See here for programme and presentations.
Politics and policy make inequality worse. In the US 95% of the increase in income from 2009-12 has gone to the top 1%. Median wealth fell by 40%, back to levels of 1989. There are many dimensions to inequality – income, wealth, health, exposure to environmental hazards and access to justice.
Inequality affects the poor, but also hollowing out of the middle class. Things are getting worse in most countries, even ‘successful countries’ like Germany since the mid 1990s the bottom decile has shown negative growth. Economic inequality breeds political inequality. Rule by the 1% for the 1%. Inequality undermines social mobility, with the US, the least socially mobile. Unequal incomes and outcomes are closely correlated.
When outlining the causes – he initially focused on weak unions, social conventions – marriage/divorce and lack of good regulation, but pointed the finger squarely at macroeconomic model. His main thesis is that Rent seeking is the main reason not marginal productivity (ie greed of the rich aiming for higher profits, who manipulate the economy for their own interests, rather than ‘earned high rewards because they are more productive’. The trickle down theory – doesn’t work ‘’ It’s a pity, because we’ve thrown an awful lot of money at the top 1%’. We should talk of wealth appropriation not wealth creation – ie large bonuses, speculation and high risk investment, with no social contribution. He argued that the evidence showed that increasing tax rates at the top wouldn’t make a difference on growth. To the contrary “unregulated wealth, undermines democracy, divides our society and weakens our economy’’.
“Unequal societies don’t function very well. The individual and the economy suffer. We are paying a high prices for inequality with a weak economy and the trade offs between inequality and growth are not true – even the IMF says it (although that’s a bit worrying in itself’’
However, his priorities for action shied away from tax reform:
1) Equality of opportunity – education, financial inclusion and inheritance tax
2) Promoting full employment – with an end to austerity.
3) Discouraging financial speculation
3) Industrial Policy.
“The real issue though is how to change politics. EU seems to be enrolled in a race to the bottom through the Eurozone. It needs greater transparency about consequences of erroneous policies and empowerment to the individual and civil society”.
Professor James K Galbraith
Talked about 2 dimensions: 1) Distribution function – ie the income and wealth gap and 2) categorical inequality: that allow specific attributes to divide us (ie gender, race, disability, religion.
He underlined that the two are completely interconnected. The Neo-Liberal era saw a rise of finance, the erosion of minimum wage, unions and attacks on social insurance and the welfare state. This has had an immediate impact on hardening the categorical lines and creating new ones – particularly nationality.
He warned of the need for concrete steps rather than more theory: stop the rapacious growth of income to the top 1%, and extend systems of Insurance and Social Solidarity and Employment so that the whole community is protected from economic instability. He highlighted that the EU needed to break from business as usual, including in the EP elections and for the Commission. ´´The EU needs an Obama – the best would be to have a candidate from Greece!´´.
Jean-Paul Fitoussi, (LUISS University, Rome)
Focused on democracy as a public good. ´´you can have wealth concentrated in a few hands or you can have democracy. But you can´t have both´´. Inequality goes a long way to explain the financial crisis, with the demand for high-return assets and aspirational debt fuelled by credit from the have-nots. He underlined the importance of policy choice – the political decisions have reinforced regressive taxation and downsizing of the welfare state, which increases inequality. The EU zone crisis was inevitable with the sovereign debt crisis for any country which has no control over its financial system. It´s important to see it´s not just about austerity, but neo-liberal structural reform which is undermining the social fabric, dealing with it as a supply problem. The ideology says we just need a freer labour market, but this just creates more unemployment, economic insecurity and loss of autonomy.
Wanted to give some new insights to their research on more equal societies do better and how we can build transitions to economies that promote well-being and sustainable development-ie that profit people and planet. The problem of inequality gets worse with the increase in inequality and has a severe impact on health – particularly mental illness. ie 23% in UK, 26% in US whilst less than 10% in SE. We need to understand how it makes us feel. Stress rises when people feel judged prejudicially by others. Strong evidence about the link between income inequality and people’s pyscho-social state – to depression and schitzophrenia. 2 recent studies on self-rated health, shows that there is little relation between objective health and self-rated health. ie the countries with lower objective health, the higher the self-rated. Why? Evidence shows that people ‘big themselves up’ in a more unequal society, which can increase stress and undermine cohesion. Maximizing well being for all means tackling unequal societies. There is also a link between equality and sustainability. More equal – more green, recycle more, concerned about their neighbours, use fewer resources, also peace index.
“Inequality is the biggest problem of all’. We mustn’t forget the countless individual human tragedies as well as the threat to the political and social fabric and growth. Income that is concentrated in the top income levels, leads to lower growth and stagnating growth, and speculation bubbles. Good policies can fix it. Too long the invisible hand has driven policy towards maximising profit. The crisis of capitalism is becoming a crisis of democracy. Inequality is about poverty, but also the middle class. Rich people don’t need a strong state – but everybody needs a helping hand to bounce back – that’s what a safety net is for. The best practice in Europe is the strong welfare state, which is investing in people ‘to support people to be active and to protect them when this fails’.
3 key priorities:
- Financial Regulation: 3000 traders in 2012 took home 1 million Euros, used for speculation. There’s a toxic link between bank debt and state debt. We need to make banks safe.
- Tax Fraud: progressive taxation is an important tool – shifting tax from labour to capital, but the priority for the EU is tax avoidance and evasion – 1 trillion lost euros . This is 2000 Euros for every EU citizen, 4 x the Education budget of the EU. It could pay off the sovereign debt. EU role is to close down tax havens, create a blacklist and clamp down, impose levies and block companies who don’t pay tax from receiving state aid.
- 3)Social Dumping: Need to take action – Just Jobs Index, youth, gender pay gap and fair pay. An EU system of minimum wage.. Stop the race to the bottom, by defending the EU model. Economic progress must go hand in hand with social progress.