Neil Reynolds on Inequality

Another over the top tirade in today’s Globe from Neil Reynolds for whom “equality is the stuff of gulags and guillotines.” (Dion Gets it Wrong on Real Freedom. Globe and Mail. December 15.) 

 Mr Reynolds appears to be entirely unfamiliar with the best comparative empirical resarch on the topic, generally available from from the Luxemburg Income Survey (ww.lis.org)  which specializes in comparative studies of income distribution and poverty.

Entirely contrary t0 his argument, relative income equality is neither mathematically contradictory nor unattainable, Relative child povery rates in the Nordic countries (household income less than half of median) are half or less than the comparable  Canadian /US/ UK rates. There is absolutely no “mathematical” reason why relative poverty rates in Canada could not be cut substantially.

 Moreover,  Reynolds is simply empirically wrong to suggest thst the poor in rich countries are absolutely better off than the poor in more equal advanced industrial countries – a point detailed at empirical length in the LIS research papers by Lee Rainwater and others . The bottom 20% or so in Sweden are well ahead of the bottom 20% in the US,  in absolute as well as in relative terms (and even more so if we adjust for access to public and social services.) The social situation of the bottom 20% in the US is an affront to the values of a civilized society, rather than a salutary lesson that a rising tide lifts all boats. As Amartya Sen has detailed, mortality and morbidity rates in high equality developing world societies such as Kerala are superior to those of the US under-class.

Reynolds is empirically wrong to argue that there is no connection between equality of condition and equality of opportunity. Inter-generational income mobility – the key empirical indicator of real equalityof opportunity – is higher in Canada than in the US, and higher in most parts of social democratic Europe than in Canada. (See Corak’s studies for StatsCan.) Real opportunity of life-chances for children demands some degree of substantive equality between parents, and high inequality societies are also low opportunity societies.

Last but not least, Reynolds is at odd with his ideologicsal mentor, Adam Smith, who consistently argued for a relative rather than absolute definition of poverty. To be poor, he argued, was to be without the means of self-respect in a particular mular communityb at a particular point in time.

8 comments

  • Fine post. The widespread belief that there is a tradeoff between wealth and equality is one of the triumphs of the right, and we need to counter it whenever possible.

  • Reynolds stock column is an ode to market fundamentalism. His role in the newspaper is like that of a Tory MP: he occupies a place that would might otherwise by take by someone with somthing to say. When you think of his counterparts in the FT (Martin Wolf) or the NYT (Paul Krugman) providing Canadians with a writer of this quality is a sad commentary on the aspirations of the Globe and Mail to inform Canadians.

  • The general level of value added in business columns is quite low in Canada both in print and on the major networks.

    I woke up yesterday to hear Michael Hlinka on Metro Morning argue that the 30 million Xmas bonus to the top man over at Goldman Sachs was justified because he created value for shareholders and then Hlinka added the rather un-intelligible comment that he did not “mean to sound Marxist”. No joke.

    It is a good thing my mattress in the on floor…I did not have to far to fall. The logic was so poor I am still trying to imagine how Hlinka calculated the marginal product of investment bankers.

    The other great whopper was Andrew Coyne’s claim back in November that ‘corporations do not pay taxes, workers and consumers do.’ In fact the direct quote was that a “corporation never paid a dime’s worth of tax.”

    There seems to be a lot of crass shilling in the Canadian business press for inequality. Duncan is right at least over at FT they add some flare and innovation.

    Perhaps we should compile a list of 2006’s greatest shills for inequality in the Canadian business press.

  • So, Andrew Jackson is going to send this piece in letter form to the Globe to refute Reynolds claims, I take it?

    tb

  • What are your opinions on income redistribution in the form of the negative income tax? I know there seems to be an income effect associtated with it, but that could also hold true for welfare if one reduces the the welfare tax back. In 1974 the Conservative government in the UK was going to introduce a tax credit program that was available to all people in the UK. The credit, for ex. would be worth 6 pounds a week, and if you had 11 pounds a week of income, with a 30% tax, your benefit would be 6-(30%x11)=2.7 pounds. I think this is how the EITC works in the US.

  • http://canadianlabour.ca/index.php/Jobs__Economy/864

    Here’s the link to a short paper I did on this – I think working income supplements have a modes, supportive role to play in an nati poverty strategy but there are a lot of problems.

  • Please fix link to LIS. It should be http://www.lisproject.org/

    thanks

  • Mr. Jackson makes it sound like a bad thing that Neil Reynolds was and may still be a libertarian.

    Being against the status quo and the way that powerful elites use government force to become even more powerful and steal from the everyman, you would think that Mr. Jackson would welcome the contributions of anyone who challenges the right of some people to subjugate others through government.

    But alas, no, he would rather dream that he and his friends might get the levers of power instead in order to re-distribute wealth from the productive to the less productive.

    Too bad there are two problems with that: first, it is rare that his type can outmuscle the powerful elites and actually GET their hands on the power, and second, if and when they do, redistribution does not work for long as the productive will either find ways to ignore the laws or the disincentives will curb their productivity.

    The irony of it all is that what the powerful elites REALLY fear is a citizenry that is libertarian, that will assert their freedoms and refuse to be subjugated. They do not fear a loudy and boisterous government-worshipping left that only wants power for themselves, since they will almost never win.

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