ECONOMICS:EQUALITY, THOUGH seemingly straightforward, is a complex issue. Is equality of opportunity more important than equality of outcomes? If it is easy to move up (and down) the ladder, will outcomes merely reflect individual preferences? Is equality of income or wealth the best measure of material equality, and what are its most important determinants?
The debate on these issues has changed hugely over time. Today, nobody opposes equality of opportunity. But meritocracy has not always been universally embraced. Edmund Burke, the most influential thinker this island has produced, believed that sticking to the social strata in which you were born was the natural order of things.
Such know-your-place nonsense was long ago defeated in the battle of ideas, even if its vestiges remain. In this country, barristers’ controlling of access to advocate-schooling is a textbook example. The breaking up of their medieval guild appears – however belatedly – to be at hand.
But sweeping away the barriers to advancement for those not born into privilege is not enough. New barriers tend to form as elites – sometimes consciously, sometimes unconsciously – create new ways of protecting their patch.
The rise and rise of competition law, with its origins in US cartel-smashing legislation of the late 19th century, is among the most important embodiments of the realisation that maintaining meritocracy is an endeavour without end. But even when the will exists, maintaining meritocracy is difficult.
In the US all kinds of inequality are on the increase. One reason that America’s social elevator is not working as it used to is because of elitism in education. As the cost of attending the best universities has risen, access has been limited increasingly to those already wealthy and privileged. How excellence can be achieved without some element of elitism has yet to resolved.
The exponential rise of meritocracy in the 19th century led to changes in attitudes to other equality issues. If equality of opportunity is to be strived for, then why not equality of outcomes, and specifically material outcomes? Given the resistance of the rich at the time to share more evenly the spoils of the industrial revolution (taxes and the welfare state were next to non-existent), many egalitarians concluded that the fastest and most effective way to attain greater equality was to level everything and start afresh.
But great levelings failed time and again. Moreover, that intellectual tradition had its end point in Stalin’s gulags, Mao’s mass famines and Pol Pot’s killing fields. Revolutionary state socialism is, mercifully, dead. One of the many legacies is that today no democracy – not even the Nordics – targets material equality.
There are, in turn, many reasons for that. One is that even in the most meritocratic societies, material inequality can increase for good as well as bad reasons.
Imagine a particularly bright crop of technology students setting up their own businesses and they all end up as rich as Mark Zucherberg. That would make society more unequal in material terms. But everyone would celebrate their achievements and no one would argue that they should be held back in the interests of income equality.
Immigration is another phenomenon which is good for economies overall, while having negative implications for some. Because the newly arrived are usually more concentrated in lower-paid jobs, their addition to the labour supply has a bigger wage-dampening effect for those on low incomes than those making the most. Immigration tends, therefore, to increase income inequality.
If the modern European state tries to avoid holding people back, it does a great deal to give those at the bottom a hand up. But even with progressive tax regimes and big welfare systems, the state’s role is only one of many factors determining equality levels.
Ireland’s recent experience is a case in point. As the chart shows, Government actions – via spending cuts and tax increases – would have lessened income inequality if no other factors had been at work, according to researchers at the ESRI and the University of Exeter. When measures between 2008 and the middle of last year are taken into account, the incomes of the richest have been reduced most. Despite this, recent figures (for 2010) show that income inequality has risen to a high point over recent years. Such are the complexities of equality and its determinants.
