Saturday, August 09, 2014


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 ‘ieaTVHERE   
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.]


Blogger Unknown said...

Gavin,I been reading your blog for quite some time and have enjoyed it a lot and this is my first comment.

I myself actually consider myself politically to be somewhere between your "soft" libertarianism and "hard" libertarianism.

I am of the view that eliminating poverty through a universal basic income is better than trying to reduce inequality for what exactly does "inequality" mean? Is there any standard by which we can declare a "just" or "equal" distribution of wealth? No,because it is in my opinion a vague standard which is why many politicans love it so much.

I also wanted to know what is your own views on various issues-wealth redistribution,univeral healthcare and the welfare state?I know your mantra:"Markets where possible,states where nescessary" but what eaxctly do you mean by that?

9:12 am  
Blogger Gavin Kennedy said...

Good set of questions and thank you for your positive commetns about ‘Lost Legacy’.
First, inequality, however measured, has been associated with human societies since they evolved from the proto-human predescesors of Homo sapiens, both within small bands and across all bands. There is nothing ordained across all human groupings in the history (and deep pre-history) of our species. This has nothing to do with basic human rights; it is what it is, a universal feature of our species as it has evolved. That does not mean that we must accept the historic mal-distribution of consumable resources or that somehow it is inevitable and thereby regretably acceptable.
Second, it is interesting that in the deep past of non-recorded history, when inequality existed with living standards (access to consumables) unequally divided by physical and mental prowess (also cunning) of individuals, existing inequalities were not based upon the accumulation of piles of necessities accruing to some individuals and not to others. From observation of closely-related kin species (chimpanzees; Goodall, etc.) where a minority of alpha males dominate resource and sexual access to females, distribution is uneven, if subject to change through time and circumstances - new candidate alphs males.
Thirdly, inequality remained present through all the changing types of human societies within a variety of evolving behavioural changes roughly captured in the manner in which natural resources chnaged from evolving human ingenuity over long period of time from the discovery of piecemeal innovations, unevely shared across groups. Not all groups discovered and adapted changes simultaneously. Some remained hunters, some others discovered the innovation of property, other livestock and farming.
Fourthly, poverty is relative to available production of necessities, later conveniences and finally amusements (luxuries). The poor in the richer economies are ‘better off’ than the relatively rich in the poorest countries. Liberty, justice, markets, elected governments, limited corruption of officials, etc. are essential elements of raising the poorest segments of all economies with majorities of relatively poor people to into majorities of richer people, all relatively wealthier than majority poor peoples in relatively poorer economies.

Fifthly, soft libertarians hold to policies and freedoms that blend such policies with the realities of human history and not to policies that give freedoms only to ‘top dogs’ or impose corrupt general social policies that entrench new forms of rent seeking bureaucracies.

5:35 pm  

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