There is no equality debate

Although the claim is frequently repeated it is untrue that a debate about economic equality is underway. To those who follow it carefully it should quickly become clear that something else is happening.

Take the recent discussion at the World Economic Forum in Davos. A televised debate involving some of the main protagonists helps make some of the themes clear. The focus was not on equality but on what was regarded as excessive inequality.

A call for income equality would, strictly speaking, suggest that everyone should have the same earnings. But none of the key proponents in the current debate are calling for anything remotely like that. On the contrary, they insist that inequality is both desirable and necessary to provide incentives for people to work hard.

In this respect it was notable that the IMF chief, Christine Lagarde, corrected another panelist in the TV debate who suggested she was advocating equality. The French technocrat protested, quite rightly, that she had said no such thing.

New egalitarians such as Lagarde instead claim that inequality has become too extreme. In their view it has reached the point where it is having damaging social effects. The exact nature of these negative impacts is debated but it is typically claimed that excessive inequality can damage social cohesion and distort the political system. Often the argument is about plutocracy – it is alleged that the rich have too much political power.

This focus on extreme inequality also helps explain why there is such an obsession with the super-rich. To be merely rich is no longer considered noteworthy. The focus is on those at the very extreme end of the income distribution; such as the 85 billionaires who according to Oxfam have as much wealth as the poorest half of the world’s population.

If there is no debate about equality it begs the question why so many people assume it still exists.  This should be understood in relation to the difficulty many people have in breaking from the intellectual landscape of the past.

In relation to the equality discussion it is often those who regard themselves as having a free market perspective who find the discussion most tricky. They are too ready to detect echoes of their leftist opponents of yesteryear when they hear criticisms of extreme inequality. Such free marketeers fail to appreciate how much the discussion has moved on since the 1980s.  The old scripts are of limited use in understanding contemporary anxieties.

It is particularly striking that nowadays it is often the wealthy and the best connected who profess the greatest concern about inequality. At the Davos get-together, which after all is a jamboree for the global elite, complaining about the dangers of the inequality gap has become an annual ritual. The TV panel included not only Lagarde but Mark Carney, the governor of the Bank of England, and Robert Shiller, a Nobel laureate in economics. Winnie Byanyima, the executive director of Oxfam International, was co-chair of the entire conference.

To understand the current obsession with extreme inequality and the super-rich it is necessary to appreciate the discussion is fundamentally different from the debates of the past.

This blog post was first published on Fundweb today.