Roger Brown, The Inequality Crisis

Roger Brown, The Inequality Crisis: The facts and what we can do about it, Policy Press, 2017, xii + 288 pp, pbk, 1 4473 3758 4, £12.99

As Kate Pickett’s foreword suggests, there is now plenty of information about the scale of inequality, and about the way that it is increasing; and there is now more understanding that inequality is a serious social risk: but action to reverse the trend has been conspicuously absent. Roger Brown’s book adds to our understanding of the extent of wealth and income inequalities in the UK, and of the ways in which they are increasing; and, sadly, it adds to our understanding of the UK government’s promises to act on the problem, and of its failure to do so.

The first chapter finds that the incomes and assets of the wealthiest have been increasing in value, and that earned incomes of those further down the earnings range have been declining in value. Chapter 2 understands that a certain level of inequality might be a spur to economic activity, but also finds that as inequality increases it stifles economic growth, impedes social mobility, imposes a variety of other social ills, and hands political power to the wealthy.

Chapter 3 studies a number of causes of increasing inequality: globalisation, technological change, increasing returns to capital, and changes in employment patterns and household structure. As Brown suggests, it is the combination of these factors that is driving inequality. Chapter 4 offers a rather different perspective on the causes of inequality, and finds that significant factors have been neoliberal government policy, including ‘austerity’; an increasing compression of wage-levels, partly brought about by trade union activity; a financial sector that is now ‘too big to fail’ and therefore able to attract government subsidy; and effective monopolies, such as rail operators and major energy providers, which are also able to attract subsidies from government. While the changes listed in chapter 3 are global in extent and therefore effect, those listed in chapter 4 have exhibited different levels of impact in different countries largely because their extents and effects are the result of country-specific institutional decisions.

The search for responses to inequality begins with chapter 5. Taxes on wealth, reducing tax allowances that benefit the wealthy, changes to corporate taxation, and increases in social expenditure, are all discussed. Ambiguous ‘guaranteed minimum income for all’ terminology is employed, and Tony Atkinson’s Participation Income, and also a Basic Income for children, are preferred to a Citizen’s Basic Income for all. The onerous and intrusive administration required for a Participation Income is not recognised.

Chapter 6 suggests increasing expenditure on ‘active labour market’ programmes, but has not taken account of research that shows that the sanctions related to such programmes are counter-productive. The chapter also makes suggestions in relation to trades unions, corporate governance, political party funding, media ownership, education policy, and financial sector regulation. Chapter 7 suggests that governments should be accountable to parliament for the level of inequality; that tackling tax avoidance and inefficient markets should be priorities; and that assets should be taxed at the same rates as income. Some discussions simply state the problem: for instance, to increase corporate tax rates might reduce revenue because the tax base is mobile. The chapter discusses government promises in relation to ‘just managing families’, corporate governance, and other fields, and shows that government actions have either had very little effect in the right direction or rather too much in the opposite one. Chapter 7 also discusses the effect of inequality on the decision to leave the European Union, and the effects of private campaign funding on that outcome. The chapter concludes with a long list of government policies that exacerbate inequality.

This book is significant both for its broad canvas and for the level of detail that it contains. (For instance: as well as the kinds of rent-seeking discussed in other recent books, there is useful discussion of the pros and cons of professional self-regulation: the maintenance of standards on the one hand, and the possibility of rent-seeking on the other). A full quarter of the book comprises notes and references. The only major criticism to offer is that, as the author recognises, none of his suggestions have been costed. It would be useful to see the figures.

This book has particular significance for the Citizen’s Basic Income debate. First of all, it makes it clear that inequality is caused by a very broad range of factors, that they all need to be tackled, and that tackling just one of them will not do the job: so no Citizen’s Basic Income scheme can be an answer to inequality on its own. But the book is also full of examples of policies that some might have thought would reduce inequality but that in fact exacerbate it: for instance, government attempts to encourage savings do not in fact enable the poor to save but rather benefit those already able to save, and so tend to increase inequality. It would be very easy to construct a Citizen’s Basic Income scheme that would exacerbate inequality without realising that that would be its effect. It is therefore essential that anyone who publishes an illustrative scheme should be able to show that their scheme would not increase inequality, and, even better, that it would reduce it.

At the end of her foreword Kate Pickett suggests that we should all read this book and then pass it on to someone else, because when enough of us come to understand the problem ‘things will begin to change’. Let’s hope that she’s right.