Markets and Morality

How Danny Dorling (and Oxfam) recycle Karl Marx’s wretched ‘immiseration theory’

150 years after Karl Marx first proposed it, the theory of immiseration continues to have an uncanny hold on the left. The workers would get poorer and poorer, Marx predicted, until they could take no more and rose up in revolution. This hypothesis was based on a zero-sum view of the economy and is one of the worst predictions ever made. As old Karl scribbled away in the British Library, the working classes outside were at the dawn of a period of unprecedented wage growth which has continued to the present day. In the second half of the nineteenth century, wages doubled in real terms. They have risen several times over in the years since.

Today, the claim that ‘the poor get poorer’ lives on as part of the critique of ‘neoliberalism’ which, it is claimed, slashes welfare, cuts public services, opens the door to cheap imports and allows immigrants to push down workers’ wages. And yet, for those with eyes to see, the evidence plainly shows that the poor have got richer, along with the rest of the workers. Between 1986 and 2011, the median wage grew by 62 per cent in real terms and wages for those in the bottom one per cent grew by 70 per cent. Between 1977 and 2010, disposable income grew by 89 per cent in the poorest fifth of households and by 100 per cent in the median household. (I use the starting dates of 1977 and 1986 because that happens to be what the Office for National Statistics uses in its data sets.) As recently as November 2014, the Institute for Fiscal Studies was predicting that the median household income would be three per cent below pre-crash levels in 2015/16. In fact, as last week’s data showed, median household income was four per cent higher.

Many people of a leftist persuasion refuse to acknowledge these facts. Those who grudgingly concede them are keen to change the subject to another economic indicator that they perpetually claim is getting worse: inequality (or its close cousin relative poverty). There can be no good news under ‘neoliberalism’. Everything is getting worse – and if it seems like things are getting better it is just the calm before the storm.

From the perspective of left-wingers, a Conservative-led government pursuing public sector cuts from 2010 seemed a certain recipe for immiseration, inequality and unemployment. But it wasn’t. As Office for National Statistics figures showed last week, incomes have risen by 13 per cent in the bottom fifth of households since 2007/08 but have fallen by three per cent in the top fifth. Like Sam Bowman, I don’t think income inequality is very important, but those who do should acknowledge that it is now lower now than at any time since 1986. The rise in inequality predicted by the OECD, the Fabian Society, Oxfam and many others has not come about. Child poverty has also fallen. As for unemployment, it is at a twelve year low and will be at a forty year low if it falls any further.

The recession itself was painful, but the recovery was surprisingly egalitarian. Between 2008 and 2011, unemployment rose from 5.2 per cent to 8.5 per cent as the private sector shed jobs, but was below six per cent again by the autumn of 2014. Median incomes fell five per cent below their pre-crash peak in 2013/14 but are now four per cent higher. Only the top fifth have yet to recover and the bottom fifth never fell below the 2007/08 level to begin with. There were hundreds of thousands of redundancies in the public sector, but the unemployment figures suggest that they were absorbed into a growing private sector, along with new arrivals from the EU and many thousands of people who came off benefits to enter the labour market.

Mention these facts on social media and you will be met with incomprehension and denial. It is remarkable how much cynicism can be mustered up against Office for National Statistics data by people who happily believe any old rumour about David Cameron’s days as an undergraduate or what Donald Trump gets up to in hotel rooms. This motivated scepticism begins with whataboutery (‘what about wealth inequality?’ ‘what about the 1%?’) before insisting that the dark prophecy was not wrong, it has merely been postponed (‘but the real cuts haven’t happened yet’) and ends with a squeal of magic words (‘Brexit!’, food banks!’).

A recent article by the ‘human geographer’ Danny Dorling lamenting that the poor have found themselves jobs ticks all these boxes. Dorling admits that ‘the incomes of the country’s poorest households – in the bottom fifth of the income distribution – have increased’ and concedes that ‘economic inequalities are falling’, but claims that this is only because ‘the people who are poorest are being forced into work that they would not do if they had any choice’. This talk of ‘choice’ is dangerously close to admitting that a life on benefits is, for some people, a voluntary decision. It is true that the Office of National Statistics says that increased participation in the labour market is one of the reasons for incomes rising at the bottom, but it takes a warped view of humanity to view this as a bad news story. Even low paid work provides a better income than welfare, and a low paid job is the first step towards a high paid job. For Dorling, however, the dwindling ranks of people rotting on the dole is another gloomy statistic to support his bizarre, evidence-free assertion that ‘people are not really financially better-off, other than a tiny proportion of the population in the top 1%’.

Ah, the one per cent. The ultimate trump card in any Twitter row for those who are determined to believe that we are being immiserated. Oxfam were at it again this week with their annual guesstimate of the number of billionaires who hold the same amount of wealth as those who own virtually nothing. Much has already been written about Oxfam’s dubious methodology, but it cannot be denied that many hundreds of millions of people continue to live in lamentable poverty. Nearly all of them live in countries that do not have functioning democracies and/or free economies. Oxfam do not think to ask why countries that have embraced capitalism house only a tiny proportion of these unfortunates (aside from rich westerners who have taken on temporary debt), nor do they pause to wonder how these countries became rich in the first place while socialist dictatorships and protectionist backwaters remain poverty-stricken.

Oxfam have been running this gimmick for so long that there must be a point to it, but what can it be? I can only assume that it is aimed at those oblivious souls who see the economy as a zero-sum game and believe that that one person’s gain is another person’s loss; people for whom wealth and inequality are virtually synonyms. People like Jonathan Bartley, Green Party co-leader, for example, who responded to Oxfam’s report by saying:

“This report confirms how wealth inequality has soared to an appalling new level, with just eight men amassing the same wealth as a staggering 3.6 billion people. Globalisation is benefiting an elite few while the overwhelming majority continue to live in insecurity and extreme poverty.”

Overwhelming majority? The fact is that since 1980, the proportion of the world population living in extreme poverty has fallen from 44 per cent to below 10 per cent. Max Roser and Esteban Ortiz-Ospina note that ‘every day in the last 25 years there could have been a newspaper headline saying “The number of people in extreme poverty fell by 137,000 since yesterday”.’ It is a shame that such stories are never told, least of all by Oxfam and the Green Party. If they were then we would not have surveys in which 55 per cent of Britons think that the proportion of people in the world living in extreme poverty has increased in the last thirty years while only 12 per cent think it has fallen.

That is a staggering statistic in the face of the greatest improvement in poverty reduction the world has ever seen, but I have little doubt that a majority of Britons are equally convinced that incomes have fallen, inequality has risen and the poor have got poorer in their own country in the past thirty years. Why wouldn’t they, when so many pundits, politicians and pressure groups are intent on them believing that life has got worse, is now terrible and is about to become catastrophic?


Head of Lifestyle Economics, IEA

Christopher Snowdon is the Head of Lifestyle Economics at the IEA. He is the author of The Art of Suppression, The Spirit Level Delusion and Velvet Glove; Iron Fist. His work focuses on pleasure, prohibition and dodgy statistics. He has authored a number of papers, including "Sock Puppets", "Euro Puppets", "The Proof of the Pudding", "The Crack Cocaine of Gambling" and "Free Market Solutions in Health".

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