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Summon the ghost of Lloyd George Samuel Brittan Financial Times 20/07/07 Equality of income or wealth is neither attainable nor desirable. It does not even obtain in the grave. Nevertheless, the egalitarians have scored a paper victory by establishing inequality as the title of most studies of income and wealth distribution, so much so that this nomenclature is used by analysts who in practice favour much less redistribution than I do, simply to secure academic respectability. Much preferable is the attitude of Walter Veltroni, probable leader of a new Italian centre-left party, who has just said "the issue is not being against wealth, but against poverty". Heated arguments over such issues illustrate that there is no such thing as completely value-free social science. But there are still degrees of subjectivity. A new Rowntree study, Poverty, Wealth and Place in Britain, 1968-2005, does itself no favours by being far too value-loaded. For example, one of its categories consists of the "exclusive wealthy with sufficient wealth to exclude themselves from the norms of society", as if I become more likely so to exclude myself (whatever that means) if property prices rise in my part of London. Those with the patience to delve into the small print will find that such terms are carefully defined. The results are less horrifying than might be expected. The "breadline poor" shrank in the 1970s from about 23 to 17 per cent of all households but have since steadily risen to above 25 per cent. The most deprived "core poor", on the other hand, have fluctuated with no trend between 10 and 15 per cent. Most surprisingly, the "exclusive wealthy", who might be defined in the bar room as the stinking rich, hovered around 5 per cent of households, again with no clear trend. An international context is helpful. The new Organisation for Economic Co-operation and Development Employment Outlook shows a steady increase in earnings inequality since 1980 irrespective of the political colour of government in the US and the UK, but not in France or Japan. The income share of the top 0.1 per cent fell irregularly from about 10 per cent in 1913 to some 2 per cent in 1980, but then started to climb – more steeply in the US than in the UK and not at all in France and Japan, which are not, however, typical of the developed world. A Goldman Sachs economic paper explains that two forces have been at work: a decline in the share of wages in national income and a greater concentration at the top among wage and salary earners. These trends partly reflect technological developments, but also the first effects of competition, real and threatened, from low-wage producers in countries such as India and China. The Rowntree authors are troubled by a survey showing 73 per cent believing the gap between high and low incomes to be too large, but only 32 per cent in favour of government redistribution. The apparent contradiction might be due to jealousy and envy rather than a sincere desire to help; or it may reflect ignorance of the meaning of "redistribute". My Cambridge tutor, the late Peter Bauer, used to criticise the left for assuming that the wealthy had "extracted" their gains from the rest of us. This is instructive, but extraordinarily difficult to apply. Bill Gates's Microsoft was not extracted from anyone; but what do we say about his children's inheritance? My own approach to social justice derives from the "veil of ignorance" promulgated by the philosopher John Rawls: namely, what we would favour if we had no idea what our own position in society was to be. One can use his "veil of ignorance" for a thought experiment without endorsing the particular conclusions Rawls himself claimed to derive from it. Most of the studies mentioned look at income before taxes and benefits, presumably because of the extreme difficulty of making international comparisons that allow for fiscal transfers. These redistributive measures go some way to mitigate the worst disparities but may now need to be carefully augmented, at least in Anglo-Saxon-type economies. It used to be possible to rebut egalitarians by pointing out how little the masses had to gain from raiding the wealthy. It is now no longer so obviously the case. But it is still true that the gains from such raids would be modest and that ill-conceived measures such as price control and over-regulation risk killing the geese that lay the golden eggs. Nevertheless, carefully designed fiscal redistribution remains a better response to globalisation than the protectionist threats with which the US Congress, for example, so loves to play. If you are looking for a tax to provide the wherewithal that has little or no disincentive effect you need look no further than that old favourite, a tax on land – not on development but on pure space. The case for it was eloquently expounded before the first world war by those two great non-socialists, Winston Churchill and David Lloyd George. Plans were well advanced for introducing it when the war came about and diverted these two statesmen to supposedly higher things. We need to summon up their ghosts.
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