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Wealth gap debate exposes narrow views

Thu, 14 Apr 2011

A new mantra on the Left is that societies work best when the gap between the richest and the poorest is closest. It is usually argued in the context that the greater the equality the better outcome.

Most commentators who support the argument usually add something about the failure of free markets, tax cuts and deregulation, among other evils of capitalism (or “neo-liberalism” as they like to call it).

The case for equality has become popularised in The Spirit Level, a study by two “social epidemiologists,” which is a fancy term for describing how social institutions, conventions and behaviour explain patterns of health in the population.

The authors’ most widely quoted claim is that inequality acts like a “pollutant spread throughout society” and erodes “trust, increasing anxiety and illness, [and] encouraging excessive consumption."

The book is heavy on statistics and has presented economists with quite a challenge to rebut the arguments. But rebut them they have, pointing out the selective use of social outcomes – for example, quoting obesity figures but not smoking; imprisonment not crime; and drug use not alcoholism.

Others have noted that some fast-growing economies, such as Korea and Czech Republic, are omitted and, if included, would have reversed most of the findings. This is because, as the economists say, it is generation of wealth, rather than is unequal spread, that best contributes to improved living standards. (A summary can be found in the above Wikipedia link.)

Making the rich less wealthy makes the poor poorer
This denunciation of economic growth by the Left, in favour of reducing the “wealth gap,” is behind its opposition to most forms of progress – most spectacularly depicted this week in Greenpeace’s “no coal, no oil” campaign against seismic exploration off East Cape.

As Christopher Snowdon, author of The Spirit Level Delusion (Wiley, 2010), noted

Since inequality can be alleviated by narrowing the gap without making anyone richer, their logic dictates that society would improve if the poor got 5% poorer so long as the rich got 20% poorer. A doubling of everyone’s income, on the other hand, would make everyone’s life worse.

One local commentator, favourably quoting such authorities as Joseph Stiglitz and IMF managing director Dominique Strauss-Kahn, also used an IMF research paper to suggest inequality was “hazardous to economic growth and may have contributed to the global financial crisis.” This stretches what the IMF researchers actually said.

They focus mainly on developing economies – not advanced western ones – and quote one text that says societies where widely distributed political power (any democracy) is used to “effect redistribution, say, through the tax system, may create disincentives to investment and result in lower or less durable growth.”

The paper goes on to identify three characteristics that improve durable growth periods: better political institutions, liberalised trade and smaller real exchange rate overvaluation.

Inequality in most countries changes little over time and where changes have not been benign (the authors single out six conflict-ridden Third World countries), it is usually when oil-funded consumer subsidies are removed due to a sharp drop in revenue, or is due to some other factor, such as a crackdown on crime.

They conclude, “In general, if increasing inequality were somehow a natural counterpart to the development of a market economy, then one would expect richer countries to be more unequal – but they are not – if anything the reverse is true.”

And where some incentives have created a greater degree of inequality – among, say, farmers in China – the result has been a tremendous spurt in growth that reduced overall inequality. Again, Brazil’s pro-market reforms, combined with greater social assistance spending, brought that country’s big reduction in poverty.

The reference to inequality causing the GFC, by the way, is almost an afterthought arising from the suggestion the sub-prime lending in the US was due to overcome housing discrepancies – the authors actually say the main cause was inadequate regulation.

Where are all the refugees?
Not so long ago, 2005 in fact, a widely publicised report by the UN Environment Programme predicted that climate change would create 50 million climate refugees by 2010. Along with others from the likes of the IPCC, Greenpeace and Lord Stern, such predictions have proved widely astray.

Nevertheless, the plight of these phantom people produced a documentary, which has already screened here, and even a handy map showing where they were located. By now, they would be fleeing a range of disasters, including sea level rise, tsunamis, stronger hurricanes or cyclones, and disruption to food production.

Well, that has definitely happened in Japan, which was not a focus for the UN prediction and no one there is doing anything but staying put. Instead, the UN identified these "refugees" wouldbe fleeing low-lying islands in the Pacific and the Caribbean as well as the coastal regions of China and countries such as Bangladesh.

So what has happened in these places? Mainly, their populations have all risen, some quite substantially.

The treasonous Sir Peter
It is not news that a branch of the loony left has branded Sir Peter Jackson as an enemy of the people with a so-called Quisling Award in recognition of his role as the individual who has done the most in the past year to facilitate foreign control of New Zealand.

(The “awards” were judged by two state-funded university lecturers in Auckland and an ex-MP, among others.)

This will no doubt be a surprise to the considerable number of talented Kiwis, who have gone to Hollywood and realised their dreams – be it as actors, directors or even stunt people – without any assistance from Sir Peter.

I seem to recall the main reason the government clarified the employment laws for Warner Bros, enabling The Hobbit to be made in Wellington, was the large number of film people who walked in protest through the capital to ensure their continued employment.

For their efforts, the Hollywood studio was branded the worst “transnational” company operating in New Zealand. (The word “transnational,” by the way, is another giveaway and is used only by Marxist academics.)

This, too, will be news to all the Kiwis who worked on Yogi Bear, an animated feature made here last year and which screened earlier this year.

Meanwhile, the hitherto unknown Kiwi actor Nico Evers-Swindell has rocketed to fame of a sort with his role as Prince William in a Hollywood TV biopic, William & Kate;The Movie. London tabloid The Sun, which rarely runs more than 50 words in a story, thinks it “naff” , while Sydney’s Daily Telegraph has the trailer.

Another Kiwi, Grant Bowler, plays the lead in the film of Ayn Rand’s Atlas Shrugged, which has its US premiere tonight (April 15).

Critic PJ O’Rourke, in his review for the Wall Street Journal, is none too kind, saying Bowler, as steel magnate Hank Rearden, and his co-star, Taylor Schilling as railway heiress Dagny Taggart, are “upright” to a fault.

More seriously, O'Rourke says the adaptation has gone retro (the book was published in 1957 and is set in the future) when it should have restated the issues for today:

The anti-individualist enemies that Ayn Rand battled are still the enemy, but they’ve shifted their line of attack. Political collectivists are no longer much interested in taking things away from the wealthy and creative… It’s the plain folks, not a Taggart/Rearden elite, whose prospects and opportunities are stolen by corrupt school systems, health-care rationing, public employee union extortions, carbon-emissions payola and deficit-debt burden graft. Today’s collectivists are going after malefactors of moderate means.

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Wealth gap debate exposes narrow views