Political Promise

Guilt is Good

In Uncategorized on October 21, 2010 at 7:00 am

Olly Cardinali parahrases Gordon Gekko with a 21st update on that iconic statement, arguing ways we can tackle poverty for good.

Antila, this is the name of the world’s first billion dollar house. Antila has been built for Indian’s richest man, Mukesh Ambani. I expect from the summit of the twenty seven story building are spectacular views of the city of Mumbai. Mr Ambani may even be able to see the Dharavi slum, made infamously familiar to most of us by ‘Slumdog Millionaire’, the Oscar winning film. Antila and Dharavi, with their locus only miles apart, are potent symbols of the global chasm in income inequality; a global problem with no simple solution.

‘The Spirit Level’, an excellent and influential study of income inequality among “rich countries”, argues powerfully with substantiation that income inequality is a root cause of most social ills, from mistrust and crime to physical and mental health problems. These social ills have increased since the 1970s, as income inequality has grown. The book’s authors, Richard Wilkinson and Kate Pickett, determined that Sweden and Japan are the most “successful” rich countries because of their low levels of income inequality. Both countries are socio-economic freaks, achieving rapid economic growth post-war. Sweden has achieved low income inequality through a vast redistributive welfare state, which Mr Wilkinson and Ms Pickett favour. Japan has achieved low income inequality without a large welfare state, but instead has done sothrough its private sector culture of generous salaries and provisions for the majority of the Japanese workforce. Both countries should be examples to the rest of the rich world.

However, Sweden has elected a centre-right government for two consecutive terms, pledging to scale back the Welfare State. Japan has its sixth Prime Minister in five years and having yet to be revived from a decade of economic slumber, requires deep private sector reform. Protests in Greece, France, Ireland and Spain are reacting to Western governments inflicting public sector cuts. Cuts, as we know, are the order of the day in the UK and will be in the USA next year if the resurgent Republicans get their way. It is clear that rich governments cannot afford to follow the (former) example of Sweden, through vast redistributive welfare states. Meanwhile no economy is keen to replicate Japan’s policies, considering the example it has set through sluggish growth in reaction to the Asian financial crisis of the late 1990s. So, as governments throughout the rich world are forced into public spending cuts, is the chasm in income inequality set to become irreversibly deeper?

Income inequality is often an issue held dearly by so-called ‘progressive’ politicians. Yet I find the term “progressive” pretentious; who exactly would call themselves anti-progress? Even Jean-Jacques Rousseau, who denounced commercial progress, thought that society has regressed since mans roots among the ‘state of nature’. To Rousseau, progress would be a return a society that is as similar to nature as possible. The definition of progress is subject to the individual. I digress… Many will condemn the comprehensive spending review as non-progressive and unfair (another problematic political term; who exactly dubs themselves as anti-fair?). There will be many reasonable criticisms to be made of Mr Osborne’s announcements, including that the spending cuts will likely exacerbate income inequality levels. Nevertheless, Britain had a self proclaimed “progressive” Labour government for twelve years, yet income inequality has increased about 10% since 1997. Between 1979 and 1990 income inequality rose an enormous 40%, proof of the flaws in the theory of ‘trickle-down economics’, but levels were within a 1-2% margin between 1990 and 1997. Low taxes are therefore not an answer to income inequality but “tax and spend” has not shown to be the solution either; not least because of the consequences for the National Debt, which, as we are witnessing, eventually causes public spending to be reined in.

The rich should pay an increased tax burden to everybody else, but the existence of Switzerland and fellow tax havens means it will almost always be the middle income earners who will be squeezed by taxes, not the super-rich. Tax and spend politics will not stop billion dollar houses being built overlooking slums. However hope lies in the example of the two men who sit in second and third place above Mukesh Ambani, owner of the billion dollar Antila, in the Forbes rich list: Bill Gates and Warren Buffet respectively. These American billionaires are practising philanthropy on an unprecedented scale, setting an example that fellow billionaires should give away 50% of their wealth. While cynics have automatically been dubious of their intentions, suggesting is a feel good way of tax dodging, I feel obliged to point out that there are less generous means of tax dodging!

Moreover, not only should the tax system promote philanthropy but society should continue to increase their pressure on the rich; society should expect those who can to bequeath significant shares of their fortunes. A government may tax the wealthy as much as it possibly can, yet tax will cause resentment among the wealthy; guilt on the other hand is far more effective. Social guilt is perhaps society’s best weapon in hoping to lower global income inequality and decreasing the many social ills that this inequality brings.

This is why I come to the CSR… no, not the comprehensive spending review again, the other CSR event, in Poland on October 20th. Yes, the Corporate Social Responsibility Marketplace hosted a Responsible Business Forum in Warsaw. The Forum has the aim of ‘disseminating corporate social responsibility throughout Europe’. You do not even need to know what the term ‘corporate social responsibility’ actually means to roll your eyes at it, it is commercial management jargon. Yet it is also reflective of a positive fashion in private sector; the notion that corporations and wealthy organisations should make an effort to benefit their local and global community, through environmental, social and charitable gestures. The reason it is growing as a fashion is because, firstly, the public sphere both encourages and is attracted to brands and firms that portray themselves to have a heart.

Secondly, it is because corporations can become as competitive in practising social responsibility as they can be in making money; at least when they think that the former can lead to the latter. One such example is ‘Fairtrade’, sweeping in a domino effect through commercial confectionary food and coffee chains for example. Even corporations can be guilt tripped into doing social good.

The great fight against income inequality will need action from the public sector with sensible taxation, from the private sector with socially responsible practises, from billionaires with a conscious or with PR sensitivity and most of all from society in general to encourage a surge in social guilt. We should not loathe the rich… but we should make them guilty for being so.

The same could be applied to politicians who cut public services. To paraphrase Gordon Gekko, the unforgettable protagonist of the ‘Wall Street’ films, “guilt is good”.

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