It's not just the less well-off who should feel aggrieved by fat cat salaries. One way or another, it's costing all of us
If you’ve never seen US comedian Lewis Black’s riff about greed you should have a look. So too should Paul Reynolds, and a few other chief executives employed by our major companies.
While it’s tempting to beat up on the Paul Reynolds of the world, we can leave talkback land to do that. But having enjoyed Black’s humour, progressives (and even those corporate fat cats) should then turn to a recent book which is creating the odd wave in social democratic circles overseas. It’s called The Spirit Level and is by two British academics, Richard Wilkinson and Kate Pickett. Its findings – and the research is rigorous – makes for compelling reading.
According to Wilkinson and Pickett, unequal societies with large wealth disparities are bad, not just for the impact poverty has on the poor, but for the well-off as well.
The Guardian has an informative review summarising some of the key findings. The US is wealthier and spends more on health care than any other country, yet a baby born in Greece, where average income levels are about half that of the US, has a lower risk of infant mortality and longer life expectancy than an American baby. Obesity is twice as common in the UK as the more equal societies of Sweden and Norway, and six times more common in the US than in Japan. Teenage birth rates are six times higher in the UK than in more equal societies; mental illness is three times as common in the US as in Japan; murder rates are three times higher in more unequal countries.
New Zealand gets a few citings in the book, which are well deserved. Of the countries surveyed, we enjoy one of the lowest levels of average income, but we enjoy one of the largest income gaps. Not surprisingly, we also boast high incarceration rates, high levels of mental illness, a high level of teenage births. Where we don’t too badly – in high average literacy levels, for example – there’s a twist. Our average score might be high, but we show a high degree of social inequality in literacy. Moreover, researchers suggest one of the reasons for our good score for average literacy might have more to do with the fact that we have a higher proportion of kids who should sit the tests but don’t because they have dropped out, or are truants.
According to Wilkinson and Pickett:
“Across whole populations, rates of mental illness are five times higher in the most unequal compared to the least unequal societies. Similarly, in most unequal societies people are five times as likely to be imprisoned, six times as likely to be clinically obese, and murder rates may be many times higher. The reason why these differences are so big is, quite simply, because the effects of inequality are not confined just to the least well-off: instead they affect the vast majority of the population.”
So what does all this mean? It gives some grunty data to start progressive politicians to thinking about serious measures to reverse inequality. Until the end of the Keynesian consensus, societies were, relative to today, rather equal. And we don’t need nostalgia to remind us that New Zealand in the 1970s was a rather kinder, cleaner, less violent, safer place than it is now.
Yes, the 1980s brought in some nice changes. We can shop on weekends. We can drink wine from bottles. We can eat exotic foods. But do we really need a society with such marked disparities of income? Surely it’s not beyond us to rein in corporate excess while keeping some of the accouterments of modern society? Does Paul Reynolds really need every cent of the $5 million he received?
Comments (9)
I've obviously seen the argument before - and the authors may well address this, but whenever I see it explained one possibility is always left open.
Why is it considered that high levels of inequality causes high levels of mental illness, poor health, and lower education outcomes, etc. and not the other way around?
Surely a country where the education disparity is great will see an income/wealth disparity? And a country with a high level of mental illness will see that larger portion of its population face much greater barriers in seeking wealth for themselves and their families?
Is fixing our inequality problem the key to solving our mental health problem, or is fixing our mental health problem the key to fixing out inequality problem?
I'd also note that this "And we don’t need nostalgia to remind us that New Zealand in the 1970s was a rather kinder, cleaner, less violent, safer place than it is now."
I'm pretty sure you do - and it's probably already been pointed out on Pundit in relation to a justice-related sentencing issue. Even ignoring likely substantial unreported family violence, the murder rate used to be much higher. From about the mid 70s, we started regularly hitting 40+ murders a year. We're still at about the number, and the population is more than one-third higher.
It strikes me that once inequality reaches a certain point (specific to each society, and at which the structural nature and effects of inequality become difficult to overcome) there will be an inevitable process whereby cause and effect will reciprocate, possibly with ever greater amplitude. This is the desired outcome of neo-liberalism, for, in that view, it is the amplitude of that reciprocation that provides the incentive for some people (as individuals) to break out of poverty. All can seek to break out, if they are 'the right stuff', but most will not, because they are not. This, for me, is why the performance of the post-1999 governments in NZ needs to be subjected to critical analysis. Was that 'certain point' reached before 1999, or could the post-1999 governments have done more, better, to reverse the damage of the post-1984 model? Has the post-1999 experience brought us closer, or beyond, that certain point?
There is a second issue in remunerating Reynolds to this extent, one of corporate governance. It would not surprise me to discover an abundance of qualified people perfectly happy to do Reynold's job for a trifling 2.5 million. This being so, are the shareholders not being bilked? So how does he get away with it?
Graeme,
You ask "Why is it considered that high levels of inequality causes high levels of mental illness, poor health, and lower education outcomes, etc. and not the other way around?" The answer, I suppose, lies in forming a hypothesis and testing it. So the authors posit that inequality in income causes bad social outcomes. What evidence exists to substantiate this hypothesis? Well - how about this:
[The authors] use the information to create a series of scatter-graphs whose patterns look nearly identical, yet which document the prevalence of a vast range of social ills. On almost every index of quality of life, or wellness, or deprivation, there is a gradient showing a strong correlation between a country's level of economic inequality and its social outcomes. Almost always, Japan and the Scandinavian countries are at the favourable "low" end, and almost always, the UK, the US and Portugal are at the unfavourable "high" end, with Canada, Australasia and continental European countries in between.
In other words, there is no falsification of the hypothesis in the data. But is there an alternative explanation that could account for the observed correlation (for, after all, correlation is not in itself proof of a causative relationship). Well, perhaps (as you point out) the low inequality results from the fact that these societies somehow independently have managed to adopt policies that produce better social outcomes across the board (in other words, Scandinavia and Japan miraculously have stumbled onto policies that solve all the problems of health, education, mental health, etc, etc - thus producing more equal societies). To this we then need to apply Occams razor - is the simpler (hence preferable) explanation that the low inequality in these countries causes the good social outcomes, or that these countries each have managed to luck into the best policy approaches to a wide range of social areas, thus causing lower inequality?
Furthermore, lets take one area - mental health. Apparently, "Around a quarter of British people, and more than a quarter of Americans, experience mental problems in any given year, compared with fewer than 10 per cent in Japan, Germany, Sweden and Italy." Now, are there any special social programmes/policies in place in the latter countries that can account for the lower incidence of this objectively verifiable phenomena (nb: we're not dealing with reported levels of satisfaction or the like)? Does Germany intervene more quickly at the very first signs of mental illness? Does Sweden have rest and therapy retreats for stressed out people? If not - if the USA and the UK treat people's mental health in the same way as the latter countries (NB: by "treat" I mean deal with prior to the symptoms manifesting ... which is the relevant comparison here) - then the claim "these countries are more equal because of fixing other social problems" is falsified.
Why would it have to be "special social programmes/policies" or "independently [adopted] policies that produce better social outcomes" that account for lower incidences of mental health problems?
Couldn't it be genetic? A particular gene or combination of genes in a population that makes them less susceptible to a particular disease (and their children less susceptible as well)? Or environmental? I anticipate that Scandinavia and Japanese diets (maybe Italian too?) are high in oil-rich fish as one example. Or even cultural - the importance of education within the family; a society where the older generations are ignored might create greater feelings of alienation etc.
Why would national boundaries be important? New York State and Alabama have the highest levels of income inequality in the US, yet one is near the top for life expectancy and the other near the bottom.
I'm not saying they're wrong, but their scatter-graphs are just as good at proving causality the other way 'round. Switch the x- and y- axes and you'll get the same basic graph, and the same relationship.
mind the gap
Graeme,
Switch the x- and y- axes and you'll get the same basic graph, and the same relationship.
Across virtually every single social outcome in the same countries? THAT'S the point. Either you've got an incredible coincidence - that each of these countries has independently discovered the best policies (or happens to have the same physical/cultural conditions ... fish oil? really?) to produce an incredibly broad range of good social outcomes, thus producing equality ... or policies aimed at producing equality has caused these social outcomes. Now, you CAN argue the former if you want. But I'll bet you don't really believe it. Nor would you put good money on it.
Now, you CAN argue the former if you want. But I'll bet you don't really believe it. Nor would you put good money on it.
Perhaps. But I also can't argue the other way. I can't even begin to fathom a mechanism by which wealth/income inequality causes mental illness.
The argument that - for example - high levels of mental illness will lead to wealth/income inequality seems almost inarguably true.
This doesn't mean the reverse cannot also be true, but were a significant number people with mental health concerns to immigrate here, I think inequality would rise immediately - and if a bunch emigrated I think it would decrease. I don't have the same confidence that mental illness would increase if Bill Gates and George Soros moved here, or how it would decrease if the Talleys and the Fletchers etc, all left. And even if it did I've no idea how it would have.
I'm not saying that any particular genetic factor or environmental factor is causing lower or higher incidence of particular societal ills throughout the world - that's laughably implausible. But I can see that there could be quite direct mechanisms by which various genetic factors or environmental factors would cause mental illness, and how that incidence of mental illness would result in greater inequality.
Graeme,
First up, we should not let the focus on mental illness as one single issue divert us from the larger point at hand - that levels of inequality in different countries are correlated to lots of different negative social indicators. So whether you can fathom a mechanism by which inequality causes mental illness isn't really the point here. It's whether you can show any common link between the different "low negative social indicators countries" (i.e. Scandanavia, Japan, etc) other than their low rates of inequality that can explain why they have these features. After all, it takes a theory to beat a theory!
But on the issue of mental illness, let's see if we can't find some plausible reason why inequality may cause mental illness. First up, the link between social status and prevalence of mental illness is pretty much settled. Why might this link exist? There's this study, which reports:
Of the various social causation hypotheses tested, the idea that the impact of SES on mental illness is mediated by economic stress received the strongest support, with this model substantially fitting the data.
Which makes some sense - the poorer you are, the more stress in your life, which then contributes to the manifestation of mental illness (i.e. it may exacerbate underlying genetic factors, etc). But what about inequality (cf poverty per se)? Well, that gets us back to the point of David's post - what it means to be "rich" or "poor" isn't static (above a certain base-line satisfaction of basic physical needs). Earning $300 a week in the Gabon would make you wealthy. Doing so in NZ makes you poor. So the subjective experience of poverty (and the stress that this generates) largely depends on how a person perceives their economic (hence social) status within a given society.
Anyway - that's the argument made in this World Health Organisation report.
Mental health is also a key pathway through which inequality impacts on health. There is overwhelming evidence that inequality is a key cause of stress in itself and also exacerbates the stress of coping with material deprivation. This chronic stress is written on the body through specific physiological reactions, which are triggered by conscious and unconscious emotional and cognitive responses. Social position influences level and duration of exposure to the social injuries associated with low status, and also capacity to recover – socio-economic differences in the time it takes for blood pressure to return to normal after a stressful event are a compelling example of this. The fact that poverty is more damaging in some circumstances than in others highlights the urgent need to address policy responses that undermine precisely those characteristics that individuals and communities need to survive adversity: respect, dignity, self esteem, positive identity and connectedness. Evidence of the shame and humiliation that accompany poverty demonstrates the importance of addressing both the material and social dimensions of deprivation. Mental health is produced socially: the presence or absence of mental health is above all a social indicator and therefore requires social, as well as individual solutions.
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