The Equality Effect
For the three decades prior to 2008, some countries, including the US and the UK, chose a path that led to greater inequality, often on the assumption that there was no viable alternative. Yet, even under intensifying globalization, many other nation-states have continued to take a different road and have chosen ever-greater equality. Today, it is through the examples of how life differs between more and less economically equitable countries that we are able to measure the equality effect.
The equality effect can appear magical. In more equal countries, human beings are generally happier and healthier; there is less crime, more creativity, more productivity, and – overall – higher real educational attainment. The evidence for the benefits of living more economically equitable lives is now so overwhelming that it will soon start to change politics and societies all over the world.
This may be hard to credit with a puerile reality-show host in the White House and rightwing populism on the march in Europe. But the time will come when this positive equality effect will be as readily accepted as the benefits of women voting or of former colonies gaining independence, which were seen as outlandish ideas only a century ago – and that time may come very soon. Greater equality is no longer just ‘a dangerous idea’; we now have evidence of what happens when some countries choose to become more economically equitable and others don’t.
But we also have short memories. We forget that not long ago people argued vehemently against women being allowed to vote or whole countries having their freedom. So we often fail to ask what we are doing today that will be regarded with horror in the future.
The basic thrust of this magazine theme – and the book from which it is drawn, which tells the story more fully – is that human beings are found to be happier and healthier the more economically equal we are. Greater equality is not sufficient for widespread happiness, but it is necessary. This is borne out by looking at statistics from all over the world – as well as by surveying long stretches of human history with the benefit of hindsight.
Greater economic equality does not mean all people doing very similar work, or living in very similar types of families, or similar homes. It does not mean all schools being the same or all people being paid exactly the same. It means moving towards all people being respected and fairly rewarded for the work they do, the contributions they make and the needs they have. It means respecting reciprocity. Money is relative. If some people are over-rewarded, others are effectively fined.
Equality means being afforded the same rights, dignity and freedoms as other people. These include the right to access resources, the dignity of being seen as able, and the freedom to choose what to make of your life on an equal footing with others. Believing that we all deserve such parity is very far from suggesting that we would all behave in the same way if we had more equal opportunities.
Although leftwing and green politicians tend to advocate greater equality more vocally, and rightwing and fascist ones tend to oppose it, equality is actually not the preserve of any political label. Great inequality has been sustained or increased under systems labelled as socialist and communist. Some free-market systems have seen equalities grow and the playing field become more level. Anarchistic systems can be either highly equitable or inequitable. Many such social systems existed in the past before the rule of law and the concept of property became widespread, and they were not all greatly equitable or inequitable.
Setting out to become more unequal
At the beginning of the 20th century most affluent countries were similarly unequal, and then became similarly equal by the middle decades of that century, so it was very difficult to ascertain what specific effects could be associated with different degrees of inequality and equality. However, since the 1970s the affluent countries of the world have diverged. Because of that divergence we are now able to quantify what the effects of varying levels of economic equality appear to be.
It was 44 years ago, in 1973, that inequalities in the US reached an all-time low – at this point, the richest one per cent of people earned only 7.7 times the average US wage – a remarkably high level of economic equality. The table above shows the earliest and latest records on inequality in 12 major countries as well as highest and lowest points achieved since those records started being collected.
These figures really do matter because they show not just how much inequality has varied across time but also that it varies greatly between affluent countries at any one point in time. When people tell you that high inequality is inevitable, you need a table like this as evidence that they are wrong.
It is true that within recent living memory almost everywhere was more equal than it is today. If you live in the US, it will be hard to imagine a world in which the boss earns just 7.7 times more than the average worker – yet this was the case as recently as 1973. People in the Netherlands or Finland, by contrast, would be appalled if inequality in their countries rose up to those levels. They are already horrified that they have risen up from their own minimums of, respectively, five, three-and-a-half and four times the average worker’s wage. However, the most recent data for the US, UK and Germany show the average pay of the top one per cent being respectively 18, 13 and 12 times average earnings.
Britain was even more equitable than the US in the 1970s and peak equality lasted a little longer. I grew up in that era of much greater equality in the UK. I was 10 years old in 1978 when the rich were least rich, when the best-off one per cent earned only 5.7 times the average income. By 2007, that figure had risen to 15.4 times. Almost every year since I was aged 10 I have watched the very rich get even richer and, immediately below them, the affluent take more and more of what was left. This has left less and less for most people, especially for the poorest, whose numbers have grown. The somewhat heartless statistics in the table above tell a story both of the relentless growth of inequality in some rich countries, and of other countries choosing to keep levels of income inequality comparatively low.
If you have lived through the last four decades in the US, Canada or the UK, then simply by observing what has happened around you it looked (until very recently) as if the best-off would always take more and more. You might have concluded that, if you didn’t join them, or at least begin to behave like them, your life and those of your children would suffer.
But look again at the table above and you’ll see that the same trend of ever-rising inequality hardly applied at all in the Netherlands, Sweden or France over this same time period. There is greed and corruption everywhere – but it is better controlled in some countries than in others.
Greed of the rich worldwide
At the start of the last century, almost everywhere in the world, the richest one per cent received between 10 and 30 per cent of all the personal income. Who those richest people were changed in China from feudal lords to communist officials (and their friends), and in India from the Raj to local entrepreneurs (and the most corrupt politicians), but there is always a top one per cent.
For 60 years of the 20th century, inequalities fell rapidly almost everywhere. The income share of the top one per cent in society is just one measure of inequality, but it is a good measure; using it ensures you focus on the rich, their take and their behaviour. Even a cursory study of inequality reveals that the greed of the rich is the real problem, not some laziness among the poor. In practice, the ‘one-per-cent-take’ statistic correlates closely with other measures of inequality, but it may be one of the best to focus on because the very richest have such a disproportionate effect. People compare their own situations with those just above them and with the richest more than with those just below. Scholars who study inequality are coming to believe it is vital to concentrate on the rich as the major problem, rather than to continue the historical tradition of focusing so much on the poor.1
By 1980, almost nowhere did this elite receive as much as 10 per cent! By the end of the first decade of this century, inequalities had risen again, but we also had a wider variety of outcomes between countries in terms of equality and inequality than has ever previously been recorded. Worldwide, we collectively appear to be making new choices and winning at least some of the battles.
It is important to remember that the majority of the rich countries of the world still enjoy levels of equality similar to those experienced by Canada, the US and the UK when they were at or near their most equal. It is far easier to treat others as equals in times and places of greater widespread equality. Then you do not have to behave like a saint in order not to fiddle your expenses. It is easier to behave well when you are all more equal. And we have known this for many centuries. It led to one of the most famous declarations of all time about the right to be treated as an equal and to be healthy, free and happy as a result:
‘We hold these truths to be self-evident, that all men [sic] are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.’
US Declaration of Independence, 1776
Today, on its website, the officials of the US House of Representatives celebrate key gains in greater equality, writing:
‘The House’s first African-American member was elected in 1870. The first Hispanic member took office in 1877, the first woman member in 1917, the first Asian-American member in 1957, and the first African-American woman member in 1969. In 2007, Representative Nancy Pelosi of California was elected as the first woman Speaker of the House.’2
Nowhere are losses of equality listed as achievements. In future the 2008 election of Barack Obama will be added to that list. Donald Trump’s electoral victory is unlikely to be immortalized in the same way. Progress is never linear; but those who are not progressive are forgotten more quickly unless they become the worst of tyrants.
Greater equality is often won only after great insult has been recognized. Future egalitarians may look back on us today and ask why we did not consider children’s rights more fully than we do today. They may wonder why we did not value more highly the rights of those at the end of life, of prisoners of war, of criminals, of people considered deranged or simple, of animals, of diversity in nature, of future generations and their rights to a habitable planet, and of others whom we are unable yet to recognize as a disregarded group. If we act now, then future generations may look back at us and say we were living in the years when the trend changed and we helped to change it. Many things become clearer with hindsight but, given what we know about the benefits of greater equality today, it is already clear what we should be striving for now.
Where wealth and poverty are locked in
For those of us unfortunate enough to live in inequitable countries, but fortunate enough to live in the rich world, we have to look back to before the 1980s to realize the great equalities that were lost and many of the ways in which life has changed. We have to work hard to remember what it was like to live in the US when Americans were more equal. When they were more equal, more people found it easier to stay married to someone they loved, to find a job they liked and to stay longer at school than their parents. It was similar in Britain, but Britain is now almost as unequal as the US and, during 2011-15, its population underwent public-sector cuts worth tens of billions that were mostly to the detriment of those with less. Many of these planned cuts have yet to be fully implemented and more cuts are to come.
Then, in 2016, a slim majority in the UK voted to leave the European Union and in the US a minority voted in President Trump. Both events have been widely reported as being linked to the very high rates of economic inequality. And high economic inequality manifests itself in high inequality between men and women, by race and by class3 – and in myriad other levels of oppression all made manifest by some having much less than others. As Vito Laterza put it:
‘If we simplistically frame Trump’s victory and the Brexit vote as a revolt of the dispossessed and the disenfranchised white working classes – based on a partial and biased reading of the actual data – there is a real risk that the solutions we come up with will contribute to reinforce various forms of white nationalisms and xenophobic alliances, rather than providing a clear and uncompromising alternative to them. The attention has to shift to the whole system, with its myriads of levels of discrimination and oppression.’4
Within the US today, wealth inequalities have recently risen rapidly as measured between households designated white and those labelled black or Hispanic. This increase in inequality in wealth began before the economic crash of 2008, but was greatly exacerbated by it. The upper of the two charts below shows that, by 2009, the average white family had recourse to 19 times more wealth than the average black family.
When all the wealth of black households in the US is averaged out, by 2009 there was just $5,677 to share out among every household. Just four years earlier that figure had been $12,124. The housing-market crash hurt black families especially hard. However, Hispanics were similarly affected, with their average wealth falling from $18,359 per household in 2005 to just $6,325 by 2009. These are huge drops, over very short time periods, for millions of people already with relatively low levels of average wealth.
In contrast, the average US white family saw its mean household wealth fall from $134,992 in 2005 to $113,149 by 2009. Most white families are not that wealthy – the mean average is inflated by a very rich minority – but the median white family was still much richer than the median black or Hispanic family.6 Having low wealth in the country that perceives itself as the richest on earth is particularly demeaning.
The ‘American Dream’ is based on the notion of social mobility, that anyone poor can become rich. Yet social mobility is very low in all the world’s most unequal rich countries. There, the income of your parents really matters in determining your likely income in future. The reasons are not hard to understand. Affluent parents are likely to give their children a leg-up, to pay for them to attend selective better-funded schools or to live in areas where the teachers are less stressed because they have to teach fewer children experiencing extreme poverty. These economically unequal societies are also far more socially segregated.
By contrast, social mobility is high in more economically equitable countries because in those countries children have access to more similar resources. They will tend to go to similar schools, receive similar educational opportunities, and also be able to access a wide range of career options – few of which will lead to either very highly paid or very lowly paid jobs. More economically equitable countries are also less socially segregated. Parents worry less about whom their children mix with and what career path they take, because a person’s income bracket is of much lower importance. The rich are less rich and the poor are less poor. All are therefore freer to follow their heart’s desire.
Equality: The tide has begun to turn
Today even rightwing politicians sometimes talk of wanting to increase economic equality. They often express their concern for those ‘left behind’ economically, but it is hard to see any evidence that they are interested in much more than the votes of such people. However, the fact that they have changed how they talk demonstrates a more widespread change in our common understanding. Their immediate predecessors talked of ‘rewarding talent’, ‘a rising tide lifting all boats’, ‘allowing the tall poppies to bloom’ to the supposed (but not actual) benefit of all. Now even the perpetrators of growing inequality claim they are against it, but they do not admit to their own complicity in creating, maintaining and even increasing it.
The tide may be turning again towards greater economic equality, but the case for it needs to be made clearer – otherwise rightwingers will again subvert the argument. They will claim they are against inequality while quietly promoting a rebranded version of it.
The case for greater equality is not just the reverse of the case against income and wealth inequality. Gaining greater equality has a set of particular positive effects on a society; we can call this ‘the equality effect’. Greater economic equality makes us all less stupid, less fearful and more satisfied with life. It may bring even greater benefits than that. We are not sure because we have tolerated immense inequality for so long that we can’t be sure of all that is possible when we eventually do treat each other with economic respect.
The evidence of this positive equality effect is now overwhelming. But the message has not yet got through to most politicians and to the wider electorates to which they respond. Getting that message across is a job for all of us.
- See, eg, Susan George, Whose crisis, whose future? Polity, 2010. ↩
- On the House of Representatives website, see: house.gov/content/learn/history↩
- K Geier, The Nation, 11 Nov 2016, bit.ly/2kx5mVY↩
- Vito Laterza’s Blog, 10 Nov 2016, nin.tl/Trumpmyth↩
- For 2009: Pew Research Center tabulations of income survey and program participation data from the 2008 panel; for 1984-2004: various US Census Bureau reports including Curren Population Reports.↩
- R Kochhar, R Fry and P Taylor, Pew Centre Research, 26 July 2011, nin.tl/oDlVYp↩
Help us produce more like this
Patreon is a platform that enables us to offer more to our readership. With a new podcast, eBooks, tote bags and magazine subscriptions on offer, as well as early access to video and articles, we’re very excited about our Patreon! If you’re not on board yet then check it out here.