The Spirit Level: Why Greater Equality Makes Societies Stronger (39 page)

Introductory economics courses teach students the distinction between the ‘fixed’ costs of production on the one hand, and ‘marginal’ or variable costs on the other. Fixed costs are the costs of the factory buildings and machinery, and the variable costs are the additional costs of making one more unit of output – traditionally made up largely of the costs of the additional labour and materials needed, on the assumption that the plant and equipment are already there. Economic theory says that prices in a competitive market should fall until they equal marginal (or variable) costs. Prices higher than that would mean that by producing and selling more, a manufacturer could still earn a little more profit, whereas at a lower price making even one more item would add more to costs than it gained in income from sales.

Throughout large swathes of the modern economy technological change is rapidly reducing variable costs. For everything that can be copied digitally, additional copies cost little or nothing either to produce or to distribute over the internet. This applies to all music, to all computer software and games, to films, to all books and to the written word in any form, to all information and to pictures. That covers a large part of what is produced for entertainment and leisure, for education at all levels, and for many economic and professional applications of computer software – whether for stock control, statistical analysis or computer-aided design.

So low are marginal costs of digital products that there is a growing ‘free’ sector. Efforts are made to enforce patents and copyright protection in an attempt to restrict access and enable companies to hold on to profits; but the logic of technological progress is difficult to resist. Systems of copy protection codes are cracked and goods ‘liberated’. In some cases free access is supported by advertising, in others it is genuinely free, as with ‘freeware’ or ‘shareware’ computer programmes. The internet has already provided free access to almost unlimited information, not only books, encyclopaedias, dictionaries, newspapers, but increasingly to on-line journals. Whether legally or not, music and films are downloaded free. Some service providers now provide unlimited free storage space. Phone calls can cost only a fraction of what they used to and, when using computer links, are increasingly free. Emails and instant messaging also provide effectively free communications.

Though less dramatic than in the digital economy, the trend towards rapidly diminishing variable costs may also apply to many other areas of technology, including the products of nano-technology, biotechnology, electronically printed components and genetic engineering. These new technologies hold out possibilities of more efficient solar power, cheaper medicines and more economical new materials.

From the point of view of many of the companies producing digital products, the changes have not appeared as new opportunities for enhancing human life and enjoyment, but as profound threats to profits. Instead of maximizing the benefits of the new technologies, we find ourselves with institutional structures which have fought to restrict this new potential. The dramatic lowering of variable costs puts a rapidly widening gap between the maximization of profit and the maximization of public benefit. In this situation it is important that governments use their powers to aid the development of new institutional structures, not to prop up and defend the restrictions of the old ones.

It used to be argued that goods for which the marginal costs were close to zero were inherently public goods and should be made publicly available. Before the digital era, bridges and roads were commonly used examples. Once society has incurred the capital costs of making a bridge or road, maximum benefit from the initial investment is gained only if use is unrestricted by charging. Hence, people should be allowed free access. The need to provide unrestricted free access in order to maximize the public benefit was offered as an economic explanation of why roads and bridges were in public ownership – until governments began to try to recoup the costs of road building by charging tolls.

Once the capital cost has been incurred, the more people sharing the benefits the better. Where municipal investment provides local internet access, there is no need to restrict access to it. When the Victorians established free public libraries they recognized the same logic: a book can be read repeatedly at no extra cost. Perhaps we need public bodies and non-profits, funded from public revenue, able to negotiate a price at which to buy access or copyrights for the nation. Perhaps we need international bodies able to negotiate free access to educational and business resources throughout the world. From the point of view of society as a whole, the tendency for technological change to reduce marginal costs is rapidly tipping the balance of advantage away from allowing profit-maximizing corporations to control the distribution of goods. Increasingly they can only rely on the remnants of monopolistic power provided by patents or copyright. We need to find new ways of paying organizations and individuals for life-enhancing research, creativity and innovation – the geese which lay the golden eggs – which does not then restrict access to the benefits. Perhaps we need charities to fund the development of software for free worldwide use. We certainly need a complete revision of copyright and patent laws so that those who produce valuable goods and services can be paid in ways which do not restrict access to their products.

The question for politicians and the public is whether it is possible to find ways of paying corporations for their research and development without trying to police a pricing system which restricts access to the benefits of what they have produced – benefits which may include life-saving drugs, agricultural innovations which could feed the hungry, and access to scientific and academic journals for universities in the developing world. If it is correct to think that new technology tends increasingly to lower variable costs, then this problem will become increasingly pressing.

Perhaps the logic moves us towards a society in which access to an ever-increasing range of goods is no longer tightly rationed by income, and our possessions cease to play such an important role in social differentiation. We might hope that we will start to experience ourselves primarily as unranked members of the same society brought together in different combinations according to our various shared interests.

THE FUTURE OF EQUALITY

Caught up in day-to-day events, it is easy to forget that a longer view reveals an almost unstoppable historical trend towards greater equality. It runs like a river of human progress from the first constitutional limitations on the ‘divine’ (and arbitrary) right of kings, and continues on through the slow development of democracy and the establishment of the principle of equality before the law. It swells with the abolition of slavery and is strengthened by the extension of the franchise to include non-property-owners and women. It picks up pace with the development of free education, health services and systems of minimum income maintenance covering periods of unemployment and sickness. It runs on to include legislation to protect the rights of employees and tenants, and legislation to prevent racial discrimination. It includes the decline of forms of class deference. The abolition of capital and corporal punishment is also part of it. So too is the growing agitation for greater equality of opportunity – regardless of race, class, gender, sexual orientation and religion. We see it also in the increasing attention paid by lobby groups, social research and government statistical agencies to poverty and inequality over the last fifty years; and most recently we see it in the attempt to create a culture of mutual respect.

All are different manifestations of growing equality. And, despite differences in political opinion, there are few people who, when looking back on these historical developments, would not regard them all as welcome. The historical forces underlying them ensure that these are changes which a large majority will want to continue. That this river of human progress is occasionally briefly dammed up, or we experience eddying currents, should not blind us to its existence.

The relationships between inequality and the prevalence of health and social problems shown in earlier chapters suggest that if the United States was to reduce its income inequality to something like the average of the four most equal of the rich countries (Japan, Norway, Sweden and Finland), the proportion of the population feeling they could trust others might rise by 75 per cent – presumably with matching improvements in the quality of community life; rates of mental illness and obesity might similarly each be cut by almost two-thirds, teenage birth rates could be more than halved, prison populations might be reduced by 75 per cent, and people could live longer while working the equivalent of two months less per year.

Similarly, if Britain became as equal as the same four countries, levels of trust might be expected to be two-thirds as high again as they are now, mental illness might be more than halved, everyone would get an additional year of life, teenage birth rates could fall to one-third of what they are now, homicide rates could fall by 75 per cent, everyone could get the equivalent of almost seven weeks extra holiday a year, and the government could be closing prisons all over the country.

What is essential if we are to bring a better society into being is to develop a sustained movement committed to doing that. Policy changes will need to be consistently devoted to this end over several decades and that requires a society which knows where it wants to go. To help with this we provide – and will continue to provide – our research findings, graphs and other information on the Equality Trust’s web site (
www.equalitytrust.org.uk
).

The initial task is to gain a widespread public understanding of what is at stake. But rather than allowing this to be just one more idea that briefly gains attention before fashionable opinion moves on, we need to build a social movement committed to its realization. It must be taken up and pursued by a network of equality groups meeting to share ideas and action everywhere, in homes and offices, in trade unions and political parties, in churches and schools. It needs also to be pursued by the pressure groups, charities and services concerned with the various issues which are related to equality, whether health or teenage births, prison populations or mental health, drugs or educational standards. And they need to be coupled with the urgent task of dealing with global warming. In all these settings we must speak out and explain the advantages of a more equal society.

Nor should we allow ourselves to be cowed by the idea that higher taxes on the rich will lead to their mass emigration and economic catastrophe. We know that more egalitarian countries live well, with high living standards and much better social environments. We know also that economic growth is not the yardstick by which everything else must be judged. Indeed we know that it no longer contributes to the real quality of our lives and that consumerism is a danger to the planet. Nor should we allow ourselves to believe that the rich are scarce and precious members of a superior race of more intelligent beings on whom the rest of us are dependent. That is merely the illusion that wealth and power create.

Rather than adopting an attitude of gratitude towards the rich, we need to recognize what a damaging effect they have on the social fabric. The financial meltdown of late 2008 and the resulting recession show us how dangerous huge salaries and bonuses at the top can be. As well as leading those in charge of our financial institutions to adopt policies which put the wellbeing of whole populations in jeopardy, the very existence of the super-rich increased the pressure to consume as everyone else tried to keep up. The long speculative boom which preceded the financial crash was fuelled substantially by the growth of consumers’ expenditure. Increased inequality led people to reduce their savings, increase their bank overdrafts and credit card debt, and arrange second mortgages to fund consumption. By adding to the speculative element in the cycles of economic boom and bust, great inequality shifts our attention from the pressing environmental and social problems and makes us worry about unemployment, insecurity, and ‘how to get the economy moving again’. Reducing inequality would not only make the economic system more stable, it would also make a major contribution to social and environmental sustainability.

Modern societies will depend increasingly on being creative, adaptable, inventive, well-informed and flexible communities, able to respond generously to each other and to needs wherever they arise. Those are characteristics not of societies in hock to the rich, in which people are driven by status insecurities, but of populations used to working together and respecting each other as equals. And, because we are trying to grow the new society within the old, our values and the way we work must be part of how we bring a new society into being. But we must also try to bring about a shift in public values so that instead of inspiring admiration and envy, conspicuous consumption is seen as part of the problem, a sign of greed and unfairness which damages society and the planet.

Martin Luther King said, ‘The moral arc of the universe is long, but it bends towards justice.’ Given that in human prehistory we lived in remarkably equal societies, maintaining a steady state – or sustainable – way of life in what some have called ‘the original affluent society’,
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it is perhaps right to think of it as an arc, curving back to very basic human principles of fairness and equality which we still regard as good manners in any normal social interaction.
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But at all stages, creating a more equal society involves people speaking their minds, making the case, organizing and campaigning.

It is impossible for governments not to influence income differences. Not only are they the largest employer in most countries, but almost every area of economic and social policy affects income distribution. Tax and benefit policies are the most obvious way. Other influential areas of policy include minimum wage legislation, education policies, the management of the national economy, whether unemployment is kept to low levels, whether different rates of VAT and sales taxes are applied to necessities and luxuries, provision of public services, pension policies, inheritance taxes, negative income tax, basic income policies, child support, progressive consumption taxes,
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industrial policy, retraining schemes, and many more. But in this chapter we have also suggested more fundamental changes to ensure that income differences are subject to democratic control and greater equality becomes more deeply rooted in the social fabric.