Ill Fares the Land Page 2

  All change is disruptive. We have seen that the specter of terrorism is enough to cast stable democracies into turmoil. Climate change will have even more dramatic consequences. Men and women will be thrown back upon the resources of the state. They will look to their political leaders and representatives to protect them: open societies will once again be urged to close in upon themselves, sacrificing freedom for ‘security’. The choice will no longer be between the state and the market, but between two sorts of state. It is thus incumbent upon us to re-conceive the role of government. If we do not, others will.

  The arguments that follow were first outlined in an essay I contributed to the New York Review of Books in December 2009. Following the publication of that essay, I received many interesting comments and suggestions. Among them was a thoughtful critique from a young colleague. “What is most striking”, she wrote, “about what you say is not so much the substance but the form: you speak of being angry at our political quiescence; you write of the need to dissent from our economically-driven way of thinking, the urgency of a return to an ethically informed public conversation. No one talks like this any more.” Hence this book.

  CHAPTER ONE

  The Way We Live Now

  “To see what is in front of one’s nose needs a constant struggle.”

  —GEORGE ORWELL

  All around us we see a level of individual wealth unequaled since the early years of the 20th century. Conspicuous consumption of redundant consumer goods—houses, jewelry, cars, clothing, tech toys—has greatly expanded over the past generation. In the US, the UK and a handful of other countries, financial transactions have displaced the production of goods or services as the source of private fortunes, distorting the value we place upon different kinds of economic activity. The wealthy, like the poor, have always been with us. But relative to everyone else, they are today wealthier and more conspicuous than at any time in living memory. Private privilege is easy to understand and describe. It is rather harder to convey the depths of public squalor into which we have fallen.

  PRIVATE AFFLUENCE, PUBLIC SQUALOR

  “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”

  —ADAM SMITH

  Poverty is an abstraction, even for the poor. But the symptoms of collective impoverishment are all about us. Broken highways, bankrupt cities, collapsing bridges, failed schools, the unemployed, the underpaid and the uninsured: all suggest a collective failure of will. These shortcomings are so endemic that we no longer know how to talk about what is wrong, much less set about repairing it. And yet something is seriously amiss. Even as the US budgets tens of billions of dollars on a futile military campaign in Afghanistan, we fret nervously at the implications of any increase in public spending on social services or infrastructure.

  To understand the depths to which we have fallen, we must first appreciate the scale of the changes that have overtaken us. From the late 19th century until the 1970s, the advanced societies of the West were all becoming less unequal. Thanks to progressive taxation, government subsidies for the poor, the provision of social services and guarantees against acute misfortune, modern democracies were shedding extremes of wealth and poverty.

  To be sure, great differences remained. The essentially egalitarian countries of Scandinavia and the considerably more diverse societies of southern Europe remained distinctive; and the English-speaking lands of the Atlantic world and the British Empire continued to reflect long-standing class distinctions. But each in its own way was affected by the growing intolerance of immoderate inequality, initiating public provision to compensate for private inadequacy.

  Over the past thirty years we have thrown all this away. To be sure, “we” varies with country. The greatest extremes of private privilege and public indifference have resurfaced in the US and the UK: epicenters of enthusiasm for deregulated market capitalism. Although countries as far apart as New Zealand and Denmark, France and Brazil have expressed periodic interest, none has matched Britain or the United States in their unwavering thirty-year commitment to the unraveling of decades of social legislation and economic oversight.

  In 2005, 21.2 percent of US national income accrued to just 1 percent of earners. Contrast 1968, when the CEO of General Motors took home, in pay and benefits, about sixty-six times the amount paid to a typical GM worker. Today the CEO of Wal-Mart earns nine hundred times the wages of his average employee. Indeed, the wealth of the Wal-Mart founders’ family that year was estimated at about the same ($90 billion) as that of the bottom 40 percent of the US population: 120 million people.

  The UK too is now more unequal—in incomes, wealth, health, education and life chances—than at any time since the 1920s. There are more poor children in the UK than in any other country of the European Union. Since 1973, inequality in take-home pay increased more in the UK than anywhere except the US. Most of the new jobs created in Britain in the years 1977-2007 were either at the very high or the very low end of the pay scale.

  The consequences are clear. There has been a collapse in intergenerational mobility: in contrast to their parents and grandparents, children today in the UK as in the US have very little expectation of improving upon the condition into which they were born. The poor stay poor. Economic disadvantage for the overwhelming majority translates into ill health, missed educational opportunity and—increasingly—the familiar symptoms of depression: alcoholism, obesity, gambling and minor criminality. The unemployed or underemployed lose such skills as they have acquired and become chronically superfluous to the economy. Anxiety and stress, not to mention illness and early death, frequently follow.

  Social Mobility and Inequality.

  (From Wilkinson & Pickett, The Spirit Level, Figure 12.1, p. 160)

  Income disparity exacerbates the problems. Thus the incidence of mental illness correlates closely to income in the US and the UK, whereas the two indices are quite unrelated in all continental European countries. Even trust, the faith we have in our fellow citizens, corresponds negatively with differences in income: between 1983 and 2001, mistrustfulness increased markedly in the US, the UK and Ireland—three countries in which the dogma of unregulated individual self-interest was most assiduously applied to public policy. In no other country was a comparable increase in mutual mistrust to be found.

  Social Mobility in the USA.

  (From Wilkinson & Pickett, The Spirit Level, Figure 12.2, p. 161)

  Even within individual countries, inequality plays a crucial role in shaping peoples’ lives. In the United States, for example, your chances of living a long and healthy life closely track your income: residents of wealthy districts can expect to live longer and better. Young women in poorer states of the US are more likely to become pregnant in their teenage years—and their babies are less likely to survive—than their peers in wealthier states. In the same way, a child from a disfavored district has a higher chance of dropping out of high school than if his parents have a steady mid-range income and live in a prosperous part of the country. As for the children of the poor who remain in school: they will do worse, achieve lower scores and obtain less fulfilling and lower paid employment.

  Trust and Belonging in Europe.

  (From Tim Jackson, Prosperity Without Growth: Economics for a Finite Planet [London: Earthscan, 2009], Figure 9.1, p. 145)

  Inequality, then, is not just unattractive in itself; it clearly corresponds to pathological social problems that we cannot hope to address unless we attend to their underlying cause. There is a reason why infant mortality, life expectancy, criminality, the prison population, mental illness, unemployment, obesity, malnutrition, teenage pregnancy, illegal drug use, economic insecurity, personal indebtedness and anxiety are so much more marked in the US and the UK than they are in continental Europe.

  The wider the spread between the wealthy few and the impoverished many, the worse the social problems: a statement which appears to be true for rich and poor cou
ntries alike. What matters is not how affluent a country is but how unequal it is. Thus Sweden, or Finland, two of the world’s wealthiest countries by per capita income or GDP, have a very narrow gap separating their richest from their poorest citizens—and they consistently lead the world in indices of measurable wellbeing. Conversely, the United States, despite its huge aggregate wealth, always comes low on such measures. We spend vast sums on healthcare, but life expectancy in the US remains below Bosnia and just above Albania.

  Inequality and Ill Health

  (From Jackson, Prosperity Without Growth, Figure 9.2, p. 155)

  Inequality and Crime.

  (From Wilkinson & Pickett, The Spirit Level, Figure 10.2, p. 135)

  Inequality and Mental Illness.

  (From Wilkinson & Pickett, The Spirit Level, Figure 5.1, p. 67)

  Health Expenditure and Life Expectancy.

  (From Wilkinson & Pickett, The Spirit Level, Figure 6.2, p. 80)

  Inequality is corrosive. It rots societies from within. The impact of material differences takes a while to show up: but in due course competition for status and goods increases; people feel a growing sense of superiority (or inferiority) based on their possessions; prejudice towards those on the lower ranks of the social ladder hardens; crime spikes and the pathologies of social disadvantage become ever more marked. The legacy of unregulated wealth creation is bitter indeed.1

  CORRUPTED SENTIMENTS

  “There are no conditions of life to which a man cannot get accustomed, especially if he sees them accepted by everyone around him.”

  —LEV TOLSTOY, ANNA KARENINA

  During the long decades of ‘equalization’, the idea that such improvements could be sustained became commonplace. Reductions in inequality are self-confirming: the more equal we get, the more equal we believe it is possible to be. Conversely, thirty years of growing inequality have convinced the English and Americans in particular that this is a natural condition of life about which we can do little.

  To the extent that we do speak of alleviating social ills, we suppose economic ‘growth’ to be sufficient: the diffusion of prosperity and privilege will flow naturally from an increase in the cake. Sadly, all the evidence suggests the contrary. Whereas in hard times we are more likely to accept redistribution as both necessary and possible, in an age of affluence economic growth typically privileges the few while accentuating the relative disadvantage of the many.

  We are often blind to this: an overall increase in aggregate wealth camouflages distributive disparities. This problem is familiar from the development of backward societies—economic growth benefits everyone but disproportionately serves a tiny minority positioned to exploit it. Contemporary China or India illustrate the point. But that the United States, a fully developed economy, should have a ‘Gini coefficient’ (the conventional measure of the gap separating rich and poor) almost identical to that of China is remarkable.

  It is one thing to dwell amongst inequality and its pathologies; it is quite another to revel in them. There is everywhere a striking propensity to admire great wealth and accord it celebrity status (‘Lifestyles of the Rich and Famous’). We have been here before: back in the 18th century, Adam Smith—the founding father of classical economics—observed the same disposition among his contemporaries: “The great mob of mankind are the admirers and worshippers, and, what may seem more extraordinary, most frequently the disinterested admirers and worshippers, of wealth and greatness.”2

  For Smith, this uncritical adulation of wealth for its own sake was not merely unattractive. It was also a potentially destructive feature of a modern commercial economy, one that might in the course of time undermine the very qualities which capitalism, in his eyes, needed to sustain and nourish: “The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect, persons of poor and mean condition . . . [is] . . . the great and most universal cause of the corruption of our moral sentiments.”3

  Our moral sentiments have indeed been corrupted. We have become insensible to the human costs of apparently rational social policies, especially when we are advised that they will contribute to overall prosperity and thus—implicitly—to our separate interests. Consider the 1996 “Personal Responsibility and Work Opportunity Act” (a revealingly Orwellian label), the Clinton-era legislation that sought to gut welfare provision here in the US. The stated purpose of this Act was to shrink the nation’s welfare rolls. This was to be achieved by withholding welfare from anyone who had failed to seek (and, if successful, accept) paid employment. Because an employer could thus hope to attract workers at almost any wage he offered—they could not decline a job, however distasteful, without risking exclusion from welfare benefits—not only were the numbers on welfare considerably reduced but wages and business costs fell too.

  Moreover, welfare acquired an explicit stigma. To be a recipient of public aid, whether in the form of child support, food stamps or unemployment benefits, was a mark of Cain: a sign of personal failure, evidence that one had somehow fallen through the cracks of society. In the contemporary United States, at a time of growing unemployment, a jobless man or woman is thus stigmatized: they are not quite a full member of the community. Even in social democratic Norway, the 1991 Social Services Act entitled local authorities to impose comparable work requirements on anyone applying for welfare.

  The terms of this legislation should put us in mind of a previous Act, passed in England nearly two hundred years earlier: the New Poor Law of 1834. The provisions of this law are familiar to us, thanks to Charles Dickens’s depiction of its workings in Oliver Twist. When Noah Claypole famously sneers at little Oliver, calling him “Work’us” (“Workhouse”), he is implying, for 1838, precisely what we convey today when we speak disparagingly of “welfare queens”.

  The New Poor Law was an outrage. It obliged the indigent and the unemployed to choose between work at any wage, however low, and the humiliation of the workhouse. Here, as in other forms of 19th-century public assistance (still thought of and described as “charity”), the level of aid and support was calibrated so as to be less appealing than the worst available alternative. The Law drew on contemporary economic theories that denied the very possibility of unemployment in an efficient market: if wages fell low enough and there was no attractive alternative to work, everyone would eventually find a job.

  For the next 150 years, reformers strove to abolish such demeaning practices. In due course, the New Poor Law and its foreign analogues were succeeded by the public provision of assistance as a matter of right. Workless citizens were no longer deemed any the less deserving for the misfortune of unemployment; they would not be penalized for their condition nor would implicit aspersions be cast upon their good standing as members of society. More than anything else, the welfare states of the mid- 20th century established the profound indecency of defining civic status as a function of economic good fortune.

  Instead, the ethic of Victorian voluntarism and punitive eligibility criteria was replaced by universal social provision, albeit varying considerably from country to country. The inability to work or to find work, far from being stigmatized, was now treated as a condition of occasional but by no means dishonorable dependence upon one’s fellow citizens. Needs and rights were accorded special respect and the idea that unemployment was the product of bad character or insufficient effort was put to rest.

  Today we have reverted to the attitudes of our early Victorian forebears. Once again, we believe exclusively in incentives, “effort” and reward—together with penalties for inadequacy. To hear Bill Clinton or Margaret Thatcher explain it, making welfare universally available to all who need it would be foolish. If workers are not desperate, why should they work? If the state pays people to be idle, what incentive do they have to seek out paid employment? We have reverted to the hard, cold world of Enlightened economic rationality, first and best expressed in The Fable of the Bees, Bernard Mandeville’s 1732 essay on political
economy. Workers, in Mandeville’s view, “have nothing to stir them up to be serviceable but their wants, which it is prudence to relieve but folly to cure”. Tony Blair could not have said it better.

  Welfare ‘reforms’ have revived the dreaded ‘means test’. As readers of George Orwell will recall, the indigent in Depression-era England could only apply for poor relief once the authorities had established—by means of intrusive inquiry—that they had exhausted their own resources. A similar test was applied to the unemployed in 1930s America. Malcolm X, in his memoirs, recalls the officials who “checked up” on his family: “[T]he monthly Welfare check was their pass. They acted as if they owned us. As much as my mother would have liked to, she couldn’t keep them out. . . .We couldn’t understand why, if the state was willing to give us packages of meat, sacks of potatoes and fruit, and cans of all kinds of things, our mother obviously hated to accept. What I later understood was that my mother was making a desperate effort to preserve her pride, and ours. Pride was just about all we had to preserve, for by 1934, we really began to suffer.”

  Contrary to a widespread assumption that has crept back into Anglo-American political jargon, few derive pleasure from handouts: of clothes, shoes, food, rent support or children’s school supplies. It is, quite simply, humiliating. Restoring pride and self-respect to society’s losers was a central platform in the social reforms that marked 20th century progress. Today we have once again turned our back on them.