Signal to the Gatekeepers

Why Does Inequality Matter?

T M Scanlon, Oxford University Press, 2018

Global Inequality 

Branko Milanovic, Harvard University Press, 2016

For the last 40-odd years, the prevailing attitude in political discourse towards inequality has been dismissive. If a rising tide lifts all boats, why worry about the gap? Growing anger since 2008, however, indicates that platitudes about rising boats or bigger pies are no longer enough to deflect attention. Figures from Bernie to Piketty to the Pope have received overwhelming responses to their denunciation of wealth’s status quo; the defining schism for contemporary politics is, arguably, that between the haves and the have-nots.

Two recent books crystallise the case against such disparity. In his Why Does Inequality Matter? T M Scanlon gives us a plethora of good reasons to care about inequality, and in Branko Milanović’s Global Inequality, these concerns are vindicated. The two writers, taken together, present a cluster of compelling lessons – more than an arresting window onto modern inequality, their work is a reminder of the relevance of engaged public intellectualism, and a call to take ethics seriously. They invite us to observe a blasé market nihilism at work in our present crises, which (whether explicitly or implicitly) treats ethical concerns – beyond, even, an unexamined idea of ‘utility-maximisation’ – as settled, inconsequential, or unserious. We would do better to recognise that the founding and sustaining principles of our societies are immanently ethical: perhaps even more so than they are economic. Of course, the intimate relation of the two is itself part of the point.

I remember my mother taking a next-door neighbour down to the social service agency. The elderly woman had been denied benefits to care for the granddaughter she was raising. The woman had been denied in the genteel bureaucratic way — lots of waiting, forms, and deadlines she could not quite navigate. I watched my mother put on her best Diana Ross “Mahogany” outfit: a camel-coloured cape with matching slacks and knee-high boots. I was miffed, as only an only child could be, about sharing my mother’s time with the neighbour girl. I must have said something about why we had to do this. Vivian fixed me with a stare as she was slipping on her pearl earrings and told me that people who can do, must do. It took half a day but something about my mother’s performance of respectable black person — her Queen’s English, her Mahogany outfit, her straight bob and pearl earrings — got done what the elderly lady next door had not been able to get done in over a year. I learned, watching my mother, that there was a price we had to pay to signal to gatekeepers that we were worthy of engaging.

Scanlon cites this passage from the writing of Tressie McMillan Cottom, a professor of sociology at Virginia Commonwealth University. The moral of the story, of course, is that while those without great means are routinely scorned for superficial aspirations, outward displays of wealth can make the difference between us being ‘somebody’ and being just ‘anybody’. Where social importance is tied to the perception of wealth, our hierarchies of social status reinforce hierarchies of means, and vice versa. This is not a problem that a rising tide lifting all boats could simply fix. Where wealth buys status, those with the least will always be priced out of the market for social recognition – which is always a scarce good.

That it can create humiliating or disempowering differences in status is the first of Scanlon’s reasons for why inequality may be unacceptable. Scanlon, recently retired from his post at Harvard, moves comfortably from abstract arguments to concrete examples of their relevance, producing a satisfyingly comprehensive exploration of the ethics – theoretical and practical – of inequality. The problems latent in Cottom’s story go beyond the fact that wealth establishes a sort of sociocultural gatekeeping. More than that, inequality’s beneficiaries can, by means open or obscure, set the terms according to which the worse-off are able to lead their lives. Let us take some famous examples.

At the turn of the 19th century, the Kingdom of Hawai’i was an independent state under native rule. By the turn of the 20th, it had been annexed to the United States, more or less entirely at the hands of American business interests. In the intervening decades, local autonomy – cultural, economic, and political – was eroded by a deluge of white wealth. The money of the plantation owners held such power that the Hawaiian monarchy was driven to convert to Protestantism, redistribute native lands as demanded by the planters and eventually to abdicate, with guns aimed at them by planter-financed militia.

Clearly, great inequality of wealth between the Hawaiian rulers and the planters created an imbalance of power: one whose consequence was the wholesale violation of the governing authority. This seems almost trivial. Interference in governance by disproportionately moneyed and powerful interests is nothing surprising – though it is certainly a good reason we have to reject dangerous inequalities. Perhaps less evident than the rapine of governmental autonomy, though arguably even more pernicious, was the sudden and massive shift in the autonomy of the Hawaiian people. In a generation, the islands were transformed from a diverse and self-sufficient society to one defined by cash-crop monopolism. Lifestyles and opportunities once available simply vanished. For many poor Hawaiians, the plantations were the only game in town. So great was the disparity of wealth and power that when too few native Hawaiians were willing to work on the plantations, the planters simply imported labour from East Asia, eliminating even what minimal power the natives had through control of the local labour supply. The gross inequality between planter and native meant the former could utterly dominate the latter. Note that this inequality was totally arbitrary: it was not by merit but by accident of birth and favourable political conditions that the white planters gained such immense resources relative to the average Hawaiian.

We have something of a modern echo of this story in the city of Seattle’s gentrification over the past several decades. Longstanding communities, often predominantly of colour, have faced an influx of high-income professionals, whose greater purchasing power has inflated house prices and reoriented the communities’ culture. Greater house prices meant higher property taxes, and while these might have been bearable for the rising proportion of households with incomes over $50,000, many African-American Seattleites, whose average income was closer to $15,000, have been priced out of neighbourhoods in which they grew up. Though in 1990, African-Americans in the city’s Central District outnumbered whites at a ratio of three to one, by 2000 the area had become majority-white, as former residents were forced to uproot themselves and head for more affordable locations in the suburbs.

This process in the American context has racialised and sharpened the unequal dynamic. Serious and largely arbitrary income inequality, as in Hawai’i, led to the systemic domination of people’s lives, forcing significant and unexpected changes in the choices available to them to accommodate the choices of those with greater wealth. This fact poses a challenge, as Scanlon points out, to those who would maintain that inequality is an evil necessary to respect individual freedom of property. Whose freedom takes precedence?

Why Does Inequality Matter? is not a discussion about the intrinsic or overriding importance of equality per se. Scanlon is explicit that his aim is to provide reasons to reject inequality even if we do not believe that equality of wealth is, in and of itself, an important moral objective. This is a shrewd move: opponents of inequality are routinely attacked as fringe elements peddling a politics of envy, or condemned as ideological. While these lines are stale, they nonetheless serve to distract from substantive reasons that those who endorse some of the most basic liberal principles may have to oppose excessive disparities of wealth.

Scanlon puts his six key reasons forward quite formally, stating them one by one in his introduction and devoting to each its own expository chapter. Branko Milanović’s Global Inequality, by contrast, critiques inequality more implicitly, leaving the reader to draw their own conclusions from its stark analysis of global wealth imbalance data. It would be difficult to find an economist more appropriate to write on the topic than Milanović, a former lead researcher at the World Bank whose work on inequality stretches back into the 1980s. Here, he does a marvellous job of making his scholarship accessible – his prose moves so swiftly it is often easy to miss how substantial the underlying empirical work is, and what an undertaking he has achieved.

In a striking passage, the book notes that the US presidential election of 2016 cost over two and a half billion dollars – congressional and other down-ticket races, an additional four billion. Small wonder that almost nine in ten Americans think wealth has too much influence in politics today – a striking degree of unanimity in such a polarized time, and almost astonishing given that only eight in ten can reliably agree that the Earth goes around the Sun. What’s more, the 90% seem to be right. A growing body of research has found that when the American public disagrees with the rich on policy matters, the rich tend to win. Winning the approval of the poorer half of the country, furthermore, seems to have no predictive relevance for whether a given policy will find legislative support.

Milanović believes that there is little reason for optimism that this trend toward plutocracy will reverse. Thanks to the hollowing-out of affordable education and the power of unions, the ossification of social classes through associative marriage, and the tremendous political advantages held by the wealthy, social mobility in the United States continues to decline. The looming advent of automation will only worsen matters for those who do not hold capital, and the ‘squeezed middle’ may collapse altogether as the top percentiles accrue an ever-greater share of national wealth. Barring a radical realignment of American politics, the future seems to be a drift towards oligarchy posing as democracy. More than ever, in a post-Citizens United age, neither party faces strong incentives to work against inequality. It would take a colossal effort from the American people to shift the country’s course.

Marine Le Pen, erstwhile leader of the French far right, grew up in her father’s mansion at Montretout, attended one of the country’s most prestigious law schools, and began her career in her father’s political party after only six years in legal practice. She won over a third of the popular vote in 2017 on a platform of nativism, anti-European revanchism, and outrage at the out-of-touch establishment. Though Le Pen is hardly a commoner or an outsider, she nonetheless managed to capture the allegiance of great swathes of the lower classes, who seem to believe her to be a better voice for them even than the low-born leftist Jean-Luc Mélenchon. This is so despite the fact that Le Pen’s flagship policies appear aimed far more squarely at punishing the outgroup than providing for victimised native French, mendacious pledges to resurrect traditional industry notwithstanding. The success of such European ‘elite populism’ is one reason why it’s not clear whether Europe’s future is any brighter than that of the United States. The continent’s more fractious, multi-partisan political culture facilitates the rise of militant elements. The far right is already buoyed in every European state by discontent at the perceived crimes of an unrepresentative elite and the migrants they ostensibly favour. Inequality and unfairness – even its perception – destabilise the political order, and though the stagnant living standards of the European masses is not the fault of foreigners, the outsider will no doubt suffer their fury nonetheless. A retrenchment into nationalism will do nothing to alleviate economic malaise, however, and the misdirected attention serves only the interests of the elite, Milanović claims. Though Europe’s more directly democratic institutions may act as guardrails against American-style plutocracy, Milanović fears they could also fortify the populist pressure already beginning to build.

The first of the Occupy Wall Street protests erupted in September 2011, decrying the inflated incomes and influence of the one percent. Six years later, voices from Wall Street were themselves speaking a similar language: in September 2017, Citibank released a longform report on inequality, noting with trepidation its politically inflammatory potential and harmful effects on growth and investment. While the protesters spoke with moral fury and the bankers with calculation, the points being made were similar. Nevertheless, Milanović assures us, unanimity of attitude is an illusory sign of change, for there is no incentive for the beneficiaries of inequality to change course. Any hope that they might work to moderate their advantages for fear of harsh repercussions appears misguided.

To the contrary, the wealthiest already seem to be preparing for a storm. Rather than fund better public services and the uplifting of the disadvantaged, the rich have poured increasing sums into what Marx called ‘guard labour’: all Western countries have seen dramatic increases in spending on private security, and at the same time, state police have undergone a rapid militarisation. More garishly, there has been a recent bloom of interest in luxury boltholes for the super-rich, with figures like self-described ‘anti-democratic capitalist’ Peter Thiel buying up remote hideaways and secret bunkers in case of social collapse. Such social separatism would come as no surprise to Cottom’s mother. Since power and social status are connected to relative wealth, the richest are, in a sense, better off spending a dollar to protect their privilege than spending a dollar to elevate the less wealthy.

The corrosive political and economic effects of inequality, which Milanović sees already unfolding, underline Scanlon’s later arguments. Beyond concerns over social status and autonomy, we have strong ethical reasons to oppose inequality where it undermines equality of opportunity, or the fairness of our political institutions, or where it arises from systems that are themselves unfair. For the vast majority of the population, we have self-interested reasons, too. After all, not everyone will be able to afford to live where ‘good’ jobs are available if urban housing continues to serve as an investment vehicle; not everyone can retreat to luxury safehouses in the Rockies if social tensions boil over.

Milanović’s prognostications represent only the educated guesswork of one person; admirably conscious of this, he dissembles, pointing out in an interesting segment the failures of previous forecasters to predict political or economic trends. Indeed, his predictions aren’t perfect (for instance, he seems puzzlingly insensitive to the relation between inequality and the catastrophic potential of climate change) but none are supplied without giving clear reasons. One comes away with the gnawing sense that he’s probably getting it right.

Is there hope? Milanović presents a brief set of interesting policy proposals, including a push to equalise shares in human and financial capital and an incentivisation of broad participation in investment to establish a ‘people’s capitalism’. But there is – unnervingly yet understandably for such a terse book – rather little guide to action here. Perhaps his most intriguing suggestion is that pressing threats mean the hegemony of economic growth as unquestioned objective against which all other goals are measured may have to end. While it is certainly unreasonable to ask populations whose incomes and standards of living are far below others’ to put their own pursuit of wealth on the back burner, it may be better for wealthier countries to prioritise objectives other than simple GDP growth, both ethically speaking and from the perspective of their own long-term interests.  Scanlon has given us good reasons to prioritise equality and the general well-being over greater aggregate opulence, and more are easy to find: breaking the fever of national-populism, global warming, or any other existential malaise that should arise this century may require measures that leave our economies on average poorer.

It is worth noting that from a global perspective, the outlook on inequality is rather exciting. If our focus lingers on the apparent moral and political unravelling of the West, it is easy to forget that the last 40 years has seen many hundreds of millions lifted out of poverty. This is of course a humanitarian triumph, but it has also begun to narrow the extreme inequality between the global rich and poor. Every ethical argument that applies to inequality within countries applies between them. From the perspective of many around the world, the past three centuries have been a procession of disrespect, domination, and institutional degradation at the hands of the world’s wealthier powers. Equality of status between countries and peoples precludes the cultural, political, and economic domination of some by others, which is one reason why we ought to share Milanović’s cautious hope that, on the whole, things are getting better. As he points out, there are three billion people in India and China alone, and hundreds of millions more in Indonesia, Bangladesh, the Philippines, Vietnam, Pakistan, Brazil, Ethiopia, and Nigeria. As long as living standards continue to rise more rapidly in these largest developing countries than in the rich world, global inequality may decline considerably.

The core message at work in these two books is quite simple: inequality matters because it can throw us into political and moral jeopardy. Inequality of some description and magnitude is no doubt inevitable where there is substantive individual liberty: the ability to choose how to live our lives entails the possibility of choosing a life that is less wealthy than that of others. This does not mean, however, that the safeguarding of liberty precludes any action against excessive inequality. One of the ways in which Scanlon and Milanović succeed is in fortifying a perspective that could reframe debate. Rather than thinking merely in terms of a clash between ideals of liberty and equality, we might recognise that its character and consequences mean that the inequality question is importantly distinct. Perhaps this recognition could provide an impetus for progress on an issue that might today seem hazardously stalled.