Egalitarianism reloaded: the NEF discovers the Spirit Level

The New Economics Foundation (NEF) has earned itself a reputation as the sworn enemy of economic growth and consumption. In blending neo-Malthusian resource alarmism with relentless nagging about lifestyle choices and leisure habits it doesn’t approve of, the NEF has established itself as a brand with a high recall value. While others debate about how to get the economy back on the growth track, the NEF tells us that we should rather make do with what we have, because it is more than enough already.

At least they are being consistent. Their new paper, Ten reasons to care about economic inequality, shows that even policy debates can be structured in accordance with the leitmotif of making do with what we have instead of seeking growth.

In 2009, we had The Spirit Level claiming that income inequality makes people sick, distrustful, violent, anxious, depressive, and worst of all, consumerist. Fair enough. The book created a wide-ranging debate and engaged people, even those of us who disagreed with every line of it. However, what the NEF has now produced is seemingly a rehash of the Spirit Level’s arguments, as if nothing had happened since then. Maybe the Foundation has chosen this format deliberately, as their manner of saying: one book is enough. You cannot have infinite debates on a finite planet.

The Spirit Level has provoked a variety of responses. Some have attacked it full throttle (e.g. Christopher Snowdon and Peter Saunders), some were broadly sympathetic but still ended up dismissing it on balance (e.g. Lane Kenworthy and John Kay), and others embraced it wholeheartedly. The NEF could have argued, for example, that both the sympathetic and the unsympathetic critics have got it all wrong while the enthusiasts are right. But simply ignoring the whole controversy and reverting to the original claims is unhelpful.

Let’s just pick out one example: ‘[Inequality directly affects the amount of cash in your pocket because it makes you want things. […] When the rich get richer and spend more on luxury items it also ratchets up everybody else’s perception of what they need to have.’

This is one of the most debateable assertions in the Spirit Level. It assumes that people’s consumption behaviour is mechanistically determined by factors which are measurable and politically alterable. It thus assumes an extraordinary high level of knowledge about people’s motivations, their apparent preferences and their ‘true’ preferences. It is claimed that the exposure to materialistic lifestyles ‘forces’ us to imitate them, dragging us into a life of overwork, shopping binges and indebtedness. We need the government to keep luxurious lifestyles out of our sight.

Ignoring how brazenly patronising this mindset is: What if these assumptions are not true? What if we adopt a set of wealth-destroying policies, just to find out afterwards that we have hugely overestimated our capacity to understand and direct people’s behaviour? This is no small possibility. Within the field of Happiness Economics where this thinking originates, even people who use similar methodologies can reach radically different conclusions.

There is no need to reinvent the wheel, but this NEF paper puts us right back to where we started from. But at least they practice what they preach: stagnation.

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).