do nothing but get pregnant’), child benefit, pensions, and so on, through every benefit that we now consider vital and humane. They were all once opposed by someone – usually someone wealthy.
So how does a society go about introducing a basic income, where every adult resident receives a single equitable amount, simply for being a resident? You begin by introducing it at a low level, or at first for particular cohorts of the young, and by recognizing that, in many cases, for many groups, such a situation already exists where you live. Many affluent countries now have a basic income for pensioners that no old person need live below. Similarly, basic allowances are usually awarded to all parents of children, to people when out of work, to everyone who lives in the state of Alaska or in the north of some Scandinavian countries (as incentives to live there). The result of giving all citizens in Alaska an equal share of royalties from state oil exploration licenses, is that it has risen to be among the most equitable US states – with the poorest tenth of citizens seeing their income rise by 28 per cent since the fund began, compared with a 7-per-cent rise for the richest.1
Once a principle is accepted for one group, it is easier to extend it more widely. Once a principle is accepted at all, starting with a very low basic income, it is then possible to increase the amount without needing to argue the point of principle again. This is exactly what happened in the reverse direction when tuition fees of £1,000 ($1,283) a year were introduced for UK students and then increased to £3,000, £9,000, and now to even more.
The battle for basic income has already been fought for many years and many minor and major skirmishes have been won. We are slowly winning the argument that in affluent countries there is no need for poverty and that poverty is maintained by economic inequality. Basic incomes will be introduced, just as welfare states were introduced, first in one country and then by others copying that country’s achievements.
Where will the money come from?
The most common question asked in response to the idea of introducing a basic income or of extending existing basic incomes to more groups is ‘Where will the money come from?’ Answering this is far easier than you might think. Usually money is saved from existing inefficient schemes by reducing the need for means-testing and other bureaucracy. For example, to ensure that each child receives a basic income you simply pay all parents a child allowance and you tax income and/or wealth, to pay for it. Much of this will amount to a transfer of money from richer childless couples to poorer parents with children.
Imagine how much money would be saved if a basic-income scheme one day replaced all the numerous different benefit and taxation systems existing across the whole of the European Union, or the states of the US, or in both Australia and New Zealand? How else could there ever be a unified system of social security to go with free movement of labour that already exists in Europe, the US and Australasia? There has been free movement of labour between New Zealand and Australia since 1973. As people move more often across national borders, existing national social security and pension systems begin to fail.
The cost of implementing a basic income would in any case not be huge. In a country as unequal as the UK only the best-off 30 per cent of society would lose anything, as the chart above shows, and even then by only a tiny fraction of their disposable income. Everyone else would gain. The biggest losers would be the top one per cent.
At first glance it looks as if the figures in the chart do not balance, but that is only because we have used percentages to show the gains and losses. A one-per-cent rise for the poorest is a dramatically smaller amount than a one-per-cent rise for the richest. Remember this graph when people say that a basic income would be unaffordable.
Basic income should be seen as a way to give people freedom of choice. It opens up many more gates than just undertaking paid work, as well as giving everyone the ability to walk through those gates. It allows you to care for others that need your care without having to argue for a ‘carers’ allowance’. It allows you to study without having to apply for a grant or take out a loan.
A basic income would reduce the number of people defrauding the benefit system because many benefits could then largely be done away with. Means testing invites fraud. There will still be a need for some assessment, as a basic income would not be enough for someone with greater needs than most to survive on: if you are very disabled, for example, you may need help to buy and run an adapted car or you may need a specially adapted bed. A basic income should eventually be enough for the vast majority of people to be able to live on decently and then to be able to choose what paid work, if any, they wish to do. The availability of paid work rises when people are not forced to undertake it. But to make all this possible income and wealth has to be properly taxed.
The money needed to fund a basic income scheme could be raised not only by ensuring proper levels of taxation but also by ensuring people are prosecuted for not paying the taxes they owe. Take one step further and you could fine accountants and accountancy firms for aiding and abetting tax avoidance.
A basic income has been argued for by green parties in most countries for at least a decade, and for just as long by Vivant in Belgium, the Socialist Party of South Korea, the New Zealand Democratic Party, the Liberal Party of Norway, the Workers’ Party of Brazil, and the New Party Nippon in Japan.3
To be sustainable, a universal basic income would ultimately involve continuous redistribution of wealth – and perhaps eventually reparations between countries.
Why not a maximum income?
There are more dramatic ways to reduce economic inequalities, including introducing a maximum income. When the financial crash hit, in the year 2008, the total income of all US citizens was $8,250 billion a year. If pay differentials returned to their 1970 levels, working from the bottom up, total US income would be reduced to $6,400 billion a year. If a limit were imposed of 20:1 on what the richest could receive each year (compared to the mean average), you would see that annual US income bill drop to $5,430 billion a year – less than two-thirds of the total bill in 2008, yet with 90 per cent of people receiving a pay rise. None of these figures are hard to calculate, so why are they so rarely discussed? It is because we have come to accept very high levels of inequality as inevitable.
Just as most of us now accept that there should be minimum incomes, living wages, for those in work, so we could come to accept that there should also be maximum incomes, with taxation above that sum at 100 per cent. However, it might well take a great shock before any such scheme were ever introduced in the US, such as the election of a president from the extreme right who then fails to deliver on his promises to the people.
The richest 0.1 per cent of Americans in 2008 had an average annual income of $5.6 million each. This would be reduced to $1.15 million each if income differentials were to return to 1970s levels. If American society were to become even more equitable than it was in 1970 – perhaps out of necessity following a massive and prolonged stock-market crash resulting from inept political leadership – and this top group were paid ‘only’ 20 times the average, they would each have ‘just’ $631,000 each a year to live on.
What was once possible becomes impossible and then strangely possible again. Maximum incomes have already been, in effect, introduced into much of public life in the UK as pay ratios are now published annually for civil servants by government department and, to date, they have fallen as the pay of the person at the top of each UK ministry has in effect been frozen while the median pay continues to rise ever so slightly.4
This is a start, but the greatest inequalities are in wealth holdings as decade after decade of rising income inequalities automatically results in enormous inequalities in wealth.
It was in 1974 – at the height of income equality in Britain – that the only Labour Party manifesto ever to include a wealth tax was written. The party won the election – but the promise was not implemented.5
Instead, growing price inflation led to instability.
Partly because no wealth tax was implemented in the UK in the 1970s, inflation was not curtailed and housing prices rose sharply, and unemployment was then allowed to grow. If you don’t keep moving forward it is very easy to slip backwards, to see social mobility reduce and poverty and inequality become entrenched.
Taking a different road for change
If you do not think it is possible to maintain equality in the modern, globalized world, then consider the Netherlands and Switzerland. These countries are hardly Utopias, although Switzerland in 2017 was reported in the World Happiness Report to be the fourth-happiest country in the world and the Netherlands to be the sixth-happiest. The Netherlands is the average country in the rich world by its quintile income inequality range, but does an especially good job of controlling its top one per cent. The Swiss are famous for their secretive banks, but also ensure that their best-off one per cent do not take excessively.
Both the Netherlands and Switzerland have suffered small rises in inequality in recent years, peaking around the end of the ‘dot.com bubble’ in the year 2000 and the great financial crash year 2008 in Switzerland; and around 2002 and 2007 in the Netherlands, which is not quite as closely tied to the world’s financial markets. Despite being home to so many bankers, Switzerland is far more equitable than the UK and the US. In the Netherlands the best-off hundredth take 6.3 per cent of all income at the latest count. In both these countries the share of the one per cent has been reduced from very high levels in the past and, when it appeared to be rising again in the 1990s and 2000s, steps were taken to curtail those rises, because most people in these two countries do not want to see their societies become dysfunctional.
Switzerland and the Netherlands are also countries in which people tend to be more innovative (on average) and hence their economies do well, with concentration on pharmaceuticals among much else in Switzerland and computing in the Netherlands (where wifi was invented).
We would not know that greater equality was so beneficial were it not for those few extremely equitable affluent countries that demonstrate the effect so well. Just as we would never have been able to measure the equality effect today were it not for the example of those few countries that have, in recent decades, allowed inequalities to rise sharply – in particular, without the recent errors of the UK and the US. We would not have realized so clearly the close inter-relationships between the many different aspects of equality – financial, gender, health, housing security, safety, employment, happiness and respect. And we would also not know of it but for those researchers who first looked for it when the data were hardest to uncover.
A decade has passed since Kate Pickett and Richard Wilkinson first produced two obscure academic papers that demonstrated a remarkable correlation between the level of economic inequality in a country and the social harm suffered by its population. By adding many more examples they turned these initial findings into the best-selling book The Spirit Level in 2009. In the ensuing decade recognition of the various harms caused by economic inequality has grown exponentially.
Hundreds of books on inequality have since been published in the US and the UK – and that is no spatial or temporal coincidence. Furthermore, the increasing inequality that was occurring in the decades up to 2009 in these and many other countries has since in many cases stalled or even been reversed. This was not just as a result of the financial crash of 2008, itself very much a product of rising inequality. It was also as a result of many of those in power coming to realize that they are part of a generation who have recently inherited rising inequality from their forebears, and all the problems, hurt, harm and disharmony that then flow from that.
Want to know more? Get The Equality Effect book by Danny Dorling.
New times present new priorities and we need to develop new arguments for increasing equality, and new ways of again firing up the desire, the demand and the necessity for more equality. The alternative is a dystopian future in which all are fearful, even those who have the most.
We have always made our own history, always from circumstances not of our own choosing, and we have always eventually succeeded in becoming more equal. The clamour has never been louder than it is today – there is collective outrage, a great wrong has to be put right and the fuse has been lit – but don’t stand back, take part. Greater equality is realized through believing it is not only desirable, but also possible, and by refusing to accept anything that takes us further away from that goal.
- S Goldsmith, ‘The Alaska Permanent Fund Dividend: An experiment in wealth distribution’, paper presented at 9th International Congress of the Basic Income European Network, 12-14 Sep 2002. ↩
- M Torry, Two feasible ways to implement a revenue-neutral Citizen‘s Income scheme, Euromod Working Paper Series, 6/15, Apr 2015, nin.tl/euromod. ↩
- nin.tl/basicincomeWiki. ↩
- See Table 3 on page 95 of: , dannydorling.org/books/betterpolitics. ↩
- B Knight, A minority view, Alliance Publishing Trust, 2011.↩