The Inequality Gap – Marching Towards Socialism

In a time of economic pressure, politicians seem even less able than before to address the inequalities in society.

The Inequality Gap – Marching Towards Socialism

By Stuart Thomson, Managing Director, Johnsons Chartered Accountants

In a time of economic pressure, politicians seem even less able than before to address the inequalities in society. No matter what their stated aims, no political party seems able to shift the markers of poverty in any meaningful way. Is there a solution, or are we heading inexorably towards a socialist society as the only means of protecting the most vulnerable?

Centuries ago there were the ‘haves’ (not many) and the ‘have nots’ (the many). Societies around the world, with few exceptions, have progressively sought to rebalance this by reducing the economic difference between the ‘haves’ and ‘have nots’. There have even been arguments that there should be no difference at all between people in terms of personal wealth, such as the arguments of Karl Marx.

The West has moved far more quickly in this direction. Even America, which is generally a strong anti-socialism advocate, has brought in measures to support those in need. However I think there is a disconnect. Political rhetoric eschews political correctness and taxing the rich to help the poor, and yet economic inequality has risen across all political spectrums in the West. There can only be two explanations. Either politicians are ineffective at best, arguably useless, or the data is inaccurate.

I postulate that people who have risen to the top of their own greasy pole (political parties for politicians) cannot all be ineffective, and that the measure of changing inequality is fundamentally flawed.

Crude measures are used to explain inequality. General income, or wealth is used, but it excludes two key aspects that affect equality: 

  • Social security benefits benefit the poor far more than the wealthy. For example, state pensions and national healthcare schemes are areas which, if withdrawn (or doubled), would impact the poor far more than the wealthy who often have private pensions and private healthcare. Such benefits are not covered by commonly published metrics on inequality.
  • The general standard of living across humanity has increased. Famine, whilst not eradicated, is limited. Death during childbirth sadly still exists, but with access to modern medicine its likelihood is reduced. Transport is available to all, and education is not just the preserve of the rich. Whilst I think everyone accepts that there is more to do in these areas, Western society has moved forward, and such progress is not captured by raw data on earnings or wealth.

So where are we really in terms of inequality? Well the starting point, a subject I wrote about at university, is that simple measures like the Lorenz curve are wonderful at summarising one degree of inequality, but money is not the only measure. Inequality measures need to address two things:

  1. A wider range of aspects affecting inequality.
  2. Society’s view of what inequality looks like. This issue needs to be discussed, debated and agreed. Everyone is different, with different attitudes to work, different skills and even different health needs.

It is unlikely, when all factors are considered, that equality in all areas can ever be achieved, even if that was the goal. Instead, society needs to ascertain what scale of inequality, and in what areas, is that inequality appropriate. Politicians like to simplify messages, which is not to say our politicians are simple, but they seek public approval based on simple arguments. This is why only a few politicians go down in history as truly changing society (for better or worse), because this particular problem is entrenched, nuanced and complex.

We need to discuss what type of society we want. In the UK, the Labour Party is probably best at communicating their preference, but then it is a simple message and the hard aspects of affordability are often omitted from their ideal. The Scottish Nationalist Party similarly omits affordability, and is focused on self-determination. The Conservative Party has the hardest message to communicate – progress for all without seeing either side of the equality divide paying for the other. It’s a difficult balance to maintain, which would explain why the young often have left-wing leanings, as they dream of idealism, whilst the older generation generally forms broader views across the political spectrum.

Why does inequality matter? Well on the narrow, publicly communicated definition, it doesn’t. What matters on this narrow measure is neither poverty nor inequality. However I think that also misses the mark. I am firmly of the view that society needs to focus on a few areas:

  1. Protecting its people.
  2. Avoiding poverty (and not just financial poverty) for all.
  3. Equality of opportunity – everyone needs to be able to dream, as well as have the chance to succeed.
  4. Helping those who are unable (not those who are unwilling) to help themselves.

Measuring our politicians on these measures still highlights glaring deficiencies in outcomes. Crime is up, and the health of our national economy has been checked by the global pandemic. With inflation appearing over the horizon, more people are starving and relying on food banks and state benefits. Education is seen as the key to equality of opportunity but private education still sells itself on a ‘better education’, whatever that means. And those who need our help tend to get sympathy, not transformative help.

So however we appraise our politicians they are simply not making a difference, no matter what their stated ideals might be. Instead, simple goals result in poor outcomes with political headlines. We are fated to march towards socialism if the complexities of society cannot be reflected in our leaders’ aspirations.