A countervailing force

Abstract

PHILOSOPHY OF TRADE UNIONRIGHTS□ EGALITARIANISM A countervailing force Thereis an important correlation internationally between countries withstronger tradeunion movements and greater equality RICHARD WILKINSON, Emeritus Professor of Social Epidemiology and author of The Spirit Level with Kate Pickett Income widened Robert Wade differences rapidly gave over an in illustration the many last countries few ofhow decades. large have Income widened rapidlyover the last few decades. Robert Wadegavean illustration ofhowlarge the changesin the distribution of incomehad beenintheUSA.Interviewed inthedocumentary TheFlaw, he said thatthe fallin the shareof incomegoingto the bottom90 percentof the populationrepresented an annual transfer of roughly one and a halftrillion dollarsto thetop one percent. He pointsout thatthistookplace "ina stabledemocracy withthegovernments that werepromoting thisupwardredistribution being re-elected timeand timeagain."How has this happenedand how can itbe putright? Changes in income distribution duringthe twentieth century have a similar pattern across manycountries. Incomedifferences werehighin the1920sbut,during the1930s,theydiminished dramatically. Inequalitythen remainedlow or continuedto diminish untilincomedifferences started to widenagainfrom sometime after the endofthe1970s.TheNobelPrizewinning economistPaul Krugman attributes thesechangesto 'polities'. He givesprideofplace forthenarrowingofincomedifferences in theUSAduring the 1930sto Roosevelt's NewDeal. Buteventhough FDR was the conduitforthesechangesin the USA,there weresimilar declinesin inequality in othercountries. The scale ofincomedifferences looks broadlyU-shaped duringthe twentieth centuryin many countries- the decline in inequality duringthe 1930s,followedby low inequality whichlastedthrough untilthe 1970s, onlyto be followedby risinginequality again from the1980sand/or 1990s. These changeswereofcoursepartofa much widerpattern ofprogressive socialand economicpolicy whichincluded thedevelopment ofwelfaresystems and of protective legislation coveringemployment , housingand consumerrights. Perhapsthemostimportant driver forthislong U-shapedpattern of inequality was thewaxing andthenthewaningofthefearand influence of socialism and communism. The greatdepression ofthe1930s(triggered bythefinancial collapse of 1929) was seen by manyas the collapse of capitalism whichMarxism had longpredicted. The growing influence of Communism, aided by the SovietUnion,the strength of the trade unionmovement and ofsocialist parties inmany Europeancountries, influenced social attitudes andpolicyon inequality from the1920sonwards. Withtheend ofWWIIcame a rapidincreasein thenumber of communist countries. Fromthen untilthe later1960s,estimates suggestedthat, regardless oftheother failings ofthesesocieties, their economiesweregrowing as fast, or faster, thantheeconomiesof themarket democracies. Norcouldthegrowing technical prowessofthe Soviet Union,demonstrated by the successful launchofSputnik in 1957,be ignored. The fear was of a system whichinitially seemedas ifit might be moreefficient. Onlyinthe1970sdidthe reputation foreconomicefficiency ofthecentrally planned economies become seriouslytarnished ,and notuntilthe1980swerethesesocietieswidelyseen as failing. Comparisons ofthehealth differences between Easternand WesternEurope seem to indicate some of theunderlying trends. Untilaboutthe end of the 1960s,lifeexpectancy improved at least as fastin Easternas in Western Europe. Several Eastern European countries hadbetter life expectancy thanWestern Europe.EastGermany, thoughpoorer,had better lifeexpectancy than WestGermany. But fromabout 1970 onwards, healthceased to improvethroughout Eastern Europe and the SovietUnion.It continuedto improve intheWest, andbytheendofthe1980s all WesternEuropeancountries had betterlife expectancythan all EasternEuropean ones. During the1980scommunism ceasedtobe a real threat totheWestandtheregimes inthesecountries finally collapsedin 1989-90. Asthethreat of communism diminished, incomedifferences in theWeststarted towidenagainandtowards the end of thetwentieth century inequality had, in manycases,returned tolevelsnotseensincethe 1920s. Ofcoursemanyanalyseshavetried to identify thecausesofchangesininequality - particularly thecausesofthewidening ofincomedifferences whichhas takenplace overthelast30 yearsor so. Mostoftheseanalyses haveconcerned themselveswithstatistical analyses restricted tofactors whichcan be measuredquantitatively and are therefore blindto the ideologicaland political factorswhich explain why so manydifferent components - changesintaxrates, weakening of tradeunionpower,thewaningof welfaresystems ,denationalisation, financial deregulation oftenmovedtogether , and whytherewere no effective countervailing redistributive policies. The evidencethatfearofcommunism exerted an important influence on incomedistribution in non-communist countries can also be foundin otherpartsof the world.A 1993 WorldBank reportentitledTheEast Asian Miracle , argued thatsimilar forceswere at workin whatwere thencalled'theAsianTigereconomies'- Japan, Republicof Korea, Taiwan, Singapore,Hong Kong,Thailand, Malaysiaand Indonesia.Under policieswhichcametobe called"shared growth" theyall reducedtheirincomeinequality during thedecadesfrom I960 to 1980.TheWorldBank authorssuggestthatthismove towardsgreater equalitywas drivenby governments in each country trying to gainpopularsupportto ward INTERNATIONAL union rights Page 24Volume 18Issue 4201 2 PHILOSOPHY OF TRADE UNIONRIGHTS□ EGALITARIANISM offthethreat from communism which,in many countries was onlytoo apparent. In terms ofinequality, itlooksas ifthefearof socialism andcommunism helpedmakecapitalist societiesverymuch more humane than they might otherwise havebeen.Butthat hasnotbeen theonlymotivation forredistributive policies.In bothworldwars,Britainbecame much more equal. In his essay War and Social Policy , Titmuss saysthatthegovernment believedthat "togainthecooperation of themasses"in the war effort "thesocial pyramid had to be flattened " so that peoplefelt that theburdenofwar was equallyshared.Notonlywere taxesmade muchmoreprogressive and incomedifferences narrowed, buttheBeveridge report, whichlaid out plansfora welfarestateto put an end to want,disease,ignorance, squalorand idleness, was publishedin one ofthedarkest periodsof thewarwhenyoumight otherwise haveexpected suchexpensesto be furthest from theminds ofpoliticians. Examplessuchas thesesuggest thatthemost powerful...