Tony Atkinson, author of Inequality: What Can Be Done, talks about facing up to one of the defining problems of our time
Since the beginning of the Industrial Revolution, and especially since the beginning of the 20th century, humanity has built a world of previously unimaginable prosperity. At the turn of the century, the United Nations set forth the Millennium Development Goals, which included a push to halve the world population living in extreme poverty by 2015—the goal was achieved in 2008, in large part due to China’s growth. But meanwhile the problem of income inequality quietly grew into a staggering social program, becoming a source of tension in both developed and developing countries around the globe.
Tony Atkinson, Centennial Professor at the London School of Economics and author of Inequality: What Can Be Done?, has studied poverty and inequality for over four decades. He believes income inequality to be among the defining issues of our time, one that can only be solved through a concerted global effort. In this interview he discusses the roots of the problem, the challenges to solving it, and why he has hope.
Q. In the book you mentioned that for a long time inequality was ignored as a topic among economists. Why do you think that was the case, and why has it changed?
A. That’s a good question. I suppose in the immediate post-war period, we felt, certainly in the advanced countries, that a combination of full employment, and expanding welfare states, that we had dealt with the problems certainly at the bottom of the scale. And that we had progressive taxes that were narrowing the gap between the rich and the poor. And so for quite a long time, there was a feeling that the problems of the interwar period and so on were gone. So economists tended to focus on growth and adding development and so on, and that was certainly reasonable. But they didn’t realize that in fact we hadn’t [resolved] the problems. And so there was a rediscovery of poverty, with the war on poverty, by the John F. Kennedy and Lyndon Johnson regime, and in other countries, too.
Around 1980, a more conservative ideology took over, and Ronald Reagan got rid of most of the war on poverty in America, and we saw Margaret Thatcher cutting back on the welfare state, and I feel that economists of that time didn’t regard poverty as something they should bother about. Whereas classical economists thought that differences in income and wealth were important, but by the time they got to the 1970s and 80s, in most countries, it wasn’t part of the economic curriculum. When my working life started in the 60s it was a point of interest, and then it died away, and then as you say in recent years it has resurfaced. I think that’s partly because of course it has increased so much in many countries. So now [the issue] has come up from non-economists, from the general concern of politicians and the public, rather than academic professionals realizing it was something they ought to be looking at.
Q. Inequality is faced in many different kinds of countries. In China, of course, inequality has grown enormously since the Reform and Opening Up. Do you think there’s much of a qualitative difference between the inequality faced in the developed world, like the US and the UK, and the inequality faced in developing nations, like China?
A. This is indeed the same phenomenon. There’s no doubt that the effect of globalization means it is very different for China developing now than if it had been in the 50s or 60s. It’s now much more of a shared phenomenon, one that’s happening at the top of the scale… China is keenly aware of many of the issues that arise from the rural/urban differences and the extended engagement in the modern official/unofficial economy and so on. And it has taken steps to deal with that. But it’s a very different situation, I think, across certain key differences with China and India, or China and Brazil. I think the differences are probably greater there, and depend on the political decisions being taken, as well as the country context.
Q. Do you think that the developing world should address the problem in a different way than the developed world?
A. I think you can’t repeat history, necessarily. And I think one has to remember that of course the success, in terms of the western countries, has been largely due to the willingness to tax people…. [But we have] long-standing very well-off people in Brazil, or very recent, extremely rich people in China…. I think the problem of raising revenue to finance redistribution and public services is one of the serious problems that are faced by the rapidly developing countries.
Q. China’s GINI coefficient is among the highest in the world right now. At the beginning of Reform and Opening Up in the 1970s it became a national policy that it was acceptable for some people to grow rich faster than others, that inequality was part of the process. But at what point does this acceptable difference become too much? Where is the limit? And is that limit possible to see?
A. The first thing, what you say, of course, is that China has over 10, 15, 20 years, made remarkable progress in terms of reducing the number of people in extreme poverty. And I think that without the Chinese contribution we would not have met the millennium development goal of halving extreme poverty in the world. I think the first thing to say is that [it was] of course a success. But it brings with it the next questions, which is as the country [on the] whole becomes richer, that poverty line, $1.90 a day (the World Bank’s official international poverty line), ceases to be so relevant. And of course most countries move to some relative notion of people falling behind, and that’s when, for example, the emphasis on the bottom 40%, which the World Bank now has as their second goal, and that then raises questions about how much, say a substantial fraction of the Chinese population are not, while they aren’t worse off, but not sharing in the recent rapid growth. I think that’s the issue which will arrive, and that’s where it’s moving, in terms of a different benchmark.
Q. Do you think then that now the focus should be strictly on inequality of income in China, and not so much on stamping out poverty? Because even given the massive strides forward that China has made, the very bottom in China is much, much poorer than you would see in a developed country. So how do you balance the two?
A. Indeed, as you rightly say, it’s been a great success but there are still many, many people below $1.90 [a day], and that becomes harder and harder to deal with, in the sense that there tend to be more and more different groups of people less easily reached in various ways, and you have multi-geographic and ethnic and other various factors come in. So I think indeed it becomes a harder problem… you now have to, in fact, balance [the goals], and not let the gap widen too much… I didn’t think my book would sell well in the United States, but in fact it is getting a lot of coverage, and that’s because people are aware the bottom half has not seen any improvement in 20 or 30 years.
Q. Poverty is often thought of on a global scale. When you think “inequality,” you often think of a rich country and a poor country, the difference between living in the US or UK, and living in a more far-flung region of China, or living in a country in sub-Saharan Africa. But is that really how we address the problem in reality, as a global community? Or is it more individual countries fighting individual battles?
A. That’s a very interesting question. I think the world has become more globally conscious. In the sense not just of threats, but also more awareness of that we are in it together. There’s no doubt that the more thinking people, have [decided that issues like] climate change [are] not issues you can discuss other than by thinking about the planet as a whole. And I think to some extent that’s fed into other areas. I think the agreement on sustainable development goals, and people say they’re not too serious, but I think the fact that the world agreed to them is a very positive sign. Of course, what action there [may be] is another matter. But I think we are seeing, at both the governmental level and the private level, much more engagement. I think the difficulty is more knowing what it is that, for example, allows some countries to go faster than others, and what leads to some countries being better governed than others. It’s more a difficulty of solving the problems than it is for the world to engage.
Q. That’s a nice segue into my next question: how can a country like China, with such an opaque governmental system, work with other countries and organizations to alleviate inequality?
A. That’s beyond my expertise, but I don’t think that’s probably the barrier. Because again in some ways I think although it’s not been easy, we have seen some movement of greater understanding in terms of the climate change area, which is a change that’s remarkable. I understand that [China] has been making contributions which are very positive in many respects. So I’m not sure it’s that [aspect], although of course the unpredictability is an issue, but then of course how can you predict an American presidential election? The American system is very transparent, but not always easy to deal with. And I think if you were a neutral observer, you might think it would be easier to reach an agreement on climate change with China than with the United States. And certainly the European Union has been able to do many things which have transcended national disagreements. At the moment it isn’t a good time to say, but on the whole it has been very successful. For example, they have the Europe 2020 agenda, to among other things reduce poverty substantially, and that was agreed by all the member states. But I think that countries can differ a lot, and provided there is a forum for dialogue. And that I think is perhaps the most worrying aspect of the global development, the growth of more regional centers, perhaps undermining the global ones. The United Nations is weaker than global blocs.
Q. And how do you see that reality playing out in the next five to 10 years?
A. I think that very much remains to be seen. Some of the regional blocs become, or [institutions] like investment banks, become quite powerful [and] might undermine the global institutions, some of which are pretty slow to be on the move, like the United Nations Security Council. So I think that is a threat, and that of course may raise issues about competition between regional blocs, which we haven’t seen in a while. So, having lived through the Cold War, I wouldn’t like to see a repeat of that.
Q. On balance, all things considered, are you more optimistic about solving the inequality problem, or pessimistic?
A. Well, in the short term it’s hard to be optimistic, with all the difficulties there are in the world, and nationally. On the other hand, I’ve been very positively encouraged by the response to my book, and I’ve been speaking at events all around the UK and Europe…. A [lot] of young people have come to me really engaged in the discussion. …I’ve have had countless journalists from Korea and China ringing me up and asking me about it. I think there’s a lot of interest, which I wouldn’t have expected even two or three years ago… I think there’s a sense that people may not be willing to go very far, but nonetheless they feel it is something that they have to take seriously.