Oh for fuck\’s sake Willy!

Jeebus.

And thus the golden thread. City bonuses have propelled income inequality which in turn has delivered more social dysfunctionality and increased social workers\’ case loads. The statistical causation is unarguable. What is harder is to explain why. Here Wilkinson and Pickett become more speculative.

"Causation" is the "why".

If the "why" is speculative then we don\’t have an unarguable causation.

What you mean is that we have a statistical correlation which is unarguable. Causation is something still to be discussed.

Britain\’s growing social problems are indissolubly linked with the growth of income inequality, rising by some 40% over the last 35 years and remaining largely unchanged under New Labour despite initiatives such as the minimum wage and the earned income tax credit. The economy has changed increasingly to reward the skilled and the professionals. But the overwhelming cause has been the explosive growth of incomes at the top, of which the animating element above any other has been grotesquely high City bonuses which have become the benchmark for senior executives in business beyond.

For example, here is an alternative "why".

Globalisation.

Imagine, just as an example, two situations. Purely autarkic national economies and one global economy. There will be those who rise to the top of such national economies (how they do so, through privilege, merit or anything else does not matter for this example). They will be able to earn some amount by being at the peak of such smallish economies.

In that global economy there will be, from each nation or sub-area of it, some who are able to compete and reach the top of that global economy. Each national economy would be presumed to have fewer who can compete globally than were successful nationally.

We could look at this through business….Bill Gates doesn\’t make all his money in the US economy nor James Dyson in the UK. Or sport, Tiger Woods doesn\’t get his $100 million a year purely from the US nor Christiano Ronaldo his dosh in the UK.

Now we didn\’t start a few decades ago from purely autarkic economies and we don\’t have a purely global one now but that is at least the direction we\’ve been travelling in over that period. But as we move in that direction we would expect those who were previously limited by the earnings capabilities in a national economy, but who can and do now compete and earn globally, to pull ahead of those in that original national economy.

That is, because of those few global superstars, we would expect national income inequality to increase in an era of increasing gliobalisation. Driven by the incomes of that top 0.1%, 0.001% who can indeed compete globally.

At this point this is only an alternative "why" of course. We need some method of determining whether it applies to the real world better than the mantra of "City greed and bonuses".

Well, we do in fact have one more fact that we can add. National inequality has been rising in just about every country around the world over the past few decades. Yes, even the Nordics, Denmark and Sweden for example, those who are pointed to as having solved this problem.

(Globalisation has also reduced inequality between nations when weighted for population and according to some at least, reduced total global inequality between people. For which much joy but that\’s an aside in this argument.)

So, which is the better "why"?

Is it that uniquely in the UK there has been City greed and thus inequality in the UK has risen? Or is it that we have a global change, of increasing inequality within nations, within economies, something which a global explanation better fits?

It isn\’t actually necessary that a global phenomenon requires a global explanation: it\’s possible that greed broke out everywhere I suppose. But that Occam\’s shaving device thing would lead you to a preference for a global explanation for a global phenomenon, would it not?

And the increased globalisation of those previously national economies does indeed fit the facts as we know them. Increased national inequality comes from the fact that those previously constrained within national economies are now able to earn from the global one. Instead of pennies from tens of millions, they can now amass pennies from billions.

Of course, it\’s possible that some would think this rise in national inequality to be such a serious problem that globalisation must be stopped. To which I would respond that the globalisation of the past few decades has also raised hundreds of millions if not a billion or two out of abject poverty to something approaching a middle class life. The greatest, in fact, reduction in poverty ever in the history of our species.

I think it a fair price (although acknowledge that this is something upon which reasonable people can differ) that there be greater inequality within nations so that billions can escape destitution.

Don\’t you?

 

8 comments on “Oh for fuck\’s sake Willy!

  1. It’s also worth noting that anyone who has tried to solve these problems with the unequality created by the market has at best slowed down growth (as in e.g. Sweden) and in many cases caused social problems so great that those experienced in the UK now seem ridicolous (think Soviet, DDR, Cuba, Venezuela)

  2. Anyone who uses the term “statistical causation” clearly does not know what he is talking about- at least in relation to statistics or causation.

  3. why pick on the city bonuses – why not blame football players incomes or the price of mars bars.

  4. I have regular dealings with The City (and Wall Street) as part of my day job.

    I have never seen such a diverse group of people in my life. Basically they are the most mixed group of nationalities you could imagine.

    This tends to suggest that Tim is right. The best talent, globally, is coming to London and being paid big bonuses, based on the money they earn their employers, also on a global basis.

  5. Isn’t part of the problem because of rather than in spite of the initiatives that labour has put in place

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