Zoe Williams and Dierdre McCloskey go head to head

The Duel: Is inequality the root of all social ills?

Zoe Williams thinks so—Deirdre McCloskey disagrees
Zoe Williams: Everybody is against inequality, yet nobody thinks they can be the agent of its reversal. It feels either too vast or too abstract, like fighting a tide. It is only when you start talking about its effects—the mechanisms by which inequality makes our lives worse—that you get any sense of agency. Its effects are everywhere: there is no social ill that cannot be traced back to the concentration of wealth into ever fewer hands.

The problem is not that somebody else has a Porsche and you want one: it is not even the proven disparities in health, life expectancy, educational attainment, and all other measures of wellbeing, between one income group and another. Rather, it is that wealth inequality brings an imbalance of power, which is not a steady state, it is a feedback loop. The status quo is not static.

A key driver of inequality has been the redistribution of profit, away from labour, towards the holders of capital. There’s no natural arrest to this: the lower your wages, the more dependent you are on your job—being unable to build a savings cushion—and the less you can negotiate; your security and conditions decline; now your bargaining power is lower still, and your wages ratchet down further. Your position in the housing market is eroded as your options are limited; the landlord’s position improves, as your poor working conditions render you unable to save for a house of your own. Revenge evictions, zero-hours contracts, poorly constructed, dangerous housing stock, slave-like workplace surveillance; these apparently disparate phenomena all spring from a surfeit of power, of the asset-holding class over the rest.

The standard inequality narrative demands that the poor better themselves—ideally mentored by the rich—in order to improve their prospects: in real life, all our prospects are in rather a simple interplay. Wealth concentrates power, which is marshalled to curtail the countervailing power of any threat to itself. It’s not inevitable, but it is observable, unlike trickle down, or invisible hands, or any of the other theories whereby inequality is justified.

Deirdre McCloskey: Stipulate what is true, namely, that almost everyone opposes poverty. Let’s start from an assumption of ethical equity. It will reduce the heat.

And yet you confuse poverty with inequality. Since 1800, never mind 1980, poverty has dramatically fallen, in Britain and worldwide. Equality of real comfort has therefore risen. My Irish ancestors starved. In 1967 Ireland was a very poor country. Now my distant cousins throng O’Connell Street in search of a thirtieth pair of trousers. You say that the poor are poor because of market forces, and their corruption by the rich, who take income from labour and give it to capital. No. In the United States until recently the share of labour was indeed falling. How far? From 63 per cent of GDP to 61 per cent. It is rising now.

You also think that profit has no social function. But it does, directing labour and machines and land to where they are best employed. If British coal is unprofitable, it should not be mined. Suppose profit is indeed a useless tax on labour; socialism imposes a higher tax, of inefficiency. Consider East and West Germany. Take your pick. And then you imply that wages are determined by bargaining power. I ask you to go to your boss or customer and stand up for a doubling of your income. It won’t work. Because you lack power? No. Because the supply of and demand for similarly gifted people means that the buyer of your services is free to go elsewhere. So are you.

And as for the rich getting political power—when has that not been so? I join you in worrying about democracy: Trump. But betterment is killed by keeping the red flag flying here. What we need is the blessed Adam Smith’s “liberal plan of equality [of social standing], liberty [of enterprise], and justice [before the law].”

ZW: To draw the causal link between inequality and poverty is not the same as confusing the two things: indeed, approaching the issue of equality by pointing out that Irish people no longer starve is a rather more glaring conflation of the two.

Yes, the condition of being poor has improved since the 1800s, when it was not uncommon to lose a limb in pursuit of subsistence wages. I hope I’m not being presumptuous when I say that we all hope for more than to exceed that era.

From 1990-2009, the median wage-share across Organisation for Economic Co-operation and Development nations dropped from 66.1 per cent to 61.7 per cent, those figures distorted slightly by the fact that the bloated salaries of CEOs still count as wage share. This is widely acknowledged, by the OECD and the International Monetary Fund, to be significant, and a key driver of inequality within countries. It’s certainly been accompanied, across those 34 most economically advanced countries, by the impoverished work conditions I’ve described.

Yes, profit can be useful in generating investment and obviating needless activity; even modest profits serve those purposes. An argument for the principle of profit is not an argument for profit always to be paramount and growing, at the expense of wages. You’re correct that few people are so valuable they could get a 100 per cent pay rise overnight, but it shouldn’t be necessary to push the terms to such extremes: problems arise through inequality not because everyone’s liberty depends on their ability to make infinite demands, but because low and stagnant wages diminish one’s freedom to make any.

I’m glad you raised Trump, a perfect example of the next stage: as inequality perverts the labour and housing markets, so it moves into politics. “Elite overproduction” occurs when the pool of people who are extremely wealthy expands and there aren’t enough offices of power to accommodate them all. They pour money into think tanks, campaigns and lobbying to insert themselves at the highest level. The result is a president who, in intelligence, knowledge and experience, defiles the office. Adam Smith could not possibly have foreseen that, but I’m sure he’d take my part on this one.

DM: Lamenting poverty, while insinuating that libertarians like me are uncharitable, doesn’t cure it. Free markets, instituted in China and India, do, and since 1980 have done so. You and I agree on the awful Golden Rule: those who have the gold, rule. Thus again Trump. Its result has been governmental programmes making poor people worse off. The Common Agricultural Policy. Planning permission in London restricting the supply of housing.

You do not in fact “draw the causal link between inequality and poverty.” You change the subject from poverty, on which we agree, to inequality. Work conditions are nothing like getting more “impoverishing.” Labour’s share fell and is now reversing. The share is anyway beside the point if the poor are getting better off. They are. One wouldn’t know it from the alarmists on the left attacking rich people. I have no worries about joining you in attacking inherited wealth. But most wealth comes from betterments good for all of us. In the terms of the philosopher John Rawls, exchange-tested betterment has radically improved the lot of the poorest. Better food, medicine and housing, if planning permission and council-governed inflammable cladding were not making it worse.

You take the left’s view that profit is mainly about “generating investment” out of saving. Not so. The economics is that in a free society if you or I invent a self-wringing mop (the film Joy) or bring McDonald’s from a small chain to an enormous one (the film The Founder) we make very big profits, but they compensate for the expected losses from failed attempts. We need the failed attempts, in art and science and business. To have a dynamic economy, which is the main welfare programme and has been for two centuries, we need to let people have a go. You and I agree that poor people should also have a go. Making them serfs of council housing, which Jeremy Corbyn wants, does not let them go.

ZW: I “lamented” poverty only because you raised it. The equality issue is about power which, unevenly distributed, has a detrimental effect on rich and poor, not to mention the middle. Free markets are another red herring (unless your position is that free markets are so beneficial, they render equality irrelevant.) Markets are social spaces like any other; they need to be founded on just principles in order to thrive, just as a nightclub needs punters not to mug each other, if it is to be popular.

It is a canard of the right that any argument for equality is motivated by hatred of the rich. Some rich people are corrupted by money, rendered vain, witless, sociopathic. Others aren’t and undertake great works of philanthropy. I don’t have a strong view on what money does to character; I would love not to have to worry about the characters of billionaires. But it matters: decisions that affect us all are made by very few.

Inequality creates a problem more dispiriting to watch than anything emanating from the White House. It corrodes our ability to think and act collectively, in our own best interests. We have the capability to ditch fossil fuels and arrest climate change, and yet we don’t, because the holders of carbon capital have captured key institutions, currently, the US government. We’re heading towards an age of automation whose fruits, if shared, could usher in an era of undreamt leisure and plenty. The signs so far are that its fruits won’t be shared but hoarded, by a handful of people who see a robot future not as a way to liberate people but to undercut them.

Even if you had shown—I don’t think you have—that a more equal society would have snuffed out the creativity behind the self-wringing mop and the Big Mac, I would be prepared to forego those pleasures for the more meaningful and exciting innovations a fairer world would make possible.

DM: Yes, my position is that free markets are so beneficial, they render equality irrelevant. I have assembled the evidence in three long books.

You do not care to raise the subject of poverty. The left has abandoned its traditional care for the average and the poor in favour of a new obsession about the rich. Against a background of a rise of real income for the average and the poor of 3,000 per cent since 1800, or a doubling since 1980, and more in the poorest places such as China, India and African nations, the left has wanted to change the subject, just so long as it could carry on hating capitalism. When the workers were not impoverished but enriched, they were said to be alienated. When they were not, they were said to be dependent on Third World poverty. When the Third World started to get rich, the left shifted over to claiming that capitalism in liberal governments was failing to ditch fossil fuels and arrest climate change.

In the past few years thanks to Thomas Piketty’s success, the left has rushed over to the claim that inequality has corroded our ability to act collectively. It is not true, though I would not lament if the ability to act collectively were leashed: we worked collectively to erect the British and now the American Empire. There is no evidence that the influence of the rich is any greater than it was in 1980 or 1800. George Soros balances Charles Koch. Nor is there evidence that inequality has risen any more than in previous blips. The evidence is now that it is reversing. The share of labour is rising. But in any case the minor ups and downs of inequality have seen an era of undreamt of leisure and plenty.

Why? Because a liberal society makes us rich in goods and spirit, against, as Milton teased, the “budge doctors of the Stoic fur”: our best-beloved friends on the left.