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La diseguaglianza non è solo un problema da poveri


The crisis overwhelming social work and Sir Fred Goodwin's $700,000 pension, symbol above any other of disproportionate City reward for failure, seem universes apart. But the world of business and finance is not hermetically sealed from our society. Values are commonly generated and commonly held. What happens in the City is linked by a golden thread to the grim case load of an overstretched social worker.
The connection is spelt out with stark clarity in Richard Wilkinson and Kate Pickett's remarkable new book The Spirit Level. Income inequality, they show beyond any doubt, is not just bad for those at the bottom but for everyone. More unequal societies are socially dysfunctional across the board. There is more teenage pregnancy, mental illness, higher prison populations, more murders, higher obesity and less numeracy and literacy in more unequal societies. Even the rich report more mental ill health and have lower life expectancies than their peers in less unequal societies.
Britain's growing social problems are indissolubly linked with the growth of income inequality, rising by some 40% over the last 35 years and remaining largely unchanged under New Labour despite initiatives such as the minimum wage and the earned income tax credit. The economy has changed increasingly to reward the skilled and the professionals. But the overwhelming cause has been the explosive growth of incomes at the top, of which the animating element above any other has been grotesquely high City bonuses which have become the benchmark for senior executives in business beyond. I have lost count of the number of HR directors of FTSE 100 companies who have told me now how the struggle to keep up with City pay infected their own remuneration structures.
And thus the golden thread. City bonuses have propelled income inequality which in turn has delivered more social dysfunctionality and increased social workers' case loads. The statistical causation is unarguable. What is harder is to explain why. Here Wilkinson and Pickett become more speculative.
The heart of their argument seems to be that human beings are social creatures for whom the esteem of others is central to our well-being. We have a deep inbuilt sense of fairness. In laboratory experiments, individuals do not try and scoop all the rewards; rather, they seek to share and collaborate.
I like Charles Kingsley's creations in The Water Babies, Mrs Doasyouwouldbedoneby and Mrs Bedonebyasyoudid, as personifications of human instincts for fairness. We want to behave fairly in the expectation that others will reciprocate and we want to punish those who cheat by doing to them what they did to us.
These are elemental human emotions, part of the stock in trade in being a member of society. Very unequal societies, however, make it harder for them to be expressed. It becomes more difficult to share, collaborate and behave fairly or to punish those who cheat through social sanctions. The rich see no point in earning the esteem of the less well-off; the less well-off see such an unbridgeable gap that there is no point in playing the social game. If the rich find esteem, it is destructive, narcissistic esteem conferred by having more possessions, argue Wilkinson and Pickett. Modesty and self-deprecation give way to extravagance and boasting. What counts is more for me now. Everybody becomes ruder and more violent.
The cumulative weight of the evidence makes the case hard to refute. The implications are profound. The overriding explanation for failing schools is not league tables, bad leadership or poor teaching ? it is inequality. It's similar for teenage pregnancy and rising prison populations and even the breakdown of manners.
But what the authors do not address is the troubling evidence from recent British Social Attitudes Surveys that while a clear majority do not like current levels of inequality, support for doing anything about it is falling, at least through the tax and benefit system. Rather than doing as we would be done by, the British have a keener-than-ever awareness of being cheated by benefit frauds and unjust claimants and are not minded to pay up for more redistribution.
This is the weakest part of the Wilkinson/Pickett thesis. Just by revealing the wealth of data that shows how we are all damaged by inequality, they think we should be shocked into a transformation of our attitudes. We should do capitalism more fairly and we should support every measure that can be devised to limit inequality. Until the current economic catastrophe, the appeal fell on largely deaf ears, especially those of our business and financial leaders, but the crisis is the opportunity to force a re-evaluation of a now exploded set of economic ideas.
One of the more startling comments last week came from Jack Welch, the former CEO of GE and author of the doctrine that the sole purpose of company managements was shareholder value maximisation and quarterly profits growth, who said that the whole idea was always dumb. First, it led to extravagant executive pay by hooking it ever more closely to share price performance. But more dangerously it led managements to neglect the real sources of company strength ? their employees, their innovativeness and their responsiveness to markets. Shareholder value maximisation, and the ideas around it (the bonus culture, the legitimacy of tax havens, the importance of light touch regulation), is at the heart of the economic crisis.
My fantasy is that Britain's business and financial leadership would share Welch's conversion. Instead, we have last week's remarks from the president of the CBI, Martin Broughton, dismissing G20 leaders' preoccupations about bonuses and tax havens as "red herrings".
They are not. Trust matters for business. Depositors are fleeing from distrusted banks and putting their cash in National Savings ? ?9.55bn in the last three months, more than double the level six months earlier.
Worse, banks don't trust each other. Everyone knows that banks have been run to enrich those at the top and that until there is a decisive intervention on how bankers are paid and taxed and how banks are regulated they are likely to stay as delinquent as ever.
This conversion that will not just make business more sustainable, but it will start to make our society less dysfunctional. Our business leaders don't need to become socialists. They just need to read The Water Babies, look around them and give a lead.
Copyright Guardian Newspapers Limited 2009