Equality talk obscures low horizons

What is the likely impact of policies to redress wide economic inequalities? Many support this goal and some abhor it but few take the trouble to spell out exactly what they mean by equality in this context.

Barack Obama’s 2014 State of the Union speech provided a good opportunity to unpick the concept. The president is both a frequent critic of inequality and the head of what is still the world’s most powerful state. Admittedly his recent speech was relatively dull but it was still a good vantage point from which to examine his notion of equality.

For the purposes of this post let’s leave aside some of the non-economic conceptions of equality the president raised. There was moral equality in his nod to the United States Declaration of Independence of 1776. “We believe in the inherent dignity and equality of every human being”, said the president. There was also gender equality (“a woman deserves equal pay for equal work”), legal equality and what he called “marriage equality” (presumably a reference to gay marriage). All of these are important ideas to examine but they need not detain us here.

Once these other notions are put to one side it becomes clear that in the economic sphere the president was not advocating equality but criticising what he regards as excessive inequality. Like most contemporary egalitarians he argues that economic inequality has gone too far. But he made no demands for any significant redistribution of wealth let alone for equality of incomes.

Like many others he also muddled the stagnation of average incomes with widening inequality. Although these two phenomena can coincide they are not the same thing. Obama name checked the Earned Income Tax Credit, introduced in 1975, as a way of helping families who work hard. Whatever the merits of this measure it is not likely to have much impact on the gap between rich and poor.

Look more closely and it becomes apparent that the president was more focused on opportunity than inequality. “Opportunity is who we are,” he said. “And the defining project of our generation is to restore that promise.”

The problem with this concept is precisely that is so elastic. Virtually anyone, whatever their political views, can claim to support opportunity. Obama’s association of opportunity with access to a good job, honest work and strong communities was also hard to dispute. He uses such phrases as platitudes rather than meaningful demands.

Two broad conclusions can be drawn from Obama’s use of equality in his recent speech. First, its practical content from an economic perspective is virtually nil. Obama was essentially saying it is unfair for inequality to reach excessive levels – itself a highly subjective call. At most he was making the uncontentious claim that America should not be allowed to develop a caste system: there should be the opportunity to move up (and implicitly down) “ladders of opportunity”.

More telling is what all the talk of inequality obscures. Focusing so much on relative differences of income inevitably downplays the importance of absolute increases in living standards. All the talk of inequality betrays a dearth of ideas on how to promote economic growth.

The president’s polished inequality rhetoric disguises his incredibly low horizons about the potential to achieve prosperity for all.

This comment was first published today on Fundweb.