Thought for the Day: Debating Inequality

Wednesday, 28 January 2015, 10:30 am
Column: Keith Rankin

In the weekend I watched A Richer World, but for Whom? BBC's 'World Debate' from the 2015 World Economic Forum at Davos, Switzerland. Martin Sorrell and Klaus Kleinfeld represented the capitalist rich. On the fence were 'political economists' loosely defined (Mark Carney, Christine Lagardeand Robert Schiller), and the poor were advocated for by Oxfam's Winnie Byanyima.

It's quite normal for 'capitalist leaders' (by which I mean both business leaders and their political cheer-leaders) to interpret concern about inequality as attacking capitalism itself, and to therefore evade the key points about both inequality and sustainability. Yes, it's true that many people concerned about inequality do have a track record as critics of capitalism. I am not one of those good people; I try to maintain an academic detachment about the virtues and vices of capitalism. I just wish that these 'wealth creators' (even Winnie Byanyima said "of course they are creators of wealth") would be less defensive when being asked to address the issues of inequality and sustainability, both central to any proper debate about wealth.

The key cited virtue of capitalism is its power to create economic growth, and growth (by definition) does have the power to lift billions of people out of absolute poverty, the central points of both Sorrell and Kleinfeld. But at what cost? The kind of capitalism that I like factors in inequality (not the same thing as poverty) and unsustainability as systemic costs, and seeks to create economic wealth net of these costs.

A few centuries ago the two tribes of Rapa Nui (Easter Island) reputedly achieved rapid growth (in output of Moai) and achieved full employment in the process. Then the last tree was struck down, in order to transport the last Moai. So ended the Easter Island economic miracle.

There are less costly ways to address both inequality and poverty than the capitalist growth that we are familiar with. And wealth is a much more nebulous concept than its usage in this BBC programme conveyed.

ENDS

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Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

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