Daniel Hannan is wrong: we don’t need to be poorer to be more equal

Daniel Hannan has got it wrong (again). A poorer society is less likely to be a more equal society.

Daniel Hannan has got it wrong (again). A poorer society is less likely to be a more equal society

Tory MEP Daniel Hannan has a provocative piece in today’s Telegraph in which he argues, among other things, that a “poorer society will be more equal”:

“A poorer society will more be equal for the obvious reason that there are fewer assets to spread. That doesn’t make it equal in other ways: hunter-gatherer tribes often have huge gradations of status, including concubinage and hereditary slavery. But inequalities of physical wealth are a product of, well, wealth…In other words, as a result of Labour’s recession, egalitarians got their way. The materialism that they rail against declined.”

It’s an interesting piece. However one of Hannan’s fundamental assumptions is wrong: poorer societies are not necessarily more equal.

There is a proper debate to be had about whether inequality is good or bad for growth that was re-ignited recently by an IMF paper, which concluded that inequality did hurt growth prospects. The research found, however, that redistribution to address inequality was only negative in terms of growth when redistribution reached extreme levels.

That said, it’s not unreasonable to argue that inequality is neutral or positive for growth in certain circumstances.

But Hannan’s problem is this: his blanket statement that “a poorer society will be more equal for the obvious reason that there are fewer assets to spread” is just plain wrong. Richer countries tend to be more equal than poorer ones largely because, as Jonathan Portes has pointed out, as societies get richer they develop mechanisms to spread income and wealth that poorer societies lack.

Similarly when Hannan uses the example of the Second World War and the recent recession to support his case – i.e. to say that inequality fell sharply because people got poorer – he ignores the real reason that inequality decreased in those instances: society had put mechanisms in place to mitigate inequality – in the latter case things like tax credits, the benefits system and higher income taxes for the rich.

In other words, Daniel Hannan has got it wrong (again): a poorer society is less likely to be a more equal society (click the graphs to zoom).

Inequality graph 2j

Inequality graphj


11 Responses to “Daniel Hannan is wrong: we don’t need to be poorer to be more equal”

  1. treborc1

    I think I’ll get my bow and arrows out and my club and go gather a few women and then some rabbit stew.

  2. Frippertronics

    This word “redistribution” really has to stop. Income is something that is earned by people exchanging goods. It is not a big pile that we found somewhere and decide to “distribute”. When governments take away our money, they are not “redistributing” anything, they’re simply taking it away. If a thief steals my wallet, my money is not being “redistributed” from me to him. He’s just stealing it.

  3. Michael

    Hannan really isn’t that bright. Not entirely sure why left and right take so much notice.

  4. John

    Because other people also pay attention? We do give idiots a lot of airtime these days.

  5. John

    True, but your argument suggests that the use to which the government puts your money is no better than the theif; enriching only themselves.

    Taxes pay for a wide variety of things from welfare to defence. I doubt you’ll argue we don’t need these things and thus, taxes should be paid.

    In terms of ‘redistribute’ it’s wrong to simply say ‘we shouldn’t redistribute’ at all as there will ALWAYS be hypothetical situations in which redistribution (or whatever term you choose) is right. If you lost your arms I’m sure you’d appreciate wealth being redistrubuted from a healthy person to you since (I’m assuming) while able-bodies you also worked and contributed to society. Only fair they support you now you can’t, through no fault of your own.

    So what you want is for redistibution to change so money isn’t spent on things you don’t wany? (I’m asking; I don’t want to put words in your mouth)

  6. Frippertronics

    The thief might very well use the money for very worthy purposes such as feeding himself and his family, but that does not change the fact that there has been no distribution, just theft.
    Your argument is that because the government does good things with my money then taking it away is OK. There are two problems with this
    1 The government does plenty of bad things with my money such as fighting pointless wars in Afghanistan etc.
    2 The end does not justify the means. You wouldn’t approve it if a charity confiscated some of your money even though they’ll use it for good deeds.
    Using weasel words such as “redistribution” when it’s clear it’s no such thing only shows how baseless the moral case for forced taxation is.

  7. cleach

    Well said

  8. John

    1. Just beacuse bad things happen due to a deed doesn’t make the deed itself bad. If we follow your thinking to it’s logical conclusion the rule of law breaks down because sometimes justice miscarries.

    2. I didn’t argue the end DID justify the means. You are arguing in absolutes. Because someone takes your money they are a thief. Because thief is a negative moral word they are in the wrong. Yet, as you yourself pointed out sometimes they aren’t.

    That, in essence IS my argument. Redistribution is not ALWAYS wrong and while government can (and does) mismanage our taxes is NOT a reason to stop paying them. It IS a reason to become more politically engaged and make sure they KNOW that we do NOT appreciate their mismanagement of funds.

    And, out of curiosity, how is ‘redistribute’ being misused? They money is being taken from point A and put in point B. Seems a pretty clear cut use of the word to me. Like ‘power’, people hear synonyms of ‘redistribute’ rather than the word itself.

  9. Frank

    This author lacks any understanding of how societies get richer, which causes the article to fail.

    Societies & the world become richer through the division of labour and optimal allocation of scarce resources to the greatest demand. The only efficient system man has devised to divide labour and allocate resources is the price mechanism, and for the price mechanism to work you need a free market. The beauty of capitalism is that it takes mankind’s primordial selfishness and makes it a force of good for the rest of society. You succeed by serving other people, and by serving them better than other people do. This is what has made society richer. This is the reason glass windows in your house are accessible to all, rather than the preserve of the elite in society. This is the reason computers have gone from being 3 in the world and government only, to covering every desk in the country.

    Now in such a society those best at meeting demand accumulate wealth. The greater their success at serving other in society, the greater their wealth. It is their reward for risking their private capital, and in most cases it was their incentive. Like it or not human nature is not altruistic. But in their journey of accumulating wealth they are enriching all of us. Bill Gates is worth $77 billion, which I am sure many readers here think is ‘disgusting’. But please before you next think how unfair it is, pause, and think what we would lose if Bill Gates didnt have $77 billion but also the world didn’t have microsoft office and windows. Perhaps some may prefer such a world, but in that case you are confirming Hannan’s point that there would be greater equality, but we would all be poorer.

    Government interference in this may sometimes be necessary. To protect those unable to participate in the free market, to stop the free market working at its most profitable in order to protect the environment etc etc But whenever government does interfere, in material wealth terms, we do become poorer. Perhaps other benefits outweigh the material wealth we have forgone e.g. we have clean rivers but pay more for our cars as factories are not allowed to dump waste in them. Its a case by case basis. But we dont get rich through government intervention, we get poorer.

  10. Champagne Socialist

    We all know what happens to economies when its policymakers become obsessed with implementing equality………….

  11. Carl Marks

    I’m really not sure why you believe that only “wealthy countries” have the mechanisms to redistribute wealth…wealthy countries like Hong Kong and Singapore have nothing of the sort, yet are among the most prosperous economies in the world. Yes a big divide between rich and poor exists but to say that “wealth distributing policies” and “wealth creation” go hand in hand is not reflected in the world at all. In fact, it might even be oxymoronic

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