What Can Be Done About Inequality

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  • Book: Inequality: What Can Be Done? By Anthony Atkinson.



By Charles Piketty:

"In Inequality: What Can Be Done?, Atkinson leaves the terrain of scholarly research and ventures into the realm of action and public intervention. By so doing, he returns to the role of public intellectual that he has never really abandoned since the beginning of his career. Before his historic work in 1978 on the distribution of wealth in Britain, he had already written several other books that in their way were public interventions. In particular, we can mention Poverty in Britain and the Reform of Social Security (1969) and Unequal Shares—Wealth in Britain (1972). With Atkinson, the dividing lines between history, economics, and politics have never been strict: he has always tried to reconcile the scholar with the citizen, often discreetly, occasionally in a more forthright manner.

All the same, Inequality: What Can Be Done? goes much further in that direction than any of his earlier books. Atkinson takes risks and sets forth a genuine plan of action. In it we find his customary stylish prose, his distinctive way of offering a fair hearing to every argument and author, presenting them all in the best light, with simplicity and clarity. But in this book Atkinson makes distinctions and takes positions in a far more drastic way than his natural caution generally inclines him to do. While he has not written a funny book, we find in it the mordant irony that his students and colleagues know so well, an irony that does not always appear with such clarity in his more academic publications.

One such case is the section in which he evokes the historic events of 1988, when Nigel Lawson, Margaret Thatcher’s chancellor of the exchequer, led the British Parliament in voting for a reduction of the top marginal income tax rate to 40 percent (that rate was 83 percent when the Iron Lady first came to power in 1979). One Conservative MP got so carried away that he is reported to have said that “he did not have enough zeroes on his calculator” to measure the size of the tax cut that he had just helped to approve for himself. It was a grim moment and fully merits the use of Atkinson’s sharp talons.

This break with a half-century of progressive tax policy in the United Kingdom was Thatcherism’s distinctive achievement (just as the Tax Reform Act of 1986, which cut the upper tax rate in the US to 28 percent, was the distinctive achievement of Reaganism). It would never really be called into question by New Labour during the years of Tony Blair (for whom Atkinson has no special fondness), any more than Reagan’s tax cuts were by the Democrats during the Clinton or Obama years. Nor can we expect that the rate will be seriously called into question under the newly elected Tory government.

Another telling story, which may surprise many of his students and colleagues: on the occasion of that historic vote in 1988, Atkinson himself was in the House of Commons, busily working away on his PC and his tax microsimulator in the Shadow Cabinet Room. With the aid of his colleague Holly Sutherland, he was in fact able to finish calculating the proposed budget before the chancellor of the exchequer was able to complete his speech—wry evidence that scientific research and computer codes can give rise to new forms of participatory democracy.

The Battle for Fiscal Progressivity and National Insurance

The idea of going back to a more progressive tax structure clearly has a major part in the plan of action that Atkinson sets forth. The British economist leaves no doubt about it: the spectacular lowering of top income tax rates has sharply contributed to the rise of inequality since the 1980s, without bringing adequate corresponding benefits to society at large. We must therefore waste no time discarding the taboo that says marginal tax rates must never rise above 50 percent. Atkinson proposes a far-reaching reformation of the British income tax, with top tax rates raised to 55 percent for annual income above £100,000 and 65 percent for annual income above £200,000, as well as a hike in the cap on contributions to national insurance.

All of which would make it possible to finance a significant expansion of the British social security and income redistribution system, notably with a sharp increase in family benefits (doubling and even quadrupling them in one of the variants proposed), as well as a rise in retirement and unemployment benefits for people with lower resources.* Atkinson presents a series of variants of these measures and scenarios for reform, while advocating those measures that make it possible to return to a policy of universal social safety nets (i.e., that would be open to everyone), as opposed to conditional transfers of resources.

If these proposals, statistically accounted for and fully financed from taxes, were to be adopted, there would be a significant drop in British levels of inequality and poverty. According to the simulations done by Atkinson and Sutherland, those levels would fall from their current quasi-American levels to the point where they would come close to European and OECD averages. This is the central goal of Atkinson’s first set of proposals: you can’t expect everything from fiscal redistribution, but that nonetheless is where you have to begin.

But Atkinson’s plan of action hardly stops there. At the core of his program is a series of proposals that aim to transform the very operation of the markets for labor and capital, introducing new rights for those who now have the fewest rights. His proposals include guaranteed minimum-wage public jobs for the unemployed, new rights for organized labor, public regulation of technological change, and democratization of access to capital. This is only a sampling of the many reforms he recommends.

Instead of saying more in detail about these proposals, I’d like to focus particularly on the question of wider access to capital and ownership. Atkinson here makes two especially innovative suggestions. On the one hand, he calls for the establishment of a national savings program allowing each depositor to receive a guaranteed return on her capital (below a certain threshold of individual capital). Given the drastic inequality of access to fair financial returns, particularly as a consequence of the scale of the investment with which one begins (a situation that has in all likelihood been aggravated by the financial deregulation of the last few decades), this proposal strikes me as particularly sound. In Atkinson’s view, it is intimately bound up with the larger issue of a new approach to public property and the possible development of a new form of sovereign wealth fund. The public authority cannot resign itself merely to go on piling up debt and endlessly privatizing everything it possesses.

On the other hand, alongside this national guaranteed and insured savings program, Atkinson proposes establishing an “inheritance for all” program. This would take the form of a capital endowment assigned to each young citizen as he or she reached adulthood, at the age of eighteen. All such endowments would be financed by estate taxes and a more progressive tax structure. In concrete terms, Atkinson estimates that, with current revenue from the British estate tax, it would be possible to finance a capital endowment of slightly more than £5,000 for each young adult. He calls for a far-reaching reform of the system of inheritance taxation, and especially for greater progressivity with regard to the larger estates. (He proposes an upper rate of 65 percent, as with the income tax.) These reforms would make it possible to finance a capital endowment on the order of £10,000 per young adult.

Personally speaking, I must say that I’ve always had certain reservations about the idea of an individual financial endowment. I’ve generally preferred a focus on guaranteed access to certain fundamental goods—education, health, culture among them. But whichever approach you may prefer, the idea of directly linking the estate tax to the allocation of rights that would be underwritten by such a tax seems to me extremely pertinent. The immense advantage of the solution set forth by Atkinson is that it makes it possible to clearly express the notion that the purpose of the estate tax is to underwrite “inheritance for all.” By directly linking the sum given to each person with estate tax rates, we may perhaps hope to change the terms of the democratic debate on this subject." (http://www.nybooks.com/articles/archives/2015/jun/25/practical-vision-more-equal-society/)