How do we tackle inequalities in society?

A couple of articles in the Independent touch on inequality and social mobility.

Hamish McRae is sceptical of the commission headed by Alan Milburn to look into working class access to the professions as a top down down solution.

    The problem with this political approach is that it is likely to fail. You can prise open a bit more access to say, the law, but you won’t have a material impact on society. If you start from the other end and look at inequality from an economic perspective rather than a political one, you are much more likely to open up real opportunities for people who have had a difficult start in life.

He focuses up the need to upskill the workforce to compete in a global market place.

    If people fail to get over the various qualification hurdles the first time, they need other opportunities to do so. I also suspect we could do with less of a credential culture – not to use qualifications as a barrier to entry to the extent we do now. We should not kid ourselves that up-skilling will solve income inequalities but it should stop them growing.

There seems to be a implicit conclusions underlying his argument; if we are competing in a global marketplace against people with much lower wages, and we need to upskill the workforce here to compete for more of those jobs, we will lower the wage rate for high skilled jobs. This will decrease inequality and raise lower incomes, but I suspect not in a way that would be appeal to many in the middle classes. Regardless, looking at some of the underlying causes of inequality rather simply demanding the government redistribute wealth or enforce top down solutions as a universal panacea. The downturn perhaps offers better scope for new ideas to “materially change society” than in more comfortable times.
Johann Hari rails against one of those underlying inequalities in the form of unpaid internships. He does this not on the grounds that working for no payment is inherently unfair but that it excludes those who cannot support themselves during the period, and in any case will favour those with the best connections — likely already well off.

    This is happening all over Britain’s professions. The wealthy writer (and self-confessed “pushy mum”) Rachel Johnson is admirably honest about it. She says: “The truth is getting a job depends almost entirely on getting work experience, which depends almost entirely on whom you or your family knows … This back-scratching cycle of privilege is the middle-class Circle of Life. So it’s all jolly unfair, frankly.” Who does this cheat? Johnson says: “All those students who support themselves through university, only to find out when they leave that the glittering prizes have already been handed out, at a ceremony they never knew was taking place, to the undergraduate with the best connections.”

As he points out, this is not simply unfair, but a waste of talent and productivity to the economy of as a whole. This seems to me, however, as a place where government policy could actually make a difference; Johann is supportive of Brown’s apprenticeship scheme but this could perhaps be tackled by either forcing degree courses to include substantial experience, or by extending student loans for an internship year. As a matte rof opportunity rather than outcome, there should be approaches available to both left and right.

  • Greenflag

    Kensei,

    ‘How do we tackle inequalities in society?’

    Short answer. We (as societies ) don’t really want to or can’t afford or would rather not . It’s uncomfortable for the ‘haves ‘ most of them anyway and yes also uncomfortable for some of the ‘have nots ‘ . Yes some politicians pontificate and the word ‘equality ‘ is much bandied about . The fact that this thread has received 1% of the replies of a thread on Israel & Gaza is an indication . Nevertheless you have set out a broad topic which should have generated ‘discussion’ . Will put a few thoughts together later today.

  • Kensei

    GF

    Hurrah. This thead feels like an orphan child even though I thought it more interesting than the other one I posted. I am going to try moving a little bit up to the top in the hope fo getting some more interst.

  • Greenflag

    A long historical view would tell us that ‘inequality ‘ has existed ever since man became bright enough to organise into groups of hunters and gatherers and began to increase in population from the time of the neolithic agricultural revolution and the idea of an hierarchical society took root . Small hunter gatherer clans were more ‘egalitarian ‘ in that a great degree of interdependence between each of the members was crucial to survival .

    By feudal times society was rigidly hierarchical with the social and economic pyramid from serf or villien to King and Pope clearly laid out . But even rigidly hierarchical societies are not immune from ‘natural ‘ events . When the Black Death swept through Europe and removed a third or more of the population there was an ‘unjamming ‘ of inequality at least in the sense that many of those at the bottom of the pyramid found that just by surviving the plague they could now earn more and some broke free of the ties that bound .

    As the aristocratic order broke down and ‘democracy ‘ raised it’s head in France , the USA and eventually Britain there was another major upheaval among the social classes with the formation of a more numerous middle and lower middle class and the industrial urban working class.

    I understand that all the above is known to you and others already but I think it’s essential to understand the background so as to put in context the huge economic upheaval of the industrial revolution in the west and it’s still remaining social consequences in these days even if that ‘industrial revolution ‘ is now passe or has moved offshore .

    I tend to agree with Hamish McRae re the chances of any ‘commission’ no matter how well meaning making any significant impa ct -least of all in tough financial times . There was at least we are told a dramatic increase in ‘social’ and economic mobility following WW2 and Aneuran Bevans welfare state and educational reforms . But it would appear from some of the numbers quoted that despite Thatcher’s revolution and Labour’s terms in office that ‘mobility ‘ has scarcely changed in the UK this past generation ?

    It’s only ‘natural ‘ that those who have want to hold on to that which they have (this includes also the ‘risen ‘ of the former non elites ) . Education ( university ) has been seen as the path to the ‘top’ with Oxford or Cambridge preferred . Family influence and wealth and position naturally give the children of the elite an easier path to the top . This in Ireland (Republic ) was and is called ‘pull ‘ . Two generations ago if a bright kid wanted to be a mason it did’nt matter if he had all the will or talent or skill to be one -if his father was not a mason then he could’nt be one . We know how Belfast ship workers and tradesmen kept the ‘jobs’ in the family . We see now how many of the children or grandchildren of those tradesmen are now adrift -cut loose from their former certain moorings as indeed is the case among many of today’s white collar lower and middle classes who see their ‘jobs’ disappearing under the twin effect of outsourcing to the East and through technological advances which minimize staff numbers . The ‘padding ‘ of the public sector and indeed the overrepresentation of politicians on this island is an acknowledgement that the ‘elite ‘ here as in England don’t have any major change ‘ideas’ to decreasing inequality in society other than ‘educational ‘ access ?

    to be continued

  • Kensei

    GF

    Thatcher’s reforms were in general detrimentral to equality in that destroyed a lot of blue collar jobs. But in some other ways they opened up things — the City became much more focuesed on merit, for example.

    Inequality has grown for the past few generations becuase bluntly, no one has cared. Rising tides were lifting all boats, or at leats enough that it was easy to ignore the top boats rising much faster. As things unwind, we are going to start seeing the consequences of that. Hamish states:

    But there are costs to society from this. If high earners earn less, tax revenues will plunge, putting more of the burden on to middle earners. That is already happening.

    But he seems to miss the point that the reliance on top earners is a direct result of focusing growth on them – it’s a failure of current policy.

    It’s only ‘natural ‘ that those who have want to hold on to that which they have (this includes also the ‘risen ‘ of the former non elites ) . Education ( university ) has been seen as the path to the ‘top’ with Oxford or Cambridge preferred . Family influence and wealth and position naturally give the children of the elite an easier path to the top . This in Ireland (Republic ) was and is called ‘pull ‘ .

    We’ll never completely close off that. but the Government can certainly look at setting up mechanisms that will help people increase their available opportunities, as I pointed out in the second example.

    the question is, what can be done to increase the opportunities people have available, and to open their circle. To an extent, this is of a piece with my earlier thread on Gladwell’s “Outliers”:
    http://sluggerotoole.com/index.php/weblog/outliers-and-the-eleven-plus/

  • Greenflag

    In feudal times there was no belief in ‘equality’ or even in reducing ‘inequality’ The very idea would have been seen as ‘heretical ‘ and against the good order of God’s creation. Belief in a form of equality began with Magna Carta and has progressed through the ages with setbacks here and there to the present day .Humanity went through many revolutions , wars , uprisings etc etc to get to where we are today which is that whereas Americans can state in their constitution that all men are created ‘equal ‘ this applies only and probably not even then at the moment of birth . Once in the world it matters very much whether your father’s name is Rothschild or Garcia etc .

    In feudal times ‘society’ was held together by the fear of God and the rigid social structure . There was a ‘social ‘ and economic contract between the haves and have nots . There were fixed obligations . The Church also supported the structure by it’s imposition of a greater order than that of ‘man ‘ i.e God’s law .

    In modern society at least since the Industrial Revolution in the West the growth of the middle and lower middles classes there has been an ‘increase ‘ in expectations everywhere . These expectations of a better life in the future have been ‘promulgated ‘ by political movements from laissez faire raw capitalism to national socialism -fascism and communism not excluding the past 25 years of neo conservative ‘economic’ darwinism in the USA and the lingering attempts at whats called social democracy in parts of Europe .

    Everywhere in all countries there has been ‘resistance’ to demands for more equality or should that be less inequality by the ‘conservative ‘ elements i.e the ‘haves’ in society . It is no different now than it was in 1800 when William Pitt the younger wanted to bring in reform by allowing British and Irish Catholics access to State offices and the vote . KIng George 111 disagreed and Pitt resigned . Thirty years later the change came anyway . In Russia the success of the ‘conservative ‘ elements in keeping down the ‘peasants ‘ led of course to Communist revolution . The economic emisseration of the German lower middle classes gave Hitler his opportunity . The widespread mobilisation within British society in WW2 and the great sacrifices made by the ordinary British people during the war led to a situation which would not tolerate a return to the 1920 ‘s in terms at least of access to decent housing , education , health etc .

    Thus from the above we can see that there is an inbuilt tendency towards greater ‘equality ‘ which seems to go along with democratisation and higher living and educational /health standards for more and more of the population .

    Will this continue or has it reached a zenith at least in the west ?

  • Ulsters my homeland

    ‘How do we tackle inequalities in society?’

    blame the Prods, it always works.

  • Greenflag

    Sorry Kensei we crossed there with my add on.

    to contine my ‘muddlling’ through here for the moment .

    As I’ve said in earlier threads progress is not guaranteed and very often Governments don’t set the agenda but are seemingly powerless to do much more than clean up after the economic or political whirlwind has passed through . Much of what appeared to be progress during the Thatcher years is now seen to have been achieved at a huge societal cost and yet we know that ‘Thatcherism ‘ was itself a response to what were seen even then as developing economic trends worldwide which were going to do to Britain eventually what Mrs Thatcher expedited .

    It seems to me that we (UK/USA/Ireland ) and most of the developed world are in for round 2 of the Thatcher years although I’m not yet clear on whether it will be less or more disruptive to society generally. The advent of the Democrats to power in the USA may be a mitigating factor over the next 4 years anyway.

    more anon

  • Greenflag

    ‘what can be done to increase the opportunities people have available, and to open their circle.’

    This of course is the practical issue and the one which ought to but rarely exercises the minds of the ‘haves ‘ even those of the leftist ‘haves ‘ persuasion . The rightist ‘haves’ take as a given that anybody can become anything if they really want to and have the get up and go etc etc . A lifetime of observation of peoples working in various cultures from Third World to First to Communist -capitalist transition has left me no ‘ideological ‘ or ‘cultural ‘ or ‘religious ‘ answers to reducing ‘inequality’ other than increasing access to opportunity for all and steady economic growth with income differentials not so extreme as they have become . The latter has of course only become possible due to the huge worldwide span of major corporations since the 1980’s and the enormous productivity increases in the wake of technological advances .

    When JFK said that life was’nt fair he was stating what most of us believe . This of course does not mean that outcomes are all just a matter of luck and happenstance and family connections . We know of too many ( although in total they may be just a small fraction of any population) who break through income , class and social barriers. Mrs Thatcher was IIRC the grocer’s daughter from Grantham. ? Ted Heath , Harold Wilson, Bertie Ahern , Ian Paisley all climbed from family obscurity to lead their countries /province.

    But there is from all of this I believe an understanding or a sense that most of us know when perceived ‘unfairness ‘ becomes no longer socially or economically or politically tolerable.
    Recent scientific research carried out on our primate cousins shows that even they possess a sense of ‘fairness’ . Somehow we (or those of us who at least are non sociopathic or psychopathic) instinctively know when the ‘unfair ‘ bridge has been crossed .

    We see this in present day attack on Gaza – It was seen in the 1960’s in the USA with the Civil Rights marches – in South Africa -in Northern Ireland in the late 1960’s and elsewhere around the world. We see it today in the ‘rage ‘ which many Americans are expressing at the financial sector ‘thieves ‘ and the politicians who have abused the trust of the people .

    I haven’t read Gladwell’s outliers (yet ) so I feel uneasy about commenting directly. I have come to the belief particularly in recent years that a third level ‘education ‘ as the sole path to ‘economic ‘and social ‘ success is not enough per se and is more a political placebo than anything else . In any event the number of solicitors , army officers , medical doctors etc that any society can produce and pay for is limited . In the 19th century and well into the 20th century a ‘professional degree ‘ in Ireland gave one a 40% chance of emigration to pursue one’s chosen profession . There simply was’nt a big enough economy to support the number of graduates the country produced .

    As to your point
    ‘What can government practically do to increase opportunities ? ‘

    As Government is generally (in the widest sense ) made up of those elements who are already entrenched I would not expect too many apples as they would not wish to see their own families toppled from the cart ?

    Sorry if that sounds too cynical -It ‘s not meant to be . While I’m an advocate for Govt intervention in health care and education – government is at the mercy of the economy directly in order to finance it’s activities and as we know the ‘economy’ is in the hands of the well entrenched .

    Instead of focusing on everybody going to ‘college’ I’d prefer to see more effort and money going into education , training and higher incomes for those who neither have the inclination nor desire to spend several years at university studying some arcane subject which may make interesting dinner table conversation but which is practically worthless in the ‘real ‘ world .

    Sorry for the length -In rereading it’s a bit muddled I’m afraid but my gut tells me that inequality is built into the human condition but like unfairness can be legislated against at least up to a point where neither becomes politically disruptive or destructive .
    In terms of the present economy and worldwide investment trends etc it’s difficult to see if any government anywhere will or can have much of an impact in this area in the short term anyway imo.

  • GF

    The things is, with manufacturing in real decline across the Western world, employment of is broadly in 3 categories.

    1. Professional / Graduate
    2. Trades
    3. Service

    There is probably some mileage in encouraging more people into the trades, but that avenue has been somewhat curtailed by the downturn and collapse in construction. The service industry has jobs of questionable value, though perhaps something could looked at in improving conditions here – they are hard to outsource after all. Which just leaves jobs requiring tertiary education as the big potential driver of growth. And we are in competition with elsewhere, so we need more graduates to get those jobs.

    There are also entrepreneurs. But they are naturally a small part of an economy, and the successful percentage even less even if the government is doing a lot to help them. And it is likely that a good percentage of them will need people with a third level education to get businesses going.

    So it is probably the right way to go. But it needs done right. Without disparaging any degree, there is no point having 50 Media Studies graduates when you need one Maths graduate. Or lowering standards to claim the result you wantr. And so on.

  • Clady cowboy

    The forced sale of Jersey’s banks to the state, emptying of said banks ina tax reclaimation swoop and closing of tax loopholes would probably inject tens of billions into the economy. Use this to lower taxes from the bottom up.

    Oh, to address Hari’s actual point, a little gumption on behalf of HR depts that interim posts at prestigious companies just means interns learned how to make good coffee all day long and should be no more hireable than others without ‘work experience’ but merely working experience.

  • Ri Na Deise

    ‘How do we tackle inequalities in society?’

    By ignoring them and hoping for the best.

  • eranu

    are there inequalities in society these days? or is alot of it just jealousy from lazy people who want what others have, but are too lazy to put in the hard work to get it? i dont consider myself any different from a self made millionaire. its just that they have worked hard, been lucky and made alot of money for themselves.
    education being so important these days we could nip any potential for an unequal start in life in the bud. we could create a system where rich or poor kids have the chance to study hard and through their own effort get the best education they could possibly get regardless of the money their family has. we could call the system grammar schools.

  • kensei

    eranu

    are there inequalities in society these days?

    Yes.

    or is alot of it just jealousy from lazy people who want what others have, but are too lazy to put in the hard work to get it?

    No.

    i dont consider myself any different from a self made millionaire. its just that they have worked hard, been lucky and made alot of money for themselves.

    Delighted for you. Perhaps that “self made millionaire” got a lot of life chances you didn’t know about. Perhaps he’s not self made, but made a mint selling securities in the City that went bad. Perhaps he’s a CEO that has bounced from job to job picking up golden parachutes along the way without really doing much. And so on.

  • eranu

    kensei, what are the specific inequalities we currently have in society then? i have a feeling that when specifics are discussed we would find that some people have made better decisions earlier in life as regards education and picking a career and trying harder to succeed. then when they get to be a CEO, or any well paid job, they’ve got there from their own efforts. people not doing a job properly or being greedy isnt inequality as i see it. if we all have a similar chance or opportunity to work to get a well paid job ,then we have equality.

  • Dewi

    On an absolutely basic intellectual point why should lazy people be less well off than driven people – It’s not their fault.

  • eranu

    dewi, is that a joke? i hope so!!!

  • kensei

    eranu

    If you are not goign to read the articles in question, then I don’t se why I should debate with you. Typically we we refer to inequality, we refer to differences in income (as opposed to wealth) which has been growing massively ove the course of the past few generations. Did CEOs in previous years work less hard and therefore less justify higher salaries.

    There are roughly two ways to account for income differences

    1. Differences in ability
    2. Differences in bargaining power

    Clearly differences in ability matter. But they are not the only thing that matters and only a fool would arguwe its the case.

    Second, even if it was soley down to differences in ability, if large gaps in inequality was economically and socially destructive, we’d still have to do something about it.

    if we all have a similar chance or opportunity to work to get a well paid job ,then we have equality.

    And finally – not everyone gets the same chances.

  • eranu

    fair enough if its not about specifics. i certainly agree that ability is not the only thing that matters, just mentioning that aspect.

    arent the large salarys to do with there being more money (or used to be) in the system these days?
    whats the difference between an MLA giving their cousin a job as their secretary, and a super rich person giving their cousin a job on the board of their company?
    i wonder is the big gap between the top earners and the bottom earners really that big a deal? does it do anything in our everyday lives? the mountain to climb might take longer to reach the top, but it can still be climbed.

    just a few thoughts. im out of free time in work, so have to go.

  • Mack

    Kensei

    You are asking the wrong question(s). Should you not be asking

    1. How do you raise living standards for all?
    2. How do you ensure consistency of access to public services for all?

    If society protects individual property rights – then the wealthy are always going to have an advantage. As capitalism requires strong protection for an individuals property rights – Capitalist society is therefore always going to be unequal.

    If the school system is crap – the rich can pay for extra tuition.

    Capitalism, is however much better at fostering innovation that drives living standards higher for everyone.
    However unfair that may seem, someone will always have more. Better not to focus on that, but to focus on how to ensure everyone has enough to enjoy a decent life.

    The state has an obligation, I think, to provide services equally to it’s citizens. Ideally these services (at least in critical areas) should be of a high enough standard that there is no need for recourse to private sector alternatives.

    However, I would suggest, that seeing as the rich have an advantage and society is structurally unequal – there may be a strong argument for encouraging the wealthy to contribute directly to the cost of some of those services from which they benefit. E.g. by encouraging private health care, schools, universities. From which government could use the tax take to fund services for the less well off.

    Paul Graham’s pretty good on this kind of thing. He’s a tech entrepreneur turned early stage investor.

    http://paulgraham.com/inequality.html
    http://paulgraham.com/wealth.html
    http://paulgraham.com/gap.html

  • Mack

    Kensei

    On Maggie Thatcher – there is too much respect given to her by those in the UK on both sides. To those on the left she seen as someone who destroyed Britain’s well paid manufacturing & industrial base. To those on the right, a hero who’s free market reforms and monetarism got Britain back of it’s knees.

    In reality, Britain was bankrupt. In 1976 the UK had to turn to the IMF for a bailout. The 1970’s were the time of the sick man of Europe, the three day work week and in 1979 “Britain isn’t working”. The loss of those Blue collar jobs you attribute to Thatcher (in reality many, many more were already gone by the time she came), were on life support by the time she came along. She merely had the sense and the bravery to pull the plug.

    By the early 1980’s the North Sea Oil was flowing, coupled with savage public spending cuts helped the UK exchequer get back on track. Paul Volcker at the federal reserve was the kind of central banker we’ve needed for the last number of years. A fierce inflation fighter – he raised rates to levels that would cause a spate of heart attacks across Ireland if Trichet were to emulate him today. Thanks to Volcker the inflation genie was bottled. In contrast to 2005-2006 – interest rates were at long term highs, stock and property markets were at long term lows. The next likeliest direction of movement was clear. The 80’s were a boom time party for most of the West. Loadsa money in the UK and everyone turning Japanese with the mother of all booms (they partied until it was 1989).

    By the 1990’s the boom had begun to run out of steam. Interest rates were back down to or below long term trends – Japan had already blown up spectacularly and was experiencing deflation. The stock markets were reaching new highs, but many were concerned about a bubble. The Fed chairman Alan Greenspan looked at the punch bowl, but instead of taking it away – at the first signs of trouble he topped it up. Creating the Greenspan put – business could engage in whatever risky behaviourit liked because when they hit a wall Greenspan would ease monetary policy. And so it was in 2000-2001 when the tech bubble burst and Al Qaeda crashed planes into the World Trade Centre in New York. We were due a massive recession then, to clear the cobwebs after a 20 year binge. Greenspan was no Volcker, and instead of detoxing our system, the doctor ordered more of the same. As the tech bubble deflated, the biggest global property bubble ever roared into life. Which leaves us to where we are today – facing a massive bust, that should have been a small recesssion in the mid 1990’s.

    All of the above, is just to say, Maggie had much less influence on the world than her PR machine would have you believe.

  • kensei

    eranu

    i wonder is the big gap between the top earners and the bottom earners really that big a deal?

    There are a number of potential downsides, look them up. Trivial example. Government wants to introduce an NHS. It needs ot tax higher earners higher. But the already have access to health care, so they oppose it, and as they have a lot of money and influence, manage to block it. the people at the bottom get screwed, but if an NHS would result in a healthier more productive society, then society as a whole is worse off.

    Mack

    You are asking the wrong question(s). Should you not be asking

    1. How do you raise living standards for all?
    2. How do you ensure consistency of access to public services for all?

    No. How to increase the size of the pie or ensure access to it are important questions. But the question on how the pie is divided also matters, and needs considered too.

    If society protects individual property rights – then the wealthy are always going to have an advantage. As capitalism requires strong protection for an individuals property rights – Capitalist society is therefore always going to be unequal.

    Inherent advantage will never be completely eradicated. But you are being disingenious here. No one is claiming that inequality can be completely eradicated. Capitalist societies have produced a range of income distributions. Which one represents the best allocation of scare resources between competing ends? Severe inequality poses a moral challenge, in that it heavily stacks the cards against those not already on the ladder and an economic challenge in that society will lose the benfit from people who would otherwise be highly skilled or productive.

    Moving towards a society more truly base don merit should help everyone.

  • Mack

    Kensei

    Moving towards a society more truly base don merit should help everyone.

    I agree with that. Where I have an issue with the forumlation of the question is that it naturally leads to the State redistributing wealth via taxation. Which is not an efficient mechanism for driving living standards higher. What you need is for the wealthy to invest the capital they have accrued into businesses that will grow and provide beneficial services. The state can encourage that, but an ex-entrepreneur will have a much clearer idea of how to properly execute on that than a government beaurocrat.

    Ideally we’d want equal access to education across society and equal access to that capital. Much like the service the aforementioned Paul Graham provides with his own experience, time & capital. (To the benefit of a couple of brothers from Limerick who recently sold their PG funded start up).

  • kensei

    MackI agree with that. Where I have an issue with the forumlation of the question is that it naturally leads to the State redistributing wealth via taxation. Which is not an efficient mechanism for driving living standards higher.

    Which does not mean there is not a place for it. All progressive systems of taxation are redistributive, and given marginal impact of the next pound/euro/dollar son someone on 20,000 versus 200,000, this is entirely just.

    Moreover, the successful entrepreneur is likely at one point the budding entrepreneur with little money. The system should be designed to make it easy at the start, and then ask people for contribution when they’ve made it to help other people do the same. What happens is people make it and try to kick away the ladder.

    The state can encourage that, but an ex-entrepreneur will have a much clearer idea of how to properly execute on that than a government beaurocrat.

    This type of rhetorical anti-Government speel sets off the big red alarm bells in my head. Most entrepreneurs know dick, and certainly less than the government. Most new businesses fail. What matters is that there are a lot of them running a lot of different experiments at the same time, and there is a mechanism to separate between them. It is not at all apparent that the concentration of a lot of money in a few small hands aids this process.

  • Greenflag

    Eranu & Kensei

    ‘or is alot of it just jealousy from lazy people who want what others have, but are too lazy to put in the hard work to get it? ‘

    Would if it were that simple 😉 In terms of the overall you can break the numbers (people ) down to 20-60 -20 . 20% of people will be highly motivated -work or study very hard – be innovative -objective orientated and while this ties in with education and intelligence it does not mean that they would all have a ‘university degree ‘ I’ve come across people in this category who have been excellent entrepreneurs and business people -many extremely wealthy. And there is even evidence and numbers that can show that a ‘university ‘ education ‘ may indeed reduce the entrepreneurial drive of some in this group . Perhaps half or slightly more than half of this group can or will want to be ‘entrepreneurs ‘ This number will be greater or smaller depending on the actual society being looked at e.g the number would have been higher in Industrial Revolution Age England than say in Medieval England likewise in Ireland the number would have been greater in the period 1990 through 2005 say than in the 1820’s , 1930 ‘s or the 1890’s .

    Then you have the 60% these are the people who want to work and who want to do a good job but who are motivated by things other than the creation of ‘wealth ‘ . Yes they would not give back any lottery winning money but neither would they want to work 16 hour days for several years to build a business . Although some in this category could run a business if push came to shove many would be ‘psychologically ‘ not cut out for the ‘pressures’. But these people are the backbone of any society and they need to be motivated for the economic system to perform and for a more ‘equitable ‘ society to be possible . This motivation may not be just monetary alone but can come from being content to live in a society which is seen to be ‘fair ‘ to all it’s citizens and where the ‘weak’ are not driven to the wall . Break the back of this (60%) and you get revolution . Germany and the Weimar republic is just one example of how a society can collapse or turn to extremism . Then you have the 20% at the bottom . A number of these will be what are called ‘lazy ‘ but these are people may have medical , or psychological issues or may have been ‘marginalised ‘ for all kinds of reasons . They may be of the ‘wrong ‘ religion , tribe , or caste or live in an economically backward area etc . Most of this 20% are still however capable of contributing to society given opportunity and a mix of policies which brings them up to the level of the 60% group . This is in everybody’s interest.

    The above is a generalisation but is made to help put the ‘issue ‘ i.e how to reduce inequality or what is percieved inequality in societies in perspective instead of the simplistic ‘inequality is bad ‘ ‘equality is good ‘ type of argument . Also we need to be mindful that the ‘above ‘ rough breakdown operates at company , organisation and country / state level and in economic and political settings which may reduce or increase ‘inequality ‘ or ‘equality ‘ within any society . .

    Between the two extremes of what are called the ‘nanny’ state and the red claw world of economic darwinism there is a spectrum of solutions which will suit various societies at points in their development .We see in retrospect that introducing ‘state ‘ socialism ‘ to newly independent African countries in the 1960’s , 70’s etc was a disaster . Just because it worked in Sweden /Britain in 1960 does not mean it can work in Tanzania in 1980 .

    These ‘ solutions’ don’t just happen by themselves . The market alone cannot be relied upon to deliver them either and it is up to governments to direct policies to ensure that the more people that are less dependent on the public exchequer the better by a mix of policies that work to that effect . Ideology alone won’t do it and this applies just as much to the ideology of the extreme left as to that of the neo conservative free market uber alles approach of the past two decades .

    TBC

  • Mack

    Come on Kensei. Yer average government employee is not only an employee but an employee in the most protected type of job you can imagine. An entreprenuer (risk bearer) is taking huge risks – well beyond the ken of the aforementioned employee. A private sector investor is also risking their own resources.

    What can that employee actually know of the ruthlessness of the market? How can s/he accurately judge which start up has more chance of success better than someone who has travelled that road before? Compare and contrast the success of the IDA (bringing already successful business to Ireland – easy to identify) and Enterprise Ireland (fund Irish start ups – not easy to id success). Or better yet – Paul Graham’s Y Combinator with Enterprise Ireland. (And the story of the two young Limerick students who headed to PG in the USA because Enterprise Ireland wouldn’t support them)..

    On kicking away the ladder – I agree that some do attempt this. Mostly second and third generations of dynasties that are already built. This problem is potentially solved via inheritance tax – but if it’s not solved Globally expect our dynasty builders to simple leave. Equally there are those like Graham (and many, many more in the US) who devote their time, their knowledge and the capital they’ve made in helping pull others up. In the process they help us all. If the government has a role – it is in encouraging and facilitating people like Graham – not in actually doing the sponsoring themselves.

    On failed entreprenuers – they’re the people we really owe the debt of gratitude too. The successful ones get their reward in bucket loads – but the ones who risked all and lost, took a chance to change the world for the better – they deserve our admiration & respect. The bankruptcy laws in Ireland a disgustingly penal – the stigma of failure much to high.

    But let me put it this way – who would you trust to advise an Irish start up –

    1. Someone risking their own money ?
    2. Someone risking someone elses (tax payers) money?

    I’d go for #1 every time.

  • kensei

    Come on Kensei. Yer average government employee is not only an employee but an employee in the most protected type of job you can imagine. An entreprenuer (risk bearer) is taking huge risks – well beyond the ken of the aforementioned employee. A private sector investor is also risking their own resources.

    No, you come on. A government employee has access to resources that an entreprenuer doesn’t. If I was looking for a single organisation to come up with a best shot, then I would go for the government. And to that, I can add that even entreprenuers can go wrong. Alan Sugar made a lot fo money during the 70’s and 80’s, but made a lot fo wrong calls in the 90’s.

    What is required is pluralism — lot of entreprenuers, trying lots of different things. That is why the system works, and is superior to centrally planned systems.

    What can that employee actually know of the ruthlessness of the market? How can s/he accurately judge which start up has more chance of success better than someone who has travelled that road before? Compare and contrast the success of the IDA (bringing already successful business to Ireland – easy to identify) and Enterprise Ireland (fund Irish start ups – not easy to id success). Or better yet – Paul Graham’s Y Combinator with Enterprise Ireland. (And the story of the two young Limerick students who headed to PG in the USA because Enterprise Ireland wouldn’t support them)..

    Enterprise Ireland can never match the success of the IDA – most businesses fail. I’m not sure how Enterprize Ireland works, but Invest NI is a nmess. All they need to do is provide funding and support to promising companies that meet certain funding criteria. That’s it. Most will fail, because most businesses will fail. But that’s ok: private capital is freed to do somethign else, and the people involved are probably financially better off and more able to try again.

    Some public funds will do good. We are back to pluralism.

    On failed entreprenuers – they’re the people we really owe the debt of gratitude too. The successful ones get their reward in bucket loads – but the ones who risked all and lost, took a chance to change the world for the better – they deserve our admiration & respect. The bankruptcy laws in Ireland a disgustingly penal – the stigma of failure much to high.

    I agree. But there has to be a balance, becasue otherwise you run into big moral hazard problems.

    But let me put it this way – who would you trust to advise an Irish start up –

    1. Someone risking their own money ?
    2. Someone risking someone elses (tax payers) money?

    I’d go for #1 every time.

    It’s irrelevant. If each has a slightly different criteria, then each will help businesses that the other will miss. There might be some overlap, but it is likely either will tell perfectly sensible things, and it will come down to the quality of product and people. On the margins maybe, t’d matter. But the systenm works because all our eggs are not in one basket.

    I should add that not all VCs are nice. They can be very concerned with getting a quick return, and not in the long term value or growth of the business. And they can meddle, where they were better leaving alone. So, no silver bullets. Once again, what is needed is pluralism – lots of Paul Grahams and support form the government and family, friends and fools and perhaps sources of microfunding and the like.

  • Mack

    Also one major draw back of having the government do it – is that the government is political.

    Let’s say creating jobs in Sligo is a political priority for the government. So two different teams come to the investment agency with a broadly similar idea. One in Dublin, one in Sligo. The Dublin team is stronger – more experience, better mix of skills, solid prototype. The Sligo team is weaker, but jobs in Sligo are a high priority.

    Who gets the funding?

    We’ll the agency may well have a quota for Sligo that means it’s not outside the realms of possibility that the Sligo team will get funding at the expense of the Dublin team.

    This is much less likely to happen if you have private investors risking their own time & capital.

  • Mack

    Kensei –

    In relation to your last post. There is a limited pool of resources. The government can encourage the allocation of those resources to private agencies that will invest them in start-ups (for example by giving money invested in start-ups preferential tax treatment cf other investments).
    Or it can tax high net worth individuals and attempt to redistribute that way.

    I think the former is likely to be more successful than the latter. But I accept there is some room for both, particularly when the business start up networks are not well developed – or when there is a crisis of funding for those networks.

  • kensei

    Mack

    This is a false dilemma. The government can tax high worth indivduals and channel the money into investing in startups if it choses. At the end of the day, government expediture must be paid for. So who pays? The lower end or the high end? Progressive taxation systems developed for a reason.

    I don’t think the government should be hugely meddling in business investment, but I think there is some room for it to have money available and support or a service to link up people with good ideas but poor contacts with those that can help them. The devil in this area is in the detail. The biggest problem I see for government is most of what they put their money will fail, and governments have problems with failures.

  • Greenflag

    Kensei ,

    ‘with manufacturing in real decline across the Western world, employment is broadly in 3 categories.

    1. Professional / Graduate
    2. Trades
    3. Service ‘

    This has been happening for the past 20 years to a degree never seen before in history . The implicit assumption was that ‘globalisation ‘ would reduce costs for everybody and improve living standards worldwide . This has happened to an extent. But little or no thought appears to have been made as to what the effect of outsourcing manufacturing & some services etc ec would have on home economies . It was/is assumed somehow that continuing innovation and high tech progress plus value added services will take up the ‘slack ‘. Well they appeared to for a while but the numbers coming out of the USA and other western countries are now telling a markedly different story. All of the much vaunted ‘productivity ‘ increases have led not to higher wages but to greater emisseration of many of the 60% . The free for all has led to the ‘transfer ‘ of billions in retirement funds into a hole in the sky ? And a trillion dollars in home equity value has sunk without a trace . Of course many will say that it was never there in the first place . And the only solution economists can come up now with is apparently to go into further ‘debt’ in order to get out of or reduce the debt/deficit ??? .

    The first period of outsourcing (1980’s 90’s )saw to the decline of manufacturing in the west . The second period has seen the outsourcing of even some services to take the benefit of lower wages and costs . The presumption is still that this is to everybody’s advantage longer term and inevitable anyway so tough luck .

    We are now back to relying on a dollop of Keynesianism to restart the economic motor ? And truth is nobody knows if it will or not or indeed can . We know protectionism would probably prolong a world recession and perhaps lead to worse . The option of just letting the entire financial system fold in on itself and go under because of massive debt was looked at and recoiled from .

    The above is a macro view and may seem to be irrelevant to the micro level at which Kensei and Mack discuss above yet it all hangs together.

    The assumption or should I say hope which Mack and yourself appear to be making is that with government or private sector investment and good ideas channelled to the right projects it will be possible to say reduce public sector dependency in NI from 70% at present to say 40% or even 30% and reduce inequality at the same time ? In this new economic world that we see unfolding that’s being an optimist .

    We ( the West generally ) may yet have to find other non traditional remedies to ensure that large sections of our populations are not alienated from either the economy nor the political system in the coming new world order/disorder. While I don’t doubt the greater ‘dynamism’ of the private sector in creating ‘real jobs’ / ‘wealth ‘ etc we now know -some of us have always known that all that glitters is not gold either.

    In a reaction against some of the idiocies of the nanny state -the neo conservatives went to the other extreme . While I’m all in favour of each individual being as responsible for his/her life according to his or her abilities -I’ve always been more than a little sceptical that somehow the ‘market’ would in time correct all societal imbalances and not eventually lead to chaos. Somehow the neo conservative ideology that assumes or insists that the average citizen/subject is the person best placed to choose the private health care plan and/or retirement fund, which when replicated by all will lead to a comfortable retirement and lifelong good health for everyone , has been seen to have been ‘insane ‘. We have seen whereby accumulated ‘invested wealth ‘ has thieved the retirement funds of many of the 60% -ruined some even among the the top 20% and pushed the remaining 20% to the wall or into foreclosure or debt etc etc . The top 20% as described above are not immune to greed or to criminal inclinations and neither are the 60% immune from the temptation to get something for nothing.

    It was thought that Mr Greenspan had finally conquered the ‘boom and bust ‘of the eternal economic cycle by his judicious twiddling around with interest rates and the well judged nuanced comments on the economy when he felt it was necessary . Now it appears that that was just another ‘mission unaccomplished ‘.