Friday, 11 December 2015

Inequality - 5 Myths Debunked: Myth 5

Concluding the series…

Myth 5: Only a few people make the world unequal.

Reality: In actual fact, we all make the world more unequal.

It's not just those in the top earning bracket that make society more unequal, we consumers make it more unequal too. In most cases however you spend your money you are making the world a more unequal place. When you buy £100 worth of goods at Sainsbury's you are helping shareholders earn a bit more in dividends. Most shareholders are better off than most people in the UK, and nearly everyone in the developing world - therefore you are contributing to income inequality. Even more extreme, when you buy a new CD, or go to the cinema, or buy tickets to Jimmy Carr's latest comedy show, or purchase a new car, or buy a best-selling author's new book you are distributing some money to some of the richest people in society - authors, actors, musicians, car manufactures, and so forth.

Clearly from an economic perspective there is nothing wrong with that. When you buy Radiohead's new album you make the band members and the record company a little bit better off, but you also reward their hard work in making an album. Equally importantly, the transaction is full of winners; Radiohead and the record company and the retail seller all gain by making a profit, and you gain because you obtain something that you valued more than the money it cost to buy it. But you also made the world a bit more of an unequal place.

Tied into this myth is the myth that when a country increases its inequality it decreases its prosperity. I don't know how anyone could think that's true. The reality can be conveyed by simply imagining this. If the UK saw its own equivalent of Bill Gates, Warren Buffett, Michael Bloomberg and Mark Zuckerberg rise to the top, it's obvious that as a result the UK would become simultaneously more unequal yet more prosperous.

End of series - hope it was helpful and edifying!