The Greatest Danger to the World

Review of Inequality: What Can Be Done? By Anthony B. Atkinson. Harvard University Press. 384 pp. $29.95

More than 80 years ago, during the Great Depression, R.H. Tawney asserted that "while inequality is easy, since it demands no more than to float with the current, equality is difficult, for it involves swimming against it... it has its price and its burdens."

In Inequality, Sir Anthony Atkinson, a fellow of Nuffield College, Oxford, a professor at the London School of Economics and Political Science, and a founder of modern inequality studies, elaborates on and qualifies Tawney's claim. Since the 1980s, Atkinson reminds us, income inequality in the United States and the United Kingdom has increased substantially. And in a poll recently conducted by the Pew Research Center, citizens of these two countries deemed it "the greatest danger to the world."

Convinced that excessive inequality is unjust and has bad consequences on social cohesion, political participation, and economic growth, Atkinson is intent on stimulating a national conversation about the distribution of income. He maintains that inequality is "not the product of forces over which we have no control." Government policies have contributed to inequality and government can take steps reduce it.

Atkinson makes 15 proposals designed to return to the levels achieved before "the Inequality Turn" in the 1980s. They include: encouraging innovation in a form that increases employment; laws to facilitate union representation of workers; guaranteed public employment at a minimum wage (set at a living wage); national savings bonds that guarantee a positive real rate of interest; a capital endowment (national inheritance) paid to all at adulthood; the creation of a sovereign wealth fund; a return to a more progressive personal income tax, with a top rate of 65%; a progressive lifetime gift and inheritance tax; a substantial Child Benefit paid to all children; a "participation income" paid to anyone making "a social contribution"; a substantial increase in the levels of social insurance; and an allocation of 1% of the gross national income of wealthy countries to development assistance to poor countries.

Atkinson tries to refute the "standard objections" of critics. Citing evidence from the past and employing a theoretical examination of possible impacts, he insists that there are insufficient grounds for blanket claims that his proposals, if implemented, would lower economic output and reduce growth. Higher wages, for example, might increase productivity; proposals to help small savers could increase wealth accumulation and investment.

Pointing out that the original welfare state had its origins in a period of globalization, Atkinson identifies evidence of growing international cooperation on environmental protection, finance, and women's rights. Moreover, pressure on banks to disclose the accounts and investments of foreigners to the appropriate authorities in the countries in which they have tax liabilities is beginning to produce results.

Finally, Atkinson emphasizes that given the progressivity of the tax rates he supports, his recommendations (if applied to the United Kingdom) could be revenue neutral. By achieving "a salient reduction" in overall inequality, overall poverty, and child poverty, he suggests, his reform package could contribute mightily to a functioning democracy and a good society.

Having concluded that "it is remarkably difficult to shift people's opinions if they are carrying in their heads" fixed -- and flawed -- theoretical conceptions, Atkinson did not focus all that much on empirical evidence of how his proposals would work "in reality." And he acknowledges that many readers may feel that (except for his attempt to refute the "corrosive" claim that nothing can be done) he has devoted insufficient attention to politics.

These two decisions, it seems to me, make it far less likely that his proposals will get traction beyond the diminished and discouraged cohort of unreconstructed New Dealers in the United States and "Back to Beveridge" [the 1942 plan for social security] reformers in the United Kingdom. Critics will surely dismiss Inequality as "the same-old-same-old" litany of liberal bromides. They will claim that at a time in which the U.S. and the U.K. are struggling to reduce government deficits, Atkinson's recommendations will require massive additions to an already bloated bureaucracy; throw money at problems with little or no control over how it will be spent; create disincentives to work and a culture of entitlements; force businesses and individual creators of wealth to re-locate; and send jobs abroad.

Except for climate change, inequality is, indeed, the greatest danger to our world. For many reasons, reducing it should be on everyone's agenda. Anthony Atkinson deserves great credit for attempting to stimulate a national conversation -- and for demonstrating that some "solutions to these problems lie in our hands." That said, it is important to recognize that in the 1980s Ronald Reagan and Margaret Thatcher changed the political discourse about equality of opportunity, inequality, and the role of government in regulating the economy, redistributing income, and providing a social safety net. It ain't easy, these days to swim against the current -- and head upstream.