Thursday, 5 December 2013

Boris Johnson: Cheer Leading For Inequality

When he gave the annual Margaret Thatcher lecture Boris Johnson’s praised inequality in a calculated way. He was positioning to challenge the Tory leadership from the right, if and when Cameron and Osborne fail to increase Tory seats at the next election.

Perhaps in an attempt to block Johnson’s manoeuvring, George Osborne, in a softer way, repeated those sentiments in his comment on Johnson’s lecture: inequalities of outcome are inevitable; the important thing is to ensure equality of opportunity through schooling:

"I think there is actually increasingly common agreement across the political spectrum you can't achieve equality of outcome, but you should be able to achieve equality of opportunity… You should give everyone, wherever they come from, the best chance, and, actually, education is the key to this."
This is partly wishful thinking when schooling in so many ways reinforces inequalities driven by catchment areas and the residential segregation of different income groups. But the more troubling point is that the Tory Right are now trying to break with the Westminster consensus in several ways.

First, the five Tory back benchers who wrote Britannia Unchained have blamed our lazy workers for continuing underperformance: “The British are among the worst idlers in the world. We work among the lowest hours, we retire early and our productivity is poor. Whereas Indian children aspire to be doctors or businessmen, the British are more interested in football and pop music”.

Now Boris Johnson praises the deserving rich who are smarter so that they will inevitably succeed against the masses who, on his account, have low IQs not a deficient work ethic. Johnson presents us with the cornflakes pack account of social reproduction and income inequality:

“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 2per 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”

This analogy rests on a farrago of unjustified assertion about competitive struggle, half-truth about the contribution of the rich and sleight of hand about the IQ evidence topped off by a failure to distinguish between income and wealth inequalities.

1. Johnson’s whole argument is framed  in a familiar way by the assertion that our country and individuals within it are all engaged in ceaseless, striving competition:

  “Like it or not, the free market economy is the only show in town. Britain is competing in an increasingly impatient and globalised economy, in which the completion is getting ever stiffer. No one can ignore the harshness of that competition, or the inequality it inevitably accentuates; and I am afraid that violent centrifuge is operating on human beings who are already very far from equal in raw ability, if not spiritual worth.”

This is really a quite peculiar perception which hardly fits the facts. The balance between internationally exposed and sheltered activities in Britain has been decisively changed by the competitive failure of British tradeable goods. Real manufacturing output has not increased in the past forty years and manufacturing now accounts for no more than 11% of GDP; our export success is narrowly concentrated in financial services from London finance whose activity brings public risks as well as private rewards.

Johnson’s argument completely ignores the sheltered “foundational economy” of private and public organisations producing everyday goods and services. Pipe and cable utilities, transport infrastructure, food processing, supermarkets, health, education and welfare altogether now employ 40% or more of the workforce. In these sectors, pay relativities and minimum wages are not determined by competition from Guangdong Province but are a result of social choices intersecting with business models

2. Johnson tries to legitimise income inequality by making disputable claims about how “the rich” contribute to society through paying taxes.

“ When Margaret Thatcher came to power in 1979 they ( the rich) faced a top marginal rate of 98% and the top 1% of earners contributed 11% of the government’s total revenues from income tax. Today, when taxes have been cut substantially, the top 1% contributes almost 30% of income tax, and indeed the top 0.1%- just 29,000 people- contribute fully 14% of all taxation. That is an awful lot of schools and roads and hospitals paid for by the super rich”

We‘re fairly sure the 30% figure exaggerates the contribution of the rich. A quick google  search highlights a BBC story from 2009 which suggests that the figure is below a quarter for the top 1%. The 30% figure does not come from any kind of academic source since but seems to have been put into circulation by a stockbroking firm Oriel Securities which explicitly says it is doing “non independent research which constitutes marketing communications “

And the 30% of taxes claim represents the same sleight of hand as in the old trade narrative about London finance’s contribution which we dissected in our Alternative Banking Report of 2009. London finance highlighted its 30% contribution to corporation tax and ignored the fact that its contribution to all taxes paid was half as large and a sector like manufacturing paid more. So it is in this case where Boris Johnson highlights share of income tax without discussing the broader picture. Mrs Thatcher did not reduce state expenditure’s share of GDP, but cut income tax rates and shifted the burden of taxation onto regressive consumption taxes. So the share of all taxes paid by the rich is much lower than 30% and it is the poor and middle income groups who are paying for their own schools and hospitals

3. Johnson’s category of “ the rich” conflates inequality of income and wealth; if we dis-aggregate the two groups, the relation between IQ and income is positive but the relation between IQ and wealth is almost certainly non existent

Here is a standard sociologist’s take on the correlation between IQ, income and wealth. 
There is a loosely positive correlation between IQ and income, but it is not immensely strong. That is because, for example, there are many examples of institutions which pay modest wages to high IQ individuals – public universities being one good example. But the more interesting finding is that the correlation between IQ and wealth is completely absent. And the obvious explanation for that is because wealth is inherited without conditions as to intelligence, diligence or anything else.

Inherited wealth is the big problem for the new social Darwinists like BoJo. Not least because the past 30 years of widening income inequality will be followed by congealed wealth inequalities because the rich cannot easily be prevented from having children who will often be dim scions. These inevitabilities would be best addressed by a system of death duties and inheritance tax which (unlike the present regime) could not easily be dodged by setting up a family trust.

The fundamental problem is always the economic and social reproduction of inequality. But that is always invisible in Johnson’s discourse.

Dyfal Donc and Stanley