This page picks up a debate on WhatsWrongWithInequality where OliSharpe said :

Surely we should be careful to look at timescale issues. Yes inequality in UK has (I believe) gotten worse since the 70s rather than better. That is a bad trend. But the longer term trend is that modern societies (prosperous liberal democracies with a social welfare system) are much more equal (both in terms of rights and wealth) than the societies in which our grandfathers live in.

I think we should think more about this longer term trend, what it means, and how it works. It looks to me like the overlap of several trends :

  • an industrial / technological / communication trend, which has been improving increasingly rapidly since the invention of ThePrintingPress.
  • an energy trend which has been substituting animal and human power for coal / gas / oil.
  • a political trend towards democracy, freedom, workers "rights" and social tolerance.

Into this third category, I'd put all the developments in our understanding that people have rights, and governments have duties to uphold those rights. And it is this political tradition which is largely responsible for the increase in "equality". I'm not so convinced now, that the first two, which certainly do increase wealth and even well-being, also, necessarily lead to greater equality. I'm more and more convinced that their natural tendency is towards a power-law distribution, hence the link to PowerLaws–WealthDistribution.

So only the third, the political / social trend, can actually take us towards greater equality. And that is the trend which has been in reverse for the last 30 years. I hope it's a temporary blip, but remember the over-all trend is only about 500 years old. So 30 years isn't entirely insignificant.

PhilJones

One point to note: I currently believe one of the basic theories of Marx, namely that the means of production determine which types of society and politics are possible. A repeated mistake in the 20C was for people to think that they could push politics beyond where economic reality was ... typically this led to millions of deaths through starvation (let alone political oppression).

I would therefore think that your point 3 above could not have occurred as much as it has without the progress that has been made in 1 and 2.

And I guess I then take the view that a desire to improve 3 is obvious (from a secular view point at least). Of course we'd all like to live in a more equal world where nothing bad happens. At any given time we should keep pressure on politicians to improve the current situation. However, if we want to make lasting long term improvements to the political landscape, then we have to make lasting, sustainable improvements to the underlying economic reality. We need to improve and share the means of prodcution.

–OliSharpe

I am sympathetic to your underlying TechnologicalDeterminism, ie. that 1 & 2 are EnablingConstraints on 3. But I'm made sceptical by this 30 year reversal. Is that also determined by the technology?

I guess you can make a case : that a certain level of improvement in communication technologies strengthens hierarchies and central government (TheMarketLogicOfInformation); and this enables central government to also enforce redistribution and greater equality.

But the newer, cheaper, more democratic communication technologies also enable people to more easily bypass and avoid the control of centralized, hierarchies, and therefore also detracts from government's capacity to enforce equality. Hence this new round of technology reduces equality.

If this is true, it's not very good news. We're going to be forced to choose whether to support technology or justice. (Maybe you want to label choosing justice over technology "luddite"? :-)

The other position, which I desperately hope is true, is that this reversal isn't particularly determined by the level of technology, but by some specific political decisions that have been made over the last 30 years : to free international capital flows, to remove restrictions and responsibilities from markets and employers, for governments to actively support certain kinds of interventions in the market (paying to under-write arms exports, but not paying to police labour conditions, corporate welfare but not personal welfare) etc.

The technology certainly lets more be done internationally, and that's a good thing. But the same technology could have been used by government to maintain the control necessary for it's redistributive role. How come IT gives multi-nationals a good enough idea of their financial position to pay share-holder dividends, but the government can't find out enough to tax them properly? This is simply a failure of will, by the TheNationState, to adjust the accounting requirements sufficiently to define how much the company should pay.

PhilJones

One possible explanation of the 30 year reversal may be because the redistributive policies set up by our society are designed to work within a nation state, and globalisation enables the richest section of society to evade these constraints. Obviously some aspects of this will have been around for a long time, but maybe in the recent past the rise in globalisation has made it even easier for the rich to evade the 'dynamics of redistribution' in all its forms. The very rich can therefore become massively rich by exploiting the global market, while the median rich end up paying for the redistributive policies of the nation states.

This suggestion makes me curious to see the data, as the above arguement would suggest that inequality would be most exaggerated at the richest end of the spectrum.

–OliSharpe

Quick data point : . http://blogs.salon.com/0002007/2003/08/02.html . See also DataResources / EconomicData

OK, you say that it's globalization which enables the rich to avoid egalitarian redistribution mechanisms. But to decide whether responsibility lies more with technology or politics we have to consider whether globalization is driven by one or the other. Of course, it's both. But is it more to do with what governments decided (prompted by their electorates and economic and business advisors) or is it more to do with the micro-processor, fast switches, optical cables and MooresLaw?

PhilJones

Oh, well surely, again, technology was an essential enabler. Indeed, I'd say that at the 'moment' technology is way ahead of politics in the globalisation arena. In other words technology is making possible things that politics doesn't yet know how to handle ... and therefore the powerful can fully exploit this power vacuum. In 100 years or so (?? timescale ??) politics will catch up with the reality of globalisation and we'll have some sense of global politics that enables global social and economic justice.

Indeed, that's why it's essential to put political pressure on our political servants to start really thinking and acting in terms of global social justice. On this issue I think Tony Blair's heart is in the right place ... it's just his execution that is occasionally very questionable.

–OliSharpe

But I'm starting to realize that this story of government ignorance / impotence is highly convenient for those who don't want anything done. And it isn't clear how true it really is. Here's an example I'm impressed by, from JosephStiglitz's GlobalizationAndItsDiscontents, which I finally got round to reading.

During the Asian crisis of the late 90s, both Malaysia and Thailand faced capital flight as investors tried to pull their money out those country's currencies. Malaysia, against the advice of the IMF, imposed a ban on taking money from the country; which they later converted into a tax. When the crisis had subsided, they dropped the tax. Thailand, on IMF advice, raised interest rates. The effect : Malaysia got out of the crisis much better off than Thailand, as the high interest-rates drove many Thai companies into bankruptcy.

The reason the IMF told both countries to go the interest rate solution, and not the tax / restriction solution, was pure ideology; justified by the "money stays where it is well treated" philosophy which says that governments which demonstrate a willingness to go against what the market "wants" will scare away future foreign investment.

In practice, not only did the Malaysian economy survive in better shape. Being in better shape, it attracted more returning investment, sooner.

If you're too focused on technological determinism, you're going to miss this kind of story. You think slow government computers and practices are powerless in the face of fast international electronic currency exchanges, and optical cables which suck money out of a country more rapidly due to their higher bandwidth. But in fact, the real differences are much more due to policy. Which is in turn guided by the myth that government can't fight against the markets.

PhilJones

See also :

  • /In2002