Friday, December 7, 2012

Steve Baron: Income inequality & child poverty

I’ll be blunt and say straight up front, I’m a dirty, stinking, money loving capitalist. I’ve speculated in real estate, the stock market, even foreign currency and I've been lucky enough to do very well from it too. However, I’m also a capitalist that has a social conscience. I believe in justice, fairness and equal opportunity. That is why income inequality and child poverty concern me greatly.

I started hearing about income inequality a few years ago in the main stream media, after a book called 'The Spirit Level' was published. It was mainly left wing commentators that were banging on about it and my first thoughts were… "here we go again, rob from the rich to give to the poor, bloody socialists".

Although I had only read a little bit about income inequality, it was an issue that concerned me somewhat… but it wasn’t until I read 'The Spirit Level' that I realised just how important it is to understand why income inequality is a serious issue and that New Zealand ranked extremely poorly, almost at the top of the so called wealthy OECD countries, when it comes to income inequality.

The sad part is that there would be very few New Zealand politicians who even realise we have this problem, or even worse, that urgent attention is needed to fix it. If you have any real interest in the future of the world, or New Zealand in particular… then I would implore you to read 'The Spirit Level', even if you only download the first few chapters, free, to your Kindle or Kindle PC.

From a psychological perspective, big differences in material wealth make 'status differences' important, and in more unequal societies there’s more distance between the 'haves' and the 'have-nots'. Whether you like it or not, we all maintain our social status by showing superiority to those below us, even if we don’t realise we are doing it. Those deprived of status try to regain their status by taking it out on more vulnerable people below them. The English have a saying: "The captain kicks the cabin boy and the cabin boy kicks the cat". This is called 'displaced aggression'. Wilkinson & Pickett, in The Spirit Level, gave an example of this: the man who is berated by his boss then comes home and shouts at his wife and children. If you think this example is a spurious link to income inequality… I would suggest you think again. Statistical evidence shows that income inequality has far reaching effects, including: increased youth suicide, child abuse, increased social spending, rising crime rates and unequal opportunity.

Income inequality is like a disease that goes unnoticed; not too dissimilar to Semmelweis discovering in 1847 that if doctors didn't wash their hands before attending women in childbirth, deaths increased dramatically from puerperal fever. Income inequality is an issue most of us are oblivious to and we need to be more aware of the effects of it as this is the major cause of child poverty. I will not try and explain the reasoning and statistical evidence behind this—I couldn’t do it justice in the limited space available. But if you have any doubts or think this is simply an exaggeration, then I would encourage you again, to read The Spirit Level by Wilkinson & Pickett. They do an excellent statistical explanation for all of these issues I’ve just mentioned.

The general direction where a government can intervene in order to reduce and solve the problem of income inequality are: labour market policies, migration policies, fiscal policies, tax levels, transfer schemes for vulnerable groups and poor regions, social security improvements and streamlining. The solutions are not simple. What works in one country doesn't work in another, but understanding and accepting there is a serious problem in the first place is paramount.

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[Steve Baron is a political commentator. He holds a B.A. (Hons) in Political Science and a B.A. in Economics. He is a published author; a regular columnist in various publications throughout NZ; the Founder of Better Democracy NZ; a former businessman and Waipa Mayoral candidate.]

1 comment:

rossc said...

My 2 cents

Gareth Morgan and Milton Freidman both proposed a universal income.

Decriminalise drugs, don't have to legalize sales but at least decriminalise as drug use is a symptom of economic, educational and social failure not the cause and prohibition punishes the poor.

Reform education and give the power to the children, parents and teachers take the power from the centre and free the education system.

Do these three things and you will see greater change than any other government policy.