Sunday, 16 June 2019

Corbyn & Blair Have Both Got It Wrong

This week Jeremy Corbyn and Tony Blair have been having a spat about which of them cares the most about inequality in accordance with Labour party values. They may not be confused at the same level (it's difficult for anyone to be more confused than Jeremy Corbyn about anything) - but watching their squabble unfold is a bit like watching a tarot card reader and an astrologer arguing about the best way to teach astronomy. Both Corbyn and Blair are so far from the truth that their litany of economic nonsense seamlessly blends together to a messy ideology that bears little resemblance to reality.

Here's the reality: in every way that's important to what humans desire in an economic system, the rich have got richer, but the poor have done best of all. As Matt Ridley reminds us in The Rational Optimist, the poor in the developing world grew their consumption twice as fast as the world as a whole between 1980 and 2000. Poverty has been reduced in the world more in the past 50 years than in the previous 500.

What the Blairites and Corbynites need to understand most pressingly about inequality is that it is only by the rich getting richer that the poor get richer (the past few thousand years ought to be demonstrable evidence of this). An in-country increase in inequality is one of the natural and wholly expected consequences of a growing economy - it almost always entails that income inequality widens, because the way a nation spends its money on voluntary transactions is not in a way that transfers income equally to all kinds of people - it is, by and large, a very naturally unequal and democratic merit-based distribution.

To see why, think of your monthly expenditure, once you've paid your tax. The chances are a great proportion of your monthly needs and enjoyment is going to go to businesses already more wealthy than you: a food bill to Sainsbury's, a television subscription bill to SKY TV, a music CD to Amazon (and the artist), a takeaway bill to KFC, a fuel bill to Shell, and so on. All of those voluntary transactions make people already wealthier than you even wealthier, because those goods and services are also being consumed by many others too. The providers are good at providing what people want and need, and because of this, the income distribution among the population is skewed in favour of a small percent of the population. There is no global conspiracy - just natural concentrations of earned income from market choices (for more on this, see this blog post). 

Further, it is because wealth is not a fixed pie that it should be easily seen how the rich get rich and the poor do as well. It is because of all the wealth creation that even the poorest people in the UK and USA are living lives that their forbears could only dream about. When Harold Macmillan uttered his famous phrase that the folk of 1957 had 'never had it so good' - he was speaking to people who were earning less then on full time wages than the average state welfare beneficiary now - particularly when you factor in other ways to be better off, like better standards of electricity, running water, bathrooms, kitchens, cars, entertainment, widespread communication, health care, hand held devices, and unprecedented access to knowledge that even the richest people in the world a few decades ago would have marvelled at.  

There are also other perfectly natural things that concentre income in richer circles purely due to people's freedoms in making choices - such as assortative mating, freer movement of people, and increased competition - all of these liberalising phenomena increase in-nation inequality. But there's more, because what this also does at the same time is reduce global inequality (as I explain more fully in this blog). Countries expand their economies, and in doing so global inequality falls. If you begin with the base error of unjust inequality, as Corbyn and Blair do, your whole narrative is set up to be wrong.

I'll leave you with this nice quote from Matt Ridley, that the Malthusian alarmists would also do well to heed:

"Since 1800, the population of the world has multiplied six times, yet average life expectancy has more than doubled and real income has risen more than nine times. Taking a shorter perspective, in 2005, compared with 1955, the average human being on Planet Earth earned nearly three times as much money (corrected for inflation), ate one-third more calories of food, buried one-third as many of her children and could expect to live one-third longer. She was less likely to die as a result of war, murder, childbirth, accidents, tornadoes, flooding, famine, whooping cough, tuberculosis, malaria, diphtheria, typhus, typhoid, measles, smallpox, curvy or polio. She was less likely, at any given age, to get cancer, heart disease or stroke. She was more likely to be literate and to have finished school. She was more likely to own a telephone, a flush toilet, a refrigerator and a bicycle. All this during a half-century when the world population has more than doubled, so that far from being rationed by population pressure, the goods and services available to the people of the world have expanded. It is by any standard, an astonishing human accomplishment."
Matt Ridley - The Rational Optimist