This week, Pope Francis has issued his first apostolic exhortation entitled Evangelii Gaudium (The Joy of Gospel). The exhortation covers a lot of ground but the Pope makes clear that inequality is the biggest economic issue of our time.
Another 800-pound gorilla expressed a very different viewpoint a couple of days ago. Addressing the Centre for Policy Studies in London in a speech titled “What Would Maggie do Today?” Boris Johnson, the right wing Conservative party’s Mayor of London, said that economic inequality is good because it encourages people to work harder. He also established a polemic parallelism between the distribution of IQ and cornflakes in a pack.
Equality is not a stable equilibrium as Gregory Mankiw explains with this thought experiment used another recent controversial paper “Defending the One Percent”:
Imagine a society with perfect economic equality. Then, one day, this egalitarian utopia is disturbed by an entrepreneur with an idea for a new product. Think of the entrepreneur as Steve Jobs as he develops the iPod, J. K. Rowling as she writes her Harry Potter books, or Steven Spielberg as he directs his blockbuster movies. The new product makes the entrepreneur much richer than everyone else. How should the entrepreneurial disturbance in this formerly egalitarian outcome alter public policy? Should public policy remain the same, because the situation was initially acceptable and the entrepreneur improved it for everyone? Or should government policymakers deplore the resulting inequality and use their powers to tax and transfer to spread the gains more equally? (Gregory Mankiw, “Defending the One Percent”)
I have taken the liberty to cut, reshuffle and paste bits and pieces of their respective speeches to create a sort of imagined but vivid dialogue between the two fat cats which illustrates the two sides of the inequality debate:
THE POPE: Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralised workings of the prevailing economic system. We can no longer trust in the unseen forces and the invisible hand of the market. Growth in justice requires more than economic growth
BORIS: Ding dong! Marx is dead. Ding dong! communism’s dead. Ding dong! socialism’s dead! Ding dong! Clause Four is dead, and it is not coming back. Like it or not, the free market economy is the only show in town.
THE POPE: Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized. We have to say “thou shalt not” to an economy of exclusion and inequality. Such an economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality. While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation.
BORIS: No one can ignore the harshness of that competition, or the inequality that it inevitably accentuates.
THE POPE: Today in many places we hear a call for greater security. But until exclusion and inequality in society and between peoples are reversed, it will be impossible to eliminate violence. This is not the case simply because inequality provokes a violent reaction from those excluded from the system, but because the socioeconomic system is unjust at its root.
BORIS: We cannot ignore this change in relative economic standing, and the resentment it sometimes brings. Last week I tried to calm people down, by pointing out that the rich paid a much greater share of income tax than they used to.
THE POPE: A financial reform open to such ethical considerations would require a vigorous change of approach on the part of political leaders. Money must serve, not rule!
BORIS: I stress: I don’t believe that economic equality is possible; indeed, some measure of inequality is essential for the spirit of envy and keeping up with the Joneses that is, like greed, a valuable spur to economic activity.
THE POPE: Ethics has come to be viewed with a certain scornful derision. It is seen as counterproductive, too human, because it makes money and power relative. It is felt to be a threat, since it condemns the manipulation and debasement of the person. We have created a “throw away” culture which is now spreading. The excluded are not the “exploited” but the outcast, the “leftovers”. The thirst for power and possessions knows no limits.
BORIS: I am afraid that violent economic centrifuge is operating on human beings who are already very far from equal in raw ability, if not spiritual worth. Whatever you may think of the value of IQ tests, it is surely relevant to a conversation about equality that as many as 16 per cent of our species have an IQ below 85, while about 2 per cent have an IQ above 130. The harder you shake the pack, the easier it will be for some cornflakes to get to the top.
THE POPE: I beg the Lord to grant us more politicians who are genuinely disturbed by the state of society, the people, the lives of the poor! It is vital that government leaders and financial leaders take heed and broaden their horizons.
BORIS: Yes, that’s the question I am asking today: WHAT WOULD MAGGIE DO NOW?, because I think she would have taken the question of social mobility very seriously indeed.
Yes, inequality is the debate, and sooner or later you will have to take sides