Do we still care about inequality?

This is my latest article for the FT.

Has the global preoccupation with extreme inequality peaked? This key question, posed by Labour’s unexpectedly poor performance in the recent UK general election, received little attention. The opposition party’s avowedly egalitarian stance failed to resonate with the electorate in sufficient numbers despite discontent at the government’s austerity programme.

The British public’s preferences apparently ran counter to influential voices worldwide warning of the widening gap between super-rich and poor. These range from US president Barack Obama and the Pope to the heads of the Bank of England and the International Monetary Fund.

Anxious discussions about the inequality divide have also become a regular fixture at the World Economic Forum in Davos. The forum even published a report, introduced by former US vice-president Al Gore, identifying rising income inequality as the most dangerous trend for 2015.

This difference in perceptions raises the awkward possibility that ordinary people may not share the concern with widening inequality expressed by the trend’s elite critics. Although the public often tells pollsters it sees the gap between rich and poor as a big problem, this may not shift voting intentions. Or maybe the public is simply more preoccupied with other questions.

Perhaps the dearth of comment on this mismatch is because it is seen as a specifically British enigma. But this ignores Labour’s close ties with fellow egalitarians across the Atlantic. David Axelrod, who was instrumental in Obama’s 2008 and 2012 presidential campaigns, advised Ed Miliband, then Labour’s leader, to focus on inequality. Jacob Hacker, a Yale political science professor, had earlier inspired Miliband to promote “predistribution” — the idea of attempting to pre-empt the emergence of excessive inequalities.

The connections have also gone in the opposite direction. Ed Balls, Labour’s former shadow chancellor, was co-author with Lawrence Summers, former US Treasury secretary, of a report on inclusive prosperity published by the Center for American Progress, a centre-left think-tank in Washington DC. Yet Balls lost his seat in the election.

Lane Kenworthy, professor of sociology at the University of California-San Diego, says opinion polls showing public concern about the inequality gap can be misleading. He accepts most such surveys show that most people see inequality as too high. However, when pollsters ask the public what the government’s priorities should be, the topic is rarely near the top of the list.

“When push comes to shove it’s something most people don’t really care a whole lot about,” Kenworthy says. In his view people are more concerned with absolute living standards, economic security and opportunity. He says social democrats and those on the centre left would be better off focusing on these areas. Policies addressed to improving performance in those spheres tend to have the side-effect of helping to reduce income inequality.

Michael Barone, a fellow at the American Enterprise Institute, a conservative Washington DC-based think-tank, takes a harder line, saying people, with the possible exception of those in Greece, are seldom concerned with inequality. He argues it is often those who live in the most unequal communities, such as New York and San Francisco, who “yelp loudest” about inequality. “The sympathetic analysis of the reason is that these people are more aware of inequality,” he says.

It could be, Barone argues, that those who live in such areas make the mistake of projecting their concerns on to the general population. “The ordinary person in America, and I guess in the UK too, is not angry and full of anguish because they cannot afford to spend $2,000 on a pair of shoes,” he says.

Of course, there were other factors in Labour’s poor electoral performance besides its focus on extreme inequality. Nevertheless it is worth looking carefully at what Labour, and indeed most other critics of inequality, argue. It is a common misconception to assume they are advocating equality in relation to outcomes or wages. Such proposals went out of fashion long ago.

Instead, the consensus is that inequality is rising to the extent it is already causing, or may soon cause, damage to society. In other words, it is widely accepted a substantial degree of inequality is inevitable and probably desirable. The increasingly common criticism, at least among policy-makers, is that the trend is reaching the stage where it is damaging the social fabric.

From this perspective it is worth remembering British prime minister David Cameron too has criticised extreme inequality in some circumstances — for example, where people do not have the opportunities to make the most of their talents. The Tories may not be as closely associated with inequality as a campaigning theme as Labour, but the differences on the question can be exaggerated.

A peculiar paradox seems to have emerged: the topic of inequality no longer sharply divides left and right. Instead, a gap seems to have opened up between policy-makers preoccupied with extreme inequality and the public, which is less concerned.