Redistributing the wealth – but how?

One thing I will miss about working at Leeds Met Students’ Union is the political debates we have in the office.

It’s like a game show… put 5 hyper political people in a room, give them some instant coffee and whoosh, off they go. Our Union is one of the better ones, at least afterwards we kiss and make up.

I do love my workmates very much, they’re my best friends and my political nemeses all at once. Just to emphasise that, we could not come from more different political angles. Although I think sometimes they’re a lot more right-wing than they give themselves credit for (I doubt they would agree with me and blazing row of the day no.3 would start).

We began with a discussion about the UKs wealthiest employee in Higher Education. Interestingly enough this is the funds manager for the University of Oxford. For context Oxford has an endowment worth more than many developing countries are worth annually (over £5.5bn), for additional context, the UK government grants £18bn a year to higher education. Yes I know, scary right. So I can’t remember the exact figure but this person was being paid at least £300k a year.

I say ‘Hmm I suppose that means the fund manager is paid more than the Vice Chancellor’ (I won’t go into it too much, I’ll leave that for another time, but some VCs are paid nearly double what the British Prime Minister is paid a year) which Ben, our Associate President Development, who likes to stir conversations up and chip in with inflammatory comments he doesn’t even agree with, says ‘well you don’t really need the Chief Executive’ … which leads us to a conversation on whether organisations need managerial and administrative leaders, and whether a group of efficient senior managers could do this. For the record I thought the idea was ridiculous.

You know in conversations when you can almost predict what will happen next? And because you know someone so well, exactly what they will say? Yeh we had a moment like that.

Vicki, the Associate President Diversity gives her classic contribution to any discussion ‘no one needs to be paid that’ (in reference to the amount some VCs are paid). Now before my blood pressure hits the roof it’s good to go through what I think we broadly agree on:

  • That the current gap between the rich and the poor is intolerable
  • That some rich people are paid so much that the numbers cease to be relevant to every day life
  • That the very richest (earning millions of pounds a year) could afford to be taxed very slightly more

However, I struggle to see how you can compare the amount being paid to labourers in sub-Saharan Africa with the richest people in the USA. They are worlds apart and the pressures and expectations on their income and expenditure are so different. However the typical lefty approach is to generalise everything and equate the two together. This was characterised by Vicki’s announcement that, and I quote, “3% of the population own 95% of the world’s resources” which quite frankly is a lie. I’m not sure about the 2% in the middle too. The number is still a shocking 20% owning 80% but let’s not lie.

Vicki thinks that people paid sums like this are paid too much. I think that no one is empowered to say what constitutes ‘too much’. In fact, society sets these things. The market (the subject of much abuse, poor market) isn’t some evil corporation run from Washington DC, it’s the collective efforts of every person in a given area to improve their lives. It is directly responsible for lifting billions of people across Asia out of poverty, yet it gets a bad rap. Anyway, that’s a tangent (get used to it, oh and get used to my riotous use of brackets). So, aside, the market decides these things. If it deems the skills or attributes a person has to be worth a certain figure then who are we to argue with the democratic, collective will of all people participating in the market as a system.

So, how would you redistribute wealth? It’s a good point, I don’t think that people on the economic right (myself included) have come up with a good enough way. I agree to being taxed, although I think I am being taxed too much. That draws us into a discussion – for another blog I think – on taxation and what it’s used for and consent.

So do we create an amnesty? Hand in your cash millionaires! Or maybe a telethon, which Blue Chip company CEO can promise a £100,000 by midnight? Or maybe a huge collective penny collection drive to reduce poverty in urban areas. It may sound like I’m making fun of poverty but I’m not, I’m serious. Other than increased taxation how could it work?

I know there are numerous possibilities around gentrification and the beneficial social impact of large companies on communities etc and jobs and stuff but it’s not concrete. If you look back at my MAP testing entry I talked about being a shaper. I’m trying to unify taxation policy, the left and right of the political spectrum and gentrification into a single glorious concept. No wonder I’m struggling.

One thing I think we can all expect from my blog is that it will probably raise more questions than it answers.

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One thought on “Redistributing the wealth – but how?”

  1. Hey Will, I saw this linked-through on FB. If you don’t mind, I thought I’d go on and indulge in a bit of a long one. 🙂

    To begin:

    ‘…whether organisations need managerial and administrative leaders, and whether a group of efficient senior managers could do this. For the record I thought the idea was ridiculous.’

    Well, given a country like Belgium–wracked for decades now with ineffectual government–has continued to operate precisely under the management of its civil service (the political equivalent of senior managers) I wouldn’t say the idea is entirely ridiculous. It may not be the wisest way to run a country–its latest election shows why that’s so–yet the average Belgian is doing just fine, with both a higher quality of life than his/her peers in Britain (obsessed as its political establishment, its business leaders and its media are with ‘strong government’) and with a higher per-capita income to boot.

    As to global inequalities, neither the numbers you nor your friend Vicki gave were really wide of the mark—but they weren’t exactly telling either. Hers were an exaggeration, to be sure, but yours were slightly uncharitable. 2% of the world’s population controls over half of the world’s assets, according to the World Institute for Development Economics Research. So yeah, your figures are right, as it were, but they’re not as statistically relevant to the debate as you made them out to be.

    More importantly, however, you implicitly assume that the market’s pricing of executive remuneration is about right. For a start, that makes an assumption that markets correctly determine these prices to begin with; that’s a very bold claim, and one that doesn’t actually hold up to the economic literature. (Nor, as I can’t imagine you’d forget, with our recent experience with market failure.) Markets as a matter of course fail to correctly transmit information generally, and pricing information specifically; what makes you think executive pay is any less different? Markets disseminate information very poorly, with adverse effects for pretty much everyone, and we should only look to the ridiculous run-up of executive pay in the United States since the 1970s to see how, with today’s CEOs paid out of all proportion to the remuneration of their workers, those pay packages don’t justify themselves. And never mind the string of corporate scandals precisely involving corporate pay–‘high finance’ being only the most recent sector of the economy to experience this. If your assumption, therefore, is that market-determined executive pay is okay for no other reason than because markets dictated them, then that is a non-sensical assumption.

    There is also the slightly niggling point you make about Asia’s economies. For you see, they have got richer precisely out of the sort of ‘anti-market’ policies routinely discouraged by liberal economists: that is, through government-mandated industrial policies, state-directed market interventions, state-directed investments in R&D, etc. No major East Asian economy–not South Korea, not Japan, not China–has let the markets call the shots, not without much larger state interventions than you see in the West today. And it should also be noted that the same went for the West German and French economies during their rapid industrialisation in the 1950s and 1960s. It is the grossest distortion perpetuated by Western commentators, and one I have never understood given the facts, that Asia grew richer as a result of an adherence to the market-system-is-right mantra.

    Lastly, this confused debate on income equality is rather pointless for two reasons. (Allow me to indulge in a bit of cynicism here.) Firstly, because we know for a fact that income was more equitably distributed when tax rates were decidedly more progressive in the West–a time which, shockingly, was characterised by the highest growth rates the West has ever experienced. And secondly, because everyone pretends (as you seem to accept here) that simply taxing people more doesn’t work.

    Yet, that latter ‘fact’ is disproved in every sizable country that still maintains income equality-sensitive taxation (Sweden, Norway, Denmark, par example) and completely destroyed when viewed against historical rates of income equality in Western countries. Sweden and Denmark, for example, have much, MUCH higher rates of taxation than the US and Britain; yet, they are both almost as ‘competitive’, according to the World Economic Forum, as the US (and much more so than the UK), and with MUCH better social outcomes than both.

    So it is that in the United States and the United Kingdom, the huge run up of income inequality ‘just happened to coincide’ with the rise of monetarism (which elevated an obsession with combating inflation above the imperative to create jobs) and neo-liberalism (the market is always rise, which you’re implicitly advocating, and taxation is generally bad) in the late 1970s. It’s the reason, by the by, why income inequality in the US during the latter part of the last decade actually surpassed the levels of income equality last seen in the age of American ‘robber barons’, the so-called ‘Gilded Age’.

    All of this makes this sort of debate–usually involving a lot of hand-wringing by folks who would know better if they only took a slightly longer view (read: as if history didn’t begin with the election of Margaret Thatcher, and as though other countries have nothing to teach us)–look very pointless to those advocating a huge break with all the dated assumptions you are making. The same sort of dated assumptions, by the way, advocated by The Telegraph and The Mail, the stuff of Thatcherite legend (and legend alone, not fact), and which will probably be implemented by this new UK government. The Great Recession was supposed to have shown us just how wrong these assumptions were, yet it hasn’t seemed to convince the right in the slightest.

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