July 13th, 2010

frank_davis4

The Spirit Level

Chris Snowdon has written a whole book about it, and Dick Puddlecote wrote a piece about it yesterday.

I must say that, as a bit of a lefty, The Spirit Level sounded like it was something that I would agree with. The thesis of the book is that increased inequality in society results in worse health, more crime, more teen pregnancies, and so on. Stood to reason, didn't it? Us lefties like equality.

That said, having looked at the arguments from it put forward on equalitytrust, I think this is an awful book.

What is meant by wealth and poverty? For the most part, people tend to measure wealth by how much they've got in the way of house, car, TV set, swimming pool, fashionable clothes and shoes. Wealth, in this view, consists in a pile of things. You're rich if you have a big pile of stuff. And you're poor if you've got a small pile. And probably people measure this way because it is what is most readily apparent. You can see it. You can see the big house and its rolling manicured lawn, and you can compare that to the corrugated iron shed on the other side of town with an entire family living in it.

But this is a superficial measure of wealth. A better measure of wealth is how long someone has to work every day to provide themselves with a plate of food on the table, and a roof over their head. If they have to work all day every day to keep body and soul together, they're poor. If they have to do hardly anything at all to earn the same, they're rich. The rich are the idle rich, and the poor are the toiling poor. The very richest people in a society are often almost perfectly idle, and the very poorest are perpetually busy. A Roman slaveowner reclined at his table while his slaves scurried around busily. On a scale of idleness from 0% to 100%, the very richest are at nearly 100% idle, and the very poorest are about 0% idle. Everybody else is somewhere in between.

disasterNow let's see why inequality matters. Let's imagine a society of 9 people in which the first is 90% idle, the second 80% idle, and so on down to the last who is 10% idle. That's the blue line in the graph at left. Average idleness is 50%. So some people are busier than others. Does that matter? Not really. Now let's suppose of this same society that a disaster befalls it. It doesn't matter what the disaster is. It could be an earthquake, or a flood, or a failure of crops, or some sort of epidemic. And the result of the disaster is that for a while everybody has to work nearly twice as hard as they did before.

So the idlest member of this society, who only worked 10% of the time, now has to work 20% of the time. And the next idlest, who used to only work 20% of the time, now has to work 40% of the time, and so on. And that means that the sixth, seventh, eighth, and ninth members have to work 120%, 140%, 160%, and 180% of the time. But they can't actually work more than 100% of the time. Idleness can't fall below 0%, because that's the hardest anyone can work. That's the red line in the graph at left. And that means they won't be able to survive. However hard they work, they can't make ends meet. So, as a result of the disaster, 4 out the 9 members of this society will perish. And if the other 5 members of the society depended upon them in any way, their deaths will result in increased work for them too, perhaps to the point where they cannot survive either. In this way, the whole society may be extinguished. And that matters.

However, if theirs had been an egalitarian society, and they all worked 50% of the time, then a doubling of their work would have meant them working 100% of the time, and all just managing to survive. Therefore egalitarian societies are more likely to survive disasters than inegalitarian ones.

Seen this way, you'd expect to see the worst ill-effects of any temporary misfortune to regularly fall upon the poorest and hardest working members of an unequal society. They would tend to die youngest. They would tend to succumb earliest to disease. They would tend to resort to crime more often.

And that's the reason why I think that there is an element of truth underlying the thesis of The Spirit Level. And I have set out my reasons why.

But The Spirit Level offers no such logical explanation of why there should be worse health outcomes in unequal societies. Instead, all that it does is to look at the available statistics for mortality, health, crime, etc, and compare this with inequalities in income, and finding that in more unequal societies, there is more death, sickness, crime, etc. And then it says that the inequality causes these outcomes.

In this respect The Spirit Level employs the same sort of 'reasoning' that underpins the kind of antismoking research that has determined that smoking 'causes' lung cancer - which is to find that people who smoke tend to die of lung cancer more often than people who don't, and declare that therefore smoking 'causes' lung cancer. The causal mechanism - of how exactly a few puffs at a cigarette results in lung cancer - is not given. And it is not explained exactly how income inequalities in a society cause early death or disease or crime.

At one point a causal explanation is attempted, to explain how inequality might result in social ill-effects:

A very important part of what fuels consumption however is status competition - keeping up with others, maintaining appearances, having the right clothes, car, housing, education etc, to compare favourably with others. All these pressures are intensified by greater inequality. As a result people in more unequal societies work much longer hours to keep up appearances. They spend more, save less, get into debt more and aspire to ever higher incomes....

Sorry. But why does anyone have to keep up with other people, maintain appearances, etc? Is envy automatic? More or less everybody's got a TV set, but I don't. Do I envy them? No. I don't envy them because I don't want one.

If this is a consequence of anything, it is a consequence of how many people mismeasure wealth, by looking at superficial appearances - having the right clothes, car, etc -. It is not an argument for greater equality. It's an argument for not being so stupid, and for measuring wealth in a better way.

Furthermore, annual income is not a measure of how well off anyone is. If someone earns $10,000 a year, this is meaningless unless it is known how many hours a day need to be worked to earn this. Someone might earn this working part-time, or working all day 7 days a week. And $10,000 a year doesn't mean anything unless the cost of living is factored in. How much does a loaf of bread and a pint of milk cost? Only if we know this can we find out if someone can survive on $10,000/year. Income on its own is an insufficient measure of wealth.

And then there's the question of how income inequality is measured. The authors point out that there are a number of ways of doing this. For some reason, they choose to use one method when comparing countries, and another measure when they're comparing states within a country. Why? The first method they use is to compare the top 20% incomes with the bottom 20%. The second method - the Gini Coefficient method - totals up inequality over the whole society. If everyone earns the same, inequality would equal 0. If one person gets everything, inequality would equal 1. I suspect the shift from one measure to the other is because one shows higher inequality than the other, and the one that shows the greater inequality is being chosen.

I've given an explanation of why I think equality in a society is an important and valuable thing in some circumstances. Notably the circumstance in which some sort of disaster befalls a society. There are plenty of examples of this. Captain William Bligh (of Mutiny on the Bounty fame) no doubt lunched rather better than his crew, and slept in a more comfortable bed, and had his own cabin while he was captain of the Bounty. But when he was put in an open boat with a few other crew members, and sailed halfway across the Pacific, he ate exactly what they ate, and drank the same few drops of water that they drank. He didn't have a little cabin on the stern of the boat. He didn't take twice as much food or twice as much water. Because he had to. He depended on his crew, and he had to ensure that they survived, because if they didn't, he wouldn't either. Inequality was tolerable aboard the Bounty, but it was intolerable aboard the open boat on which he sailed away from it. (And if Bligh really ought to be famous for anything, it should be for that remarkable journey in an open boat, about which a book has been written, whose title escapes me.)

And this is why all sorts of disaster scenarios - of global warming, and population explosion, and acid rain, etc, etc - are constantly being invoked in order to advance the cause of social equality. Because it is only in circumstances of disaster that a good case can be made for social equality.

Inequality in modern industrial society is a consequence of economic growth which does not initially benefit everybody equally across society. Somebody dreams up some new tool or technique for doing something, and they make a fortune. Everyone else eventually benefits in a small way as they acquire the use of these new tools and techniques. But in the process, one man has been made very rich, and everybody else has been made slightly better off too. Inequality appears.

And then, because he's got more than enough money to buy himself enough to eat, and keep a roof over his head, he spends most of the excess on consumer goods. Like swimming pools. And TV sets. And paintings by Vincent van Gogh. Consumer society grows out of social inequality as people with more money than they need spend it on things they don't need. If they don't spend that excess cash on something, and kept it in a suitcase under the stairs, nobody would be able to earn it and spend it themselves. It isn't envy or keeping up with the Joneses that drives consumer society. It's excess cash in people's pockets. The authors of The Spirit Level have got the causal mechanism wrong.

Inequality is inevitable while a poor, busy society is in transition to becoming a rich, idle society. Perfect equality is only ever found in the busiest societies (like Bligh's open boat on the Pacific) where idleness approaches 0, or in the most perfectly idle societies. In between there's bound to be inequality. And if social equality is enforced anywhere along the line, it can only be done so by halting economic growth. And if economic growth is halted, economic decline will inevitably follow.

One way of thinking about economic growth is to think of a tribe of people living in a deep, dark bog at the bottom of a hill. One day they decide to climb to the top of the hill, and live on its sunny, fertile uplands. So they set off in single file to climb the narrow path to the top. And when the leaders have got to the top, some of the rest are still standing at the bottom. And then somebody shouts, "This is unfair! Some people have got to the top while the rest of us are still standing up to our knees in the bog at the bottom! We should all be equally half way up the hill by now. This has got to stop. They must all come back down!" And this is manifestly silly, because it's only during the walk from the bottom of the hill to the top that this temporary inequality arises. If people would just wait their turn before climbing the path to the top, all would be well, and equality would be restored once they'd all got to the top. But while the walk to the top of a hill might take half a day or less, economic growth from busy poverty to idle wealth takes centuries, perhaps even millennia. And so the transitory nature of the intervening inequality is not perceived. Instead it looks, at any one time, like a permanent condition. A permanent condition in which some people are at the top of the hill, and some are at the bottom.

I used to live once in Rio de Janeiro. And I was shocked by the contrast between the wealth of the white skyscrapers on Copacabana beach, and the poverty of the tin shack favelas perched on the hills above it. At the time it looked to me like a permanent condition. After all, it was the same every morning. And I thought it was an intolerable inequity. But in retrospect I think I took a superficial view of the relative wealth of the rich and poor, and that what I was seeing was a line of people on a path from the bottom to the top of a hill, moving very slowly up. Or, in the case of Rio de Janeiro, from the hills above down to the sunny beaches below. In time they'll all get there, if they're sufficiently patient. And when they get there, they'll not just be boundlessly rich, but equally boundlessly rich.