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Business News/ Opinion / Book Review | Inequality: What can be done?
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Book Review | Inequality: What can be done?

Atkinson seems to harbour the conceit of scientific socialism that if only we try hard enough, the govt can fix everything that ails us

Photo: Ramesh Pathania/MintPremium
Photo: Ramesh Pathania/Mint

As a reviewer in The Economist wittily remarked, books on inequality must now be divided into those published BC—or before Capital in the Twenty-First Century by Thomas Piketty —and those published AP, or after Piketty: such has been the impact of the French economist’s analysis of the causes and consequences of risking wealth and income inequality.

The appearance of Inequality: What can be done?, an important new book on inequality by the distinguished British economist Anthony Atkinson, might therefore represent a piece of bad timing, since Piketty, his own disciple, has already shaped, to a large extent, the contours of the public debate on the subject. As it happens, the guru is more radical than his disciple when it comes to policy recommendations, but more on this shortly.

By now, the facts on inequality in the advanced economies are well known, from the work of Piketty and others, as well as the success some years back of the Occupy Wall Street movement in drawing attention to the outsized incomes and wealth of the “one percent". In the case of the US and the UK, in particular, income (and wealth) inequality was high before the outbreak of the First World War, bounced around erratically during the inter-war years, and then fell rapidly after the Second World War, until turning up again starting approximately in the early 1980s—something that Atkinson calls the “Inequality Turn". (One may see this long-term trend either through looking at economists’ conventional measure of income inequality—the so-called Gini coefficient—or by merely tracking the income share of the top one per cent of earners over time.)

The facts are not in dispute. Nor, in large, measure are the causes.

Falling inequality in the post-war years reflected the economic boom engendered after the pent-up slack of consumer demand was unleashed when wartime controls ended, leading to rapid growth in manufacturing and in well paying blue collar jobs which supported it. Rising inequality, in turn, reflected a constellation of factors, including the increasing globalization of trade and investment patterns, skill-biased technological change, and an ideological shift in the US and UK away from high taxes and heavy government intervention in the economy toward a lower-tax, lower-public spending regime, as exemplified by Ronald Reagan and Margaret Thatcher.

What is hotly disputed is whether income inequality is something that we ought to worry too much about and, if we answer yes, what might be the appropriate policy responses. After all, to those of a classical liberal bent, it is inequality of opportunity, rather than of outcome, which ought to be of primary concern. Here, Atkinson argues credibly that the two cannot realistically be separated. Pervasive inequality of outcome will engender inequality of opportunity in subsequent generations—since the rich have a larger set of opportunities (such as admission to elite schools, clubs, and social networks) that they can pass on to their children than the poor.

Where Atkinson, a social democrat in the classic British tradition, departs even from the continental leftist, Piketty, is in advocating aggressive government intervention to attenuate, and if possible even reverse, the current trend of rising inequality.

The 15 proposals that he offers range from fairly conventional measures such as raising the minimum wage, to rather more radical policies such as providing guaranteed public employment and capping top incomes. That such policies have been tried and have failed to achieve their intended goals, serving instead to retard economic growth and therefore to sink all boats—whether in the US, UK or socialist economies the world over—does not deter Atkinson.

Perhaps Atkinson continues to harbour the conceit of scientific socialism that, if only we try hard enough, are sincere in our convictions, and devise clever policies, the government can fix everything that ails us? We saw just how that thinking played out in the Indian context, but never mind.

Vivek Dehejia is a Mint columnist.

Comments are welcome at views@livemint.com

Follow Mint Opinion on Twitter at https://twitter.com/Mint_Opinion-

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Published: 25 Jun 2015, 02:29 PM IST
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