• Inequality Means Less Freedom

    When I stepped down as Vice-Chancellor of Waikato University in 2004, I was fortunate enough to spend a few months in Oxford as a Visiting Fellow at Nuffield College whose Warden at that time was Professor A.B. (later Sir Tony) Atkinson. He was a renowned economist and the world’s leading authority on inequality, its causes and consequences.

    The Nuffield College magazine, in its latest issue, carried a range of articles in his memory and as a tribute to the work he did. The issue is entitled “Inequality Is A Choice”, reflecting one of his principal conclusions – that inequality doesn’t just happen but is the consequence of deliberate choices made by governments, choices either to act or – more often – not to act.

    Sir Tony was able to show that levels of inequality vary from country to country and from time to time. Countries whose governments deliberately counteract inequality show a lesser degree of inequality, not surprisingly, than those where the interests of the wealthy and privileged prevail without restriction.

    He demonstrated that a market economy will always show a natural tendency for the rich to get richer and for the poor to get (comparatively) poorer. This because the return on capital is almost always faster than the growth of the economy as a whole, so that an increasing proportion of any new wealth created goes to those who already have money and own assets. In New Zealand, we can see this demonstrated by the increasing share taken by profits and the decreasing share of wages in our economy over recent years.

    It is only when a government sets out to change this trend that inequality ceases to increase – good examples were the post-war Labour government in Britain and the pre-war government here. But if governments are relaxed about, or perhaps even welcome, the usual trend, (as they have recently in New Zealand) then inequality grows.

    Sir Tony was of course talking about economic inequality and accordingly focused on matters of comparative wealth and income. But there has been a growing recognition over recent times that inequality is not only an economic phenomenon, but is equally important in other senses as well. In New Zealand, we have always been blessed by our refusal to allow a “ruling class” to develop, but we are now perilously close to allowing the wealthy to have more respect, influence and therefore power than the rest of us.

    And someone growing up in sub-standard housing or with limited educational opportunities or inadequate access to health care or whose working day is organised to suit his employer without regard for his own interests should surely be regarded as less than equal with his more fortunate fellow-citizens.

    And that should lead us to recognise that there is a range of policies, not just economic policies – policies such as the rights of workers in the workplace and building state houses for low income families— that will directly influence the level of inequality.

    It is often argued that greater equality can be achieved only by limiting the freedom of those who are doing better than others. Today, however, we can see that the link between equality and freedom is not so much that you can only have one at the expense of the other, but that they support each other; someone who is less equal is also less free than he would otherwise be.

    Freedom, in other words, is not just an abstract concept but has a real practical significance; it means the power and ability to do things, to realise potential and to make choices.

    A society in which only a privileged few have a wide range of choices while everyone else has to “like it or lump it” is not only unequal but also less free. The level of freedom in a society should be determined by the degree of freedom available to those who might be regarded as the least free. We have a long way to go – and may even be heading in the wrong direction – if our goal is a society that is both free and equal.

    Bryan Gould

    5 February 2019