At the end of 2014: a glimmer of hope for 2015?

If 2014 had a dominant issue, it would have to be immigration.

Anti-immigrant feeling is on the rise across the rich nations, with some countries such as Britain, France and Sweden seeing brutally xenophobic parties of the far right advancing threateningly. Indeed, such views are affecting, or perhaps I should say infecting, the entire political establishment: the British government has even announced it no longer intends to help finance rescue missions for migrants left to drown in the Mediterranean. It seems a death sentence is a fitting punishment for people attempting to reach Europe illegally.

Citizens of a Christian nation show their compassion

Much of the hostility comes from significant sectors of the working poor, traditionally the natural supporters of the Left, so it too feels pressured to make concessions to views it should be resisting.

While there’s no excuse for it, the spread of xenophobia among the poor isn’t hard to understand. Men and women in unskilled work are on pay that barely allows them to survive. The alternative of eating or heating is starkly posed to many families, especially to the 622,000 (according to the most recent UK government figures) on zero-hour contracts, technically in employment but with no guarantee of either work or pay. It’s no surprise that Britain’s Trussell Trust, which was feeding 30,000 people at food banks in 2007, is now feeding a million.

Life for the poor is even more precarious because, in economies struggling to recover from the 2008 shock, redundancy is an ever-present threat. So yawning before them is the black hole of unemployment, an increasingly desperate state as benefits are reduced in the name of austerity, or withheld as increasingly stringent conditions of entitlement are imposed.

In these circumstances, it’s easy to believe that immigrants in unskilled work are taking jobs which might otherwise have gone to native-born unemployed. Many of these immigrants accept lower wages, so there’s the sense that they are undercutting applicants from within the country. When skilled jobs, for instance in healthcare, go to immigrants, that too can be seen as denying opportunities locally.

So it’s easy for the far right to whip up bitterness against immigrants. And yet it isn’t immigrants who introduced zero-hour contracts, but employers wanting to cut payroll costs. Nor do immigrants demand lower wages, they merely accept them as preferable to the conditions they’ve left behind. Nor, finally, is it immigrants who are keeping locals out of skilled work, but short-sighted economic policies that deny training opportunities to our young people.

The attraction of making immigration the issue is that immigrants are generally easily identifiable, whereas the corporate or political figures responsible for the real problems prefer to say out of sight. Immigrants become an easy scapegoat for all our ills, easy to fear, easy to hate. Parties based on humanity’s baser instincts, like UKIP in Britain or the Front National in France, rise on those feelings.

So it was refreshing, in this toxic atmosphere, to sense a glimmer of optimism at the end of the year. At the beginning of December, the OECD, the club of the most prosperous nations, published a study which, first, confirmed the blindingly obvious, that inequality is increasing, but then went on to assert a truth which badly needed stating: far from encouraging growth, inequality holds it back.

Estimated consequence of changes in inequality (1985-2005)
on subsequent cumulative growth (1990-2010) 

This is dynamite.

Firstly, it gives the lie to the Reagan-Thatcher sacred cow of trickle-down economics: let the rich grow richer, and their wealth will flow downwards to enrich the poor in turn. It turns out that enriching the rich just makes the rich richer. The only surprise is that anyone’s surprised.

Secondly, it shows that inequality doesn’t even encourage economic growth. Many once believed that it was better to have unjust distribution of a bigger cake, but the OECD shows that unjust distribution itself slows the growth of the whole cake. Increasing inequality between 1985 and 2005 held growth back by 8.5% on average across the OECD between 1990 and 2010.

It seems that fairness isn’t just morally preferable, it’s more economically efficient.

So, if all but a tiny minority of us are feeling poorer, it’s because we’re becoming poorer. The zero-hour contracts, the downward pressure on benefits, the cuts in public services aren’t about fixing the economy. They’re the necessary price of growing inequality, where the wealthiest 1% or even 0.1% prosper, but the least well off 40% see nothing grow but their suffering.

These are key notions, and all the more so since they’re being voiced in the wake of one of the more important publishing events of recent years: Thomas Piketty’s Capital in the 21st century. He shows, with real data to support his argument, that inequality is growing ineluctably. What’s more, while in the twentieth century there was a reduction in inequality in income, that trend is recent and by no means guaranteed. Nor has there been any corresponding reduction of inequality in wealth:

… the upper decile own 60 percent of Europe’s wealth and more than 70 percent in the United States. And the poorer half of the population are as poor today as they were in the past, with barely 5 percent of total wealth in 2010, just as in 1910.

Piketty’s central contention is that for as long as the rate of return on capital is higher than the rate of growth in the economy, the gap between the wealthiest in society and the poorest – note the depressing finding that half the people own less than 5% of the wealth – will continue to widen. And we now know this restricts overall growth.

Why do we allow this to happen? Because people with property of $100,000 or $200,000 think of themselves as on the brink of wealth, and believe their interests lie with the very wealthiest, those whose property is measured in the millions. They support measures to shore up inequality because they believe they may in time benefit from them.

Meanwhile the poorest, apparently impotent to change anything, with no voice in politics, look for an easy target. Blaming immigrants is a convenient way to explain their difficulties, and they rally behind UKIP or the Front National or their ilk.

But Piketty and the OECD, joined even by the IMF, have highlighted the real cause of their problems: inequality.

That’s what gives me some encouragement at the end of 2014. The terms of debate are beginning to change, at least at top levels of economic thought. Perhaps we can encourage some trickle-down in ideas, even if it has failed in finance. If the parties of the Left can find the courage to reject facile immigrant-bashing, and to challenge the failed economic wisdom of the Reagan-Thatcher legacy, then they may mobilise support for progressive change. Towards greater justice, and towards greater efficiency at the same time.

It wouldn’t be a moment too soon.

Happy 2015. I hope.

Dumbing down the electorate? According to the OECD, there's no need

Now here’s an interesting insight into our societies.

England and Northern Ireland (Scotland and Wales decided, perhaps wisely, not to take part in this study) are 14th out of 24 countries rated for literacy by the OECD. The United States is 17th.

On numeracy, England and Northern Ireland are 18th, the United States 22nd.

I particularly liked one of the test questions, in which respondents were asked whether the following sentence makes sense or not: ‘a person who is twenty years old is older than a person who is thirty years old.’ 

I think that tests a key skill: the aptitude that allows us to understand that the taxation system in the UK and US favours the poor over the rich, or the concept that in England we’re all in this struggle against financial crisis together, all being called on to sacrifice in the same way and to the same extent.

Interestingly, the OECD does lots of studies. Another shows that once you take taxation into account, the UK is 28th out of 34 countries when it comes to income equality, and the US a near-championship level 31st. The populations can barely read or count, but boy are they good at getting themselves ripped off by the guys with their hands in the till.

And the best news of all? This is all going to get even more intense. Among 16 to 24 year olds, England and Northern Ireland outperform the United States on literacy, coming 22nd out of 24 and leaving the US trailing behind at 19th; but on numeracy, young Americans notch up the perfect score, a straight bottom, 24th out of 24 where England and Northern Ireland can only get to 21st – honourably into the 20s but hardly comparable to the US.

That means that, without undue optimism, we can expect our electorates to get still dumber, especially in the US. With such levels of numeracy among the young, there are good grounds for hope that the Tea Party will be able to go on persuading voters that it’s a fine thing to lay off half a million people without pay, that this won’t have a knock-on effect when those people start defaulting on their obligations, and that still more to the point, there’ll be no consequences when the country defaults on its debts too.

John Boehner looking impressive.
The OECD's finding explain why he impresses so many

With a younger generation boasting such enviable levels of skill, there’ll be no difficulty getting people to accept that it’s perfectly reasonable to pass legislation, get it cleared by the supreme court and endorsed in a presidential election, and then refuse to fund government until it withdraws it. I think that’s called demanding with menaces, but the literacy results suggest that enough people won’t be able to read or understand either word.

We should be deeply grateful to the OECD for providing the hard evidence for why it is that, though the US is playing on the financial brink, and Britain’s anaemic recovery is benefiting only a tiny minority of the population,  the American Tea Party and British ConDems still enjoy otherwise inexplicably strong poll positions.

‘Nobody ever went broke underestimating the intelligence of the American public,’ said H L Mencken. The OECD has shown us why he was right. And that the sentiment can be applied just as confidently in Britain. Or at any rate in England and Northern Ireland.