The Meaning of Inequality

When I stepped down as Vice-Chancellor of Waikato University in 2004, I was fortunate enough to spend a few months in Oxford as a Visiting Fellow of Nuffield College. The Warden of the College at that time was Professor A.B. (later Sir Tony) Atkinson, who was a renowned economist and the world’s leading authority on inequality, its causes and consequences.

The Nuffield College magazine has, in its latest issue, carried a range of articles in his memory and as a tribute to the work he did. The issue is entitled “Inequality Is A Choice”, reflecting one of his principal conclusions – that inequality doesn’t just happen but is the consequence of deliberate choices made by policy-makers, choices either to act or not to act.

Sir Tony was able to show that levels of inequality vary from country to country and from time to time. Those countries with governments that put in place measures to counteract inequality exhibit, not surprisingly, a smaller degree of inequality than those where the interests of the wealthy and privileged prevail without restriction.

He demonstrated that (as the French economist, Thomas Piketty, also pointed out) a market economy will show a natural tendency for the rich to get richer and for the poor to get (comparatively) poorer. This because the return on capital is almost always faster than the growth of the economy as a whole, so that an increasing proportion of any new wealth created goes to those who already have money. We can see this exemplified in the increasing share taken by profits and the decreasing share of wages in our economy.

It is only when a government (as in the case of the post-war Labour government in Britain) sets out to change this trend that inequality ceases to increase. If governments are relaxed about, or perhaps even welcome, this trend, (as they have recently in New Zealand) then inequality grows.

Sir Tony was of course talking about economic inequality and accordingly focused on matters of comparative wealth and income and the shares of both going to different parts of society. But there has been a growing recognition over recent times that inequality is not to be defined only in economic terms, but is equally important in other senses as well. Someone who is homeless or who has limited educational opportunities or access to health care or whose working day is organised to suit his employer without regard for his own interests can also be regarded as less than equal with his more fortunate fellow-citizens.

And there is increasing interest in topics that are seen to be related to inequality – topics such as the value (other than the monetary value) we give to certain kinds of contributions to society as opposed to others. How, for example, do we rate the contributions of successful business leaders against those of top sportspeople, or brilliant musicians or painters, or of caring parents or solid citizens and volunteers? And that leads us to recognise that there is a range of policies, not just economic policies, policies such as the rights of workers in the workplace, that will directly influence the level of inequality.

Equality (and inequality) have often been seen as inevitably linked to issues of individual freedom in the sense that greater equality, it is argued, can be achieved only by limiting the freedom of those who are doing better than others – it is a topic on which I have myself written. Current approaches to this issue show a greater recognition of the truth that someone whose value to society is not properly understood or rewarded is not only less equal but also less free than he would otherwise be. Freedom, in other words, is not just an abstract concept but has a real practical meaning; it means the power and ability to do things, to realise potential and to make choices.

A society in which only a privileged few have choices while everyone else has to “like it or lump it” is not only unequal but also less free. The best way to test the level of freedom in a society is to assess the degree of freedom available to those who might be regarded as the least free. We have a long way to go – and may even be heading in the wrong direction – if we are to claim on that basis that we are free and equal.

Bryan Gould

15 January 2019