‘But it works in Sweden!’ – The case against naïve egalitarianism
24 March 2013
SUGGESTED
Uncategorized
22 March 2013
Uncategorized
Tax and Fiscal Policy
19 November 2024
Since 1979, the consumption level of the poorest tenth of British society has increased by about 60 per cent in real terms. Among this group, 24 per cent have a car, 32 per cent own the home they live in, 42 per cent have a DVD player, 84 per cent have a washing machine, 89 per cent have central heating, and 98 per cent have a TV.
In many ways, today’s poorest are better off than average households were a generation ago, and than high-earners of prior generations. Leisure goods and services that were once reserved for the well-off – air travel, dining out, hotel overnight stays – can nowadays be found among the consumption profiles of low earners. Not all is rosy, but you could do worse than being a low-earner in the UK today.
And yet, there is widespread unease about how prosperity is distributed. According to the British Social Attitudes Survey, three out of four people think income differences are too large, two out of three believe inequality causes crime and other social problems, and only one out of four believe that there is similarity of opportunities. The current recession has somewhat exacerbated these concerns, but they clearly predate it.
And they are not totally unfounded: the distribution of income in the UK is fairly unequal. Those in the middle of the distribution earn about twice as much as those at the 10th percentile, while those at the 90th percentile earn about twice as much as those in the middle. In the 1970s, these ratios were 1.8 and 1.7 respectively, and the divergence between the very bottom and the very top has grown stronger still.
Groups like Oxfam and the Child Poverty Action Group (CPAG) interpret this as an increase in poverty, because poverty, they argue, is a purely relative phenomenon: it does not matter what the least well-off can or cannot afford; what matters is how far they trail behind the rest of society. They therefore call for an end to the ‘economic policies that prioritised GDP growth over income and wealth distribution’, and for its replacement by a classic redistribution agenda: raise taxes for the better-off, raise income transfers to the less well-off, and expand the public provision of goods and services. Their paragons are the Nordic countries, with their high taxes and generous welfare states. If only the UK was more like Scandinavia, they argue, poverty would disappear.
What they refuse to acknowledge is that in aggregate terms, the UK is already a lot like Scandinavia. In terms of total net social expenditure as a percentage of GDP, the UK ranks in between the four Scandinavian countries. The British welfare state already has the size of a typical Nordic welfare state, and it also has about the same redistributive effect. The UK turns out to be more ‘Scandinavian’ than ‘Anglo-Saxon’.
Read the full article in the Spring issue of Vox: The Student Journal of Politics, Economics and Philosophy
In many ways, today’s poorest are better off than average households were a generation ago, and than high-earners of prior generations. Leisure goods and services that were once reserved for the well-off – air travel, dining out, hotel overnight stays – can nowadays be found among the consumption profiles of low earners. Not all is rosy, but you could do worse than being a low-earner in the UK today.
And yet, there is widespread unease about how prosperity is distributed. According to the British Social Attitudes Survey, three out of four people think income differences are too large, two out of three believe inequality causes crime and other social problems, and only one out of four believe that there is similarity of opportunities. The current recession has somewhat exacerbated these concerns, but they clearly predate it.
And they are not totally unfounded: the distribution of income in the UK is fairly unequal. Those in the middle of the distribution earn about twice as much as those at the 10th percentile, while those at the 90th percentile earn about twice as much as those in the middle. In the 1970s, these ratios were 1.8 and 1.7 respectively, and the divergence between the very bottom and the very top has grown stronger still.
Groups like Oxfam and the Child Poverty Action Group (CPAG) interpret this as an increase in poverty, because poverty, they argue, is a purely relative phenomenon: it does not matter what the least well-off can or cannot afford; what matters is how far they trail behind the rest of society. They therefore call for an end to the ‘economic policies that prioritised GDP growth over income and wealth distribution’, and for its replacement by a classic redistribution agenda: raise taxes for the better-off, raise income transfers to the less well-off, and expand the public provision of goods and services. Their paragons are the Nordic countries, with their high taxes and generous welfare states. If only the UK was more like Scandinavia, they argue, poverty would disappear.
What they refuse to acknowledge is that in aggregate terms, the UK is already a lot like Scandinavia. In terms of total net social expenditure as a percentage of GDP, the UK ranks in between the four Scandinavian countries. The British welfare state already has the size of a typical Nordic welfare state, and it also has about the same redistributive effect. The UK turns out to be more ‘Scandinavian’ than ‘Anglo-Saxon’.
Read the full article in the Spring issue of Vox: The Student Journal of Politics, Economics and Philosophy
5 thoughts on “‘But it works in Sweden!’ – The case against naïve egalitarianism”
Comments are closed.
SHARE
The full article and its references makes for a compelling read, if the UK were to redistribute to the level of Nordic countries comparable to initial income there would be outrage. Indeed our income system is why we steal so many top level Nordic graduates. To improve real incomes we need to reform education, as Gove is doing, increase private investment and get companies involved in tertiary education.
There is no significant level of real poverty in the UK. Thanks to high levels and multiple layers of taxation (high income tax rates, high VAT and then levies such as national insurance and council tax) have ensured that there is a vast pool of money to dip into to give effect to welfare policies.
Increasingly, when poverty in the UK is being used as a term to describe living conditions of certain sections of people its a way of saying something about their lifestyle and affording a level of lifestyle. The welfare state rather than providing a safety net also make possible / assure a level of lifestyle to people.
In vast parts of Asia, South America and Africa, where real, grinding, degrading poverty exists, middle class people aspire to things that people on welfare support in UK have.
I’m always suspicious of articles which pick and choose data as obviously as this one does. Can we please engage in fact rather than spin?
Firstly, the poorest 10 percent includes a lot of students which distorts the figures massively and therefore do not necessarily provide a representative picture.
Secondly, it’s all very well pointing to statistics about central heating and washing machines, but again, this says very little; many in this sector rent, and central heating is a capital investment undertaken by landlords to attract tennants – similarly, a washing machine is more necessary than it was 30 years ago when there was a laundrette on every corner.
Thirdly, while bemoaning multiple levels of taxation, the article ignores available figures on tax as a percentage of GDP. Last time I checked, the UK was at about 41 percent. Sweden? 55 percent. (CIA world factbook).
David,
I presume by ‘facts’ you mean ‘stuff that I want to hear’, and by ‘spin’ you mean ‘stuff that I don’t want to hear’. So here comes some more spin:
“Firstly, the poorest 10 percent includes a lot of students”. You’re wrong. The figures refer to the bottom of the expenditure distribution, not the income distribution. Yes, there are groups of people who have a notionally low income, but who are not ‘really’ poor. Students are not even a good example; the self-employed or the short-term unemployed would have been better ones. These are at the bottom of the income distribution, but not of the expenditure distribution.
“many in this sector rent, and central heating is a capital investment undertaken by landlords to attract tenants” -So? What matters is that there is a central heating in their home, not why exactly it got there.
“a washing machine is more necessary than it was 30 years ago when there was a laundrette on every corner.” -How about laundrettes disappearing precisely because of the spread of washing machines?
“the article ignores available figures on tax as a percentage of GDP.” -It ‘ignores’ them because that is not the topic of the article. Total tax levels are higher in Scandinavia, social spending is not.
Excellent riposte Kris. Can I further add something. Statist welfare policies have also dented people’s propensity for skills acquisition because such policies took away the incentive to work and made work expensive. Labour cost arbitrage is a fact of life – industries shifted away.
Welfare-benefits can be as a safety net to afford dignity to vulnerable. They cannot ever, ever be a lifestyle solution. A part of this debate is suppressed by political correctness where certain things cannot be said for the fear of being called mean-spirited.