When Peter Mandelson declared himself to be “intensely relaxed about people getting filthy rich” it might have sounded like an epitaph for the politics of equality. But in the past year or two there has been something of a mood shift; it would seem that equality and redistribution are making a comeback. The government has raised the highest rate of income tax to 45 per cent, and politicians across the spectrum, and around the developed world, have expressed outrage at the culture of bonuses, especially in the financial sector.
And yet Peter Mandelson still counsels against the “politics of resentment”, which “just leads to the conclusion that it is OK to drag people down.” The point is a valid one, as descending into cheap populism would be counterproductive and would achieve little. We need a formulation that frames the case for social democracy in terms that do not negate the politics of aspiration, and there remain unanswered questions.
Simon Fanshawe summed up the unanswered questions best, writing in December’s edition of Progress. He urges us to stop equating all wealth with wealth creation and tries to draw a distinction between the productive rich and the undeserving rich. He asks: “Should we be taking a moral view of this? And should it begin with some clear notion that what each of us does must benefit not just ourselves?” A view that “doesn’t dampen aspiration, it just gives it a moral value.” But we are still left with the question of how exactly we are to distinguish the undeserving from the deserving rich. We may agree that there are entrepreneurs who create wealth and provide employment and that they deserve financial rewards. We may also agree that the most egregious financial speculation involves little more than wealth appropriation, no wealth creation, and rather a lot of wealth destruction. But there needs to be a clear set of criteria for distinguishing deserved wealth from undeserved wealth. And we haven’t really said much about quite how rich we are comfortable with the deserving rich getting. Should people really be able to “climb without limits, free from any barrier holding them back…?”
Some of these questions can be addressed by the principles set out by the philosopher John Rawls. In his ‘A Theory of Justice’, Rawls outlines two principles of justice. The first states that “each person is to have an equal right to the most extensive scheme of equal basic liberties compatible with a similar scheme of liberties for others” and the second, that “social and economic inequalities are to be arranged so that they are both a) to the greatest benefit of the least advantaged (this is what Rawls has called the ‘difference principle’) and b) attached to offices and positions open to all under conditions of fair equality of opportunity”. Moreover the first principle takes priority over the second principle. So we allow some inequality, provided that the rest of society, right down to the least well-off, benefits from such an arrangement, and provided that the path to a greater share of wealth is open to all. And in no case may the distribution of wealth impinge on any individual’s basic rights and freedoms.
This formulation would seem to address the questions posed by Simon Fanshawe. For starters what we do should indeed benefit not just ourselves, at least to the extent that we reap material rewards. The difference principle lays out a clear rule for distinguishing the deserving and undeserving rich. When getting richer also benefits those at the bottom of the totem pole, then one belongs to the deserving rich. This would include our entrepreneurs – a system which rewards such people for creating wealth, or acting as facilitators in wealth creation, would benefit everyone else, including the least well-off. We would also include those in non-commercial fields whose work clearly benefits the rest of society, such as doctors, researchers, teachers and social workers. Those whose gains do not fit these criteria are the undeserving rich, especially those whose efforts benefit nobody else at all. This would seem to take care of unscrupulous speculators, amongst others.
A society in which some people are born with a better chance of acquiring greater wealth (whether or not this benefits the least well-off) would be one that is unfair in this scheme, as it would violate part b) of Rawls’ second principle. This definition of fairness demands a commitment to increasing social mobility, fighting discrimination, eliminating child poverty and making education available to all. We would also have to take a very careful look at the inequality-perpetuating effects of inherited wealth.
Moreover, there would also be limits on quite how rich the deserving rich can get. At the point beyond which getting even richer brings no new benefits to the least well-off, then continued accumulation of wealth ceases to be justified. So we can accept that Bill Gates and Lakshmi Mittal benefit materially from their endeavours, perhaps even grandly, but not endlessly. Extreme inequalities of wealth therefore do not fit in with the difference principle.
Rawls’ first principle also addresses extreme inequalities in wealth distribution. If we accept that an equal distribution of basic rights and liberties for all are best guaranteed by a democratic political system, in which power is shared amongst the wider population, we should be gravely concerned by the emergence of a billionaire super-class. This is true even if the billionaires commit to giving away their wealth. Their magnanimity in fact underlines the results of extreme wealth accumulating in the hands of a small elite. Bill Gates, precisely by the act of giving away vast sums of money, is exercising tremendous power – and we need to ask ourselves if we can accept the concentration of such power in the hands of one man. Is this a desirable substitute for effective public policy, resulting from a democratic process of setting social goals and priorities? And this is not to cast doubt on Mr. Gates’ good intentions, we are questioning only the system which allows such wealth differentials to accumulate.
So Rawls provides us with a framework for examining how we judge inequality. The two principles do not give us a detailed blueprint, with precise numerical boundaries; that would be the subject of extensive research as would a policy prescription for moving from where we are now towards a fairer society. But they do set goals for social change. A key point is that these are moral as well as political principles. Principles which would give us a set of criteria by which to judge economic and social functions, and would steer us away from having to choose between greed-is-good capitalism and an insistence on strict equality. Once we accept the difference principle, we also accept the inequalities permitted under this principle, not on pragmatic grounds, but on genuine moral grounds.
Our ‘deserving rich’ category would most obviously include innovators and those serving society, but would also extend to cases where it may not be intuitively obvious that there is any added value to society. A modern economy is highly complex, with countless interactions between millions of players, and there is a positive role to be played by go-betweens – intermediaries and arbitrageurs. Some of these go-betweens would also belong to the deserving rich – in other words implementing a Rawlsian system would require careful thought. Besides a moral foundation for social democracy, we would have an intellectually consistent means for defining legitimate aspiration and a defence against accusations of pandering to the ‘politics of envy’. Altogether a more robust ideological construct than vague fairy tales about some mythological ‘trickle-down effect’.
Tanweer Ali is a member of Labour International