As two years since Brits voted for Brexit is checked off the calendar, the thick tar of inequality still hampers efforts to create a wellbeing economy. So it is good that economic inequality has been in the headlines for many years now. We’ve seen presidents decry it. NGOs campaign against it. Academics calculate the scale of it. Business leaders profess their concerns about it. And people have protest and vote in exasperation at it.

There seems to be a settled – almost – acceptance that levels of income and wealth inequality are unacceptably high. And that such levels do serious harm – to people across the income spectrum, to the functioning of society, to democracy, to innovation and institutions, to economic activity, and to the environment.

Some policies have been enacted which poke at the problem: increases in minimum wages; crack downs on tax evasion and avoidance; transfers to those whose income is inadequate; even taxes on companies paying steep multiples between highest and lowest paid. Too often these are isolated instances – or they are not implemented with the vigour necessary to bring about change anywhere other than at the margins.

And so the economy keeps on generating wealth for the wealthy. It keeps on churning out extraordinary rewards for those who are fortunate to own financial assets or to sit in the leather seats of executive offices. It keeps bearing down on those cleaning those offices and working to create the financial value that gets siphoned off to those owning the shares.

This is an economic system in which rewards are skewed to a certain type of individual, typically those who operate industries that benefit from monopoly rents (such as Carlos Slim’s ownership of telecoms in Mexico) or those whose inheritance or connections mean they started life standing on a pile of financial resources or have been able to shape policies that make wealth easier to amass. And it benefits those who have money ‘spare’ and choose to put those spare dollars and pounds and euros into activities that will earn them more money than most people will earn in a life time. Just by clicking the ‘buy’ button on their share trading app.

But what if the tables were turned? Is it possible to imagine a configuration of the economy where the rewards don’t flow to the rentiers, but to the rest of society? Where more wealth went to those who generated it rather than to those whose position as a shareholder ostensibly gives them greater access to the pool of financial value created by workers, by suppliers, by women outside the marketised economy, and of course by nature itself?

In that situation, where those creating the value got most, where more people owned the economic assets themselves, and where returns were better aligned to input of effort, would some level of economic inequality be OK?

Clearly not the sky high levels now – because by definition if there is a better spread of ownership and if rewards no longer follow rent then it would be impossible for a few people to hoard as much they do now.

But would divergences in economic fortunes be acceptable if the economy was geared up to reward social value rather than extractive activities?

If the work that is done in the care economy – which is so core to that of the marketised economy – was recognised and rewarded?

And if, on the other hand, people who extracted the most also paid in the most, for example if those doing most polluting had to dig deepest into their pockets and those using more natural resources than others were footing more of the bill?

Maybe, in such circumstances, inequality would be OK? If the economy was one where prices reflected the true cost of producing something. If rewards were about work rather than rents. If ownership was shared rather than commandeered by a few whose existing wealth means their money makes more for them than most people can earn by working.

This would be a vastly different economy from that of today. It would be an economy that cultivates wellbeing – where collective wellbeing is the primary goal, at the forefront of policy making in corridors of parliaments and in the board meetings of businesses. It would take account of nature to the extent that the environment is cherished, rather than simply deemed an input to be drained.

And yes, there would be some inequality – but it would follow the lines of social value and environmental harm: those bringing more of the former would get more and those doing more of the latter would give more.

Of course, such an economy is yet to be realised. Many are working on bringing it about – and are increasingly linking up as the Wellbeing Economy Alliance so as to better connect and amplify their work.

But until we have created a wellbeing economy, it is probably best to carry on advocating against inequality because it still reflects a rigged system rather than one that puts people and planet first.

The post Under what circumstances is inequality OK? appeared first on New thinking for the British economy.

The word ‘tome’ gets bandied about all-too often. But in this case, despite claims on the cover to constitute a “brief guide to global inequality and its solutions”, tome really is apt. Jason Hickel’s The Divide is as weighty physically as it is intellectually.

And yet, fortunately, it is highly readable. I say ‘fortunately’ because this is a book that if our world is to have any chance of meeting the challenges of the 21st century, people need to read. It challenges so much received wisdom via a well-argued, flowing prose that guides you through economic history, international trade, colonialism, politics and power, and the limits to growth debate. In setting out the reality of global inequality and its tangled roots, Hickel, matador-like, destroys the statistical pivots used by official agencies and unpicks their portrayal of an optimistic account of the state of global poverty and inequality.

But The Divide is not just about statistics – it is about the political economy of today’s entrenched inequalities and why the economic model currently doing so much harm to people and planet exists.

Early pages share the story of how a writer for President Truman concocted the notion of ‘development’, almost as a space filler for a Presidential speech. This anecdote shows how much of the development agenda began in what almost amounts to a spin exercise. This is a brilliantly brutal call-out that somewhat undermines the original intentions of one of the most popular and ostensibly most virtuous causes of the 20^th century, a cause that has galvanised political agreements, huge rallies, not to mention songs from well-known rock-stars.

From here Hickel challenges the implicit – arguably deliberately concocted – belief so many hold: that inequalities and the circumstances endured by the poorest are just a ‘technical’ challenge, solvable by governments in the global ‘South’ simply setting up the right institutions, picking the right suite of policies, eliminating corruption, and so on. An early knockout punch in the bastions of mainstream policy-making comes as early as page 3, where Hickel reminds us that:

“…in the year 1500, there was no appreciable difference in incomes and living standards between Europe and the rest of the world….yet their fortunes changed dramatically over the intervening centuries – not in spite of one another but because of one another.”

The chart on page 30 then summaries the crux of Hickel’s argument, showing the ‘annual gains from aid vs. selected outflows & structural costs/losses’. Spoiler alert: aid pales when compared to the multiple (and massive) flows in the opposite direction. This is one of those “if you only look at one chart this year, look at this one” charts. So much said in one diagram.

And from here the book takes the reader on a journey of the relationship between rich and poor countries. And one is left feeling it is one of the most toxic, abusive, manipulative relationships possible to imagine. Hickel forensically sets out the contours – the cuts and the bruises and the hectoring – of that relationship. And, crucially, the imbalance of power and profit inherent in it. On page 29 he writes:

“…the World Bank, for example…profits from global South debt; the Gates Foundation, which profits from an intellectual-property regime that locks life-saving medicines and essential technologies behind outlandish patent paywalls; and Bono, who profits from the tax haven system that siphons revenues out of global South countries.”

As is probably the way with any book anyone reads, there were some points where I wasn’t entirely nodding along. As someone who has spent a good chunk of my working life working for a large international NGO, I found the sweeping discussion of international NGOs and their work to be problematic. In pointing out (admittedly not unreasonably in some instances) how the communications of many NGOs entrench the ‘aid narrative’, the discussion skims over that so many of them campaign hard – and often effectively – against many dimensions of the system Hickel calls out as so insidious. Hickel does acknowledge this in an endnote, but I worry a reader who doesn’t diligently check every endnote would walk away with the impression NGOs are all working from the same mantra, one of heroic donor and grateful recipient.

This is far from the case and Hickel himself draws on evidence Oxfam collated about the extent of inequality and wealth hoarded by billionaires, something that would have been impossible if NGOs like Oxfam weren’t proactively identifying that the economic configuration is a root cause of poverty and suffering. Moreover, many solutions Hickel offers are bolstered by the work of NGOs. Jubilee 2000, for example, had huge NGO backing, as do the efforts to end tax dodging, mobilisation against inequality, and of course the fair-trade movement. Many of these feature in Hickel’s five key areas for change, areas more likely to see success with continued, and perhaps bolstered, NGO involvement.

As always, it is a matter of balance: help people survive the current system or change the system? I think there’s an urgent need for both. Helping people cope with the current challenges is vital, lifesaving work. Humanising the system is still worth it, anything else is cruel. But clearly, what is needed is also capacity and preparedness to look beyond supporting people’s immediate survival – and to call out the systemic reasons why so many people’s survival is in peril. These dual tasks may not necessarily be undertaken by the same people or even by the same organisation (and need not be covered simultaneously in the same book), but one without the other is not enough. Without the former people will die, and without the latter dying will carry on in the face of policies that should and can be changed.

So I am left hoping that Hickel’s next project might be helping craft a new lexicon, one to replace the increasingly redundant notion of development. For example, his penultimate chapter is called ‘from charity to justice’ – a nice contrast between the two fundamentally different concepts. One system preservation. One that requires system transformation.

The transformations Hickel identifies as most important in making that shift are debt resistance; global democracy; fair trade; just wages; and reclaiming the commons. These are as good a place as any to start (and others will of course have their own top five).

What’s needed to get there is mobilisation and political action, together with connecting and amplifying the work already underway (read here about the Wellbeing Economy Alliance, a new effort to do just that). This is a task that will be aided by the questions Hickel poses and the assumptions and orthodoxy he slays.

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There seems to be a new trend in town – it’s not Pokemon Go or turmeric lattes or pouty photos on social media.

It’s the tendency to unquestioningly throw around the term ‘productivity’ as an unmitigated good – as an important goal of policy – without defining it, let alone discussing whether more ‘productivity’ is an appropriate goal for today’s economy.

Admittedly, the mantra of ‘we need to boost our economy’s productivity’ has long been with us – but it recently seems to be experiencing a spell of particularly high popularity in ministerial speeches, TV and media interviews, and in high level meetings.

In one of these meetings – a room full of highly educated people, people very senior in businesses or economic agencies or government – I asked: ‘but how are you defining productivity?’

The answer: ‘we haven’t really discussed that’.

This is concerning.

I asked if they were defaulting to the definition I was taught in my first year studying economics at university – output per worker. Yes, that was, apparently, what they had in mind: ‘Productivity gains are vital to the economy, as they mean that more is being accomplished with less’.

So the next question is if increasing the output each worker produces is necessarily a good thing. Why would we want more? And why would we want to do it with ‘less’, if less means fewer people?

First, more stuff? Really? In a world pushing up against and beyond environmental limits and planetary boundaries? When there is already more than enough to deliver sufficient food for everyone, if only we could share resources better and stop wasting so much? When the link between more stuff and enhanced wellbeing becomes tenuous after fairly modest levels of income?

Second, more output per worker? In an economy in which many people are simply trying to stitch together a semblance of a livelihood on short term contracts and too few hours, is pursuit of fewer people on the payroll a good thing for anyone other than those signing the pay cheques? And is it even relevant in an economy where care, personal services and creative sectors are growing in significance? After all, these are sectors where having more people involved might just lead to better outcomes and higher quality delivery.

And as economist William Baumol noted, with reference to a string quartet, the push for more intensity of work might end up compromising the quality of delivery and hence the experience, for both worker and customer. Ecological economist and former UK Sustainable Development Commissioner Tim Jackson explains that ‘when it comes to human services, continually stripping out the time spent in service actually becomes (in any meaningful terms) counter-productive, even though it is counted in economics as being productive’.

A recent Oxfam International report suggested we need to consider who gets the gains of any productivity increases. Doing so would reveal this is one type of decoupling that has occurred: a breakdown of the link between productivity gains and workers’ wages. To a great extent (especially in the US) owners of capital have siphoned off the benefits. Whereas workers – often due to their declining power in workplace negotiations – have been delivering more for their bosses, but without commensurate remuneration.

So why, with all these possible downsides, is productivity rolled out so often and so categorically as a good thing? It seems to me that it reflects an example of how out of date economic axioms remain entrenched in so many discussions about the economy in political and media circles.

It is the same with productivity’s twin-concept of ‘growth’ – another abstract term wheeled out without asking what sort of growth is wanted, for whom, and what trade-offs societies need to make in order to attain it. Instead an ‘adjective lipstick’ is painted on the growth pig – to paraphrase Sarah Palin. We have: ‘Inclusive Growth’; ‘Sustainable Growth’; ‘Green Growth’; ‘Shared Growth’; and ‘Low Carbon Growth’. Whitewashing an abstract term of dubious merit is not good enough.

But returning to productivity, there are some good reasons to put it forward as a goal. One would be if workers were able to negotiate to take the benefits – for example, as more leisure time, without less pay. This would be a good thing in our over-worked stressed out society. Another would be if pursuit of productivity gains were focused on those jobs that are unpleasant – using technology and automation to make these jobs easier would be entirely appropriate.

And finally, what if the sort of productivity being promoted was ‘output per unit of resources’? That would mean the same amount of material goods or services were being delivered, but using fewer resources. Given the extent of stress on the environment, an economy that chews up less would be a great turn of events.

Discussing how the challenges the economy faces and how it can be improved is a very necessary conversation. They would be even better if the terms used and assumptions made are on the table for debate and redefinition. A more cautious and nuanced approach to mantras such as growth and productivity might just lead to a wealthier country. Wealthier, of course, in the old English definition of ‘the conditions of wellbeing’…

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