Enlightenment Now? – Inequality

Global wealth has exploded over the past 250 years, but have the benefits been distributed fairly? This instalment of the "Enlightenment Now?" series looks at Steven Pinker's take on inequality and shows where it's lacking.

In the previous blog post, we looked at how global wealth has exploded over the past 250 years. Initially, this created a stark divide between the developed and developing world, the West and the rest. But, over the past 50 years, largely due to development in China and other Asian nations, this divide has levelled out – the majority of the world has got significantly richer. Another way of looking at it: In 200 years, the rate of extreme poverty in the world has gone from 90% to 10%, with almost half that decline occurring in the last 35 years.

But, we can still ask, hasn’t the majority of these gains in productivity gone to the already rich? Or, are they increasingly doing so? This blog post is about inequality and its discontents. Who’s benefited from the past 250 years of progress, and by how much? And does it have to be this way?

Pinker gives 3 reasons why we shouldn’t necessarily worry about inequality so much. I’ll look at them first and then say why, even if Pinker is right about these things, we can still do better.

Reason-not-to-worry 1: Inequality ≠ Poverty

Pinker begins with a standard philosophical move, which is to show that inequality is not necessarily bad in itself. If two people are well off, we don’t necessarily care if one has a slightly higher income than the other, for both are doing well. Why reduce the income of the one doing slightly better just because they have more than the one doing slightly worse? What matters is when there are some people who are well off and many more who are much worse off. This situation is bad because we care about poverty, not inequality per se. The inequalities in income show there’s clearly viable routes out of poverty, but only some people are currently benefiting from them.

Pinker goes on to say that, if what we actually care about is reducing poverty then we should focus on economic growth – i.e. increasing the overall size of the pie – not reducing inequality – distributing the pie we already have. This tactic has clearly worked over the past 250 years, with greater wealth production and poverty reduction than ever before in history. Indeed, Pinker notes that economic growth inevitably produces inequality, as the benefits of innovation and increased productivity are rarely distributed equally at first, even if they benefit most people in the long-run. This is exactly what we’ve seen in modernity. But, according to Pinker, we should still prefer to live in a dynamic and productive world over a stagnant and deprived one.

Reason-not-to-worry 2: Inequality ≠ Unfairness

Pinker looks at one study in particular that shows people in more unequal countries are actually happier than those in more equal ones, so long as they view the level of inequality as fair. Again, the idea is that inequality is not necessarily bad in itself. Inequality can actually be good when it represent conditions of hope – when people feel that education and other routes to upward mobility might pay off for them and their children.

This makes sense when viewed from Pinker’s narrative of inequality initially increasing with economic growth. When the overall size pie is getting bigger, it’s a hopeful situation – there more innovation and productivity happening, and therefore more forms of prosperity to go around. As long as there’s a decent chance of being on the receiving end of this progress, inequality can be seen as a good thing, not something to shy away from.

Reason-not-to-worry 3: Inequality = Equality (eventually)

Pinker’s vision of economic growth and inequality gets even rosier when we considers Wagners Law – the finding that, as countries get richer, they tend to invest more in social spending, which both rich and poor benefit from. This is the rise of the welfare state, most notably seen in Western nations after WWII. As Pinker puts it, with economic prosperity, the mission of governments goes from “warring and policing” to also “nurturing”.

Indonesia, for example, currently redistributes 2% of its GDP towards social spending. In contrast, the US redistributes 19%. Of course, Scandinavian countries allocate a lot more of their GDP to things like health, education, pensions, and income support. But Pinker generally thinks there’s a sweet spot – probably around 25% of a country’s GDP – where redistribution is no longer an effective means to widespread prosperity. Either way, Wagner’s Law is a convenient finding for squaring further economic growth with inequality. With economic growth, the overall size of the pie doesn’t just get bigger, it also gets more fairly distributed – everyone gets richer.

Three reasons to worry anyway

It’s hard not to agree with Pinker’s analysis of inequality. But, even if what he says is true, that doesn’t mean we shouldn’t worry about inequality. Each of his conclusions can be contested:

1) Increasing the overall size of the pie may be an effective way of steadily reducing poverty in the long-term. But it may not be the most effective means of reducing poverty as much as we can and as soon as possible. For example, according to recent research, it will take more than 100 years to end poverty at $1.90/day. In his book, The Divide, Jason Hickel shows how we can end poverty much more quickly simply by changing the rules of the global economy, looking at everything from wages to debt to trade. All these rules have to do with how global wealth is fairly distributed, not how it’s produced.

2) Pinker notes that people are happy with inequality if they view it as fair. Well, is it fair? Although US citizens, for instance, are told to believe in the American Dream, the statistics on social mobility in the US are shocking. If you are born into the bottom fifth of households in the overall income distribution, you have a 36% chance of staying there and only a 10% chance of making it to the top fifth. Things are worse for Black Americans born in the bottom fifth: with a 51% chance of staying at the bottom and only a 3% chance of making it to the top. The picture is similar for those with unmarried parents and high school dropouts. That doesn’t seem fair to me.

3) Lastly, Wagner’s Law – the finding that, as countries get richer, they invest more in social spending – can be used to show that we should care more about inequality, not less. Presumably, richer countries invest more in social spending because it would be unfair not to. When the pie is much bigger, they can afford to distribute it more fairly. So, the question is: When countries get even richer, how much inequality is fair? It seems like Pinker would like to cap social spending for rich countries at around 25% of their GDP. But, why shouldn’t much richer countries spend more on social services? Why should the US spend under 20% when France spends over 30%? If prosperity affords redistribution, we should be less and less content with inequality the richer we get.

The fundamental issue

Although Pinker highlights that inequality can be viewed as good or bad, depending on whether or not it’s causes are fair, he says nothing about how we can assess what is and isn’t fair. He seems to suggest that the status quo is fair because insofar as it is generally making everyone better off. But can’t we do better than that?

Consider, for instance, how income inequality has increased in rich countries over the past 50 years. Many political theorists blame these changes on unfair neoliberal ideologies championed by the Regan and Thatcher administrations in the 1980s. The size of the welfare state has been substantially cut despite continued economic growth.

In response, Pinker argues that these changes are more a result of globalisation than politics. Increases in inequality in developed countries are directly related to increases in wages in developing countries, particularly China and other Asian nations. These nations have steadily outcompeted technological and manufacturing companies in the West, creating an “emerging global middle class”. The upshot of this Asian boom is the “hollowed-out middle class” of Western countries – the lower middle classes of the rich world, the losers that globalisation left behind.

But Pinker seems to accept this analysis without question. As he puts it: “Globalisation helped the lower and middle classes of poor countries, and the upper class of rich countries, much more than it helped the lower middle class of rich countries.” But, instead of accepting the “hollowed-out middle class” as an inevitable trade-off of globalisation, shouldn’t rich countries be investing more in helping out those on the unfortunate side of this trade-off? Instead, neoliberal policies seem to do the exact opposite – leaving the losers of this global rat race to fend for themselves.