REDUCING POVERTY IS MORE IMPORTANT THAN CRUSADING AGAINST INEQUALITY

“McCloskey on Inequality” (9 August) HERE  

a 24 minute video interview on BCC ‘Hard Talk’ programme and a much clearer talk by Deirdre McCloskey on ‘ieaTV’ HERE   

I have stated on Lost Legacy (and elsewhere in discussions and debates) that “poverty is a far more important problem that inequality”.  This has sometimes been dismissed by claiming, often passionately, that people are poor because a minority are rich, sometimes ‘obscenly' so.  

Such commonsense reposts to my views also see the solution as simple: ‘tax the rich and spend the wealth on the poor’.  Now I am not at all going to argue that such a penal tax level could not be undertaken by governments, whether in a democracy or in a revolutionary spirit of 'righting the injustices inflicted on those trying to live on low wages' plus, or without, state-funded benefit payments.

But to claim that poverty is caused by inequality is manifestly untrue. To argue that poverty is getting worse is also untrue, especially when supported by apparent declines in shares of annual GDP enjoyed by the poorest compared to the richest 10 or 1 percent.

If that were true you would have to argue that the bottom half of the income distribution today is worse off than the bottom half of the income distribution of say, 60 years ago, or even 30 years ago.  

Compare the shopping baskets of households in Britain in 1950 with 2014; compare proportions of households - across the income spectrum - and the contents in their weekly shopping lists.  Compare household aids available to your grandmother with those in your mother’s house - and your own household - and, if you have grown-up children, compare their household gadgets with yours when you were their age.

Poverty is relative across the income spectrum but the expectation of what constitutes poverty is also relative to your generation’s living standards.  Of course, each income level, as generations pass on, defines poverty relative to what is expected in the long-term growth of the economy. What yesterday were regarded as ‘basic’ necessities are no longer regarded as such; what are now regarded as basic necessities were undreamt or even heard-of twenty years ago.

Yesterday’s luxuries are today’s necessities.  Today’s necessities are tomorrow’s junk or antiques.  So it went on, albeit slower, since the 18th century, through the nineteenth, and in the recent past through the twentieth.  All this reflects in content units the rising per capita incomes from a dollar a day, or less, to the $100 dollars or more since before markets began to emerge in north-western Europe, eventually squeezing out dependence on agriculture and shepherding for growing dependence on manufactured products and related services.

Yesterday’s rich enjoyed their luxuries long before the majority dreamt of them.  A fridge, dish and clothes washing machines, central heating, holiday’s abroad, colour tv, mobile/cell phones, multi-car households, computers, ipads, multi-channel tvs, 24-hour news, internet, face-book, texting, Google, debit/credit cards, Amazon, skype, space travel, and all the rest, with more to come tomorrow. 

Relative poverty still exists and absolute poverty still exists in vast parts of the world.  But, significant numbers of those in absolute poverty, at great personal risk, try to move from where they are into the richer countries, despite the existence of relative poverty in their intended destinations and the certain knowledge that they will suffer those higher levels of relative poverty should they manage to evade the many political and administrative obstacles trying to prevent them arriving in the rich countries.

Why? Because the relative poverty in the rich countries is incomparably better for them than the absolute poverty from whence they came.  Moreover this migration flow is almost alll one way from poorer poorest to richer poorest in the rich countries.

Adam Smith described wealth of nations as the production of consumables which he associated with the richest market nations.  It wasn’t piles of gold or precious stones, or money (however defined); it was the annual production of “necessaries, conveniences and amusements”.  

As always across the deep history of human kind there has been inequality (culturally defined).  Only since the sustained, unintended evolution of markets, loosely acompanied by general justice  liberty across populations, has there been a secular, if uneven, rising access of humans to, albeit unequal, per capita consumption of the necessaries, conveniences and amusements of life. 

That is why I for one consider true liberty to be more important that nominal democracy and the constant, secular reduction in poverty through rising GDP per person, to be more important than inequality.

[I highly recommend that readers watch both viedeos - the iea interview is much clearer and better than the longer BBC one.]