Embedded particularly in writings that generalize about the rise of ‘the welfare state’ is the idea that social policies emerged in the twentieth century to curb the rampant inequality produced by capitalism. This argument, it may be noted, is given currency as much in terms of the need to protect capitalism as in terms of the recognition of inequality as a social problem. Indeed, the role of social policy in the reinforcement of the status quo led socialist movements in the nineteenth and twentieth centuries to see reforms as distracting attention from the fight against capitalism. In that respect welfare provision may be seen as a means to ‘buy’ votes for the status quo in the context of universal democracy, a theme continued in scholarly presentations of the Marxist interpretation of social policy (O’Connor, 1973). Moreover, the strongest impetus towards the reduction in wealth inequality is shown to have occurred around the two world wars (Piketty, 2014).
Questions about social policy’s egalitarian goals have become particularly significant because of the evidence of increases in income and wealth inequality across the industrialized nations during the twentieth and early twenty-first centuries, often framed as a more combative question of whether this implies a failure of the so-called welfare state project (see discussions in Taylor-Gooby, 2013 and Gamble, 2016). Inasmuch as rising inequality embodies a fightback by economic elites against equalization, it implies a need to give attention to the structural factors determining achieved income before, as well as after, any direct state interventions with respect to taxes and benefits. It is here that a particular justification for a perspective on social policy that embraces much more than income-related interventions can be found. The weakening of redistributive action may need to be explained not merely in terms of policy ‘retrenchment’ but also by deindustrialization, globalization and demographic change. There are complex interactions here, which cannot be addressed satisfactorily in any analysis that separates issues about social policy from those about economic policy. These issues are explored further in the next two chapters.
Problems such as these have been highlighted especially by the advocates of ‘basic income’ or ‘citizens’ income’ schemes. Their arguments coalesce around a need to detach a concern with the relief of poverty from the labour market assumptions characteristic of social protection schemes established from the mid-twentieth century in advanced economies (see the discussion in Chapter 6). The rise of conditional cash transfer systems of social assistance as a means of poverty relief in low-income countries is indicative of how this policy problematic is emerging. In countries where administrative systems and formal labour markets are not so well established, the idea that income support may be made conditional on participation in other forms of welfare-related behaviour aiming to improve health and education outcomes and ultimately human capital development has been attractive to governments. But the arguments for resource transfers implicit in both these universal basic income and conditional cash transfer schemes cannot side-step the question of the relationship between those who pay their costs and those who receive their benefits, even though this division is in many ways artificial (Farnsworth and Irving, 2018a). The implicit ‘universalism’ (whether categorical, that is, based on membership of a particular social group, or not) has to rest upon some notion of deductions to support payments. In that sense the fundamental proposition of this chapter remains relevant: that social policy analysis needs to address the wider distribution of resources as a whole.
Finally, the recognition of intimate connections between social policy and inequality is given additional support from research that identifies the extent to which the most unequal societies have inherent problems even for those who are advantaged within them. That point is explicitly addressed in, for example, the work of Wilkinson and Pickett (2010), in which they show the relationship between, on the one hand, economic inequalities and health inequalities, and on the other, the relationship between the latter and other social problems. In summary, they argue that even the better off are disadvantaged (in terms of health and other problems) in unequal societies. Hence specific ameliorative interventions in societies (even the provision of universal health services) will be undermined where economic inequalities are not addressed.
Such a view has more recently found echoes in some unexpected places. Christine Lagarde, managing director of the IMF, for example, argued in a speech in May 2014 that rising income inequality was one of the ‘leading economic stories of our time’. After three decades where economic orthodoxy had embraced inequality as a motivating factor propelling growth, under Lagarde the IMF has been much more vocal on the negative consequences of inequality for economic development, for example in the October 2017 issue of its flagship publication Fiscal Monitor, entitled Tackling Inequality (IMF, 2017b). Other international organizations have also begun to publicly question the costs of inequality. The OECD has a Centre for Opportunity and Equality, and published an important report with a revealing subtitle, Why Less Inequality Benefits All, indicating the organization’s shift in thinking (OECD, 2015). After several years in development and negotiation (Deacon, 2013), the International Labour Organization (ILO) successfully adopted a universal Social Protection Floor in Recommendation (No. 202, 2012) and through Convention (No. 102, 1952). ‘Reduced Inequalities’ is also the tenth of the seventeen explicit SDGs adopted by the UN in 2015. With these issues in mind the next section goes on to address the evidence about inequality.
Inequality between and within nations
The two central topics for this discussion of inequality concern both inequality between nations and inequality within nations. There are various sources for data on incomes and wealth across the world,1 and the picture generated by these data sources is very predictable. With respect to wealth per head, Switzerland tops the list at $537,600, followed by Australia at $405,600 and the US at $388,600. The figure for the UK is $278,000 (Credit Suisse, 2018, p. 80). At the other end of the scale, wealth per head is below $5,000 in much of Africa and South Asia. Similar evidence emerges if the focus is on annual income rather than wealth. The term income refers to a flow of money across a specific period of time, while wealth refers to the holding of assets (including, for example, property) which may, or may not, contribute to that income. Of course, holdings of wealth affect inequalities, but it is important to be aware what sorts of data are being compared. Among the richer member states of the OECD, 2015 data on GDP (per head) range between $100,000 (Luxembourg) and $18,000 (Mexico), with the US at $56,000 and the UK at $41,000. The OECD average is $40,000. The figures for many countries are much lower, at less that $1,000 per head. Looking at the combination of between- and within-country inequality, Bourguignon summarizes that:
The gap between the standard of living of the richest 10% of the world and the poorest 10% was above 90 in 2008. In absolute values, the poorest 600 million have an average of $270 in disposable income per year, while the richest have a standard of living above $25,000. (2015, p. 22)
The best comparative measure for within-country inequality is the Gini coefficient, ‘a single-number summary index of inequality ranging from 0 to 100 per cent’, which converts a whole distribution to a single number (Atkinson, 2015, p. 17; see also there his further exploration of its use). Atkinson’s country comparison of coefficient scores shows inequality to be lowest in Sweden, Norway, Iceland and Denmark. A range of European and East Asian nations feature in the middle of his list, including Taiwan, Japan and South Korea. Higher inequality is found in the UK and the US, with scores comparable to that of Russia. The poorest OECD member country, Mexico, is also the most unequal in that group. Below Mexico in Atkinson’s list are various Latin American countries, China and South Africa. One obvious pattern, evident in Atkinson’s data, is that, as far as the richer nations are concerned, distinctions between countries have much in common with the ordering of ‘welfare regimes’ (discussed in Chapter 3). However, what is also significant are the high levels of inequality within many low-income countries, which is another factor in the recent adoption of ‘inclusive growth’ as a key element of policy discussion for international organizations. The precarious growth of a ‘middle class’ in African countries in particular (AfDB, 2011) has a direct impact on both median incomes and the shape of social