Labor speaks

The former head of the British Labour Party, Ed Miliband, offers a few thoughts on inequality for the London Review of Books. He cites statistics and studies, including those of the International Monetary Fund and the Organization of Economic Cooperation and Development, which confirm what many of us feel: that the rich are growing richer and the Rest of Us are either treading water or sinking fast.

But one takeaway from the article, among many, intrigues. Inequality is not just bad for those who miss out on economic prosperity. The entire economy itself struggles when so many have so little while a relative few have so much.

One solution is redistribution. Impose more taxes on the wealthy then transfer benefits to those in need. However, this will not cut it, argues Miliband. Citing Joseph Stiglitz, there is something fundamentally wrong in a system that lavishly rewards a small minority as it denies economic security for everyone else. Raising tax rates will get us only so far. There must be pre-distribution initiatives. Miliband:

…tackling inequality demands that we act on all fronts. When I was the leader of the Labour Party, I said that we needed to talk not just about redistribution but also about ‘predistribution’. The word is ugly, but the idea was right. You can only do so much with tax and transfers: the more wildly imbalanced the economy and earnings, the harder it is, especially in a globalised economy, to do anything about inequality. And the more unbalanced the initial distribution of income, the harder it will be to win political support for progressive taxation, given the strength of the forces opposed to change. The living wage and the introduction of proper rules on executive pay are at least as important as rates of income tax. We need, too, a much more open discussion about the top 1 per cent. We should acknowledge the contribution they make as well as the burden they place on everyone else. The entrepreneurs, inventors and software designers who reap big rewards often make a big contribution to the creation and sustaining of jobs, but what balance should be struck between how much they are rewarded – and how much more than others in their companies – and how much they are taxed? Until quite recently, people would ask why it mattered that those at the top were doing so well, as long as everyone else was prospering too. But it can’t any longer be denied that the scale of the rewards reaped by the 1 per cent has the effect of denying others. The scale of the effect is, of course, particularly visible in the London housing market, with wealthy buyers, many of them from outside the UK, pushing up prices and putting London out of reach for a great many people.

Miliband begins his essay mentioning Seattle’s own Nick Hanauer. He is wealthy, though he attributes his wealth to luck, picking the right parents, and both “consequences” and “timing.” Hanauer visibly and financially supports the growing efforts to increase the minimum wage, a pre-distributional strategy, because he knows that his position has little to do with his own efforts. This attitude places him outside prevailing sentiments.

We Americans persistently cling to the fiction that we, too, can become the next Bill Gates, if only we work hard and smart. Against all evidence to the contrary, we believe that we live in a land of upward social mobility, and that whether we climb or fall has everything to do with us, as individuals, than with good fortune and good parentage. Such beliefs prevent us from seeing a much starker reality: the decks are stacked against the Rest of Us.

As much as we, or certainly I, loathe politics, we are forced to accept the truism that only through political action, at whatever level, can we arrest rising inequality and promote the Rest of Us. What a difficult challenge, to be sure. I regret that we’re not up to the task. Whether or not I’m being overly pessimistic, the task begins with opening our eyes.