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Equality of outcome: an ethical imperative

Village has always tended to support a vision of equality of outcome in society. Unfortunately, the most widely supported form of equality is equality of opportunity. Since it has more of the qualities of “freedom” than of “equality” even Margaret Thatcher revered it, for example. Unfortunately, too many human rights these days are being pursued on the back of equality of opportunity or freedom rather than equality of outcome. One of the regrettable symptoms of this is that the victims of topical forms of discrimination seem to have little empathy for, or solidarity with, victims of other types of discrimination.

It is good to see a refocus of the equality debate on issues where outcomes can easily be measured – on income, and wealth. Issues of equality of opportunity cannot so easily be measured since opportunity can be intangible. A lot of the re-orientation is down to Thomas Piketty and his recent book ‘Capital in the Twenty-First Century’ which draws on extraordinarily wide-ranging objective data and which is admirable too for drawing attention to the influence of policy on inequality as manifest in perverse income and wealth distribution.

Almost everyone in economics and (therefore) mainstream politics had for years agreed that higher taxes on the rich and re-distribution to the poor have hurt economic growth.

As Paul Krugman has noted “liberals had generally viewed this as a trade-off worth making, arguing that it’s worth accepting some price in the form of lower GDP to help fellow citizens in need. Conservatives, on the other hand, have advocated trickle-down economics, insisting that the best policy is to cut taxes on the rich, slash aid to the poor and count on a rising tide to raise all boats”. But, because of the Great Recession and Piketty, fashion has moved phenomenally swiftly to a different view, that there isn’t actually any trade-off between equity and inefficiency, that inequality has become so extreme that it’s inflicting economic damage so that redistribution – taxing the rich and helping the poor – may well raise, not lower growth rates.

The latest manifestation of this surprisingly comes from economists at Standard & Poor’s with their beguilingly titled ‘How Increasing Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide’. The fact that a reviled Ratings Agency is addressing economic inequality suggests that a debate that has been largely confined to the academic world and left-of-centre political circles could become practical.

Piketty analyses historical data to show that at the end of World War II the top 1% in Ireland, the UK and the US, for example, collected about 15% of all national income. The share collected by the wealthiest people dropped in the subsequent decades and then rebounded from the mid-1970s. At the start of the new millennium the concentration of income at the top was back at around pre-war levels, though it dipped in the Great Recession. In the US incomes of those in the top 1% have now recovered and surpassed pre-crisis levels, though in Ireland the Gini Coefficient seems to suggest that efforts over the last few years to redistribute wealth, through taxation and welfare, have been successful, though absolute levels of deprivation for the poorest are at crisis levels and shockingly, in Budget 2014 for example, the lowest income group lost proportionately more income than any other group.

On the back of the data, in ways that are redolent of Karl Marx’ views on Capital, Piketty makes the case that it is inevitable that the returns to capital will be higher than those to labour, and that since the richest already have more capital, they will inevitably simply continue to get richer (at least unless a global tax on capital is imposed). Piketty, a mild man, considers this a problem for economics, but eschews the ethical issues it poses. He therefore posits a theory that is fragile: in the event equality were once again deemed bad for the economy, presumably it might be justifiable to jettison equality. As an economist, Professor Piketty’s focus is too narrow.

Village believes equality of outcome is an ethical not an economic imperative. We are all equal from birth, and equal moral agents. If we designed a social contract with these essentials as the starting point, with a veil of ignorance as to our actual circumstances and prospects (or a radical open-mindedness as to how nourishing society could be), we would see that equality of outcome is the optimal politics. Society’s goal is to recognise that, distributing resources to reinforce that underlying equality – by promoting equal outcomes.

Unfortunately the debate about equality – and its different forms – remains very crude, partly because those who benefit from inequality want to keep their privileges.
We need to promote structures that address overall levels of inequality but which also focus on pre-existing difficulties for the very least well-off. And we need to ground the structures in ethics, rather than
economics. •

(editorial September 2014)