From Germany to America: A Dialog on Inequality

Published by Anonymous (not verified) on Sun, 24/06/2018 - 12:59am in



By Polly Cleveland

At a coffee break between sessions at the annual History of Economics Society meeting, I chatted with D___, a tall, blond young woman, a professor of political science at a German university. On hearing that I work on inequality, she immediately challenged me.

D: “I don’t believe in equality. Inequality is just a statistic, a side effect. What’s relevant is how people actually live. What matters are policies to improve citizen’s wellbeing, like health or education, not policies to reduce inequality.

P: But aren’t those statistics useful in identifying those societies that are or are not doing a good job providing those services? After all, there are many statistical studies showing that more equal societies have grown faster and have a higher GDP per capita.”

D: No. Inequality statistics are just an artifact. They don’t mean anything. We could all be perfectly equal in extreme poverty, like we were in East Germany. [Obviously before she was born.] Is that what you want?”

P: In the United States, our Congress just passed a new tax law reducing income taxes for the rich and for large corporations.  That will surely lead to reduced services and other benefits to poorer people.

D: Well, what do you want? A flat tax? The same tax on each person? That would be a perfectly equal tax.

P: A flat tax would be regressive because it would take a higher percent of the income of poor people—if they could pay it at all. How about a flat percentage tax on wealth? Since wealth is much more unequal than income, that would be more progressive even than an ideal progressive income tax.

D: That’s not the point. We need to focus on ordinary citizens’ wellbeing. If we do that, the rest will take care of itself.

P: OK, how about a basic income grant, that is, the same sum paid monthly to every citizen of a country, man woman and child, rich and poor. A large enough sum to provide a modest living. That idea has become very popular lately. It is being promoted by some Silicon Valley tech entrepreneurs.

D: No, I don’t think that’s a good idea. People should contribute to society. Basic income would give people bad incentives. They would take it easy.

P: Wait a moment, there’s a difference between basic income with no strings attached, and public assistance money. Here and I assume in Germany, public assistance is phased out as people earn more income. What’s amazing is that some people who receive assistance keep on working even though they lose income. The dignity of holding a job is very important.

D: Well you may be right about that, especially in Germany.

P: In the 1970s there was a guaranteed minimum income experiment run for five years in Manitoba, Canada. Recipients received additional income which—as with public assistance—was phased out as they earned more. A few years back Evelyn Forget, who’s here at the conference, analyzed the data. She found that only new mothers and teenagers worked substantially less. The teenagers became more likely to finish school, presumably due to less pressure to support their families. New mothers and school age teenagers are just the people you’d want to stay home. Remember, this was not a fixed basic income, but a guaranteed minimum with a sharp phase-out at 50% or more effective tax.

D: Still, you have to make a choice. Do you want equality of opportunity or equality of outcome? You can’t have both.

P: Actually, I think you can, sort of. A basic income grant, plus the public services we expect in a modern society—health, education, pensions, security, justice –including protection from unfair practices like monopolies—those should guarantee a rough equality of opportunity. Above that, it should be OK for people to earn high incomes by hard work, talent, or even luck. But you need progressive taxes to finance the system.

Whoops, just as I was getting to the punch line, the elevator arrived to take us downstairs to the next sessions. I would have said that as Adam Smith wrote in the Wealth of Nations (1776), taxes should be proportional to benefits received—a notion more radical than any proposed by today’s leftists. Chief among benefits received, Smith included government protection of title to land, in an era when some 2% owned most of the land in England. The tax he favored was a tax on the value of that land, a tax that would capture the “rent” or unearned income England’s “great proprietors” gained from the mere title to land granted and protected by the king. England had a land tax, but at low rates and poorly administered. The French “Philosophe” reformers whom Smith visited in Paris is 1766 advocated land taxes, as did the next generation of economists such as David Ricardo.

A hundred years later, in 1879, the American economist and radical reformer Henry George took Smith’s idea and ran with it. In his world-wide bestseller Progress and Poverty, George argued that all taxes should be replaced with taxes on land values only, and the revenues used for public purposes like schools and infrastructure (including public bath houses!). This was a perfectly practical proposal: property taxes then and now are assessed on land and buildings valued separately. In the heyday of George’s influence in the late 19th and early 20th century, assessors just left out the buildings and raised the rate on land to make up the difference.

Now almost 140 years later, as support for basic income has grown, some advocates have made the obvious connection: why not finance basic income with a land tax? That squares the circle, doesn’t it? Equality of opportunity at the bottom via a basic income grant, financed by a tax that limits inequality of outcome at the top.

That might be too theoretical for my pragmatic German acquaintance. She’s right, though, that we need to be more specific in talking about inequality.

Achieving fairness in the tax system

Published by Anonymous (not verified) on Wed, 13/06/2018 - 12:10am in

These are the slides I used for a talk at De Montfort University this morning on achieving fairness in the tax system:

  • A talk for the Taxation and Social Policy Group Launch Event - 12th June - De Montfort University, Leicester by Richard Murphy, Professor of Practice in International Political Economy, City, University of London
  • Some theory
    • Most of us are here because we are aware of austerity
    • This is the idea that, in formal terms
    • G = T
    • Where G = government spending
    • And T = tax revenues
  • But we know that austerity has not happened
    • G ≠ T
    • Instead the government has borrowed
    • G = T + ∆B
    • Where B = Total government debt
    • And ∆B = the change in government debt in a period, or total government borrowing
  • But this is not the whole story
    • The government has also created £435 billion of quantitative easing funding since 2009
    • As the Bank of England says:
    • “Quantitative easing involves us creating digital money. We then use it to buy things like government debt in the form of bonds.”
    • Which means that QE funds government spending instead of debt in that case
  • To give the whole story
    • Now
    • G = T + ∆B + ∆M
    • Where M is the stock of government created money
    • And ∆M is the change in that stock in a period
  • Why explain this?
    • What it means is that tax does not fund government spending
    • All government spending can be funded by money creation (not printing, I stress)
    • Or by borrowing
    • And the only reason why a government does not do this is because of the risk of inflation
    • In other words, the reason governments tax is to control. inflation - and not as such to fund government spending which can be and is all done by money creation in the first instance by overdraft at the Bank of England
  • This matters because it fundamentally changes our view of tax
    • I argued in The Joy of Tax that there are six reasons to tax:
    • Reclaiming the money the government spends into the economy to prevent inflation
    • Ratifying the value of money - because the government only accepts its own currency in tax payment it has value - which is what the ‘promise to pay’ now means
    • Redistributing income and wealth
    • Repricing market failure
    • Reorganising the economy - or fiscal policy
    • Reinforcing democracy - people who pay tax vote
  • This theoretical diversion has, then, been for a reason.
    • Social purpose is not a tack on extra
    • Tax is a fundamental instrument of monetary policy
    • And fiscal policy
    • And social policy
    • As well as industrial, environmental and every other policy you care to mention
  • But most important of all
    • If tax is not primarily about funding government spending then its role in creating social justice is more important than ever before
  • So what can make the tax system fairer?
    • First, we need to define inequality
    • And then see how tax exacerbates it
    • And then see what can be done about tackling those faults in the system
  • Inequality
    • Income inequality
    • Wealth inequality
    • Market access
    • Security
      • The social safety net
  • Income inequality
    • The tax system is notionally progressive
    • But
      • Those with excess income can take it out of income tax and take it into lower rate corporation tax
      • Or lower rate capital gains tax
      • And even offshore - sometimes legitimately
    • So a progressive system is undermined by tax spillovers within the tax system that favour the wealthy
    • Where a tax spillover is the way in which one part of the tax system reinforces or undermines the effectiveness of another part of that system
  • Income inequality (2)
    • The tax system is nominally progressive but:
    • Of the hundreds of tax reliefs and allowances most favour the wealthy
    • Pension tax relief costs more than £50 bn a year and is intensely biased to the wealthy
    • ISA relief costs billions and has the same effect
    • As do many investment reliefs
    • The annual cost is well over £60n a year
  • Income inequality (3)
    • NIC is regressive - it starts at low levels of income and is reduced at higher levels of income
    • All our indirect taxes are regressive
      • Council tax
      • Licence fees
      • Excise duties
    • VAT is regressive
      • Because the well-off do not spend all their income
      • Things they tend to buy more of such as education, health, houses, travel and financial services all enjoy major tax advantages for VAT purposes
  • Wealth inequality (1)
    • CGT is not progressive
      • Each person gets a second personal allowance
      • And the allowance if effectively transferrable within marriages and civil partnerships
      • Rates are low
      • Some incentives such as Entrepreneur’s relief are absurdly generous at 10% on £10 million of gain
  • Wealth inequality (2)
    • Inheritance tax is absurdly designed
      • It will capture the wealthy middle classes
      • But most higher levels of wealth still avoid it by gifts in lifetime or the use of trusts
      • But such planning requires there to be excess wealth - beyond that required to live upon or in (the family home)
      • Some investments, like estates, farms and private companies, are favoured without reason being offered
    • Offshore only remains open to the wealthy
  • Access to markets
    • Limited liability has a cost to the user and is only available to those who can afford it but protects wealth against failure
    • Having a single rate of corporation tax effectively lowers the cost of capital to large companies and creates unloved playing fields
    • Only large companies can really use offshore
  • Security
    • The price of a private social safety net - and the saving for it - is a lot lower in net of tax cost for the wealthy because of subsidies e.g. to pensions and low tax rates on savings
    • There is no such bias to those who use the state social safety net, from which the wealthy are not excluded
  • Action required
    • Education on the true nature of tax
    • Promotion of the 6 Rs of tax
    • Correct assessment of tax spillovers as they impact inequality and fairness
    • Equalisation of tax rates
    • Removal of subsidies
    • The removal of bias within markets
    • New taxes to create progressively - especially on wealth

Trickle-Down Urbanism

Published by Anonymous (not verified) on Mon, 11/06/2018 - 5:45pm in

For all his differences with his predecessor, New York City mayor Bill de Blasio has inherited the same fundamental dilemmas that faced Michael Bloomberg—and much of the billionaire’s approach to resolving them.

Inequality breeds stress and anxiety. No wonder so many Britons are suffering | Richard Wilkinson and Kate Pickett

Published by Anonymous (not verified) on Mon, 11/06/2018 - 12:56am in

In equal societies, citizens trust each other and contribute to their community. This goes into reverse in countries like ours

The gap between image and reality yawns ever wider. Our rich society is full of people presenting happy smiling faces both in person and online, but when the Mental Health Foundation commissioned a large survey last year, it found that 74% of adults were so stressed they felt overwhelmed or unable to cope. Almost a third had had suicidal thoughts and 16% had self-harmed at some time in their lives. The figures were higher for women than men, and substantially higher for young adults than for older age groups. And rather than getting better, the long-term trends in anxiety and mental illness are upwards.

For a society that believes happiness is a product of high incomes and consumption, these figures are baffling. However, studies of people who are most into our consumerist culture have found that they are the least happy, the most insecure and often suffer poor mental health.

Related: The psychological effects of inequality – Science Weekly podcast

Related: Rising inequality linked to drop in union membership

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Carey Doberstein’s book on homelessness governance

Published by Anonymous (not verified) on Thu, 07/06/2018 - 8:53pm in

I’ve just reviewed Professor Carey Doberstein’s book on homelessness governance (UBC Press). The book looks at the way decisions were made pertaining to funding for homelessness programs in Vancouver, Calgary and Toronto during the 1995-2015 period.

Points raised in my review include the following:

-Homelessness trends look quite different across the three cities. For example, it can be growing in one city, but declining in another.

-One of the book’s main arguments is that better decisions pertaining to homelessness programming are made when multiple stakeholders are engaged in decision-making early and often.

-The book argues that Vancouver and Calgary have done a relatively good job of such engagement—more so than Toronto.

My full review can be read here.

(A modified version of this review will appear in an upcoming edition of the Canadian Journal of Political Science.)

Carey Doberstein’s book on homelessness governance

Published by Anonymous (not verified) on Thu, 07/06/2018 - 8:53pm in

I’ve just reviewed Professor Carey Doberstein’s book on homelessness governance (UBC Press). The book looks at the way decisions were made pertaining to funding for homelessness programs in Vancouver, Calgary and Toronto during the 1995-2015 period.

Points raised in my review include the following:

-Homelessness trends look quite different across the three cities. For example, it can be growing in one city, but declining in another.

-One of the book’s main arguments is that better decisions pertaining to homelessness programming are made when multiple stakeholders are engaged in decision-making early and often.

-The book argues that Vancouver and Calgary have done a relatively good job of such engagement—more so than Toronto.

My full review can be read here.

(A modified version of this review will appear in an upcoming edition of the Canadian Journal of Political Science.)

Book Review: Against Meritocracy: Culture, Power and Myths of Mobility by Jo Littler

Published by Anonymous (not verified) on Mon, 04/06/2018 - 8:59pm in

In Against Meritocracy: Culture, Power and Myths of MobilityJo Littler offers a rich analysis that intricately teases out the grasp ‘merit’ and ‘meritocracy’ have on everyday cultural and social narratives of value and power in contemporary society. This is a rewarding contribution to the shared work of challenging hegemonic, neoliberal myths that uphold the status quo, recommends Sarah Burton, and to the building of a better and fairer world. 

Against Meritocracy: Culture, Power and Myths of Mobility. Jo Littler. Routledge. 2017.

Find this book: amazon-logo

Modern life is shaped by a persistent and sinister narrative: that if you just work hard enough, you can improve yourself and so improve your situation in life. If you’re poor, miserable, unglamorous or unfulfilled, then you’ve simply not really applied yourself – you lack the grit, resilience and determination to ‘make it’, and that’s no one’s fault but your own. This is a familiar social story, and one often insidiously spun back on us in our own assessments of our individual selves and worth. Whilst a large body of scholarship exists challenging the idea(l)s of social mobility as possibility, what has not – until now – been successfully achieved is an intricate teasing out of the grasp ‘merit’ and ‘meritocracy’ have on the creation of everyday cultural and social narratives of value and power.

Jo Littler’s book, Against Meritocracy, is a richly analytical contribution to scholarship on power, neoliberalism and questions of value that responds to significant gaps in the scholarship. Its combination of social theoretical historicising and contextualising of the term ‘meritocracy’, combined with a cultural studies approach to locating the action of meritocracy in everyday life, provides a substantial and fine-grained examination of the subtleties of power and agency in social life. Littler’s work shows in great detail how the narrative of ‘hard work’ and ‘making it’ I note above has become so present and alive in Global North societies (2) – and it’s by drawing this kind of sharp attention to the way such destructive narratives are mobilised, and who they work for, that we position ourselves to challenge and reject them.

The book is divided into two parts: ‘Genealogies’ and ‘Popular Parables’. The latter is where Littler’s cultural studies (in the vein of Stuart Hall and CCCS, 10) approach shows its strength. As she notes, meritocracy ‘needs to be unpacked as an ideologically charged discourse’ (8), rather than in the ‘uni-disciplinary fashion’ (8) that most of the (scarce) analyses of the term follows. The second half of the book looks in detail at three empirical examples of meritocracy in action in the cultural, political and economic spheres – plutocrats and elitism; the film industry; and the notion of the ‘mumpreneur’. This is set up by a first part which traces the genealogies of meritocracy through social theory, political rhetoric and the welfare state, including ideas of social mobility. Here, Littler demonstrates the very complexity of the term – the ways in which it is slippery, malleable and tricksy, and how this facet has made it so perfect as rhetoric which ‘promises opportunity whilst producing social division’ (3). Putting this to use in the latter section results in a particularly coherent study, and whilst each chapter can be read in isolation, it is worth noting that Against Meritocracy is one of those unusual academic books which is actually pleasurable to read from cover to cover.

Image Credit: (pru_mitchell CC BY 2.0)

The genealogical beginning of the book – which takes in social theory, literature, history and meritocratic metaphors – allows Littler to foreground a number of important components of meritocracy, and to disimbricate the various ways the concept is employed. She disaggregates two key forms of meritocracy: firstly, as a ‘social system which is based around the idea that individuals are responsible for working hard to activate their talent’ (8); and secondly, as ‘an ideological discourse, as a system of beliefs which constitute a general worldview and uphold particular power dynamics’ (9). Importantly, Littler emphasises that i) there is significant ‘slippage’ (25) between these two systems of meritocracy; and ii) the more left-wing and social justice-oriented ‘equality of outcome’ is often now framed instead as simply ‘equality’, thus further blurring the terms of the debate (27). This segues nicely into Littler’s drawing of our attention to the precedence of the individual in formulations of meritocracy (24), which she twins with a recognition that a Western narrative of social mobility, allowing a few who work hard to rise to the top, ‘is extremely compatible with capitalism’ (27).

This conceptual vagueness and focus on the individual is central in the sleight of hand outlined in Chapter Four, ‘Just Like Us?: Normcore Plutocrats and the Popularisation of Elites’. Here, Littler successfully hones in on the ways epithets of ‘elite’ have shapeshifted to obscure the structural inequalities brought about by and engendered through global capitalism. The chapter opens with the simple but perceptive statement that:

Whilst the existence of elites is hardly new, what is to some degree more historically novel is the extent to which large sections of today’s plutocracy feel the need to pretend they are not an elite at all (115).

This guising – a performance of ordinariness – is a cultural and social trick which conceals the machinations of capitalism that creates a strata of the ‘super wealthy’ who live off ‘unearned income’ – i.e. assets that yield rent, interest or capital gains (117). The assertion ‘just like us’ enables structural privilege to be passed off as talent or merit – which in turn, as Littler states, allows plutocrats to ‘maintain and increase their power and wealth’ (120). This ‘keeps the idea of social mobility churning’ (129), thus legitimating the super-rich and the processes of global capitalism and inequality from which they draw their wealth. Littler pulls out the real danger of this pretence at the end of the chapter, noting that:

the flourishing of the ultra-wealthy has been continually enabled whilst socialised provision continues to come under repeated attack. It is an attack which happens by stealth, and the super-rich continue to promote an idea that we can all get to the top; that society is still equal (139).

However, this narrative is complicated, with Littler pointing out that widely circulated images of ‘fat cats’ (139) ‘have had an important role in popularising the conception that the super-rich can be a negative social force’ (139). Crucially, though, she notes that these critiques are still largely individualised, rather than engaging with the institutions and social practices that enable and legitimate elitism and elites (139).

The book also directly confronts the very notion of ‘merit’ in Chapter Five, ‘#Damonsplaining and the Unbearable Whiteness of Merit’, which deserves extensive kudos for the punning alone. Through analysis which focuses on merit as racialised, Littler pulls out a broader issue of the way ‘meritocratic discourse can mobilise a very essentialised conception of ability which ignores or downplays social context and the role social context has in deciding what merit might be’ (155). This context is – as is shown by the #Damonsplaining incident itself – racialised. Whilst the work in this chapter is oriented around the film industry and wider cultural products, such as literature (157), it also presents helpful theoretical insights for those of us engaged in work on questions of value, authority and legitimacy in epistemology and ontology. As Littler points out, ‘“merit” is mobilised as a term which is ostensibly colour-blind and neutral’ (156), thus not only fitting with ‘the post-racial neoliberal dream which simultaneously uses criteria that privilege white men’ (156), but is also marshalled as a defence against calls for ‘diversity’. Thus what ‘merits’ is continually framed through and by whiteness, but also passed off as ‘naturally’ so (157; see also Burton, 2015). The key achievement of this chapter is in its precise and careful outlining of the continued presence of the universalised white male body which shapes the putatively value-free notion of ‘merit’.

To be briefly critical, I did at times want more of a close textual analysis of the cultural matter that underpins the latter chapters. The work tends to return to the theoretical in a swift enough manner that can lend the feeling that the cultural examples used are rather glossed over – presented as a jumping-off point for analysis, rather than things we’re meant to find interesting in and of themselves. Given, though, that this isn’t a book about meritocracy in The Apprentice/Mumsnet/Hollywood or whatever else, it’s entirely forgivable. Littler’s work is best read alongside that of Nirmal Puwar (2004), Bev Skeggs (1997), Steph Lawler (2014), Sara Ahmed (2017) and Imogen Tyler (2013), in that it extends the work of these scholars whilst contributing a fine-grained analysis of meritocracy that enables a fruitful re-reading of what’s come before. This chimes with the sensitivity of Littler’s dedication in her ‘Acknowledgements’ – that the book is ‘a way to help the arguments, movements, strategic discussions, and conversations about how we can share’ (xiv). This is certainly a contribution that shares in the work of debunking capitalist, neoliberal and hegemonic myths that uphold the status of those already in power and, as such, it will be a rewarding site for collective thinking and action vis-à-vis building a better – fairer – social world.

Sarah Burton is Teaching Fellow in Sociology at Durham University. Prior to joining Durham, she completed her PhD, ‘Crafting the Academy: Writing Sociology and Disciplinary Legitimacy’, at Goldsmiths, and has studied English Literature, Education and Sociology at the universities of Newcastle, Cambridge and Glasgow. Sarah’s research focuses on practices and processes of knowledge production, social inequalities and literary sociology. Her publications include ‘The Monstrous ‘‘White Theory Boy’’: Symbolic Capital, Pedagogy and the Politics of Knowledge’ and a contribution to the 50th anniversary special issue of Sociology, ‘Becoming Sociological: Disciplinarity and a Sense of Home’. In addition to her work at Durham, Sarah sits on the Executive Committee of the Feminist and Women’s Studies Association, and is a member of Glasgow Refugee, Asylum and Migration Network. Read more by Sarah Burton.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics. 

Why Are CEOs Paid 361 Times More Than Their Average Employees?

Published by Anonymous (not verified) on Tue, 29/05/2018 - 6:00am in

In 1980 the average CEO-to-worker pay ratio was 42:1. In 2017 the ratio was 361:1. Total CEO compensation averaged $13.94 million last year, compared to just $38,613 for the average production and non-supervisory worker. We’ve all seen numbers like this so many times now that we barely even blink at a new set. There is, however, new research that may partly explain why this gap has gotten so wide. The CEO-to-worker pay data were reported Wednesday morning by the AFL-CIO in an update to the union’s Executive Paywatch database and website. The data were compiled from disclosures by companies of the ratio of CEO pay to the median worker’s pay required for the first time last year in federal financial filings. New research by Harvard Ph.D. candidate Nathan Wilmers, published Wednesday by the Washington Center for Equitable Growth, indicates that increased pressure from large corporate buyers suppresses wages for the workers in the buyer’s network of suppliers. Thus, large corporate buyers like Boeing and Walmart exercise outsized influence on the wages of their suppliers’ workers.

US CEO’s Paid More Than Foreign CEO’s, And They Pay Their Workers Less

Published by Anonymous (not verified) on Tue, 29/05/2018 - 6:00am in

PayWatch report, thankfully, provides that context: Average worker pay in the United States last year increased just 2.6 percent. In other words, as the PayWatch study notes, “the imbalance in our economy between the pay of CEOs and working people is worsening.” And that rates as a big deal. But to really understand how staggering America’s CEO-worker pay imbalance has become, we need to widen our field of comparative vision, from domestic to global. And what do we find when we take that step? Simply this: CEOs in the United States make significantly more than their counterparts in our peer nations, and American workers make significantly less.

Research on gender bias receives less attention than research on other types of bias

Published by Anonymous (not verified) on Thu, 17/05/2018 - 8:00pm in



Bias against women in academia is well-documented. Not only are female scientists underrepresented in academic institutions, particularly in higher ranks, but there are also certain studies that include only male participants, thereby producing biased knowledge. Magdalena Formanowicz, Aleksandra Cislak and Tamar Saguy have studied another form of gender bias among scientists: bias against research on gender bias. Research on gender […]