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Anthony de Jasay

Equal Poverty, Unequal Affluence

Anthony de Jasay*

It is not people being poor that causes social ills from school failure, teenage pregnancy, crime and short life expectancy, but the fact that some people are poorer than others. It is not the level of income, but the differences between levels that really matter. It follows that fighting poverty is the wrong battle except if it reduces inequality. The right target is inequality and never mind if reducing it were to leave the poor as poor as before. They, and society as a whole, will still be healthier and happier.

This, stripped of rhetoric, is the latest twist in the convoluted chain of arguments for altering a more or less liberal order out of all recognition until justice proper is decisively subordinated to what some call "social" justice. Explicitly shifting the target from poverty to inequality, to the point where poverty becomes irrelevant as long as it is the same for all, is a radical novelty. It is interesting to look at why it has become fashionable.

From its beginnings, there has been a vigorous egalitarian streak in Christianity, much of it inherited from Judaism. Without being replaced, modern religious egalitarianism has been superseded by a lay doctrine, partly Benthamite and partly Kantian that sought to make equal material wellbeing a requirement deduced from some self-evident moral axiom. Equal material well-being was a condition of the greatest social utility. Alternatively, it was a corollary of everybody having equal "rights" or equal moral entitlements to fair shares.

Such attempts to deduce egalitarianism from morality, though not really extinct, have not been very successful. They lay down that men have all been created equal, yet this is daily contradicted by their being strikingly unequal in vital respects. They claim that the talents and other endowments that enable some individuals to enjoy greater material riches than others are "morally arbitrary". Though most people may subconsciously read this to mean "morally wrong", on further thought it turns out to be no more wrong than right, and supports an equal distribution no more than it does an unequal one.

 

See "Welfare", by Thomas MaCurdy and Jeffrey M. Jones for a discussion of welfare entitlements. Concise Encyclopedia of Economics, Library of Economics and Liberty.

Though the abstract moral argument was and remains weak, for a long time it was propped up by a widespread feeling that aiding the really needy was a duty intrinsic to human fellowship or citizenship. It was also accepted that the duty should be transformed into an enforceable obligation through the tax system. Welfare entitlements did mitigate poverty to a limited extent, though it has been argued that they not only relieved poverty but also aggravated it by inducing dependency and irresponsibility. However, what really brought about a massive decrease of abject poverty and misery all over the world in the last two or three decades was "globalisation" that enabled hundreds of millions of mainly Asian but also Latin American and African poor to start earning wages. There is reason to expect this development to spread and intensify in the decades to come. If that would not abolish poverty, it would at least greatly ease it as a pressing problem used to justify redistributive taxation for its relief.

If poverty is destined to be an ever-weaker reason for reshaping society, there is still a last-resort case to be made by setting up inequality itself as a source of our major ills that could be cured by equality. Hence the shift of blame from levels to differences of material wellbeing, a shift that is now unfolding.

A variety of empirical studies have been targeted to show that equal distributions of privileges or affluence display fewer socially dysfunctional features than do unequal ones. Privileged baboons living in isolation from others do well, but when mixed with other baboons, some of whom may surpass them, they develop hormone and other troubles. British civil servants differ little from baboons, at least not in this respect. Those on the top rung are healthier and live longer than their subordinates, with health getting poorer and life expectancy shorter with each step down the ladder of hierarchy. Clearly, the cause is that those on the lower rungs are poorer than those above them. At least, this is what we are being invited to conclude. But how conclusive is the evidence?

Applied to entire societies, the new empirical egalitarianism boils down to this: if Country A and Country B have the same average real income, but in A it is distributed more equally than in B, then A will have better school results, less juvenile delinquency, less crime, better health and greater life expectancy. This, we are meant to understand, is because compared to B, in A fewer people are more affluent than the rest, or fewer are poorer than the rest.

 

For more discussion of Layard's thoughts, see Anthony de Jasay's article "More Nonsense on Stilts: Mr. Bentham Is At It Again", Library of Economics and Liberty, Apr. 24, 2003.

The two alternatives look symmetrical in form, but are not so in substance. If what makes a society sick is that when looking upward, people see many fellow countrymen who are more affluent than themselves, there is an explanation that is at least not counter-intuitive: people are gnawed by envy or self-reproach for their own inadequacy or bad luck in the face of the success of others. A few years back, Lord Layard of the London School of Economics diagnosed this and proposed to punish success, a source of unhappiness for others, by a tax just like a tax on pollution or some other negative externality.1 Readers will judge this proposal without being nudged either way by this essay.

The opposite case, where Country A is socially healthier because few people in it are poorer than the rest, is very different and more intriguing. Why should children do better at school if fewer of their classmates are poorer than they? The case is just conceivable, but stretches our good will a bit. Would the children in A do better still if the few poor ones were segregated into separate schools and the rest had no classmates who were poorer than themselves? Would the trick work equally if it were the few very affluent children were segregated?

The logic of the neo-egalitarians, namely that it is not low levels, but differences between levels that make society sick, tells us that if Country A were blessed with a new, even more equal income distribution where no one was affluent and no one was poorer than the rest, society would function ideally even if in this new and equal distribution all were as poor as the poorest used to be in the old distribution. This looks nonsensical and as far as I am aware, the new egalitarians do not choose to push their logic this far.

 

For more on equality and inequality, see Anthony de Jasay's article "Incomes: Equalizing or Churning?", Library of Economics and Liberty, Sep. 5, 2008.

All or most of the social dysfunctions they explain by the presence of income differences can be explained more simply by low levels of income, the old-fashioned poverty that egalitarians feel they can no longer rely on to serve as their battering ram against the ramparts of liberal order. They show empirical evidence that of two equally affluent countries, the egalitarian country A is scoring better than the less egalitarian country B. But the same evidence fully warrants a different interpretation. Country B has by definition more poor people as well as more rich. It is the prevalence of poverty that makes for the low scores, rather than the fact that not everybody is equally poor or equally affluent.

Conclusion

There are more potent ways of fighting poverty than soaking the rich. Inducing people to form and preserve two-parent families, if indeed they can be induced to do so, could be wonderfully effective. Another very potent means is to raise the demand for labour, the main or only thing the poor have to sell. One obvious cause of rising demand for labour is capital formation which, in turn, is fed by public, corporate and personal saving. We can't predict what would happen to corporate saving, but we know that public saving is generally negative. Personal saving is typically much greater proportion of high than of low incomes. Hence the same national income unequally distributed yields more saving than if it were equally distributed. By saving more, the very affluent are, so to speak, raising the price they will have to pay for labour tomorrow. In any event, unequal affluence holds out more hope for the poor than equal poverty.


Footnotes
1.

"Happiness: has social science a clue?" Richard Layard, speaker. Lionel Robbins, Memorial Lectures on March 3, 4, and 5, 2003 at the London School of Economics.


* Anthony de Jasay is an Anglo-Hungarian economist living in France. He is the author, a.o., of The State (Oxford, 1985), Social Contract, Free Ride (Oxford 1989) and Against Politics (London,1997). His latest book, Justice and Its Surroundings, was published by Liberty Fund in the summer of 2002.

The State is also available online on this website.

For more articles by Anthony de Jasay, see the Archive.
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