Partridge on income inequality

NZ Initiative Chair Rooger Partridge writes:

Since the publication of The Spirit Level in 2009, and its ‘devastating critique’, The Spirit Level Delusion, in 2010, debates in the media and among politicians have been gripped by wealth inequality fever. The latest instalment is French economist Thomas Piketty’s Capital in the Twenty-First Century – a book which is at the centre of its own maelstrom over the accuracy of its analysis.

But is inequality a worthy cause célèbre? All other things being equal, few people on either the left or right would disagree that less inequality is better than more. And any parent will know that equality will lead to a more civil, stable, state of affairs within the family – and this is no doubt also true for society as a whole. But the factors that drive inequality in economic outcomes in a free market economy also produce great benefits. China may now have greater extremes of wealth than it did before Deng Xiaoping’s reforms, but the Chinese live 25 years longer and are 50 times richer than they were 25 years ago.

Yep China is now a far more unequal country. Far better when everyone was poor and starving!

Focussing on inequality – and looking to redistributive policies to solve it – risks throwing the baby out with the bath water. We would not restrain our more talented child just to make her less successful, younger brother feel better, so why should we levy our most talented, productive citizens?

Indeed.

What is needed is a focus on the real problem: that not everyone in our society has the skills needed to take advantage of the opportunities that should be available to all. Among them are the 20 per cent of New Zealand’s school-leavers who, year after year, do not achieve NCEA level 2. It requires a suspension of belief to conclude they are failing because the rich are getter richer. The problem is more complex, but we will not solve it if we look in the wrong place.

The focus should be about equality of opportunity, not equality of outcome – the official policy of the Labour Party.