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INTERVIEW: Sir Tony Atkinson On Inequality
JP O'Malley , June 19th, 2015 16:21

JP O'Malley speaks to the economist Sir Tony Atkinson at Harvard University Press in London, to talk about why the current UK government is actually increasing inequality by slashing welfare, why a global tax might work more efficiently than a national tax rate, and why he remains optimistic that inequality can still be reduced in the coming years ahead

Inequality is one the most pressing social problems of our age. Curbed in the decades following the Second World War, it has recently returned with a vengeance. But what measures can be implemented to prevent it further?

According to the distinguished economist Sir Tony Atkinson, who has just published a new book entitled Inequality: What Can Be Done? we can actually do far more than the skeptics imagine. Atkinson has for decades now — alongside Noble Prize winners, such as Paul Krugman and Amartya Sen — been at the forefront of global research on inequality. The problem, he argues, is not just that the rich are getting richer, but that we are, as a society, failing to tackle poverty, and as a result, the economy is rapidly changing and leaving the majority of people behind.

Atkinson says that what we need are bigger and brighter ideas than simply taxing the wealthy to fund programmes of social development. Instead, he argues, we need to highlight radical proposals that require us to rethink fundamental aspects of modern society. And, that we need to cast off political ideas that have dominated recent decades. He recommends revelatory new policies in five areas: technology, employment, social security, capital and taxation.

More than just a programme for change, Atkinson's new book is a voice of hope and reason, full of informed optimism about how political action can make a better world possible.

Why have tax rates fallen so dramatically in the last few decades in the UK. For example, the top rate of tax in the UK before Margaret Thatcher got into office was 83 percent. And after the Second World War it was as high as 98 percent. How has the culture shifted so drastically in terms of how much tax the wealthy can avoid paying now?

Sir Tony Atkinson: It's changed because partially we have got better at taxing. At the time when it was very high there was huge loop holes. Capital Gains tax wasn't charged at all. So even though the tax rate was 98 percent, nobody actually paid that rate. But if you go back to the 1970s, the basic rate of tax then was 30 percent. It's now 20 percent. and that is really the key difference. We need to raise taxes by at least 5 percent just to keep the country running.

Why is Council Tax here in the UK so unfair?

TA: Well local governments in most countries operate on a level of an ability to pay. And the ability to pay is usually related to the value of the property. Council Tax in the UK is related to the value of the property. But the amount you pay goes down the more valuable your house is. What I suggest in my book is to charge a property tax in relation to the value of the property.

Do you believe a global tax on capital is a workable concept And how might they be achieved?

TA: Well I am somewhat skeptical about that.

Thomas Piketty talks about that in his book though, right?

TA: He does. I think we need to have some kind of international agreement to enforce it across the board. Piketty says the rate of wealth to income has gone up massively. On average nowadays people have eight times their income in wealth, whereas it used to be four times. A lot of that comes from property. So we ought to investigate this idea further.

I also suggest— perhaps more ambitious than Piketty— that we should have some sort of [voluntary global tax]which would be a tax that would essentially allow people to opt for a global tax regime, rather than a national tax regime. This would, in my opinion, be welcomed by many people whose tax affairs are highly complicated.

You argue in this book that in the UK during the 1980s there was a sharp rise in overall income inequality that coincided with a substantial cut in the level of social security benefits. Why do we always hear the argument constructed the other way around in the right-wing press? In terms of phrases like benefit tourism/scroungers and so forth.

TA: Semantically it's interesting: it's usually referred to as welfare, which is an American word. And this gets away from the fact that most of the time this started off as some kind of social insurance. But it's much closer to private insurance. Clearly when this was brought in it was seen as being about redistribution. But it was no doubt seen as a way providing security from the state in a way that private insurance companies couldn't give.

So first of all we need to change the language. We also we need to emphasise the contributory nature of these benefits.That's why I cannot understand why this present government keep talking as if people can just arrive here and get national insurance benefits. They can't. There are contribution conditions. And the government seem to have lost sight of that.

Many on the left after the recent UK general election will feel somewhat disheartened about the prospect of another Tory led government. You are not totally pessimistic about our economic future though: What gives you hope for optimism?

TA: One of the things I'm trying to stress is that this is about all levels of government. It's not just on a national level. So for example in the US, city governments are passing minimum wage laws. We are seeing the devolved governments in the UK—Scotland for example— who are more interested in this issue than the English government: And the EU is more interested in these issues. Things may be happening at European wide level which the UK be trying to opt out of. But it's not obvious that we can or should be trying to opt out.

And globally is there hope for optimism too?

TA: I think so. 30 years ago I wouldn't have believed we would now have millennium goals agreed to try and eradicate poverty. So we have moved on in that sense. Individuals and social organisations are now much more important. And we need to pay attention to that too.

What about Thomas Piketty's argument that we are going back to inequality not dissimilar to levels seen in the 19th century: would you disagree with that?

TA: Well we are in a very different world to the 19th century in all sorts of ways. The global divergence — when India and China were going backwards and the UK were getting richer— that's changed. This argument is a useful reference point and a good yardstick, but to say that the concentration of levels of wealth are now what they were in the 19th century is not quite true.

If inequality keeps getting worse here in the UK in the coming years, what should we expect in terms of the kind of society we are going to be living in?

TA: Well inequality cuts two ways. One of the things that drives campaigns for social media is because the current political framework is not representing people's views.

The current conversation about the Trans Atlantic Trade and Investment Partnership is taking place outside the democratic process. People are trying to get our European elected representatives to discuss it, but they are refusing to do so. And inequality allows people to control the media/ finance and politicians and so on. More inequality means it's harder to put forward more alternative views. The way the media behaved during the recent British general election campaign meant there was a restricted campaign: there wasn't any real substantial issues discussed. The more pessimistic and gloomy people are, the more pessimistic things will inevitably become. So these things partially feed on themselves. But I am very hopeful inequality can be reduced.

JP O'Malley is a freelance journalist based in London and will be interviewing Tony Atkinson in the Boogaloo pub in Highgate on Wed July 1st. Tickets can be bought here:

Inequality is out now, published by Harvard University Press