Reducing inequality is first step to curbing poverty

Not long ago, reducing inequality of wealth and income was a mission reserved for political leftists, often condemned as no more than the politics of envy by their ideological rivals. Egalitarian politics were often dismissed in the 1980s and 1990s as no more than the resentment that the unsuccessful felt for those who were more dynamic and harder working. But things look very different in 2014: Inequality has never been higher on the political agenda than it is today.

President Barack Obama declared in December that tackling income inequality is “the defining challenge of our time.” Bill de Blasio has begun his New York mayoralty by vowing to address the “quiet crisis” of inequality. And Pope Francis, in the first apostolic letter of his papacy, condemned inequality as “the root of social ills”, leading to a “moral destitution” that destroys the social fabric. Obama is due to meet the pope in Rome on March 27, with the White House saying the purpose of the meeting is to discuss “their shared commitment to fighting poverty and growing inequality.”

Now that inequality is clearly no longer a marginal concern, what should we make of this upsurge of egalitarian rhetoric? Have Obama, de Blasio and Francis turned their fire on the right target, or have they lost track of the real problem?

Many on the traditional right would argue that these new egalitarians have lost the plot. But it’s interesting that even some more progressive thinkers do not think that we should care about inequality itself. Princeton philosopher Harry Frankfurt has eloquently defended the view that inequality itself is not something to worry about. According to him, “the trouble with being poor is not that some people are rich. Rather, the trouble consists essentially in having too little to avoid the deprivations and anxieties that are characteristically suffered by people who live in poverty.” As long as everyone has enough for a decent life, who cares how much the rich have or whether inequality is rising or falling?

Frankfurt is surely right to say that the suffering of those in absolute poverty is a cause for great concern, but he is wrong when he says that both the president and the pope are mistaken in moving from a legitimate concern with alleviating poverty to a confused focus on inequality itself. The deprivations of those who suffer from inequality not only are caused by not having enough but also are intimately connected to having less while others have more.

Obama’s surprisingly radical speech on inequality makes it clear that egalitarians have better arguments than their opponents allow. Obama identified a number of reasons that the need to fight inequality is not and cannot be exhausted by addressing poverty alone. He made the point that extreme inequality can damage overall growth and prosperity, and he went much further, in connecting the fight against inequality to two core American values: opportunity and democracy. His opposition to inequality is not just technocratic but about the moral and political values at the very heart of a democratic society. One may doubt that his actions will have the clarity and purpose of his rhetoric, but his arguments nevertheless refocus attention.

Obama’s first argument is that economic inequality undermines social mobility. When inequality increases beyond a certain level, the rich pull away from the rest of society and their children are able to have opportunities for advancement that are simply denied to the less well-off. In other words, extreme income inequality transforms into a deeper inequality of opportunity. That is why America can no longer be described as a land of opportunity. It now has much lower social mobility than more equal countries such as Canada, Germany and Sweden. If we want a society that rewards merit and hard work — rather than the accident of being born to wealthy parents — and doesn’t close off the fortunes of ordinary people, then financial inequality needs to be reduced. The American dream is possible for the next generation only if the excesses of American capitalism are restrained.

So it isn’t true to say that we shouldn’t care about inequality as long as everyone has enough money to enjoy a decent standard of living. Or to put things another way, we have to realize that a decent standard of living requires limits on inequality, as we can live decently only when our political institutions are not dominated by the rich and when our children have the chance to thrive on their own merits. Comparative wealth matters, not just absolute amounts. This has nothing to do with envy but everything to do with the existence of what the economist Fred Hirsch called “positional goods.” My having caviar does not stop you from eating steak, but my ability to buy political power does deprive you of your chance for democratic influence, and my ability to buy privileges and advantages for my children does deprive your children of the chance to make the most of their talents and abilities in a fair society.

What is more, the effects of economic inequality are not static but have a tendency to grow and metastasize. We see these kinds of inequality cascades when, for example, the rich lobby Congress to change the tax code in their favor, thereby allowing them further to embed their wealth and privilege, which in turn give them even more political influence in the future. The existence of inequality cascades explains both why attacking inequality is so hard to do and why the task is so urgent.

Attacking inequality can’t be easy, though, and it can’t be politics without enemies. If we care about real democracy and real opportunity, then there are two paths open to us. Either we must find ways to break the links between wealth and political power — perhaps by campaign finance reform or other reforms to the political process — and between wealth and opportunity, by much greater public spending on education and training or we need to break up huge concentrations of wealth directly, through the taxation of income and estates or through changes to economic regulation that rebalance economic returns away from the holders of capital and back toward working people.

What’s clear is that neither path will be popular with those powerful people who have already transformed their unequal share of wealth into an unequal share of power.