From the TUC

Inequality: it doesn’t have to end this way

13 Feb 2012, by in Economics

Left of centre movements are, generally, committed to reducing inequality of income and/or wealth (and also, sometimes as a by-product, tackle the way unequal societies concentrate power in the hands of the rich.) And we are regularly told that it is not possible to prevent inequality without such heavy oppression that we will create societies without freedom, initiative or economic growth.

This is the cold war dichotomy. On the one hand, the gaudy, consumerist, freedom-loving capitalism of the USA (sure there are economic casualties, as tonight’s Panorama showed, and the highest prison population in the world: hell, you can’t make an omlette without breaking eggs). On the other, the grim, grey Stalinist socialism of the USSR which delivered equality of misery (sure no one had much, and the gulags were a by-word for cultural, political and religious oppression: hellski, you can’t make an omlette …oh.)

The latest global labour column shows that inequality may be a necessary starting point in a capitalist society, but it isn’t the inevitable outcome if democracy intervenes, as it has in Europe. If you just take the private sector, Belgium is as unequal as the USA. But once a progressive taxation system and a welfare state are factored in, Belgium has one of the lowest levels of inequality in the developed world, with the USA stuck with the inequality it started with.

I’m not totally convinced by author Malte Luebker’s argument that statist solutions like progressive taxation and relatively generous transfer payments (state benefits) are the most potent measure for reducing inequality. Denmark and Sweden end up with lower levels of inequality than Belgium, starting from a greater measure of equality in the private sector. I suspect this is the result of the strength of their collective bargaining systems (as Lars Vande Keybus argued in the previous global labour column).

And I suspect that the electorate’s support for such redistributive state action is also less about innate concepts of state responsibility, as Luebker suggests, and something to do with people’s experience of institutions like collective bargaining.

But the tables in Luebker’s article are full of rich detail (there are interesting implications for the recent egalitarianism of Latin America’s left-of-centre governments, for example), and his argument that inequality can be tamed is surely right and fundamentally important for trade unionists.