Unequal Inequality

Inequality is a big theme these days. Alister Heath writes to remind us that not all inequality is equal. 

Some inequality arises inevitably because of disparities of talent, opportunity, risk, etc. Heath focuses on the inequality that arises when people cozy up to power in order to use that power to their advantage. Some make a killing “by erecting barriers to entry to restrict competition, by providing them with cheap credit or by allowing them to use their political connections to grab contracts and other privileges.”

DC provides a prime example: “Incomes in the District of Columbia itself have done better than in any other US state in recent years: between 2000 and 2012, they surged an astonishing 23.3pc, according to the US Census Bureau, compared with a national slump in median household incomes of 6.6pc. The highest earners are often ex-Congressmen or ex-political staffers who have switched into lobbying.”

The effect is to put the squeeze on businesses that are not well-connected: “Higher minimum wages were originally welcomed by some large retailers because they knew they would hurt small rivals. Big companies find it easier to hire the compliance officers needed to deal with red tape; in finance, large banks are more easily able to afford the vast amounts of capital now required, freezing out challengers, and lawyers and accountants will have even more fun.”

Heath concludes that solutions to inequality that ignore the different sources of inequality will only make things worse. Politicized solutions will only exacerbate inequalities that were the result of politicization in the first place.