Oxfam should beware idealistic solutions to complex problems

We need to bear a few things in mind before we listen too closely to Oxfam. Christian Guthier, CC BY-SA

Oxfam is making what might appear to be a manifestly sound moral case when it urges political leaders at the global economic conference at Davos to adopt particular policies to reduce economic inequality. Oxfam’s new report cites evidence that economic inequality has bad economic and social effects. It also highlights a growing concentration of global wealth.

As the Oxfam headlines have been making clear, 80 billionaires own between them as much as the poorest 50% of the entire world – compared to the 388 billionaires it took to match the poorest 50% five years ago. By next year the top 1% in terms of world wealth will own more than the remaining 99% for the first time.

The true inequality debate

This certainly doesn’t sound like the sort of world that most of us would want to live in. The facts relating to the global distribution of wealth are undeniably startling – and even potentially alarming. All the same, on closer inspection the position is not as clear-cut as it might seem. The basic Oxfam claim that economic inequality has a systematically detrimental effect on the health and general welfare of us all is more contentious than it might appear from the confident tone in which it presses its policy recommendations.

In particular, no mention is made to the work of the writer Christopher Snowdon. Snowdon’s main focus is a 2009 book The Spirit Level, by epidemiologists Richard Wilkinson and Kate Pickett, which makes similar arguments to Oxfam about the dangers of inequality. Snowdon reassesses them and widens the range of countries that the original book considered.

In his own 2010 book, The Spirit Level Delusion, Snowdon concludes that economic inequality does not have the invariable malign role that Wilkinson and Pickett assign to it. As he says: “…more equal countries do worse under a number of criteria”. Both sides have since continued to argue that the other is wrong. My point is not particularly to take one or the other, but more to point out that it is not an unarguable fact that inequality always has malign consequences.

Some important caveats

Neither does it follow that all measures which the state adopted to try and reduce inequalities would necessarily be politically wise. For instance, the policy might have effects other than the distribution of wealth. Take an old example of a UK anti-inequality policy, the window tax of the 18th and 19th centuries. It taxed households on their number of windows, on the logic that people with more windows were wealthier.

Southampton’s Portland Street. Wikimedia, CC BY-SA

Rather than having a big effect on the distribution of wealth, it changed architecture. It led to people building big houses with far fewer windows than before, or at least filling in places where windows should be, complaining all the while about “daylight robbery”.

Another risk is that a policy might be unjust. It was easy enough to see the anti-colonial reasons behind Robert Mugabe taking land from white farmers in Zimbabwe for the past several decades, but many believe that the results have been completely unfair on the white people who had lived there for generations. None of this is to say that anti-inequality policies shouldn’t be implemented if they are unfair or have other effects, but any policies need to at least keep these possibilities in mind.

It is also far from obvious that there is a moral case for saying that, for the sake of equality, the state ought to intervene to reduce and redistribute wealth. If so, we need to bear in mind that economic inequality is not the only variety of inequality. Some people have more friends, more lovers, more children than others. If you tried to say that these should be redistributed for the sake of equality, most people would say you were crazy. Is there a compelling reason for treating economic inequality differently?

The Rawls framework

The most famous philosophical framework for morally evaluating social and economic inequalities was provided by the 20th-century American philosopher John Rawls. It is based on a thought experiment. He asks us to imagine what sort of inequalities rational actors would be prepared to accept if they could choose what sort of society they would enter into but could not choose which particular position they would have within it.

He concludes that they would accept two principles. The first is that they would accept restrictions on their freedom only up to the point that they could not act in ways that inhibited anyone else’s freedom. The second principle is that they would insist on the worst-off person being better off than they would be in a society where everyone was completely equal. This should be done in such a way that inequalities are kept to the bare minimum in which that society can function.

Coming from what was broadly an American Democrat position, Rawls was essentially making an argument for the modern industrial society but with the maximum possible redistribution. Not everyone was convinced by this argument, it must be said. For instance Rawls’ American counterpart Robert Nozick took the view that the state had no business redistributing the profits from honest transactions between individuals.

Risks in practice

But if one agrees with Rawls’ instincts towards minimising inequality, it does not follow that one need thereby be committed to accepting all attacks on inequality and all such policies as those which Oxfam might recommend.

Oxfam says, for instance, that governments should “clamp down on tax dodging by corporations and rich individuals.” They should, perhaps, do so whatever the extent of global economic inequality happens to be. Yet the effects might not always be what Oxfam would want or expect.

For instance if corporations pay more in tax, it might lead to an increase in prices. It might lead to a decrease in wages and a consequent reduction in income tax paid by workers. It might lead to a reduction in profits and a consequent reduction in the income tax paid by shareholders. The closing of legal loopholes for avoiding tax might also lead to the abandoning of schemes such as gift aid and a consequent reduction in the donations that are received by Oxfam and other charities.

Be careful what you wish for… Gert Vrey

None of this is to say that Oxfam is not highlighting something to which we should be sympathetic or consider trying to change. Instead it is a reminder that the real world is more complicated and bedevilling than some of the poverty movement would like. If our reforms make the poorest person less well off overall, we have achieved exactly the opposite to what we had hoped.