City AM is a free newspaper, available outside many railway stations in the Greater London area, targeted at City workers. It’s always worth a quick read to see what is currently agitating finance capital. On Tuesday, 3 April, the lead article was written by Ryan Bourne who occupies the Chair in Public Understanding of Economics at the Cato Institute.
The Cato Institute is an immensely rich, right wing think tank based in Washington DC. It has been deeply compromised by its involvement in the denial of global warming. Professor Bourne wisely chose to refrain from improving our understanding of that particular problem; instead, he sought to improve our understanding of growing inequality. This, according to the Professor, is a myth: inequality is at its lowest level since 1987 and is currently declining. Really?
To support his case, Professor Bourne refers to an IFS study which he fails to cite. My guess is that he is referring to Fifty Years of Income Inequality . This concludes that inequality peaked in the mid-1980s (i.e. High Thatcherdom) and has not recovered significantly since. The study recognises that interpreting how income inequality has changed in the last 20 years depends on which years you include and exactly what measure of income you use. It appears to assess the situation as flat.
It’s undeniable that the IFS study does not provide much evidence of recent growth in inequality as measured by such statistics as the Gini Income Coefficient. Why is this when most of us can observe it with our own eyes? All it takes is a walk along Croydon High Street any afternoon. The reason is that such coefficients do not relect that
- the social wage has been shredded by the austerity cuts since 2007 to health, education, social services and child support and the people at the bottom are being asked to bear too high a burden. We have replaced social security with food banks.
- social mobility has been undermined by cuts to education and student support and attacks on trade unions. Become poor, stay poor.
- the elite are sufficiently small in number and sufficiently adept for their income and wealth not to show up in Gini Coefficients
Interestingly, Professor Bourne concludes his article by saying that history shows that inequality only ever improves under communism, violent revolution, war or bubonic plague.
As bubonic plague, war and even violent revolution are best avoided (we much prefer peaceful revolution), it appears, against all the odds, that the Professor must agree with us on the need for communism! Either that or he’s actually dismayed at the prospect of the declining inequality he claims to detect. He cannot have it both ways. That’s impossible, even for a professor of public understanding of economics.